Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q4 2022 Earnings Presentation
38 slides from Live Oak Bancshares's earnings presentation, Jan 26, 2023
Slide 1: Fourth Quarter 2022
FOURTH QUARTER 2022 January 26, 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 Q4 GAAP Results
LIVE OAK BANCSHARES Q4 GAAP RESULTS 3 Live Oak Bancshares, Inc. ($ in millions, except per share data) Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 FY 2022 FY 2021 a Net Interest Income $ 86 $ 84 $ 80 $ 78 $ 78 $ 328 $ 297 Provision for Loan and Lease Credit Losses 20 14 5 2 4 41 15 b Total Noninterest I
Slide 4: Is the World Coming to an End?
IS THE WORLD COMING TO AN END? 4 Source: Headlines from Oct. 18, 2022 and Oct. 19, 2022 articles in the Wall Street Journal and Fortune. ©2023 Live Oak Bancshares. All rights reserved.
Slide 5: Regression to the Norm
REGRESSION TO THE NORM 5 1 1 Shaded area represents quarters impacted by COVID-19. 1. Loans and leases at historical cost only (excludes loans measured at fair value). ©2023 Live Oak Bancshares. All rights reserved.
Slide 6: Regression to the Norm
REGRESSION TO THE NORM 6 Shaded area represents quarters impacted by COVID-19 ©2023 Live Oak Bancshares. All rights reserved.
Slide 7: Credit Trends Generally Positive
CREDIT TRENDS GENERALLY POSITIVE 7 1 1,2 Ratios use total HFI unguaranteed loans and leases at amortized cost (inclusive of loans and leases at fair value and historical cost). 1. Classified includes loans and leases rated a risk grade 6 or higher. | 2. Criticized includes loans and leases rated a r
Slide 8: The Voice of Our Customers
THE VOICE OF OUR CUSTOMERS 8 2022 Survey of Live Oak Customers Shows Continued Confidence Live Oak Research shows our customers: Are optimistic (despite challenges) 60% believe it is a good time to expand 25% will look for capital for growth Are open to transition with 25% anticipating a change in o
Slide 9: Quarter Highlights
QUARTER HIGHLIGHTS ©2023 Live Oak Bancshares. All rights reserved.
Slide 10: 2022 Live Oak Highlights
2022 LIVE OAK HIGHLIGHTS 10 Our Path to Becoming America’s Small Business Bank $3.92 16% 31% 3.87% $4.0B 24% 12% FY 2022 Adjusted Total Adjusted Net Interest Net Interest FY 2022 Loan Loan TBV1 Diluted EPS Revenue1 Growth YoY Income1 Growth YoY Margin Production Growth2 YoY Growth YoY VERTICALITY SC
Slide 11: 2022 Adjusted Earnings Highlights
2022 ADJUSTED EARNINGS HIGHLIGHTS 11 2022 Adjustments Summary1 FY 2022 change vs. Reported Adjusted Net Interest Income Adjustments1 FY 2021 $ in millions FY 2022 FY 20221 PPP-related impacts ($6.7MM) Net interest income $ 328 $ (7) $ 321 31% Noninterest Income Noninterest income 238 (130) 108 (13)%
Slide 12: Live Oak Q4 22 Highlights
LIVE OAK Q4 22 HIGHLIGHTS 12 Our Path to Becoming America’s Small Business Bank $0.04 4% 3.76% 7% $1.2B 1% 2 Diluted Adjusted Net Interest Net Interest Loan Growth Q4 Loan TBV1 EPS Income1 Growth LQ Margin LQ Production Growth LQ VERTICALITY SCALABILITY OPTIONALITY Differentiated lending model Build
Slide 13: Q4 22 Adjusted Earnings Highlights
Q4 22 ADJUSTED EARNINGS HIGHLIGHTS 13 Balance Sheet and NII Growth Healthy Adjusted Q4 2022 change vs. Q4 22 Adjustments Summary1 Reported Adjusted Adj Q3 Adj Q4 Adjustments1 $ in millions Q4 2022 Q4 20221 2022 2021 Net Interest Income Net interest income $ 86 $ — $ 86 4% 22% Noninterest income 19 4
Slide 14: Diversification Across the Platform
DIVERSIFICATION ACROSS THE PLATFORM 14 FY 2022 Production Mix by Business Unit (%) Sponsor Finance - Middle Market Lending 61% 28% 11% $ in millions Q4 2022 FY 2022 Originations Originations Q4 Loans YoY % YoY % Outstanding1 $ Change $ Change2 Education Small Business Banking $5,583 $605 (4)% $2,439
Slide 15: Total Revenue Trends
TOTAL REVENUE TRENDS 15 Strong Net Interest Income Growth on 7% LQ Loan Growth $400 $ in millions $64 Adjusted Total Revenue1 Adjusted net interest income¹ Net gains on sales of loans Adjusted other noninterest income¹ $56 $43 Down 1% linked quarter $125 $300 $321 Up 3% over Q4 2021 $67 Up 16% year-
Slide 16: Net Interest Margin Trends
NET INTEREST MARGIN TRENDS 16 Margin Remains Resilient with Strong Growth Despite Rapidly Rising Interest Rates Average Loans and Deposits Avg Deposits Avg Loans¹ Avg PPP Loans NIM Balance Sheet Highlights YoY avg loan growth1 of 25% (~6% QoQ) $8.4 Average Balances, $ in billions $8.1 $7.9 $0.1 $7.7
Slide 17: Slowing Pace of Expense Growth
SLOWING PACE OF EXPENSE GROWTH 17 Adjusted noninterest expense¹ Adjusted efficiency ratio¹ Salaries and employee benefits - lenders/lender support 2 $ in millions $ in millions Salaries and employee benefits - other 2 Total Assets, excluding PPP¹ $76 $9,843 $9,843 $72 $66 $68 $7,951 $60 $7,951 68.8%
Slide 18: Credit Metrics Healthy
CREDIT METRICS HEALTHY 18 Trends and Borrower Behavior Remain Stable and Solid; Not Taking Our Eyes off the Ball $ in millions Past Due >30 Days1 • Q4 provision breakdown: $24 1.20% • ~ 40% from loan growth $20 1.01% 1.00% • ~ 5% from net charge-offs $16 0.80% • ~ 55% from portfolio, macroeconomic c
Slide 19: Soundness, Profitability & Growth in That Order
SOUNDNESS, PROFITABILITY & GROWTH IN THAT ORDER 19 Percent of Loan Portfolio that is • Since 2013, Live Oak has experienced 30 bps5 loss rate Government Guaranteed vs. NIM on SBA loans originated compared to the SBA 7(a) program 42% 4 total loss rate of 389 bps6 ~11x higher NIM, 3.76% 3 concentratio
Slide 20: Strong Capital Positioning - The Mahan Ratio
STRONG CAPITAL POSITIONING - THE MAHAN RATIO 20 $ in millions Capital Ratios Q4 2022 Total Assets $10,000 Common Equity Tier 1 12.5% $502 $9,000 $1,435 Total Capital 13.7% $8,000 Tier 1 Capital 12.5% $7,000 Tier 1 Leverage 9.3% $3,322 $6,000 $5,000 As of December 31, 2022 $4,000 Tier 1 Capital (a) $
Slide 21: Outlook
OUTLOOK ©2023 Live Oak Bancshares. All rights reserved.
Slide 22: 2023 Expectations
2023 EXPECTATIONS 22 In Uncertain Times, Stay True to Our Guiding Principles SAFETY & SOUNDNESS PROFITABILITY GROWTH • Stay close to existing borrowers • Minimize "noise" in earnings • Lending franchise will continue to drive healthy loan production • Maintain conservative reserves • Continued NIM r
Slide 23: ©2023 Live Oak Bancshares. All rights reserved.
23 ©2023 Live Oak Bancshares. All rights reserved.
Slide 24: Appendix
APPENDIX ©2023 Live Oak Bancshares. All rights reserved.
Slide 25: Forward Looking Statements
FORWARD LOOKING STATEMENTS 25 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 26: Appendix: Reconciliation
APPENDIX: RECONCILIATION 26 Fintech Activities Impact on Consolidated Financials ($ in millions) Banking Live Oak Canapi Fintech Consolidated, as Activities Apiture Ventures Advisors Activities Other reported Actuals for the year ended December 31, 2022 Net interest income $ 329.0 $ — $ 0.1 $ — $ 0.
Slide 27: Appendix: Reconciliation
APPENDIX: RECONCILIATION 27 Fintech Activities Impact on Consolidated Financials ($ in millions) Banking Live Oak Canapi Fintech Consolidated, as Activities Apiture Ventures Advisors Activities Other reported Actuals for the year ended December 31, 2021 Net interest income $ 297.9 $ — $ 0.1 $ 0.1 $
Slide 28: Appendix: Reconciliation
APPENDIX: RECONCILIATION 28 Reconciliation to reported balances ($ in millions) Q4 2020 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Loans held for sale, as reported $ 1,175.5 $ 1,116.5 $ 1,028.6 $ 1,199.7 $ 537.6 $ 554.6 Loans and leases held for investment, as reported 5,144.9 5,521.3 5,738.2 5,860.2 6
Slide 29: Appendix: Reconciliation
APPENDIX: RECONCILIATION 29 Reconciliation of non-GAAP items to reported balances ($ in millions) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2021 FY 2022 Net interest income, as reported $ 77.6 $ 77.8 $ 79.9 $ 83.9 $ 85.9 $ 296.8 $ 327.5 Less PPP loan interest income 0.8 0.5 0.2 0.1 0.0 9.4 0.7 Less
Slide 30: Appendix: Reconciliation
APPENDIX: RECONCILIATION 30 ($ in millions) Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Total shareholders' equity $ 715.1 $ 713.3 $ 791.7 $ 802.2 $ 811.0 Less: Goodwill 1.8 1.8 1.8 1.8 1.8 Other intangible assets 2.0 2.0 2.0 1.9 1.9 a Tangible shareholders' equity 711.3 709.5 787.9 798.5 807.4 b Shares
Slide 31: Appendix: Production and Net Asset Growth
APPENDIX: PRODUCTION AND NET ASSET GROWTH 31 7% Loan Growth LQ; 10% Total Net Growth LQ Before Loan Sales Period End ($ in millions) Increase Decrease Up 2% QoQ, Total 6% YoY $417 $684 $7,899 $7,391 $(318) $(11) $(144) $(120) Q3 2022 Full Funded Other Loan Prepayment Net Change in Guaranteed Unguara
Slide 32: Appendix: Q4 Loan Originations
APPENDIX: Q4 LOAN ORIGINATIONS1 32 1.6% 2.1% Originations Portion of Originations comprised of government guaranteed loans (%) Q4 Originations1 (in millions) $1,114 $1,084 2018 $499 Q4 2021 50.6% $1,063 45.7% $960 2019 $524 $865 2020 $808 2021 $1,084 2022 $1,178 SBA 7(a) Conventional USDA Other Prod
Slide 33: Appendix: Deposit Platform
APPENDIX: DEPOSIT PLATFORM 33 Low Delivery Costs, Healthy Retention & Continued Growth Total Deposits Growth1 Retail Savings Retail CDs Business Savings and CDs $7,000 $2.2B Balances ($ in millions) $6,000 $5,000 Business Savings & CDs up 66% YoY $4,000 $3,000 $2,000 $1,000 $— Q4 2021 Q1 2022 Q2 202
Slide 34: Appendix: Talent
APPENDIX: TALENT 34 Adding Revenue-Generating Lenders to the Team 2018-2022 Total Lenders 180 141 118 108 111 80 Lenders added from Highlighted Hires Highlighted Hires Highlighted Hires Highlighted Hires 3 - Venture banking 1 - General SBA 2 - Franchise 2 - Healthcare 2018-Present 11 - General SBA 1
Slide 35: Appendix: PPP
APPENDIX: PPP 35 On the other side of PPP | Processed nearly 15,000 PPP loans $2.3 $80.3 billion million $ in millions PPP Net Interest Income Impact PPP Loans Net Deferred Fees at $16 Originated Origination $14 $12 $2.3 $80.1 $10 $8 $6 $4 billion million $2 PPP Loans Forgiven/ Net Deferred Fees $0
Slide 36: Appendix: Evolution of Fintech Investing
APPENDIX: EVOLUTION OF FINTECH INVESTING 36 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 37: Outsized Ventures Returns Support Asset Growth
OUTSIZED VENTURES RETURNS SUPPORT ASSET GROWTH 37 Cash Proceeds2 to Date $163 million Total Implied Value1 Q4 2022 $158 million 2022 Portfolio Exits Q2 Q3 Portfolio Companies 1 2 3 4 5 6 7 9 11 Additions by Period 1. Estimated implied value based on most recent transaction data and not necessarily i
Slide 38: Live Oak Bank
LIVE OAK BANK 38 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