Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q2 2020 Earnings Presentation
31 slides from Live Oak Bancshares's earnings presentation, Jul 23, 2020
Slide 1: Second Quarter 2020
SECOND QUARTER 2020 July 23, 2020 ©2020 Live Oak Bancshares. All rights reserved.
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Information in this presentation may contain “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business and
Slide 3: Agenda
Agenda • Safety & Soundness and a snapshot of what our customers are saying • Enough is Enough – our shareholders don’t understand our investments + a short victory lap for nCino • Huntley to review performance in a very confusing quarter ©2020 Live Oak Bancshares. All rights reserved. 3
Slide 4: Our Focus
OUR FOCUS KEEPING OUR PAYCHECK ORIGINATION TECHNOLOGY & CUSTOMERS CLOSE PROTECTION PROGRAM OPPORTUNITIES PRODUCTS Continued outreach Disbursed $1.74 billion Continue to provide capital Apiture Capital Raise to small business owners Deferrals and 6 months of Processed > 10,000 loans across the countr
Slide 5: Credit & Fair Value Loan Metrics
CREDIT & FAIR VALUE LOAN METRICS Ratios1 12/31/2019 3/31/2020 06/30/2020 Past Due > 30 Days2 0.44% 0.54% 0.00% Watchlist Loans and Leases3 6.28% 6.45% 6.46% Classified Assets4 1.85% 1.88% 1.66% Non-Accruals5 0.86% 1.06% 1.00% Net Charge Off (Annualized) 0.13% 0.58% 0.21% ACL6 & FV Mark7 on HFI Ungua
Slide 6: Keeping Our Customers Close
KEEPING OUR CUSTOMERS CLOSE Energy & Infrastructure $1.52 General Lending Solutions Educational Services Agriculture billion Sponsor Finance Unguaranteed Exposure1 Government Contractors Entertainment Healthcare Centers Hotels Insurance Agencies Veterinary $2.21 Venture Banking Fitness Centers Self
Slide 7: Credit: COVID-19 Higher at-risk verticals
CREDIT COVID-19: Higher at-risk verticals Industry Exposure1 % of Portfolio2 Hotels $179 million 8.1% Wine & Craft Beverage $102 million 4.6% Educational Services $80 million 3.6% Entertainment Centers $57 million 2.6% Fitness Centers $23 million 1.0% Quick Service Restaurants $12 million 0.6% • Por
Slide 8: Portfolio Diversification
1 PORTFOLIO DIVERSIFICATION $5.70 billion Portfolio Balance2 Growth through Diversification 61.2% Guaranteed Portfolio Percentage3 $3.48 billion2 $4.81 billion SBA Guaranteed2 & Unguaranteed4 SBA 504 - $158M5 USDA - $190M6 Leases - $12M OTHER - $526M5 1. Total Loans and Leases at amortized cost (inc
Slide 9: Technology Investments
TECHNOLOGY INVESTMENTS 2011 Inception by Live Oak 2017 Joint Venture IPO: July 14, 2020 Formed by Live Oak ~ $7 billion July 2020 - $20 million investment by Market Cap T. Rowe Price & Pinnacle Bank Live Oak Carrying Value $2.5 $0 $2.1 $1.5 $8.7 million million million million million Implied Value
Slide 10: nCino Bank Operating System
NCINO BANK OPERATING SYSTEM ©2020 Live Oak Bancshares. All rights reserved. 10
Slide 11: nCino
NCINO Fiscal Year Ended January 31, (in thousands of dollars) 2018 2019 2020 Subscription Revenues 38,048 64,458 103,265 Professional Services Revenues 20,094 27,076 34,915 Total Revenues 58,142 91,534 138,180 Cost of Subscription Revenues 12,581 19,995 31,062 Cost of Professional Services Revenues
Slide 12: Public SaaS Comps Analysis
PUBLIC SAAS COMPS ANALYSIS Comp Group Description Multiples (TEV/Rev) • CY 21E Median: 15.7x High Growth SaaS Public SaaS companies with >30% revenue growth • CY 22E Median: 12.3x Public SaaS companies in which revenue growth + FCF • CY 21E Median: 17.6x High Efficiency Comps margin >40% • CY 22E Me
Slide 13: Non-GAAP Earnings
NON-GAAP EARNINGS 1. As reported 2. Included as a component of the net gains on sales of loans, as reported 3. Includes valuation gains and losses related to equity security investments, equity warrant assets, and foreclosed assets 4. See Appendix ©2020 Live Oak Bancshares. All rights reserved. 13
Slide 14: Performance
PERFORMANCE ©2020 Live Oak Bancshares. All rights reserved.
Slide 15: Q2 2020 Highlights
Q2 2020 HIGHLIGHTS 84% Increase versus Q2 2019 92% Increase versus Q2 2019 42% Increase versus Q2 2019 Total Loans and Leases HFS and HFI Total Assets Managed Portfolio $5.63 billion $8.21 billion $8.70 billion 2% Increase versus Q1 2020 3% Decrease versus Q1 2020 54% Held portion of guaranteed loan
Slide 16: PPP Activity Impacts
PPP ACTIVITY IMPACTS 1. See Appendix for total assets, as adjusted to exclude PPP activities. 2. Total loans and leases, as reported less $1.69 billion PPP net loans 3. Estimated negative impact of PPP loans & excess liquidity on Q2 2020 net interest margin 4. Adjustment for PPP to the liquidity rat
Slide 17: PPP Impact
PPP IMPACT $62.0 million • Origination Fees Received1 - $60.4 million Reported Interest Income and Fees on Loans • PPP Net Origination Fees & Costs1 Q2 2020 • $5.4 million net fees amortized into income Less $5.4 • $51.7 million net fees on balance sheet million Amortization of Net Deferred Fees on
Slide 18: Franchise Fundamentals
FRANCHISE FUNDAMENTALS $5,627 20.5% Net Interest Income Q2 2020 vs. Q2 2019 1.7x Guaranteed Loans Eligible for Sale Q2 2020 vs. Q2 2019 $430 million Loan & Lease Originations Q2 2020 Excluding PPP ©2020 Live Oak Bancshares. All rights reserved. 18
Slide 19: Loan & Lease Originations
LOAN & LEASE ORIGINATIONS For the three months ending June 30, 2020 PPP Originations USDA $1.74 $65.8 Non-SBA $2.18 billion million $251.4 billion Loan & Lease $430.1 million $185.6 Originations million million Traditional $178.7 Conventional Platforms million SBA 7(a) ©2020 Live Oak Bancshares. All
Slide 20: Highly Efficient Deposit Platform
HIGHLY EFFICIENT DEPOSIT PLATFORM $4.06 $363.5 billion million Retail Deposits CD Maturities As of June 30, 2020 Q2 2020 97.4% 62.9% Savings CD Retention2 Retention1 Q2 2020 1H 2020 1.00% 0.70% Savings 1-Year CD Offered Rate Offered Rate July 22, 2020 July 22, 2020 1. Savings balance retention compa
Slide 21: Deposit Rates & Maturities
DEPOSIT RATES & MATURITIES Since 12/31/2019 Deposit Maturities within 12 months ($ in millions) • Consumer Savings rate reduced by 85bps to 1.00%1 • Retail CD Portfolio: $1,910 average maturing rate of 2.12% • 12-month CD (comprising 62% of the Retail CD portfolio balance2) • Brokered Portfolio: $98
Slide 22: Capital & Liquidity
CAPITAL & LIQUIDITY As of June 30, 2020 $2.14 $1.75 $1.12 billion billion billion Cash & Investments Government Eligible for Sale Guaranteed Loans Government (excl. PPP)1 Guaranteed Loans 60.0% 12.9% 36.4% Cash, Investments, CET1 Capital Ratio Liquidity Ratio3 Government Guaranteed Loans (excl. PPP)
Slide 23: PPP Impact
PPP IMPACT 51 basis points Estimated Negative Impact of PPP Loans & Excess Liquidity on Q2 2020 Net Interest Margin 171 basis points Estimated Negative Impact of PPP Loans & Excess Liquidity on Q2 2020 Tier 1 Leverage Capital Ratio 1. Excludes net PPP loan balances at June 30, 2020. 2. Outstanding b
Slide 24: Recurring Revenue Growth
RECURRING REVENUE GROWTH ©2020 Live Oak Bancshares. All rights reserved. 24
Slide 25: Secondary Market Recovery
SECONDARY MARKET RECOVERY 116.80 115.85 116.50 Jun 2019 Feb 2020 Jun 2020 Trade Price % Benchmark Trades Prime + 2.75% Quarterly Adjusting 111.25 111.60 111.50 Jun 2019 Feb 2020 Jun 2020 Source: Government Loan Solutions ©2020 Live Oak Bancshares. All rights reserved. 25
Slide 26: High Performing Bank Metrics
HIGH PERFORMING BANK METRICS Q1 2020 Trend Asset Size + $ 8.0 $ 7.0 $8.21 $5.27B ($ in billion) - 3.75% 3.50% NIM 2.56% 3.55% Noninterest Income + 25% 30% 35.4% 12.5% to Total Income + 60% Efficiency Ratio1 76.9% 107.6% + 1.75% 1.25% ROA 0.22% -0.61% + 15% 20% ROE 2.68% -5.64% - 8.5% 10% Tier 1 Leve
Slide 27: Our Focus
OUR FOCUS SAFETY & WELL-BEING HELP OUR CUSTOMERS CONTINUE TO INVEST OF OUR EMPLOYEES NAVIGATE THE CRISIS IN OUR COMMUNITIES LOCAL & IN-VERTICAL KEEPING OUR PAYCHECK ORIGINATION TECHNOLOGY & CUSTOMERS CLOSE PROTECTION PROGRAM OPPORTUNITIES PRODUCTS ©2020 Live Oak Bancshares. All rights reserved. 27
Slide 28: ©2020 Live Oak Bancshares. All rights reserved.
©2020 Live Oak Bancshares. All rights reserved.
Slide 29: Appendix
APPENDIX ©2020 Live Oak Bancshares. All rights reserved. 29
Slide 30: Appendix: Total Assets Adjusted for PPP
APPENDIX ($ in thousands) Total Assets, as reported for the quarter ended June 30, 2020 $ 8,209,154 PPP-related activities Cash and cash receivable for origination fees 61,492 Loans, net of unearned 1,688,104 Allowance for credit losses (1,565) Accrued interest receivable 3,289 Estimated excess bala
Slide 31: Appendix
APPENDIX ($ in thousands) ©2020 Live Oak Bancshares. All rights reserved. 31