Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q2 2024 Earnings Presentation
29 slides from Live Oak Bancshares's earnings presentation, Jul 25, 2024
Slide 1: Second Quarter 2024
SECOND QUARTER 2024 July 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 Q2 GAAP Results
LIVE OAK BANCSHARES Q2 GAAP RESULTS 3 LIVE OAK BANCSHARES, INC. ($ IN MILLIONS, EXCEPT PER SHARE DATA) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 a Net Interest Income $ 83.9 $ 85.9 $ 82.0 $ 84.3 $ 89.4 $ 89.6 $ 90.1 $ 91.3 Provision for Credit Losses 14.2 19.7 19.0 13.0 10.3 9.
Slide 4: Second Quarter 2024 Highlights
LIVE OAK | SECOND QUARTER 2024 HIGHLIGHTS 4 Our business is gaining momentum Q2 production near all-time high Positive operating leverage being driven by revenue growth Credit quality continues to perform well, as expected Continue to invest in "good costs" Fed easing would be a tailwind ©2024 Live
Slide 5: Q2 Earnings Summary
Q2 EARNINGS SUMMARY 5 EPS • Diluted EPS of $0.59, down 2% LQ, up 51% PYQ • PPNR of $48 million, up 24% LQ, 49% PYQ • Adjusted PPNR1 of $45 million, up 17% LQ and 33% PYQ PPNR • Adjusted total revenue1 up 4% LQ and 11% PYQ • Adjusted expenses1 down ~2% despite strong new lender hiring • Down from LQ
Slide 6: Live Oak's Core Business Generating Improved Leverage
LIVE OAK'S CORE BUSINESS GENERATING IMPROVED LEVERAGE 6 Live Oak Core Operating Leverage $ in millions 1 1 Adjusted Total Revenue1 Adjusted Noninterest Expense Adjusted PPNR $120 $123 $118 $117 $110 $76 $79 $77 $74 $74 $ in millions +17% LQ $44 $46 $45 $39 $34 +33% PYQ Q2 2023 Q3 2023 Q4 2023 Q1 202
Slide 7: Stable Reserve Levels Support Growth and Macro Outlook
STABLE RESERVE LEVELS SUPPORT GROWTH AND MACRO OUTLOOK 7 Quarterly Provision and Net Charge-Offs ($ in millions) Provision Net Charge-Offs 2, 3 2 Unguaranteed ACL / Unguaranteed Loans and Leases Net Charge-Offs / Average HFI Unguaranteed Loans & Leases 2.46% 2.44% 2.31% 2.32% 2.28% 2.28% 2.22% 1.97%
Slide 8: Growth Opportunities Building
LIVE OAK | GROWTH OPPORTUNITIES BUILDING 8 Checking relationships continue to build Live Oak Express (small dollar SBA) ramping up Hiring lenders in new and existing verticals First embedded banking partnership live and growing Technology investment continues; AI in focus ©2024 Live Oak Bancshares.
Slide 9: Quarter Highlights
QUARTER HIGHLIGHTS ©2024 Live Oak Bancshares. All rights reserved.
Slide 10: Q2 2024 Summary
Q2 2024 SUMMARY 10 Q2 2024 CHANGE VS. $ IN MILLIONS Q2 2024 Q1 2024 Q2 2023 Key Highlights Net interest income $ 91 $1 $7 Noninterest income $ 34 $8 $10 • Healthy credit quality: 38bps annualized NCO's6, 80bps unguaranteed NPL's7 a Total revenue $ 125 $9 $17 Soundness • 3:1 liquidity capacity to uni
Slide 11: Strong Loan Origination Platform Driving Growth
STRONG LOAN ORIGINATION PLATFORM DRIVING GROWTH 11 YTD 2024 vs. YTD 2023 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 Small Business Banking Specialty Finance Energy
Slide 12: Strong Balance Sheet Growth Trends Continue
STRONG BALANCE SHEET GROWTH TRENDS CONTINUE 12 Loan and Deposit Balance Trends Total HFS and HFI Loans and Leases Total Deposits QoQ % Loan Growth $ in billions Key Highlights $10.7 $10.3 $10.4 $9.9 $10.0 • Loan growth remains steady $9.5 $9.0 $9.2 despite challenging $8.8 $8.4 environment: +3% LQ a
Slide 13: Current and Past Production Driving Loan Growth
CURRENT AND PAST PRODUCTION DRIVING LOAN GROWTH 13 3% PERIOD-END LOAN GROWTH LQ; 7% TOTAL NET GROWTH LQ BEFORE LOAN SALES Period End ($ in millions) $579 Increase Decrease Total $447 $(409) $9,536 $(250) $(54) $9,223 Q1 2024 Full Funded Other Loan Prepayment Guaranteed Unguaranteed Loan Q2 2024 9 To
Slide 14: Net Interest Margin and Net Interest Income Trends
NET INTEREST MARGIN AND NET INTEREST INCOME TRENDS 14 $91 Key Highlights $90 $90 $89 • Net interest income +1% LQ, +8% PYQ • Q2 loan production average yield @ 9.08% $ in millions $84 • CD headwinds in 2023 and 2024 Net Interest Income to become tailwinds once Fed cuts Net Interest Margin • ~50% of
Slide 15: Noninterest Income Trends
NONINTEREST INCOME TRENDS 15 Key Highlights $ IN MILLIONS Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Net gains on Q2 loan sales Net gains on sales of loans $11 $13 $13 $12 $14 • SBA premiums steady Loan servicing revenue 7 7 7 8 7 • Small loan SBA 7(a) providing Loan servicing asset revaluation (3) 11
Slide 16: Expenses Stable While Investments in Growth Engine Continue
EXPENSES STABLE WHILE INVESTMENTS IN GROWTH ENGINE CONTINUE 16 OVER LAST 12 MONTHS, ADDED 20 FTE IN LENDING VERTICALS, ADDED 5 FTE IN TREASURY MANAGEMENT, AND COMPLETED MULTIPLE STRATEGIC TECH INVESTMENTS Quarterly Expenses ($ in millions) 1 Personnel expense Non-personnel expense Non-GAAP adjustmen
Slide 17: Portfolio Health Remains Strong in Uncertain Rate, Macro Environment
PORTFOLIO HEALTH REMAINS STRONG IN UNCERTAIN RATE, MACRO ENVIRONMENT 16 17 15 16 7 17 18 16,18 ©2024 Live Oak Bancshares. All rights reserved. | View all disclosures at end of presentation
Slide 18: Strong Capital Positioning - The Mahan Ratio
STRONG CAPITAL POSITIONING - THE MAHAN RATIO 18 $ in millions Total Assets CAPITAL RATIOS Q2 2024 $12,000 Common Equity Tier 1 Capital 11.9% $528 Total Capital 13.1% $1,767 $10,000 Tier 1 Capital 11.9% $8,000 $3,472 Tier 1 Leverage 8.7% $6,000 As of June 30, 2024 $4,000 Tier 1 Capital (a) $1,023 Tie
Slide 19: Momentum in Our Core Business Is Building
MOMENTUM IN OUR CORE BUSINESS IS BUILDING 19 1 Adjusted PPNR : Last 12 months vs. Prior 12 months Loan Production and Pipeline $ in millions Loan Production Loan Pipeline $ in millions $3.4 $174 +41% +27% $137 $2.4 +9% adjusted revenue1 growth +1% adjusted $1.2 $1.2 expense1 growth Q3 2022 - Q2 2023
Slide 20: ©2024 Live Oak Bancshares. All rights reserved.
20 ©2024 Live Oak Bancshares. All rights reserved.
Slide 21: Appendix
APPENDIX ©2024 Live Oak Bancshares. All rights reserved.
Slide 22: Appendix: Presentation Footnotes
APPENDIX: PRESENTATION FOOTNOTES 22 1. Non-GAAP financial measures. See Appendix for reconciliation of non-GAAP items to reported balances. 2. Denominator includes loans and leases at historical cost only (excludes loans measured at fair value). 3. Quarterly average of HFI unguaranteed loans and lea
Slide 23: Forward Looking Statements
FORWARD LOOKING STATEMENTS 23 Information in this presentation may contain “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business
Slide 24: Appendix: Reconciliation
APPENDIX: RECONCILIATION 24 Fintech Activities Impact on Consolidated Financials ($ in millions) Banking Activities Apiture Live Oak Ventures Canapi Advisors Fintech Activities Other Consolidated, as reported Actuals for the quarter ended September 30, 2022 Net interest income $ 84.2 $ — $ — $ — $ —
Slide 25: Appendix: Reconciliation
APPENDIX: RECONCILIATION 25 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 September 30, 2023 Net interest income $ 89.5 $ — $ — $ — $ —
Slide 26: Appendix: Reconciliation
APPENDIX: RECONCILIATION 26 Reconciliation of non-GAAP items to reported balances ($ in millions) Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 a Net interest income, as reported $ 83.9 $ 85.9 $ 82.0 $ 84.3 $ 89.4 $ 89.6 $ 90.1 $ 91.3 b Total noninterest income, as reported 57.7 19
Slide 27: Appendix: Reconciliation
APPENDIX: RECONCILIATION 27 ($ in millions) Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Total shareholders' equity $ 832.5 $ 850.4 $ 902.7 $ 927.7 $ 961.0 Less: Goodwill 1.8 1.8 1.8 1.8 1.8 Other intangible assets 1.8 1.8 1.7 1.7 1.6 a Tangible shareholders' equity 828.9 846.8 899.1 924.2 957.6 b Shares
Slide 28: Appendix: Evolution of Fintech Investing
APPENDIX: EVOLUTION OF FINTECH INVESTING 28 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 29: Appendix: Live Oak Ventures
APPENDIX: LIVE OAK VENTURES 29 A B Book Value Cash Invested Implied Value Cash Proceeds $350 $321 $333 $335 Live Oak Bank Announces First $300 Embedded Banking $250 Partnership with $198 $200 $154 $155 $150 $129 $131 $132 $131$131 $117 Cash ProceedsB to Date $100 $80 $82 $80 $82 $171 million $59 $62