lob-ex991

Wilmington, NC, October 23, 2019 - Live Oak Bancshares, Inc. (Nasdaq: LOB) (“Live Oak” or “the Company”) today reported third quarter net earnings available to common shareholders of $3.9 million, or $0.09 per diluted share, compared to $14.3 million, or $0.34 per diluted share, for the third quarter of 2018.

“We continued to build franchise value through our portfolio of earning assets and exited the third quarter of 2019 with recurring revenue growth of 26% compared to the prior year. Supporting this recurring revenue trend, our loan and lease originations totaled $562 million for the third quarter, a 49% increase from a year ago. In addition to our core banking activities, we maintained our focus on changing the infrastructure of the financial industry to deliver more compelling products and services through technological innovation,” said James S. Mahan, III, Chief Executive Officer of Live Oak.

(Dollars in thousands, except per share data)							Increase (Decrease)
	Q3 2019			Q3 2018			Dollars			Percent			Q2 2019
Net interest income and servicing revenues	$	44,362		$	35,230		$	9,132			26	%	$	40,998
Net income		3,895			14,252			(10,357	)		(73	)		4,935
Diluted earnings per share		0.09			0.34			(0.25	)		(74	)		0.12
Non-GAAP net income (1)		4,169			16,562			(12,393	)		(75	)		5,664
Non-GAAP diluted earnings per share (1)		0.10			0.40			(0.30	)		(75	)		0.14
Loan and lease production:
Loans and leases originated	$	562,259		$	377,337		$	184,922			49	%	$	525,088
% Fully funded		51.3	%		48.2	%	n/a			n/a				42.9	%
Total loans and leases	$	3,345,048		$	2,277,812		$	1,067,236			47	%	$	3,083,310
Total assets		4,603,697			3,444,757			1,158,940			34			4,274,301
Total deposits		4,019,267			2,924,288			1,094,979			37			3,721,597

At September 30, 2019, the total loan and lease portfolio of $3.35 billion increased 46.9% from its level at the end of the third quarter of 2018 and 8.5% from its level at June 30, 2019. Compared to the second quarter of 2019, loans and leases held for investment increased $216.5 million, or 9.7%, to $2.44 billion while loans held for sale increased $45.3 million, or 5.3%, to $903.1 million. Loan and lease originations rose to $562.3 million during the third quarter of 2019, an increase of $37.2 million, or 7.1%, from the second quarter of 2019, due to increased production across multiple industry verticals. Origination volumes also benefited from the ongoing selective hiring of experienced SBA lending generalists along with the ongoing diversification of lending activities. For the first nine months of 2019, total loan and lease originations reached $1.48 billion. The total loan and lease portfolio at September 30, 2019, and June 30, 2019, of $3.35 billion and $3.08 billion, respectively, was comprised of approximately 54.7% and 57.0% of unguaranteed loans and leases, respectively.

Average loans and leases were $3.22 billion during the third quarter of 2019 compared to $2.93 billion during the second quarter of 2019.

Total deposits increased by $297.7 million, or 8.0%, to $4.02 billion at September 30, 2019, from $3.72 billion at June 30, 2019, supporting the growing loan and lease portfolio. Average total interest-bearing deposits for the third quarter of 2019 increased $302.4 million, or 8.6%, to $3.83 billion, compared to $3.53 billion for the second quarter of 2019. The ratio of average total loans and leases to average deposits was 83.1% for the third quarter of 2019, compared to 81.8% for the second quarter of 2019.

Net interest income for the third quarter of 2019 rose to $37.5 million compared to $27.7 million for the third quarter of 2018 and $33.9 million for the second quarter of 2019. The increase from the prior year was driven by the significant growth in the combined held for sale and held for investment loan and lease portfolios reflecting the Company's ongoing initiative to grow recurring revenue sources. Another contributing factor was higher investment security holdings as the Company strives to strengthen its liquidity profile while improving the asset-liability repricing mix. The increase from the second quarter of 2019 arose from higher average balances in the loans and lease portfolio. The net interest margin for the third quarter of 2019 increased four basis points to 3.74% versus 3.70% in the second quarter of 2019 as the increasing yields on interest earning assets outpaced the increase in the average cost of interest bearing liabilities.

Noninterest income for the third quarter of 2019 decreased by $5.7 million, or 23.4%, compared to the third quarter of 2018, and increased by $3.9 million, or 26.7%, compared to the second quarter of 2019. The Company’s strategic decision to retain a greater portion of its loans to improve interest income with the consequent reduction in the level of loan sales and related gains was a major factor in the decline from the third quarter of 2018.

The Company’s net gains on sales of loans decreased to $7.4 million in the third quarter of 2019 compared to $22.0 million in the third quarter of 2018 and increased from $6.0 million in the second quarter of 2019. The volume of guaranteed loan sales in the third quarter of 2019 declined to $100.5 million compared to $298.1 million in the third quarter of 2018 and increased from $71.9 million in the second quarter of 2019. As mentioned above, the decline in loan sale volumes from the prior year is consistent with the Company’s strategic decision to build its recurring revenue streams by holding substantially more of its production on balance sheet. The average net gain on guaranteed loan sales was $80.5 thousand per million sold in the third quarter of 2019, an increase from $71.8 thousand in the third quarter of 2018 and from $80.1 thousand in the second quarter of 2019. The average net gain on guaranteed loan sales for the third quarter of 2019 was influenced by $1.5 million in fair value net losses in exchange-traded interest rate lock commitments compared to $770 thousand in fair value net gains during the third quarter of 2018. Excluding fair value fluctuations in exchange-traded interest rate lock commitments, the average net gain on guaranteed loan sales was $95.0 thousand and $69.2 thousand per million sold in the third quarters of 2019 and 2018, respectively, and $93.7 thousand per million sold in the second quarter of 2019.

The net loss resulting from the revaluation of the servicing asset declined to $859 thousand for the third quarter of 2019, an improvement of $8.5 million compared to the third quarter of 2018 which was driven by improving market conditions, such as increased premiums, and increased by $456 thousand compared to the second quarter of 2019.

The flow-through loss from investments accounted for under the equity method totaled $2.4 million, $360 thousand, and $1.7 million for the quarters ended September 30, 2019, September 30, 2018, and June 30, 2019, respectively. These changes reflect the Company’s pro-rata portion of operating results for certain strategic start-up investments.

Equity security investment net gains totaled $3.3 million for the third quarter of 2019 compared to $39 thousand in the third quarter of 2018 and $32 thousand in the second quarter of 2019. The increase in the third quarter of 2019 was driven by observable fair market value changes in orderly transactions of underlying equity security instruments. The Company’s equity security portfolio is largely comprised of investments in strategic start-ups.

Noninterest expense for the third quarter of 2019 was $42.7 million, an increase from $41.2 million for the third quarter of 2018 and from $39.6 million for the second quarter of 2019.

The $1.5 million, or 3.6% increase in noninterest expense from the third quarter of 2018 was primarily driven by increases in salaries and employee benefits, professional services expense, and loan related expenses. Salaries and employee benefits expenses increased by $2.2 million to $22.7 million for the third quarter of 2019 from $20.6 million for the third quarter of 2018 due to the expansion of the workforce to support a variety of initiatives by the Company. Professional services expenses increased by $845 thousand from the third quarter of 2018 to $2.1 million for the third quarter of 2019 principally due to expenses incurred in relation to the Company’s investment in Apiture and Canapi Advisors, LLC. Other loan origination and maintenance expenses increased by $1.8 million to $3.5 million for the third quarter of 2019 compared to $1.7 million for the third quarter of 2018 due principally to expenses associated with the repurchase of certain guaranteed loans in the portfolio during the third quarter of 2019 along with increases in the ongoing guarantee fees arising from holding a higher volume of loans on balance sheet. The increase in noninterest expense from the third quarter of 2018 was mitigated by decreases in FDIC insurance of $1.0 million due to lower required premiums combined with a one-time impairment expense in the third quarter of 2018 of $2.7 million on goodwill and other intangibles associated with the sale of Reltco, Inc.

Compared to the second quarter of 2019, the $3.2 million or 8.0% increase in noninterest expense was principally comprised of data processing expense which increased $1.1 million related largely to system development and other loan origination and maintenance expense which increased by $1.8 million as described above.

Net charge-offs of $2.3 million in the third quarter of 2019 increased from $526 thousand in the second quarter of 2019 and decreased $46 thousand compared to the third quarter of 2018. Net charge-offs as a percentage of average held for investment loans and leases, annualized, for the quarter ended September 30, 2019, was 0.39% compared to 0.10% for the second quarter of 2019 and 0.57% for the third quarter of 2018.

Total nonperforming loans and leases increased to $80.8 million in the third quarter of 2019 from $65.5 million at the end of the second quarter of 2019. The unguaranteed exposure of nonperforming loans and leases increased slightly to $19.8 million, or 0.81% of total loans and leases held for investment, at September 30, 2019, compared to $18.4 million, or 0.82%, at June 30, 2019. For the quarters ended September 30, 2019 and June 30, 2019, the percentage of unguaranteed criticized and classified loans and leases, comprised of risk grades 5 through 8, to unguaranteed held for investment loans and leases was 6.62% and 5.27%, respectively.

Foreclosed assets decreased $342 thousand to $5.7 million at September 30, 2019, from $6.0 million at June 30, 2019. The unguaranteed exposure of foreclosed assets decreased to $1.1 million at September 30, 2019, from $1.2 million at June 30, 2019.

The provision for loan and lease losses for the third quarter of 2019 totaled $7.2 million compared to a negative provision of $243 thousand for the third quarter of 2018 and provision expense of $3.5 million for the second quarter of 2019. The increase in provision expense was largely the result of continued significant portfolio growth combined with increases in net charge-offs and criticized and classified loans and leases for the third quarter of 2019.

The allowance for loan and lease losses totaled $42.9 million at September 30, 2019, compared to $38.0 million at June 30, 2019. The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.76% and 1.71% at September 30, 2019, and June 30, 2019, respectively.

Income tax expense was $2.4 million in the third quarter of 2019 compared to an income tax benefit of $3.2 million in the third quarter of 2018 and income tax expense of $662 thousand in the second quarter of 2019. The Company’s effective tax rate is influenced by the leasing of renewable energy assets which generate investment tax credits. The significant increase in the effective tax rate for the third quarter of 2019 compared to the preceding quarter is the result of forecasted changes, largely comprised of a reduction in the targeted solar panel leasing activity for the remainder of the year.

During the third quarter of 2019, 624,716 shares of Class B common stock (non-voting) were converted to Class A common stock (voting) under a private sale. The conversion decreased the value of Class B common stock (non-voting) and increased the value of Class A common stock (voting) by $6.6 million.

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (October 24, 2019). 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 5573497. 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 October 31, 2019 and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

Additional commentary on the quarter by Brett Caines, Chief Financial Officer of the Company, is available at http://investor.liveoakbank.com in the supporting materials for the conference call.

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.

Live Oak Bancshares, Inc. (Nasdaq: LOB) is a financial holding company and the parent company of Live Oak Banking Company. Live Oak Bancshares and its subsidiaries partner with businesses that have a common focus of changing the banking industry by bringing efficiency and excellence to customers using technology and innovation.

	Three months ended
	3Q 2019			2Q 2019			1Q 2019			4Q 2018			3Q 2018
Interest income
Loans and fees on loans	$	55,939		$	49,914		$	44,966		$	40,628		$	37,724
Investment securities, taxable		4,001			4,116			3,317			2,558			2,528
Other interest earning assets		1,167			1,108			1,639			1,568			1,638
Total interest income		61,107			55,138			49,922			44,754			41,890
Interest expense
Deposits		23,576			21,203			19,317			15,959			14,165
Borrowings		—			—			—			—			1
Total interest expense		23,576			21,203			19,317			15,959			14,166
Net interest income		37,531			33,935			30,605			28,795			27,724
Provision for (recovery of) loan and leases losses		7,160			3,463			2,742			6,822			(243	)
Net interest income after provision for loan and lease losses		30,371			30,472			27,863			21,973			27,967
Noninterest income
Loan servicing revenue		6,831			7,063			7,410			7,752			7,506
Loan servicing asset revaluation		(859	)		(403	)		(2,246	)		(627	)		(9,380	)
Net gains on sales of loans		7,425			6,015			4,198			5,687			22,004
Equity method investments income (loss)		(2,370	)		(1,736	)		(2,014	)		1,011			(360	)
Equity security investments gains (losses), net		3,346			32			103			79			39
Gain on sale of investment securities available-for-sale		87			—			5			—			—
Lease income		2,361			2,369			2,325			2,244			2,194
Construction supervision fee income		360			386			779			323			578
Title insurance income		—			—			—			—			479
Other noninterest income		1,447			975			2,467			1,596			1,271
Total noninterest income		18,628			14,701			13,027			18,065			24,331
Noninterest expense
Salaries and employee benefits		22,717			21,990			21,855			14,503			20,553
Travel expense		1,934			1,541			1,200			3,269			2,003
Professional services expense		2,073			1,621			2,182			1,233			1,228
Advertising and marketing expense		1,277			1,665			1,364			1,023			1,462
Occupancy expense		2,131			1,848			1,609			1,738			1,588
Data processing expense		3,072			1,947			2,399			2,606			3,661
Equipment expense		4,361			4,239			3,325			3,630			3,649
Other loan origination and maintenance expense		3,535			1,708			1,639			1,482			1,742
Renewable energy tax credit investment impairment		—			602			—			—			—
FDIC insurance		101			699			635			547			1,105
Title insurance closing services expense		—			—			—			—			114
Impairment expense on goodwill and other intangibles, net		—			—			—			—			2,680
Other expense		1,536			1,716			1,993			2,527			1,459
Total noninterest expense		42,737			39,576			38,201			32,558			41,244
Income before taxes		6,262			5,597			2,689			7,480			11,054
Income tax expense (benefit)		2,367			662			317			(3,010	)		(3,198	)
Net income	$	3,895		$	4,935		$	2,372		$	10,490		$	14,252
Earnings per share
Basic	$	0.10		$	0.12		$	0.06		$	0.26		$	0.36
Diluted	$	0.09		$	0.12		$	0.06		$	0.26		$	0.34
Weighted average shares outstanding
Basic		40,240,740			40,196,662			40,160,118			40,148,115			40,119,561
Diluted		41,113,575			40,998,541			40,921,823			41,075,864			41,688,430

	As of the quarter ended
	3Q 2019			2Q 2019			1Q 2019			4Q 2018			3Q 2018
Assets
Cash and due from banks	$	159,527		$	115,292		$	221,159		$	316,823		$	368,565
Federal funds sold		88,919			68,153			64,708			—			—
Certificates of deposit with other banks		7,250			7,250			7,250			7,250			750
Investment securities available-for-sale		570,795			576,275			569,739			380,490			374,284
Loans held for sale		903,095			857,837			772,481			687,393			646,475
Loans and leases held for investment		2,441,953			2,225,473			2,002,124			1,843,419			1,631,337
Allowance for loan and lease losses		(42,944	)		(38,048	)		(35,111	)		(32,434	)		(26,797	)
Net loans and leases		2,399,009			2,187,425			1,967,013			1,810,985			1,604,540
Premises and equipment, net		280,942			281,126			271,810			262,524			263,861
Foreclosed assets		5,702			6,044			1,374			1,094			1,429
Servicing assets		37,583			41,687			44,324			47,641			49,261
Operating lease right-of-use assets		1,890			1,996			2,136			—			—
Other assets		148,985			131,216			136,053			156,249			135,592
Total assets	$	4,603,697		$	4,274,301		$	4,058,047		$	3,670,449		$	3,444,757
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest-bearing	$	56,373		$	55,416		$	53,843		$	53,993		$	48,622
Interest-bearing		3,962,894			3,666,181			3,474,562			3,095,590			2,875,666
Total deposits		4,019,267			3,721,597			3,528,405			3,149,583			2,924,288
Short term borrowings		1,295			1,345			1,393			1,441			—
Long term borrowings		15			16			17			16			1,506
Operating lease liabilities		2,041			2,162			2,314			—			—
Other liabilities		52,860			30,195			25,538			25,849			41,733
Total liabilities		4,075,478			3,755,315			3,557,667			3,176,889			2,967,527
Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding		—			—			—			—			—
Class A common stock (voting)		294,773			284,987			281,994			278,945			276,831
Class B common stock (non-voting)		42,553			49,168			49,168			49,168			49,168
Retained earnings		174,641			171,954			168,225			167,124			157,839
Accumulated other comprehensive income (loss)		16,252			12,877			993			(1,677	)		(6,608	)
Total equity		528,219			518,986			500,380			493,560			477,230
Total liabilities and shareholders’ equity	$	4,603,697		$	4,274,301		$	4,058,047		$	3,670,449		$	3,444,757

	Nine Months Ended
	September 30, 2019			September 30, 2018
Interest income
Loans and fees on loans	$	150,819		$	106,682
Investment securities, taxable		11,434			6,175
Other interest earning assets		3,914			5,032
Total interest income		166,167			117,889
Interest expense
Deposits		64,096			38,510
Borrowings		—			131
Total interest expense		64,096			38,641
Net interest income		102,071			79,248
Provision for loan and lease losses		13,365			6,236
Net interest income after provision for loan and lease losses		88,706			73,012
Noninterest income
Loan servicing revenue		21,304			21,369
Loan servicing asset revaluation		(3,508	)		(18,138	)
Net gains on sales of loans		17,638			69,483
Equity method investments income (loss)		(6,120	)		(1,397	)
Equity security investments gains (losses), net		3,481			134
Gain on sale of investment securities available-for-sale		92			—
Lease income		7,055			5,722
Construction supervision fee income		1,525			1,954
Title insurance income		—			2,775
Other noninterest income		4,889			3,798
Total noninterest income		46,356			85,700
Noninterest expense
Salaries and employee benefits		66,562			62,908
Travel expense		4,675			5,887
Professional services expense		5,876			3,645
Advertising and marketing expense		4,306			4,992
Occupancy expense		5,588			5,327
Data processing expense		7,418			9,404
Equipment expense		11,925			10,094
Other loan origination and maintenance expense		6,882			4,485
Renewable energy tax credit investment impairment		602			—
FDIC insurance		1,435			2,687
Title insurance closing services expense		—			912
Impairment expense on goodwill and other intangibles, net		—			2,680
Other expense		5,245			7,125
Total noninterest expense		120,514			120,146
Income before taxes		14,548			38,566
Income tax expense (benefit)		3,346			(2,392	)
Net income	$	11,202		$	40,958
Earnings per share
Basic	$	0.28		$	1.02
Diluted	$	0.27		$	0.98
Weighted average shares outstanding
Basic		40,199,468			40,025,265
Diluted		41,011,608			41,586,987

	As of and for the three months ended
	3Q 2019			2Q 2019			1Q 2019			4Q 2018			3Q 2018
Income Statement Data
Net income	$	3,895		$	4,935		$	2,372		$	10,490		$	14,252
Per Common Share
Net income, basic	$	0.10		$	0.12		$	0.06		$	0.26		$	0.36
Net income, diluted		0.09			0.12			0.06			0.26			0.34
Dividends declared		0.03			0.03			0.03			0.03			0.03
Book value		13.12			12.90			12.45			12.29			11.89
Tangible book value (1)		13.12			12.90			12.45			12.29			11.89
Performance Ratios
Return on average assets (annualized)		0.35	%		0.48	%		0.25	%		1.20	%		1.65	%
Return on average equity (annualized)		2.94			3.85			1.88			8.64			12.08
Net interest margin		3.74			3.70			3.63			3.72			3.61
Efficiency ratio (1)		76.22			81.37			87.56			69.48			79.23
Noninterest income to total revenue		33.07			30.23			29.85			38.55			46.74
Selected Loan Metrics
Loans and leases originated	$	562,259		$	525,088		$	390,851		$	498,987		$	377,337
Guaranteed loans sold		100,498			71,934			62,940			104,646			298,073
Average net gain on sale of guaranteed loans		80.51			80.12			61.30			59.83			71.81
Adjusted average net gain on sale of guaranteed loans (2)		94.98			93.74			89.04			77.42			69.23
Outstanding balance of sold loans serviced:
Guaranteed		2,802,073			2,870,108			2,952,774			3,045,460			3,102,820
Unguaranteed		211,095			183,991			179,307			174,066			170,784
Total		3,013,168			3,054,099			3,132,081			3,219,526			3,273,604
Asset Quality Ratios
Allowance for loan losses to loans and leases held for investment		1.76	%		1.71	%		1.75	%		1.76	%		1.64	%
Net charge-offs	$	2,264		$	526		$	65		$	1,185		$	2,310
Net charge-offs to average loans and leases held for investment (3)		0.39	%		0.10	%		0.01	%		0.28	%		0.57	%
Nonperforming loans and leases	$	80,757		$	65,473		$	70,692		$	57,690		$	52,709
Foreclosed assets		5,702			6,044			1,374			1,094			1,429
Nonperforming loans and leases (unguaranteed exposure)		19,817			18,352			20,186			14,488			12,897
Foreclosed assets (unguaranteed exposure)		1,142			1,228			170			148			158
Nonperforming loans and leases not guaranteed by the SBA and foreclosures	$	20,959		$	19,580		$	20,356		$	14,636		$	13,055
Nonperforming loans and leases and foreclosures, not guaranteed by the SBA, to total assets		0.46	%		0.46	%		0.50	%		0.40	%		0.38	%
Capital Ratios
Common equity tier 1 capital (to risk-weighted assets)		15.22	%		15.94	%		16.68	%		17.10	%		17.88	%
Total capital (to risk-weighted assets)		16.47			17.19			17.92			18.28			18.93
Tier 1 risk based capital (to risk-weighted assets)		15.22			15.94			16.68			17.10			17.88
Tier 1 leverage capital (to average assets)		11.12			11.77			12.34			13.40			13.21

(2) Excludes fair value gain/loss on exchange-traded interest rate lock commitments.

(3) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.

	Three Months Ended September 30, 2019								Three months ended June 30, 2019
	Average Balance			Interest		Average Yield/Rate			Average Balance			Interest		Average Yield/Rate
Interest earning assets:
Federal funds sold and interest earning balances in other banks	$	205,342		$	1,167		2.25	%	$	184,986		$	1,108		2.40	%
Investment securities		554,871			4,001		2.86			566,159			4,116		2.92
Loans held for sale		910,837			15,982		6.96			839,724			14,333		6.85
Loans and leases held for investment ⁽¹⁾		2,313,615			39,957		6.85			2,089,225			35,581		6.83
Total interest earning assets		3,984,665			61,107		6.08			3,680,094			55,138		6.01
Less: allowance for loan and lease losses		(37,995	)							(35,124	)
Non-interest earning assets		501,369								474,706
Total assets	$	4,448,039							$	4,119,676
Interest bearing liabilities:
Interest bearing checking	$	—		$	—		—	%	$	—		$	—		—	%
Savings		1,036,858			5,501		2.10			989,512			5,235		2.12
Money market accounts		91,813			179		0.77			85,982			161		0.75
Certificates of deposit		2,701,350			17,896		2.63			2,452,159			15,807		2.59
Total interest bearing deposits		3,830,021			23,576		2.44			3,527,653			21,203		2.41
Other borrowings		1,359			—		—			1,409			—		—
Total interest bearing liabilities		3,831,380			23,576		2.44			3,529,062			21,203		2.41
Non-interest bearing deposits		51,781								51,643
Non-interest bearing liabilities		35,654								26,580
Shareholders' equity		529,224								512,391
Total liabilities and shareholders' equity	$	4,448,039							$	4,119,676
Net interest income and interest rate spread				$	37,531		3.64	%				$	33,935		3.60	%
Net interest margin							3.74								3.70
Ratio of average interest-earning assets to average interest-bearing liabilities							104.00	%							104.28	%

	As of and for the three months ended
	3Q 2019			2Q 2019			1Q 2019			4Q 2018			3Q 2018
Total shareholders’ equity	$	528,219		$	518,986		$	500,380		$	493,560		$	477,230
Less:
Goodwill		—			—			—			—			—
Other intangible assets		—			—			—			—			—
Tangible shareholders’ equity (a)	$	528,219		$	518,986		$	500,380		$	493,560		$	477,230
Shares outstanding (c)		40,272,908			40,220,916			40,175,079			40,155,792			40,140,417
Total assets	$	4,603,697		$	4,274,301		$	4,058,047		$	3,670,449		$	3,444,757
Less:
Goodwill		—			—			—			—			—
Other intangible assets		—			—			—			—			—
Tangible assets (b)	$	4,603,697		$	4,274,301		$	4,058,047		$	3,670,449		$	3,444,757
Tangible shareholders’ equity to tangible assets (a/b)		11.47	%		12.14	%		12.33	%		13.45	%		13.85	%
Tangible book value per share (a/c)	$	13.12		$	12.90		$	12.45		$	12.29		$	11.89
Efficiency ratio:
Noninterest expense (d)	$	42,737		$	39,576		$	38,201		$	32,558		$	41,244
Net interest income		37,531			33,935			30,605			28,795			27,724
Noninterest income		18,628			14,701			13,027			18,065			24,331
Less: gain on sale of securities		87			—			5			—			—
Adjusted operating revenue (e)	$	56,072		$	48,636		$	43,627		$	46,860		$	52,055
Efficiency ratio (d/e)		76.22	%		81.37	%		87.56	%		69.48	%		79.23	%

	Three Months Ended									Nine Months Ended
	3Q 2019			2Q 2019			3Q 2018			3Q 2019			3Q 2018
Reconciliation of net income to non-GAAP net income for non-routine income and expenses:
Net income	$	3,895		$	4,935		$	14,252		$	11,202		$	40,958
Gain on sale of aircraft		—			—			—			(357	)		—
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		360			357			360			1,069			1,069
Impairment expense on goodwill and other intangibles, net		—			—			2,680			—			2,680
Renewable energy tax credit investment impairment		—			602			—			602			—
Income tax effects and adjustments for non-GAAP items *		(86	)		(230	)		(730	)		(315	)		(900	)
Non-GAAP net income	$	4,169		$	5,664		$	16,562		$	12,201		$	43,807
* Estimated at 24.0%
Non-GAAP earnings per share:
Basic	$	0.10		$	0.14		$	0.41		$	0.30		$	1.09
Diluted	$	0.10		$	0.14		$	0.40		$	0.30		$	1.05
Weighted-average shares outstanding:
Basic		40,240,740			40,196,662			40,119,561			40,199,468			40,025,265
Diluted		41,113,575			40,998,541			41,688,430			41,011,608			41,586,987
Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses:
Noninterest income, as reported	$	18,628		$	14,701		$	24,331		$	46,356		$	85,700
Gain on sale of aircraft		—			—			—			(357	)		—
Noninterest income, as adjusted	$	18,628		$	14,701		$	24,331		$	45,999		$	85,700
Noninterest expense, as reported	$	42,737		$	39,576		$	41,244		$	120,514		$	120,146
Stock based compensation expense		(360	)		(357	)		(360	)		(1,069	)		(1,069	)
Impairment expense on goodwill and other intangibles, net		—			—			(2,680	)		—			(2,680	)
Renewable energy tax credit investment impairment		—			(602	)		—			(602	)		—
Noninterest expense, as adjusted	$	42,377		$	38,617		$	38,204		$	118,843		$	116,397
Income before taxes, as reported	$	6,262		$	5,597		$	11,054		$	14,548		$	38,566
Gain on sale of aircraft		—			—			—			(357	)		—
Stock based compensation expense		360			357			360			1,069			1,069
Impairment expense on goodwill and other intangibles, net		—			—			2,680			—			2,680
Renewable energy tax credit investment impairment		—			602			—			602			—
Income before taxes, as adjusted	$	6,622		$	6,556		$	14,094		$	15,862		$	42,315
Income tax expense, as reported	$	2,367		$	662		$	(3,198	)	$	3,346		$	(2,392	)
Income tax effects and adjustments for non-recurring income and expenses		86			230			730			315			900
Income tax expense, as adjusted	$	2,453		$	892		$	(2,468	)	$	3,661		$	(1,492	)

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.