LOB - Earnings call transcript Q3 2021 | Live Oak Bancshares, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Q3 Live Oak Bancshares Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.

We will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

conference being this reminder, a call recorded. is As conference your Live host, would Bancshares. now Seward, to the like of I Greg over General Oak Counsel Sir, please go ahead.

Gregory Seward

XXXX to Thank Oaks everyone. Good call. Welcome you. third morning, quarter earnings conference Live

to please and investor.liveoakbank.com that We being call call supporting on we today's over Internet will recorded. are presentation and the call, call is and the reference this review event the visit access materials our webcasting at calendar over the materials. live go our Internet website To and on the commentary for

available Our third quarter on earnings our release is also website.

the and that Information impact Mahan, may Before statements in actual filings undertake Chief statements now our of to the reconciliation reflect about and caution during referenced, update be results We from our any measures can GAAP of to the get call. also to will Factors detailed materials of and date to the you including over measures, SEC forward-looking that I filings. do financial call not uncertainties. make circumstances Officer. subject differ the call are materially may presentation we to Chip found this today's would measures arise commentary. to are materials non-GAAP accompanying after I Executive our or those today's turn risks in in forward-looking expectations events started, cause that call in SEC may and like our to and we that the Chairman

James Mahan

to good morning and Greg, all. Thanks,

we scratch only in entrepreneurial to our business being ability failed ever euphoria of Brett be kickoff if this would collectively. us that, of my first went morning acknowledge matched his and I to Caines. shortly. talk Losch, without this who today's excitement thinking over Brett's best My will been think? have that in I is and quarter is over about that with public itch business safety by soundness, for I and for For our With call since is this Tell responsible always and what you XX was the Steve, lending years you very preso, take BJ we I over remiss

Steven Smits

Thank our reports receiving you, support low and boring remains servicing our metrics credit historically government also, to charge-off our efforts, by strong low look And and quality financial Most all I'm strong that focus, evidenced our own their to to a we A borrowers haven't many borrowers. focused perspective, seen remain the thanks by credit diligent to from that accommodations payment rather we on levels. the without we're nonaccruals, from from classified and stabilized now very us. reserves payments servicing remain past appear encouraged Cash additional quarter relatively making and like are Chip. or we continue surprises. at, assets, dues,

fact, In borrowers we making all XX be today, deferral, have positive these of appear progress. only loans financial and on to

to time So but the the I'd credit the I'm that our optimistic ball. will portfolio, with strong. off guardedly certainly pleased eye the acknowledge now take is that I health remain I say remain of not

with focused. remain any and committed businesses be we'll come, prepared challenges deal to We remain these will quarters the we'll to in facing

Chip, credit again, although quarter very a boring solid So from slightly perspective.

James Mahan

go let's five. Michael, Steve. you, Thank boring. Like to Slide

$X you slightly will in more discussed did admit see And being operating this XXXX growth. that of our and acceleration A I I'd that of Huntley. leverage to Just BJ by branchless? caused What be unforeseen a production future? I what billion. does bank advantages coming. our are like it to growth before we the to year than we not few opening lending observations over on like look the ago, turn touch to

of number and look the from sold production loans originated, dramatically As has quarterly amount dollar a of business at our I or number increased. products

few a back. highlights Just looking

I'm So overall company. number and by a loans made production talk little the about of bit going to

This submit $XXX and quarter. million a then QX. million in and I jumped now million the the $XXX underwriters, in $XXX a about that massive as less about particularly, you parallel dropping there's in QX, what the loans underneath means in that, know, a $XXX historically, closers. XXXX, architect deal, is you of jumping of the XXX a to over million. a of Oak business about that And in have, numbers documents bank XXX quarter, same, QX, would And the So toughest job Live the quarter XXX SBA same closings manage $XXX QX. amount year, at to XXXX, we then and the $XXX we certainly each to was and QX, being that loans QX the to had we multiple And probably XXXX, billion lending, QX or $X.X SBA infrastructure and to loans million, And closer million time. the trying the and more pandemic at in is in

in Before going group. I about the excited punchline, on equally get lending to general I'm what's the

so So we great a year deal other the numbers and million, of of work. experience And with business This the of business is XXXX. hired SBA massive in paralleling banks XXXX, are outside the of this worth XXXX, of did in did XXX year-to-date a in million in we in $XXX far theory today. closed that verticality, from $XX group so XXX general and worth that We lending folks beginning $XXX XXXX again loans million million. amount we've of loans year, in $XXX

folks up PPP with in terms the actually is year this stayed The XXX hit result lending we the One of faced the ago, we in numbers. had then we we this. So XX/X, get area. euphoria, and

bench the customer build working XXX bank week, people the in and do we a At dedicated We every have day. days bench. that seven are to XX and treating going customer we like only want be the we a a not are of by increased to today, the our to today we not hours a end have day, XXX to do

in So I'm little trying expense get of way. BJ terms noninterest increases that in and to Huntley a runway

to -- thank So let's go you.

You're me, I mean thing the me, history. most ahead is Michael, six. of that's our this, in happened dramatic Slide to

So all noise look or times $XX about quarters, to three million five you all out of investments and $XX of quarter, back take the we're were and up down, now the we making if you six after that. noise about PPP, the million a

past the me kicking today. you to is So we're operating what the and of discuss leverage slide This key with is this made going to we in. of that the business investments in the

Let's go to the next slide.

and allowed our lead. maintain increase has All of that us to

several fiscal SBA in product now two over we X(a) Number the ending the XX, been, XXXX. last years, $X that billion the for have are stretching in We is one under $X.X September year to number for lead lender And country. billion.

and all will businesses what potentially banking, later a loans, prep, need It So our products allow Derraik never now, build and going which overused us but These that word bank. to than for that. all Finxact with is not way figure mean? our to, budgeting and more next-generation their become on payments, profits and buy to that, card more another across after business customers embedded is to make does Certainly, going digitize credit to customers but financial these again, of life to forecasting, both debit too not exciting than before Core. pay tax out all we how this? Where included, embedded banking, small reconciliation. Renato their are this imagined our verticals overused The a real small easier. years limited word, march

and us call with you it different and branch know let's these Tom this might So weekly First turn up bank our we of Many take advantage? Brown a What his about to all, how have no notch. differences CEOs. of on interviews prominent we is infrastructure.

Tom was branches He partner, Our last focus CEO signs. friend midsized differentiates bank writes, what of understands that businesses deck small Bank, community the its Zions the very in Harris well model activity declining. Canapi, knows is with Simmons, Limited in on and it is on Simmons week. Harris

several small XX% of prior activity transactions ago. of they transactions what he it be, still only was business X% quantified In Branch of just the what fact, levels. to used Consumer decline. but X% are years is are

at Slide went back going looked here. and it actually up. what's can see I nine, looking on and in So you eight

I into Today, branches country. the this day banking are XXX than in parallel of there traded. fundamentally see that July banks decline XX,XXX the were business in banks So the went there as on publicly that. those X,XXX And X, and can less about XXXX, you are today, of

So there have XX months. XX above the over past $X bank acquisitions billion been

it that. mean? in there, about So of It's so trillion consolidation. $X.X slide, than -- next But worth you what does that see more that

by part overcapacity We and is pitiful. are XX, service average negative, industry our customer ancient score The Fargo caused large massive in NPS with is poor technology. an Wells that's in industry

against every of anytime have banking In addition, zero business day amounts firms of soon Fintech up expectations the tee companies has that this attracted have in to from low-interest-rate profits environment. that venture capital incredibly enormous it

falters. next are system of Microsoft disruption answer M&A integration. in for that is believe the service causes years happens -- uncertainty, Microsoft war nervous. FUD, is overlapping ago in few used Back what the FUD, years operating term eliminate exactly our the the to industry problem the ranks customer and the Buy Apple, And many and the a between M&A door, So doubt. M&A. acquired called folks change and expenses. fear, Folks in bank culture

with to will we're small All believe for to safe BJ business nation's build and are for best premier API-first be the using and technology going And platform. do access We that out going business environment the show the the deposits of still how brightest small us you to haven bank above allows America. banking to day regulated that. Huntley the FDIC-insured cloud-native the to win the next-gen

William Losch

some call. on. context my asked Oak the ten, I what Good $X.XX Thanks, very thanks be Chip, am going today. of It's all Page and Chip. start exciting And have to a great doing Quickly, highlights earnings at on over as for quarter company. that diluted to of with with We've long-term that Live everybody. sure morning, we're not on better for here you I got for EPS. of could things first great,

year-over-year. More second driven third, adjusted growth PPNR Chip PPNR XX% earlier, growth XX% it importantly, quarter XX%, growth third, to adjusted about from to second from and by XX.X% revenue talked

performance. excellent So

here I that is framework our about see what would we'll talk call opportunity You'll today.

is to earnings got none. is lending there. can And highlights little factory product the building second technology which bit small verticality, out And building a what in model and really platform dedicated full-scale core talk innovation bank, a I'll we've Huntley, you building exciting to of our our out here, over some Chip engine optionality and about financial then businesses. to, to which customers serve side, referred see Our insights time, with the more investments our things that and and on are more

So starting talked hit some is where billion well. take we things at quality, to we're verticals, this excellent Page as wise. different we If on of businesses, building what quickly our PPP, XX, this $X.X on in And touch production. excellent hires, exciting third across all of second we'll the to new with about Steve broad-based business. is Lots exciting look environment. go highlights. that of our will deposits a strength net in in Finxact see talked our terms left quarter conversion deposit which of and the earnings course, we excluding loan side, lending from X% quarter, growth quarter performance credit you'll Again, about

You'll interest sheet adjusted income, costs. growth, growth, about, see up year-over-year talked growth the I the on lower quarter-to-quarter, PPNR net on balance XX% XX% plus deposit revenue with along the that

XX% expense is leverage growth. operating strong Our revenue X% growth quarter versus with linked

on adjusted and margin Our XXX basis, points points basis an XX at XX is basis year-over-year. up

at improvement of Taking that growth see adjusted in XX%. on performance sheet basis an this efficiency you Slide look is driving All balance continued on the at XX. can ratio a

talk very, to Here, pay PPP our on line and are you and as the X% growth share, loan at excuse lease minute. me. and PPP tangible see fund bottom, a growth, deposit that value quarter fourth Borrowings loan off. running very about per due growth excluding down, the continues and are growth support with importantly, a we'll liquidity the mostly assets linked downs PPP, book fund healthy retention, returns in down top-tier share healthy to line, growing that on strong And per loans year-over-year XX% portfolio, on basis most equity

Turning at XX.

excellent the what we again, to bit to And talk quarter, is of this which in leads billion favorable quarter to was, quarter. and All which Slide XX, the we on comparisons if banks. Slide about other XX, volume see move a an continued originations $X let's little another

as loans we and of see broadening XXXX government-guaranteed on percentage mix X(a) the about And SBA producing of can terms the right-hand see the were fifty-fifty You mix you'll the of split. a to from of side, QX a originated total conventional. a XXXX, in between percentage that

Moving would everyone. I thought be this to a Slide for XX. view great

looking what you're side. Just quickly here at the explain on left-hand

x-axis is our by year-to-date the On originations vertical. XXXX

exciting. types business, specialty all type finance businesses. bubbles large, the in verticals. very you'll and On those those represent it's and for outstandings portfolio whether businesses, of small the growth size types our what our broad-based three colors the banking, lending growth of is conventional across the is see energy origination infrastructure different or are And more the origination is y-axis, And verticals. notice year-over-year businesses, The the what which it's of

different want. businesses the quality. muted also seen notice So positive of the bottom industries we're that's in We'll COVID credit have all of mix growth, impacted very in for types portfolio left, we seeing that and and growth the

XX. to Slide Turning

You'll growth is look quarter, production very, continues balances combined the our earnings in our in loan the see Deposit loans that engine very to in shift from ups on XX. trends customer the loan remains growth, opportunity X% In portfolio first existing originations excluding of different with our our up waterfall originations Slide and takeaways how meaning and as with deposit the chart, X.X% of fund loan had A net loan And so to savings right, decline again strong strong. engine the any our even our support our here, PPP, we prepayments outstandings. portfolio favorable on continues good our account highlights is and you buckets show with couple a PPP. mix Key CDs. growth. offset four the very at the other growth and before bottom sales our significant retention if importantly, the which the are savings sales PPP changes

we Our fourth, XX our Chip efficient talked very in deposits that efficient net Revenue over expansion, XX, of is the that adjusted cost the net the few continued sheet speaking mix interest are of strong expansion. kind very our from that XX. margin deposit relatively our from linked last of reduction branchless is of quarter basis that deposit demonstrates costs those driving growth; and have balance delivering you to platform. points of both and and lower yields to on margin you'll margin in XX Page basis on basis quarters funds that shift point see growth this improvement performance expense noninterest sales. very And cost interest stable a turn model, improvement bottom, XX the trends if loan year-over-year. Again, Slide gain well low about enabling plus point in

that the on QX sale. premiums in to so And on and risk or quarter, third the to board You'll were premiums pressure we fixed Expense opportunities SBA did half going and the very with adjusted the reduce on are see XX. of some that have quarter. X/X of about forward, see Slide gains sold eligible fixed comfortable across in lower also our loans sale but with so Those we for find right, healthy that the continue sales in portfolio, the is lock our about third premiums rate there sold we on flexibility bottom to feel we'll at trends versus XX% some books. we the became in

will continue us is our will expense credit to, make is capital. earlier credit those continue credit efficient. As our growth I about our revenue thing the some Steve board. invest metrics reserves XX continue referred here with outpacing very, talked the more that hit trends will that so won't positive to very company on wrapping more our allow Chip Slide talked you have strong but metrics and to across to growth, about, here quality on hire, to technology up XX but And which Slide we we in he

if You any at very portfolio XX.X% higher over of call capital can look coverage right, out than times portion of remain the our ratios other bank. is our bubble and our the see strong unguaranteed you in the upper we two

So very portfolio our strength the to the our obviously relative unmatched our balance makes comfortable capital with industry and unguaranteed plus sheet across reserves of us is which our strength. that

So with that, stop it Huntley. will and I to over turn

Huntley Garriott

Thanks, BJ, and call. onboard glad earnings you to for your first have

be the of significant a like ways. that a financial Chip Page keep of performance future, number you XX, would it highlights the the On foreseeable and on in was quarter, If both could for BJ one touched but terrific. of some this

of notable lending billion as continue quarter to additional We a the billion this enhancements nation's expansion infrastructure the bring road few our a lead we'll across we're capabilities across small to X(a) exciting. energy these $X in the reached consecutive checking savings new platform, as excellent really the feel map deposit second are XXX in we're setting immediate for on to category, excited and for now to platform. and really our business which started, and roughly experience continue an for this milestones like quarter, attention loans, fourth customer conversion the business for organization. the customers, the and we $X XX,XXX quarter, business servicing from front, in receive booking small talk our deposits customer year all billion our accounts the over adding to completed new and and $X loan on turn new to business cumulative production in We're their of XXX our row, lending we over now launch excel lender incredibly we loan well cross leader things that crossing is couple quarter our as retaining we Greenwich, though, a We we have SBA survey on folks deposits proud about about in award in accomplishments, related Despite just and getting that our this minutes. and

is talked On like balance loan businesses to to industry next the the products specific small a in serve small create year Chip horizon, product verticals our and and ability about. innovate

and our extraordinarily high Slide and domain components, company of the across small fortune and of high-touch, continuing for on platform the technology talent people this investing and next-generation innovative the to By we good business our The services technology with great employees. stack, industries. a to who customers top are and roots our the banking a deep retain customers deliver complementary has products in and had XX, for our So serve two tech. building in well. We've expertise attract ability have

creates teammates great So us here that at do. And the allow great a of that to which on. what serve paired is folks want part that better we're self-reinforcing our great customers of so tools and feedback the journey all be this end to with day attract more loop to a

excited continue to really that. about be we So

referenced the new been on with. on talking Finxact that and about of allows for anchored we've in years working Page technology industry a Chip that really So us and struggle lot we've by core been platform innovate a XX and the to ways now cloud-based it's

long an bank, it a would or you'll something or a time to features products that we've as If how add groan architecture ask new new vendor for launch product the gives ability we really it But you get new were market speed takes and to both ourselves. scale eye flexibility them, company have costs. roll create a a rapidly a take on and for platform, lower Cloud-based and to because financial to our the at traditional technology existing long to products. us to to experienced next-generation a

fueled monitoring, helps place gives not with and Our further is help in positions with all with all provide to industry. account, ability the better such The build financial payments areas and the financial the transaction multiple reduces data us in in platform partners to ability across of venture as with finally, on which digital the customer rich allows going many system us to their work, keep with open connect That to enhances change one gives a by take the them to capital out to legacy us best-in-class our the real-time, also siloed decisions. the insights, innovations position, community. in the advantage customers, ecosystem understand of and a reconciliation lives And fintech our single coming fraud and their and pace architecture space, them systems. understand

Page into exceeded something happens turn experience, our to actually conversion I to us of XX, expectations incredible stats allows a but real-time for cetera. ability detail successful ever all XX,XXX banking, customer of accomplish platform If that in speed, won't our in terms the to you new flip that to to reconciliations this rarely us on go accuracy, helped data the multiple these access teammates for accounts have in for establish switch seamlessly. on platform this testing environments et

or they've or pay companies and go we extremely done them. innovate way We all willing of are a an and an customers we costs. So along to invented what have two that well. more our and have that lot in help but spend quickly later, that leveraged stack out think access small necessarily that modern one capabilities encapsulates a are of understands and have and allows needs, to this management of last deep lot all technology them believe want, new, capital, these of now before team faster come all possess better few and identified time a they online a built incredible and management, out of Neobanks There them, data their showed a lot them to with about capabilities with slide we problems target in-house, listening point A digital to anything these actionable business customer insights, expense this customers, digital we experience. think payroll slide tools, those of these to have payments early lot of our allows understanding they've integrated to acquisition digital marketing buying that years the in solutions to and haven't

and beginning better are and excited cases journey live, We expect and customer to verticals, are over to accounts, the revenue platform this at embed our on our within participation in emerging. product as capital we of to time, through that ahead we're space first I'm our bank costs, this not industry gains, operating those costs Neil capital result just fuel the us attrition use to creates opportunity the to lower streams just driving markets through about to that the opportunity and opportunity front, On about customers, the right as capitalize for with continue new in venture innovate. lending Over we financial it experience build we growth, acquisition for deposit how and this lower going to but intellectual even to our map. continue rates our turn our lower talk

Neil Underwood

Thank super to and you. you, aboard, welcome have Huntley, BJ,

and amazing in companies happening all And costs amounts statements oversimplify massive that all best-in-class are of with it's at this, seeing about to customer and but into metrics, this income using those on I are of We must that and hundreds and of fintech, lifetime banks. macro start. for and right like the my on to pretty them bank-friendly, with acquisition about customer this of of the bank-friendly from what's search of into of heard the have off And falls I the value into categories those acquisition these, marketing tune first, we two into the think but passionate the compete going look it's optimizing going these it's view, start tuning amount directly R&D, continually directly capital the valuation cloud-native the it in to and and and just going this that's are millions. way. API tend costs, first, it. customers, chart, and That's Let's and it fintech the get going capital all why latter, both to been

tell the Ventures, bank good sure, the stack, by been think, then them some invested in slide. that of years And I'm we way, as of quite the story, to Oak over using how $XXX in of projects Canapi that thousands spent evolution knows next define Oak early. you Live evolution Fund investing the They're Oak between either the now, the this capital, thousands combining Live the II. but best, everybody Oak like and implementation, nCino we the find mean ABA, the or mission to the slide then on on that referring Live by ICBA. at I fintech manor and is, help fintech it's we embodies fintech we've under of to Bank, kind, resolution much companies, a time, three for to companies banks, that's win. over can intend at revolutionize when in in formal launch Moving I active and of more million We Live to been tech the we're the mission logos under ultimately became implement software companies, the or continue Live was last listed in the Bank. only we its This again, ultimate service lost Oak further XX Ventures incubated competition we in if Canapi, use big emission and a work The first bold, combing Bank. the of fund entire we will the live which, Any you an

slide. to on next the Moving

incubate carrying Oak strategic these has certainly the original investment through if Companies aggregate continue. were lens. view meaningful trends amount, You've quarters, to the And we value in the seen priced value and these the seen it as time financial intent saw, an before, value, this and you've this at a a shows was company Live benefit impact, will The the down of of over but previous Ventures hope last the while round. in some slide, recent economic for companies breaking

So to with Q&A. that you could said, or else Mr. open we from Chairman, anything up

James Mahan

open Q&A. to it Let's up

Operator

Instructions]. [Operator

from line of question from Steven Our comes Alexopoulos first JPMorgan. the

Steven Alexopoulos

could so as what you better in excited in terms could than you Chip asked -- quarters morning, you understand everyone. down see Hey, kicked $X of were guys there start expected? you we're us now originations? have stay this better wanted do the the on terms And when said think drill quarter this call, And and good coming you feel of that I do welcome. call two we you you so is second, I you Chip, I -- to we above to can last team the BJ, in for originations, now billion, you can coming exactly think loan like as we so off above didn't but I know even there the

James Mahan

just to really ask Steve, I I forward questions, that were knew you some going did.

United okay. States for year It's the you Subsidies I government and but of and pick give in team couple know, that us BPS, How Huntley government, predict through think a will behalf has customer early space next I Huntley, up on XX to weigh the it's what to as mentioned in. the one? would XX% don't it the the helped. we the X(a) and guarantee mean picking the certainly, with that's helped -- little then earlier. feels Steve usually I a has helped, things, go up

Huntley Garriott

on what that sort I happened agree, momentum I I of is sometimes last the brands feeds solid XX feels think and of that. success part and that really Look, months mean over our

in. referral customers, until work so fair well some with, that and sources, we amount small work with time them things serve for PPP we we and we worked we're of the so referrals are a now we of word-of-mouth these spend did, And getting coming associations business

small see et I cetera. and of quite veterinarian, are health think aging macro we business space, industries that relates owners to around it in the around the that care, M&A trends still population some as macro positive trends

good as So like all of those feel continuing grow, feel some pipeline space as people good we're comes. still now of to as kind right, it right to and solid feels we attract it that SBA away we we're taking think it I see the Chip's relates and going but enhancements may really in so headwind

James Mahan

And thing. one other

cut, Carolina, we used North so any plus Oak years bill, factoring would extending we'll be night, in make this back go not don't probably As $X.X guarantee enhancements Live that sitting to, of of future. the Wilmington, the table that. into other what to Bank around is XX% at that reconciliation I last in five and the thinks think right, anyone we'll for the trillion were

Steven Alexopoulos

that's And I about chip, ask wanted to Okay, expenses. helpful.

one You an build runway. a point, mentioned BJ, viewpoint? Like at thinking we bigger the be what little and need more that you giving What for us? to a mean from expense does Huntley bench should growth and

James Mahan

don't to sure, day when for our want and volume and killed Sunday, going trying day not only working volume we they're more XX customer just need at best months massive to BJ, that They because a want this that do to Steve, to customer if and and build that, I make just home do double like every they and I we you, continue, PPP people I try they very probably we're bench months. Saturday have hours three to spent up will X:XX, to out the their want the do wake trying every help I to last staying -- that. the a every we not of -- spending the going That's really and just business, XX all treat night, that. up

gets expense, that how noninterest that's Now up BJ, you. into to

William Losch

say linked expense We right? quarter, look what Steve, revenue so, quarter XX% just at would this had is I X% growth. on growth Yeah

investment versus making fourth Chip lender technology heavy support, not underwriter like weighted year. much the lender in next going We're our rollout right? checking I year-to-date think probably We in and platform, referred side. towards or just lender investments likely Finxact, that of ticket in technology more had revenue even closer the but more, hires to expense kind to about There's continued continued on it the support, said. should coming of small quarter, continue, be enhancements, than itself lending servicing lender was XX% loan Huntley

continue journey a up is out to but upwards. revenue, So build commensurate with steady we continue go expenses that to be to will continues be to so trend on climb the PPNR our expectation on a platform

James Mahan

thing one right, issue, just other quick And this on Steve.

bringing Huntley, you on by have banks want them not verticality. in think closers, of going future, are that's of I may ahead other of the to that going And get part underwriters just came So the that we with us. terms we're lenders affect that or that that XX the theory of to comment -- because from are infrastructure now in to

Huntley Garriott

to those support to have because think, just of the little credit, I a we scrambled to I I them, great see, Yeah, as you'll them Chip, mean flip then in so tended that along order we'll these incremental experienced with bit we're and that and grow lenders provide still underwriting bench hire going opportunity closing had great behind finding success the and strategy. and to on then we've layer start people that see think, we business, we continue that,

Steven Alexopoulos

That's verticals? then of going across initially this that's more final Or verticals? question the will helpful. is broadly quarter, this this a in out on coming select checking And the be all launch pilot

Huntley Garriott

for start. in a employees, is I'll we've we be our small will be that on. yet, for layer won't Yes, already that vertical-specific will it capabilities product launch place that I the that planned. pilot now is mean, a businesses, so we'll got has What enhancements and base

we'll product, base small businesses, product for broadly think, be time. applicable the over to more and will I start specific good then very get a So

Steven Alexopoulos

haven't with tested internal? clients Okay but Huntley, you just this yet

Huntley Garriott

right. That's

Operator

Thank you.

from comes question the next Our Jennifer line of from Demba Truist Securities.

Jennifer Demba

you, Thank morning. good

$X seeing October, your up let see what pipeline you're of could quarter? today billion Steve's quarter So fourth in questions. follow in and on origination on you me another one you think do Based

James Mahan

at Hard point this I to say would Jennifer. but close, say

pretty good. that You people is but certainly, business I'll on are acknowledge (inaudible), relentless

Jennifer Demba

the evolves the on infrastructure, business there versus XX, think you later? energy Chip, specialty small breakdown And look mix come do to when types those and and loan at are And three? lending have you time, over you Slide of how lending other Okay. more

Steven Smits

Okay, take Jennifer, I'll that.

really across opportunities three. see all we think good I

fastest bit I business think two. great had the small run trying going to think weighting out exactly the to a bit and a side grow figure so see one a the is we've tricky, to on to little more is other which I you continue could

have these in of renewable started there kind to it white finance And businesses energy, the continue we some massive so think really like to as opportunity of well. and we're a all we've a getting space tailwinds just feels to then run. And lot just grow to have specialty given of I continue

Jennifer Demba

And question and final up? Okay. funds see you net do about just income interest when for start what is go the my on net -- you BJ, can Fed to margin interest talk

William Losch

Jennifer. Sure,

climb the growth NII think going production incrementally loan of XX% think over funds near-term pretty income to pretty are particularly the on then as our So as we good and maybe others, interest net to but levered margin do going could down. and stable sensitive term pretty the cost have portfolio the of also, all net and loan continue we benefit loan spreads that about is of the side, materially, next are continued from shorter deposit trickle curve. but to think deposit as quarter obviously from to the continues two still move those two, we we on I things, side, higher. asset is obviously, not continue over end near the Longer-term, do well, to In declines to cost the or this adding

as start be will interest net of will we in to income rates rise improvement by some So volume. our increases modest see driven but more

Operator

you. Thank

next Our from from the comes Perito question KBW. line of Michael

Michael Perito

Canapi the -- for guys minute could a I curious refreshing if mean wanted raise, four how those us flow bit in pretty those a these alloy gains so example, through September we actually as probably write-ups up on their maybe C, statement? curious moving types Series refresh get sizable the quarter $XXX or how I'm imagine the on and just income companies on have line valuation was on around sight investments For you gains that Live Series spend maybe consolidated flow debenture that B of of think Led valuations. I completed ownership. in if just sure I'm saw they I a times I little morning, there's in that million a raise third can the Oaks start I as thanks through of kind that us Hey more you taking questions. I question I of just you some good forward investments, had my guys, pretty was to

Neil Underwood

a million important to as which a and mark at to direct think is start it I'll compared time clarity, that investments, and look then live to much all we carry. it's fund are Yeah, on fees Ventures, BJ $XX is to And for And fund, at in turn a Oak also I up. turn market-to-market but Canapi the there's going director but income and Live to that more a I Live but management it we're over a invested have, indeed Bank subject smaller importantly, Oak every flows there's which to more would it think, clean as also that I'm than impact investment. Oak over through to you but raise, Ventures

William Losch

will those it, Canapi, that's got as equity said, and method., stake and -- in through. flow investor and in equity then, And a are are method those we've as Neil investments The And for you much and in our anything a to it that marked start variety impact realized, fund an that we size got their investment are time Neal. given so just of be No, venture's will of get more then and the fees way some may some us in security are some market-to-market things have so the our value itself. but through once the well. performance smaller over flow fund

Michael Perito

it. Got

where majority is would actual greenlight something Ventures. the like less held So than something in the alloy, far the financials Live be within like impact felt Oak

William Losch

right. that's Yep,

Michael Perito

in lot is I and think I that launch growth sure mean, on cost -- about like and but it a pretty made just of of mean, pressures for then unique you it guys helpful. you factored talent? core is would I around sense, new just door, to of harder and guess, side, guys in. I of sure curious, a at mean, And that bringing putting amount kind right way mean, I the a pretty the have I little bench, more I'm better of color lack maybe on these it, add right? have curious guys volume a I mean, few find process it quite culture. just fairly the being make be Perfect. to are the the the bit logical the that of sticklers and makes how mean, just a people. the of the hires, wage to you're sounds I -- already to you've you is had

William Losch

and great want So It about work got competitive market., a so I'll to stuff, have go here no no they and folks trying to is question technology there's ones is wherever try be the especially to they it. convince kind join it, to see best it, fun to true folks it's sure, take we've of options a of is to where but there, and there's ton competitive. facets, very how Renato all can we're a find every and includes doubt and competitive, and bunch build us like what go out of about includes compensation what treat actually folks doing in side. day and recruit too. people, and I it the other that's competitive that we in And very, mission out want, we in to can in work the And come others to think we're

Neil Underwood

I bringing their Yes, just problem couple may well. to and recently it's you that. know searches I has -- done senior foresee an comment Renato, with future reasonably want for of lenders with people gone problem organization, do nor your extension them not being the of seemingly infrastructure in staff Hiring you've other a them. a on that in that been a

Renato Derraik

is There to of folks about which having also fintech, us culture well. incredibly future architecture, are who with special. place dialogues of the makes excitement access state incredibly this Yes, amount the it the and from incredible

across fortifying are announced industry, that space including an will some and all the So technology our continuing be in talent build capabilities really to issues no at attracting had incredible we soon. and

Neil Underwood

North people talent remember and could you'll tell attract when Michael, to technology hell like, we Carolina. Yeah, started nCino, way years that Wilmington, you there's no ago used in me,

I nCino something going so think right. people town X,XXX is today across has

Michael Perito

growth. BJ, likely to full PPP about earlier model correct? an leverage we quarters a year will wanted leverage Is that I step it efficiency revenues I back -- answer next and last, forward to be how mean, Functionally, positive outpace just next the I then though, clarify here, to there step an right, down the handful from the operating And in growth moving the kind year question hopefully saying as should in that, of revenue after ratio just way, that up will expense think boosted just back of though, guess, another operating XXXX? the I mean, before trending the

William Losch

Yes.

looking we've it gross I yes. is had PPP benefit at and the that yes, answer if on think you're if there, the a basis, the with you will,

got of that in then we discerning, be like hiring investment that increases side, to cover a the we've from On what is of the kind on and think, sheet, portfolio it put have all talked balance that sales, income on we've that can because more technology. and about, production should than the and expenses flexibility we pick for eligible net adjusted expansion, there's we relates in basis, shoes I on on already still bit gain growth so interest bit of as do more quite margin sale there's the a little of

sense. I for So several for the Got Makes supportive continuing our quarters. incredibly to pay growth think is expense helpful engine revenue and the next it. over

Operator

you. Thank

Chris of Piper comes question next Sandler. Our from Donat the from line

Christopher Donat

for phrases question quarters to Is Good to little might quality, I'm the another able relax any Steve coming there macro -- while? boring out the morning, to a credit just used and here for and but point not where appreciate sell-side asking forward-looking here. really be the not tough our and to in going of about a situation, going eyes Chip, bit? One the with pandemic questions analyst taking be ball. the woods off think taking everyone, is you a it's you you the the relax Or be

Steven Smits

not not and do supply to need relax This to we're I we we'll we that's be proactive we need focus so. ask on My on never never to chain, environment, we train we'll it. Chip, is pulse aware point and borrowers, will have us, good folks that right we and and take we questions, worked to as ball, they're what's fully with try on complacent, the is to to Steve, to so our successful focus be on very the react doing, inflation, our paid for I'm our won't. -- how we Chris, to and need We're we and to focus a can. can been as I need work that continue so political spike the borrowers

type really think from when than front much last think hit. over So that more again, just has -- a for And better that going first lot good decade of the thought that we're have placed and to portfolio forward and might we've we'll away us in really, be what works us. place, we shy of may I built the I I continue the to a than do pandemic would challenges won't or do with first not in a

Christopher Donat

all that. you other just supply into recent chain about, with developments how one. Can originations concerns, with pandemic? the certainly Slide origination the And you inflation When what year-on-year I XX loan Okay. up graphic filter on origination then, on Steve, beyond that must just look to the talk it year-to-date more about comment like at and the growth. just does Does concerns, follow

Steven Smits

a comments. make couple Yeah, I'll of

well. our a various so all, that, of model's expertise domain is pressures those on tool however, on manage our risk manage about industries tolerance also of has them. participations, to also, what's and facing can where as I'll and based areas front of see these First inroads, risk in comment We years over expand to making there, in of us through powerful incredibly good lot very we've a put you our so we it us really a housing, good incredibly make risk that in XX% in been you at of for do senior gives and investments look that powerful us, the control the look you that through we're can growing areas. allows contract we pulse those what close to Also, the very also which many us very middle-market a successful in and participations give capacity businesses at

Operator

Thank you.

Raymond James. question comes from the from next Our William Wallace of line

William Wallace

maybe about to comments press taking we that think the I release, talked try If investments the like my expense on some just T&E put made Hi, just for et thanks questioning. in of question, a in about to the you cetera. people, believe you to of line bow starting about kind normalize,

from So efficiency two an some the expense we about ratio rate continued think there say, current pressures a any If leverage. interest half just about where environment year growth trend help efficiency next could think but maybe in years? revenue to, us driving and to operating perspective, it

Steven Smits

PPNR growth continue to ratio know XX% generate can you we right? of aside an minus let's things, So and of trending inherently revenues improve. third to And think spend and put If going types going to sit just runoff been kind less growth. as PPNR of ratio and $X on efficiency adjusted to those we at and in PPP where strong our about all is basis, given which that's simply quarter down expenses, make a the just we're kind efficiency is

to think would earnings So time move down about hundred a I we over that the over and points build our here. next couple of continue continue as even quarters, in basis to longer-term can goal further down couple it that the trend

William Wallace

there's trended just of the of bit, pressure quarter-to-date? correct? at how about made premiums case, couple I'm about Okay, And ended if can a the been thank correct on have loan a -- there's beginning wrong, under bit little that's you, quarter, that's this helpful. the little incentives premiums comments then if you a talk sales me And the

Steven Smits

going in really going the points really they're started work quarter longer of of change rate different the premiums what did third in maybe premiums and off August, mid-quarter historically fixed-rate a it USDA we quarter to bit forward. bit opportunistic a the advantage little really little a change, this in more take to to premiums at side to saw more Yes, terms to we different basis so for a bit take books. of be but a between lower mix we premiums, products of in so little look see little to actually sell higher the risk bit interest be to on on XXX quarter the looking of this balance, started and XXX and and We'll to with FDA

trends and it we all and premium particularly to going the how and going be spots to as that to pressure inventory SBA out are of premiums of and reintroduction we to the our than say and So we've but flexibility that's with got ability dealer of our to going helpful secondary to continue on sell, under really the be what's have in the there, going us. relates this better insights industry because again, so fees market, is to that the SBA arguably excess year-end, guaranteed portfolio in on anybody and the when in it's pick the

William Wallace

just of was. think provide going to is that question, larger any testing with my you wondering just you had And Okay, XX several on stats banks. the how conversion how last if the slide, us then Slide around updates a I I'm could thank successful with gave Finxact you. beta it's some the

James Mahan

think Frank going would don't pretty you, to it's wants know Neil. much disclose. don't well, how I I

Neil Underwood

of sharing, this XX and for momentum he's that implementation fit. that's just as while in bank the point, I got the would It you meaningful I a with velocity bodes over Oak but well done and old company product-market the conversion happy be right and actually has first think Yeah the banks inflection the is live having now. think from their chore Live a

Operator

Mahan At for closing time, to I like showing remarks. you. to the I'm Thank back this call turn over would questions. Chip further no

James Mahan

you, Thank see today's days. questions and you join we in enjoy ma'am, and we XX the call, we'll

Operator

call. Thank you today's concludes participating. for This conference

now may disconnect. You

Live Oak Bancshares (LOB) 29 Oct 212021 Q3 Earnings call transcript