Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q1 2024 Earnings Presentation
28 slides from Live Oak Bancshares's earnings presentation, Apr 25, 2024
Slide 1: First Quarter 2024
FIRST QUARTER 2024 April 25, 2024 ©2024 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 Q1 GAAP Results
LIVE OAK BANCSHARES Q1 GAAP RESULTS 3 LIVE OAK BANCSHARES, INC. ($ IN MILLIONS, EXCEPT PER SHARE DATA) Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 a Net Interest Income $ 82.0 $ 84.3 $ 89.4 $ 89.6 $ 90.1 Provision for Loan and Lease Credit Losses 19.0 13.0 10.3 9.0 16.4 b Total Noninterest Income 19.6 2
Slide 4: Live Oak Focus – Soundness, Profitability, Growth
LIVE OAK FOCUS – SOUNDNESS | PROFITABILITY | GROWTH 4 Originations update and The Pipe As we say above, focus always on credit quality Increasing operating leverage better now and around the corner Add revenue generators; invest in "good costs" Automation of small loans is close Is the past a proxy
Slide 5: Credit Performance in Line with Expectations
CREDIT PERFORMANCE IN LINE WITH EXPECTATIONS 5 2 1 2 3 4 2, 5 5 ©2024 Live Oak Bancshares. All rights reserved. | View all disclosures at end of presentation
Slide 6: Regression to the Norm Continues
REGRESSION TO THE NORM CONTINUES 6 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 6, 7 6 Unguaranteed ACL / Unguaranteed loans and leases Net Charge-Offs / Average HFI Ungua
Slide 7: Live Oak's Core Business Generating Improved Leverage
LIVE OAK'S CORE BUSINESS GENERATING IMPROVED LEVERAGE 7 Live Oak Core Operating Leverage Adjusted Total Revenue10 Adjusted Noninterest Expense10 $140 $ in millions $120 $120 $118 $117 $110 $107 $ in millions 26% YoY increase $100 in core operating leverage11 $80 $79 $77 $76 $74 $74 $60 Q1 2023 Q2 20
Slide 8: Organic Growth Without Being a Serial Diluter
ORGANIC GROWTH WITHOUT BEING A SERIAL DILUTER 8 SINCE 2017, ~$500M OF ORGANIC RETAINED EARNINGS; 65% FROM CORE BUSINESS, 35% FROM FINTECH ACTIVITIES 10 Since 2013 39% Asset CAGR 34% Equity CAGR ©2024 Live Oak Bancshares. All rights reserved. | View all disclosures at end of presentation
Slide 9: The Results Have Been a Win for Shareholders
9 THE RESULTS HAVE BEEN A WIN FOR SHAREHOLDERS 12 Indexed Change in TBV Over the Last Ten Years: LOB vs. KBW Bank Coverage Universe 800% 731% 700% 600% Indexed Change in TBV (%) 500% 400% 300% 200% 113% 100% 72% —% 49% (100)% Q4 2014 Q2 2021 Q4 2017 Q2 2014 Q4 2020 Q2 2017 Q4 2013 Q4 2023 Q2 2020 Q4
Slide 10: Quarter Highlights
QUARTER HIGHLIGHTS ©2024 Live Oak Bancshares. All rights reserved.
Slide 11: Q1 2024 Summary
Q1 2024 SUMMARY 11 Q1 2024 CHANGE VS. $ IN MILLIONS Q1 2024 Q4 2023 Q1 2023 Key Highlights Net interest income $ 90 $1 $8 • Healthy credit quality: 15bps annualized NCO's13, 92bps unguaranteed NPL's3 Noninterest income $ 26 $(4) $7 Soundness • 3:1 liquidity capacity to uninsured a Total revenue $ 11
Slide 12: Lending Diversification Across the Platform
LENDING DIVERSIFICATION ACROSS THE PLATFORM 12 YOY Origination Growth by Vertical 2024 Production Mix by Business Unit (%) Size represents each vertical's outstanding balance as a proportion of the bank's total outstanding balance 67% 29% 4% 2024 ORIGINATIONS Conventional Real Estate Financing Hotel
Slide 13: Current and Past Production Driving Loan Growth
CURRENT AND PAST PRODUCTION DRIVING LOAN GROWTH 13 2% PERIOD-END LOAN GROWTH LQ; 5% TOTAL NET GROWTH LQ BEFORE LOAN SALES Period End ($ in millions) Increase Decrease $358 Total $352 $(260) $9,223 $9,021 $(187) $(61) Q4 2023 Full Funded Other Loan Prepayment Guaranteed Unguaranteed Loan Q1 2024 Tota
Slide 14: Customer Deposits
CUSTOMER DEPOSIT GROWTH CONTINUES, PORTFOLIO DIVERSIFIED & BALANCED 14 • Market competitive rates provide path to growth ◦ YoY total deposit growth of +10% ◦ Business deposits YoY growth of +48% • No branch network + great technology = low overhead ◦ 25 employees service 121,000+ accounts • 86% of d
Slide 15: Net Interest Margin and Net Interest Income Trends
NET INTEREST MARGIN AND NET INTEREST INCOME TRENDS 15 Key Highlights $90 $90 • Net interest income +1% QoQ, $89 +10% YoY $ in millions • Q1 2024 loan production average $84 Net Interest Income yield @ 9.12% $82 Net Interest Margin • ~50% of loans are variable,19 3.46% 3.37% primarily Prime-based 3.2
Slide 16: Noninterest Income Trends
NONINTEREST INCOME TRENDS 16 Key Highlights $ IN MILLIONS Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Net gains on Q1 loan sales Net gains on sales of loans $10 $11 $13 $13 $12 • SBA premiums improved Loan servicing revenue 6 7 7 7 8 • USDA sales return Loan servicing asset revaluation — (3) 11 (4) (3)
Slide 17: Moderating Expense Growth
MODERATING EXPENSE GROWTH 17 Quarterly Expenses ($ in millions) 10 Personnel expense Non-personnel expense Non-GAAP adjustments $93 $79 $79 $76 $74 $19 $2 $32 $32 $33 $31 $34 QoQ increase: Annual merit adjustment 2024 bonus accrual $45 $43 $43 $40 $47 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 FTEs 977
Slide 18: Credit Metrics Healthy
CREDIT METRICS HEALTHY 18 $16 million Q1 provision: Q1 HFI • Primarily related to portfolio and macroeconomic changes $ in millions UNGUARANTEED PAST DUE >30 NON- DAYS1, 2 ACCRUALS2, 3 BALANCE $3 million of net charge offs in the quarter Small Business Banking $3,296 0.24% 0.97% • Charge offs occurr
Slide 19: Strong Capital Positioning - The Mahan Ratio
STRONG CAPITAL POSITIONING - THE MAHAN RATIO 19 $ in millions Total Assets CAPITAL RATIOS Q1 2024 $12,000 Common Equity Tier 1 Capital 11.8% $525 Total Capital 13.0% $10,000 $1,718 Tier 1 Capital 11.8% $8,000 Tier 1 Leverage 8.6% $3,455 $6,000 As of March 31, 2024 $4,000 Tier 1 Capital (a) $980 Tier
Slide 20: ©2024 Live Oak Bancshares. All rights reserved.
20 ©2024 Live Oak Bancshares. All rights reserved.
Slide 21: Appendix
APPENDIX ©2024 Live Oak Bancshares. All rights reserved.
Slide 22: Appendix: Presentation Footnotes
APPENDIX: PRESENTATION FOOTNOTES 22 1. Past due loans and leases include HFI unguaranteed loans and leases on accrual status at amortized cost (inclusive of loans and leases at fair value and historical cost). 2. Ratio uses total HFI unguaranteed loans and leases at amortized cost (inclusive of loan
Slide 23: Forward Looking Statements
FORWARD LOOKING STATEMENTS 23 Information in this presentation may contain “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business
Slide 24: Appendix: Reconciliation
APPENDIX: RECONCILIATION 24 Fintech Activities Impact on Consolidated Financials ($ in millions) Banking Activities Apiture Live Oak Ventures Canapi Advisors Fintech Activities Other Consolidated, as reported Actuals for the quarter ended March 31, 2023 Net interest income $ 82.2 $ — $ — $ — $ — $ (
Slide 25: Appendix: Reconciliation
APPENDIX: RECONCILIATION 25 Reconciliation of non-GAAP items to reported balances ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 a Net interest income, as reported $ 82.0 $ 84.3 $ 89.4 $ 89.6 $ 90.1 b Total noninterest income, as reported 19.6 24.2 37.9 30.1 26.1 Fair value adjustments: Add
Slide 26: Appendix: Reconciliation
APPENDIX: RECONCILIATION 26 ($ in millions) Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Total shareholders' equity $ 822.8 $ 832.5 $ 850.4 $ 902.7 $ 916.7 Less: Goodwill 1.8 1.8 1.8 1.8 1.8 Other intangible assets 1.8 1.8 1.8 1.7 1.7 a Tangible shareholders' equity 819.2 828.9 846.8 899.1 913.2 b Shares
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 Orum* Blend Codat Crux Climate Apiture1* Asset Class Co-led
Slide 28: Appendix: Live Oak Ventures
APPENDIX: LIVE OAK VENTURES 28 A B Book Value Cash Invested Implied Value Cash Proceeds $333 $337 $350 $321 $300 $250 Cash ProceedsB to Date $198 $171 million $200 $154 $155 $150 $129 $131 $132 $132$132 Total Implied ValueA $117 Q1 2024 $100 $80 $82 $80 $82 $166 million $59 $62 $62 $52 $132 $50 $29