WILMINGTON, N.C., Oct. 25, 2017 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (Nasdaq:LOB) (“Live Oak” or “the Company”) today reported third quarter net earnings available to common shareholders of $12.9 million, or $0.33 per diluted share, compared to $3.5 million, or $0.10 per diluted share, for the third quarter of 2016.

“We are very pleased with our third quarter performance. We continue our mission to serve the needs of small businesses with year-to-date loan and lease originations of $1.45 billion nearly matching our production for all of 2016. Adding to this excitement, we also raised over $100 million in capital which will expedite the pursuit of our growth trajectory and the many exciting opportunities presented to us. The recent closing of our joint venture with First Data Corporation to create Apiture will significantly enhance our endeavor to revolutionize the industry with open API's on next generation financial institution platforms,” said James S. Mahan, III, Chief Executive Officer of Live Oak.

Third Quarter 2017 Key Measures
(Dollars in thousands, except per share data)										Increase (Decrease)
		Q3 2017				Q3 2016				Dollars				Percent			Q2 2017
Loan production:
Loans and leases originated		$	395,682			$	381,050			$	14,632			4	%		$	586,471
% Fully funded		37.4		%		36.1		%		n/a				n/a			42.2		%
Loan sales:
Guaranteed loans sold		$	163,843			$	210,610			$	(46,767	)		(22	)%		$	203,714
Net gains on sales of guaranteed loans		18,148				21,833				(3,685		)		(17	)		18,676
Average net gain on sale of guaranteed loans, per million sold		110.76				103.67				7.09				7			91.68
Net interest income and servicing revenues		27,515				17,491				10,024				57			24,566
Net income attributable to Live Oak Bancshares, Inc.		12,862				3,479				9,383				270			9,795
Diluted earnings per share		0.33				0.10				0.23				230			0.27
Non-GAAP net income (1)		13,323				5,498				7,825				142			10,227
Non-GAAP diluted earnings per share (1)		0.34				0.16				0.18				113			0.28

(1) See accompanying GAAP to Non-GAAP Reconciliation.

Loans and Leases

At September 30, 2017, the total loan and lease portfolio of $1.86 billion increased 67.5% above its level of a year ago. Net loans and leases held for investment increased $83.9 million, or 7.9%, to $1.15 billion at September 30, 2017, from $1.06 billion at June 30, 2017. Loans held for sale increased $83.4 million, or 13.7%, to $692.6 million at September 30, 2017, from $609.1 million at June 30, 2017. Loan and lease originations totaled $395.7 million during the third quarter, a decline from the prior quarter due to the seasonality of lending in the renewable energy sector. The total loan and lease portfolio at September 30, 2017, and June 30, 2017, of $1.86 billion and $1.69 billion, respectively, were comprised of approximately 60.6% and 61.7% of unguaranteed loans and leases, respectively.

Average loans and leases were $1.77 billion during the third quarter of 2017 compared to $1.61 billion during the second quarter of 2017.

Net Interest Income

Net interest income for the third quarter of 2017 increased to $21.0 million compared to $11.6 million for the third quarter of 2016. The increase was driven by the significant growth in the combined held for sale and held for investment loan and lease portfolios and reflected the Company's initiative to grow recurring revenue sources by increasing the level of loans and leases retained on the balance sheet. The net interest margin of 3.91% for the for the third quarter of 2017 was consistent with 3.92% for the second quarter of 2017. The net interest margin has risen by 59 basis points from the third quarter of 2016 as the Company has benefited from the repricing characteristics of its loan portfolio in the rising rate environment.

Noninterest Income

Noninterest income for the third quarter of 2017 totaled $25.1 million, compared to $25.4 million for the third quarter of 2016. Net gains on sales of loans decreased to $18.1 million in the third quarter of 2017 compared to $21.8 million in the third quarter of 2016 and was in line with $18.2 million in the second quarter of 2017. The decrease in revenue from the prior year was due to a reduction in the volume of guaranteed loan sales partially offset by an increase in the average net gain on sale of guaranteed loans. The $39.9 million reduction in the volume of guaranteed loans sales from the prior sequential quarter resulted from a decrease in the percentage of new loans that were fully funded at closing, a product of the aforementioned seasonality of renewable energy lending. This was countered by the increase in the average net gain on guaranteed loan sales to $110.7 thousand per million sold versus $91.7 thousand in the prior quarter. Loan servicing revenues of $6.5 million in the third quarter of 2017 rose by $630 thousand from the third quarter of 2016. The inclusion of Reltco, Inc. and National Assurance Title, Inc. (collectively referred to as "Reltco"), which were acquired in February 2017, contributed $2.0 million in noninterest income to the Company in the third quarter of 2017.

Noninterest Expense

Noninterest expense for the third quarter of 2017 was $35.9 million compared to $27.2 million for the third quarter of 2016 and $33.3 million for the second quarter of 2017.

The $8.6 million, or 31.7%, increase in noninterest expense for the third quarter of 2017 compared to the third quarter of 2016 reflected the ongoing expansion of the Company’s workforce and related infrastructure in support of its growth strategy. There were increases in salaries and employee benefits of $1.6 million, equipment expense of $1.6 million and other expense of $1.5 million. Salaries and employee benefits were largely influenced by the addition of Reltco personnel during the first quarter of 2017 along with resources to support the ongoing growth of the business platform. Total stock based compensation expense in the third quarter of 2017 was $2.0 million compared to $4.1 million for the third quarter of 2016. The increase in equipment expense reflected the higher levels of depreciation related to aircraft acquired in the first quarter of 2017 and solar panels acquired for the Company’s renewable energy leasing business. Other expenses increased primarily due to the addition of Reltco in the first quarter of 2017 combined with support expenses driven by business growth.

Compared to the second quarter of 2017, noninterest expense increased $2.6 million, or 7.7%. This increase was driven by higher levels of salaries and benefits and higher costs related to equipment, delivery of loan and lease products, and other initiatives to support the growing business segments and diversification of the Company. Total stock based compensation expense in the third quarter of 2017 was $2.0 million compared to $1.9 million for the second quarter of 2017.

Asset Quality

The unguaranteed exposure of nonperforming loans declined slightly to $3.3 million at September 30, 2017, compared to $3.5 million at June 30, 2017. Total unguaranteed nonperforming loans as a percentage of total loans and leases held for investment declined to 0.28% at September 30, 2017, compared to 0.33% at June 30, 2017. Total nonperforming loans increased slightly to $22.4 million in the third quarter of 2017 from $21.9 million at the end of the prior quarter.

The unguaranteed exposure of foreclosed assets increased to $446 thousand at September 30, 2017, from $345 thousand at June 30, 2017. Foreclosed assets increased $91 thousand to $2.2 million at September 30, 2017, from June 30, 2017.

Net charge-offs totaled to $959 thousand in the third quarter of 2017 compared to $191 thousand in the second quarter of 2017 and $937 thousand in the third quarter of 2016. Net charge-offs as a percentage of average held for investment loans and leases, annualized, for the quarters ended September 30, 2017 and 2016 were 0.34% and 0.51%, respectively. Net charge-offs for the first nine months of 2017 totaled $2.7 million compared to $929 thousand for the first nine months of 2016.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the third quarter of 2017 totaled $2.4 million compared to $1.6 million for the second quarter of 2017 and $3.8 million for the third quarter of 2016. The third quarter of 2017 provision exceeded net charge-offs, thus adding to loan loss reserves in consideration of the continued growth of the loan portfolio.

The allowance for loan and lease losses totaled $21.0 million at September 30, 2017, compared to $19.6 million at June 30, 2017. The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.80% at September 30, 2017 and June 30, 2017, respectively.

Income Tax

There was a net income tax benefit in the third quarter of 2017 of $5.1 million compared to a tax expense of $2.6 million in the third quarter of 2016 and $408 thousand in the second quarter of 2017. The negative effective rate in the third quarter of 2017 principally reflected an increase in anticipated investment in renewable energy assets generating investment tax credits. As the lessor of these assets, the Company is accomplishing broader strategic initiatives in the renewable energy sector.

Deposits

Total deposits increased by $141.2 million, or 7.5%, to $2.01 billion at September 30, 2017, compared to $1.87 billion at June 30, 2017, following successful deposit gathering campaigns. Average total interest-bearing deposits for the third quarter of 2017 increased $203.2 million, or 11.7%, to $1.94 billion, compared to $1.74 billion for the second quarter of 2017. The ratio of average total loans to average interest-bearing deposits was 91.1% for the third quarter of 2017, compared to 92.7% for the second quarter of 2017.

Conference Call

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (October 26, 2017). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 99094314. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the webcast will be archived on the Company's website for one year. A replay of the conference call will also be available until 5:00 p.m. ET November 2, 2017, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

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; 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; 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; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; 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. (Nasdaq:LOB) is a financial holding company and the parent company of Live Oak Banking Company, a national online platform for small business lending.

Contacts:
Brett Caines | CFO | Investor Relations | 910.796.1645 & Micah Davis | Marketing Director | Media Relations | 910.550.2255

Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)
		Three months ended
		3Q 2017				2Q 2017				1Q 2017				4Q 2016				3Q 2016
Interest income
Loans and fees on loans		$	26,977			$	23,559			$	19,754			$	16,239			$	14,961
Investment securities, taxable		325				316				323				292				337
Other interest earning assets		870				470				342				383				264
Total interest income		28,172				24,345				20,419				16,914				15,562
Interest expense
Deposits		6,758				5,592				4,543				4,283				3,689
Borrowings		389				361				235				239				242
Total interest expense		7,147				5,953				4,778				4,522				3,931
Net interest income		21,025				18,392				15,641				12,392				11,631
Provision for loan and leases losses		2,426				1,556				1,499				3,844				3,806
Net interest income after provision for loan and lease losses		18,599				16,836				14,142				8,548				7,825
Noninterest income
Loan servicing revenue		6,490				6,174				5,923				5,668				5,860
Loan servicing asset revaluation		(3,691		)		(1,164		)		(2,009		)		(3,340		)		(3,421		)
Net gains on sales of loans		18,148				18,176				18,952				22,513				21,833
Gain on sale of securities available-for-sale		—				—				—				—				1
Construction supervision fee income		362				286				429				868				502
Title insurance income		1,968				2,397				1,438				—				—
Other noninterest income		1,783				798				1,020				618				657
Total noninterest income		25,060				26,667				25,753				26,327				25,432
Noninterest expense
Salaries and employee benefits		19,037				17,968				18,682				17,121				17,471
Travel expense		2,289				2,148				1,598				1,811				2,218
Professional services expense		1,068				1,424				1,736				1,137				907
Advertising and marketing expense		1,516				1,976				1,485				1,109				1,097
Occupancy expense		1,473				1,350				1,195				1,267				1,058
Data processing expense		1,982				1,858				1,696				1,435				1,252
Equipment expense		2,228				1,703				1,074				550				611
Other loan origination and maintenance expense		1,601				981				1,005				824				806
Renewable energy tax credit investment impairment		—				—				—				3,197				—
FDIC insurance		858				724				726				910				210
Title insurance closing services expense		687				785				405				—				—
Other expense		3,117				2,383				3,383				3,023				1,588
Total noninterest expense		35,856				33,300				32,985				32,384				27,218
Income before taxes		7,803				10,203				6,910				2,491				6,039
Income tax (benefit) expense		(5,059		)		408				798				(2,989		)		2,561
Net income		12,862				9,795				6,112				5,480				3,478
Net loss attributable to noncontrolling interest		—				—				—				—				1
Net income attributable to Live Oak Bancshares, Inc.		$	12,862			$	9,795			$	6,112			$	5,480			$	3,479
Earnings per share
Basic		$	0.34			$	0.28			$	0.18			$	0.16			$	0.10
Diluted		$	0.33			$	0.27			$	0.17			$	0.16			$	0.10
Weighted average shares outstanding
Basic		37,366,041				34,618,721				34,466,904				34,235,375				34,206,943
Diluted		38,644,677				35,942,041				35,646,918				35,208,433				35,001,817

Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)
		As of the quarter ended
		3Q 2017				2Q 2017				1Q 2017				4Q 2016				3Q 2016
Assets
Cash and due from banks		$	260,907			$	207,373			$	158,887			$	238,008			$	355,485
Certificates of deposit with other banks		3,250				5,750				6,000				7,250				7,500
Investment securities available-for-sale		76,575				72,993				68,630				71,056				70,334
Loans held for sale		692,586				609,138				512,501				394,278				345,277
Loans and leases held for investment		1,169,887				1,084,503				999,270				907,566				766,977
Allowance for loan losses		(21,027		)		(19,560		)		(18,195		)		(18,209		)		(15,178		)
Net loans and leases		1,148,860				1,064,943				981,075				889,357				751,799
Premises and equipment, net		129,233				125,008				101,398				64,661				60,646
Foreclosed assets		2,231				2,140				1,706				1,648				2,235
Servicing assets		53,392				53,675				53,584				51,994				49,729
Other assets		65,155				57,087				48,344				37,009				26,735
Total assets		$	2,432,189			$	2,198,107			$	1,932,125			$	1,755,261			$	1,669,740
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing		$	55,260			$	40,966			$	38,029			$	27,990			$	28,461
Interest-bearing		1,957,631				1,830,755				1,601,114				1,457,086				1,374,556
Total deposits		2,012,891				1,871,721				1,639,143				1,485,076				1,403,017
Short term borrowings		—				10,000				13,100				—				—
Long term borrowings		26,872				52,173				27,473				27,843				28,074
Other liabilities		27,835				26,582				26,220				19,495				24,497
Total liabilities		2,067,598				1,960,476				1,705,936				1,532,414				1,455,588
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding		—				—				—				—				—
Class A common stock (voting)		266,336				150,939				147,933				149,966				145,284
Class B common stock (non-voting)		49,168				49,168				50,015				50,015				50,015
Retained earnings		49,707				38,041				28,938				23,518				18,723
Accumulated other comprehensive (loss) income		(620		)		(517		)		(697		)		(652		)		130
Total shareholders’ equity attributed to Live Oak Bancshares, Inc.		364,591				237,631				226,189				222,847				214,152
Noncontrolling interest		—				—				—				—				—
Total equity		364,591				237,631				226,189				222,847				214,152
Total liabilities and shareholders’ equity		$	2,432,189			$	2,198,107			$	1,932,125			$	1,755,261			$	1,669,740

Live Oak Bancshares, Inc.
Statements of Income (unaudited)
(Dollars in thousands, except per share data)
		Nine months ended
		September 30, 2017				September 30, 2016
Interest income
Loans and fees on loans		$	70,290			$	38,868
Investment securities, taxable		964				840
Other interest earning assets		1,682				650
Total interest income		72,936				40,358
Interest expense
Deposits		16,893				9,376
Borrowings		985				725
Total interest expense		17,878				10,101
Net interest income		55,058				30,257
Provision for loan losses		5,481				8,692
Net interest income after provision for loan losses		49,577				21,565
Noninterest income
Loan servicing revenue		18,587				15,725
Loan servicing asset revaluation		(6,864		)		(5,051		)
Net gains on sales of loans		55,276				52,813
Gain on sale of securities available-for-sale		—				1
Construction supervision fee income		1,077				1,799
Title insurance income		5,803				—
Other noninterest income		3,601				1,925
Total noninterest income		77,480				67,212
Noninterest expense
Salaries and employee benefits		55,687				45,875
Travel expense		6,035				6,394
Professional services expense		4,228				2,345
Advertising and marketing expense		4,977				3,425
Occupancy expense		4,018				3,306
Data processing expense		5,536				3,864
Equipment expense		5,005				1,696
Other loan origination and maintenance expense		3,587				2,001
FDIC insurance		2,308				507
Title insurance closing services expense		1,877				—
Other expense		8,883				4,648
Total noninterest expense		102,141				74,061
Income before taxes		24,916				14,716
Income tax (benefit) expense		(3,853		)		6,432
Net income		28,769				8,284
Net loss attributable to noncontrolling interest		—				9
Net income attributable to Live Oak Bancshares, Inc.		$	28,769			$	8,293
Earnings per share
Basic		$	0.81			$	0.24
Diluted		$	0.78			$	0.24
Weighted average shares outstanding
Basic		35,485,371				34,191,014
Diluted		36,730,054				35,003,422

Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)
		As of and for the three months ended
		3Q 2017				2Q 2017				1Q 2017				4Q 2016				3Q 2016
Income Statement Data
Net income attributable to Live Oak Bancshares, Inc.		$	12,862			$	9,795			$	6,112			$	5,480			$	3,479
Per Common Share
Net income, basic		$	0.34			$	0.28			$	0.18			$	0.16			$	0.10
Net income, diluted		0.33				0.27				0.17				0.16				0.10
Dividends declared		0.03				0.02				0.02				0.02				0.02
Book value		9.15				6.86				6.54				6.51				6.26
Tangible book value (1)		8.84				6.50				6.17				6.51				6.26
Performance Ratios
Return on average assets (annualized)		2.18		%		1.89		%		1.33		%		1.26		%		0.91		%
Return on average equity (annualized)		16.79				16.53				10.93				9.95				6.54
Net interest margin		3.91				3.92				3.76				3.08				3.32
Efficiency ratio (1)		77.80				73.90				79.69				83.64				73.44
Noninterest income to total revenue		54.38				59.18				62.21				68.00				68.62
Selected Loan Metrics
Loans and leases originated		$	395,682			$	586,471			$	468,663			$	514,565			$	381,050
Guaranteed loans sold		163,843				203,714				208,715				260,125				210,610
Average net gain on sale of guaranteed loans		110.76				91.68				90.80				86.55				103.67
Held for sale guaranteed loans (note amount) (2)		1,093,385				1,005,753				866,260				754,834				692,278
Quarterly increase (decrease) in note amount of held for sale guaranteed loans		87,632				139,493				111,426				62,556				52,922
Estimated net gain to be recognized on quarterly increase in guaranteed loans held for sale (3)		9,707				12,789				10,117				5,414				5,486
Asset Quality Ratios
Allowance for loan losses to loans and leases held for investment		1.80		%		1.80		%		1.82		%		2.01		%		1.98		%
Net charge-offs		$	959			$	191			$	1,513			$	813			$	937
Net charge-offs to average loans and leases held for investment (4)		0.34		%		0.07		%		0.63		%		0.39		%		0.51		%
Nonperforming loans		$	22,420			$	21,856			$	22,469			$	23,781			$	14,023
Foreclosed assets		2,231				2,140				1,706				1,648				2,235
Nonperforming loans (unguaranteed exposure)		3,299				3,546				3,643				4,784				3,354
Foreclosed assets (unguaranteed exposure)		446				345				304				246				304
Nonperforming loans not guaranteed by the SBA and foreclosures		3,745				3,891				3,947				5,030				3,658
Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets		0.15		%		0.18		%		0.20		%		0.29		%		0.22		%
Capital Ratios
Common equity tier 1 capital (to risk-weighted assets)		17.78		%		11.93		%		12.79		%		15.35		%		16.63		%
Total capital (to risk-weighted assets)		18.93				13.08				14.01				16.60				17.88
Tier 1 risk based capital (to risk-weighted assets)		17.78				11.93				12.79				15.35				16.63
Tier 1 leverage capital (to average assets)		13.99				9.93				10.60				12.03				13.18

Notes to Quarterly Selected Financial Data

(1) See accompanying GAAP to Non-GAAP Reconciliation.
(2) Includes the entire note amount, including undisbursed funds for the multi-advance loans.
(3) The estimated revenue from the sale of the quarterly increase in guaranteed loans is based on the average net gain on sale of loans for that quarter. This is an estimate based on the respective quarter activity and does not reflect actual gains to be recognized.
(4) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.

Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)
		Three months ended September 30, 2017											Three months ended June 30, 2017
		Average Balance				Interest				Average Yield/Rate			Average Balance				Interest				Average Yield/Rate
Interest earning assets:
Interest earning balances in other banks		$	292,066			$	870			1.18	%		$	199,904			$	470			0.94	%
Investment securities		73,312				325				1.76			69,544				316				1.82
Loans held for sale		653,342				9,922				6.03			562,984				8,226				5.86
Loans and leases held for investment (1)		1,116,209				17,055				6.06			1,050,074				15,333				5.86
Total interest earning assets		2,134,929				28,172				5.24			1,882,506				24,345				5.19
Less: allowance for loan and lease losses		(19,544		)									(18,198		)
Non-interest earning assets		242,014											209,484
Total assets		$	2,357,399										$	2,073,792
Interest bearing liabilities:
Interest bearing checking		$	35,127			$	51			0.58	%		$	40,541			$	57			0.56	%
Savings		196,220				682				1.38			3,809				12				1.26
Money market accounts		453,985				1,303				1.14			475,265				1,114				0.94
Certificates of deposit		1,257,072				4,722				1.49			1,219,542				4,409				1.45
Total interest bearing deposits		1,942,404				6,758				1.38			1,739,157				5,592				1.29
Other borrowings		42,219				389				3.66			42,765				361				3.39
Total interest bearing liabilities		1,984,623				7,147				1.43			1,781,922				5,953				1.34
Non-interest bearing deposits		43,652											32,718
Non-interest bearing liabilities		22,650											22,165
Shareholders' equity		306,474											236,987
Noncontrolling interest		—											—
Total liabilities and shareholders' equity		$	2,357,399										$	2,073,792
Net interest income and interest rate spread						$	21,025			3.81	%						$	18,392			3.85	%
Net interest margin										3.91											3.92
Ratio of average interest-earning assets to average interest-bearing liabilities										107.57	%										105.64	%

(1) Average loan and lease balances include non-accruing loans.

Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)
		As of and for the three months ended
		3Q 2017				2Q 2017				1Q 2017				4Q 2016				3Q 2016
Total shareholders’ equity		$	364,591			$	237,631			$	226,189			$	222,847			$	214,152
Less:
Goodwill		7,278				7,266				7,165				—				—
Other intangible assets		5,126				5,292				5,410				—				—
Tangible shareholders’ equity (a)		$	352,187			$	225,073			$	213,614			$	222,847			$	214,152
Shares outstanding (c)		39,862,147				34,639,848				34,600,819				34,253,602				34,215,050
Total assets		$	2,432,189			$	2,198,107			$	1,932,125			$	1,755,261			$	1,669,740
Less:
Goodwill		7,278				7,266				7,165				—				—
Other intangible assets		5,126				5,292				5,410				—				—
Tangible assets (b)		$	2,419,785			$	2,185,549			$	1,919,550			$	1,755,261			$	1,669,740
Tangible shareholders’ equity to tangible assets (a/b)		14.55		%		10.30		%		11.13		%		12.70		%		12.83		%
Tangible book value per share (a/c)		$	8.84			$	6.50			$	6.17			$	6.51			$	6.26
Efficiency ratio:
Noninterest expense (d)		$	35,856			$	33,300			$	32,985			$	32,384			$	27,218
Net interest income		21,025				18,392				15,641				12,392				11,631
Noninterest income		25,060				26,667				25,753				26,327				25,432
Less: gain on sale of securities		—				—				—				—				1
Adjusted operating revenue (e)		$	46,085			$	45,059			$	41,394			$	38,719			$	37,062
Efficiency ratio (d/e)		77.80		%		73.90		%		79.69		%		83.64		%		73.44		%

Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)
		Three months ended												Nine months ended
		3Q 2017				2Q 2017				3Q 2016				3Q 2017				3Q 2016
Reconciliation of net income to non-GAAP net income for non-routine income and expenses:
Net income attributable to Live Oak Bancshares, Inc.		$	12,862			$	9,795			$	3,479			$	28,769			$	8,293
Provision for loans reclassified as held for investment		—				—				—				—				4,023
Stock based compensation expense for restricted stock awards with an effective grant date of May 24, 2016, as discussed in Note 10 of our March 31, 2016 Form 10-Q		286				378				3,365				1,010				5,608
Merger costs for acquisition of Reltco and Apiture investment		390				250				—				1,156				—
Trade-in loss on aircraft		—				—				—				206				—
Renewable energy tax credit investment income, impairment and loss		19				19				—				57				—
Income tax effects and adjustments for non-GAAP items *		(278		)		(259		)		(1,346		)		(972		)		(3,852		)
Other renewable energy tax expense		44				44				—				132				—
Non-GAAP net income		$	13,323			$	10,227			$	5,498			$	30,358			$	14,072
* Estimated at 40.0%
Non-GAAP earnings per share:
Basic		$	0.36			$	0.30			$	0.16			$	0.86			$	0.41
Diluted		$	0.34			$	0.28			$	0.16			$	0.83			$	0.40
Weighted-average shares outstanding:
Basic		37,366,041				34,618,721				34,206,943				35,485,371				34,191,014
Diluted		38,644,677				35,942,041				35,001,817				36,370,054				35,003,422
Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses:
Noninterest income, as reported		$	25,060			$	26,667			$	25,432			$	77,480			$	67,212
Renewable energy tax credit investment income		(10		)		(10		)		—				(30		)		—
Noninterest income, as adjusted		25,050				26,657				25,432				77,450				67,212
Provision for loan losses, as reported		2,426				1,556				3,806				5,481				8,692
Provision for loans reclassified as held for investment		—				—				—				—				(4,023		)
Provision for loan losses, as adjusted		2,426				1,556				3,806				5,481				4,669
Noninterest expense, as reported		35,856				33,300				27,218				102,141				74,061
Stock based compensation expense		(286		)		(378		)		(3,365		)		(1,010		)		(5,608		)
Merger costs associated with Reltco and Apiture investment		(390		)		(250		)		—				(1,156		)		—
Trade-in loss on aircraft		—				—				—				(206		)		—
Renewable energy tax credit investment impairment and loss		(29		)		(29		)		—				(87		)		—
Noninterest expense, as adjusted		35,151				32,643				23,853				99,682				68,453
Income tax (benefit) expense, as reported		(5,059		)		408				2,561				(3,853		)		6,432
Income tax effects and adjustments for non-recurring income and expenses		278				259				1,346				972				3,852
Other renewable energy tax expense		(44		)		(44		)		—				(132		)		—
Income tax expense, as adjusted		$	(4,825	)		$	623			$	3,907			$	(3,013	)		$	10,284

This press release presents the non-GAAP financial measures previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measures 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.

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