Live Oak Bancshares, Inc. · NYSE:LOB

Live Oak Bancshares — Q1 2022 Earnings Presentation

44 slides from Live Oak Bancshares's earnings presentation, Apr 28, 2022

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 4: Agenda
AGENDA 4 1. Chairman & CEO Remarks 2. Q1 Highlights 3. Verticality – Our differentiated small business lending model 4. Scalability – Building the moat 5. Optionality – Value creation through industry disruption 6. Q&A ©2022 Live Oak Bancshares. All rights reserved.
Slide 5: 2022 Continued the Momentum Started in 2020
2022 CONTINUED THE MOMENTUM STARTED IN 2020 5 Adjusted PPNR1 Up 91% Q1 2022 vs Q1 2021 Adjusted PPNR1 12% Compound Quarterly Growth Rate Q1 2020 to Q1 2022 59% CAGR 2020 to 2022 1. Adjusted non-GAAP financial measures. See Appendix for reconciliation of non-GAAP items to reported balances. ©2022 Liv
Slide 6: Q1 Production Over Last Five Years
Q1 PRODUCTION1 OVER LAST FIVE YEARS 6 Highest Q1 Originations in History 21% CAGR 2018-2022 29% Growth YoY 2021-2022 1. Loan & Lease Originations, excluding PPP (in millions of dollars). ©2022 Live Oak Bancshares. All rights reserved.
Slide 8: Live Oak Q122 Highlights
LIVE OAK Q122 HIGHLIGHTS 8 Our Path to Becoming America’s Small Business Bank $0.76 44% 91% 29% 30% Diluted Adjusted Total Adjusted PPNR1 Loan Production2 Loan EPS Revenue1 Growth YoY Growth YoY Growth YoY Growth2 YoY VERTICALITY SCALABILITY OPTIONALITY Differentiated lending model Building the moat
Slide 9: Q122 Adjusted Earnings Highlights
Q122 ADJUSTED EARNINGS HIGHLIGHTS 9 91% Adjusted PPNR1 Growth on 44% Revenue1 Growth 2022 vs. 2021 Scaling Investments in Lending, Deposit and Tech Platform Q122 Adjustments Summary1 Net Interest Income PPP-related impacts Noninterest Income Loan servicing asset revaluation Other fair value adjustme
Slide 10: Revenue Trends Remain Healthy
REVENUE TRENDS REMAIN HEALTHY 10 1 Adjusted Total Revenue1 1 $ in millions Up 3% linked quarter, 44% year-over-year Adjusted Net Interest Income1 Up 5% linked quarter, 44% year-over-year • Relatively stable loan yields • Meaningful reduction in deposit rate paid Net Gains on Sales of Loans Up 4% lin
Slide 11: Investing in Scalable Growth
INVESTING IN SCALABLE GROWTH 11 Continuing to Add People & Technology to Expand Platform 1 1 • Adjusted expenses up 10% LQ, 24% vs Q1 2021 • 48 net new FTEs in Q1 2022, up 6% since Q4 2021 and 29% since Q1 2021 • 35% Q1 hires were in tech (development, IT, product, information security) • Salaries &
Slide 12: Strong Balance Sheet Trends
STRONG BALANCE SHEET TRENDS 12 4% Loan Growth Excluding PPP Linked Quarter 30% Loan Growth YoY excluding PPP 19% Tangible Book Value Growth Per Share YoY 18.9% Return on Average Equity 1.6% Return on Average Assets 1. See Appendix for reconciliation of reported balances to non-GAAP items. ©2022 Live
Slide 13: Q1 Loan Originations
Q1 LOAN ORIGINATIONS1 13 Highest Q1 Originations in History, 29% Increase in Production over Q121 Q1 Originations1 (in millions) 2018 $398 2019 $391 2020 $501 2021 $672 2022 $865 21.5% CAGR Q1 2018 56% 78% 55% 54% 56% to Q1 2022 Percent Fully Funded 1. Loan & Lease Originations, excluding PPP (in mi
Slide 14: Production Engine Leads to Net Asset Growth
PRODUCTION ENGINE LEADS TO NET ASSET GROWTH 14 4% Loan Growth LQ, Excluding PPP; 7% Total Net Growth LQ Before Loan Sales Period End ($ in millions) Increase Decrease Total Q4 2021 Fully Funded Other Loan Prepayment Net Change in Guaranteed Unguaranteed Q1 2022 Total Loan Originations Disbursements
Slide 15: Net Interest Margin Trends
NET INTEREST MARGIN TRENDS 15 Significant NIM Expansion Since Q1 2021 1 Balance Sheet Highlights YoY avg core loan growth of 33% (~7% QoQ) NIM remained strong and resilient, aided by Q1'22 liquidity deployment ~45% of loans are variable, primarily Prime Core Loan 5.30% 5.26% 5.29% 5.27% 5.28% Yield
Slide 16: Credit Metrics Healthy
CREDIT METRICS HEALTHY 16 Trends and Borrower Behavior Favorable; Frequent Monitoring Continues $ in millions • Criticized and classified loans continue to perform as expected quarter-over-quarter • Past dues remain at historically low levels, even with most government assistance expired • Non-accru
Slide 17: Strong Capital Positioning
STRONG CAPITAL POSITIONING 17 Favorable Loan Mix, Reserves & Capital Provide Balance Sheet Strength Capital Ratios Q1 2022 $ in millions Common Equity Tier 1 12.1% Total Capital 13.2% Tier 1 Capital 12.1% Tier 1 Leverage 8.9% As of March 31, 2022 ($ in millions) Tier 1 Capital (a) $724 Tier 1 Capita
Slide 18: High Performing Bank Metrics
HIGH PERFORMING BANK METRICS 18 Live Oak Bank’s Q1 Performance as Compared with Industry Peers3 Peer Top Median Quartile NIM 2.98 3.19 4.02% Efficiency Ratio1 59.5% 59.5 66.3 1.13 1.42 ROA 1.6% 9.74 12.0 ROE 18.9% 12.2 14.2 CET1 Ratio 12.1% Total loan and lease portfolio, 11.8 30% 5.3 excluding PPP2
Slide 19: Historical SBA Secondary Market Premiums
HISTORICAL SBA SECONDARY MARKET PREMIUMS 19 Variable Loan Sale Premiums: • Expand/contract with loan spreads to Prime • Influenced by prepayment speeds, composition, appetite • Able to be pooled Fixed 5Y Loan Sale Premiums: • Fluctuate more than variable quarterly adjust loan premiums • Influenced b
Slide 20: Multi-Year View of Performance
MULTI-YEAR VIEW OF PERFORMANCE 20 Soundness, Profitability, and Growth – In that Order Through previous economic cycles: • Credit quality strength • Origination growth • NII improvement 3 1 2 1. Net interest income is as reported for fiscal years 2017-2019. Fiscal years 2020 and 2021 reflect adjuste
Slide 22: Milestone Updates
MILESTONE UPDATES 22 Leveraging the Platform Q1 WINS UPCOMING - Continued momentum of core platform 1H 2022 - Production growth continues in traditionally - Continued expansion of core platform slower time of year - Small business checking enhancements - Built out lending and tech teams to facilitat
Slide 23: Diversification Across the Platform
DIVERSIFICATION ACROSS THE PLATFORM 23 22% 38% 29% Increase in Increase in Origination1 Lenders Lending Support Growth vs Q1 2021 2022 Production Mix by Business Unit (%) 65%65 6 29 1 Size of bubble represents each vertical's outstanding balance as a proportion of the Bank's total outstanding balanc
Slide 24: SBA General Lenders Help Fuel Organic Growth
SBA GENERAL LENDERS HELP FUEL ORGANIC GROWTH 24 Putting Capital into the Hands of Small Business Owners Across the Country 24 General SBA Lenders $1.1B General Loan Production Since 2017 $300M Vertical Loan Production Since 2017 ©2022 Live Oak Bancshares. All rights reserved.
Slide 25: Finxact Sale Finalized
FINXACT SALE FINALIZED 25 Use of Proceeds to Support Continued Growth Fiserv’s acquisition Proceeds Pre-tax gain of of Finxact approximately $120MM closed April 1, 2022 Non-dilutive capital to support will be included in Q2 2022 loan growth noninterest income Accelerating innovation Fintech investme
Slide 26: Accelerating Tech Talent to Drive Initiatives
ACCELERATING TECH TALENT TO DRIVE INITIATIVES 26 Leveraging Finxact Gain to Enhance Innovation WHAT $10-15MM investment in WHY Long-term investment in the technology and talent future of our company HOW Building out three key areas: development, cybersecurity and leadership capabilities across our s
Slide 27: Live Oak Ventures & Canapi Remain Active
LIVE OAK VENTURES & CANAPI REMAIN ACTIVE 27 Venture Investments Help Propel Live Oak’s Mission to be America's Small Business Bank FOLLOW-ONS NET NEW INVESTMENTS NEW BANK EXISTING PORTFOLIO PARTNERSHIPS INCUBATION STUDIO INFRASTRUCTURE Supporting future rounds of existing Invest in companies that ca
Slide 28: Live Oak Culture
LIVE OAK CULTURE 28 Model Drives Continued Success Attract & Retain Top Talent Invest and Build in Banking and Tech Next-Gen Tech Stack HIGH TECH & HIGH TOUCH PLATFORM Ability to Better Serve Deliver Innovative Customers Products & Services ©2022 Live Oak Bancshares. All rights reserved.
Slide 29: Live Oak 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 industry expertise • Growing and investing
Slide 32: Forward Looking Statements
FORWARD LOOKING STATEMENTS 32 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 36: Appendix
APPENDIX 36 1. Included as a component of the net gains on sales of loans on the income statement. 2.Includes valuation losses related to equity security investments, equity warrant assets, and foreclosed assets 3.See Appendix "FinTech Activities Impact on Consolidated Financials” 4.Amount reflects
Slide 39: Efficient Deposit Funding Platform
EFFICIENT DEPOSIT FUNDING PLATFORM 39 Low Delivery Costs, Healthy Retention & Continued Growth Savings Account $1.4B Business Savings & CDs Retention Remains Strong up 71% YOY $1.6B Retail CDs down 6% YOY $2.7B Retail Savings up 22% YOY 6bps Noninterest Expense of Deposits2 Q1 2022 1. Excludes broke
Slide 40: On the Other Side of PPP
APPENDIX 40 On the other side of PPP | Processed nearly 15,000 PPP loans $2.3 $80.3 billion million PPP Loans Net Deferred Fees at Originated Origination $2.2 $77.6 billion million PPP Loans Net Deferred Fees Forgiven/Paid Down Recognized $134.3 $2.7 million million $10.4 million net interest income
Slide 41: Delivering Products & Services to Customers
DELIVERING PRODUCTS & SERVICES TO CUSTOMERS 41 Building What Customers Need on a Next-Gen Platform  QuickBooks  SBA  Payroll  Conventional  Expense Management  Line of Credit  Treasury Management  Small Balance Loan  Insights  Purchasing Card  Embedded Banking  Credit Card ACCESS TO MANA
Slide 42: Live Oak Bank Tech Stack
APPENDIX 42 Live Oak Bank Tech Stack PAYMENTS USER EXPERIENCE COMMUNICATIONS TRANSFERS Real Multi Time Position RISK BACK OFFICE MANAGEMENT System of Record API Cloud First Native FINANCIAL DATA REPORTING ANALYTICS Bank Employees Bank Customers ©2022 Live Oak Bancshares. All rights reserved.
Slide 43: Evolution of Fintech Investing at LOB
EVOLUTION OF FINTECH INVESTING AT LOB 43 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 Notarize* Finxact* Co-led Series B Led Seed A Led Series
Slide 44: Direct Fintech Investments
DIRECT FINTECH INVESTMENTS 44 Low Cash Investment, Significant Current Valuation 2 1 Portfolio 1 2 4 5 6 7 7 8 8 9 10 Companies 1. Estimated implied value based on most recent transaction data and not necessarily indicative of current or future value. 2. Q1 2022 implied value does not incorporate Fi

Live Oak Bancshares — Q1 2022 Earnings Presentation on 6ix

Live Oak Bancshares — Q1 2022 Earnings Presentation

Slide 1: First Quarter 2022

Slide 2: Forward Looking Statements

Slide 3: Live Oak Bancshares Q1 GAAP Results

Slide 4: Agenda

Slide 5: 2022 Continued the Momentum Started in 2020

Slide 6: Q1 Production Over Last Five Years

Slide 7: Quarter Highlights

Slide 8: Live Oak Q122 Highlights

Slide 9: Q122 Adjusted Earnings Highlights

Slide 10: Revenue Trends Remain Healthy

Slide 11: Investing in Scalable Growth

Slide 12: Strong Balance Sheet Trends

Slide 13: Q1 Loan Originations

Slide 14: Production Engine Leads to Net Asset Growth

Slide 15: Net Interest Margin Trends

Slide 16: Credit Metrics Healthy

Slide 17: Strong Capital Positioning

Slide 18: High Performing Bank Metrics

Slide 19: Historical SBA Secondary Market Premiums

Slide 20: Multi-Year View of Performance

Slide 21: Verticality | Scalability | Optionality

Slide 22: Milestone Updates

Slide 23: Diversification Across the Platform

Slide 24: SBA General Lenders Help Fuel Organic Growth

Slide 25: Finxact Sale Finalized

Slide 26: Accelerating Tech Talent to Drive Initiatives

Slide 27: Live Oak Ventures & Canapi Remain Active

Slide 28: Live Oak Culture

Slide 29: Live Oak Bank

Slide 30: Q&A

Slide 31: ©2022 Live Oak Bancshares. All rights reserved.

Slide 32: Forward Looking Statements

Slide 33: Appendix

Slide 34: Appendix

Slide 35: Total Assets, Reconciliation Non-GAAP Items to Reported Balances

Slide 36: Appendix

Slide 37: Appendix

Slide 38: Noninterest Expense of Deposits

Slide 39: Efficient Deposit Funding Platform

Slide 40: On the Other Side of PPP

Slide 41: Delivering Products & Services to Customers

Slide 42: Live Oak Bank Tech Stack

Slide 43: Evolution of Fintech Investing at LOB

Slide 44: Direct Fintech Investments