Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q2 2023 Earnings Presentation
29 slides from Live Oak Bancshares's earnings presentation, Jul 26, 2023
Slide 1: Second Quarter 2023
SECOND QUARTER 2023 July 26, 2023 ©2023 Live Oak Bancshares. All rights reserved.
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS 2 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 a
Slide 3: Live Oak Bancshares Q2 GAAP Results
LIVE OAK BANCSHARES Q2 GAAP RESULTS 3 LIVE OAK BANCSHARES, INC. ($ IN MILLIONS, EXCEPT PER SHARE DATA) Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 a Net Interest Income $ 84.3 $ 82.0 $ 85.9 $ 83.9 $ 79.9 Provision for Loan and Lease Credit Losses 13.0 19.0 19.7 14.2 5.3 b Total Noninterest Income 24.2 1
Slide 4: History of FDIC Insurance Limits
HISTORY OF FDIC INSURANCE LIMITS 4 January 1, 1934 September 21, 1950 December 23, 1969 March 31, 1980 At inception, the FDIC limit was set Limit raised to $10,000 Limit raised to $20,000 Limit raised to $100,000 at $2,500 1934 1934 1950 1966 1969 1974 1980 2008 July 1, 1934 October 16, 1966 October
Slide 5: Regression to the Norm Continues
REGRESSION TO THE NORM CONTINUES 5 WE HAVE CONSISTENTLY BUILT RESERVES TO SUPPORT LOAN GROWTH AND CHANGES IN THE MACRO OUTLOOK Quarterly Provision and Net Charge-Offs ($ in millions) Provision Net charge-offs Unguaranteed ACL / Unguaranteed loans and leases¹ ~2x Industry Reserves/ 3.01% Loans of 1.2
Slide 6: Conservative in How We Provision vs. Actual Charge-Offs
CONSERVATIVE IN HOW WE PROVISION VS. ACTUAL CHARGE-OFFS 6 Cumulative Provision Expense vs. Net Charge-Offs since Q4 2019 ($ in millions) $134 ~4:1 Provision Expense to Net Charge-offs since Q4 2019 $35 Cumulative Provision Cumulative Net Charge-offs ©2023 Live Oak Bancshares. All rights reserved. |
Slide 7: Quarter Highlights
QUARTER HIGHLIGHTS ©2023 Live Oak Bancshares. All rights reserved.
Slide 8: Q2 Earnings Summary
Q2 EARNINGS SUMMARY 8 • PPNR of $32 million, up 41% LQ on higher net interest income and Diluted EPS of $0.39 lower expenses • $861 million of loan production, down 10% from Q2 2022 Loan balance and production growth healthy • Loan growth up 2% QoQ, 18% YoY Deposit growth up 5% QoQ, 21% YoY • Custom
Slide 9: Q2 Key Highlights
Q2 KEY HIGHLIGHTS 9 Q2 2023 CHANGE VS. $ IN MILLIONS Q2 2023 Q1 2023 Q2 2022 $0.39 41% Net interest income $ 84 3% 5% Diluted EPS PPNR Growth LQ Noninterest income 24 23% (81)% a Total revenue 108 7% (48)% b Noninterest expense 76 (3)% (5)% 3% 3.29% a-b PPNR 32 41% (75)% Net Interest Income Net Inte
Slide 10: Lending Diversification Across the Platform
LENDING DIVERSIFICATION ACROSS THE PLATFORM 10 YTD YOY Origination Growth by Vertical Q2 2023 Production Mix by Business Unit (%) Size represents each vertical's outstanding balance as a proportion of the bank's total outstanding balance 56% 32% 12% Q2 2023 ORIGINATIONS Sponsor Finance MML Q2 LOANS
Slide 11: Net Interest Margin and Net Interest Income Trends
NET INTEREST MARGIN AND NET INTEREST INCOME TRENDS 11 $80 $84 $86 $82 $84 Key Highlights $ in millions Q2 2023 Net Interest Margin 3.89% includes ~12bps impact from 3.89% 3.84% 3.84% Net Interest Income 3.76% 3.76% conservative liquidity position Net Interest Margin 3.46% 3.46% 3.29% 3.29% Quarterly
Slide 12: Noninterest Income Trends
NONINTEREST INCOME TRENDS 12 Key Highlights $ IN MILLIONS Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Net gains on sales of loans Net gains on sales of loans $6 $9 $7 $10 $11 in Q2 Loan servicing revenue 6 6 6 6 7 • Secondary market Loan servicing asset revaluation (9) (1) (5) — (3) premiums stable afte
Slide 13: Customer Deposits
CUSTOMER DEPOSIT GROWTH CONTINUES, PORTFOLIO DIVERSIFIED & BALANCED 13 LOB vs Industry - Deposit QoQ % Change • Strong customer deposit growth QoQ: +$438 million, +6.8% LOB Total Deposits ($ in billions) LOB Industry • +22% QoQ growth rate in business deposits • Live Oak Deposits ~5% average QoQ gro
Slide 14: Strong Liquidity Profile
STRONG LIQUIDITY PROFILE 14 Insured Deposits / Total Deposits On-Balance Sheet Cash Coverage of Cash + Securities + Guaranteed Uninsured Deposits Loans / Total Assets 86% 57% 49% 62% 40% 23% 9 9 Live Oak 8 US Banking Industry 9 Live Oak US Banking Industry Live Oak US Banking Industry AFS Securities
Slide 15: Moderating Expense Growth
MODERATING EXPENSE GROWTH 15 Key Highlights $ in millions Salaries Total noninterest expense % technology related expense to total noninterest expense10 $85 Expenses down 3% LQ, 5% YoY $81 $83 $79 $76 • Q1 2023 includes $2.4 million reserve for unfunded commitments expense related to assumption refi
Slide 16: Credit Metrics Healthy
CREDIT METRICS HEALTHY 16 Q2 HFI $13 million Q2 provision breakdown: $ in millions UNGUARANTEED PAST DUE >30 NON- DAYS11 ACCRUALS12 BALANCE • ~ $5 million from loan growth • ~ $1 million from net charge-offs Small Business Banking $2,788 0.30% 0.84% • ~ $7 million from portfolio & macroeconomic chan
Slide 17: Strong Capital Positioning - The Mahan Ratio
STRONG CAPITAL POSITIONING - THE MAHAN RATIO 17 $ in millions Total Assets CAPITAL RATIOS Q2 2023 $11,000 Common Equity Tier 1 11.6% $478 $10,000 Total Capital 12.8% $1,945 $9,000 Tier 1 Capital 11.6% $8,000 $7,000 Tier 1 Leverage 8.5% $3,310 $6,000 $5,000 As of June 30, 2023 $4,000 Tier 1 Capital (
Slide 18: Q2 Summary Observations
Q2 SUMMARY OBSERVATIONS 18 STAYING TRUE TO OUR GUIDING PRINCIPLES SAFETY & SOUNDNESS PROFITABILITY GROWTH • Safety and soundness remain • Working to improve consistency in • Lending franchise should continue to paramount earnings drive healthy loan production and net interest income growth • Continu
Slide 19: ©2023 Live Oak Bancshares. All rights reserved.
19 ©2023 Live Oak Bancshares. All rights reserved.
Slide 20: Appendix
APPENDIX ©2023 Live Oak Bancshares. All rights reserved.
Slide 21: Appendix: Presentation Footnotes
APPENDIX: PRESENTATION FOOTNOTES 21 1. Loans and leases at historical cost only (excludes loans measured at fair value). 2. Data derived from S&P Capital IQ Pro, financial results as of or for the period ended 6/30/2023. Data includes all MET banks with assets of $3 billion or more and Q2 2023 finan
Slide 22: Forward Looking Statements
FORWARD LOOKING STATEMENTS 22 Information in this presentation may contain “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business
Slide 23: Appendix: Reconciliation
APPENDIX: RECONCILIATION 23 Fintech Activities Impact on Consolidated Financials ($ in millions) Banking Activities Apiture Live Oak Ventures Canapi Advisors Fintech Activities Other Consolidated, as reported Actuals for the quarter ended June 30, 2023 Net interest income $ 84.5 $ — $ — $ — $ — $ (0
Slide 24: Appendix: Reconciliation
APPENDIX: RECONCILIATION 24 Reconciliation of non-GAAP items to reported balances ($ in millions) Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 a Net interest income, as reported $ 79.9 $ 83.9 $ 85.9 $ 82.0 $ 84.3 Less PPP loan interest income 0.2 0.1 — — — Less PPP loan deferred fees & costs amortized in
Slide 25: Appendix: Reconciliation
APPENDIX: RECONCILIATION 25 ($ in millions) Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Total shareholders' equity $ 791.7 $ 802.2 $ 811.0 $ 822.8 $ 832.5 Less: Goodwill 1.8 1.8 1.8 1.8 1.8 Other intangible assets 2.0 1.9 1.9 1.8 1.8 a Tangible shareholders' equity 787.9 798.5 807.4 819.2 828.9 b Shares
Slide 26: Appendix: Production and Net Asset Growth
APPENDIX: PRODUCTION AND NET ASSET GROWTH 26 2% PERIOD-END LOAN GROWTH LQ; 6% TOTAL NET GROWTH LQ BEFORE LOAN SALES Period End ($ in millions) Down 15% QoQ, Increase 14% YoY Decrease Total $390 $425 $(354) $8,360 $8,220 $(245) $(76) Q1 2023 Full Funded Other Loan Prepayment Guaranteed Unguaranteed Q
Slide 27: Appendix: Evolution of Fintech Investing
APPENDIX: EVOLUTION OF FINTECH INVESTING 27 FROM LIVE OAK VENTURES TO CANAPI, HOW LOB USES FINTECH TO ENHANCE THE BANKING EXPERIENCE LIVE OAK VENTURES CANAPI CANAPI CONTINUED Direct Investment Advisor and LP Investor in Fund I Fund II Nova Blooma Blend Codat Apiture1* Asset Class Co-led Series B Led
Slide 28: Appendix: Live Oak Ventures
APPENDIX: LIVE OAK VENTURES 28 1 2 Book Value Cash Invested Implied Value Cash Proceeds $350 $323 $321 $300 Follow on Round $250 $198 $200 $154 $155 Q2 2023 $131 $150 $129 $117 $129 Cash Proceeds2 to Date $100 $80 $82 $80 $82 $164 million $52 $52 $50 $19 $29 Total Implied Value1 $15 $17 $1 $4 $6 Q2
Slide 29: Live Oak Bank: Our Path to Becoming America's Small Business Bank
LIVE OAK BANK 29 OUR PATH TO BECOMING AMERICA'S SMALL BUSINESS BANK VERTICALITY SCALABILITY OPTIONALITY Differentiated lending model Building the moat Value creation through industry disruption dedicated to small businesses • 30+ lending verticals with deep • Growing and investing in the lending • L