Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q3 2019 Earnings Presentation
23 slides from Live Oak Bancshares's earnings presentation, Oct 24, 2019
Slide 1: Third Quarter 2019
Third Quarter 2019 October 24, 2019 © 2019 Live Oak Bancshares Inc. All Rights Reserved
Slide 2: Forward Looking Statements
L I V E O A K B A N C S H A R E S | F O R WA R D L O O K I N G S TAT E M E N T S 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,
Slide 3: Q3 Headlines
Q3 HEADLINES § THE BEAT GOES ON! § What makes Live Oak so different and interesting to own? - Another quarter of high growth in recurring revenue - Strong credit quality - The real earnings of the bank and its growth - Over to Huntley for more details 3
Slide 4: Q3 2019 vs. Q3 2018
T H E B E AT G O E S O N Q3 2019 vs. Q3 2018 1 46.9% Total Loan & Lease Portfolio 3.7x Guaranteed Loans Eligible for Sale Strategic Pivot 35.4% Net Interest Income 10.9% Noninterest Expense, as adjusted 1 1. See Appendix for GAAP to Non-GAAP reconciliation 4
Slide 5: Organic Growth Drives Bottom Line
ORGANIC GROWTH DRIVES BOTTOM LINE Incremental Quarterly Impact Loan & Lease Net Spread2 Net Income3 EPS4 Growth1 Q4 $253 x 4.56% = $2.31 $0.06 2018 million million Q1 $244 x 4.44% = $2.17 $0.05 2019 million million Q2 $309 x 4.43% = $2.74 $0.07 2019 million million Q3 $262 x 4.44% = $2.32 $0.06 2019
Slide 6: Credit Trends
CREDIT TRENDS Q3 Q4 Q1 Q2 Q3 ($ in thousands) 2018 2018 2019 2019 2019 Net charge-offs $2,310 $1,185 $65 $526 $2,264 Provision for (recovery of) loan & lease (243) 6,822 2,742 3,463 7,160 losses Allowance for loan & lease losses 26,797 32,434 35,111 38,048 42,944 1 Nonperforming Loans to Bank Tier 1
Slide 7: Investing in the Future: FinTech Activities Impact Earnings
INVESTING IN THE FUTURE FinTech Activities Impact Earnings Three Months Ended ($ in thousands) 9/30/2019 6/30/2019 3/31/2019 YTD 2019 Income before taxes, as reported $ 6,262 $ 5,597 $ 2,689 $ 14,548 Provision for loan and lease losses 7,160 3,463 2,742 13,365 Income before taxes, adjusted to exclud
Slide 8: FinTech Investments
FINTECH INVESTMENTS Total Investment Carrying Value $17.4 $16.6 million million Latest Implied Value Implied Unrealized Gain $56.6 $40.0 million million 8
Slide 9: Live Oak – Inside Ownership
LIVE OAK – INSIDE OWNERSHIP 1 Publicly Traded $5-10BB Banks with 15% ROE Insider Entity Name Ticker Ownership % 26% 14% ServisFirst Bancshares, Inc. SFBS 8% Meta Financial Group, Inc. CASH First Financial Bankshares, Inc. FFIN 5% Live Oak’s Insider Washington Trust Bancorp, Inc. WASH 9% Ownership %
Slide 10: Performance
PERFORMANCE
Slide 11: Q3 2019 Highlights
Performance Q3 2019 HIGHLIGHTS 47% increase versus Q3 2018 34% Increase versus Q3 2018 15% increase versus Q3 2018 Loans and Leases HFS and HFI Total Assets Managed Portfolio (1) $3.35 billion $4.60 billion $6.36 billion 26% Q3 2019 versus Q3 2018 11% Q3 2019 versus Q3 2018 64% (3) Guaranteed loans
Slide 12: Strong Diversified Q3 Loan Production
Performance STRONG DIVERSIFIED Q3 LOAN PRODUCTION Q3 Production Across 43 States Across 29 Verticals $1.7 million Average Loan Size 12
Slide 13: Total Portfolio Diversification
Performance T O TA L P O R T F O L I O D I V E R S I F I C AT I O N $3.34 billion Portfolio Balance Growth through Diversification 45.3% Guaranteed Portfolio Percentage $1.53 billion 13
Slide 14: Credit Quality Remains Strong
Performance CREDIT QUALITY REMAINS STRONG $7.2 million 39 bps 1.76% versus Q2 2019 of 10 bps versus Q2 2019 of $3.5 million versus Q2 2019 of 1.71% Provision for loan and lease losses Annualized Net CO to ALLL to Loans & Leases HFI Average Loans & Leases HFI $21.0 million 46 bps 6.62% versus Q2 2019
Slide 15: Highly Efficient Deposit Platform
Performance H I G H LY E F F I C I E N T D E P O S I T P L AT F O R M $2.98 Billion Retail Deposits1 96% Savings Retention YTD 2019 67% CD Retention YTD 2019 1. As of September 30, 2019 15
Slide 16: Strong Recurring Revenue Growth
Performance STRONG RECURRING REVENUE GROWTH 16
Slide 17: Volatility Subsides & Predictability Increases
Performance V O L AT I L I T Y S U B S I D E S & P R E D I C TA B I L I T Y I N C R E A S E S 17
Slide 18: Expense Discipline
Performance EXPENSE DISCIPLINE $36.7 1 1 * See Appendix for Non-GAAP Reconciliation 1. Noninterest expense, as modified. Excludes Q4 2018 accrued incentive compensation reversal of $4.5 million 18
Slide 19: High Performing Bank Metrics
Performance HIGH PERFORMING BANK METRICS Q2 2019 Trend + $ 8B $ 7B Asset Size $4.60 B $4.27B 3.75% 3.50% NIM 3.74% 3.70% + Income - 25% Noninterest 30% to total revenue 33.1% 30.2% + 60% Efficiency Ratio1 76.2% 81.4% - 1.25% 1.75% ROA 0.35% 0.48% 3.85% - 20% 15% ROE 2.94% + 8.5% 10% Tier 1 Leverage
Slide 20: Digital Transformation
Performance D I G I TA L T R A N S F O R M AT I O N Large Core Processors Largest Banks 6,000 COMMUNITY BANKS 20
Slide 21: Appendix
APPENDIX
Slide 22: Non-GAAP Noninterest Expense, As Adjusted and As Modified; Efficiency Ratio
N O N - G A A P R E C O N C I L I AT I O N NON-GAAP NONINTEREST EXPENSE, AS ADJUSTED AND AS MODIFIED; EFFICIENCY RATIO Three months ended Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Noninterest expense, as reported $ 38,072 $ 40,830 $ 41,244 $ 32,558 $ 38,201 $ 39,576 $ 42,737 Stock base
Slide 23: © 2019 Live Oak Bancshares Inc. All Rights Reserved
© 2019 Live Oak Bancshares Inc. All Rights Reserved