Live Oak Bancshares, Inc. (NYSE:LOB) Q4 2022 Earnings Conference Call January 26, 2023 9:00 AM ET Company Participants Greg Seward - Chief Risk Officer and General Counsel James Mahan - Chairman and Chief Executive Officer William Losch - Chief Financial Officer Huntley Garriott - President Steve Smits - Chief Credit Officer Conference Call Participants Steven Alexopoulos - JPMorgan Crispin Love - Piper Sandler Michael Perito - KBW Operator Good day and thank you for standing by. Welcome to the Q4 2022 Li ...

0.00% 1.20% | --- | --- | --- | --- | --- | |---------------------------------------------------|-------------------------------|----------------------|---------------|--------------------| | $ in millions | Q4 HFI Unguaranteed Balance | Past Due >30 Days 1 | NonAccruals 2 | Net Charge Offs 3 | | Small Business Banking $2,616 0.71% 0.71% (0.08%) | | | | | | Specialty Finance $1,381 0.06% 0.29% 0.41% | | | | | | Energy & Infrastructure $599 —% 0.57% 0.34% | | | | | 1.00% 0.80% Funeral Home & Cemetery Governm ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of Live Oak Bancshares, Inc [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Live Oak Bancshares' unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flow statements [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets increased to $9.31 billion from $8.21 billion at year-end 2021, driven by a $1.32 billion increase in net loans and leases, funded by a $1.29 billion increase in total deposits, with shareholders' equity growing to $802.2 million despite a significant increase in accumulated other comprehensive loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$9,314,650** | **$8,213,393** | **$1,101,257** | | Net loans and leases | $6,775,091 | $5,457,678 | $1,317,413 | | Loans held for sale | $537,649 | $1,116,519 | ($578,870) | | **Total Liabilities** | **$8,512,482** | **$7,498,260** | **$1,014,222** | | Total deposits | $8,404,909 | $7,112,044 | $1,292,865 | | Borrowings | $35,616 | $318,289 | ($282,673) | | **Total Shareholders' Equity** | **$802,168** | **$715,133** | **$87,035** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For Q3 2022, net income increased to $42.9 million from $33.8 million in Q3 2021, driven by higher equity method investment income and net interest income, with nine-month net income rising to $174.4 million from $136.8 million year-over-year primarily due to increased equity method investment income Key Income Statement Data (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $83,886 | $77,735 | $241,599 | $219,147 | | Provision for credit losses | $14,169 | $4,319 | $21,272 | $11,292 | | Total Noninterest Income | $57,724 | $25,276 | $218,921 | $126,444 | | Total Noninterest Expense | $83,048 | $55,459 | $229,641 | $171,289 | | **Net Income** | **$42,868** | **$33,839** | **$174,416** | **$136,848** | | **Diluted EPS** | **$0.96** | **$0.76** | **$3.88** | **$3.05** | - Equity method investments income was a major driver of performance, recording income of **$29.1 million** in Q3 2022 and **$146.1 million** for the first nine months of 2022, compared to losses in the same periods of 2021[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q3 2022 was $6.9 million, a significant decrease from $28.8 million in Q3 2021, and for the nine-month period, it was $77.2 million, down from $123.4 million year-over-year, driven by a substantial other comprehensive loss of $97.2 million from net unrealized losses on investment securities Comprehensive Income Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $42,868 | $33,839 | $174,416 | $136,848 | | Other comprehensive loss, net of tax | ($35,959) | ($5,058) | ($97,188) | ($13,442) | | **Total Comprehensive Income** | **$6,909** | **$28,781** | **$77,228** | **$123,406** | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased from $715.1 million at the end of 2021 to $802.2 million at September 30, 2022, primarily driven by $174.4 million in net income, partially offset by a $97.2 million other comprehensive loss and $3.9 million in cash dividends - For the nine months ended September 30, 2022, shareholders' equity increased by **$87.1 million**, driven by net income of **$174.4 million** and restricted stock compensation of **$14.2 million**, offset by an other comprehensive loss of **$97.2 million** and cash dividends of **$3.9 million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2022, net cash provided by operating activities was $98.3 million, a significant improvement from a use of $134.2 million in the prior year period, with investing activities using $903.2 million and financing activities providing $1.0 billion, resulting in a net increase in cash and cash equivalents of $199.6 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided (used) by operating activities | $98,328 | ($134,208) | | Net cash (used) provided by investing activities | ($903,217) | $48,059 | | Net cash provided by financing activities | $1,004,509 | $114,863 | | **Net increase in cash and cash equivalents** | **$199,620** | **$28,714** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies and financial results, covering the loan portfolio, fair value measurements, securities holdings, servicing assets, borrowings, and segment reporting [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for Q3 and the first nine months of 2022, highlighting increased net income driven by fintech investment gains, offset by higher credit loss provisions, operating expenses, and lower loan sale gains - Net income for Q3 2022 was **$42.9 million**, up from **$33.8 million** in Q3 2021, and for the first nine months of 2022, net income was **$174.4 million**, up from **$136.8 million** in the prior year period[146](index=146&type=chunk)[149](index=149&type=chunk) - The increase in net income was largely driven by a **$30.4 million** increase in equity method investment income in Q3 2022 (from a **$28.4 million** gain on the sale of Payrailz) and a **$150.8 million** increase for the nine-month period (including a **$120.5 million** gain on the sale of Finxact)[147](index=147&type=chunk)[150](index=150&type=chunk) - Offsetting factors included an increased provision for loan and lease credit losses (**$9.9 million** higher in Q3 YoY), decreased net gains on sales of loans (**$9.6 million** lower in Q3 YoY), and higher noninterest expense (**$27.6 million** higher in Q3 YoY)[149](index=149&type=chunk)[150](index=150&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) The company's results were significantly impacted by its Fintech segment, with a $150.8 million increase in equity method investment income from Finxact and Payrailz sales driving profitability, despite a $42.0 million decrease in equity security investment gains and a 34.1% rise in noninterest expenses Key Performance Drivers - Nine Months 2022 vs 2021 | Metric | YTD 2022 | YTD 2021 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $241.6M | $219.1M | +10.2% | | Provision for Credit Losses | $21.3M | $11.3M | +88.4% | | Equity Method Investments Income | $146.1M | ($4.7M) | +$150.8M | | Equity Security Investments Gains | $2.5M | $44.5M | -94.4% | | Net Gains on Sales of Loans | $35.9M | $47.0M | -23.7% | | Noninterest Expense | $229.6M | $171.3M | +34.1% | [Financial Condition](index=58&type=section&id=Financial%20Condition) Total assets grew by $1.10 billion (13.4%) to $9.31 billion at September 30, 2022, primarily fueled by a $1.33 billion increase in loans and leases held for investment, funded by $1.29 billion in deposit growth, while borrowings decreased and shareholders' equity increased despite an unrealized investment portfolio loss - A transfer of **$754.7 million** in loans from held for sale to held for investment occurred in Q3 2022, driven by management's intent to hold loans longer in the current rising rate environment[201](index=201&type=chunk) - Loans and leases held for investment increased by **$1.33 billion** (**24.1%**) in the first nine months of 2022[202](index=202&type=chunk) - Total deposits increased by **$1.29 billion** (**18.2%**) to fund asset growth[204](index=204&type=chunk) [Asset Quality](index=58&type=section&id=Asset%20Quality) Asset quality metrics showed mixed results, with total nonperforming assets and TDRs (excluding fair value loans) increasing by $27.8 million to $108.0 million, while the allowance for credit losses grew to $78.3 million due to loan growth and macroeconomic changes Nonperforming Assets and TDRs (excluding fair value loans, in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Nonaccrual loans and leases | $60,064 | $42,533 | | Total performing TDRs | $46,804 | $37,063 | | **Total nonperforming assets and TDRs** | **$108,046** | **$80,216** | | Unguaranteed exposure of NPA & TDRs | $42,727 | $37,000 | - The allowance for credit losses (ACL) increased by **$14.7 million** to **$78.3 million** at September 30, 2022, driven by loan growth, charge-off experience, loan reclassifications, and macroeconomic changes[223](index=223&type=chunk) [Capital](index=63&type=section&id=Capital) The company maintained strong capital levels, with all regulatory capital ratios remaining well in excess of 'well capitalized' requirements, including a consolidated Common Equity Tier 1 (CET1) capital ratio of 13.16% and a Total Capital ratio of 14.36% as of September 30, 2022 Regulatory Capital Ratios (Consolidated) | Ratio | Sep 30, 2022 | Dec 31, 2021 | Minimum Requirement | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 13.16% | 12.38% | 4.50% | | Tier 1 Capital | 13.16% | 12.38% | 6.00% | | Total Capital | 14.36% | 13.53% | 8.00% | [Quantitative and Qualitative Disclosures about Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk through its Asset/Liability Committee, using EVE and NII simulation models, with the balance sheet being asset-sensitive, expecting NII to increase in a rising rate environment, though EVE analysis shows a theoretical market value loss - The company's balance sheet is asset-sensitive, with a total cumulative one-year gap of **5.2%** as of September 30, 2022[230](index=230&type=chunk)[242](index=242&type=chunk) Interest Rate Sensitivity Analysis (as of Sep 30, 2022) | Basis Point Change | Estimated % Change in NII (12 Months) | Estimated % Change in EVE | | :--- | :--- | :--- | | +300 | +7.2% | (17.8)% | | +200 | +4.8% | (11.6)% | | +100 | +2.4% | (5.6)% | | -100 | (2.4)% | +5.2% | [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022[250](index=250&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of 2022[251](index=251&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2022, the company reports no material pending legal proceedings - Management states that as of September 30, 2022, there are no material pending legal proceedings against the company or its subsidiaries[254](index=254&type=chunk) [Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes in risk factors were reported compared to the 2021 Form 10-K[255](index=255&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board of Directors authorized a stock repurchase program of up to $50 million, effective from May 17, 2022, through December 31, 2023, with no shares repurchased as of September 30, 2022 - A **$50 million** stock repurchase program was authorized in May 2022, but no shares have been purchased as of the end of Q3 2022[256](index=256&type=chunk) [Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None [Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=69&type=section&id=Item%205.%20Other%20Information) None [Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including certifications by the CEO and CFO and interactive data files

| --- | --- | --- | |------------------------------------------------------------------|-------|-------| | | | | | THIRD QUARTER 2022 | | | | ©2022 Live Oak Bancshares. All rights reserved. October 27, 2022 | | | 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 ...

Financial Data and Key Metrics Changes - Earnings per share for Q3 2022 were $0.96, driven by strong net interest income and loan growth, with net interest margin at $3.84, declining just 5 basis points from the previous quarter despite 150 basis points of rate hikes [15][20] - Net interest income grew 26% year-over-year, with loan growth at 23%, and total revenue increased by 12% year-over-year [16][20] - Adjusted PPNR was up 21% due to strong net interest income growth and higher fee income [18] Business Line Data and Key Metrics Changes - Loan production reached $1 billion, with pipelines near all-time highs and credit quality remaining strong [16][20] - The average charge-off ratio for the company is significantly lower than the industry average, with 66% of loans originated under the SBA 7(a) program [12] - The company has seen diverse loan originations across various verticals, particularly in established sectors like agriculture and newer sectors like SBA General Lending [22] Market Data and Key Metrics Changes - The company reported that 43% of its total loan portfolio is government guaranteed, contributing to low nonaccruals and past dues [25] - The sentiment among small businesses has deteriorated, with many expecting a slowdown, yet the company's current credit performance remains strong [28][30] Company Strategy and Development Direction - The company emphasizes the importance of capital management in a potentially declining economy, focusing on maintaining a strong balance sheet [5][6] - Plans to enhance the lending platform and technology infrastructure, including a new loan origination platform to improve efficiency [34][37] - The company aims to expand its addressable market by offering working capital products and deposits to small businesses [29][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertainty in the economic environment but expresses confidence in the company's ability to navigate challenges and capitalize on opportunities [6][13] - The company anticipates that as the Fed's rate hikes stabilize, net interest margins will also stabilize and potentially improve [45][46] - Management remains vigilant regarding credit quality and is proactively engaging with existing customers to mitigate risks [25] Other Important Information - The company has invested $52 million in fintech companies since 2015, yielding significant returns and contributing to non-dilutive capital generation [11] - The company is excited about the recent launch of its checking account product, which has seen rapid customer acquisition [35] Q&A Session Summary Question: Cost of deposits and funding sources - Management indicated that deposit costs are expected to rise as the Fed continues its tightening cycle, with a mix of funding coming from both online savings and CDs [41][44] Question: Expectations for net interest margin (NIM) - Management expects NIM to stabilize at the higher end of the previously discussed range, with potential for modest increases in 2023 [45][46] Question: Venture portfolio valuations - Management expressed confidence in the current valuations of their venture portfolio, citing strong investor support and the quality of the companies involved [48][49] Question: Business checking account growth - The company reported an average balance of $5,000 to $10,000 across its new checking accounts, with plans to target larger businesses with treasury management capabilities in the future [54][56] Question: Noninterest-bearing deposit mix - Management anticipates a modest increase in the noninterest-bearing deposit mix, with significant growth expected over the next five years [59][60]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number: 001-37497 LIVE OAK BANCSHARES, INC. (Exact name of registrant as specified in its charter) | North Carolina | | | 26-4596286 | | | --- | --- ...

Live Oak Bancshares, Inc. (NYSE:LOB) Q2 202 Earnings Conference Call July 28, 2022 9:00 AM ET Company Participants Greg Seward - Chief Risk Officer and General Counsel Chip Mahan - Chairman and Chief Executive Officer William Losch - Chief Financial Officer Huntley Garriott - President Micah Davis - Chief Marketing Officer Conference Call Participants Steven Alexopoulos - JP Morgan Crispin Love - Piper Sandler Jennifer Demba - Truist Securities Operator Good day and thank you for standing by. Welcome to the ...

| --- | --- | --- | --- | |---------------------|-------|-------|-------| | | | | | | SECOND QUARTER 2022 | | | | 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 usually can be identified by the use of forward-looking terminology such as "may," "will," "would ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number: 001-37497 LIVE OAK BANCSHARES, INC. (Exact name of registrant as specified in its charter) | North Carolina 26-4596286 | | --- | | (State or ...

Live Oak Bancshares, Inc. (NYSE:LOB) Q1 2022 Earnings Conference Call April 28, 2022 9:00 AM ET Company Participants Greg Seward – General Counsel Chip Mahan – Chairman and Chief Executive Officer William Losch – Chief Financial Officer Huntley Garriott – President Renato Derraik – Chief Information and Digital Officer Steve Smits – Chief Credit Officer Conference Call Participants Steven Alexopoulos – JPMorgan Crispin Love – Piper Sandler Michael Perito – KBW Jennifer Demba – Truist Securities Operator Goo ...