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WILMINGTON, N.C., Oct. 23, 2024 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (NYSE: LOB) (“Live Oak” or “the Company”) today reported third quarter of 2024 net income of $13.0 million, or $0.28 per diluted share.
“Live Oak delivered historic production levels this quarter as our teams continue to put capital into the hands of business owners across the country,” said Live Oak Chairman and Chief Executive Officer James S. (Chip) Mahan III. “We believe our business momentum is in an exciting place and our conservative approach to growth is driving positive operating leverage, revenue, and deeper customer relationships.”
Third Quarter 2024 Key Measures
| (Dollars in thousands, except per share data) |
|
|
| Increase (Decrease) |
|
| |||||||||||||
|
| 3Q 2024 |
| 2Q 2024 |
| Dollars |
| Percent |
| 3Q 2023 | ||||||||||
| Total revenue(1) | $ | 129,932 |
|
| $ | 125,479 |
|
| $ | 4,453 |
|
|
| 3.5 | % |
| $ | 127,301 |
|
| Total noninterest expense |
| 77,589 |
|
|
| 77,656 |
|
|
| (67 | ) |
|
| (0.1 | ) |
|
| 74,262 |
|
| Income before taxes |
| 17,841 |
|
|
| 36,058 |
|
|
| (18,217 | ) |
|
| (50.5 | ) |
|
| 42,760 |
|
| Effective tax rate |
| 27.0 | % |
|
| 25.2 | % |
|
| n/a |
|
|
| n/a |
|
|
| 6.9 | % |
| Net income | $ | 13,025 |
|
| $ | 26,963 |
|
| $ | (13,938 | ) |
|
| (51.7 | )% |
| $ | 39,793 |
|
| Diluted earnings per share |
| 0.28 |
|
|
| 0.59 |
|
|
| (0.31 | ) |
|
| (52.5 | ) |
|
| 0.88 |
|
| Loan and lease production: |
|
|
|
|
|
|
|
|
| ||||||||||
| Loans and leases originated | $ | 1,757,856 |
|
| $ | 1,171,141 |
|
| $ | 586,715 |
|
|
| 50.1 | % |
| $ | 1,073,255 |
|
| % Fully funded |
| 42.4 | % |
|
| 38.2 | % |
|
| n/a |
|
|
| n/a |
|
|
| 52.2 | % |
| Total loans and leases: | $ | 10,191,868 |
|
| $ | 9,535,766 |
|
| $ | 656,102 |
|
|
| 6.9 | % |
| $ | 8,775,235 |
|
| Total assets: |
| 12,607,346 |
|
|
| 11,868,570 |
|
|
| 738,776 |
|
|
| 6.2 |
|
|
| 10,950,460 |
|
| Total deposits: |
| 11,400,547 |
|
|
| 10,707,031 |
|
|
| 693,516 |
|
|
| 6.5 |
|
|
| 10,003,642 |
|
(1) Total revenue consists of net interest income and total noninterest income.
Loans and Leases
As of September 30, 2024, the total loan and lease portfolio was $10.19 billion, 6.9% above its level at June 30, 2024, and 16.1% above its level a year ago. Excluding historical Paycheck Protection Program loans, the third quarter of 2024 was the Company’s highest loan production quarter of all time. Compared to the second quarter of 2024, loans and leases held for investment increased $659.8 million, or 7.2%, to $9.83 billion while loans held for sale decreased $3.7 million, or 1.0%, to $360.0 million. Average loans and leases were $9.76 billion during the third quarter of 2024 compared to $9.38 billion during the second quarter of 2024.
The total loan and lease portfolio at September 30, 2024, and June 30, 2024, was comprised of 34.5% and 36.4% of guaranteed loans, respectively.
Loan and lease originations totaled $1.76 billion during the third quarter of 2024, an increase of $586.7 million, or 50.1%, from the second quarter of 2024. Loan and lease originations increased $684.6 million, or 63.8%, from the third quarter of 2023.
Deposits
Total deposits increased to $11.40 billion at September 30, 2024, an increase of $693.5 million compared to June 30, 2024, and an increase of $1.40 billion compared to September 30, 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 third quarter of 2024 increased $287.5 million, or 2.8%, to $10.56 billion, compared to $10.27 billion for the second quarter of 2024. The ratio of average total loans and leases to average interest-bearing deposits was 92.5% for the third quarter of 2024, compared to 91.4% for the second quarter of 2024.
Borrowings
Borrowings totaled $115.4 million at September 30, 2024 compared to $117.7 million and $25.8 million at June 30, 2024, and September 30, 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 capital levels in order to accommodate future growth expectations.
Net Interest Income
Net interest income for the third quarter of 2024 was $97.0 million compared to $91.3 million for the second quarter of 2024 and $89.4 million for the third quarter of 2023. The net interest margin for the third quarter of 2024 and second quarter of 2024 was 3.33% and 3.28%, respectively, an increase of five basis points quarter over quarter. During the third quarter of 2024, the average cost of interest-bearing liabilities increased by two basis points, while the average yield on interest-earning assets increased by six basis points.
The increase in net interest income for the third quarter of 2024 compared to the third quarter of 2023 was largely driven by growth in average loans and leases held for investment. Partially mitigating this increase was a decrease in the net interest margin by four basis points arising from an increase in deposits and borrowings, 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 third quarter of 2024 was $32.9 million, a decrease of $1.2 million compared to the second quarter of 2024, and a decrease of $5.0 million compared to the third quarter of 2023. The primary drivers in noninterest income changes are outlined below.
The loan servicing asset revaluation resulted in a loss of $4.2 million for the third quarter of 2024 compared to a $11.3 million gain for the third quarter of 2023. This decrease between periods was principally due to the third quarter of 2023 change in valuation techniques used to estimate the fair value of servicing rights which resulted in a nonrecurring gain of $13.7 million during that period.
Net gains on sales of loans was $16.6 million, a $2.3 million increase compared to the second quarter of 2024 and a $4.0 million increase compared to the third quarter of 2023. The increase in net gains on sales of loans for both compared periods was the result of higher levels of market premiums combined with increased loan sale volumes. The average guaranteed loan sale premium was 107%, 106% and 105% for the third and second quarters of 2024 and third quarter of 2023, respectively. The volume of guaranteed loans sold was $266.3 million for the third quarter of 2024 compared to $250.5 million sold in the second quarter of 2024 and $225.6 million sold in the third quarter of 2023.
Loans accounted for under the fair value option had a net gain of $2.3 million for the third quarter of 2024, compared to a net gain of $172 thousand for the second quarter of 2024 and a net loss of $568 thousand for the third quarter of 2023. The increased levels of net gains arising from the valuation of loans accounted for under the fair value option compared to the second quarter of 2024 was largely associated with lower market interest rates. The increase in net gains when compared to the third quarter of 2023 was principally due to the third quarter of 2023 change in valuation techniques used to estimate the fair value of loans measured at fair value, which resulted in a nonrecurring gain of $1.3 million during that period.
Management fee income decreased by $2.2 million, as compared to both the second quarter of 2024 and third quarter of 2023. This decrease was the result of a restructuring of the Canapi Funds in the third quarter of 2024. In connection with that restructuring, the Company’s subsidiary Canapi Advisors voluntarily withdrew as an advisor to the funds. The Company remains an investor in the Canapi Funds and continues its focus on new and emerging financial technology companies.
Other noninterest income for the third quarter of 2024 totaled $7.1 million compared to $11.0 million for the second quarter of 2024 and $3.5 million for the third quarter of 2023. The quarter over quarter decrease of $3.9 million was largely related to a $6.7 million gain arising from the sale of one of the Company’s aircraft in the second quarter of 2024, partially offset by a $2.4 million gain from the sale of a building in the third quarter of 2024. The $3.6 million increase compared to the third quarter of 2023 was largely related to the above mentioned $2.4 million gain from the sale of an idle building and accompanying land that was determined earlier in 2024 not to be best suited to serve the Company’s future expansion plans.
Noninterest Expense
Noninterest expense for the third quarter of 2024 totaled $77.6 million compared to $77.7 million for the second quarter of 2024 and $74.3 million for the third quarter of 2023. Compared to the third quarter of 2023, the increase in noninterest expense was principally impacted by smaller balance increases in various expense categories, partially offset by $2.2 million in decreased levels of FDIC insurance expense. The decrease in FDIC insurance expense was the product of favorable changes in the Company’s FDIC assessment rates.
Asset Quality
During the third quarter of 2024, the Company recognized net charge-offs for loans carried at historical cost of $1.7 million, compared to $8.3 million in the second quarter of 2024 and $9.1 million in the third 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 September 30, 2024, June 30, 2024, and September 30, 2023, was 0.08%, 0.38% and 0.48%, respectively.
Unguaranteed nonperforming (nonaccrual) loans and leases, excluding $8.7 million and $9.6 million accounted for under the fair value option at September 30, 2024, and June 30, 2024, respectively, increased to $49.4 million, or 0.52% of loans and leases held for investment which are carried at historical cost, at September 30, 2024, compared to $37.3 million, or 0.42%, at June 30, 2024.
Provision for Credit Losses
The provision for credit losses for the third quarter of 2024 totaled $34.5 million compared to $11.8 million for the second quarter of 2024 and $10.3 million for the third quarter of 2023. The level of provision expense in the third quarter of 2024 was primarily the result of specific reserve increases on individually evaluated loans and continued growth of the loan and lease portfolio. Provision expense for three individually evaluated loan relationships amounted to $13.6 million, or 60.0% and 56.3% of the increase in the total provision for loan and lease losses when compared to the second quarter of 2024 and third quarter of 2023, respectively.
The allowance for credit losses on loans and leases totaled $168.7 million at September 30, 2024, compared to $137.9 million at June 30, 2024. 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 1.78% and 1.57% at September 30, 2024, and June 30, 2024, respectively.
Income Tax
Income tax expense and related effective tax rate was $4.8 million and 27.0% for the third quarter of 2024, $9.1 million and 25.2% for the second quarter of 2024 and $3.0 million and 6.9% for the third quarter of 2023, respectively. The lower level of income tax expense for the third quarter of 2024 compared to the second quarter of 2024 was primarily the result of the decreased level of pretax income. The higher level of income tax expense for the third quarter of 2024 as compared to the third quarter of 2023 was primarily the result of lower levels of anticipated investment tax credits in 2024 as compared to the prior year.
Conference Call
Live Oak will host a conference call to discuss the Company's financial results and business outlook tomorrow, October 24, 2024, at 9:00 a.m. ET. The call will be accessible by telephone and webcast using Conference ID: 04478. 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.: 800.549.8228
International: +1 646.564.2877
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 | 910.202.6926
Claire 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 |
| 3Q 2024 Change vs. | ||||||||||||||||||||||||
|
| 3Q 2024 |
| 2Q 2024 |
| 1Q 2024 |
| 4Q 2023 |
| 3Q 2023 |
| 2Q 2024 |
| 3Q 2023 | ||||||||||||||
| Interest income |
|
|
|
|
|
|
|
|
|
| % |
| % | ||||||||||||||
| Loans and fees on loans | $ | 192,170 |
|
| $ | 181,840 |
|
| $ | 176,010 |
|
| $ | 169,531 |
|
| $ | 162,722 |
|
|
| 5.7 |
|
|
| 18.1 |
|
| Investment securities, taxable |
| 9,750 |
|
|
| 9,219 |
|
|
| 8,954 |
|
|
| 8,746 |
|
|
| 8,701 |
|
|
| 5.8 |
|
|
| 12.1 |
|
| Other interest earning assets |
| 7,016 |
|
|
| 7,389 |
|
|
| 7,456 |
|
|
| 8,259 |
|
|
| 9,188 |
|
|
| (5.0 | ) |
|
| (23.6 | ) |
| Total interest income |
| 208,936 |
|
|
| 198,448 |
|
|
| 192,420 |
|
|
| 186,536 |
|
|
| 180,611 |
|
|
| 5.3 |
|
|
| 15.7 |
|
| Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Deposits |
| 110,174 |
|
|
| 105,358 |
|
|
| 101,998 |
|
|
| 96,695 |
|
|
| 90,914 |
|
|
| 4.6 |
|
|
| 21.2 |
|
| Borrowings |
| 1,762 |
|
|
| 1,770 |
|
|
| 311 |
|
|
| 265 |
|
|
| 287 |
|
|
| (0.5 | ) |
|
| 513.9 |
|
| Total interest expense |
| 111,936 |
|
|
| 107,128 |
|
|
| 102,309 |
|
|
| 96,960 |
|
|
| 91,201 |
|
|
| 4.5 |
|
|
| 22.7 |
|
| Net interest income |
| 97,000 |
|
|
| 91,320 |
|
|
| 90,111 |
|
|
| 89,576 |
|
|
| 89,410 |
|
|
| 6.2 |
|
|
| 8.5 |
|
| Provision for credit losses |
| 34,502 |
|
|
| 11,765 |
|
|
| 16,364 |
|
|
| 8,995 |
|
|
| 10,279 |
|
|
| 193.3 |
|
|
| 235.7 |
|
| Net interest income after provision for credit losses |
| 62,498 |
|
|
| 79,555 |
|
|
| 73,747 |
|
|
| 80,581 |
|
|
| 79,131 |
|
|
| (21.4 | ) |
|
| (21.0 | ) |
| Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Loan servicing revenue |
| 8,040 |
|
|
| 7,347 |
|
|
| 7,624 |
|
|
| 7,342 |
|
|
| 6,990 |
|
|
| 9.4 |
|
|
| 15.0 |
|
| Loan servicing asset revaluation |
| (4,207 | ) |
|
| (2,878 | ) |
|
| (2,744 | ) |
|
| (3,974 | ) |
|
| 11,335 |
|
|
| (46.2 | ) |
|
| (137.1 | ) |
| Net gains on sales of loans |
| 16,646 |
|
|
| 14,395 |
|
|
| 11,502 |
|
|
| 12,891 |
|
|
| 12,675 |
|
|
| 15.6 |
|
|
| 31.3 |
|
| Net gain (loss) on loans accounted for under the fair value option |
| 2,255 |
|
|
| 172 |
|
|
| (219 | ) |
|
| (170 | ) |
|
| (568 | ) |
|
| 1211.0 |
|
|
| 497.0 |
|
| Equity method investments (loss) income |
| (1,393 | ) |
|
| (1,767 | ) |
|
| (5,022 | ) |
|
| 47 |
|
|
| (1,034 | ) |
|
| 21.2 |
|
|
| (34.7 | ) |
| Equity security investments gains (losses), net |
| 909 |
|
|
| 161 |
|
|
| (529 | ) |
|
| (384 | ) |
|
| (783 | ) |
|
| 464.6 |
|
|
| 216.1 |
|
| Lease income |
| 2,424 |
|
|
| 2,423 |
|
|
| 2,453 |
|
|
| 2,439 |
|
|
| 2,498 |
|
|
| — |
|
|
| (3.0 | ) |
| Management fee income |
| 1,116 |
|
|
| 3,271 |
|
|
| 3,271 |
|
|
| 3,309 |
|
|
| 3,277 |
|
|
| (65.9 | ) |
|
| (65.9 | ) |
| Other noninterest income |
| 7,142 |
|
|
| 11,035 |
|
|
| 9,761 |
|
|
| 8,607 |
|
|
| 3,501 |
|
|
| (35.3 | ) |
|
| 104.0 |
|
| Total noninterest income |
| 32,932 |
|
|
| 34,159 |
|
|
| 26,097 |
|
|
| 30,107 |
|
|
| 37,891 |
|
|
| (3.6 | ) |
|
| (13.1 | ) |
| Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Salaries and employee benefits |
| 44,524 |
|
|
| 46,255 |
|
|
| 47,275 |
|
|
| 44,274 |
|
|
| 42,947 |
|
|
| (3.7 | ) |
|
| 3.7 |
|
| Travel expense |
| 2,344 |
|
|
| 2,328 |
|
|
| 2,438 |
|
|
| 1,544 |
|
|
| 2,197 |
|
|
| 0.7 |
|
|
| 6.7 |
|
| Professional services expense |
| 3,287 |
|
|
| 3,061 |
|
|
| 1,878 |
|
|
| 3,052 |
|
|
| 1,762 |
|
|
| 7.4 |
|
|
| 86.5 |
|
| Advertising and marketing expense |
| 2,473 |
|
|
| 3,004 |
|
|
| 3,692 |
|
|
| 2,501 |
|
|
| 3,446 |
|
|
| (17.7 | ) |
|
| (28.2 | ) |
| Occupancy expense |
| 2,807 |
|
|
| 2,388 |
|
|
| 2,247 |
|
|
| 2,231 |
|
|
| 2,129 |
|
|
| 17.5 |
|
|
| 31.8 |
|
| Technology expense |
| 9,081 |
|
|
| 7,996 |
|
|
| 7,723 |
|
|
| 8,402 |
|
|
| 7,722 |
|
|
| 13.6 |
|
|
| 17.6 |
|
| Equipment expense |
| 3,472 |
|
|
| 3,511 |
|
|
| 3,074 |
|
|
| 3,480 |
|
|
| 3,676 |
|
|
| (1.1 | ) |
|
| (5.5 | ) |
| Other loan origination and maintenance expense |
| 4,872 |
|
|
| 3,659 |
|
|
| 3,911 |
|
|
| 3,937 |
|
|
| 3,498 |
|
|
| 33.2 |
|
|
| 39.3 |
|
| Renewable energy tax credit investment impairment (recovery) |
| 115 |
|
|
| 170 |
|
|
| (927 | ) |
|
| 14,575 |
|
|
| — |
|
|
| (32.4 | ) |
|
| 100.0 |
|
| FDIC insurance |
| 1,933 |
|
|
| 2,649 |
|
|
| 3,200 |
|
|
| 4,091 |
|
|
| 4,115 |
|
|
| (27.0 | ) |
|
| (53.0 | ) |
| Other expense |
| 2,681 |
|
|
| 2,635 |
|
|
| 3,226 |
|
|
| 5,117 |
|
|
| 2,770 |
|
|
| 1.7 |
|
|
| (3.2 | ) |
| Total noninterest expense |
| 77,589 |
|
|
| 77,656 |
|
|
| 77,737 |
|
|
| 93,204 |
|
|
| 74,262 |
|
|
| (0.1 | ) |
|
| 4.5 |
|
| Income before taxes |
| 17,841 |
|
|
| 36,058 |
|
|
| 22,107 |
|
|
| 17,484 |
|
|
| 42,760 |
|
|
| (50.5 | ) |
|
| (58.3 | ) |
| Income tax expense (benefit) |
| 4,816 |
|
|
| 9,095 |
|
|
| (5,479 | ) |
|
| 1,321 |
|
|
| 2,967 |
|
|
| (47.0 | ) |
|
| 62.3 |
|
| Net income | $ | 13,025 |
|
| $ | 26,963 |
|
| $ | 27,586 |
|
| $ | 16,163 |
|
| $ | 39,793 |
|
|
| (51.7 | ) |
|
| (67.3 | ) |
| Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Basic | $ | 0.28 |
|
| $ | 0.60 |
|
| $ | 0.62 |
|
| $ | 0.36 |
|
| $ | 0.89 |
|
|
| (53.3 | ) |
|
| (68.5 | ) |
| Diluted | $ | 0.28 |
|
| $ | 0.59 |
|
| $ | 0.60 |
|
| $ | 0.36 |
|
| $ | 0.88 |
|
|
| (52.5 | ) |
|
| (68.2 | ) |
| Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Basic |
| 45,073,482 |
|
|
| 44,974,942 |
|
|
| 44,762,308 |
|
|
| 44,516,646 |
|
|
| 44,408,997 |
|
|
|
|
| ||||
| Diluted |
| 45,953,947 |
|
|
| 45,525,082 |
|
|
| 45,641,210 |
|
|
| 45,306,506 |
|
|
| 45,268,745 |
|
|
|
|
| ||||
Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
|
| As of the quarter ended |
| 3Q 2024 Change vs. | ||||||||||||||||||||||||
|
| 3Q 2024 |
| 2Q 2024 |
| 1Q 2024 |
| 4Q 2023 |
| 3Q 2023 |
| 2Q 2024 |
| 3Q 2023 | ||||||||||||||
| Assets |
|
|
|
|
|
|
|
|
|
| % |
| % | ||||||||||||||
| Cash and due from banks | $ | 666,585 |
|
| $ | 615,449 |
|
| $ | 597,394 |
|
| $ | 582,540 |
|
| $ | 534,774 |
|
|
| 8.3 |
|
|
| 24.6 |
|
| Certificates of deposit with other banks |
| 250 |
|
|
| 250 |
|
|
| 250 |
|
|
| 250 |
|
|
| 3,750 |
|
|
| — |
|
|
| (93.3 | ) |
| Investment securities available-for-sale |
| 1,233,466 |
|
|
| 1,151,195 |
|
|
| 1,120,622 |
|
|
| 1,126,160 |
|
|
| 1,099,878 |
|
|
| 7.1 |
|
|
| 12.1 |
|
| Loans held for sale |
| 359,977 |
|
|
| 363,632 |
|
|
| 310,749 |
|
|
| 387,037 |
|
|
| 572,604 |
|
|
| (1.0 | ) |
|
| (37.1 | ) |
| Loans and leases held for investment(1) |
| 9,831,891 |
|
|
| 9,172,134 |
|
|
| 8,912,561 |
|
|
| 8,633,847 |
|
|
| 8,202,631 |
|
|
| 7.2 |
|
|
| 19.9 |
|
| Allowance for credit losses on loans and leases |
| (168,737 | ) |
|
| (137,867 | ) |
|
| (139,041 | ) |
|
| (125,840 | ) |
|
| (121,273 | ) |
|
| (22.4 | ) |
|
| (39.1 | ) |
| Net loans and leases |
| 9,663,154 |
|
|
| 9,034,267 |
|
|
| 8,773,520 |
|
|
| 8,508,007 |
|
|
| 8,081,358 |
|
|
| 7.0 |
|
|
| 19.6 |
|
| Premises and equipment, net |
| 267,032 |
|
|
| 267,864 |
|
|
| 258,071 |
|
|
| 257,881 |
|
|
| 258,041 |
|
|
| (0.3 | ) |
|
| 3.5 |
|
| Foreclosed assets |
| 8,015 |
|
|
| 8,015 |
|
|
| 8,561 |
|
|
| 6,481 |
|
|
| 6,701 |
|
|
| — |
|
|
| 19.6 |
|
| Servicing assets |
| 52,553 |
|
|
| 51,528 |
|
|
| 49,343 |
|
|
| 48,591 |
|
|
| 47,127 |
|
|
| 2.0 |
|
|
| 11.5 |
|
| Other assets |
| 356,314 |
|
|
| 376,370 |
|
|
| 387,059 |
|
|
| 354,476 |
|
|
| 346,227 |
|
|
| (5.3 | ) |
|
| 2.9 |
|
| Total assets | $ | 12,607,346 |
|
| $ | 11,868,570 |
|
| $ | 11,505,569 |
|
| $ | 11,271,423 |
|
| $ | 10,950,460 |
|
|
| 6.2 |
|
|
| 15.1 |
|
| Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Noninterest-bearing | $ | 258,844 |
|
| $ | 264,013 |
|
| $ | 226,668 |
|
| $ | 259,270 |
|
| $ | 239,536 |
|
|
| (2.0 | ) |
|
| 8.1 |
|
| Interest-bearing |
| 11,141,703 |
|
|
| 10,443,018 |
|
|
| 10,156,693 |
|
|
| 10,015,749 |
|
|
| 9,764,106 |
|
|
| 6.7 |
|
|
| 14.1 |
|
| Total deposits |
| 11,400,547 |
|
|
| 10,707,031 |
|
|
| 10,383,361 |
|
|
| 10,275,019 |
|
|
| 10,003,642 |
|
|
| 6.5 |
|
|
| 14.0 |
|
| Borrowings |
| 115,371 |
|
|
| 117,745 |
|
|
| 120,242 |
|
|
| 23,354 |
|
|
| 25,847 |
|
|
| (2.0 | ) |
|
| 346.4 |
|
| Other liabilities |
| 83,672 |
|
|
| 82,745 |
|
|
| 74,248 |
|
|
| 70,384 |
|
|
| 70,603 |
|
|
| 1.1 |
|
|
| 18.5 |
|
| Total liabilities |
| 11,599,590 |
|
|
| 10,907,521 |
|
|
| 10,577,851 |
|
|
| 10,368,757 |
|
|
| 10,100,092 |
|
|
| 6.3 |
|
|
| 14.8 |
|
| Shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Class A common stock (voting) |
| 361,925 |
|
|
| 356,381 |
|
|
| 349,648 |
|
|
| 344,568 |
|
|
| 340,929 |
|
|
| 1.6 |
|
|
| 6.2 |
|
| Class B common stock (non-voting) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Retained earnings |
| 707,026 |
|
|
| 695,172 |
|
|
| 669,307 |
|
|
| 642,817 |
|
|
| 627,759 |
|
|
| 1.7 |
|
|
| 12.6 |
|
| Accumulated other comprehensive loss |
| (61,195 | ) |
|
| (90,504 | ) |
|
| (91,237 | ) |
|
| (84,719 | ) |
|
| (118,320 | ) |
|
| 32.4 |
|
|
| 48.3 |
|
| Total shareholders' equity |
| 1,007,756 |
|
|
| 961,049 |
|
|
| 927,718 |
|
|
| 902,666 |
|
|
| 850,368 |
|
|
| 4.9 |
|
|
| 18.5 |
|
| Total liabilities and shareholders’ equity | $ | 12,607,346 |
|
| $ | 11,868,570 |
|
| $ | 11,505,569 |
|
| $ | 11,271,423 |
|
| $ | 10,950,460 |
|
|
| 6.2 |
|
|
| 15.1 |
|
(1) Includes $343.4 million, $363.0 million, $379.2 million, $388.0 million and $410.1 million measured at fair value for the quarters ended September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and September 30, 2023, respectively.
Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)
|
| Nine Months Ended | ||||||
|
| September 30, 2024 |
| September 30, 2023 | ||||
| Interest income |
|
|
| ||||
| Loans and fees on loans | $ | 550,020 |
|
| $ | 454,136 |
|
| Investment securities, taxable |
| 27,923 |
|
|
| 24,751 |
|
| Other interest earning assets |
| 21,861 |
|
|
| 22,852 |
|
| Total interest income |
| 599,804 |
|
|
| 501,739 |
|
| Interest expense |
|
|
| ||||
| Deposits |
| 317,530 |
|
|
| 243,512 |
|
| Borrowings |
| 3,843 |
|
|
| 2,498 |
|
| Total interest expense |
| 321,373 |
|
|
| 246,010 |
|
| Net interest income |
| 278,431 |
|
|
| 255,729 |
|
| Provision for credit losses |
| 62,631 |
|
|
| 42,328 |
|
| Net interest income after provision for credit losses |
| 215,800 |
|
|
| 213,401 |
|
| Noninterest income |
|
|
| ||||
| Loan servicing revenue |
| 23,011 |
|
|
| 20,057 |
|
| Loan servicing asset revaluation |
| (9,829 | ) |
|
| 8,860 |
|
| Net gains on sales of loans |
| 42,543 |
|
|
| 33,654 |
|
| Net gain (loss) on loans accounted for under the fair value option |
| 2,208 |
|
|
| (3,369 | ) |
| Equity method investments (loss) income |
| (8,182 | ) |
|
| (6,041 | ) |
| Equity security investments gain (losses), net |
| 541 |
|
|
| (585 | ) |
| Lease income |
| 7,300 |
|
|
| 7,568 |
|
| Management fee income |
| 7,658 |
|
|
| 10,015 |
|
| Other noninterest income |
| 27,938 |
|
|
| 11,467 |
|
| Total noninterest income |
| 93,188 |
|
|
| 81,626 |
|
| Noninterest expense |
|
|
| ||||
| Salaries and employee benefits |
| 138,054 |
|
|
| 130,778 |
|
| Travel expense |
| 7,110 |
|
|
| 7,378 |
|
| Professional services expense |
| 8,226 |
|
|
| 4,685 |
|
| Advertising and marketing expense |
| 9,169 |
|
|
| 10,058 |
|
| Occupancy expense |
| 7,442 |
|
|
| 6,259 |
|
| Technology expense |
| 24,800 |
|
|
| 23,456 |
|
| Equipment expense |
| 10,057 |
|
|
| 11,517 |
|
| Other loan origination and maintenance expense |
| 12,442 |
|
|
| 10,867 |
|
| Renewable energy tax credit investment (recovery) impairment |
| (642 | ) |
|
| 69 |
|
| FDIC insurance |
| 7,782 |
|
|
| 12,579 |
|
| Other expense |
| 8,542 |
|
|
| 12,035 |
|
| Total noninterest expense |
| 232,982 |
|
|
| 229,681 |
|
| Income before taxes |
| 76,006 |
|
|
| 65,346 |
|
| Income tax expense |
| 8,432 |
|
|
| 7,611 |
|
| Net income | $ | 67,574 |
|
| $ | 57,735 |
|
| Earnings per share |
|
|
| ||||
| Basic | $ | 1.50 |
|
| $ | 1.30 |
|
| Diluted | $ | 1.48 |
|
| $ | 1.28 |
|
| Weighted average shares outstanding |
|
|
| ||||
| Basic |
| 44,937,409 |
|
|
| 44,298,798 |
|
| Diluted |
| 45,707,245 |
|
|
| 45,023,739 |
|
Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
|
| As of and for the three months ended | ||||||||||||||||||
|
| 3Q 2024 |
| 2Q 2024 |
| 1Q 2024 |
| 4Q 2023 |
| 3Q 2023 | ||||||||||
| Income Statement Data |
|
|
|
|
|
|
|
|
| ||||||||||
| Net income | $ | 13,025 |
|
| $ | 26,963 |
|
| $ | 27,586 |
|
| $ | 16,163 |
|
| $ | 39,793 |
|
| Per Common Share |
|
|
|
|
|
|
|
|
| ||||||||||
| Net income, diluted | $ | 0.28 |
|
| $ | 0.59 |
|
| $ | 0.60 |
|
| $ | 0.36 |
|
| $ | 0.88 |
|
| Dividends declared |
| 0.03 |
|
|
| 0.03 |
|
|
| 0.03 |
|
|
| 0.03 |
|
|
| 0.03 |
|
| Book value |
| 22.32 |
|
|
| 21.35 |
|
|
| 20.64 |
|
|
| 20.23 |
|
|
| 19.12 |
|
| Tangible book value(1) |
| 22.24 |
|
|
| 21.28 |
|
|
| 20.57 |
|
|
| 20.15 |
|
|
| 19.04 |
|
| Performance Ratios |
|
|
|
|
|
|
|
|
| ||||||||||
| Return on average assets (annualized) |
| 0.43 | % |
|
| 0.93 | % |
|
| 0.98 | % |
|
| 0.58 | % |
|
| 1.46 | % |
| Return on average equity (annualized) |
| 5.21 |
|
|
| 11.39 |
|
|
| 11.93 |
|
|
| 7.36 |
|
|
| 18.68 |
|
| Net interest margin |
| 3.33 |
|
|
| 3.28 |
|
|
| 3.33 |
|
|
| 3.32 |
|
|
| 3.37 |
|
| Efficiency ratio(1) |
| 59.72 |
|
|
| 61.89 |
|
|
| 66.89 |
|
|
| 77.88 |
|
|
| 58.34 |
|
| Noninterest income to total revenue |
| 25.35 |
|
|
| 27.22 |
|
|
| 22.46 |
|
|
| 25.16 |
|
|
| 29.76 |
|
| Selected Loan Metrics |
|
|
|
|
|
|
|
|
| ||||||||||
| Loans and leases originated | $ | 1,757,856 |
|
| $ | 1,171,141 |
|
| $ | 805,129 |
|
| $ | 981,703 |
|
| $ | 1,073,255 |
|
| Outstanding balance of sold loans serviced |
| 4,452,750 |
|
|
| 4,292,857 |
|
|
| 4,329,097 |
|
|
| 4,238,328 |
|
|
| 4,028,575 |
|
| Asset Quality Ratios |
|
|
|
|
|
|
|
|
| ||||||||||
| Allowance for credit losses to loans and leases held for investment(3) |
| 1.78 | % |
|
| 1.57 | % |
|
| 1.63 | % |
|
| 1.53 | % |
|
| 1.56 | % |
| Net charge-offs(3) | $ | 1,710 |
|
| $ | 8,253 |
|
| $ | 3,163 |
|
| $ | 4,428 |
|
| $ | 9,122 |
|
| Net charge-offs to average loans and leases held for investment(2) (3) |
| 0.08 | % |
|
| 0.38 | % |
|
| 0.15 | % |
|
| 0.22 | % |
|
| 0.48 | % |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nonperforming loans and leases at historical cost(3) |
|
|
|
|
|
|
|
|
| ||||||||||
| Unguaranteed | $ | 49,398 |
|
| $ | 37,340 |
|
| $ | 43,117 |
|
| $ | 39,285 |
|
| $ | 33,255 |
|
| Guaranteed |
| 166,177 |
|
|
| 122,752 |
|
|
| 105,351 |
|
|
| 95,678 |
|
|
| 65,837 |
|
| Total |
| 215,575 |
|
|
| 160,092 |
|
|
| 148,468 |
|
|
| 134,963 |
|
|
| 99,092 |
|
| Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment(3) |
| 0.52 | % |
|
| 0.42 | % |
|
| 0.51 | % |
|
| 0.48 | % |
|
| 0.43 | % |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nonperforming loans at fair value(4) |
|
|
|
|
|
|
|
|
| ||||||||||
| Unguaranteed | $ | 8,672 |
|
| $ | 9,590 |
|
| $ | 7,942 |
|
| $ | 7,230 |
|
| $ | 6,518 |
|
| Guaranteed |
| 49,822 |
|
|
| 51,570 |
|
|
| 47,620 |
|
|
| 41,244 |
|
|
| 39,378 |
|
| Total |
| 58,494 |
|
|
| 61,160 |
|
|
| 55,562 |
|
|
| 48,474 |
|
|
| 45,896 |
|
| Unguaranteed nonperforming fair value loans to fair value loans held for investment(4) |
| 2.53 | % |
|
| 2.64 | % |
|
| 2.09 | % |
|
| 1.86 | % |
|
| 1.59 | % |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Capital Ratios |
|
|
|
|
|
|
|
|
| ||||||||||
| Common equity tier 1 capital (to risk-weighted assets) |
| 11.19 | % |
|
| 11.85 | % |
|
| 11.89 | % |
|
| 11.73 | % |
|
| 11.63 | % |
| Tier 1 leverage capital (to average assets) |
| 8.60 |
|
|
| 8.71 |
|
|
| 8.69 |
|
|
| 8.58 |
|
|
| 8.56 |
|
Notes to Quarterly Selected Financial Data
(1) See accompanying GAAP to Non-GAAP Reconciliation.
(2) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.
(3) Loans and leases at historical cost only (excludes loans measured at fair value).
(4) Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost).
Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)
|
| Three Months Ended |
| Three Months Ended | ||||||||||||||||||||
|
| Average Balance |
| Interest |
| Average Yield/Rate |
| Average Balance |
| Interest |
| Average Yield/Rate | ||||||||||||
| Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| Interest-earning balances in other banks | $ | 519,340 |
|
| $ | 7,016 |
|
|
| 5.37 | % |
| $ | 555,570 |
|
| $ | 7,389 |
|
|
| 5.35 | % |
| Investment securities |
| 1,287,410 |
|
|
| 9,750 |
|
|
| 3.01 |
|
|
| 1,263,675 |
|
|
| 9,219 |
|
|
| 2.93 |
|
| Loans held for sale |
| 409,902 |
|
|
| 9,859 |
|
|
| 9.57 |
|
|
| 387,824 |
|
|
| 9,329 |
|
|
| 9.67 |
|
| Loans and leases held for investment(1) |
| 9,354,522 |
|
|
| 182,311 |
|
|
| 7.75 |
|
|
| 8,997,164 |
|
|
| 172,511 |
|
|
| 7.71 |
|
| Total interest-earning assets |
| 11,571,174 |
|
|
| 208,936 |
|
|
| 7.18 |
|
|
| 11,204,233 |
|
|
| 198,448 |
|
|
| 7.12 |
|
| Less: Allowance for credit losses on loans and leases |
| (137,285 | ) |
|
|
|
|
|
| (136,668 | ) |
|
|
|
| ||||||||
| Noninterest-earning assets |
| 567,098 |
|
|
|
|
|
|
| 562,488 |
|
|
|
|
| ||||||||
| Total assets | $ | 12,000,987 |
|
|
|
|
|
| $ | 11,630,053 |
|
|
|
|
| ||||||||
| Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| Interest-bearing checking | $ | 350,239 |
|
| $ | 4,892 |
|
|
| 5.56 | % |
| $ | 304,505 |
|
| $ | 4,267 |
|
|
| 5.64 | % |
| Savings |
| 5,043,930 |
|
|
| 51,516 |
|
|
| 4.06 |
|
|
| 4,804,037 |
|
|
| 48,617 |
|
|
| 4.07 |
|
| Money market accounts |
| 134,481 |
|
|
| 190 |
|
|
| 0.56 |
|
|
| 128,625 |
|
|
| 186 |
|
|
| 0.58 |
|
| Certificates of deposit |
| 5,028,830 |
|
|
| 53,576 |
|
|
| 4.24 |
|
|
| 5,032,856 |
|
|
| 52,288 |
|
|
| 4.18 |
|
| Total deposits |
| 10,557,480 |
|
|
| 110,174 |
|
|
| 4.15 |
|
|
| 10,270,023 |
|
|
| 105,358 |
|
|
| 4.13 |
|
| Borrowings |
| 116,925 |
|
|
| 1,762 |
|
|
| 6.00 |
|
|
| 119,321 |
|
|
| 1,770 |
|
|
| 5.97 |
|
| Total interest-bearing liabilities |
| 10,674,405 |
|
|
| 111,936 |
|
|
| 4.17 |
|
|
| 10,389,344 |
|
|
| 107,128 |
|
|
| 4.15 |
|
| Noninterest-bearing deposits |
| 237,387 |
|
|
|
|
|
|
| 223,026 |
|
|
|
|
| ||||||||
| Noninterest-bearing liabilities |
| 90,079 |
|
|
|
|
|
|
| 70,667 |
|
|
|
|
| ||||||||
| Shareholders' equity |
| 999,116 |
|
|
|
|
|
|
| 947,016 |
|
|
|
|
| ||||||||
| Total liabilities and shareholders' equity | $ | 12,000,987 |
|
|
|
|
|
| $ | 11,630,053 |
|
|
|
|
| ||||||||
| Net interest income and interest rate spread |
|
| $ | 97,000 |
|
|
| 3.01 | % |
|
|
| $ | 91,320 |
|
|
| 2.97 | % | ||||
| Net interest margin |
|
|
|
|
| 3.33 |
|
|
|
|
|
|
| 3.28 |
| ||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities |
|
|
|
|
| 108.40 | % |
|
|
|
|
|
| 107.84 | % | ||||||||
(1) Average loan and lease balances include non-accruing loans and leases.
Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)
|
| As of and for the three months ended | ||||||||||||||||||
|
| 3Q 2024 |
| 2Q 2024 |
| 1Q 2024 |
| 4Q 2023 |
| 3Q 2023 | ||||||||||
| Total shareholders’ equity | $ | 1,007,756 |
|
| $ | 961,049 |
|
| $ | 927,718 |
|
| $ | 902,666 |
|
| $ | 850,368 |
|
| Less: |
|
|
|
|
|
|
|
|
| ||||||||||
| Goodwill |
| 1,797 |
|
|
| 1,797 |
|
|
| 1,797 |
|
|
| 1,797 |
|
|
| 1,797 |
|
| Other intangible assets |
| 1,606 |
|
|
| 1,644 |
|
|
| 1,682 |
|
|
| 1,721 |
|
|
| 1,759 |
|
| Tangible shareholders’ equity (a) | $ | 1,004,353 |
|
| $ | 957,608 |
|
| $ | 924,239 |
|
| $ | 899,148 |
|
| $ | 846,812 |
|
| Shares outstanding (c) |
| 45,151,691 |
|
|
| 45,003,856 |
|
|
| 44,938,673 |
|
|
| 44,617,673 |
|
|
| 44,480,215 |
|
| Total assets | $ | 12,607,346 |
|
| $ | 11,868,570 |
|
| $ | 11,505,569 |
|
| $ | 11,271,423 |
|
| $ | 10,950,460 |
|
| Less: |
|
|
|
|
|
|
|
|
| ||||||||||
| Goodwill |
| 1,797 |
|
|
| 1,797 |
|
|
| 1,797 |
|
|
| 1,797 |
|
|
| 1,797 |
|
| Other intangible assets |
| 1,606 |
|
|
| 1,644 |
|
|
| 1,682 |
|
|
| 1,721 |
|
|
| 1,759 |
|
| Tangible assets (b) | $ | 12,603,943 |
|
| $ | 11,865,129 |
|
| $ | 11,502,090 |
|
| $ | 11,267,905 |
|
| $ | 10,946,904 |
|
| Tangible shareholders’ equity to tangible assets (a/b) |
| 7.97 | % |
|
| 8.07 | % |
|
| 8.04 | % |
|
| 7.98 | % |
|
| 7.74 | % |
| Tangible book value per share (a/c) | $ | 22.24 |
|
| $ | 21.28 |
|
| $ | 20.57 |
|
| $ | 20.15 |
|
| $ | 19.04 |
|
| Efficiency ratio: |
|
|
|
|
|
|
|
|
| ||||||||||
| Noninterest expense (d) | $ | 77,589 |
|
| $ | 77,656 |
|
| $ | 77,737 |
|
| $ | 93,204 |
|
| $ | 74,262 |
|
| Net interest income |
| 97,000 |
|
|
| 91,320 |
|
|
| 90,111 |
|
|
| 89,576 |
|
|
| 89,410 |
|
| Noninterest income |
| 32,932 |
|
|
| 34,159 |
|
|
| 26,097 |
|
|
| 30,107 |
|
|
| 37,891 |
|
| Total revenue (e) | $ | 129,932 |
|
| $ | 125,479 |
|
| $ | 116,208 |
|
| $ | 119,683 |
|
| $ | 127,301 |
|
| Efficiency ratio (d/e) |
| 59.72 | % |
|
| 61.89 | % |
|
| 66.89 | % |
|
| 77.88 | % |
|
| 58.34 | % |
| Pre-provision net revenue (e-d) | $ | 52,343 |
|
| $ | 47,823 |
|
| $ | 38,471 |
|
| $ | 26,479 |
|
| $ | 53,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This press release presents non-GAAP financial measures. The adjustments to reconcile from the non-GAAP financial measures to the applicable GAAP financial measure 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.