Banking & Finance

Live Oak Talks Loan Generation, PPP Activity

By Jenny Callison, posted Feb 5, 2021
In a conference call Jan. 28, Live Oak Bancshares officials elaborated on the company’s fourth-quarter and year-end financial reports. The company’s fiscal year ended Dec. 31.
Live Oak Bancshares, parent of Wilmington-based Live Oak Bank (Nasdaq: LOB), posted quarterly net income of nearly $29.6 million, which translates to earnings per share of $0.68. The Zacks Consensus Estimate for EPS was $0.52 per share.
Net income for the quarter was below expectations, however, falling roughly $4.2 million below that of the third quarter of 2020.
Net earnings for the company’s fiscal year totaled $59.5 million, or $1.43 per diluted share, up 32% from those of the previous fiscal year.
“Our mission to be America’s small business bank has never been more important. The past year was incredibly challenging for our country’s entrepreneurs, and their drive and determination reinforce why we want to fundamentally shift the way banking is done,” Chairman and CEO James “Chip” Mahan said in a news release Jan. 27. “As our efforts to drive rapid change in financial technology gained momentum in 2020, our teams continued their relentless focus on supporting customers in a time unequaled in recent history.
“In 2020, we grew assets by $3 billion by serving small businesses across the U.S. and significantly increased net income,” his statement continued. “Our balance sheet and funding model position us very well to serve America’s small businesses in the coming year.”
During the subsequent conference call, Mahan and other officials stressed the 76% year-over-year increase in loan and lease production, from $3.6 billion in 2019 to $6.3 billion at the end of 2020. Paycheck Protection Program lending contributed to this past year’s numbers.
“The total loan and lease portfolio of $6.32 billion is comprised of $1.50 billion of Paycheck Protection Program (“PPP”) loans, net of deferred fees and costs, at December 31, 2020,” the company’s release stated.
Excluding PPP loans, Live Oak originated about 1,000 loans, totaling $1.75 billion, during the second half of the year, Live Oak Bank President Huntley Garriott said during the conference call.
Mahan is bullish about continued growth in loan and lease generation.
“Over the last six quarters we’ve averaged origination of about $500 million. In the last two quarters, about $879 million. “[I am] very excited about year-over-year growth of originations from $2 billion to $2.7 billion, that’s a 34% increase. All the time around this place we talk about 15%, whether it’s originations or EPS, a wonderful thing about 15% as it doubles every five years. So yeah, that’s right: $3 billion to $3.1 billion, that’s doable for 2021, and we’re excited about it.”
A key aspect of the earnings call was a discussion of Live Oak Bank’s role in connecting small businesses with available federal COVID-19 relief, especially PPP financing.
The bank also designated a team, headed by business development officer Kay Anderson, to help borrowers in six industries – dubbed the “Covid 6” by Mahan – that have been most affected by coronavirus restrictions.
Anderson spoke of her largely successful efforts to improve the financial picture for borrowers in those six industries: entertainment centers, hotels, wine and craft beverages, educational services, fitness centers and quick-service restaurants.
“We have been examining the characteristics of these borrowers, which make up 17% of our borrowers,” she said. “It’s noteworthy that their classified assets have pretty much stabilized.”
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