PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Live Oak Bancshares, Inc. as of March 31, 2023, and for the three-month period then ended, with comparative data for December 31, 2022, and the corresponding period in 2022 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets grew to **$10.36 billion** from **$9.86 billion** at year-end 2022, driven by a **$343 million** increase in net loans and leases, while total liabilities rose to **$9.54 billion**, primarily due to a **$537 million** increase in total deposits Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$10,364,297** | **$9,855,498** | | Net loans and leases | $7,578,745 | $7,247,612 | | Investment securities available-for-sale | $1,149,691 | $1,014,719 | | Cash and due from banks | $463,186 | $280,239 | | **Total Liabilities** | **$9,541,490** | **$9,044,465** | | Total deposits | $9,421,994 | $8,884,928 | | Borrowings | $30,767 | $83,203 | | **Total Shareholders' Equity** | **$822,807** | **$811,033** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the first quarter of 2023, net income plummeted to **$398 thousand** from **$34.5 million** in Q1 2022, primarily due to a significant increase in the provision for credit losses and a drop in noninterest income Q1 2023 vs Q1 2022 Income Statement (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net interest income | $82,017 | $77,779 | | Provision for loan and lease credit losses | $19,021 | $1,836 | | Total noninterest income | $19,579 | $32,668 | | Total noninterest expense | $78,962 | $65,714 | | **Net income** | **$398** | **$34,509** | | **Diluted earnings per share** | **$0.01** | **$0.76** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 31, 2023, net cash provided by operating activities was **$158.5 million**, while net cash used in investing activities was significant at **$592.9 million**, resulting in a net increase in cash and cash equivalents of **$46.6 million** Cash Flow Summary for Three Months Ended March 31, 2023 (in thousands) | Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $158,456 | | Net cash used by investing activities | $(592,854) | | Net cash provided by financing activities | $480,948 | | **Net increase in cash and cash equivalents** | **$46,550** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's operations, accounting policies, and financial instrument specifics, including its SBA/USDA guaranteed lending model, fintech investments, and the adoption of ASU 2022-02 - The company operates primarily through its bank subsidiary, specializing in nationwide small business lending, with a significant portion of loans guaranteed by the SBA and USDA[19](index=19&type=chunk) - The company has two reportable operating segments: Banking (lending and deposit services) and Fintech (strategic investments in financial technology companies)[27](index=27&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - In Q1 2023, the company refined its allowance for credit losses (ACL) methodology, resulting in a **$1.5 million** increase in the ACL and a **$2.4 million** increase in the reserve on unfunded commitments[28](index=28&type=chunk)[29](index=29&type=chunk) - The company adopted ASU 2022-02 on January 1, 2023, which eliminates Troubled Debt Restructuring (TDR) accounting and enhances disclosures for loan modifications to borrowers experiencing financial difficulty, resulting in a net increase to retained earnings of **$676 thousand**[33](index=33&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant drop in Q1 2023 net income to **$0.4 million** from **$34.5 million** in Q1 2022, attributing it to higher provision for credit losses, lower gains on loan sales, and increased operating expenses [Performance Summary](index=42&type=section&id=Performance%20Summary) For Q1 2023, net income was **$398 thousand** (**$0.01** per diluted share), a steep decline from **$34.5 million** (**$0.76** per diluted share) in Q1 2022 Q1 Performance Snapshot | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $398 thousand | $34.5 million | | Diluted EPS | $0.01 | $0.76 | - Key drivers for the decrease in net income included a higher provision for loan losses (**+$17.2 million**), lower net gains on loan sales (**-$10.8 million**), increased net loss on fair value loans (**-$5.0 million**), and higher noninterest expense (**+$13.2 million**)[144](index=144&type=chunk) [Net Interest Income and Margin](index=42&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest income for Q1 2023 increased by **5.4%** to **$82.0 million**, driven by a **22.3%** increase in average interest-earning assets, though the net interest margin compressed to **3.46%** from **4.02%** year-over-year Net Interest Income and Margin Analysis | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Interest Income | $82.0 million | $77.8 million | | Net Interest Margin | 3.46% | 4.02% | | Avg. Yield on Earning Assets | 6.39% | 4.79% | | Avg. Cost of Interest-Bearing Liabilities | 3.11% | 0.81% | - The increase in net interest income was primarily due to a **$13.8 billion** increase in volume, which was partially offset by a **$9.5 billion** decrease due to rate changes (margin compression)[152](index=152&type=chunk) [Provision for Loan and Lease Credit Losses](index=45&type=section&id=Provision%20for%20Loan%20and%20Lease%20Credit%20Losses) The provision for loan and lease credit losses was **$19.0 million** in Q1 2023, a substantial increase of **$17.2 million** from **$1.8 million** in Q1 2022, attributed to significant loan growth and evolving portfolio trends - Provision for credit losses increased to **$19.0 million** in Q1 2023 from **$1.8 million** in Q1 2022[155](index=155&type=chunk) - Net charge-offs increased to **$6.7 million** (**0.38%** of average loans) in Q1 2023, compared to **$2.4 million** (**0.19%**) in Q1 2022, with the increase primarily isolated to two relationships[157](index=157&type=chunk) [Noninterest Income](index=46&type=section&id=Noninterest%20Income) Noninterest income fell by **40.1%** to **$19.6 million** in Q1 2023 from **$32.7 million** in Q1 2022, mainly due to a **$10.8 million** decrease in net gains on sales of loans and a **$4.5 million** net loss on fair value loans Noninterest Income Components (in thousands) | Component | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net gains on sales of loans | $10,175 | $20,977 | | Net (loss) gain on loans (fair value option) | $(4,529) | $516 | | Loan servicing asset revaluation | $356 | $(1,569) | | Management fee income | $3,472 | $1,488 | | **Total noninterest income** | **$19,579** | **$32,668** | - The volume of guaranteed loans sold decreased by **23.6%** to **$167.8 million** in Q1 2023 from **$219.7 million** in Q1 2022, and the average net gain on sale premium fell from **109%** to **106%**[167](index=167&type=chunk) [Noninterest Expense](index=47&type=section&id=Noninterest%20Expense) Total noninterest expense for Q1 2023 rose **20.2%** to **$79.0 million** from **$65.7 million** in Q1 2022, driven by increases in salaries and employee benefits, advertising and marketing, technology, and other expenses Noninterest Expense Components (in thousands) | Component | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Salaries and employee benefits | $44,765 | $38,507 | | Technology expense | $7,729 | $6,053 | | Advertising and marketing expense | $3,603 | $1,729 | | Other expense | $6,329 | $2,786 | | **Total noninterest expense** | **$78,962** | **$65,714** | - Full-time equivalent employees increased from **842** at March 31, 2022, to **968** at March 31, 2023, contributing to higher salary costs[173](index=173&type=chunk) [Financial Condition](index=50&type=section&id=Financial%20Condition) Total assets grew by **5.2%** to **$10.36 billion** at March 31, 2023, officially crossing the **$10 billion** threshold, fueled by loan and investment securities growth, and supported by a **6.0%** increase in total deposits - Total assets increased by **$508.8 million** to **$10.36 billion** as of March 31, 2023[184](index=184&type=chunk) - Loans and leases held for investment grew by **$342.8 million** (**4.7%**) during Q1 2023[186](index=186&type=chunk) - Total deposits grew by **$537.1 million** (**6.0%**) to **$9.42 billion**, with uninsured deposits approximately **$1.4 billion**, or **14.5%** of total deposits[187](index=187&type=chunk) - As of March 31, 2023, the Company and Bank first exceeded **$10 billion** in total assets, which will subject them to additional regulatory requirements under the Dodd-Frank Act, including potential CFPB supervision and changes to interchange fee rules (Durbin Amendment)[189](index=189&type=chunk)[190](index=190&type=chunk)[193](index=193&type=chunk) [Asset Quality](index=51&type=section&id=Asset%20Quality) Asset quality showed some deterioration in Q1 2023, with nonperforming assets (excluding fair value loans) increasing by **16.8%** to **$85.7 million** and criticized and classified loans rising to **$504.2 million** Nonperforming Assets (excluding loans at fair value) | Metric | March 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total nonperforming assets | $85,698 thousand | $73,392 thousand | | Unguaranteed nonperforming exposure | $22,002 thousand | $18,784 thousand | | NPA / Total HFI Loans | 1.19% | 1.07% | | ACL / Total HFI Loans | 1.50% | 1.41% | - Potential problem (criticized) and classified loans increased by **$79.5 million** in Q1 2023 to **$504.2 million**[203](index=203&type=chunk) - The increase in criticized loans (Risk Grade 5) was concentrated in several verticals, including Sponsor Finance, Bioenergy, Senior Housing, and Venture Banking[205](index=205&type=chunk) [Liquidity and Capital](index=54&type=section&id=Liquidity%20and%20Capital) The company maintained a strong liquidity position, with immediately available sources totaling **$4.24 billion**, or **40.9%** of total assets, at March 31, 2023, and capital levels remained well above regulatory requirements - Immediate liquidity sources (cash, fed funds sold, unpledged securities, credit lines) totaled **$4.24 billion**, or **40.9%** of total assets, at March 31, 2023[209](index=209&type=chunk) Bank Capital Ratios - March 31, 2023 | Ratio | Actual | Well Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 Ratio | 10.00% | 6.50% | | Tier 1 Capital Ratio | 10.00% | 8.00% | | Total Capital Ratio | 11.25% | 10.00% | | Tier 1 Leverage Ratio | 7.24% | 5.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's interest rate risk profile shifted to slightly liability-sensitive as of March 31, 2023, with simulation models projecting a **0.8%** decrease in Net Interest Income (NII) and a **7.8%** decrease in Economic Value of Equity (EVE) in a **+100 basis point** rate shock - As of March 31, 2023, the company's interest rate risk profile shifted to slightly liability-sensitive, meaning net interest income will generally move in the opposite direction of interest rates[215](index=215&type=chunk) Interest Rate Sensitivity Analysis (as of March 31, 2023) | Basis Point Change | Estimated % Change in NII (12 months) | Estimated % Change in EVE | | :--- | :--- | :--- | | +300 | (2.1)% | (23.3)% | | +200 | (1.3)% | (15.6)% | | +100 | (0.8)% | (7.8)% | | -100 | (0.1)% | 7.7% | - The liability-sensitive position is attributed to the rapid repricing of deposits compared to the longer duration of the asset portfolio, which includes an increased amount of fixed-rate loans originated since 2020[231](index=231&type=chunk)[232](index=232&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's Chief Executive Officer and Chief Financial Officer evaluated the disclosure controls and procedures as of March 31, 2023, and concluded they were effective, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2023[233](index=233&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2023[234](index=234&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2023, the company reports that it is not a party to any material pending legal proceedings - In the opinion of management, there are no material pending legal proceedings as of March 31, 2023[237](index=237&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) The company has identified a new material risk factor following recent high-profile bank failures, involving the potential for eroded customer confidence in the banking system and anticipated increased regulatory scrutiny - A new risk factor highlights that recent negative developments in the banking industry have eroded customer confidence, which could materially adversely impact the Company's liquidity, net interest margin, and results of operations[238](index=238&type=chunk) - The company anticipates increased regulatory scrutiny and new regulations as a result of recent events, which may increase costs and reduce profitability[239](index=239&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a share repurchase program, authorized in May 2022, for up to **$50 million** of its voting common stock through December 31, 2023, under which no shares had been repurchased as of March 31, 2023 - The Board of Directors authorized a repurchase program for up to **$50 million** in common stock, effective through December 31, 2023[240](index=240&type=chunk) - As of March 31, 2023, the Company had not made any purchases of shares under the Repurchase Program[240](index=240&type=chunk) [Defaults Upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - None[241](index=241&type=chunk) [Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[242](index=242&type=chunk) [Other Information](index=61&type=section&id=Item%205.%20Other%20Information) None reported - None[243](index=243&type=chunk) [Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, material contracts such as an amendment to the software service agreement with nCino, and certifications by the CEO and CFO - Exhibits filed include an amendment to the software service agreement with nCino, Inc., and certifications from the Principal Executive Officer and Principal Financial Officer[245](index=245&type=chunk)

Live Oak Bancshares, Inc. (NYSE:LOB) Q1 2023 Earnings Conference Call April 27, 2023 9:00 AM ET Company Participants Greg Seward - Chief Risk Officer and General Counsel James Mahan - Chairman and Chief Executive Officer Huntley Garriott - President William Losch - Chief Financial Officer Steven Smits - Chief Credit Officer Conference Call Participants Brandon King - Truist Securities Crispin Love - Piper Sandler Steven Alexopoulos - JPMorgan David Feaster - Raymond James Operator Good morning, ladies and ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-37497 LIVE OAK BANCSHARES, INC. (Exact name of registrant as specified in its charter) | North Carolina | 26-4596286 | | -- ...

Live Oak Bancshares, Inc. (NYSE:LOB) Q4 2022 Earnings Conference Call January 26, 2023 9:00 AM ET Company Participants Greg Seward - Chief Risk Officer and General Counsel James Mahan - Chairman and Chief Executive Officer William Losch - Chief Financial Officer Huntley Garriott - President Steve Smits - Chief Credit Officer Conference Call Participants Steven Alexopoulos - JPMorgan Crispin Love - Piper Sandler Michael Perito - KBW Operator Good day and thank you for standing by. Welcome to the Q4 2022 Li ...

0.00% 1.20% | --- | --- | --- | --- | --- | |---------------------------------------------------|-------------------------------|----------------------|---------------|--------------------| | $ in millions | Q4 HFI Unguaranteed Balance | Past Due >30 Days 1 | NonAccruals 2 | Net Charge Offs 3 | | Small Business Banking $2,616 0.71% 0.71% (0.08%) | | | | | | Specialty Finance $1,381 0.06% 0.29% 0.41% | | | | | | Energy & Infrastructure $599 —% 0.57% 0.34% | | | | | 1.00% 0.80% Funeral Home & Cemetery Governm ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of Live Oak Bancshares, Inc [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Live Oak Bancshares' unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flow statements [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets increased to $9.31 billion from $8.21 billion at year-end 2021, driven by a $1.32 billion increase in net loans and leases, funded by a $1.29 billion increase in total deposits, with shareholders' equity growing to $802.2 million despite a significant increase in accumulated other comprehensive loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$9,314,650** | **$8,213,393** | **$1,101,257** | | Net loans and leases | $6,775,091 | $5,457,678 | $1,317,413 | | Loans held for sale | $537,649 | $1,116,519 | ($578,870) | | **Total Liabilities** | **$8,512,482** | **$7,498,260** | **$1,014,222** | | Total deposits | $8,404,909 | $7,112,044 | $1,292,865 | | Borrowings | $35,616 | $318,289 | ($282,673) | | **Total Shareholders' Equity** | **$802,168** | **$715,133** | **$87,035** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q3 2022, net income increased to $42.9 million from $33.8 million in Q3 2021, driven by higher equity method investment income and net interest income, with nine-month net income rising to $174.4 million from $136.8 million year-over-year primarily due to increased equity method investment income Key Income Statement Data (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $83,886 | $77,735 | $241,599 | $219,147 | | Provision for credit losses | $14,169 | $4,319 | $21,272 | $11,292 | | Total Noninterest Income | $57,724 | $25,276 | $218,921 | $126,444 | | Total Noninterest Expense | $83,048 | $55,459 | $229,641 | $171,289 | | **Net Income** | **$42,868** | **$33,839** | **$174,416** | **$136,848** | | **Diluted EPS** | **$0.96** | **$0.76** | **$3.88** | **$3.05** | - Equity method investments income was a major driver of performance, recording income of **$29.1 million** in Q3 2022 and **$146.1 million** for the first nine months of 2022, compared to losses in the same periods of 2021[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q3 2022 was $6.9 million, a significant decrease from $28.8 million in Q3 2021, and for the nine-month period, it was $77.2 million, down from $123.4 million year-over-year, driven by a substantial other comprehensive loss of $97.2 million from net unrealized losses on investment securities Comprehensive Income Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $42,868 | $33,839 | $174,416 | $136,848 | | Other comprehensive loss, net of tax | ($35,959) | ($5,058) | ($97,188) | ($13,442) | | **Total Comprehensive Income** | **$6,909** | **$28,781** | **$77,228** | **$123,406** | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased from $715.1 million at the end of 2021 to $802.2 million at September 30, 2022, primarily driven by $174.4 million in net income, partially offset by a $97.2 million other comprehensive loss and $3.9 million in cash dividends - For the nine months ended September 30, 2022, shareholders' equity increased by **$87.1 million**, driven by net income of **$174.4 million** and restricted stock compensation of **$14.2 million**, offset by an other comprehensive loss of **$97.2 million** and cash dividends of **$3.9 million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2022, net cash provided by operating activities was $98.3 million, a significant improvement from a use of $134.2 million in the prior year period, with investing activities using $903.2 million and financing activities providing $1.0 billion, resulting in a net increase in cash and cash equivalents of $199.6 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $98,328 | ($134,208) | | Net cash (used) provided by investing activities | ($903,217) | $48,059 | | Net cash provided by financing activities | $1,004,509 | $114,863 | | **Net increase in cash and cash equivalents** | **$199,620** | **$28,714** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies and financial results, covering the loan portfolio, fair value measurements, securities holdings, servicing assets, borrowings, and segment reporting [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for Q3 and the first nine months of 2022, highlighting increased net income driven by fintech investment gains, offset by higher credit loss provisions, operating expenses, and lower loan sale gains - Net income for Q3 2022 was **$42.9 million**, up from **$33.8 million** in Q3 2021, and for the first nine months of 2022, net income was **$174.4 million**, up from **$136.8 million** in the prior year period[146](index=146&type=chunk)[149](index=149&type=chunk) - The increase in net income was largely driven by a **$30.4 million** increase in equity method investment income in Q3 2022 (from a **$28.4 million** gain on the sale of Payrailz) and a **$150.8 million** increase for the nine-month period (including a **$120.5 million** gain on the sale of Finxact)[147](index=147&type=chunk)[150](index=150&type=chunk) - Offsetting factors included an increased provision for loan and lease credit losses (**$9.9 million** higher in Q3 YoY), decreased net gains on sales of loans (**$9.6 million** lower in Q3 YoY), and higher noninterest expense (**$27.6 million** higher in Q3 YoY)[149](index=149&type=chunk)[150](index=150&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) The company's results were significantly impacted by its Fintech segment, with a $150.8 million increase in equity method investment income from Finxact and Payrailz sales driving profitability, despite a $42.0 million decrease in equity security investment gains and a 34.1% rise in noninterest expenses Key Performance Drivers - Nine Months 2022 vs 2021 | Metric | YTD 2022 | YTD 2021 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $241.6M | $219.1M | +10.2% | | Provision for Credit Losses | $21.3M | $11.3M | +88.4% | | Equity Method Investments Income | $146.1M | ($4.7M) | +$150.8M | | Equity Security Investments Gains | $2.5M | $44.5M | -94.4% | | Net Gains on Sales of Loans | $35.9M | $47.0M | -23.7% | | Noninterest Expense | $229.6M | $171.3M | +34.1% | [Financial Condition](index=58&type=section&id=Financial%20Condition) Total assets grew by $1.10 billion (13.4%) to $9.31 billion at September 30, 2022, primarily fueled by a $1.33 billion increase in loans and leases held for investment, funded by $1.29 billion in deposit growth, while borrowings decreased and shareholders' equity increased despite an unrealized investment portfolio loss - A transfer of **$754.7 million** in loans from held for sale to held for investment occurred in Q3 2022, driven by management's intent to hold loans longer in the current rising rate environment[201](index=201&type=chunk) - Loans and leases held for investment increased by **$1.33 billion** (**24.1%**) in the first nine months of 2022[202](index=202&type=chunk) - Total deposits increased by **$1.29 billion** (**18.2%**) to fund asset growth[204](index=204&type=chunk) [Asset Quality](index=58&type=section&id=Asset%20Quality) Asset quality metrics showed mixed results, with total nonperforming assets and TDRs (excluding fair value loans) increasing by $27.8 million to $108.0 million, while the allowance for credit losses grew to $78.3 million due to loan growth and macroeconomic changes Nonperforming Assets and TDRs (excluding fair value loans, in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Nonaccrual loans and leases | $60,064 | $42,533 | | Total performing TDRs | $46,804 | $37,063 | | **Total nonperforming assets and TDRs** | **$108,046** | **$80,216** | | Unguaranteed exposure of NPA & TDRs | $42,727 | $37,000 | - The allowance for credit losses (ACL) increased by **$14.7 million** to **$78.3 million** at September 30, 2022, driven by loan growth, charge-off experience, loan reclassifications, and macroeconomic changes[223](index=223&type=chunk) [Capital](index=63&type=section&id=Capital) The company maintained strong capital levels, with all regulatory capital ratios remaining well in excess of 'well capitalized' requirements, including a consolidated Common Equity Tier 1 (CET1) capital ratio of 13.16% and a Total Capital ratio of 14.36% as of September 30, 2022 Regulatory Capital Ratios (Consolidated) | Ratio | Sep 30, 2022 | Dec 31, 2021 | Minimum Requirement | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 13.16% | 12.38% | 4.50% | | Tier 1 Capital | 13.16% | 12.38% | 6.00% | | Total Capital | 14.36% | 13.53% | 8.00% | [Quantitative and Qualitative Disclosures about Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk through its Asset/Liability Committee, using EVE and NII simulation models, with the balance sheet being asset-sensitive, expecting NII to increase in a rising rate environment, though EVE analysis shows a theoretical market value loss - The company's balance sheet is asset-sensitive, with a total cumulative one-year gap of **5.2%** as of September 30, 2022[230](index=230&type=chunk)[242](index=242&type=chunk) Interest Rate Sensitivity Analysis (as of Sep 30, 2022) | Basis Point Change | Estimated % Change in NII (12 Months) | Estimated % Change in EVE | | :--- | :--- | :--- | | +300 | +7.2% | (17.8)% | | +200 | +4.8% | (11.6)% | | +100 | +2.4% | (5.6)% | | -100 | (2.4)% | +5.2% | [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022[250](index=250&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of 2022[251](index=251&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2022, the company reports no material pending legal proceedings - Management states that as of September 30, 2022, there are no material pending legal proceedings against the company or its subsidiaries[254](index=254&type=chunk) [Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes in risk factors were reported compared to the 2021 Form 10-K[255](index=255&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board of Directors authorized a stock repurchase program of up to $50 million, effective from May 17, 2022, through December 31, 2023, with no shares repurchased as of September 30, 2022 - A **$50 million** stock repurchase program was authorized in May 2022, but no shares have been purchased as of the end of Q3 2022[256](index=256&type=chunk) [Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None [Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=69&type=section&id=Item%205.%20Other%20Information) None [Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including certifications by the CEO and CFO and interactive data files

| --- | --- | --- | |------------------------------------------------------------------|-------|-------| | | | | | THIRD QUARTER 2022 | | | | ©2022 Live Oak Bancshares. All rights reserved. October 27, 2022 | | | 2 FORWARD LOOKING STATEMENTS Information in this presentation may contain "forward-looking statements" within the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business ...

Live Oak Bancshares, Inc. (NYSE:LOB) Q3 2022 Earnings Conference Call October 27, 2022 9:00 AM ET Company Participants Greg Seward - Chief Risk Officer and General Counsel James Mahan - Chairman and Chief Executive Officer William Losch - Chief Financial Officer Huntley Garriott - President Neil Lawrence - President & Director Conference Call Participants Steven Alexopoulos - JPMorgan Crispin Love - Piper Sandler Michael Perito - KBW Operator Thank you for standing by, and welcome to Live Oak Bancshares T ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number: 001-37497 LIVE OAK BANCSHARES, INC. (Exact name of registrant as specified in its charter) | North Carolina | | | 26-4596286 | | | --- | --- ...

Live Oak Bancshares, Inc. (NYSE:LOB) Q2 202 Earnings Conference Call July 28, 2022 9:00 AM ET Company Participants Greg Seward - Chief Risk Officer and General Counsel Chip Mahan - Chairman and Chief Executive Officer William Losch - Chief Financial Officer Huntley Garriott - President Micah Davis - Chief Marketing Officer Conference Call Participants Steven Alexopoulos - JP Morgan Crispin Love - Piper Sandler Jennifer Demba - Truist Securities Operator Good day and thank you for standing by. Welcome to the ...