 WILMINGTON, N.C., July 22, 2020 GLOBE NEWSWIRE -- Live Oak Bancshares, Inc. Nasdaq: LOB Live Oak or the Company today reported second quarter 2020 net income of 3.8 million, or 0.09 per diluted share, compared to net income of 4.9 million, or 0.12 per diluted share, for the second quarter of 2019. The second quarter of 2020 was largely impacted by continued risks and uncertainties related to the COVID-19 pandemic. Live Oak leveraged the power of its people and technology platforms in the second quarter of 2020 to deliver in excess of 1.7 billion of loans through the Paycheck Protection Program. We fully lived out our mission as we provided much needed capital to more than 10,000 small businesses across the U.S., said James S. Mahan, III, Chairman and Chief Executive Officer of Live Oak. We are honored and humbled by the spirit and fortitude of small businesses to persevere during this unprecedented time. We are more dedicated than ever to transforming financial service technology by providing exceptional customer service and next-generation digital experiences to American small business owners.Second Quarter 2020 Key Measures Dollars in thousands, except per share data Increase Decrease 2Q 2020 2Q 2019 Dollars Percent 1Q 2020 Net interest income and servicing revenues 47,589 40,998 6,591 16 46,583 Net income loss 3,777 4,935 1,158 23 7,602 Diluted earnings loss per share 0.09 0.12 0.03 25 0.19 Non-GAAP net income loss 1 3,777 5,393 1,616 30 7,602 Non-GAAP diluted earnings loss per share 1 0.09 0.13 0.04 31 0.19 Loan and lease production: Loans and leases originated 2,175,055 525,088 1,649,967 314 500,634 Fully funded 89.8 42.9 na na 57.6 Total loans and leases 5,626,650 3,066,103 2,560,547 84 3,813,541 Total assets 8,209,154 4,271,473 3,937,681 92 5,273,569 Total deposits 5,873,292 3,718,769 2,154,523 58 4,639,401 1 See accompanying GAAP to Non-GAAP Reconciliation.Loans and LeasesAt June 30, 2020, the total loan and lease portfolio increased to 5.63 billion, 83.5 above its level a year ago and 47.5 above its level at March 31, 2020. Compared to the first quarter of 2020, loans and leases held for investment increased 1.83 billion, or 65.0, to 4.65 billion while loans held for sale decreased 19.5 million, or 2.0, to 976.6 million. Loan and lease originations totaled 2.18 billion during the second quarter of 2020, an increase of 1.67 billion, or 334.5, from the first quarter of 2020. The total loan and lease portfolio at June 30, 2020, and March 31, 2020, of 5.63 billion and 3.81 billion, respectively, consisted of approximately 38.7 and 54.8 of unguaranteed loans and leases, respectively.Average loans and leases were 5.13 billion during the second quarter of 2020 compared to 3.77 billion during the first quarter of 2020.Loans and leases held for investment, loan and lease originations, and average loans and leases were significantly influenced by the addition of loans originated through the Paycheck Protection Program PPP. PPP loans comprised 1.74 billion of the total loans and leases originated during the second quarter of 2020 and are carried at historical cost classified as held for investment at June 30, 2020. Additionally, the unguaranteed percentage of the total loan and lease portfolio of 38.7 at June 30, 2020, is significantly influenced by the addition of PPP loans carrying a 100 government guarantee.DepositsTotal deposits increased by 1.23 billion to 5.87 billion at June 30, 2020 from 4.64 billion at March 31, 2020, to support the planned origination of PPP loans and following the defensive strategy to build liquidity during the first quarter of 2020 due to the uncertainty of the effects of COVID-19. Average total interest-bearing deposits for the second quarter of 2020 increased 1.27 billion, or 29.1, to 5.63 billion, compared to 4.36 billion for the first quarter of 2020. The ratio of average total loans and leases to average interest-bearing deposits was 91.1 for the second quarter of 2020, compared to 86.3 for the first quarter of 2020.BorrowingsDuring the second quarter of 2020, the Company increased long term borrowings by 1.72 billion through the Federal Reserves Paycheck Protection Program Liquidity Facility PPPLF. These PPPLF borrowings were used to help fund PPP loans and complement the defensive strategy to build liquidity which commenced in the first quarter of 2020 due to the uncertainty of the effects of COVID-19. The PPPLF has a 100 advance rate equal to the principal amount of PPP loans pledged as security, carries an interest rate of 0.35 and loans financed under the PPPLF have a neutral impact on regulatory leverage capital ratios. This increase in borrowings at favorable rates was offset by the repayment of 45.0 million of existing debt at the parent company during the quarter.Net Interest IncomeNet interest income for the second quarter of 2020 rose to 40.9 million compared to 33.9 million for the second quarter of 2019 and 40.2 million for the first quarter of 2020. The increase from the prior year was driven by significant growth in the total loan and lease portfolios reflecting the Companys ongoing initiative to grow recurring revenue sources and strengthen its liquidity profile. This increase over the prior year was further enhanced by the aforementioned origination of 1.74 billion in PPP loans in the second quarter of 2020. The increase from the first quarter of 2020 arose from a higher average loan and lease portfolio balance offset with a 99-basis point decline in the net interest margin from 3.55 to 2.56. The decrease in interest earning asset yields outpaced the reduction in the average cost of interest-bearing liabilities with the repricing of the loan portfolio on April 1, 2020, following 150 basis points of cuts to the federal funds rate during the first quarter of 2020. Increased liquidity levels for anticipated PPP lending and the resulting PPPLF also depressed the net interest margin during the second quarter of 2020.Noninterest IncomeNoninterest income for the second quarter of 2020 increased to 22.4 million compared to 14.7 million for the second quarter of 2019 and 5.7 million for the first quarter of 2020. The increase from the prior year was largely driven by a 4.7 million increase in the net gains on sales of loans with the volume of guaranteed loans sold increasing to 155.0 million for the second quarter of 2020 from 71.9 million for the second quarter of 2019. Other noninterest income increased 3.6 million for the second quarter of 2020 compared to the prior year primarily as the result of 2.5 million in revenue resulting from the sale of services from co-developed technology for processing PPP loans. The net loss on the loan servicing asset revaluation totaled 1.6 million for the second quarter of 2020, a decrease from 3.2 million for the second quarter of 2019. Additionally, management fee income earned by Canapi Advisors, the Companys investment advisor subsidiary, increased by 1.1 million to 1.2 million for the second quarter of 2020 compared to 91 thousand for the second quarter of 2019. Offsetting the increases in noninterest income for the second quarter of 2020, the valuation adjustments related to loans measured at fair value decreased 3.9 million compared to the second quarter of 2019.Noninterest income increased 16.7 million for the second quarter of 2020 compared to the prior quarter. For the second quarter of 2020, fair value adjustments continued to be negatively impacted by uncertainty and changing conditions related to the COVID-19 pandemic. The negative valuation adjustment for loans measured at fair value was 1.1 million for the second quarter of 2020, or a decrease of 9.5 million compared to the prior quarter, while the net loss on the loan servicing asset revaluation was 1.6 million over the same period, or a decrease of 3.1 million compared to the prior quarter. The magnitude of COVID-19 related impacts on loan fair value adjustments in the second quarter was dampened by improving market conditions for unguaranteed loans. Additionally, other noninterest income increased 3.0 million from the prior quarter primarily due to the previously discussed 2.5 million in revenue from co-developed technology.The average net gain on guaranteed loan sales was 66.8 thousand per million sold in the second quarter of 2020 versus 80.1 thousand per million in the second quarter of 2019 and 63.7 thousand per million in the first quarter of 2020. The decrease in average loan sale pricing from 2019 was driven by the same factors observed in the prior quarter, including the mix of loans sold by the Company, weakening of market conditions for the purchase of guaranteed loans and less favorable fair value adjustments for exchange-traded interest rate futures contracts. The Company recorded 127 thousand in fair value net gains on exchange-traded interest rate futures contracts during the second quarter of 2020 compared to 3.2 million in fair value net losses during the first quarter of 2020. The decrease in volatility of exchange-traded interest rate futures contracts was the product of the Company preemptively exiting many such contracts in the first quarter. Excluding fair value gains and losses on exchange-traded interest rate futures contracts, the average net gain on guaranteed loan sales was 65.9 thousand and 93.7 thousand per million sold in the second quarters of 2020 and 2019, respectively, and 83.5 thousand per million sold in the first quarter of 2020.Noninterest ExpenseNoninterest expense for the second quarter of 2020 increased to 48. 