Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q1 2023 Earnings Presentation
31 slides from Live Oak Bancshares's earnings presentation, Apr 27, 2023
Slide 1: First Quarter 2023
FIRST QUARTER 2023 April 27, 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 Q1 GAAP Results
LIVE OAK BANCSHARES Q1 GAAP RESULTS 3 LIVE OAK BANCSHARES, INC. ($ IN MILLIONS, EXCEPT PER SHARE DATA) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 a Net Interest Income $ 82.0 $ 85.9 $ 83.9 $ 79.9 $ 77.8 Provision for Loan and Lease Credit Losses 19.0 19.7 14.2 5.3 1.8 b Total Noninterest Income 19.6 19
Slide 4: Let's answer the questions we know you want to ask
LET'S ANSWER THE QUESTIONS WE KNOW YOU WANT TO ASK 4 What do deposits look like? How liquid are you? How's credit? What happened with earnings this quarter? Augment market-based deposit platform with operating accounts to enhance liquidity Are you on a path to grow? ©2023 Live Oak Bancshares. All ri
Slide 5: Live Oak Q1 Special Report on Safety & Soundness
LIVE OAK Q1 SPECIAL REPORT ON SAFETY & SOUNDNESS 5 2.7% ~85% 2.31% 11.7% 20.7% Customer Deposit Deposits Ungtd ACL / CET 1 The Mahan Ratio Growth LQ Insured1 Ungtd Loans & Leases2 Ratio Tier 1 Capital + ACL & FV Mark / Ungtd Loans & Leases3 DEPOSITS & LIQUIDITY CAPITAL & CREDIT Net Customer Deposit
Slide 6: Strong Liquidity Profile
STRONG LIQUIDITY PROFILE 6 Insured Deposits / Total Deposits On-Balance Sheet Cash Coverage of Uninsured Deposits 85% 34% 32% 56% Cash and immediate borrowing capacity totaled ~$4.2 billion • ~45% of total deposits 1 4 4 Live Oak US Banking Industry Live Oak US Banking Industry • ~300% of estimated
Slide 7: Customer Deposit Growth Continues, Portfolio Diversified & Balanced
CUSTOMER DEPOSIT GROWTH CONTINUES, PORTFOLIO DIVERSIFIED & BALANCED 7 Customer deposits on a +6.2% QoQ growth rate pace pre-crisis, YTD Balance Growth finished +2.7% ($ in millions) Since 3/31, ~$87 million (+1.3%) of customer balances added, ~250 daily account growth, led by businesses, mixed betwe
Slide 8: Soundness, Profitability & Growth in That Order
SOUNDNESS, PROFITABILITY & GROWTH IN THAT ORDER 8 Portfolio Characteristics Percent of Loan Portfolio that is • Significant percentage (41%) of loan portfolio guaranteed Government Guaranteed • Loan portfolio concentrated in “lower default” industries 41% 5 • Geographic diversity mitigates regional
Slide 9: Regression to the Norm Continues
REGRESSION TO THE NORM CONTINUES 9 WE HAVE CONSISTENTLY BUILT RESERVES TO SUPPORT LOAN GROWTH AND CHANGES IN THE MACRO OUTLOOK Quarterly Provision and Net Charge-Offs ($ in millions) Provision Net charge-offs Unguaranteed ACL / Unguaranteed loans and leases² 3.01% 2.76% 2.67% 2.61% 2.49% 2.45% 2.31%
Slide 10: Quarter Highlights
QUARTER HIGHLIGHTS ©2023 Live Oak Bancshares. All rights reserved.
Slide 11: Q1 Earnings Summary
Q1 EARNINGS SUMMARY 11 • $1B of loan production, up 19% from Q122 Loan balance and production growth strong • Loan growth up 4% QoQ, 21% YoY • Customer deposit growth up 2.7% QoQ despite March disruption Deposit growth up 6% QoQ, 23% YoY • Net customer deposit growth of additional 1.3% since 3/31 •
Slide 12: Q1 Key Highlights
Q1 KEY HIGHLIGHTS 12 $ IN MILLIONS Q1 2023 Q4 2022 Q1 2022 Q1 Notable Items Net interest income $ 82 (5)% 5% Pre-Tax Noninterest Income Diluted EPS9 Impact Noninterest income 20 3% (40)% a Total revenue Net loss on loans 102 (3)% (8)% accounted for under $4.5MM ~$0.08 b Noninterest expense 79 (7)% 2
Slide 13: Lending Diversification Across the Platform
LENDING DIVERSIFICATION ACROSS THE PLATFORM 13 YTD YOY Origination Growth by Vertical Q1 2023 Production Mix by Business Unit (%) Size represents each vertical's outstanding balance as a proportion of the bank's total outstanding balance 51% 38% 11% Sponsor Finance Q1 2023 ORIGINATIONS Solar Q1 LOAN
Slide 14: Net Interest Margin and Net Interest Income Trends
NET INTEREST MARGIN AND NET INTEREST INCOME TRENDS 14 $ in millions Net Interest Income Net Interest Margin Key Highlights $84 $86 $82 $78 $80 Q123 loan production average yield 4.02% @ 8.54% 3.89% 3.84% 3.76% 3.46% Quarterly-adjusting variable rates increased another 50bps on 4/1 Q1 2022 Q2 2022 Q3
Slide 15: Noninterest Income Trends
NONINTEREST INCOME TRENDS 15 Key Highlights $ IN MILLIONS Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Net gains on sales of loans $21 $6 $9 $7 $10 Crisis negatively impacted fair value and servicing asset revaluations Loan servicing revenue 6 6 6 6 6 by $6.3 million in Q123 Loan servicing asset revaluat
Slide 16: Moderating Expense Growth
MODERATING EXPENSE GROWTH 16 Key Highlights $ in millions 14 Total noninterest expense % technology related expense to total noninterest expense $85 Expenses down 7% LQ, up 20% YoY $81 $83 $79 • Q1 2023 includes $2.4 million reserve for unfunded commitments $66 expense increase from assumption refin
Slide 17: Credit Metrics Healthy
CREDIT METRICS HEALTHY 17 Q1 HFI $19 million Q1 provision breakdown: $ in millions UNGUARANTEED PAST DUE >30 NON- DAYS15 ACCRUALS16 BALANCE • ~ 35% from loan growth • ~ 10% from net charge-offs Small Business Banking $2,716 0.08% 0.88% • ~ 55% from portfolio & macroeconomic changes Specialty Finance
Slide 18: Strong Capital Positioning - The Mahan Ratio
STRONG CAPITAL POSITIONING - THE MAHAN RATIO 18 $ in millions Total Assets CAPITAL RATIOS Q1 2023 Common Equity Tier 1 11.7% $11,000 $10,000 $499 Total Capital 12.9% $9,000 $1,617 Tier 1 Capital 11.7% $8,000 $7,000 Tier 1 Leverage 8.7% $3,362 $6,000 $5,000 AS OF MARCH 31, 2023 $4,000 Tier 1 Capital
Slide 19: 2023 Expectations
2023 EXPECTATIONS 19 IN UNCERTAIN TIMES, STAY TRUE TO OUR GUIDING PRINCIPLES SAFETY & SOUNDNESS PROFITABILITY GROWTH • In Q1, safety and soundness was • Volatile markets continue to create • Lending franchise should continue to paramount "noise" in earnings - focus on drive healthy loan production a
Slide 20: ©2023 Live Oak Bancshares. All rights reserved.
20 ©2023 Live Oak Bancshares. All rights reserved.
Slide 21: Appendix
APPENDIX ©2023 Live Oak Bancshares. All rights reserved.
Slide 22: Appendix: Presentation Footnotes
APPENDIX: PRESENTATION FOOTNOTES 22 1. Live Oak Banking Company Consolidated in accordance with FDIC guidelines. 2. Loans and leases at historical cost only (excludes loans measured at fair value). 3. Represents total unguaranteed loans and leases at amortized cost (inclusive of loans and leases at
Slide 23: Forward Looking Statements
FORWARD LOOKING STATEMENTS 23 Information in this presentation may contain “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business
Slide 24: Appendix: Reconciliation
APPENDIX: RECONCILIATION 24 Fintech Activities Impact on Consolidated Financials ($ 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 to reported balances ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Loans held for sale, as reported $ 1,028.6 $ 1,199.7 $ 537.6 $ 554.6 $ 533.3 Loans and leases held for investment, as reported 5,738.2 5,860.2 6,853.4 7,344.2 7,687.0 Less PPP loan
Slide 26: Appendix: Reconciliation
APPENDIX: RECONCILIATION 26 Reconciliation of non-GAAP items to reported balances ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Net interest income, as reported $ 77.8 $ 79.9 $ 83.9 $ 85.9 $ 82.0 Less PPP loan interest income 0.5 0.2 0.1 — 0.0 Less PPP loan deferred fees & costs amortized
Slide 27: Appendix: Reconciliation
APPENDIX: RECONCILIATION 27 ($ in millions) Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Total shareholders' equity $ 713.3 $ 791.7 $ 802.2 $ 811.0 $ 822.8 Less: Goodwill 1.8 1.8 1.8 1.8 1.8 Other intangible assets 2.0 2.0 1.9 1.9 1.8 a Tangible shareholders' equity 709.5 787.9 798.5 807.4 819.2 b Shares
Slide 28: Appendix: Product and Net Asset Growth
APPENDIX: PRODUCT AND NET ASSET GROWTH 28 4% PERIOD-END LOAN GROWTH LQ; 8% TOTAL NET GROWTH LQ BEFORE LOAN SALES Period End ($ in millions) Up 12% YoY Increase Decrease $398 Total $562 $(331) $8,220 $(168) $(140) $7,899 Q4 2022 Full Funded Other Loan Prepayment Guaranteed Unguaranteed Q1 2023 Total
Slide 29: Appendix: Evolution of Fintech Investing
APPENDIX: EVOLUTION OF FINTECH INVESTING 29 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 30: Appendix: Live Oak Ventures
APPENDIX: LIVE OAK VENTURES 30 1 2 Book Value Cash Invested Implied Value Cash Proceeds $350 $321 $322 Cash Proceeds2 to Date $300 $163 million $250 Total Implied Value1 Q1 2023 $198 $200 $159 million $154 $155 $150 $129 $131 $130 $117 2023 $100 $80 $82 $80 $82 New Investment $52 $52 Q1 $50 $29 $15
Slide 31: Live Oak Bank: Our Path to Becoming America's Small Business Bank
LIVE OAK BANK 31 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