Live Oak Bancshares Q4 Earnings Call Highlights
by Danessa Lincoln · The Markets DailyLive Oak Bancshares (NYSE:LOB) highlighted record loan production, strong year-over-year growth and improved operating leverage during its fourth-quarter 2025 earnings call, while also addressing credit trends, margin expectations in a declining-rate environment and progress in two strategic initiatives: Business Checking and the Live Oak Express small-dollar SBA product.
Management points to record production and operating leverage
President B.J. Losch said 2025 featured a “busy and potentially distracting backdrop,” citing macro uncertainty, late-year Federal Reserve rate cuts and an ongoing small business credit cycle. Despite that environment, he said the company delivered record loan production and meaningful growth across several metrics.
Losch pointed to highlights that included record loan production, 17% loan growth, 27% core pre-provision net revenue (PP&R) growth, 17% revenue growth and 13% tangible book value growth. He also emphasized a two-year increase in loan production, describing 57% growth across the company’s small business and commercial lending groups and “strong pipelines heading into 2026.”
Chief Financial Officer Walt Pritchard said the fourth quarter “produced $44 million in net income and $0.95 of earnings per share,” which he said were roughly three times the prior-year quarter. He attributed results to growth and profitability improvement, a fourth consecutive quarter of lower-to-stable provision expense, and $28 million of net gains in the company’s venture investment portfolio, including a $24 million gain related to the Apiture sale.
Loan and deposit growth, with checking a key focus
Live Oak reported fourth-quarter loan production of $1.6 billion, capping a company record $6.2 billion for 2025. Pritchard said that production drove 17% annual loan balance growth, which he described as “outstanding loan origination that you just won’t see replicated broadly across the industry.”
On the balance sheet, management said total loans grew about 4% sequentially in the fourth quarter, while customer deposits were modestly lower quarter over quarter due to typical seasonality. Even with that seasonal dip, the company reported 18% year-over-year customer deposit growth.
Business Checking was repeatedly cited as a major initiative. Pritchard said Business Checking balances reached $377 million, doubling year over year and increasing 4% sequentially for a fourth consecutive quarter of growth. Management also highlighted improving relationship depth:
- Customers with both a loan and deposit relationship increased to 22%, up from roughly 6% at the start of 2024.
- 37% of new loan customers opened a checking account in the fourth quarter.
- Low-cost deposits (including non-interest-bearing checking and certain other low-cost balances) were about 4% of total deposits, roughly doubling year over year.
Looking ahead, Pritchard described an “aspirational goal” of reaching about 15% of deposits in non-interest-bearing accounts over time, while noting that level is not expected next year.
Net interest income and margin: strong Q4, near-term compression expected
Management reported net interest income rose $8 million, or 7%, from the prior quarter and $26 million, or 26%, from the year-ago quarter. The company’s net interest margin expanded five basis points sequentially in the fourth quarter, which Pritchard said was helped by deposit repricing lower following 50 basis points of Fed cuts during the quarter, while the company’s large variable-rate loan book did not reprice until January 1.
In the Q&A, Pritchard said Live Oak typically sees near-term compression in net interest margin and net interest income in the quarter following a 50-basis-point move, because variable-rate loans reprice on the first business day of the quarter. However, he said deposit pricing adjustments and strong loan growth tend to help the bank return to an “up and to the right” trajectory in both net interest income and margin over time.
For 2026 planning, Pritchard said the company’s base outlook assumes three Fed cuts in March, June and September. He added that fewer cuts or cuts later in the year would represent an earnings opportunity. He also noted that a stable environment has historically worked well for the company’s model, and that the company focuses heavily on net interest income as it manages variability in margin.
Gain-on-sale timing, Live Oak Express ramp, and notable items
Guaranteed loan sale gains were lower in the fourth quarter, which management said was intentional. Pritchard explained that the company’s large venture investment gains gave it flexibility to delay loan sales into 2026 while increasing held-for-sale loans by roughly $60 million to capture additional net interest income for a few months. In response to a question, he estimated the annualized net interest income benefit from holding the additional held-for-sale balance at about $1.8 million to $2.5 million, noting it was “not overly material for Q4 itself.” He said the company expects to monetize the additional held-for-sale balance in the first quarter.
Management also discussed Live Oak Express, its small-dollar SBA 7(a) offering. Pritchard said Live Oak Express contributed $12 million to gain on sale in 2025, representing about 20% of the total and roughly doubling its contribution from 2024. In Q&A, he cautioned that doubling again in 2026 would be “very aspirational,” suggesting growth but “something less than that.” Losch outlined longer-term ambitions, saying an aspirational “cruise altitude” target is $1 billion per year of Live Oak Express production over time, though not next year.
Losch said the company is building capabilities to expand lead generation and improve efficiency, including co-developing a next-generation loan origination platform, adding performance marketing expertise, and adjusting incentive plans. He also addressed SBA standard operating procedure (SOP) changes affecting small-dollar loans, saying Live Oak has been intentional about underwriting and not chasing the highest pricing or “spotty credit,” even if that reduces the total addressable market.
Separately, Pritchard noted that reported results included venture gains and about $11 million of offsets from items including warrant losses, accelerated depreciation of capitalized software, severance and funding allocated to a donor-advised fund.
Credit trends described as stabilizing; expenses expected to moderate
On credit, management emphasized stability in past-due trends. Pritchard said loans more than 30 days past due remained low for the fifth consecutive quarter at $10 million, or 9 basis points of held-for-investment loans, as of December 31. He added that non-accrual loans increased to $110 million, or 91 basis points of the unguaranteed held-for-investment portfolio, with the increase “primarily driven by SBA credits” and described as consistent with broader SBA industry trends.
Chief Credit Officer Michael Cairns said the quarter was “fairly uneventful and stable,” noting classified loans were flat to slightly improving. He explained that non-accruals sit within the classified loan population and that potential losses are assessed once loans are classified, which he said helped explain why the company did not see a spike in reserves or provision expense from the non-accrual increase. Cairns also said borrowers had not yet fully felt the benefit of late-2025 rate cuts but “should in 2026,” potentially providing some relief if additional cuts occur.
On expenses, Pritchard said the company remains focused on operational improvements and technology investments, including efforts involving AI. In Q&A, he said the company expects expense growth to “moderate quite a bit,” likely in the single digits year over year, as Live Oak prioritizes spending around Business Checking, Live Oak Express and technology initiatives.
About Live Oak Bancshares (NYSE:LOB)
Live Oak Bancshares, Inc is a bank holding company headquartered in Wilmington, North Carolina, and operates through its subsidiary Live Oak Banking Company. Founded in 2008, the company leverages a branchless, technology-driven platform to deliver specialty lending and deposit products across the United States. Live Oak Bancshares completed its initial public offering in February 2018 and trades on the NYSE under the ticker symbol LOB.
The company’s primary focus is on originating and servicing commercial loans for small businesses in select industry verticals.