First quarter 2020 summary ECONOMIC POSITION Past 12 months SMALL BUSINESS MIDDLE MARKET Optimism flat Increased optimism Decreased profits Increased prices & sales Decreased hiring & capital expenditures Increased capital expenditures ECONOMIC OUTLOOK Next 12 months Increased confidence Increased confidence Increased prices, sales & profit expectations Increased prices, sales & profit expectations Increased cash reserve expectations; Flat hiring, cash reserve & capital expenditure expectations Decreased hiring & capital expenditure expectations CREDIT OUTLOOK Decreased need but increased expected need for bank loans Decreased need & expected need for bank loans Flat demand for additional credit Decreased demand for additional credit Increased expectations to apply for additional credit Increased expectations to apply for additional credit 2 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Business confidence fluctuation with major events FINANCIAL CONDITION Next 12 months net difference Trump elected Private sector jobs return to pre- Trade Housing market recession levels Low oil & Income tax tensions hits bottom gas prices rate cuts Stock market Unemployment hits record peaks high Tariffs announced Government Brexit Polarizing shutdown Health 35-day gov’t election care bill shutdown passes Stimulus Dodd- S&P 500 package Frank & reaches new passes CPA act enabled high 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Middle market ($10MM-<$500MM) Small business ($100K-<$10MM) Q: During the next 12 months, do you expect your company’s overall financial condition to… BusinessPulse Quarterly Trending Data (1 st quarter) 3 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
U.S. economy confidence fluctuation with major events U.S. ECONOMY CONDITION Next 12 months net difference Tariffs announced Trade Private sector jobs tensions Income tax return to pre- Trump rate cuts Housing market recession levels Low oil & elected hits bottom gas prices Stock market Brexit hits record high 35-day gov’t Polarizing shutdown election Government shutdown S&P 500 reaches new high 0% Net difference 2012 2013 2014 2015 2016 2017 2018 2019 2020 Middle market ($10MM-<$500MM) Small business ($100K-<$10MM) Q: During the next 12 months, do you expect the U.S. economy to… BusinessPulse Quarterly Trending Data (1 st quarter) 4 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Most are not expecting a recession within the next two years EXPECTED YEAR NEXT RECESSION WILL BEGIN SMALL BUSINESS MIDDLE MARKET ($100K-<$10MM) ($10MM-<$500MM) 8% 12% 2020 2021 30% 61% 30% 58% After 2021 Q: When do you anticipate the U.S. will begin another economic recession? BusinessPulse First Quarter 2020 Data 5 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
1 Retrospective economic position 6 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Small business past-looking perceptions of overall financial was higher than middle market for the first time FINANCIAL CONDITION 60% Past 12 months 47% 44% 39% 38% 35% 40% 37% 32% 25% 26% 27% 25% 20% 29% (improve – deteriorate) Net difference 16% 7% 14% 0% -20% -19% -17% -30% Small business ($100K-<$10MM) -40% Middle market ($10MM-<$500MM) -60% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q: During the last 12 months, did your company’s overall financial condition… BusinessPulse Quarterly Trending Data (1 st quarter) 7 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Small business net difference change from the first quarter of 2019 (past 12 months) Total small Micro business Small enterprise Business banking business market ($100K-<$500K) ($500K-<$2.5MM) ($2.5MM-<$10MM) 12% Overall financial condition 12% 14% 5% 2% Prices 0% 14% 5% 4% Sales 5% 2% -1% -11% Profits -14% 4% -6% 5% Full-time employees 6% 5% -2% -1% Capital expenditures -2% 6% 3% -4% Excess cash reserves -9% 10% 9% = change <5% = change 5%-10% = change 11%-15% Q: During the last 12 months, did your company’s… $100K-<$10MM = change 16%+ BusinessPulse Quarterly Trending Data (1 st quarter) 8 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Sales and price increases have likely impacted perceptions of overall financial condition SMALL BUSINESS PRICES, SALES & PROFITS Decreased Past 12 months 2% Increased 100% 33% +31% Net difference Prices 75% (increased – decreased) 50% Decreased (increased – decreased) 18% Net difference 25% Increased 44% +26% Net difference Sales 0% (increased – decreased) -25% Decreased -50% 21% Increased Prices 30% Sales -75% +9% Net difference Profits (increased – decreased) Profits after taxes -100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q: During the last 12 months, did your company’s… $100K-<$10MM BusinessPulse Quarterly Trending Data (1 st quarter) 9 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
While still relatively low, capital expenditures have increased in the first quarter of 2020 SMALL BUSINESS HIRING, CAPITAL EXPENDITURES & CASH RESERVES Decreased Increased Past 12 months 6% 9% 100% Full-time +3% Net difference employees 75% (increased – decreased) 50% Decreased (increased – decreased) 15% Increased Net difference 25% 23% Capital +8% Net difference 0% expenditures (increased – decreased) -25% Decreased Increased -50% 20% Full-time employees 19% Capital expenditures Excess -75% <1% Net difference cash Excess cash reserves (increased – decreased) reserves -100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q: During the last 12 months, did your company’s… $100K-<$10MM BusinessPulse Quarterly Trending Data (1 st quarter) 10 10 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Middle market net difference change from the first quarter of 2019 (past 12 months) Total middle Commercial banking Corporate banking market ($10MM-<$50MM) ($50MM-<$500MM) 2% Overall financial condition -1% 11% 4% Prices 4% 4% 2% Sales 2% 3% -3% Profits -5% 6% 3% Full-time employees 2% -5% -12% Capital expenditures -13% -9% 7% Excess cash reserves 4% 17% = change <5% = change 5%-10% = change 11%-15% Q: During the last 12 months, did your company’s… $10MM-<$500MM = change 16%+ BusinessPulse Quarterly Trending Data (1 st quarter) 11 11 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Middle market profits decreased after an uptick at the end of 2019 MIDDLE MARKET PRICES, SALES & PROFITS Decreased Past 12 months 6% Increased 42% 100% +36% Net difference Prices (increased – decreased) 75% 50% Decreased Increased 19% 56% (increased – decreased) 25% Net difference +37% Net difference Sales 0% (increased – decreased) -25% Decreased Increased -50% 28% 42% Sales +14% Net difference Profits -75% (increased – decreased) Prices Profits after taxes -100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q: During the last 12 months, did your company’s… $10MM-<$500MM BusinessPulse Quarterly Trending Data (1 st quarter) 12 12 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Middle market net difference hiring ticked down after a high point in the fourth quarter of 2019 MIDDLE MARKET HIRING, CAPITAL EXPENDITURES & CASH RESERVES Decreased Past 12 months 12% Increased 36% 100% Full-time +24% Net difference employees (increased – decreased) 75% 50% Increased Decreased (increased – decreased) 32% 16% Net difference 25% Capital +16% Net difference expenditures 0% (increased – decreased) -25% Decreased Increased 19% -50% 34% Full-time employees Excess +15% Net difference Capital expenditures cash -75% (increased – decreased) Excess cash reserves reserves -100% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q: During the last 12 months, did your company’s… $10MM-<$500MM BusinessPulse Quarterly Trending Data (1 st quarter) 13 13 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
2 Future economic outlook 14 14 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
Small business and middle market financial condition confidence improved FINANCIAL CONDITION Next 12 months 70% 63% 61% 59% 56% 53% 50% 50% 43% 40% 43% 40% 31% 38% 30% 27% (improve – deteriorate) 11% 26% Net difference 19% 10% 5% -10% -30% Middle market ($10MM-<$500MM) Small business ($100K-<$10MM) -50% -70% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q: During the next 12 months, do you expect your company’s overall financial condition to… BusinessPulse Quarterly Trending Data (1 st quarter) 15 15 Powered by BARLOW RESEARCH ASSOCIATES, INC . Live Oak BusinessPulse
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