The first quarter of 2020 delivered some COVID-19-related stormy weather to the economy, and Live Oak Bank’s earnings report reflects the impact of those gusty winds.
On Wednesday, the bank reported a net loss of $7.6 million for the quarter (or a loss of $0.19 per diluted share), compared to net earnings of $2.4 million, or $0.06 per diluted share, in the first quarter of 2019.
Live Oak's stock (Nasdaq: LOB) was down 12 percent Thursday to $12.36.
CEO and Chairman James “Chip” Mahan explained in an earnings call Thursday that the quarter’s numbers reflect Live Oak’s pivot to focus on helping its small business customers weather the storm via various SBA programs.
As the nation’s top SBA lender in terms of loan amount, Live Oak Bank was heavily involved in the lending programs the U.S. Department of the Treasury rolled out hastily last quarter in response to the virus-fueled economic downturn.
“The first quarter of 2020 will always be remembered as an unprecedented time in world history,” Mahan said in Wednesday’s earnings report. “Despite the challenges thrust upon us all, Live Oak’s people have worked tirelessly throughout this period to connect with each of its customers to understand their situation and offer payment relief.
"We have been on a relentless pursuit to interpret and implement new loan programs and subsequently deploy millions in funds to small businesses in need across the country. We take our role in empowering small business owners seriously and consider it a privilege to help those in need during these trying times.”
The bank processed about 5,000 Paycheck Protection Program loans for the SBA, disbursing about $1 billion, according to Live Oak's earnings presentation Thursday
(Mahan and bank president Huntley Garriott spoke about those emergency loan programs during a recent BizTalk interview.
Mahan did point to some positive numbers. Live Oak’s total assets were nearly $5.3 billion as of March 31, compared with slightly more than $4.8 billion at the end of 2019. During the first quarter of this year, the bank’s total loan and lease portfolio increased to $3.81 billion, just over 38% above its level in Q1 of 2019 and about 6% more than its level at the end of 2019.
Loan and lease originations in Q1 were $500.6 million, down 4.4% from totals in the previous quarter, the release reported.
“This decrease in loan originations was largely attributable to businesses being interrupted by the COVID-19 pandemic beginning in March,” the release stated.
When those economic storms hit in March, Live Oak was well on its way to achieving its goals of doing $2 billion in originations this year and moving its savings and CD customers to the Finxact cloud banking platform, Mahan said in the earnings call Thursday morning. Those goals, he added, took a back seat when the bank made small-business rescue work a priority.
Asked about prospects for the bank as the economy recovers, LOB officials in the earnings call Thursday expressed confidence that the bank’s focus on delivering a personal experience to each of its borrowers, its investment in technology and its conservative fiscal management bode well for the future.
“I think we will be better on the other side,” Mahan said.
For more about Live Oak Bank’s role in the SBA’s Paycheck Protection Program and helping other borrowers get SBA loan payment deferrals, read May’s Banking & Finance column in the upcoming edition of the Greater Wilmington Business Journal.