Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q3 2024 Earnings Presentation
29 slides from Live Oak Bancshares's earnings presentation, Oct 24, 2024
Slide 1: Third Quarter 2024
THIRD QUARTER 2024 October 24, 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 Q3 GAAP Results
LIVE OAK BANCSHARES Q3 GAAP RESULTS 3 LIVE OAK BANCSHARES, INC. ($ IN MILLIONS, EXCEPT PER SHARE DATA) Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 a Net Interest Income $ 85.9 $ 82.0 $ 84.3 $ 89.4 $ 89.6 $ 90.1 $ 91.3 $ 97.0 Provision for Credit Losses 19.7 19.0 13.0 10.3 9.0 16.
Slide 4: Third Quarter 2024 Highlights
LIVE OAK | THIRD QUARTER 2024 HIGHLIGHTS 4 Momentum continues to build Record Q3 loan production1 Positive operating leverage driven by revenue growth Elevated provision from record loan growth and specific impairments of three relationships Continue to invest in "good costs" Fed easing will be a ta
Slide 5: Q3 Earnings Summary
Q3 EARNINGS SUMMARY 5 EPS • Diluted EPS of $0.28 • Strong PPNR growth more than offset by elevated provision • PPNR of $52 million, up 9% LQ, down 1% PYQ • Adjusted PPNR2 of $53 million, up 18% LQ and 22% PYQ PPNR • Adjusted total revenue2 up 7% LQ and 11% PYQ • Adjusted expenses2 flat compared to L
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 2 Adjusted PPNR +18% LQ +22% PYQ $53 $ in millions $46 $45 $44 $39 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Adjusted Total $118 $120 $117 $123 $131 Revenue 2 Adjusted Noninterest $74 $74 $79 $77 $77
Slide 7: Momentum in Our Core Business Is Building
MOMENTUM IN OUR CORE BUSINESS IS BUILDING 7 2 Adjusted PPNR : Last 12 months vs. Prior 12 months Loan Production and Pipeline $ in millions Loan Production Loan Pipeline $183 $ in billions $3.5 $142 +29% $2.8 +25% +10% adjusted revenue2 growth $1.8 +1% adjusted noninterest expense2 $1.1 growth Q4 20
Slide 8: Reserve Levels Over Time Supporting Growth and Outlook
RESERVE LEVELS OVER TIME SUPPORTING GROWTH AND OUTLOOK 8 Quarterly Provision and Net Charge-Offs $ in millions Provision Net Charge-Offs 3, 4 3 Unguaranteed ACL / Unguaranteed Loans and Leases Net Charge-Offs / Average HFI Unguaranteed Loans & Leases 2.46% 2.53% 2.44% 2.31% 2.32% 2.28% 2.28% 2.22% $
Slide 9: Growth Opportunities Building
LIVE OAK | GROWTH OPPORTUNITIES BUILDING 9 Lending pipelines at all-time highs Live Oak Express (small dollar SBA) ramping up Checking relationships building Commercial Banking efforts scaling Infrastructure investments enabling growth ©2024 Live Oak Bancshares. All rights reserved. | View all discl
Slide 10: Quarter Highlights
QUARTER HIGHLIGHTS ©2024 Live Oak Bancshares. All rights reserved.
Slide 11: Q3 2024 Summary
Q3 2024 SUMMARY 11 Q3 2024 CHANGE VS. $ in millions Q3 2024 Q2 2024 Q3 2023 Key Highlights Net interest income $ 97 $6 $8 • 8bps annualized NCO's6, Noninterest income $ 33 $(1) $(5) 88bps unguaranteed NPLs7 Soundness a Total revenue $ 130 $4 $3 • 3:1 liquidity capacity to uninsured b Noninterest exp
Slide 12: Strong Loan Origination Platform Driving Growth
STRONG LOAN ORIGINATION PLATFORM DRIVING GROWTH 12 YTD 2024 vs. YTD 2023 Origination Growth by Vertical Quarterly Production Trend Size represents each vertical's outstanding balance as a proportion of the bank's total outstanding balance $ in millions 8 Small Business Banking Commercial Total Senio
Slide 13: Strong Balance Sheet Growth Trends Continue
STRONG BALANCE SHEET GROWTH TRENDS CONTINUE 13 Loan and Deposit Balance Trends $ in billions Total HFS and HFI Loans and Leases Total Deposits QoQ % Loan Growth Key Highlights $11.4 $10.7 • Strong quarter of loan $10.3 $10.4 $10.2 $10.0 $9.5 production drives elevated $9.0 $9.2 $8.8 loan growth: +7%
Slide 14: Business Checking Spotlight
BUSINESS CHECKING SPOTLIGHT 14 CHECKING ACCOUNTS BUILDING DEEPER, MORE PROFITABLE RELATIONSHIPS Business Checking Customers Key Highlights $ in millions Checking Balances Savings & CD Balances Avg COF LOB Average COF • Business checking full launch in Q1 2024 4.07% 4.13% 4.15% 3.90% 3.72% • Business
Slide 15: Net Interest Margin and Net Interest Income Trends
NET INTEREST MARGIN AND NET INTEREST INCOME TRENDS 15 $97 Key Highlights $ in millions $91 • Net interest income +6% LQ, +9% PYQ $89 $90 $90 • Q3 loan production average yield @ 8.86%, Net Interest Income +103bps to average portfolio loan yield Net Interest Margin • ~54% of loan portfolio is variabl
Slide 16: Noninterest Income Trends
NONINTEREST INCOME TRENDS 16 $ in millions Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Key Highlights Net gains on sales of loans $13 $13 $12 $14 $17 Loan servicing revenue 7 7 8 7 8 Net gains on Q3 loan sales Loan servicing asset revaluation 11 (4) (3) (3) (4) • SBA premiums steady Net (loss) gain on l
Slide 17: Expenses Stable While Investments in Growth Engine Continue
EXPENSES STABLE WHILE INVESTMENTS IN GROWTH ENGINE CONTINUE 17 GROWTH-FOCUSED HIRING DRIVEN BY REVENUE-GENERATING, DEPOSIT GATHERING, RISK, AND TECHNOLOGY-BASED ROLES Quarterly Expenses $ in millions 2 Personnel expense Non-personnel expense Non-GAAP adjustments $93 $78 $78 $78 $74 $19 $31 $32 $33 $
Slide 18: Key Credit Trends
KEY CREDIT TRENDS 14, 16 18 Q3 2024 Credit Stats • $2 million of net charge offs, 3bps of avg. HFI unguaranteed loans3,4 • About 40% of increase in unguaranteed classified loans driven by three relationships • Past dues elevated reflecting the environment • 88bps of nonaccrual/HFI unguaranteed loans
Slide 19: Strong Capital Positioning - The Mahan Ratio
STRONG CAPITAL POSITIONING - THE MAHAN RATIO 19 $ in millions Total Assets CAPITAL RATIOS Q3 2024 Common Equity Tier 1 Capital 11.2% $475 $12,000 Total Capital 12.4% $1,900 $10,000 Tier 1 Capital 11.2% $3,518 Tier 1 Leverage 8.6% $8,000 $6,000 As of September 30, 2024 $4,000 Tier 1 Capital (a) $1,04
Slide 20: ©2024 Live Oak Bancshares. All rights reserved.
20 ©2024 Live Oak Bancshares. All rights reserved.
Slide 21: Appendix
APPENDIX ©2024 Live Oak Bancshares. All rights reserved.
Slide 22: Appendix: Presentation Footnotes
APPENDIX: PRESENTATION FOOTNOTES 22 1. Excludes PPP loans. 2. Non-GAAP financial measures. See Appendix for reconciliation of non-GAAP items to reported balances. 3. Denominator includes loans and leases at historical cost only (excludes loans measured at fair value). 4. Quarterly average of HFI ung
Slide 23: Forward Looking Statements
FORWARD LOOKING STATEMENTS 23 Information in this presentation may contain “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. These statements generally relate to our financial condition, results of operations, plans, objectives, future performance or business
Slide 24: Appendix: Reconciliation
APPENDIX: RECONCILIATION 24 Fintech Activities Impact on Consolidated Financials ($ in millions) Banking Activities Apiture Live Oak Ventures Canapi Advisors Fintech Activities Other Consolidated, as reported Actuals for the quarter ended December 31, 2022 Net interest income $ 86.2 $ — $ — $ — $ —
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 December 31, 2023 Net interest income $ 89.7 $ — $ — $ — $ —
Slide 26: Appendix: Reconciliation
APPENDIX: RECONCILIATION 26 Reconciliation of non-GAAP items to reported balances ($ in millions) Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 a Net interest income, as reported $ 85.9 $ 82.0 $ 84.3 $ 89.4 $ 89.6 $ 90.1 $ 91.3 $ 97.0 b Total noninterest income, as reported 19.1 19
Slide 27: Appendix: Reconciliation
APPENDIX: RECONCILIATION 27 ($ in millions) Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Total shareholders' equity $ 850.4 $ 902.7 $ 927.7 $ 961.0 $ 1,007.8 Less: Goodwill 1.8 1.8 1.8 1.8 1.8 Other intangible assets 1.8 1.7 1.7 1.6 1.6 a Tangible shareholders' equity 846.8 899.1 924.2 957.6 1,004.4 b Sh
Slide 28: Appendix: Current and Past Production Driving Loan Growth
APPENDIX: CURRENT AND PAST PRODUCTION DRIVING LOAN GROWTH 28 7% PERIOD-END LOAN GROWTH LQ; 11% TOTAL NET GROWTH LQ BEFORE LOAN SALES Period End ($ in millions) Increase Decrease $779 Total $746 $(460) $10,192 $(266) $(143) $9,536 Q2 2024 Full Funded Other Loan Prepayment Guaranteed Unguaranteed Loan
Slide 29: Appendix: Live Oak Ventures
APPENDIX: LIVE OAK VENTURES 29 A B Book Value Cash Invested Implied Value Cash Proceeds $333 $338 $350 $321 $300 $250 Cash ProceedsB to Date $171 million $198 $200 $154 $155 Total Implied ValueA $150 $129 $117 $131 $132 $130$130 Q3 2024 $167 million $100 $80 $82 $80 $82 $59 $62 $62 $52 $50 $29 $15 $