Good day, ladies and gentlemen, and welcome to the First Quarter 2021 Live Oak Bancshares Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Greg Seward, General Counsel of Live Oak Bancshares. You may begin.

Thank you. Good morning, everyone. Welcome to Live Oak's First Quarter of 2021 Earnings Conference Call. We are webcasting live over the Internet and this call is being recorded. To access the call over the Internet and review the presentation materials and commentary that we will reference on the call, please visit our website at investor.liveoakbank.com and go to today's call on our Event Calendar for supporting materials. Our first quarter earnings release is also available on our website. Before we get started, I would like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from our expectations are detailed in the materials accompanying this call and in our SEC filings. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arrive after the date of today's call. Information about any non-GAAP financial measures referenced, including reconciliation of those measures to GAAP measures can also be found in our SEC filings and in the presentation materials and commentary. I will now turn the call over to Chip Mahan, our Chairman and Chief Executive Officer.

Thanks, Greg. And good morning and welcome to our Q1 earnings call. As you can see from the agenda before you, we are kicking off today's call with a tribute to our Co-Founder, Kel Landis, who passed away on January 2. Your Board proudly created the Kel Landis Student Excellence Fund at his beloved University of North Carolina Kenan-Flagler Business School. We love you, Kel. Some things never change. Once again, Huntley and I will attempt to unpack a healthy and yes noisy quarter. As I try to put myself in your position as to what really matters as the pandemic and government assistance to small businesses winds down, Steve Smits and I are going to discuss the COVID effect on our customer base and a brief look ahead. We shall then turn our attention to Q1 loan originations and what loan growth looks like for the rest of the year as most other banks report a decline in loans outstanding and net interest margins. Trust me, that is not our challenge. Neil Underwood will provide a brief update on Live Oak Venture investments as well as what he sees through his Canapi lens. Lastly, back to the noise, before I turn it over to Huntley for greater detail, I'm going to focus on the metric that means the most to me, the core earnings of this business, which is a brief examination of our pre-tax pre-provision income. So Steve, just about a year ago, the world was pretty bleak. And as I recall, you and your colleagues were predicting potential dire circumstances and maybe even losses of over $100 million. You quickly moved to isolate six of our verticals and disclosed that the current state of play in each quarter. Two questions for you. Number one, what losses have we taken from the COVID 6? And secondly, what have been the COVID losses in the rest of the bank?

Thank you, Chip. Yes, there certainly was a great deal of uncertainty. I was probably in the $34 million loss expectation in the early days, but today, we've taken $11.6 million in charges related to COVID. However $9.8 million of that was related to our hotel markdown. So if you exclude the hotels, we've charged off $1.7 million in loans that are directly a result of COVID stress. And of that, $1.2 million was in the COVID 6 industries and only $600,000 has been in the non-COVID industry. I do think it's important to note however that we've already reserved an additional $5 million on top of that for loans that were impacted by COVID. They may ultimately turn into charge-offs, but we're working very closely with them. We've also reserved another $10.8 million for loans that are experiencing some level of stress due to COVID, but I'm pretty cautiously optimistic as they are trending favorably today, so the expectation is we can avoid losses on most of this.

So, Steve, clearly, we will be adding reserves for growth. But what does your crystal ball say about charge-offs for the rest of the year?

Well, businesses still are not completely out of the woods and we do need to be prepared for potential surprises. Based on what I know today, I'm expecting charge-offs for the remainder of the year to be more reflective of pre-COVID levels. As I mentioned, we continue to work with borrowers still experiencing stress due to COVID, but at the same time, we're seeing a notable gain in credit quality across the rest of our portfolio. Many businesses are actually stronger today than they were pre-COVID and that's thanks in large part to the government programs.

So Steve, our reserve plus fair value mark on our total held for investment unguaranteed loan portfolio was right at $70 million at the end of the quarter or 2.6% of unguaranteed loans down slightly from year-end to 3%. How do you look at reserves post-COVID?

So Chip, I see reserves trending towards pre-COVID period levels as a percentage of loans and then barring any surprises, I'd expect that we'll see that trend over the next several quarters.

So two of your verticals in the COVID 6, the restaurants and wine and craft beverage may get assistance from the Restaurant Rehabilitation Fund as administered by the Small Business Administration. It's my understanding that there is a pool out there of about $28 million for both restaurants and related businesses. We've heard that the calculation that goes something like this. 2019 revenues less 2020 revenues less PPP 1.0, less PPP 2.0, equals grant money. How do you see that?

So if the program funds remain available, there is a small number of our most impacted restaurant bars that actually will see really significant benefits from the program. Now, the good news is that our portfolio in our quick-serve restaurants have actually fared really well, thanks to their delivery and their drive-through services. They may not even need a grant. Now, with regards to our wine and craft borrowers, this program can be very meaningful to our really our smallest breweries who have historically relied pretty heavily on on-site sales in tap rooms, for example. So again, barring funds being available for the program, we're pretty optimistic that our most in-need borrowers can see a significant benefit from this program.

So let's move on to the site visit slide. Thank you, Micah. There it is. I call this our stand by our customer slide. We try to treat every customer like the only customer in the bank. And when you're in a jam, we're going to be there for you. So the support Steve's lack of charge-offs through the pandemic in the last four months, we made in the pandemic 121 site visits to these folks and the losses predicted, as Steve just did, are rather de minimis. So when you know this mess outright, we generated about $100 million in fees including spread income from PPP, and the losses were just like we discussed. So, let's move on to the next slide. Let's focus on originations and growth. So how did it go first quarter? So we did originate and closed $1.180 billion in loans, $672 million was non-PPP, $508 million was PPP. So that reconciles the $1.180 billion. In addition to that, so far in the month of April, we've closed another $280 million. So $280 million plus $672 million gives us the $952 million for the year, which is just about $1 billion. And if you add the $508 million in PPP, that gets you to $1.460 billion or about $1.5 billion. Things are good. Moving on to the next slide. So we rarely do this and we're not going to disclose actual dollars from that, but what you have here is a bifurcation of our pipe. So proposal to underwriting is the blue and credit approval to closing is the green. Both are up 60% year-over-year. Just another word, I had the wonderful circumstance yesterday afternoon to spend about an hour with our closers. And to say that we're burning the midnight oil and attempting to keep up with this volume and treat every customer like the only customer in the bank would be an understatement. I also had the chance to visually zoom in and meet six new closers. And another six new are coming on in the middle of May. So in the last couple of quarters, we've added five lending officers, 13 underwriters, 25 closers, 16 servicers for a total of 59. So when the business is there, we're going to go get it. Moving on to the next slide. This is our diversification slide and the trend continues. One of these quarters we're going to make loans in all 50 states, 45 ain't too bad for 90 days. And it looks like that our new verticals after 2017 are gaining on our legacy verticals late at $280 million versus almost $400 million by the legacy verticals. Neil, talk to us about investments inside the holding company and some of these valuations that you're seeing at Canapi, brother.

Well, certainly, touch on it in a bit. But first on out, like you just stated, only to say that things are tracking nicely and a lot of the Ventures portfolio, most importantly, the software is actually really working. We've had for years, as you guys know, Huntley will give you the Live Oak Bank update, but in terms of the companies themselves, they are experiencing greater market adoption, net new logos with larger annual contract values. Cloud-based and API first are proving themselves out, offering better customer experiences, more optimal economics, really lowering the total cost of ownership. All these companies continue to raise capital at appreciating values. In fact, two of these companies you see in the state are in a raise currently. As a reminder, the thesis of Live Oak Bancshares was to leverage the collective R&D budgets of all of these companies, re-architecting bank infrastructure, which we all know is many decades old. Equity appreciation is certainly nice that's secondary to our first - to being first out with the new cloud-based tech. Switching gears to Canapi, last quarter we finally closed out the fund totaling $660 million with 40 bank LPs, the ABA and the ICBA. And the thesis of working here as well as we continue to win deals away from blue-chip Silicon Valley venture funds. Most notably in Q1, we led $130 million-rounded Notarize alongside CapitalG, which as you know it's Google's venture arm. Notarize digitizes the notary workflow bringing gig economy notaries together with large enterprises and their clients. What is even bigger than that in our view, we think of Notarize as the Uber of trusts. In terms of the market, we are indeed gypsying this massive valuations, it's super frothy out there. One thing that we're able to do though is actually invest at good valuations, given our limited partner base for the 40 banks, the ICBA and ABA and that's super exciting to us. We're able to get access to good deals where maybe others won't. We're also able to wedge ourselves in where there is not a formal round, we can actually go in, and given our LP base, so strategic, create around and create an event. And again, just back to Live Oak, how Canapi affects Live Oak. In our role at Canapi, we define success by surfacing the best in fintech and sharing with the Live Oak product teams. Economics are also very real in the fund structure, but they too are secondary. Huntley, over to you.

No, I got one more slide, Neil, but that's a good job, buddy.

Oh, over to you.

Yes, yes. So my last slide. It is my most important slide and I'm going to attempt to make a case that the $24 million of pre-tax pre-provision income in Q1 really ought to be closer to the $30 million. And you know, Huntley, I was thinking about this earlier today. I have been in this business almost 50 years, 48 years, and I am convinced myself that you almost have to be a Certified Public Accountant to actually understand a bank income statement. So I'm going to read something that Jennifer Demba wrote last night, talking about $3 million of the $6 million of adjustments that I'm recommending that you focus on. She says, "As of Q1 2021, Live Oak will not elect fair value for the unguaranteed retained portion of all new government guaranteed loans sold. This decision reduces volatility and drives more predictable revenue for LOB. Under the fair value option, the unguaranteed retained portion is revalued each quarter. Therefore, the legacy portfolio of loans at fair value will remain subject to quarterly fair value adjustments. Not electing fair value generally results in a larger discount on the retained loan portion and decreasing net gain on sale revenue. The discount is subsequently accreted into interest income over the remaining life of the loan." To many, that will sound like gobbledygook. Let me see if I can unpack that. In relatively good times, we say we can sell a loan for about $100,000 per million. Under this new change, that $100,000 will go to $20,000. And the $20,000 will be accreted into income over the life of the loan or if prepaid accreted instantly. So you can change your forecast by that amount over the entire portfolio going forward. This gives us, as Jennifer says, more predictable earnings. For the quarter, that was about $3 million. So if we recorded like we historically recorded, that $24 million would be $27 million. The other $3 million are legal fees, which are non-recurring, we certainly hope, in the not-too-distant future relative to a previously disclosed lawsuit. And here to really drill down on all those details is our President, Huntley Garriott.

Thanks, Chip. Before we get into the numbers, I want to spend just a minute on what's been and continues to be a pretty intense last year for our small business customers, all of our employees and the communities that we serve more broadly. Our focus has been and will remain to take care of those customers, to take care of our people, and to try to serve as an agent of change in those communities. So the areas of focus are the same, as Chip said, hopefully, we're emerging from this pandemic and we're all looking forward to some easier times, but we continue to stay focused. So on the balance sheet on page 13, the overall growth trends remain really strong. Loans - loan growth up 33% year-over-year, excluding PPP. 5.5% linked quarter, driven by the strong loan originations that Chip referenced coupled with slower prepayment speeds as borrowers enjoyed some of the additional subsidies from the SBA. The eligible-for-sale portfolio continue to build, although at a bit of a more measured pace than last year. On the income side, overall with provision down, fair value is moving in the right direction and the tailwind from PPP, the headline earnings number of $0.88 feels really solid. Breaking down those key drivers, we talked about loan origination. When you combine that with NIM expansionthat drove strong growth in net interest income, both year-over-year and linked quarter. Net gain on sale was impacted by the change in accounting that we're going to talk about, and expenses are up with a few unusual items that we'll unpack as well. Bottom line, the adjusted pre-tax pre-provision earnings number ex PPP, as Chip referenced, up over 35% year-over-year, down a bit from Q4, but that still feels really good. And the growth rate…

Let's do it.

[Operator Instructions] Your first question comes from Jennifer Demba with Truist Securities.

I've got a few questions. Number one, Chip and Huntley, what do you see as the biggest risks to your budget and earnings expectations in '21 right now?

The biggest risk to our internal budget that you haven't seen.

I mean, I would start and say prepayment speeds have been really favorable. And if we see a big spike in that in the back half of the year, that will move some of the fair value numbers around. And that's - again the budget numbers, that also could reduce the growth of the balance sheet a little bit. But that's maybe the one that's a little bit out of our control. But that would be the one that I think where that I look at, but you want to, Chip?

I would say just examining the pipeline and originations, we still feel really good about what we told you last, $3 billion to $3.1 billion. And Steve, I've probably been with 40 customers the last 90 days. And I reaffirm what you say, it just - it doesn't seem like there are many big credit surprises out there to Jennifer's question. I think we're pretty much steady as she goes. You really did scrape. Yes.

I agree.

Okay. Can you give us an update on where the lawsuit stand that you referenced in the press release?

Yes, Jennifer, it's Huntley. We put out the disclosure that we got and that's sort of all the update we got right now.

Okay. All right. In terms of legal fees, do you have any thoughts on what the legal fees might be for the rest of the year?

We'd always like to have lots of them.

Okay. Last question, the deposits continue to reprice down. How do you think about positioning the funding base for a different rate environment where certain funds are higher in the current funding mix is not as favorable for Live Oak?

Yes, look, that is why we're so laser-focused on building out a checking account and operating accounts, because we know that they have real advantages in a rising and higher rate environment. So we love what we're funding with now. And our goal is to be building out those checking accounts and operating accounts, so that if and when that cycle turns, we can capture that advantage.

Do you have any specific targets like, I want to - you want to get to X amount by the end of next year or something like that to share with us or can you give us any detail there?

I think that's too early right now to do any of that.

Yes.

We've said that we don't think it's going to have a lot of financial impact this year and we still stand by that. But if we get that right, if we start to look into next year, well, I think we can give some targets. As we look at our plan for next year, we still don't have that in there, and we still think that we've got a really solid sort of operating model, but we can start to give more detail on our expectations as that - as we get closer in the year.

Okay, great. And you did a great job giving the filing information I think we need and the slide deck and in your monologues. Thanks.

Thanks, Jennifer.

Your next question comes from Michael Perito with KBW.

Hey, good morning, everybody. Thanks for taking my questions. Chip, like you, I'm a bit more of a plain English guy, so I was wondering if I could maybe just hash through a couple of these items to make sure I'm thinking about them the right way. And I wanted to start - so I mean, is it correct to assume that given the change on the fair value, I mean, on the incremental gain on sale, your margins are going to move down over the course of the balance of this year and then eventually sell down at a lower rate. Is that directionally correct or am I misinterpreting what's going to happen?

I'm so excited that for the first time in over a year that Brett Caines is standing next to me to answer that question, six feet away.

Hey, Mike. Yes, I think as we look going forward, it's going to look more similar to Q1. So if you take what you saw in 2020, probably in Q3 and Q4 of 2020, and as Chip mentioned, about a 20% reduction in gain on sale revenue given this accounting election that we've decided to make, that's probably a good forward way to look at it. I will reiterate what Huntley said, the secondary market right now is our premiums being paid are very, very favorable. And I think they're probably at an all-time high right now. So of course, the market impact which we cannot predict, that comes down, that was like more of a change downward compared to Q1. But just in a steady market, just the accounting election change is about a 20% drop in the expected revenue on gain on sale.

We should have probably done this before, Michael. I mean, this is kind of like son of servicing asset reval, servicing at reval, down $9 million one quarter, up $5 million in the next. That's why we started holding a bunch of these loans. We've leveled in these loans. This is the same thing. We probably should have done it some time ago to give you more predictability.

And then again just to reiterate, we do get all of those cash flows back over the life of the loan. And on booking the retained piece, probably about 100 basis points on average of incremental loan yield on that retained piece. So it's not an insignificant benefit over time in the net interest income line.

Got it. So - and that there is income benefit to the margin over the life of the loan, near term, the big gain on sale margins will be more indicative of the first quarter than the back half of last year from an accounting perspective and then we'll have to make considerations for the environment and the demand for secondary loan sales over the course of the future. That seems to be the general gist?

You nailed it? Yes.

Okay. And then on the cost side, I was wondering, first, if you maybe could just talk a little bit about the pipeline for additional kind of renewable energy investments. And then maybe just spend a second to talk about kind of some of the risk factors we should be thinking about as you guys, I imagine, consider to do more of these? Is it any noticeably different than a typical tax credit type situation or anything else unique we should be thinking about?

Yes. So our - when we think about it, we want to - given the geography of the income statement, we'll be mindful of sort of capacity to do these relative to taxable income. That also drives the timing with which that you can recognize and that drives the IRR. So we'll do - maybe we can give you a bit more color about sort of capacity, but I think, think of it in the context of what we did in this situation relative to our taxable income. So we'll continue to look to do a little bit on a programmatic basis. Nothing and I don't have any giant spikes, but we'll try to continue to do something similar to this. And they can be a bit lumpy. These projects take a while to get together. So close one in one quarter, one in the next quarter, maybe a little bit lumpy. We're going to try to avoid that. From a credit perspective, Steve, you can pile in. We like these projects from a repayment perspective. The project needs to stay operational in order to secure the tax benefits from the program. So your real risk is that you can't operate the program and we've been in the business long enough to feel comfortable that even if something were to happen with an operator, you can find another operator and keep the lights on. So, but I don't know, Steve, on the credit side, do you have any thoughts?

You're exactly right. It - our experience in this space is incredibly important. We've learned a great deal over the years. We've refined our servicing. We have the proper controls in place. So we feel pretty comfortable that we can identify good projects, learn from those projects in order to make smart investments on that side of the equation. So that all comes together.

Brett, do you have anything to add, brother?

Yes, I would say, Mike, as you're thinking about and all of you, as you're thinking about modeling in these type Fed investments, probably the simplest way to think about it is take a look at what you're forecasting for pre-tax income. And our investments right all for the probably around 10% of that number and then that helps us target a tax rate kind of in the mid-teens.

Got it. That's helpful. So that to take that all on the costs side, right, so I think, Huntley, you mentioned the adjusted - I think it was $53 million, obviously, there is still some elevated legal fees and that $53 million, that could hopefully drop off as the year progresses here. But then next quarter, there'll be some additional small hit on the RSUs on top of that $53 million. And then potentially in the back half of the year at some point, there could be some more impairment related to any additional renewable projects that, that could also possibly come in. Is that generally fair? Is there anything else significant beyond that, that you would highlight?

I think that feels good. Brett, do you…

Yes, I think you nailed it.

Okay. And then just what about growth rate, right? Because I feel like there is a dynamic here that obviously you guys are building platforms that are scalable and you're trying to leverage those economies of scale. But clearly there is, as you guys mentioned in your prepared remarks, there is a high need for investment as your bank grows significantly, right. So I mean, how should we think about kind of the cost growth dynamic as we think about adding talent and supporting growth, but also trying to leverage platforms that you built that are highly scalable?

Well, I'll tell you the way I look at it. Huntley, you can add to this, right, pretty simple. If we can grow the loan portfolio of 15% and EPS 15% year-over-year, that's our goal. Hopefully, we can beat that a little bit, but that's what we say internally and that's what we shoot for.

Yes, I think on a balance sheet revenue 15% to 20%. And then if we can keep the expense side closer to 10%, then we're creating significant operating leverage. So those are kind of metrics again it gets a little lumpy, and - but 15% plus on the balance sheet and revenue side, and 10% plus - and 10% on the expense side, feels like a pretty good - pretty good numbers.

Got it. Yes. No, I - the PPP isn't doing anyone any favors in terms of trying to model any of this out. But I appreciate all that commentary. Thank you, guys, for taking my questions.

Thank you, Michael.

Yep.

Your next question comes from Steven Alexopoulos with JPMorgan.

Good morning. This is Alex Lau on Steve - for Steve.

Hey, Alex.

Hey. On your loan originations ex PPP of $670 million per quarter, this was a drop from the prior two quarters from around the $900 million range. Do you have some color on what drove the lower originations or was it more of a timing thing?

It's more seasonal, Alex. That's what we tried to show in that slide. I can't remember the percentage we were up over last Q1. Q1s are a slow quarter. And we've made a little bit of a comeback and close to really large loan in April. But I think we're standing by what we said last quarter, $3 billion to $3.1 billion still feels pretty good. So you shouldn't view that the way you're viewing it, because Q1 is slow.

Yes.

Understood. And I'm sorry if I missed this, but can you give some color on the uptick in non-performers in the quarter? Thanks.

Yes, this is Steve. Several loans for which we've impaired over the quarter, but not anything significant. I mean, it was actually relatively small number of relationships. Most of them are tied into challenges that existed pre-COVID, where COVID just simply was not - didn't do them a favor. So, I put it in the category influenced by COVID, but had pre-existing challenges that we continue to work through.

Thank you. And just last one, can you talk about how you're marketing the checking accounts? And do you have a target or a sense of the growth potential for the year? Thank you.

Micah, do you want to talk about marketing, and then turn it over to Huntley since you're the marketing guy?

Yes. So our focus now is to build the pilot out and get the system stable and ready to go. So we don't have any definitive plans yet or definitive budget to market it, but we feel word-of-mouth will be really good and existing customers will definitely want to purchase.

We'll start there and then our ultimate goal is to leverage partners for distribution and product enhancements through embedded banking. And so, this platform is easily integratable into other software, vertical software in other partners. So that distribution channel ultimately will be our strategy, when, as Micah said, we're ready to hit the accelerator.

I think, Alex, too we are going to have an Investor Day when this pandemic goes away probably here in Wilmington, where we can describe to you as we've described to most of you in the past what all that means, what is the community [indiscernible] future. So we will March vertical by vertical to create a deposit experience embedded in what you need to operate your business from financial planning to credit books to tax to all these other things, practice management software in the platform. We've been working on for four years with Finxact in the middle that allows us to do that. Cloud-native API first, but that is not something that we can drill down on one question on our earnings call. That's why we're going to invite all you folks to Wilmington, when things settle down from this damn disease.

Thanks for all the color.

[Operator Instructions] Your next question comes from Chris Donat with Piper Sandler.

Chip, I wanted to review a bit of your - the dialogue you had with Steve on slide five and the site visits. I liked what I heard about guardedly optimistic, but also recognize still not out of the woods. Can you just give us a little color on how you think the world might look as some of the beneficial impacts from PPP and various stimulus programs fade over time? Like you were just talking about in the last question, there are some businesses that were challenged before the pandemic. I feel like there's going to be some cohort of businesses that really aren't able to bounce back robustly. But I don't know if that's going to mean much for your credit quality. So just trying to understand a bit how this unfolds for small businesses for credit quality as some of the help is withdrawn.

So I'll start, because of Steve has to stay back and plant himself at the door of the ball, then I get to fly around and meet with customers, particularly ones that are challenged. So I think the programs, Chris, have worked. And I think that our lending officers did a great job of picking folks that had eye of the tiger. Now, there were a couple that just gave up and threw us the keys, but there weren't many. And Steve basically alluded to the charge-offs earlier in his comments. So just simply put, with all this government money that's out there, the ones that want to fight are going to, I think, just be fine. I just don't see very many losses. I mean, whatever that total number you came up with a minute ago was de minimis compared to what we thought a year ago. And you may want to tag on to that.

The government programs are wonderful.

Yes.

At the same time, we cannot become complacent. So it's not lost on the significant percentage of our borrowers that were receiving subsidy payments, for example, from the government. We could become very complacent with the payments coming in and lose sight of really what's going on with that business. So I talk about the surprises. We will - how do we minimize the surprises, the throwing in the keys. We call them the subsidy riders. They're riding the subsidy payment, but their plan is to throw in the keys at the end after the government stops. So it's all about servicing to knowing your customer. We've talked about this in prior earnings calls. We put a stress mark on every one of our borrowers. As we sit today, 97% of the entire portfolio we have a stress mark. You can't put a stress mark unless you have talked to that customer, collected financial data, measured that financial data and assessed the stress. So we have a really good intel on how our borrowers are doing, which gives me great confidence. But I am aware that the March payment, 37% of our portfolio in terms of dollars had a subsidy payment made. One data point is our payments are the fifth of each month, so we felt really, really good that most burned off in April. In addition, we see that stress mark from high to medium to low trending towards low. And those are based on real numbers. So what matters what does your balance sheet look like? Have you made the right thing? Have you received government support? Has that wound up on the balance sheet to give you some cushion as you get back on your feet? What does your credit look like? What is your status with your vendors? So we think about, well, what's the next shoe to drop. It's going to be are you in arrears with your vendors? Do you have some past rent that you're going to have to make up with? What's your strategy? What's your 13-week burn rate? We're looking at all of those really diligently. So we've invested pretty heavily on our servicing to get as good a feel as we can about what our portfolio looks like going forward. There will be surprises. I've talked about it. That's why we've got reserved for that. Hopefully, it doesn't turn into losses. But we feel that we've done everything we possibly can do to have a good feel for the health of our portfolio at this time.

And I think the conclusion there, we'll stop talking here, as you know, we're just so unusual. We have plenty of capital, stated capital. And you got another $1.8 billion of government guaranteed loans and that's got a value of 150 plus million. You got all of Neil's Live Oak Ventures, that's another $150 million. And then basically the PPP numbers is close to $100 million as well, if you add up all the fees and the spread income, as I mentioned earlier in my comments, so we have a balance sheet that is way different than any other bank that you cover.

Got it, okay. Thanks for all the color there. And then sort of related issue here as we think about the future. Just the pace of PPP round two originations, it felt like you guys started a little slower than others. And looks - just wondering what you - how you're thinking about second quarter or at least through May 31 for PPP originations?

Yes, I think we've really focused, given everything else we have going on, on our existing customers in helping them through, and sort of got through that and are effectively done. I mean, there may be a few other little pieces that come, but effectively I think we served our customers that we could and feel good about that. So it was a big effort to stand that up again and in quite of the luxury of taking the entire company and turning towards it like we did a year ago. So - but I think for Q2 purposes, we're effectively - you shouldn't think about much new in the pipe.

Got it. Okay. Thanks very much, gentlemen.

Thanks, Chris.

All right. And I'm showing no further questions at this time. I will now like to turn the conference back to Chip Mahan, CEO.

Thank you, ma'am. And thanks to everyone for attending and we'll see in 90 days.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect.