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Live Oak Bancshares, Inc. Reports Second Quarter 2017 Results

WILMINGTON, N.C., July 26, 2017 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq:LOB) (“Live Oak” or “the Company”) today reported second quarter net earnings available to common shareholders of $9.8 million, or $0.27 per diluted share, compared to $123 thousand, or $0.00 per diluted share, for the second quarter of 2016. The Company achieved record-level production in the second quarter with loan and lease originations of $586.5 million.

“We exited the first half of 2017 having generated loans and leases in excess of $1 billion dollars along with strong earnings momentum. Our highest-ever origination level in the second quarter fully demonstrates the growing power of the Live Oak business model. With $45 million in total revenues for the quarter, our steady investments in resources and initiatives are generating excellent returns. We will continue to innovate and invest in new strategic opportunities that will empower small businesses throughout the U.S. and benefit the Company for the long term,” said James S. Mahan, III, Chief Executive Officer of Live Oak.

Second Quarter 2017 Key Measures

(Dollars in thousands, except per share data) Increase (Decrease)
Q2 2017 Q2 2016 Dollars Percent Q1 2017
Loan production:
Loans and leases originated$586,471 $356,865 $229,606 64% $468,663
% Fully funded42.2% 40.2% n/a n/a 63.2%
Loan sales:
Guaranteed loans sold$203,714 $135,555 $68,159 50% $208,715
Net gains on sales of guaranteed loans18,676 14,555 4,121 28 18,952
Average net gain on sale of guaranteed loans, per million sold91.68 107.37 (15.69) (15) 90.80
Net interest income and servicing revenues24,566 14,998 9,568 64 21,564
Net income attributable to Live Oak Bancshares, Inc.9,795 123 9,672 7,863 6,112
Diluted earnings per share0.27 0.00 0.27 100 0.17
Non-GAAP net income (1)10,227 3,883 6,344 163 6,808
Non-GAAP diluted earnings per share (1)0.28 0.11 0.17 155 0.19

(1) See accompanying GAAP to Non-GAAP Reconciliation.

Loans and Leases

Net loans and leases held for investment increased $83.9 million, or 8.5%, to $1.06 billion at June 30, 2017, from $981.1 million at March 31, 2017. Loans held for sale increased $96.6 million, or 18.9%, to $609.1 million at June 30, 2017, from $512.5 million at March 31, 2017. The increase in both portfolios was driven by record volumes of loan and lease originations, which rose by 64.3% above the prior year level to $586.5 million. The combined total loan and lease portfolio at June 30, 2017, and March 31, 2017, of $1.69 billion and $1.51 billion, respectively, were comprised of approximately 61.7% and 63.4% of unguaranteed loans and leases, respectively. At June 30, 2017, the total loan and lease portfolio of $1.69 billion increased 66.1% above its level of a year ago.

Average loans and leases were $1.61 billion during the second quarter of 2017 compared to $1.42 billion during the first quarter of 2017.

Net Interest Income

Net interest income for the second quarter of 2017 increased to $18.4 million compared to $9.9 million for the second quarter of 2016. The increase was driven by the significant growth in the combined held for sale and held for investment loan and lease portfolios. It also reflects the Company's prior decision to grow recurring revenue sources by increasing the level of loans and leases retained on the balance sheet. Net interest income further benefited from a steadily rising net interest margin, which rose from 3.76% for the for the first quarter of 2017 to 3.92% for the second quarter of 2017 as the rise in yields on interest earnings assets outpaced those on the Company's funding sources.

Noninterest Income

Noninterest income for the second quarter of 2017 rose to $26.7 million, compared to $19.3 million for the second quarter of 2016. Net gains on sales of loans increased to $18.2 million in the second quarter of 2017 compared to $14.6 million in the second quarter of 2016 and decreased slightly versus the $19.0 million in the first quarter of 2017. The increase from the prior year was due to a higher volume of guaranteed loan sales partially offset by a reduction in the average net gain on sale of guaranteed loans. The decline from the prior quarter was due to a lower volume of guaranteed loans sold during the second quarter of 2017 partly mitigated by a slight increase in the average net gain on guaranteed loan sales. Loan servicing revenues of $6.2 million in the second quarter of 2017 rose by $1.1 million from the second quarter of 2016. The inclusion of Reltco, Inc. and National Assurance Title, Inc. (collectively referred to as "Reltco") which were acquired in February 2017 contributed $2.4 million in noninterest income to the Company in the second quarter of 2017.

Noninterest Expense

Noninterest expense for the second quarter of 2017 was $33.3 million compared to $25.1 million for the second quarter of 2016 and $33.0 million for the first quarter of 2017.

The $8.2 million, or 32.5%, increase in noninterest expense for the second quarter of 2017 compared to the second quarter of 2016 was principally driven by increased salaries and employee benefits of $2.6 million, equipment expense of $1.2 million and other expense of $1.0 million. Salaries and employee benefits were largely influenced by the addition of Reltco personnel during the first quarter of 2017 along with resources to support the ongoing growth of the business platform. Total stock based compensation expense in the second quarter of 2017 was $1.9 million compared to $2.9 million for the second quarter of 2016. The increase in equipment expense reflected the higher levels of depreciation related to aircraft acquired in the first quarter of 2017 and solar panels acquired to meet leasing commitments, while other expense increased primarily due to the addition of Reltco in the first quarter of 2017 combined with support expenses driven by business growth.

Compared to the first quarter of 2017, noninterest expense increased $315 thousand, or 1.0%. This modest increase was driven by higher levels of investment in travel, advertising, occupancy, data processing and equipment to support the growing levels of business. Total stock based compensation expense in the second quarter of 2017 was $1.9 million compared to $1.8 million for the first quarter of 2017.

Asset Quality

The unguaranteed exposure of nonperforming loans declined slightly to $3.5 million at June 30, 2017, compared to $3.6 million at March 31, 2017. Total nonperforming loans also decreased to $21.9 million in the second quarter of 2017 from $22.5 million at the end of the prior quarter. Total unguaranteed nonperforming loans as a percentage of total loans and leases held for investment declined to 0.33% at June 30, 2017, compared to 0.36% at March 31, 2017.

Foreclosed assets increased $434 thousand to $2.1 million at June 30, 2017, from March 31, 2017. The unguaranteed exposure of foreclosed assets increased to $345 thousand at June 30, 2017, from $304 thousand at March 31, 2017.

Net charge-offs decreased to $191 thousand in the second quarter of 2017 compared to $1.5 million in the first quarter of 2017 and net recoveries of $240 thousand in the second quarter of 2016. Net charge-offs (recoveries) as a percentage of average held for investment loans and leases, annualized, for the quarters ended June 30, 2017 and 2016 were 0.07% and (0.18)%, respectively. Net charge-offs (recoveries) for the first six months of 2017 totaled $1.7 million compared to $(8) thousand for the first six months of 2016.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the second quarter of 2017 totaled $1.6 million compared to $1.5 million for the first quarter of 2017 and $3.5 million for the second quarter of 2016. The second quarter of 2017 provision exceeded net charge-offs and reflects the continued growth of the loan portfolio.

The allowance for loan and lease losses totaled $19.6 million at June 30, 2017, compared to $18.2 million at March 31, 2017, due to the aforementioned growth of the portfolio. The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.80% at June 30, 2017, compared to 1.82% at March 31, 2017.

Income Tax

Income tax expense in the second quarter of 2017 totaled $408 thousand compared to an income tax expense of $557 thousand in the second quarter of 2016 and $798 thousand in the first quarter of 2017. The effective rate of 4.0% in the second quarter of 2017 principally reflected the ongoing generation of investment tax credits by the renewable energy leasing activity which derives from the Company’s broader strategic initiatives in the renewable energy sector.

Deposits

Total deposits increased by $232.6 million, or 14.2%, to $1.87 billion at June 30, 2017, compared to $1.64 billion at March 31, 2017, following successful deposit gathering campaigns. Average total interest-bearing deposits for the second quarter of 2017 increased $205.3 million, or 13.1%, to $1.74 billion, compared to $1.53 billion for the first quarter of 2017. The ratio of average total loans to average interest-bearing deposits was 92.7% for the second quarter of 2017, unchanged from the first quarter of 2017.

Conference Call

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (July 27, 2017). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 51147900. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the webcast will be archived on the Company's website for one year. A replay of the conference call will also be available until 5:00 p.m. ET August 2, 2017, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

Important Note Regarding Forward-Looking Statements

Statements in this press release that are based on other than historical data or that express the Company’s plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration (“SBA”) rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company's status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; a reduction in or the termination of the Company's ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems; competition from other lenders; the Company's ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company's business; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; and the other factors discussed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

About Live Oak Bancshares, Inc.

Live Oak Bancshares, Inc. (Nasdaq:LOB) is a financial holding company and the parent company of Live Oak Banking Company, a national online platform for small business lending.

Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)
Three months ended
2Q 2017 1Q 2017 4Q 2016 3Q 2016 2Q 2016
Interest income
Loans and fees on loans$23,559 $19,754 $16,239 $14,961 $12,902
Investment securities, taxable316 323 292 337 252
Other interest earning assets470 342 383 264 248
Total interest income24,345 20,419 16,914 15,562 13,402
Interest expense
Deposits5,592 4,543 4,283 3,689 3,243
Borrowings361 235 239 242 242
Total interest expense5,953 4,778 4,522 3,931 3,485
Net interest income18,392 15,641 12,392 11,631 9,917
Provision for loan and leases losses1,556 1,499 3,844 3,806 3,453
Net interest income after provision for loan and lease losses16,836 14,142 8,548 7,825 6,464
Noninterest income
Loan servicing revenue6,174 5,923 5,668 5,860 5,081
Loan servicing asset revaluation(1,164) (2,009) (3,340) (3,421) (1,604)
Net gains on sales of loans18,176 18,952 22,513 21,833 14,555
Gain on sale of securities available-for-sale 1
Construction supervision fee income286 429 868 502 667
Title insurance income2,397 1,438
Other noninterest income798 1,020 618 657 649
Total noninterest income26,667 25,753 26,327 25,432 19,348
Noninterest expense
Salaries and employee benefits17,968 18,682 17,121 17,471 15,411
Travel expense2,148 1,598 1,811 2,218 2,330
Professional services expense1,424 1,736 1,137 907 910
Advertising and marketing expense1,976 1,485 1,109 1,097 1,365
Occupancy expense1,350 1,195 1,267 1,058 1,055
Data processing expense1,858 1,696 1,435 1,252 1,404
Equipment expense1,703 1,074 550 611 534
Other loan origination and maintenance expense981 1,005 824 806 621
Renewable energy tax credit investment impairment 3,197
FDIC insurance724 726 910 210 148
Title insurance closing services expense785 405
Other expense2,383 3,383 3,023 1,588 1,354
Total noninterest expense33,300 32,985 32,384 27,218 25,132
Income before taxes10,203 6,910 2,491 6,039 680
Income tax expense (benefit)408 798 (2,989) 2,561 557
Net income9,795 6,112 5,480 3,478 123
Net loss attributable to noncontrolling interest 1
Net income attributable to Live Oak Bancshares, Inc.$9,795 $6,112 $5,480 $3,479 $123
Earnings per share
Basic$0.28 $0.18 $0.16 $0.10 $0.00
Diluted$0.27 $0.17 $0.16 $0.10 $0.00
Weighted average shares outstanding
Basic34,618,721 34,466,904 34,235,375 34,206,943 34,189,217
Diluted35,942,041 35,646,918 35,208,433 35,001,817 35,206,125


Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
As of the quarter ended
2Q 2017 1Q 2017 4Q 2016 3Q 2016 2Q 2016
Assets
Cash and due from banks$207,373 $158,887 $238,008 $355,485 $175,506
Certificates of deposit with other banks5,750 6,000 7,250 7,500 8,500
Investment securities available-for-sale72,993 68,630 71,056 70,334 66,804
Loans held for sale609,138 512,501 394,278 345,277 329,206
Loans and leases held for investment1,084,503 999,270 907,566 766,977 690,517
Allowance for loan losses(19,560) (18,195) (18,209) (15,178) (12,309)
Net loans and leases1,064,943 981,075 889,357 751,799 678,208
Premises and equipment, net125,008 101,398 64,661 60,646 61,064
Foreclosed assets2,140 1,706 1,648 2,235 2,971
Servicing assets53,675 53,584 51,994 49,729 48,454
Other assets57,087 48,344 37,009 26,735 24,591
Total assets$2,198,107 $1,932,125 $1,755,261 $1,669,740 $1,395,304
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing$40,966 $38,029 $27,990 $28,461 $22,942
Interest-bearing1,830,755 1,601,114 1,457,086 1,374,556 1,117,855
Total deposits1,871,721 1,639,143 1,485,076 1,403,017 1,140,797
Short term borrowings10,000 13,100
Long term borrowings52,173 27,473 27,843 28,074 28,173
Other liabilities26,582 26,220 19,495 24,497 18,984
Total liabilities1,960,476 1,705,936 1,532,414 1,455,588 1,187,954
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding
Class A common stock (voting)150,939 147,933 149,966 145,284 141,181
Class B common stock (non-voting)49,168 50,015 50,015 50,015 50,015
Retained earnings38,041 28,938 23,518 18,723 15,928
Accumulated other comprehensive (loss) income(517) (697) (652) 130 201
Total shareholders’ equity attributed to Live Oak Bancshares, Inc.237,631 226,189 222,847 214,152 207,325
Noncontrolling interest 25
Total equity237,631 226,189 222,847 214,152 207,350
Total liabilities and shareholders’ equity$2,198,107 $1,932,125 $1,755,261 $1,669,740 $1,395,304


Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)
Six months ended
June 30, 2017 June 30, 2016
Interest income
Loans and fees on loans$43,313 $23,907
Investment securities, taxable639 503
Other interest earning assets812 386
Total interest income44,764 24,796
Interest expense
Deposits10,135 5,687
Borrowings596 483
Total interest expense10,731 6,170
Net interest income34,033 18,626
Provision for loan losses3,055 4,886
Net interest income after provision for loan losses30,978 13,740
Noninterest income
Loan servicing revenue12,097 9,865
Loan servicing asset revaluation(3,173) (1,630)
Net gains on sales of loans37,128 30,980
Construction supervision fee income715 1,297
Title insurance income3,835
Other noninterest income1,818 1,268
Total noninterest income52,420 41,780
Noninterest expense
Salaries and employee benefits36,650 28,404
Travel expense3,746 4,176
Professional services expense3,160 1,438
Advertising and marketing expense3,461 2,328
Occupancy expense2,545 2,248
Data processing expense3,554 2,612
Equipment expense2,777 1,085
Other loan origination and maintenance expense1,986 1,195
FDIC insurance1,450 297
Title insurance closing services expense1,190
Other expense5,766 3,060
Total noninterest expense66,285 46,843
Income before taxes17,113 8,677
Income tax expense1,206 3,871
Net income15,907 4,806
Net loss attributable to noncontrolling interest 8
Net income attributable to Live Oak Bancshares, Inc.$15,907 $4,814
Earnings per share
Basic$0.46 $0.14
Diluted$0.44 $0.14
Weighted average shares outstanding
Basic34,543,229 34,183,004
Diluted35,772,182 35,079,660


Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
As of and for the three months ended
2Q 2017 1Q 2017 4Q 2016 3Q 2016 2Q 2016
Income Statement Data
Net income attributable to Live Oak Bancshares, Inc.$9,795 $6,112 $5,480 $3,479 $123
Per Common Share
Net income, basic$0.28 $0.18 $0.16 $0.10 $0.00
Net income, diluted0.27 0.17 0.16 0.10 0.00
Dividends declared0.02 0.02 0.02 0.02 0.01
Book value6.86 6.54 6.51 6.26 6.06
Tangible book value (1)6.50 6.17 6.51 6.26 6.06
Performance Ratios
Return on average assets (annualized)1.89% 1.33% 1.26% 0.91% 0.04%
Return on average equity (annualized)16.53 10.93 9.95 6.54 0.24
Net interest margin3.92 3.76 3.08 3.32 3.26
Efficiency ratio (1)73.90 79.69 83.64 73.44 85.88
Noninterest income to total revenue59.18 62.21 68.00 68.62 66.11
Selected Loan Metrics
Loans and leases originated$586,471 $468,663 $514,565 $381,050 $356,865
Guaranteed loans sold203,714 208,715 260,125 210,610 135,555
Average net gain on sale of guaranteed loans91.68 90.80 86.55 103.67 107.37
Held for sale guaranteed loans (note amount) (2)1,005,753 866,260 754,834 692,278 639,356
Quarterly increase (decrease) in note amount of held for sale guaranteed loans139,493 111,426 62,556 52,922 97,761
Estimated net gain to be recognized on quarterly increase in guaranteed loans held for sale (3)12,789 10,117 5,414 5,486 10,497
Asset Quality Ratios
Allowance for loan losses to loans and leases held for investment1.80% 1.82% 2.01% 1.98% 1.78%
Net charge-offs (recoveries)$191 $1,513 $813 $937 $(240)
Net charge-offs (recoveries) to average loans and leases held for investment (4)0.07% 0.63% 0.39% 0.51% (0.18)%
Nonperforming loans$21,856 $22,469 $23,781 $14,023 $12,902
Foreclosed assets2,140 1,706 1,648 2,235 2,971
Nonperforming loans (unguaranteed exposure)3,546 3,643 4,784 3,354 2,174
Foreclosed assets (unguaranteed exposure)345 304 246 304 433
Nonperforming loans not guaranteed by the SBA and foreclosures3,891 3,947 5,030 3,658 2,607
Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets0.18% 0.20% 0.29% 0.22% 0.19%
Capital Ratios
Common equity tier 1 capital (to risk-weighted assets)11.93% 12.79% 15.35% 16.63% 18.26%
Total capital (to risk-weighted assets)13.08 14.01 16.60 17.88 19.43
Tier 1 risk based capital (to risk-weighted assets)11.93 12.79 15.35 16.63 18.26
Tier 1 leverage capital (to average assets)9.93 10.60 12.03 13.18 14.32

Notes to Quarterly Selected Financial Data

(1) See accompanying GAAP to Non-GAAP Reconciliation.
(2) Includes the entire note amount, including undisbursed funds for the multi-advance loans.
(3) The estimated revenue from the sale of the quarterly increase in guaranteed loans is based on the average net gain on sale of loans for that quarter. This is an estimate based on the respective quarter activity and does not reflect actual gains to be recognized.
(4) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.


Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)
Three months ended June 30, 2017 Three months ended March 31, 2017
Average
Balance
Interest Average Yield/
Rate
Average
Balance
Interest Average Yield/
Rate
Interest earning assets:
Interest earning balances in other banks $199,904 $470 0.94% $194,176 $342 0.71%
Investment securities 69,544 316 1.82 71,075 323 1.84
Loans held for sale 562,984 8,226 5.86 466,567 6,521 5.67
Loans and leases held for investment (1) 1,050,074 15,333 5.86 955,021 13,233 5.62
Total interest earning assets 1,882,506 24,345 5.19 1,686,839 20,419 4.91
Less: allowance for loan and lease losses (18,198) (18,199)
Non-interest earning assets 209,484 167,644
Total assets $2,073,792 $1,836,284
Interest bearing liabilities:
Interest bearing checking $40,541 $57 0.56% $44,351 $65 0.59%
Savings 3,809 12 1.26
Money market accounts 475,265 1,114 0.94 479,545 948 0.80
Certificates of deposit 1,219,542 4,409 1.45 1,009,915 3,530 1.42
Total interest bearing deposits 1,739,157 5,592 1.29 1,533,811 4,543 1.20
Other borrowings 42,765 361 3.39 28,068 235 3.40
Total interest bearing liabilities 1,781,922 5,953 1.34 1,561,879 4,778 1.24
Non-interest bearing deposits 32,718 28,686
Non-interest bearing liabilities 22,165 22,042
Shareholders' equity 236,987 223,677
Noncontrolling interest
Total liabilities and shareholders' equity $2,073,792 $1,836,284
Net interest income and interest rate spread $18,392 3.85% $15,641 3.67%
Net interest margin 3.92 3.76
Ratio of average interest-earning assets to average interest-bearing liabilities 105.64% 108.00%

(1) Average loan and lease balances include non-accruing loans.


Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)
As of and for the three months ended
2Q 2017 1Q 2017 4Q 2016 3Q 2016 2Q 2016
Total shareholders’ equity$237,631 $226,189 $222,847 $214,152 $207,350
Less:
Goodwill7,266 7,165
Other intangible assets5,292 5,410
Tangible shareholders’ equity (a)$225,073 $213,614 $222,847 $214,152 $207,350
Shares outstanding (c)34,639,848 34,600,819 34,253,602 34,215,050 34,192,382
Total assets$2,198,107 $1,932,125 $1,755,261 $1,669,740 $1,395,304
Less:
Goodwill7,266 7,165
Other intangible assets5,292 5,410
Tangible assets (b)$2,185,549 $1,919,550 $1,755,261 $1,669,740 $1,395,304
Tangible shareholders’ equity to tangible assets (a/b)10.30% 11.13% 12.70% 12.83% 14.86%
Tangible book value per share (a/c)$6.50 $6.17 $6.51 $6.26 $6.06
Efficiency ratio:
Noninterest expense (d)$33,300 $32,985 $32,384 $27,218 $25,132
Net interest income18,392 15,641 12,392 11,631 9,917
Noninterest income26,667 25,753 26,327 25,432 19,348
Less: gain on sale of securities 1
Adjusted operating revenue (e)$45,059 $41,394 $38,719 $37,062 $29,265
Efficiency ratio (d/e)73.90% 79.69% 83.64% 73.44% 85.88%


Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)
Three months ended Six months ended
6/30/2017 3/31/2017 6/30/2016 6/30/2017 6/30/2016
Reconciliation of net income to non-GAAP net income for non-routine income and expenses:
Net income attributable to Live Oak Bancshares, Inc.$9,795 $6,112 $123 $15,907 $4,814
Provision for loans reclassified as held for investment 4,023 4,023
Stock based compensation expense for restricted stock awards with an effective grant date of May 24, 2016, as discussed in Note 10 of our March 31, 2016 Form 10-Q378 346 2,243 724 2,243
Merger costs for acquisition of Reltco250 516 766
Trade-in loss on aircraft 206 206
Renewable energy tax credit investment income, impairment and loss19 19 38
Income tax effects and adjustments for non-GAAP items *(259) (435) (2,506) (694) (2,506)
Other renewable energy tax expense44 44 88
Non-GAAP net income$10,227 $6,808 $3,883 $17,035 $8,574
* Estimated at 40.0%
Non-GAAP earnings per share:
Basic$0.30 $0.20 $0.11 $0.49 $0.25
Diluted$0.28 $0.19 $0.11 $0.48 $0.24
Weighted-average shares outstanding:
Basic34,618,721 34,466,904 34,189,217 34,543,229 34,183,004
Diluted35,942,041 35,646,918 35,206,125 35,772,182 35,079,660
Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses:
Noninterest income, as reported$26,667 $25,753 $19,348 $52,420 $41,780
Renewable energy tax credit investment income(10) (10) (20)
Noninterest income, as adjusted26,657 25,743 19,348 52,400 41,780
Provision for loan losses, as reported1,556 1,499 3,453 3,055 4,886
Provision for loans reclassified as held for investment (4,023) (4,023)
Provision for loan losses, as adjusted1,556 1,499 (570) 3,055 863
Noninterest expense, as reported33,300 32,985 25,132 66,285 46,843
Stock based compensation expense(378) (346) (2,243) (724) (2,243)
Merger costs associated with Reltco(250) (516) (766)
Trade-in loss on aircraft (206) (206)
Renewable energy tax credit investment impairment and loss(29) (29) (58)
Noninterest expense, as adjusted32,643 31,888 22,889 64,531 44,600
Income tax expense, as reported408 798 557 1,206 3,871
Income tax effects and adjustments for non-recurring income and expenses259 435 2,506 694 2,506
Other renewable energy tax expense(44) (44) $(88)
Income tax expense, as adjusted$623 $1,189 $3,063 $1,812 $6,377

This press release presents the non-GAAP financial measures previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measures are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results. The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company. The non-GAAP financial measures are used by management to assess the performance of the Company’s business for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.


Contacts: Brett Caines | CFO | Investor Relations | 910.796.1645 & Micah Davis | Marketing Director | Media Relations | 910.550.2255

Source:Live Oak Bancshares