Live Oak(US:LOB)2023-08-02 20:08Financial Performance - For Q2 2023, the Company reported net income of $17.5 million, or $0.39 per diluted share, a significant decrease from $97.0 million, or $2.16 per diluted share, in Q2 2022[150]. - For the first half of 2023, net income was $17.9 million, or $0.40 per diluted share, compared to $131.5 million, or $2.92 per diluted share, in the same period of 2022[151]. - Noninterest income for Q2 2023 decreased by $104.4 million, or 81.2%, primarily due to a $120.5 million gain from Finxact included in the previous year's results[176][178]. - The consolidated net income for the three months ended June 30, 2023, was $17.5 million, a decrease from $97.0 million in the same period of 2022[198]. Loan and Lease Performance - The provision for loan and lease credit losses increased by $7.8 million to $13.0 million in Q2 2023, compared to $5.3 million in Q2 2022[152]. - Loans and leases held for investment increased to $7.39 billion as of June 30, 2023, representing a growth of $2.07 billion, or 38.7%, compared to the previous year[171]. - The net charge-offs for loans and leases for the first half of 2023 totaled $7.8 million, an increase of 62.2% from $4.8 million in the same period of 2022[172]. - Nonperforming loans and leases not guaranteed by the SBA or USDA totaled $44.9 million, or 0.61% of the held for investment portfolio, up from $12.0 million, or 0.22%, in the previous year[173]. - Total loans and leases 90 or more days past due increased by $41.1 million, or 72.7%, compared to December 31, 2022[230]. Interest Income and Expenses - Net interest income increased by $4.4 million, or 5.5%, to $84.3 million in Q2 2023, up from $79.9 million in Q2 2022[155]. - Total interest income was $70.465 million, an increase of $46.205 million compared to Q2 2022, while total interest expense rose to $66.097 million, up by $11.547 million[167][170]. - The cost of funds on interest-bearing liabilities increased by 260 basis points to 3.59% in Q2 2023[155]. - The net interest margin decreased from 3.95% for the first half of 2022 to 3.36% for the first half of 2023[158]. Asset and Deposit Growth - Total assets increased to $10.82 billion as of June 30, 2023, representing a growth of $963.7 million, or 9.8%, from $9.86 billion at December 31, 2022[206]. - Total deposits reached $9.88 billion, an increase of $994.2 million, or 11.2%, from $8.88 billion at December 31, 2022[208]. - Cash and cash equivalents, along with investment securities available-for-sale, increased by $509.9 million, or 35.6%, to $1.94 billion at June 30, 2023[210]. Credit Losses and Allowances - The allowance for credit losses on loans and leases increased to $120.1 million at June 30, 2023, up from $96.6 million at December 31, 2022[220]. - The Allowance for Credit Losses (ACL) increased by $23.6 million, or 24.4%, from $96.6 million at December 31, 2022, to $120.1 million at June 30, 2023[229]. - The allowance for credit losses on loans and leases to total nonperforming loans and leases was 108.00% at June 30, 2023, down from 131.58% at December 31, 2022[220]. Regulatory and Economic Environment - The Federal Reserve increased the federal funds upper target rate to 5.50% as of July 26, 2023, with projections indicating a potential increase to 5.6% by the end of 2023[159]. - In the first half of 2023, the Federal Reserve increased the federal funds upper target rate by 100 basis points, reaching 5.50%[159]. - The Federal Reserve's projections indicate a potential decrease in the federal funds rate to 4.6% by the end of 2024, impacting future interest income expectations[159]. Expense Management - Total noninterest expense for the three months ended June 30, 2023, decreased by $4.4 million, or 5.5%, compared to the same period in 2022[188]. - Salaries and employee benefits for the three months ended June 30, 2023, decreased by $3.2 million, or 6.9%, compared to the same period in 2022[189]. - Professional services expense decreased by $2.0 million, or 49.9%, for the three months ended June 30, 2023, compared to the same period in 2022[190]. - Advertising and marketing expense increased by $2.6 million, or 64.1%, for the six months ended June 30, 2023, compared to the same period in 2022[191]. Risk Management - The Company maintains an investment securities portfolio with $1.13 billion available to pledge as collateral as of June 30, 2023[233]. - The balance sheet's total cumulative gap position was 5.0% as of June 30, 2023, indicating the Company's interest rate sensitivity[236]. - Management believes the allowance for credit losses (ACL) of $120.1 million at June 30, 2023, is appropriate given the risk in the loan and lease portfolio[230].