Banking & Finance

Live Oak Bank Reports Lower Revenue But Solid Yearlong Performance

By Jenny Callison, posted Jan 25, 2024
Live Oak Bancshares’ 2023 fourth-quarter earnings-per-share missed analysts’ expectations, but the Wilmington-based bank’s revenues exceeded Wall Street forecasts. The company released the quarterly and 2023 fiscal year numbers after markets closed Wednesday.
Acknowledging that 2023 was a bumpy year for banks in many respects, Live Oak officials were nonetheless upbeat in their assessments and their predictions during their earnings call Thursday morning.

“Live Oak Bank spent 2023 doing what we do best — growing loans, deposits, and revenue in our mission to support small business owners, our employees and our shareholders,” Chairman and CEO James “Chip” Mahan said in the company’s Q4 release. “When looking back at 2023, it is clear that our customers and our model were extraordinarily resilient. We are proud to serve America’s small business owners through all cycles and believe our fourth quarter results, and the historical performance of our bank, continue to demonstrate our strength in the market.”

Fourth quarter 2023 net income was $16.2 million, or $0.36 per share, Live Oak reported. Total revenue for the quarter was $119.7 million. Analysts, on average, had predicted earnings of $0.56 per share and total revenue of $119.4 million, according to Zacks Investment Research.

Revenue was down 6% from Live Oak’s third quarter, in which the company reported total revenue of $127.3 million and earnings per share of $0.88. Loan and lease production declined 9% since the previous quarter, from $1,073 billion as of Sept. 30 to nearly $982 million as of Dec. 31. But the portfolio continues to grow, the earnings report pointed out.

“At December 31, 2023, the total loan and lease portfolio was $9.02 billion, 2.8% above its level at September 30, 2023 and 14.2% above its level at December 31, 2022,” the release stated. “This growth was driven by strong origination volumes.”

Deposit growth – a key goal of banks in 2023 – was a bright spot for Live Oak. Its total deposits increased to $10.28 billion as of the end of Q4, an increase of $271.4 million compared to the end of Q3, and a year-over-year increase of $1.39 billion.

Mahan pointed out that the increase in total deposits provides support for the growth in the loan and lease portfolio. In the earnings call Thursday he also noted that the company’s expenses were essentially flat, both quarter over quarter and year over year and characterized the company’s future course as “steady as she goes.”

Compared with that of FY 22, Live Oak’s reported net income for the year ended Dec. 31, 2023 was down significantly: $73.9 million, or $1.64 per diluted share, versus $176.2 million ($3.98 per diluted share) the previous year. But the company’s loan and lease portfolio grew 14% year over year to just over $9 billion, and the company’s assets increased from almost $9.9 billion as of Dec. 31, 2022 to nearly $11.3 billion a year later.

For both the quarter and the year as a whole, Live Oak had to borrow less, a boon to its bottom line.

Live Oak’s new Chief Financial Officer Walt Phifer pointed to the success with which Live Oak’s borrowers have weathered the twin challenges of inflation and interest rate increases over the past year or more.

“Our credit quality remains strong, a tribute to our small business borrowers,” he said during the call. “Our past dues are the lowest they have been in the past five quarters. And this month we sold our first two USDA loans in almost seven quarters. We expect no more major disruptions and no rate hikes. Our prior guidance holds true.”

As of 3 p.m. Thursday, Live Oak Bancshares was trading at $40.38, down slightly for the day. Shares began the day at $42.50.
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