Live Oak Bancshares, Inc. · NYSE:LOB
Live Oak Bancshares — Q2 2021 Earnings Presentation
36 slides from Live Oak Bancshares's earnings presentation, Jul 22, 2021
Slide 1: Second Quarter 2021
SECOND QUARTER 2021 July 22, 2021 ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 2: Forward Looking Statements
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 and
Slide 3: Q2 2021 Performance
3 Q2 2021 PERFORMANCE As reported Live Oak Bancshares, Inc. ($ in thousands, except per share data) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Net Interest Income $ 40,161 $ 40,898 $ 51,363 $ 62,301 $ 69,950 $ 71,462 Provision for (Recovery of) Loan and Lease Credit Losses 11,792 9,958 10,274 8
Slide 4: Credit & Fair Value Metrics
4 CREDIT & FAIR VALUE METRICS Ratios1 3/31/2020 06/30/2020 09/30/2020 12/31/2020 03/31/2021 06/30/2021 Past Due > 30 Days2 0.54% 0.00% 0.00% 0.05% 0.12% 0.13% Watchlist Loans and Leases3 6.45% 6.46% 7.97% 9.61% 9.45% 9.34% Classified Assets4 1.88% 1.66% 2.32% 2.18% 2.23% 1.88% Non-Accruals5 1.06% 1.
Slide 5: On the Other Side of PPP
5 ON THE OTHER SIDE OF PPP Where are we now? Total Loan & Lease Portfolio Performance Processed nearly 15,000 PPP loans Q2 2020 – Q2 2021 $2.31 $1.36 $951.4 $13.9 billion PPP Loans billion PPP Loans million PPP Loan Balance million Originated Forgiven/Paid Down Remaining Net Charge-Offs $4.1 $80.3 $
Slide 6: Quarter Comparisons: Loan & Lease Portfolio Growth
6 QUARTER COMPARISONS Loan & Lease Portfolio Growth $ in millions 36.8% Q1 2019 to Q2 2021 Compounded Annual Growth, excluding PPP Loan Portfolio ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 7: Quarter Comparisons: Growth & Diversification
7 QUARTER COMPARISONS Growth & Diversification 159% Growth Q2 2020 to Q2 2021 $430.1 million to $1.11 billion Originations excluding PPP ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 8: Loan Origination Growth
8 LOAN ORIGINATION GROWTH Vertical started 2018 through present Vertical started 2008 through 2017 New Verticals Contribute to Growth Q2 2019 Loan & Lease Originations Q2 2020 Loan & Lease Originations Q2 2021 Loan & Lease Originations 2008-2017 $403.9 million 2008-2017 $291.6 million 2008-2017 $514
Slide 9: Loan & Lease Origination Characteristics
9 LOAN & LEASE ORIGINATION CHARACTERISTICS 2019 2020 2021 Loan & Lease Originations, excluding PPP (in millions of dollars) Portion of Originations comprised of government guaranteed loans (%) % Fully 55.6% 42.9% 51.3% 49.0% 57.6% 89.8% 72.9% 55.6% 77.7% 58.6% Funded ©2021 Live Oak Banking Company.
Slide 10: Sample View: Newer Verticals
10 SAMPLE VIEW: 5 NEWER VERTICALS Q2 2021 Originations for 5 verticals launched after 2017 Unguaranteed HFI 30-89 Days Past Due Criticized and Verticals Non-Accrual1 Loans & Leases1 & Accruing1 Classified1 Bioenergy 1.86% 0.00% 0.00% 0.00% Community Facilities 0.57% 0.00% 0.00% 0.00% General Lending
Slide 11: Q2 2021 Diversified Originations
11 Q2 2021 DIVERSIFIED ORIGINATIONS1 Geographic Diversification 1.) Loan & lease originations excluding PPP loans ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 12: Non-GAAP Pre-Tax Pre-Provision Income
12 NON-GAAP PRE-TAX PRE-PROVISION INCOME $ in millions 1 1 16.2% Average Quarterly Growth Rate Q1 2020 to Q2 2021 Non-GAAP pre-tax pre-provision income, as adjusted for PPP activities 1.) See Appendix for reconciliation of reported balances to non-GAAP items ©2021 Live Oak Banking Company. All right
Slide 13: Technology Investments
13 TECHNOLOGY INVESTMENTS $ in millions Live Oak Cash $13.4 $3.1 $2.2 $1.5 $5.0 $0.0 $0.5 Investment Live Oak Carrying $6.2 $0.0 $2.9 $1.5 $51.5 $53.2 $0.5 Value2 Estimated Implied $41.8 $15.0 $4.4 $1.3 $51.5 $68.3 N/A Value1 of Shares Owned by Live Oak Change since Q1 2021 $0.0 +$1.1 $0.0 -$0.1 +$1
Slide 14: Canapi Update
14 CANAPI UPDATE LOB’s investment in Canapi is paying off through access to top-tier fintech companies as well as encouraging early fund performance Existing portfolio company Seed Series A Series A Series D Series B Jun-20 Nov-20 Dec-20 Apr-21 Jul-21 Series B Series B Series C Series B Series B Dec
Slide 15: Performance
PERFORMANCE ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 16: Our Focus Remains Consistent
16 OUR FOCUS REMAINS CONSISTENT KEEPING OUR SAFETY & WELL-BEING SUPPORTING SMALL DELIVERING CUSTOMERS CLOSE OF OUR EMPLOYEES & BUSINESSES TECHNOLOGY & PRODUCTS COMMUNITIES In-Person and Virtual Flexible Hybrid Work Model Dedicated to Providing Loan Servicing Enhancements Capital to Small Business Ou
Slide 17: Q2 Balance Sheet Highlights
17 Q2 BALANCE SHEET HIGHLIGHTS Q2 Q1 Q2 Change from Change from $ in billions unless otherwise indicated 2020 2021 2021 Prior Quarter Prior Year Total Loans and Leases $3.94 $5.09 $5.58 9.6% 41.7% Excluding PPP1 Managed Portfolio $7.01 $8.31 $8.71 4.9% 24.3% Excluding PPP2,1 Eligible for Sale $1.12
Slide 18: Q2 Income Statement Highlights
18 Q2 INCOME STATEMENT HIGHLIGHTS Q2 Q1 Q2 Change from Change from $ in millions 2020 2021 2021 Prior Quarter Prior Year Loan & Lease Originations, $430 $672 $1,114 65.7% 159.0% excluding PPP Net Interest Income , as adjusted for PPP Activities1 $40.7 $57.5 $64.8 12.8% 59.3% + Servicing Revenue Net
Slide 19: Notable Events – Q2
19 NOTABLE EVENTS – Q2 Event Comments Q2 Financial Impact Non-Cash Gain: $30.2 million FMV of Greenlight increased following Series D capital raise Greenlight Gain Live Oak Ventures sold a portion of its shares Cash Gain: $13.9 million . Total Gain: $44.1 million Originated $1.11 billion loans and N
Slide 20: PPP Impact
20 PPP IMPACT ($ in millions) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Total Assets, as reported $8,209.2 $8,093.4 $7,872.3 $8,417.9 $8,243.2 Total Adjustments for PPP Activities1 2,625.5 2,218.8 1,510.2 1,475.1 937.2 Total Assets, as adjusted to exclude PPP Activities 5,583.6 5,874.6 6,362.1 6,942.8
Slide 21: Franchise Fundamentals
21 FRANCHISE FUNDAMENTALS 1 72% Q2 2021 vs Q2 2020 Net Interest Income, as adjusted for PPP activities 15% Q2 2021 vs Q1 2021 Net Interest Income, as adjusted for PPP activities 42% Q2 2021 vs Q2 2020 Total Loan and Lease Portfolio, excluding PPP 10% Q2 2021 vs Q1 2021 Total Loan and Lease Portfolio
Slide 22: Guaranteed Loan Sales
22 GUARANTEED LOAN SALES Guaranteed Loan Sales Secondary Market Remains Strong Long Term Sale Targets Remain Consistent % Sold Q2 2021 Last 6 Quarters Target SBA 24% 31% 35% USDA 37% 63% 100% ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 23: Investing in Growth
23 INVESTING IN GROWTH 1 $51.8 million Non-GAAP noninterest expense, as adjusted for PPP activities1 0.71% Non-GAAP noninterest expense, as adjusted for PPP activities to Total assets, as adjusted to exclude PPP activities1 1.) See Appendix for reconciliation of non-GAAP items to reported balances ©
Slide 24: Funding Model Excels in Current Environment
24 FUNDING MODEL EXCELS IN CURRENT ENVIRONMENT $5.1 65.1 billion thousand Retail Deposits Open Accounts As of June 30, 2021 As of June 30, 2021 10 26% Basis points YoY Retail Deposits Noninterest Cost of Growth Funds 1 Versus Q2 2020 Q2 2021 Savings Account Retention 0.60% Open Savings % Still Open
Slide 25: New Deposit Platform Update
25 NEW DEPOSIT PLATFORM UPDATE For the quarter ended Sep 30, 2020 Dec 31, 2020 Mar 31, 2021 June 30, 2021 Q2’21 vs. Q1’21 Accounts 182 740 1,905 2,920 53% Account Growth Account Balance $12.1 $61.6 $156.1 $426.3 173% Balance Growth million million million million ©2021 Live Oak Banking Company. All
Slide 26: NIM Expansion & Liquidity Management
26 NIM EXPANSION & LIQUIDITY MANAGEMENT • Estimated Adjusted NIM improvement driven by: • Ending Q2 2021 liquidity improved in Q2 2021 • COF reductions via Retail savings rate decreases and (19.4%) compared to Q1 2021 (22.4%) as Q2 2021 CD maturity event liquidity was deployed towards the end of the
Slide 27: Non-GAAP Pre-Tax Pre-Provision Income
27 NON-GAAP PRE-TAX PRE-PROVISION INCOME ($ in thousands) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Net interest income, as reported 40,161 40,898 51,363 62,301 69,950 71,462 Less PPP loan interest income - 3,317 4,403 4,269 3,567 3,201 Less loan deferred fees & costs amortized into interest i
Slide 28: Capital & Liquidity
28 CAPITAL & LIQUIDITY $1.26 $2.66 $2.01 Government Guaranteed2 vs. Non-Government Guaranteed Assets (as adjusted to exclude PPP activities) billion billion billion Cash & Investments Government Eligible for Sale Guaranteed Loans Government (excl. PPP)1 Guaranteed Loans 2 53.3% 12.5% 19.4% Cash, Inv
Slide 29: Tier 1 Leverage Impacts
29 TIER 1 LEVERAGE IMPACTS 1 2 2 1 1.) Direct impact to earnings from PPP-related activities, including loan fee recognition and interest income as well as funding implications. Average PPP loan balance exclusion from capital ratios dependent on average balance pledged to Federal Reserve’s Payroll P
Slide 30: High Performing Bank Metrics
30 HIGH PERFORMING BANK METRICS Q1 2021 Trend Asset Size - $ 8.0 3.50% $ 7.0 $8.24 $8.42B ($ in billion) - 3.75% NIM 3.63% 3.81% Efficiency Ratio1 + 60% 40.7% 57.7% 1.75% + 1.25% ROA 3.0% 1.98% + 20% 15% ROE 18.6%2 41.3% 26.9% + 8.5% 10% Tier 1 Leverage 8.70% 8.50% Total loan and lease portfolio, 20
Slide 31: ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
31 ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 32: Appendix: Fintech Activities Impact on Consolidated Financials
Fintech Activities Impact on Consolidated Financials 32 APPENDIX ($ in thousands) Actuals for the quarter ended June 30, 2021 Banking Activities Apiture Live Oak Ventures Canapi Advisors Fintech Activities Other Consolidated, as reported Net interest income $ 71,839 $ - $ 3 $ 4 $ 7 $ (384) $ 71,462
Slide 33: Total Assets, Reconciliation to Reported Balances
33 APPENDIX Total Assets, Reconciliation to Reported Balances ©2021 Live Oak Banking Company. All rights reserved. Member FDIC. Equal Housing Lender.
Slide 34: Reconciliation of Non-GAAP Items to Reported Balances
Reconciliation of non-GAAP items to reported balances 34 APPENDIX ($ in thousands) Net interest income, as reported Less PPP loan interest income Less loan deferred fees & costs amortized into interest income, net Q1 2020 40,161 - - Q2 2020 40,898 3,317 5,380 Q3 2020 51,363 4,403 9,183 Q4 2020 62,30
Slide 35: Efficiency Ratio Reconciliation
35 APPENDIX ($ in thousands) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Efficiency Ratio Noninterest Expense 49,491 48,100 42,650 52,435 58,272 57,558 Net Interest Income 40,161 40,898 51,363 62,301 69,950 71,462 Noninterest Income 5,742 22,411 47,044 10,803 31,057 70,111 Less: gain (loss) on s
Slide 36: Deposits COF Breakdown
DEPOSITS COF BREAKDOWN 36 Deposits Direct Cost of Funds Three months ended June 30, 2021 ($ in Thousands) Interest $ 14,820 Personnel 888 Travel & Entertainment 0 Marketing Expense 115 Professional Services 186 Technology Expense 245 Other Expense 50 Total Direct Deposit Expenses $ 16,304 Average De