Live Oak Bancshares, Inc. · NYSE:LOB

Live Oak Bancshares — Q4 2021 Earnings Presentation

42 slides from Live Oak Bancshares's earnings presentation, Jan 26, 2022

Slide 2: Forward Looking Statements
2 FORWARD LOOKING STATEMENTS 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
4 AGENDA 1. Chairman & CEO Remarks 2. 2021 & Q4 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: Live Oak 2021 Highlights
5 LIVE OAK 2021 HIGHLIGHTS Our Path to Becoming America’s Small Business Bank $3.71 75% $3.9B | 46% 32% 23% FY 2021 Adjusted PPNR1 Loan Production2 Loan Tangible Book Diluted EPS Growth YoY and Growth YoY Growth2 YoY Value Growth YoY VERTICALITY SCALABILITY OPTIONALITY Differentiated lending model B
Slide 7: Live Oak Q421 Highlights
7 LIVE OAK Q421 HIGHLIGHTS Our Path to Becoming America’s Small Business Bank $0.66 11% 8% $1.1B 7% Diluted Pre-Tax Income Adjusted PPNR1 Loan Loan EPS Growth LQ Growth LQ Production Growth3 LQ VERTICALITY SCALABILITY OPTIONALITY Differentiated lending model Building the moat Value creation through
Slide 8: Q421 Adjusted Earnings Highlights
8 Q421 ADJUSTED EARNINGS HIGHLIGHTS 8% Adjusted PPNR1 Growth LQ Driven by 8% Adjusted Revenue1 Growth; 75% Adjusted PPNR1 growth on 37% Revenue1 Growth 2021 vs. 2020 Q421 Adjustments Summary1 Net Interest Income • PPP-related impacts Noninterest Income • Loan servicing asset revaluation • Other fair
Slide 9: Revenue Driven by Strong NII Growth
9 REVENUE DRIVEN BY STRONG NII GROWTH $ in millions Adjusted Total Revenue1 Up 8% linked quarter, 40% year over year Adjusted Net Interest Income1 Up 7% linked quarter, 50% year over year on strong loan growth, relatively stable loan yields and meaningful reduction in 1 1 1 deposit rate paid 1 1. Ad
Slide 10: Investing in Growth
10 INVESTING IN GROWTH Continuing to Add People & Technology to Expand Platform 1 1 • Positive operating leverage driving continued improvement in efficiency ratio • Adjusted expenses up 8% LQ, 24% vs Q4 2020 • 39 net new FTEs in Q4 2021, up 164 since Q4 2020 • Salaries & Benefits up 10%, headcount
Slide 11: Balance Sheet Strong and Growing
11 BALANCE SHEET STRONG AND GROWING 7% Loan Growth Excluding PPP Linked Quarter 32% Loan Growth YoY excluding PPP 23% Tangible Book Value Growth Per Share YoY 16.8% Return on Average Equity 1.5% Return on Average Assets 1. See Appendix for reconciliation of reported balances to non-GAAP items. ©2022
Slide 12: Loan Originations
12 LOAN ORIGINATIONS1 Greater than One Billion in Lending Production for 3rd Consecutive Quarter Percent 73% 56% 78% 55% 54% Fully Funded 1. Loan & Lease Originations, excluding PPP (in millions of dollars). ©2022 Live Oak Bancshares. All rights reserved.
Slide 13: Strong Production Leading to Net Asset Growth
13 STRONG PRODUCTION LEADING TO NET ASSET GROWTH 7% Loan Growth LQ, Excluding PPP; 7% Total Net Growth LQ Before Loan Sales Period End ($ in millions) Increase Decrease Total Q3 2021 Fully Funded Other Loan Prepayment Net Change in Guaranteed Unguaranteed Q4 2021 Total Loan Originations Disbursement
Slide 14: Efficient Deposit Funding Platform
14 EFFICIENT DEPOSIT FUNDING PLATFORM Low Delivery Costs, Healthy Retention & Continued Growth 1 Savings Account $1.3B Business Savings & CDs Retention Remains Strong up 89% YOY $1.7B Retail CDs down 13% YOY $2.5B Retail Savings up 48% YOY 10bps Noninterest Expense of Deposits2 Q4 2021 1. Excludes b
Slide 15: Balance Sheet Growth Momentum
15 BALANCE SHEET GROWTH MOMENTUM Significant NIM Expansion Over the Course of 2021 1 Balance Sheet Highlights • NIM remains strong and resilient • 35% average loan growth YoY, excluding PPP • ~44% of loans are variable, primarily Prime • ~35% of funding in retail savings Core Loan 5.27% 5.30% 5.26%
Slide 16: Credit Metrics Healthy
16 CREDIT METRICS HEALTHY Signs Indicate Customers Are Returning to Pre-Pandemic Operations $ in millions • Criticized and classified loans continue to decrease quarter over quarter • Covid impacted verticals continue to show signs of improvement with favorable risk grade trends and indications of a
Slide 17: Credit Reserves and Capital
17 CREDIT RESERVES AND CAPITAL Favorable Loan Mix, Reserves & Capital Provide Balance Sheet Strength Capital Ratios Q4 2021 $ in millions Common Equity Tier 1 12.4% Total Capital 13.5% Tier 1 Capital 12.4% Tier 1 Leverage 8.9% As of December 31, 2021 ($ in millions) Tier 1 Capital (a) $689 Tier 1 Ca
Slide 18: High Performing Bank Metrics
18 HIGH PERFORMING BANK METRICS Live Oak Bank’s Q4 Performance as Compared with Industry Peers3 Peer Top Median Quartile 3.00 3.33 NIM 4.02% 57.5 50.3 Efficiency Ratio1 53.6% 1.34 1.51 ROA 1.5% 13.5 11.1 ROE 16.8% 12.3 14.3 CET1 Ratio 12.4% Total loan and lease portfolio, 3.0 7.1 32% excluding PPP2
Slide 20: Milestone Updates
20 MILESTONE UPDATES Leveraging the Platform 2021 WINS UPCOMING - Continued momentum of core platform 1H 2022 - Growth from generalists, new verticals, and - Continued expansion of core platform conventional lending teams - Small business checking enhancements - Built out support teams to facilitate
Slide 21: Diversification and Growth Across the Platform
DIVERSIFICATION AND GROWTH ACROSS THE PLATFORM 21 22% 39% 46% Increase in Increase in 2021 Total Lenders Lending Support Origination1 Growth vs 2020 2021 Production Mix by Business Unit 58% 13% 29% 1 1 Size of bubble represents each vertical's outstanding balance as a proportion of the Bank's total
Slide 22: Investing in Tech Talent to Support Growth
22 INVESTING IN TECH TALENT TO SUPPORT GROWTH Enhancing Quality & Efficiency Across the Business WHAT Significant investment WHY Accelerate new capabilities, ongoing in tech talent speed-to-market, and innovation HOW Building 7 dedicated teams aligned to key areas Small Business Banking, Deposits &
Slide 23: Delivering Products & Services to Customers
23 DELIVERING PRODUCTS & SERVICES TO CUSTOMERS Building What Customers Need on a Next-Gen Platform q QuickBooks q SBA q Payroll q Conventional q Expense Management q Line of Credit q Rules Engine q Small Balance Loan q Insights q Credit Card q Embedded Banking ACCESS TO MANAGE/ CAPITAL INTEGRATE MOV
Slide 24: Building the Community Bank of the Future
BUILDING THE COMMUNITY BANK OF THE FUTURE 24 Marrying High-Tech, High-Touch Approach for Customized Small Business Banking Community Bank Fintech Superpowers High-Tech, High-Touch Strengths Personalized Service Banking Building Blocks Integrated Solutions We started the fundamentals on Develop busin
Slide 25: Seamless Connectivity with Embedded Banking
25 SEAMLESS CONNECTIVITY WITH EMBEDDED BANKING Unlocking the Combined Power of Banking and Business Management Solutions Evolving Industry Landscape Opportunity Keys to Success - Proliferation of verticalized - Provide more value to the - Best-in-class technology software customer architecture - Pre
Slide 26: Live Oak Culture
26 LIVE OAK CULTURE 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 27: Evolution of Fintech Investing at LOB
27 EVOLUTION OF FINTECH INVESTING AT LOB 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 TBD Nova Able Built* Finxact* Co-led Series B Led Seed Series B Inve
Slide 28: Direct Fintech Investments
28 DIRECT FINTECH INVESTMENTS Low Cash Investment, Significant Current Valuation 1 Portfolio 1 2 4 5 6 7 7 8 8 9 Companies 1. Estimated implied value based on most recent transaction data and not necessarily indicative of current or future value. ©2022 Live Oak Bancshares. All rights reserved.
Slide 29: Live Oak Ventures Remains Active
29 LIVE OAK VENTURES REMAINS ACTIVE Direct Investments Continue to be Critical to Our Innovation • Strategy starts with business rationale • Investments are opportunistic and driven by the business and technology discussions • Venture investments help propel Live Oak's mission to be America's small
Slide 30: Live Oak Bank
30 LIVE OAK BANK 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 33: Forward Looking Statements
33 FORWARD LOOKING STATEMENTS 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 34: 2021 Continued the Momentum Started in 2020
34 2021 CONTINUED THE MOMENTUM STARTED IN 2020 Adjusted PPNR1 Up 75% 2021 vs 2020 Adjusted PPNR1 15% Average Quarterly Growth Rate Q1 2020 to Q4 2021 1. Adjusted non-GAAP financial measures. See Appendix for reconciliation of non-GAAP items to reported balances. ©2022 Live Oak Bancshares. All rights
Slide 38: Appendix
38 APPENDIX 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 41: On the Other Side of PPP
41 APPENDIX 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 $2.0 $73.8 billion million PPP Loans Net Deferred Fees Forgiven/Paid Down Recognized $268.4 $6.5 million million $10.1 million net interest income
Slide 42: Live Oak Bank Tech Stack
42 APPENDIX 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.

Live Oak Bancshares — Q4 2021 Earnings Presentation on 6ix

Live Oak Bancshares — Q4 2021 Earnings Presentation

Slide 1: Fourth Quarter 2021

Slide 2: Forward Looking Statements

Slide 3: Live Oak Bancshares Q4 GAAP Results

Slide 4: Agenda

Slide 5: Live Oak 2021 Highlights

Slide 6: Quarter Highlights

Slide 7: Live Oak Q421 Highlights

Slide 8: Q421 Adjusted Earnings Highlights

Slide 9: Revenue Driven by Strong NII Growth

Slide 10: Investing in Growth

Slide 11: Balance Sheet Strong and Growing

Slide 12: Loan Originations

Slide 13: Strong Production Leading to Net Asset Growth

Slide 14: Efficient Deposit Funding Platform

Slide 15: Balance Sheet Growth Momentum

Slide 16: Credit Metrics Healthy

Slide 17: Credit Reserves and Capital

Slide 18: High Performing Bank Metrics

Slide 19: Verticality | Scalability | Optionality

Slide 20: Milestone Updates

Slide 21: Diversification and Growth Across the Platform

Slide 22: Investing in Tech Talent to Support Growth

Slide 23: Delivering Products & Services to Customers

Slide 24: Building the Community Bank of the Future

Slide 25: Seamless Connectivity with Embedded Banking

Slide 26: Live Oak Culture

Slide 27: Evolution of Fintech Investing at LOB

Slide 28: Direct Fintech Investments

Slide 29: Live Oak Ventures Remains Active

Slide 30: Live Oak Bank

Slide 31: Q&A

Slide 32: ©2022 Live Oak Bancshares. All rights reserved.

Slide 33: Forward Looking Statements

Slide 34: 2021 Continued the Momentum Started in 2020

Slide 35: Appendix

Slide 36: Appendix

Slide 37: Total Assets, Reconciliation Non-GAAP Items to Reported Balances

Slide 38: Appendix

Slide 39: Appendix

Slide 40: Noninterest Expense of Deposits

Slide 41: On the Other Side of PPP

Slide 42: Live Oak Bank Tech Stack