WILMINGTON, N.C., April 24, 2024 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (NYSE:LOB) ("Live Oak" or "the Company") today reported first quarter of 2024 net income of $16.5 million, or $0.36 per diluted share. "The Live Oak model continued to prove its fortitude in the first quarter as our teams marched ahead to steadily grow both sides of the balance sheet and delivered exceptional service to our customers," said Live Oak Chairman and CEO James S. (Chip) Mahan III. "In a challenging environment for our industry, I remain bullish on our dedication to America's small business owners and believe that our passion around innovation, efficiency and expertise will continue to shine a light on how Live Oak differs from the crowd." First Quarter 2024 Key Measures (Dollars in thousands, except per share data)       Increase (Decrease)       1Q 2024   4Q 2023   Dollars   Percent   1Q 2023 Total revenue(1) $ 116,208     $ 119,683     $ (3,475 )   (2.9 )%   $ 101,596   Total noninterest expense   78,679       93,204       (14,525 )   (15.6 )     78,962   Income before taxes   21,165       17,484       3,681     21.1       3,613   Effective tax rate   21.8 %     7.6 %   n/a   n/a     89.0 % Net income $ 16,548     $ 16,163     $ 385     2.4 %   $ 398   Diluted earnings per share   0.36       0.36       —     —       0.01   Loan and lease production:                   Loans and leases originated $ 805,129     $ 981,703     $ (176,574 )   (18.0 )%   $ 1,030,882   % Fully funded   43.8 %     49.0 %   n/a   n/a     54.5 % Total loans and leases: $ 9,223,310     $ 9,020,884     $ 202,426     2.2 %   $ 8,220,279   Total assets:   11,503,300       11,271,423       231,877     2.1       10,364,297   Total deposits:   10,383,361       10,275,019       108,342     1.1       9,421,994                                         (1) Total revenue consists of net interest income and total noninterest income. Loans and Leases As of March 31, 2024, the total loan and lease portfolio was $9.22 billion, 2.2% above its level at December 31, 2023, and 12.2% above its level a year ago. This growth was the product of strong origination volumes. Compared to the fourth quarter of 2023, loans and leases held for investment increased $278.7 million, or 3.2%, to $8.91 billion while loans held for sale decreased $76.3 million, or 19.7%, to $310.7 million. Average loans and leases were $9.11 billion during the first quarter of 2024 compared to $8.84 billion during the fourth quarter of 2023.  The total loan and lease portfolio at March 31, 2024, and December 31, 2023, was comprised of 37.4% and 37.8% of guaranteed loans and leases, respectively. Loan and lease originations totaled $805.1 million during the first quarter of 2024, a decrease of $176.6 million, or 18.0%, from the fourth quarter of 2023. Loan and lease originations decreased $225.8 million, or 21.9%, from the first quarter of 2023. Deposits Total deposits increased to $10.38 billion at March 31, 2024, an increase of $108.3 million compared to December 31, 2023, and an increase of $961.4 million compared to March 31, 2023. The increase in total deposits from prior periods was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels. Average total interest-bearing deposits for the first quarter of 2024 increased $234.7 million, or 2.4%, to $10.07 billion, compared to $9.84 billion for the fourth quarter of 2023. The ratio of average total loans and leases to average interest-bearing deposits was 90.4% for the first quarter of 2024, compared to 89.9% for the fourth quarter of 2023. Borrowings Borrowings totaled $120.2 million at March 31, 2024 compared to $23.4 million and $30.8 million at December 31, 2023, and March 31, 2023, respectively. During the first quarter of 2024, the Company increased long-term borrowings by $100.0 million through an unsecured 5.95% fixed rate 60-month term loan with a third party correspondent bank. This increase in borrowings was to strategically enhance Bank capital levels in order to accommodate future growth expectations. Net Interest Income Net interest income for the first quarter of 2024 was $90.1 million compared to $89.6 million for the fourth quarter of 2023 and $82.0 million for the first quarter of 2023. The net interest margin for the first quarter of 2024 and fourth quarter of 2023 was 3.33% and 3.32%, respectively, an increase of one basis point quarter over quarter. During the first quarter of 2024, the average cost of interest-bearing liabilities increased by 17 basis points while the average yield on interest-earning assets increased by 19 basis points. The increase in net interest income for the first quarter of 2024 compared to the first quarter of 2023 was driven by growth in average loans and leases held for investment. Partially mitigating this increase was a decrease in the net interest margin by 13 basis points arising from an increase in deposits combined with the increase in average cost of funds outpacing the increase in average yield on interest-earning assets. Noninterest Income Noninterest income for the first quarter of 2024 was $26.1 million, a decrease of $4.0 million compared to the fourth quarter of 2023, and an increase of $6.5 million compared to the first quarter of 2023. The primary drivers in noninterest income changes are outlined below. The loan servicing asset revaluation resulted in a loss of $2.7 million for the first quarter of 2024 compared to a $356 thousand gain for the first quarter of 2023. The net loss in the loan servicing asset revaluation for the first quarter of 2024 was principally related to increasing market prepayment speeds while the net gain in the first quarter of 2023 was the result of positive movements in market premiums. In the third quarter of 2023, the Company changed its valuation techniques in the estimation of fair value for servicing assets and loans accounted for under the fair value option. Loans accounted for under the fair value option had a net loss of $219 thousand for the first quarter of 2024, compared to a $4.5 million net loss for the first quarter of 2023. The net loss in the valuation of loans accounted for under the fair value option in the first quarter of 2024 was largely the result of the above discussed increased levels of market prepayment speeds, while the net loss in the first quarter of 2023 was driven by negative market impacts related to rising interest rates. Equity method investment losses totaled $5.0 million for the first quarter of 2024, a $5.1 million increase in losses from net income of $47 thousand in the fourth quarter of 2023 and a $2.1 million increase from the net loss of $3.0 million in the first quarter of 2023. The increase in losses for both comparative periods was principally related to heightened levels of underlying losses in several of the Company's equity method investees. Other noninterest income for the first quarter of 2024 totaled $9.8 million compared to $4.1 million for the first quarter of 2023. This $5.7 million increase in noninterest income was largely related to a gain arising from increased fair value of equity warrant assets associated with the Company's wine & craft beverage vertical. Noninterest Expense Noninterest expense for the first quarter of 2024 totaled $78.7 million compared to $93.2 million for the fourth quarter of 2023 and $79.0 million for the first quarter of 2023. The driver for the quarter over quarter decrease was $14.6 million of impairment charges in the fourth quarter of 2023 related to a new renewable energy tax credit investment. Partially offsetting the decrease in noninterest expense for both comparative periods was increased salaries and employee benefits of $3.0 million compared to fourth quarter of 2023 and $2.5 million compared to the first quarter of 2023. Asset Quality During the first quarter of 2024, the Company recognized net charge-offs for loans carried at historical cost of $3.2 million, compared to $4.4 million in the fourth quarter of 2023 and $6.7 million in the first quarter of 2023. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, annualized, for the quarters ended March 31, 2024, December 31, 2023, and March 31, 2023, was 0.15%, 0.22% and 0.38%, respectively. Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $7.9 million and $7.2 million accounted for under the fair value option at March 31, 2024, and December 31, 2023, respectively, increased to $43.1 million, or 0.51% of loans and leases held for investment which are carried at historical cost, at March 31, 2024, compared to $39.3 million, or 0.48%, at December 31, 2023. Provision for Loan and Lease Credit Losses The provision for loan and lease credit losses for the first quarter of 2024 totaled $16.4 million compared to $9.0 million for the fourth quarter of 2023 and $19.0 million for the first quarter of 2023. The provision expense in the first quarter of 2024 was primarily the result of specific reserve changes on individually evaluated loans and to a lesser extent continued growth of the loan and lease portfolio combined with charge-off related impacts. The allowance for credit losses on loans and leases totaled $139.0 million at March 31, 2024, compared to $125.8 million at December 31, 2023. The allowance for credit losses on loans and leases as a percentage of total loans and leases held for investment carried at historical cost was 1.63% and 1.53% at March 31, 2024, and December 31, 2023, respectively. Income Tax Income tax expense and related effective tax rate was $4.6 million and 21.8% for the first quarter of 2024, $1.3 million and 7.6% for the fourth quarter of 2023 and $3.2 million and 89.0% for the first quarter of 2023, respectively. The higher level of income tax expense for the first quarter of 2024 compared to the fourth quarter of 2023 was primarily the result of lower investment tax credits in 2024 as compared to the prior year. The higher level of income tax expense for the first quarter of 2024 as compared to the first quarter of 2023 was primarily the result of increased pretax income during the current period while the lower effective tax rate was principally the product of discrete items in the first quarter of 2023 related to stock compensation. Conference Call Live Oak will host a conference call to discuss the Company's financial results and business outlook tomorrow, April 25, 2024, at 9:00 a.m. ET. The call will be accessible by telephone and webcast using Conference ID: 50185213. A supplementary slide presentation will be posted to the website prior to the event, and a replay will be available for 12 months following the event. The conference call details are as follows: Live Telephone Dial-In U.S.: 888.259.6580 International: +1 416.764.8624 Pass Code: None Required Live Webcast Log-In Webcast Link: investor.liveoakbank.com Registration: Name and Email Required Multi-Factor Code: Provided After Registration 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; the impacts of global health crises and pandemics, such as the Coronavirus Disease 2019 (COVID-19) pandemic, on trade (including supply chains and export levels), travel, employee productivity and other economic activities that may have a destabilizing and negative effect on financial markets, economic activity and customer behavior; adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; 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 or those of its third-party service providers; technological risks and developments, including cyber threats, attacks, or events; 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; changes in political and economic conditions, including any prolonged U.S. government shutdown; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; adverse results, including related fees and expenses, from pending or future lawsuits, government investigations or private actions; 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. (NYSE:LOB) is a financial holding company and the parent company of Live Oak Bank. Live Oak Bancshares and its subsidiaries partner with businesses that share a groundbreaking focus on service and technology to redefine banking. To learn more, visit www.liveoakbank.com. Contacts: Walter J. Phifer | CFO | Investor Relations | 910.202.6926Claire Parker | Corporate Communications | Media Relations | 910.597.1592 Live Oak Bancshares, Inc.Quarterly Statements of Income (unaudited)(Dollars in thousands, except per share data)   Three Months Ended   1Q 2024 Change vs.   1Q 2024   4Q 2023   3Q 2023   2Q 2023   1Q 2023   4Q 2023   1Q 2023 Interest income                     %   % Loans and fees on loans $ 176,010     $ 169,531     $ 162,722     $ 152,362     $ 139,052     3.8     26.6   Investment securities, taxable   8,954       8,746       8,701       8,503       7,547     2.4     18.6   Other interest earning assets   7,456       8,259       9,188       8,847       4,817     (9.7 )   54.8   Total interest income   192,420       186,536       180,611       169,712       151,416     3.2     27.1   Interest expense                           Deposits   101,998       96,695       90,914       85,003       67,595     5.5     50.9   Borrowings   311       265       287       407       1,804     17.4     (82.8 ) Total interest expense   102,309       96,960       91,201       85,410       69,399     5.5     47.4   Net interest income   90,111       89,576       89,410       84,302       82,017     0.6     9.9   Provision for loan and lease credit losses   16,364       8,995       10,279       13,028       19,021     81.9     (14.0 ) Net interest income after provision for loan and lease credit losses   73,747       80,581       79,131       71,274       62,996     (8.5 )   17.1   Noninterest income                           Loan servicing revenue   7,624       7,342       6,990       6,687       6,380     3.8     19.5   Loan servicing asset revaluation   (2,744 )     (3,974 )     11,335       (2,831 )     356     31.0     (870.8 ) Net gains on sales of loans   11,502       12,891       12,675       10,804       10,175     (10.8 )   13.0   Net (loss) gain on loans accounted for under the fair value option   (219 )     (170 )     (568 )     1,728       (4,529 )   (28.8 )   95.2   Equity method investments (loss) income   (5,022 )     47       (1,034 )     (2,055 )     (2,952 )   (10,785.1 )   (70.1 ) Equity security investments (losses) gains, net   (529 )     (384 )     (783 )     121       77     (37.8 )   (787.0 ) Lease income   2,453       2,439       2,498       2,535       2,535     0.6     (3.2 ) Management fee income   3,271       3,309       3,277       3,266       3,472     (1.1 )   (5.8 ) Other noninterest income   9,761       8,607       3,501       3,901       4,065     13.4     140.1   Total noninterest income   26,097       30,107       37,891       24,156       19,579     (13.3 )   33.3   Noninterest expense                           Salaries and employee benefits   47,275       44,274       42,947       43,066       44,765     6.8     5.6   Travel expense   2,438       1,544       2,197       2,770       2,411     57.9     1.1   Professional services expense   1,878       3,052       1,762       1,996       927     (38.5 )   102.6   Advertising and marketing expense   3,692       2,501       3,446       3,009       3,603     47.6     2.5   Occupancy expense   2,247       2,231       2,129