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EX-31.1 - EXHIBIT 31.1 - Live Oak Bancshares, Inc.exhibit3112017q1.htm
EX-32 - EXHIBIT 32 - Live Oak Bancshares, Inc.exhibit322017q1.htm
EX-31.2 - EXHIBIT 31.2 - Live Oak Bancshares, Inc.exhibit3122017q1.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2017
or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to             .
Commission file number: 001-37497
liveoakbancshareslogo.jpg
LIVE OAK BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
North Carolina
26-4596286
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
1741 Tiburon Drive
Wilmington, North Carolina
28403
(Address of principal executive offices)
(Zip Code)
(910) 790-5867
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ý    NO  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ý    NO  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
¨
 
Accelerated filer
 
x
 
 
 
 
Non-accelerated filer
 
¨ (Do not check if smaller reporting company)
 
Smaller reporting company
 
¨
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  ý
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of May 5, 2017, there were 29,883,600 shares of the registrant’s voting common stock outstanding and 4,723,530 shares of the registrant’s non-voting common stock outstanding.




Live Oak Bancshares, Inc. and Subsidiaries
Form 10-Q
For the Quarterly Period Ended March 31, 2017
TABLE OF CONTENTS

 
 
Page
PART I. FINANCIAL INFORMATION
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 




PART I. FINANCIAL INFORMATION
Item 1.        Financial Statements
Live Oak Bancshares, Inc.
Consolidated Balance Sheets
As of March 31, 2017 (unaudited) and December 31, 2016*
(Dollars in thousands)
 
March 31,
2017
 
December 31,
2016*
Assets
 
 
 
Cash and due from banks
$
158,887

 
$
238,008

Certificates of deposit with other banks
6,000

 
7,250

Investment securities available-for-sale
68,630

 
71,056

Loans held for sale
512,501

 
394,278

Loans and leases held for investment
999,270

 
907,566

Allowance for loan and lease losses
(18,195
)
 
(18,209
)
Net loans and leases
981,075

 
889,357

Premises and equipment, net
101,398

 
64,661

Foreclosed assets
1,706

 
1,648

Servicing assets
53,584

 
51,994

Other assets
48,344

 
37,009

Total assets
$
1,932,125

 
$
1,755,261

Liabilities and Shareholders’ Equity
 
 
 
Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
38,029

 
$
27,990

Interest-bearing
1,601,114

 
1,457,086

Total deposits
1,639,143

 
1,485,076

Short term borrowings
13,100

 

Long term borrowings
27,473

 
27,843

Other liabilities
26,220

 
19,495

Total liabilities
1,705,936

 
1,532,414

Shareholders’ equity
 
 
 
Preferred stock, no par value, 1,000,000 authorized, none issued or outstanding at March 31, 2017 and December 31, 2016

 

Class A common stock, no par value, 100,000,000 shares authorized, 29,877,289 and 29,530,072 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively
147,933

 
149,966

Class B common stock, no par value, 10,000,000 shares authorized, 4,723,530 shares issued and outstanding at March 31, 2017 and December 31, 2016
50,015

 
50,015

Retained earnings
28,938

 
23,518

Accumulated other comprehensive income (loss)
(697
)
 
(652
)
Total equity
226,189

 
222,847

Total liabilities and shareholders’ equity
$
1,932,125

 
$
1,755,261

*    Derived from audited consolidated financial statements.
See Notes to Unaudited Consolidated Financial Statements

1


Live Oak Bancshares, Inc.
Consolidated Statements of Income
For the three months ended March 31, 2017 and 2016 (unaudited)
(Dollars in thousands, except per share data)
 
Three Months Ended
March 31,
 
2017
 
2016
Interest income
 
 
 
Loans and fees on loans
$
19,754

 
$
11,005

Investment securities, taxable
323

 
251

Other interest earning assets
342

 
138

Total interest income
20,419

 
11,394

Interest expense
 
 
 
Deposits
4,543

 
2,444

Borrowings
235

 
241

Total interest expense
4,778

 
2,685

Net interest income
15,641

 
8,709

Provision for loan and lease losses
1,499

 
1,433

Net interest income after provision for loan and lease losses
14,142

 
7,276

Noninterest income
 
 
 
Loan servicing revenue
5,923

 
4,784

Loan servicing asset revaluation
(2,009
)
 
(26
)
Net gains on sales of loans
18,952

 
16,425

Construction supervision fee income
429

 
630

Title insurance income
1,438

 

Other noninterest income
1,020

 
619

Total noninterest income
25,753

 
22,432

Noninterest expense
 
 
 
Salaries and employee benefits
18,682

 
12,993

Travel expense
1,598

 
1,846

Professional services expense
1,736

 
528

Advertising and marketing expense
1,485

 
963

Occupancy expense
1,195

 
1,193

Data processing expense
1,696

 
1,208

Equipment expense
1,074

 
551

Other loan origination and maintenance expense
1,005

 
574

FDIC insurance
726

 
148

Other expense
3,788

 
1,707

Total noninterest expense
32,985

 
21,711

Income before taxes
6,910

 
7,997

Income tax expense
798

 
3,314

Net income
6,112

 
4,683

Net loss attributable to noncontrolling interest

 
8

Net income attributable to Live Oak Bancshares, Inc.
$
6,112

 
$
4,691

Basic earnings per share
$
0.18

 
$
0.14

Diluted earnings per share
$
0.17

 
$
0.13

See Notes to Unaudited Consolidated Financial Statements

2


Live Oak Bancshares, Inc.
Consolidated Statements of Comprehensive Income
For the three months ended March 31, 2017 and 2016 (unaudited)
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2017
 
2016
Net income
$
6,112

 
$
4,683

Other comprehensive (loss) income before tax:
 
 
 
Net unrealized (loss) gain on investment securities arising during the period
(73
)
 
389

Reclassification adjustment for (gain) loss on sale of securities available-for-sale included in net income

 

Other comprehensive (loss) income before tax
(73
)
 
389

Income tax benefit (expense)
28

 
(150
)
Other comprehensive (loss) income, net of tax
(45
)
 
239

Total comprehensive income
$
6,067

 
$
4,922

See Notes to Unaudited Consolidated Financial Statements

3


Live Oak Bancshares, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the three months ended March 31, 2017 and 2016 (unaudited)
(Dollars in thousands)
 
Common stock
 
Retained
earnings
 
Accumulated
other
comprehensive
income (loss)
 
Non-
controlling
interest
 
Total
equity
Shares
 
 
 
Class A
 
Class B
 
Amount
 
Balance at December 31, 2015
29,449,369

 
4,723,530

 
$
187,507

 
$
12,140

 
$
(192
)
 
$
33

 
$
199,488

Net income (loss)

 

 

 
4,691

 

 
(8
)
 
4,683

Other comprehensive income

 

 

 

 
239

 

 
239

Issuance of restricted stock
2,776

 

 

 

 

 

 

Stock option exercises
8,203

 

 
48

 

 

 

 
48

Stock option based compensation expense

 

 
592

 

 

 

 
592

Restricted stock expense

 

 
67

 

 

 

 
67

Dividends (distributions to shareholders)

 

 

 
(684
)
 

 

 
(684
)
Balance at March 31, 2016
29,460,348

 
4,723,530

 
$
188,214

 
$
16,147

 
$
47

 
$
25

 
$
204,433

Balance at December 31, 2016
29,530,072

 
4,723,530

 
$
199,981

 
$
23,518

 
$
(652
)
 
$

 
$
222,847

Net income

 

 

 
6,112

 

 

 
6,112

Other comprehensive loss

 

 

 

 
(45
)
 

 
(45
)
Issuance of restricted stock
273,946

 

 

 

 

 

 

Withholding cash issued in lieu of restricted stock issuance

 

 
(4,828
)
 

 

 

 
(4,828
)
Employee stock purchase program
12,411

 

 
241

 

 

 

 
241

Stock option exercises
33,136

 

 
186

 

 

 

 
186

Stock option based compensation expense

 

 
456

 

 

 

 
456

Restricted stock expense

 

 
1,347

 

 

 

 
1,347

Stock issued in acquisition of Reltco, Inc.
27,724

 

 
565

 

 

 

 
565

Dividends (distributions to shareholders)

 

 

 
(692
)
 

 

 
(692
)
Balance at March 31, 2017
29,877,289

 
4,723,530

 
$
197,948

 
$
28,938

 
$
(697
)
 
$

 
$
226,189

See Notes to Unaudited Consolidated Financial Statements

4


Live Oak Bancshares, Inc.
Consolidated Statements of Cash Flows
For the three months ended March 31, 2017 and 2016 (unaudited)
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2017
 
2016
Cash flows from operating activities
 
 
 
Net income
$
6,112

 
$
4,683

Adjustments to reconcile net income to net cash used by operating activities:
 
 
 
Depreciation and amortization
1,708

 
1,065

Provision for loan losses
1,499

 
1,433

Amortization of premium on securities, net of accretion
110

 
30

Amortization (accretion) of discount on unguaranteed loans, net
1,155

 
146

Deferred tax expense
2,046

 
739

Originations of loans held for sale
(329,990
)
 
(256,077
)
Proceeds from sales of loans held for sale
227,667

 
172,638

Net gains on sale of loans held for sale
(18,952
)
 
(16,425
)
Net increase in servicing assets
(1,590
)
 
(3,147
)
Net loss on disposal of premises and equipment
213

 

Stock option based compensation expense
456

 
592

Restricted stock expense
1,347

 
67

Stock based compensation expense excess tax benefits
874

 

     Business combination contingent consideration fair value adjustment
200

 

Changes in assets and liabilities:
 
 
 
Other assets
1,399

 
516

Other liabilities
(1,951
)
 
(146
)
Net cash used by operating activities
(107,697
)
 
(93,886
)
Cash flows from investing activities
 
 
 
Purchases of securities available-for-sale
(19
)
 
(2,443
)
Proceeds from sales, maturities, calls, and principal paydowns of securities available-for-sale
2,262

 
890

Proceeds from sale/collection of foreclosed assets

 
52

Business combination, net of cash acquired
(7,583
)
 

Maturities of certificates of deposit with other banks
1,250

 
1,250

Loan and lease originations and principal collections, net
(91,378
)
 
8,742

Purchases of premises and equipment, net
(37,660
)
 
(251
)
Net cash (used in) provided by investing activities
(133,128
)
 
8,240

See Notes to Unaudited Consolidated Financial Statements

5


Live Oak Bancshares, Inc.
Consolidated Statements of Cash Flows (Continued)
For the three months ended March 31, 2017 and 2016 (unaudited)
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2017
 
2016
Cash flows from financing activities
 
 
 
Net increase in deposits
154,067

 
210,677

Repayment of long term borrowings
(370
)
 
(104
)
Proceeds from short term borrowings
13,100

 

Stock option exercises
186

 
48

Employee stock purchase program
241

 

Withholding cash issued in lieu of restricted stock
(4,828
)
 

Shareholder dividend distributions
(692
)
 
(1,026
)
Net cash provided by financing activities
161,704

 
209,595

Net (decrease) increase in cash and cash equivalents
(79,121
)
 
123,949

Cash and cash equivalents, beginning
238,008

 
102,607

Cash and cash equivalents, ending
$
158,887

 
$
226,556

 
 
 
 
Supplemental disclosure of cash flow information
 
 
 
Interest paid
$
4,836

 
$
2,690

Income tax
2,828

 
2,181

 
 
 
 
Supplemental disclosures of noncash operating, investing, and financing activities
 
 
 
Unrealized holding (losses) gains on available-for-sale securities, net of taxes
$
(45
)
 
$
239

Transfers from loans to foreclosed real estate and other repossessions
58

 
406

Transfer of loans held for sale to loans held for investment
3,656

 
13,763

Transfer of loans held for investment to loans held for sale
1,642

 
752

Business combination:
 
 
 
Assets acquired (excluding goodwill)
5,766

 

Liabilities assumed
4,681

 

Purchase price
8,250

 

Goodwill recorded
7,165

 

See Notes to Unaudited Consolidated Financial Statements

6


Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation
Nature of Operations
Live Oak Bancshares, Inc. (the “Company” or “LOB”) is a bank holding company headquartered in Wilmington, North Carolina incorporated under the laws of North Carolina in December 2008. The Company conducts business operations primarily through its commercial bank subsidiary, Live Oak Banking Company (the “Bank”). The Bank was organized and incorporated under the laws of the State of North Carolina on February 25, 2008 and commenced operations on May 12, 2008. The Bank specializes in providing lending services to small businesses nationwide in targeted industries. The Bank identifies and grows within credit-worthy industries through expertise within those industries. A significant portion of the loans originated by the Bank are guaranteed by the Small Business Administration (“SBA”) under the 7(a) Loan Program and to a lesser extent by the U.S. Department of Agriculture ("USDA") Rural Energy for America Program ("REAP") and Business & Industry ("B&I") loan programs. On July 28, 2015 the Company completed its initial public offering. In 2010, the Bank formed Live Oak Number One, Inc., a wholly-owned subsidiary, to hold properties foreclosed on by the Bank.
In addition to the Bank, the Company owns Live Oak Grove, LLC, opened in September 2015 for the purpose of providing Company employees and business visitors an on-site restaurant location, Government Loan Solutions, Inc. (“GLS”), a management and technology consulting firm that specializes in the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under the SBA 7(a) loan program and USDA-guaranteed loans, and 504 Fund Advisors, LLC (“504FA”), formed to serve as the investment adviser to the 504 Fund, a closed-end mutual fund organized to invest in SBA section 504 loans.
The Company acquired control over 504FA, previously carried as an equity method investment, on February 2, 2015 by increasing its ownership from 50.0% to 91.3%. The acquisition of an additional 41.3% of ownership occurred in exchange for contingent consideration estimated to total $170 thousand. Transactions in the third quarter of 2015 and first quarter of 2016 increased the Company’s ownership to 92.9%. On September 1, 2016, the Company acquired the remaining 7.1% ownership from a third party investor in exchange for contingent consideration estimated to total $24 thousand.
In August 2016, the Company formed Live Oak Ventures, Inc. for the purpose of investing in businesses that align with the Company's strategic initiative to be a leader in financial technology.
In November 2016, the Company formed Live Oak Clean Energy Financing LLC for the purpose of providing financing to entities for renewable energy applications.
On February 1, 2017, the Company completed its acquisition of Reltco Inc. and National Assurance Title, Inc. (collectively referred to as "Reltco"), two nationwide title agencies under common control based in Tampa, Florida. See Note 4. Business Combination for a further discussion of this transaction.
The Company earns revenue primarily from the sale of SBA and USDA-guaranteed loans and net interest income. Income from the sale of loans is comprised of net gains on the sale of loans, revenues on the servicing of sold loans and valuation of loan servicing rights. Offsetting these revenues are the cost of funding sources, provision for loan and lease losses, any costs related to foreclosed assets and other operating costs such as salaries and employee benefits, travel, professional services, advertising and marketing and tax expense.
General
In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included, and all intercompany transactions have been eliminated in consolidation. Results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2017. The consolidated balance sheet as of December 31, 2016 has been derived from the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the Securities Exchange Commission on March 9, 2017 (SEC File No. 001-37497) (the "2016 Annual Report"). A summary description of the significant accounting policies followed by the Company is set forth in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2016 Annual Report. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes in the Company's 2016 Annual Report.
The preparation of financial statements in conformity with United States generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

7



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Amounts in all tables in the Notes to Unaudited Consolidated Financial Statements have been presented in thousands, except percentage, time period, stock option, share and per share data or where otherwise indicated.
Business Segments
Management has determined that the Company has one significant operating segment, which is providing a lending platform for small businesses nationwide. In determining the appropriateness of segment definition, the Company considers the materiality of a potential segment, the components of the business about which financial information is available, and components for which management regularly evaluates relative to resource allocation and performance assessment.
Change in Accounting Estimate
During 2017, the Company assessed its estimate of the useful lives of the Company’s aircraft transportation. The Company revised its original useful life estimate of 20 years and currently estimates that its aircraft transportation will have a useful life of 10 years. The effects of reflecting this change in accounting estimate on the 2017 consolidated financial statements are as follows:
 
 
March 31, 2017
Decrease in:
 
 
Net income
 
$
288

Basic EPS
 
$
0.01

Diluted EPS
 
$
0.01

Reclassifications
Certain reclassifications have been made to the prior period’s consolidated financial statements to place them on a comparable basis with the current year. Net income and shareholders’ equity previously reported were not affected by these reclassifications.
Note 2. Recent Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies the accounting for share-based payment transactions for items including income tax consequences, classification of awards as equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 was effective and adopted by the Company on January 1, 2017. Starting this quarter, stock-based compensation excess tax benefits or deficiencies are reflected in the Consolidated Statements of Income as a component of the income tax expense, where as they previously were recognized in equity. Additionally, the Consolidated Statements of Cash Flows now present excess tax benefits as an operating activity while any cash paid in lieu of shares for tax-withholding being classified as a financing activity. There were no excess tax benefits in the prior period presented for reclassification. Finally, the Company will continue to incorporate actual forfeitures as they occur in the accrual of compensation expense. As a result of the adoption of ASU 2016-09, the Consolidated Statement of Cash Flows for the three months ended March 31, 2017 was adjusted as follows: a $874 thousand increase to net cash provided by operating activities and a $4.8 million increase to net cash used in financing activities. The adoption of ASU 2016-09 further resulted in a $0.03 increase in basic EPS and $0.02 increase on diluted EPS for the three months ended March 31, 2017. See Note 9 for information regarding the additional impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805) - Clarifying the Definition of a Business” (“ASU 2017-01”).  ASU 2017-01 clarifies the definition and provides a more robust framework to use in determining when a set of assets and activities constitutes a business. ASU 2017-01 is intended to provide guidance when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 will be effective for the Company on January 1, 2018. The Company does not expect this amendment to have a material effect on its consolidated financial statements.

8



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 removes Step 2 from the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 will be effective for the Company on January 1, 2020, with early adoption permitted for interim or annual impairment tests performed after January 1, 2017. ASU 2017-04 is not expected to have a material impact on its consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20) - Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 clarifies the scope of Subtopic 610-20 and adds guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. The amendments conform the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. ASU 2017-05 will be effective for the Company on January 1, 2018 and is not expected to have a significant impact on its consolidated financial statements.
Note 3. Earnings Per Share
Basic and diluted earnings per share are computed based on the weighted average number of shares outstanding during each period. Diluted earnings per share reflects the potential dilution that could occur, upon the exercise of stock options or upon the vesting of restricted stock grants, any of which would result in the issuance of common stock that would then be shared in the net income of the Company.
 
Three Months Ended
March 31,
 
2017
 
2016
Basic earnings per share:
 
 
 
Net income available to common shareholders
$
6,112

 
$
4,691

Weighted-average basic shares outstanding
34,466,904

 
34,176,753

Basic earnings per share
$
0.18

 
$
0.14

Diluted earnings per share:
 
 
 
Net income available to common shareholders, for diluted earnings per share
$
6,112

 
$
4,691

Total weighted-average basic shares outstanding
34,466,904

 
34,176,753

Add effect of dilutive stock options and restricted stock grants
1,180,014

 
777,839

Total weighted-average diluted shares outstanding
35,646,918

 
34,954,592

Diluted earnings per share
$
0.17

 
$
0.13

Anti-dilutive shares
1,068,595

 
2,369,813



9



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Note 4. Business Combination
On February 1, 2017, the Company completed its acquisition of Reltco Inc. and National Assurance Title, Inc. (collectively referred to as "Reltco"), two nationwide title agencies under common control based in Tampa, Florida. The acquisition continues the Company's growth strategy, including vertically integrating with complementary services to deliver a high-quality customer experience with speed.
On the acquisition date, the fair value of Reltco included $5.8 million in assets and $4.7 million in liabilities. The total acquisition gross consideration at the time of the transaction, including earn-out contingent consideration was approximately $15.8 million. The acquisition was valued at $12.6 million after consideration of the applicable fair value adjustments to the earn-out, resulting in the Company paying $7.7 million in cash and issuing 27,724 shares of its common stock at closing in addition to an earn-out of up to 184,012 shares of its stock and $3.8 million in cash, in exchange for all of the outstanding shares of Reltco. The earn-out was recorded as a $4.3 million contingent liability on the acquisition date and is earned proportionally based on the ratio of the new subsidiary's actual future aggregate net income after tax divided by a target net income after tax of approximately $6.0 million over the four year earn-out period. Fair value measurement of the earn-out was calculated using the Monte Carlo Simulation. The Monte Carlo Simulation simulates 100,000 trials to assess the expected market price as of the earn-out measurement date at the end of each of the next four years based on the Cox, Ross & Rubinstein option pricing methodology. The Monte Carlo Simulation utilized various assumptions that include a risk free rate of return through the end of each measurement period equivalent to that of a U.S. Treasury, expected volatility of 30.00% over four years and a dividend yield of 0.40%.
The merger was accounted for in accordance with the acquisition method of accounting, and the identifiable assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date separately from goodwill. Contingent consideration is recorded at fair value based on the terms of the purchase agreement with subsequent quarterly changes in fair value recorded through earnings. At March 31, 2017 the Company recorded expense of $200 thousand related to the increased fair value of contingent consideration using the above referenced Monte Carlo Simulation methodology and revised assumptions as of that date.
The following table summarizes the allocation of the purchase price on the date of acquisition to assets acquired and the liabilities assumed based on their estimated fair values (dollars in thousands, except per share data):
Fair value of assets acquired
 
Cash
$
102

Accounts receivable
159

Intangible assets
5,505

Total assets acquired
5,766

Fair value of liabilities assumed
 
Contingent consideration
4,300

Accounts payable and other liabilities
381

Total liabilities assumed
4,681

Net assets acquired
$
1,085

Purchase price
 
Common shares issued
27,724

Purchase price per share of the Company’s common stock
$
20.38

Company common stock issued
565

Cash
7,685

Total purchase price
8,250

Goodwill
$
7,165


10



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Goodwill recorded represents future revenues and efficiencies gained through the Reltco acquisition. Goodwill in this transaction is expected to be deductible for income tax purposes. Intangible assets consist of trade names of $1.2 million, customer relationships of $3.9 million, and non-compete agreements of $405 thousand. The trade names have indefinite lives and the customer relationships and non-compete agreements range from five to eight years.
The Company incurred merger expenses of $766 thousand and $116 thousand in 2017 and 2016, respectively, related to the Reltco acquisition. No merger expenses were incurred for the quarter ended March 31, 2016.
The following pro forma financial information for the quarters ended March 31, 2017 and 2016 reflects the Company's estimated consolidated pro forma results of operations as if the Reltco acquisition occurred on January 1, 2016:
 
Three Months Ended March 31,
 
2017
 
2016
Revenue (net interest income and noninterest income)
$
41,432

 
$
33,732

Net income available to common stockholders
6,150

 
4,914

Basic earnings per share
0.18

 
0.14

Diluted earnings per share
0.17

 
0.14



11



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Note 5. Investment Securities
The carrying amount of investment securities and their approximate fair values are reflected in the following table:
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
March 31, 2017
 
 
 
 
 
 
 
US government agencies
$
17,811

 
$
36

 
$
33

 
$
17,814

Residential mortgage-backed securities
49,921

 

 
1,084

 
48,837

Mutual fund
2,031

 

 
52

 
1,979

Total
$
69,763

 
$
36

 
$
1,169

 
$
68,630

 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
US government agencies
$
17,803

 
$
52

 
$
32

 
$
17,823

Residential mortgage-backed securities
52,301

 
3

 
1,031

 
51,273

Mutual fund
2,012

 

 
52

 
1,960

Total
$
72,116

 
$
55

 
$
1,115

 
$
71,056

There were no sales of securities during the three months ended March 31, 2017 and March 31, 2016.
The following tables show gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
Less Than 12 Months
 
12 Months or More
 
Total
March 31, 2017
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
US government agencies
$
6,503

 
$
33

 
$

 
$

 
$
6,503

 
$
33

Residential mortgage-backed securities
44,986

 
997

 
3,851

 
87

 
48,837

 
1,084

Mutual fund
1,979

 
52

 

 

 
1,979

 
52

Total
$
53,468

 
$
1,082

 
$
3,851

 
$
87

 
$
57,319

 
$
1,169

 
Less Than 12 Months
 
12 Months or More
 
Total
December 31, 2016
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
US government agencies
$
6,508

 
$
32

 
$

 
$

 
$
6,508

 
$
32

Residential mortgage-backed securities
49,109

 
1,017

 
1,635

 
14

 
50,744

 
1,031

Mutual fund
1,960

 
52

 

 

 
1,960

 
52

Total
$
57,577

 
$
1,101

 
$
1,635

 
$
14

 
$
59,212

 
$
1,115

At March 31, 2017, there were three residential mortgage-backed securities in unrealized loss positions for greater than 12 months and twenty-two residential mortgage-backed securities, three US government agency securities and the 504 Fund mutual fund investment in an unrealized loss position for less than 12 months. Unrealized losses at December 31, 2016 were comprised of two residential mortgage-backed securities in unrealized loss positions for greater than 12 months and three US government agency securities, twenty-two residential mortgage-backed securities and the 504 Fund mutual fund investment in an unrealized loss position for less than 12 months.
These unrealized losses are primarily the result of volatility in the market and are related to market interest rates. Since none of the unrealized losses relate to marketability of the securities or the issuer’s ability to honor redemption obligations and the Company has the intent and ability to hold the securities for a sufficient period of time to recover unrealized losses, none of the securities are deemed to be other than temporarily impaired.
All residential mortgage-backed securities in the Company’s portfolio at March 31, 2017 and December 31, 2016 were backed by US government sponsored enterprises (“GSEs”).

12



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

The following is a summary of investment securities by maturity:
 
March 31, 2017
 
Available-for-Sale
 
Amortized
cost
 
Fair
value
US government agencies
 
 
 
Within one year
$
9,970

 
$
9,992

One to five years
7,841

 
7,822

Total
17,811

 
17,814

 
 
 
 
Residential mortgage-backed securities
 
 
 
Five to ten years
8,436

 
8,353

After 10 years
41,485

 
40,484

Total
49,921

 
48,837

 
 
 
 
Total
$
67,732

 
$
66,651

The table above reflects contractual maturities. Actual results will differ as the loans underlying the mortgage-backed securities may repay sooner than scheduled. This table excludes the 504 Fund mutual fund investment.
At December 31, 2016, an investment security with a fair market value of $1.5 million was pledged to secure a line of credit with the Company’s correspondent bank. At March 31, 2017, the security pledged to secure a line of credit with the Company's correspondent bank was released. At March 31, 2017 and December 31, 2016, an investment security with a fair market value of $100 thousand was pledged to the Ohio State Treasurer to allow the Company's trust department to conduct business in the state of Ohio and investment securities with a fair market value of $2.5 million and $1.2 million, respectively, were pledged to the Company's trust department for uninsured trust assets held by the trust department.


13



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Note 6. Loans and Leases Held for Investment and Allowance for Loan and Lease Losses
Loan Portfolio Segments
The following describes the risk characteristics relevant to each of the portfolio segments. Each loan and lease category is assigned a risk grade during the origination and closing process based on criteria described later in this section.
Commercial and Industrial
Commercial and industrial loans (C&I) receive similar underwriting treatment as commercial real estate loans in that the repayment source is analyzed to determine its ability to meet cash flow coverage requirements as set forth by Bank policies. Repayment of the Bank’s C&I loans generally comes from the generation of cash flow as the result of the borrower’s business operations. This business cycle itself brings a certain level of risk to the portfolio. In some instances, these loans may carry a higher degree of risk due to a variety of reasons – illiquid collateral, specialized equipment, highly depreciable assets, uncollectable accounts receivable, revolving balances, or simply being unsecured. As a result of these characteristics, the SBA guarantee on these loans is an important factor in mitigating risk.
Construction and Development
Construction and development loans are for the purpose of acquisition and development of land to be improved through the construction of commercial buildings. Such loans are usually paid off through the conversion to permanent financing for the long-term benefit of the borrower’s ongoing operations. At the completion of the project, if the loan is converted to permanent financing or if scheduled loan amortization begins, it is then reclassified to the “Commercial Real Estate” segment. Underwriting of construction and development loans typically includes analysis of not only the borrower’s financial condition and ability to meet the required debt obligations, but also the general market conditions associated with the area and type of project being funded.
Commercial Real Estate
Commercial real estate loans are extensions of credit secured by owner occupied and non-owner occupied collateral. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Such repayment of commercial real estate loans is commonly derived from the successful ongoing operations of the business occupying the property. These typically include small businesses and professional practices.
Commercial Land
Commercial land loans are extensions of credit secured by farmland. Such loans are often for land improvements related to agricultural endeavors that may include construction of new specialized facilities. These loans are usually repaid through the conversion to permanent financing, or if scheduled loans amortization begins, for the long-term benefit of the borrower’s ongoing operations. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies.
Each of the loan types referenced in the sections above is further segmented into verticals in which the Bank chooses to operate. The Bank chooses to finance businesses operating in specific industries because of certain similarities. The similarities range from historical default and loss characteristics to business operations. However, there are differences that create the necessity to underwrite these loans according to varying criteria and guidelines. When underwriting a loan, the Bank considers numerous factors such as cash flow coverage, the credit scores of the guarantors, revenue growth, practice ownership experience and debt service capacity. Minimum guidelines have been set with regard to these various factors and deviations from those guidelines require compensating strengths when considering a proposed loan.

14



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Loans and leases consist of the following:
 
March 31,
2017
 
December 31,
2016
Commercial & Industrial
 
 
 
Agriculture
$
1,328

 
$
1,714

Death Care Management
9,989

 
9,684

Healthcare
38,545

 
37,270

Independent Pharmacies
92,043

 
83,677

Registered Investment Advisors
73,169

 
68,335

Veterinary Industry
41,117

 
38,930

Other Industries
117,237

 
94,836

Total
373,428

 
334,446

Construction & Development
 
 
 
Agriculture
37,700

 
32,372

Death Care Management
4,433

 
3,956

Healthcare
33,849

 
30,467

Independent Pharmacies
1,034

 
2,013

Registered Investment Advisors
319

 
294

Veterinary Industry
14,810

 
11,514

Other Industries
40,231

 
31,715

Total
132,376

 
112,331

Commercial Real Estate
 
 
 
Agriculture
5,948

 
5,591

Death Care Management
56,533

 
52,510

Healthcare
112,691

 
114,281

Independent Pharmacies
18,375

 
15,151

Registered Investment Advisors
14,325

 
11,462

Veterinary Industry
103,175

 
102,906

Other Industries
57,765

 
46,245

Total
368,812

 
348,146

Commercial Land
 
 
 
Agriculture
126,706

 
113,569

Total
126,706

 
113,569

Total Loans and Leases1
1,001,322

 
908,492

Net Deferred Costs
7,677

 
7,648

Discount on SBA 7(a) and USDA Unguaranteed2
(9,729
)
 
(8,574
)
Loans and Leases, Net of Unearned
$
999,270

 
$
907,566

1
Total loans and leases include $40.8 million and $37.7 million of U.S. government guaranteed loans as of March 31, 2017 and December 31, 2016, respectively.
2
The Company measures the carrying value of the retained portion of loans sold at fair value under ASC Subtopic 825-10. The value of these retained loan balances is discounted based on the estimates derived from comparable unguaranteed loan sales.

15



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Credit Risk Profile
The Bank uses internal loan and lease reviews to assess the performance of individual loans and leases by industry segment. An independent review of the loan and lease portfolio is performed annually by an external firm. The goal of the Bank’s annual review of select borrowers' financial performance is to validate the adequacy of the risk grade assigned.
The Bank uses a grading system to rank the quality of each loan and lease. The grade is periodically evaluated and adjusted as performance dictates. Loan and lease grades 1 through 4 are passing grades and grade 5 is special mention. Collectively, grades 6 through 8 represent classified loans and leases in the Bank’s portfolio. The following guidelines govern the assignment of these risk grades:
Exceptional (1 Rated): These loans and leases are of the highest quality, with strong, well-documented sources of repayment. Debt service coverage (“DSC”) is over 1.75X based on historical results. Secondary source of repayment is strong, with a loan to value (“LTV”) of 65% or less if secured solely by commercial real estate (“CRE”). Discounted collateral coverage from all sources should exceed 125%. Guarantors have credit scores above 740.
Quality (2 Rated): These loans and leases are of good quality, with good, well-documented sources of repayment. DSC is over 1.25X based on historical or pro-forma results. Secondary source of repayment is good, with a LTV of 75% or less if secured solely by CRE. Discounted collateral coverage should exceed 100%. Guarantors have credit scores above 700.
Acceptable (3 rated): These loans and leases are of acceptable quality, with acceptable sources of repayment. DSC of over 1.00X based on historical or pro-forma results. Companies that do not meet these credit metrics must be evaluated to determine if they should be graded below this level.
Acceptable (4 rated): These loans and leases are considered very weak pass. These loans and leases are riskier than a 3-rated credit, but due to various mitigating factors are not considered a Special mention or worse. The mitigating factors must clearly be identified to offset further downgrade. Examples of loans and leases that may be put in this category include start-up loans and leases and loans and leases with less than 1:1 cash flow coverage with other sources of repayment.
Special mention (5 rated): These loans and leases are considered as emerging problems, with potentially unsatisfactory characteristics. These loans and leases require greater management attention. A loan or lease may be put into this category if the Bank is unable to obtain financial reporting from a company to fully evaluate its position.
Substandard (6 rated): Loans and leases graded Substandard are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. They typically have unsatisfactory characteristics causing more than acceptable levels of risk, and have one or more well-defined weaknesses that could jeopardize the repayment of the debt.
Doubtful (7 rated): Loans and leases graded Doubtful have inherent weaknesses that make collection or liquidation in full questionable. Loans and leases graded Doubtful must be placed on non-accrual status.
Loss (8 rated): Loss rated loans and leases are considered uncollectible and of such little value that their continuance as an active Bank asset is not warranted. The asset should be charged off, even though partial recovery may be possible in the future.

16



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

The following tables summarize the risk grades of each category:
 
Risk Grades
1 - 4
 
Risk Grade
5
 
Risk Grades
6 - 8
 
Total
March 31, 2017
 
 
 
 
 
 
 
Commercial & Industrial
 
 
 
 
 
 
 
Agriculture
$
1,270

 
$
58

 
$

 
$
1,328

Death Care Management
9,759

 
120

 
110

 
9,989

Healthcare
30,128

 
1,484

 
6,933

 
38,545

Independent Pharmacies
81,042

 
5,721

 
5,280

 
92,043

Registered Investment Advisors
70,357

 
2,038

 
774

 
73,169

Veterinary Industry
36,558

 
2,502

 
2,057

 
41,117

Other Industries
117,082

 
155

 

 
117,237

Total
346,196

 
12,078

 
15,154

 
373,428

Construction & Development
 
 
 
 
 
 
 
Agriculture
37,700

 

 

 
37,700

Death Care Management
4,433

 

 

 
4,433

Healthcare
33,849

 

 

 
33,849

Independent Pharmacies
1,034

 

 

 
1,034

Registered Investment Advisors
319

 

 

 
319

Veterinary Industry
12,875

 

 
1,935

 
14,810

Other Industries
40,231

 

 

 
40,231

Total
130,441

 

 
1,935

 
132,376

Commercial Real Estate
 
 
 
 
 
 
 
Agriculture
5,948

 

 

 
5,948

Death Care Management
50,234

 
3,766

 
2,533

 
56,533

Healthcare
105,110

 
6,610

 
971

 
112,691

Independent Pharmacies
14,380

 
1,827

 
2,168

 
18,375

Registered Investment Advisors
14,173

 
152

 

 
14,325

Veterinary Industry
88,282

 
2,505

 
12,388

 
103,175

Other Industries
57,765

 

 

 
57,765

Total
335,892

 
14,860

 
18,060

 
368,812

Commercial Land
 
 
 
 
 
 
 
Agriculture
125,382

 
1,128

 
196

 
126,706

Total
125,382

 
1,128

 
196

 
126,706

Total1
$
937,911

 
$
28,066

 
$
35,345

 
$
1,001,322


17



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

 
Risk Grades
1 - 4
 
Risk Grade
5
 
Risk Grades
6 - 8
 
Total
December 31, 2016
 
 
 
 
 
 
 
Commercial & Industrial
 
 
 
 
 
 
 
Agriculture
$
1,656

 
$
58

 
$

 
$
1,714

Death Care Management
9,452

 
121

 
111

 
9,684

Healthcare
28,723

 
681

 
7,866

 
37,270

Independent Pharmacies
73,948

 
6,542

 
3,187

 
83,677

Registered Investment Advisors
65,297

 
2,246

 
792

 
68,335

Veterinary Industry
34,407

 
1,967

 
2,556

 
38,930

Other Industries
94,736

 
100

 

 
94,836

Total
308,219

 
11,715

 
14,512

 
334,446

Construction & Development
 
 
 
 
 
 
 
Agriculture
32,061

 

 
311

 
32,372

Death Care Management
3,956

 

 

 
3,956

Healthcare
30,467

 

 

 
30,467

Independent Pharmacies
2,013

 

 

 
2,013

Registered Investment Advisors
294

 

 

 
294

Veterinary Industry
9,725

 
1,789

 

 
11,514

Other Industries
31,715

 

 

 
31,715

Total
110,231

 
1,789

 
311

 
112,331

Commercial Real Estate
 
 
 
 
 
 
 
Agriculture
5,591

 

 

 
5,591

Death Care Management
46,427

 
4,314

 
1,769

 
52,510

Healthcare
103,097

 
7,142

 
4,042

 
114,281

Independent Pharmacies
12,654

 
1,968

 
529

 
15,151

Registered Investment Advisors
11,462

 

 

 
11,462

Veterinary Industry
88,168

 
3,995

 
10,743

 
102,906

Other Industries
46,245

 

 

 
46,245

Total
313,644

 
17,419

 
17,083

 
348,146

Commercial Land
 
 
 
 
 
 
 
Agriculture
112,333

 
1,138

 
98

 
113,569

Total
112,333

 
1,138

 
98

 
113,569

Total1
$
844,427

 
$
32,061

 
$
32,004

 
$
908,492

1
Total loans and leases include $40.8 million of U.S. government guaranteed loans as of March 31, 2017, segregated by risk grade as follows: Risk Grades 1 – 4 = $12.5 million, Risk Grade 5 = $4.7 million, Risk Grades 6 – 8 = $23.6 million. As of December 31, 2016, total loans and leases include $37.7 million of U.S. government guaranteed loans, segregated by risk grade as follows: Risk Grades 1 – 4 = $8.7 million, Risk Grade 5 = $7.7 million, Risk Grades 6 – 8 = $21.3 million.

18



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

Past Due Loans and Leases
Loans and leases are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans and leases less than 30 days past due and accruing are included within current loans and leases shown below. The following tables show an age analysis of past due loans and leases as of the dates presented.
 
Less Than 30
Days Past
Due & Not
Accruing
 
30-89 Days
Past Due
& Accruing
 
30-89 Days
Past Due &
Not Accruing
 
Greater
Than 90
Days Past
Due
 
Total Not
Accruing
& Past Due
 
Current
 
Total Loans and Leases
 
90
Days or More
Past Due &
Still Accruing
March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial & Industrial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture
$

 
$

 
$

 
$

 
$

 
$
1,328

 
$
1,328

 
$

Death Care Management

 

 

 

 

 
9,989

 
9,989

 

Healthcare
575

 
82

 
401

 
4,739

 
5,797

 
32,748

 
38,545

 

Independent Pharmacies

 

 
133

 
4,012

 
4,145

 
87,898

 
92,043

 

Registered Investment Advisors

 

 

 

 

 
73,169

 
73,169

 

Veterinary Industry
31

 
659

 
580

 
1,055

 
2,325

 
38,792

 
41,117

 

Other Industries

 

 

 

 

 
117,237

 
117,237

 

Total
606

 
741

 
1,114

 
9,806

 
12,267

 
361,161

 
373,428

 

Construction & Development
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture

 
448

 

 

 
448

 
37,252

 
37,700

 

Death Care Management

 

 

 

 

 
4,433

 
4,433

 

Healthcare

 

 

 

 

 
33,849

 
33,849

 

Independent Pharmacies

 

 

 

 

 
1,034

 
1,034

 

Registered Investment Advisors

 

 

 

 

 
319

 
319

 

Veterinary Industry

 
1,935

 

 

 
1,935

 
12,875

 
14,810

 

Other Industries

 

 

 

 

 
40,231

 
40,231

 

Total

 
2,383

 

 

 
2,383

 
129,993

 
132,376

 

Commercial Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture

 

 

 

 

 
5,948

 
5,948

 

Death Care Management

 

 
184

 
1,423

 
1,607

 
54,926

 
56,533

 

Healthcare
43

 
100

 
121

 

 
264

 
112,427

 
112,691

 

Independent Pharmacies

 

 

 
2,168

 
2,168

 
16,207

 
18,375

 

Registered Investment Advisors

 

 

 

 

 
14,325

 
14,325

 

Veterinary Industry
1,011

 
4,886

 
1,205

 
4,592

 
11,694

 
91,481

 
103,175

 

Other Industries

 

 

 

 

 
57,765

 
57,765

 

Total
1,054

 
4,986

 
1,510

 
8,183

 
15,733

 
353,079

 
368,812

 

Commercial Land
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture
196

 

 

 

 
196

 
126,510

 
126,706

 

Total
196

 

 

 

 
196

 
126,510

 
126,706

 

Total1
$
1,856

 
$
8,110

 
$
2,624

 
$
17,989

 
$
30,579

 
$
970,743

 
$
1,001,322

 
$


19



Live Oak Bancshares, Inc.
Notes to Unaudited Consolidated Financial Statements

 
Less Than 30
Days Past
Due & Not
Accruing
 
30-89 Days
Past Due
& Accruing
 
30-89 Days
Past Due &
Not Accruing
 
Greater
Than 90
Days
Past Due
 
Total Not
Accruing
& Past Due
 
Current
 
Total Loans and Leases
 
90
Days or More
Past Due &
Still Accruing
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial & Industrial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture
$

 
$

 
$

 
$

 
$

 
$
1,714

 
$
1,714

 
$

Death Care Management

 

 

 

 

 
9,684

 
9,684

 

Healthcare

 
272

 
496

 
5,920

 
6,688

 
30,582

 
37,270

 

Independent Pharmacies
42

 
293

 
408

 
2,349

 
3,092

 
80,585

 
83,677

 

Registered Investment Advisors

 

 

 

 

 
68,335

 
68,335

 

Veterinary Industry
32

 
151

 
646

 
1,441

 
2,270

 
36,660

 
38,930