LOB

Live Oak Bancshares delivered third quarter results that were well received by the market, driven by notable top-line growth despite a miss on adjusted earnings per share. Management pointed to decisive action on its exited distillery loan portfolio as the main drag on profitability, with $17 million in additional provisions taken this quarter. At the same time, operating momentum remained robust, with record levels of loan originations and substantial efficiency gains. CFO Walt Phifer emphasized the company's ability to absorb credit setbacks while still growing core earnings, underlining a key theme of the quarter. Is now the time to buy LOB? Find out in our full research report (it's free). - Revenue: $171.8 million vs analyst estimates of $166.4 million (15.7% year-on-year growth, 3.2% beat) - Adjusted EPS: $0.56 vs analyst expectations of $0.66 (15.5% miss) - Market Capitalization: $1.66 billion While we enjoy listening to the management's commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. - David Feaster (Raymond James) asked about lessons learned from the distillery portfolio and expectations for future credit quality. Chief Credit Officer Michael Cairns responded that aggressive provisioning reflects a conservative approach, with remaining exposures backed by collateral and ongoing borrower cooperation. - David Feaster (Raymond James) inquired about drivers of strong loan growth and demand trends. President BJ Losch cited a combination of Live Oak's SBA expertise, market share gains from lender exits, and new small dollar loan products. - David Feaster (Raymond James) questioned the outlook for net interest margin amid asset sensitivity and funding competition. CFO Walt Phifer said he expects margin stability, with net interest income growth tracking balance sheet expansion and deposit pricing pressures persisting. - Ben Graham (Piper Sandler) asked about the health of small business borrowers. Losch emphasized the resilience of small business owners and Live Oak's ongoing focus on conservative underwriting in anticipation of higher rates. - Emily Lee (KBW) sought an update on the business checking initiative and future product investments. Losch detailed plans to introduce merchant services, aiming to deepen customer relationships and grow low-cost deposits. In future quarters, the StockStory team will be watching (1) progress on reducing residual exposures from the exited distillery loan portfolio, (2) continued growth in checking and business banking relationships to improve funding costs, and (3) the impact of AI-driven process improvements on efficiency and credit outcomes. Execution on new product rollouts and maintaining market share in SBA lending will also be important to monitor. Live Oak Bancshares currently trades at $35.77, up from $35.35 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it's free for active Edge members). ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively. Find out which 5 stocks it's flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.

Live Oak Bancshares came into this Q3 2026 print with a stock that had drifted lower over the past three months, then ticked about 1% higher to roughly $35.70 once investors saw the numbers. That mild relief rally sits against a headline that is harder to shrug off. Reported earnings per share were $0.52, shaped heavily by a charge tied to the exited distillery portfolio, and provisions reached $55 million. For a small business focused lender built on clean credit and strong fee economics, that gap between the upbeat thesis and a chunky reserve build is what matters today. Love the Live Oak Bancshares small business lending niche but uneasy about a $55 million provision and a distillery related charge shaping EPS? Compare this quarter with a list of solid balance sheet and fundamentals stocks (26 results) to see how other lenders with cleaner reserve trends stack up. - Total Revenue (Q3 2026 vs. Q3 2025): US$120.6m vs. US$123.5m (a slight decline of about 2%) - Net Income, Excl. Extra Items (Q3 2026 vs. Q3 2025): US$24.3m vs. US$25.6m (down about 5%) - Basic EPS (Q3 2026 vs. Q3 2025): US$0.52 vs. US$0.56 (a decline of roughly 6%) - Net Interest Margin, NIM (Q3 2026 vs. Q3 2025): 3.30% vs. 3.33% (effectively stable with a slight contraction) Prefer clean charts over a dense wall of bank earnings tables and credit metrics? Explore Live Oak Bancshares' full financial picture, including a clear view of its balance sheet strength, in the interactive company report for Live Oak Bancshares. Supporters argue that Live Oak Bancshares can turn tech and AI spending into real operating leverage. "Broader use of AI and digital tools, including an AI-native loan origination platform in Live Oak Express and more than 640 internal AI agents available to all employees, is aimed at speeding up underwriting and processing while holding noninterest expense near US$85 million. This can support further operating leverage and net margin improvement." The latest quarter offers evidence in that direction. Adjusted revenue reached US$172 million and record adjusted PPNR hit US$88 million, with the efficiency ratio improving to about 49%. Live Oak Express originations of US$107 million and record US$7 million of gains show the digital engine scaling while expense remains anchored near guidance. Critics focus on whether Live Oak Bancshares can keep credit costs and spending contained as the balance sheet grows. "Live Oak Bancshares continues to invest heavily in AI driven platforms like Live Oak Express and internal AI agents. If these tools fail to keep revenue rising faster than the roughly US$85 million quarterly expense base, the current efficiency ratio in the low to mid 50s could stall or reverse, limiting operating leverage and future earnings growth." This quarter cuts both ways. Operating metrics improved, yet the US$55 million provision, including US$17 million tied to the exited distillery portfolio and US$16 million for growth, shows credit costs absorbing a large share of earnings. Commercial banking reserves on a handful of larger credits reinforce that scaling still brings lumpy downside risk. Not everyone reads the same price the same way. → See the higher figure this Narrative lands on, and how it gets there. Live Oak Bancshares reports provisions and a brief share rebound that still leave open questions about its earnings power. The real opportunity could sit in stocks that look undervalued before the market fully weighs their earnings power. - Company 1 - 28% below our estimate - helps utilities and grid owners replace aging diagnostic equipment as electrification pressures legacy test systems and maintenance practices. - Company 2 - 35% below our estimate - converts a growing mandate pipeline and new senior hires into complex capital markets and restructuring assignments for large corporate and sponsor clients. - Company 3 - 41% below our estimate - supplies high specification circuit boards and mission systems as AI data centers and defense programs adopt denser, faster electronic architectures. Those are three of them. See the full list of 30 companies trading below our fair value estimates → This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include LOB. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. Release Date: October 22, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. - Record adjusted PPNR of $88 million, up 33% year-over-year, demonstrating strong operating leverage. - Adjusted revenue grew 15% year-over-year while adjusted expenses grew only 1%, highlighting efficiency. - Record loan originations of $2.1 billion, up 29% year-over-year, diversified across 34 industries. - Live Oak Express posted record originations of $107 million, up 173% year-over-year, with gain on sale of $7 million. - Checking balances crossed $500 million, up 39% year-over-year, improving funding costs and customer stickiness. - Reported EPS was $0.52, impacted by a $17 million provision on the exited distillery portfolio, reducing EPS by $0.27. - Total provision was $55 million, with $16 million due to loan growth (CECL reserve on new loans) and $13 million from commercial banking impairments. - Distillery portfolio remains a concern with $60 million in unreserved exposure and continued industry headwinds. - Commercial banking credit trends are lumpy, with potential for charge-offs and recoveries to swing quarterly results. - Deposit market competition is intense, with rising funding costs potentially pressuring net interest margin. - Warning! GuruFocus has detected 4 Warning Signs with LOB. - Is LOB fairly valued? Test your thesis with our free DCF calculator. Q: Can you elaborate on what drove the additional $17 million provision on the exited distillery portfolio this quarter, and what lessons you've learned as you've worked through this book? A: Michael Carnes (Chief Credit Officer) explained that the entire distillery portfolio has now been classified, with heavy reserves taken in anticipation of exiting every credit. About $60 million of exposure remains to be worked out, backed by conservative collateral estimates, and some borrowers continue to pay. He noted the broader SBA book performed well with little risk-rating migration, and that underwriting now assumes borrowers will operate in an elevated rate environment at some point over the life of their loans. Q: How are you thinking about the provision trend in Q4 and next year, and the likelihood of returning to the $20 million to $25 million normal provision range? A: Walt Pfeiffer (CFO) broke the $55 million provision into the $17 million distillery action and roughly $38 million across three pieces: $16 million growth-related CECL reserve on record production, $9 million in diversified small business, and $13 million in commercial banking from six relationships. He stressed the commercial book will remain lumpy in both directionsciting three impairments in Q1, zero in Q2, and six in Q3and declined to replace the prior run-rate range or promise a step-down next quarter, emphasizing that earnings power allows the company to keep moving forward. Q: What is the total mark now on the $60 million of remaining distillery exposure, and is any additional reserve applied to it? A: Michael Carnes (Chief Credit Officer) clarified that the company has charged off everything it reasonably can, and the $60 million represents the unreserved balance secured by collateral valued on a conservative basis. Only a small amount of reserve remains against those loans. Q: What drove the sharp increase in loan production, particularly on the commercial front, and how is demand trending as rates rise? A: BJ Loesch (President) attributed small business strength to Live Oak's dominant SBA brand and market share gains as many lenders exited SBA amid SOP changes and regulatory uncertainty, plus the newer small-dollar loan option. On the commercial side, project financesuch as seniors housing and solarhas been stronger over the past year, with growth balanced and broad-based. She emphasized the company monitors soundness as closely as it celebrates growth. Q: Can you help us think through the margin trajectory given asset sensitivity, loan repricing timing, and intensifying deposit competition? A: Walt Pfeiffer (CFO) said the 3.30% margin was in line with expectations with no change to the outlook. Net interest income dollars are driven primarily by growth, while the margin depends on growth and deposit competitionincluding stated rates, exception-based pricing, and promotions. He expects the margin to remain relatively stable with NII growing in line with the balance sheet, though continued Fed hikes could provide upside. Q: For each additional 25 basis point rate hike, what is the expected incremental impact to NIM or quarterly NII? A: Walt Pfeiffer (CFO) said a 25 basis point move typically equates to roughly $5 million to $10 million of annual NII accretion, though the actual impact depends on growth and deposit competition. He noted the team is pricing well on the asset side and positioning funding appropriately, with the margin moving up or down based on those variables. Q: What are you seeing regarding the health of the small business owner todayimproving, stable, or deteriorating? A: BJ Loesch (President) used the word "resiliency," noting that when problems arise it is usually a life or business event rather than an owner unable to manage through higher costs. The portfolio and customer financialscollected every 90 daysshow little change. She added that new production is underwritten at higher rates to anticipate potential debt-service stress. Q: Can you expand on progress in the business checking initiative and any incremental capabilities or investments needed to deepen relationships? A: BJ Loesch (President) said checking has grown from virtually nothing to about 5% of the deposit base in two years, with roughly 60% from commercial customers and 40% from small business. Merchant services, a key priority this year and next, should be compelling for small business customers and shift the mix toward small business over time. She also highlighted low-cost, sticky other DDA accounts such as control and cash collateral accounts as accretive to cost of funds. Q: Can you provide an update on the competitive deposit environment and how deposit costs are trending, including spot costs versus the Q3 average? A: Walt Pfeiffer (CFO) described the environment as highly competitive across stated rates, cash-based promotions, exception-based pricing, and marketing campaigns. The Q3 average deposit cost was 3.47%, with the stated rate trending slightly higher after the September Fed hike, as deposit pricing reacts quickly. The company flexes between consumer and business savings, retail CDs, and short-term brokered funding to support strong loan growth. Q: Is there any update on the timeline to work the distillery portfolio completely off the balance sheet? A: Michael Carnes (Chief Credit Officer) said Live Oak identified headwinds in the vertical in 2024, stopped actively lending, and has been working the book down since. The goal is to exit every credit as quickly as possible, but the timeline depends on multiple variablesand the bank will not push out a borrower who is still paying. Q: How are you thinking about the expense trajectory heading into year-end and next year, particularly with AI limiting expense growth? A: Walt Pfeiffer (CFO) credited the team's track record of driving efficiency through automation and now AI, while noting Live Oak remains a growth organization that will keep investing in strategic initiatives like Live Oak Express and checking. He expects modest expense growth alongside continued improvement in the efficiency ratio, attacking both the expense and revenue sides of the ratio. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Thu, Oct. 22, 2026 - General Counsel - Greg Seward - Chairman and Chief Executive Officer - Chip Mahan - President - BJ Losch - Chief Financial Officer - Walt Phifer - Chief Credit Officer - Michael Cairns Operator: Hello, everyone. Thank you for joining us, and welcome to the Third Quarter 2026 Live Oak Bancshares, Incorporated. Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Greg Seward, General Counsel. Greg, please go ahead. Greg Seward: Thank you. Good morning, everyone. Welcome to Live Oak's third quarter 2026 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 that we will reference on the call, please visit our website at investor.liveoak.bank and go to the events and presentations tab for supporting materials. Our earnings release is also available on our website. Before we get started, I'd 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 arise 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. Here in the room, we have Chip Mahan, our Chairman and CEO, and Michael Cairns, our Chief Credit Officer, who will be available for Q&A after our President, BJ Losch, and CFO, Walt Phifer, finish their prepared remarks. I'll now turn over the call to BJ. BJ Losch: Great. Thanks, Greg. Good morning, everybody. Let me start where you'd expect me to start. We reported EPS at $0.52, as obviously not the number we wanted to print and not the number you expected from us. The driver was $17 million of additional provision on our exited distillery portfolio, about $0.27 of EPS. Excluding that action, adjusted EPS was $0.76. Later on, Walt will walk you through that bridge on slide 15. I'll spend time right up front on that this morning, but then I'm going to spend quality time on what is at risk of getting lost this quarter, which is our operating performance and momentum underneath these results, which is simply outstanding, one of the strongest operating quarters in our company history. Let's get started on slide four. Five themes in the quarter. One, the decisive action on the distillery portfolio. Two, outstanding operating leverage momentum with record adjusted PPNR of $88 million, up 33% year-over-year. Three, the main Live Oak engine, our small business banking model, is humming. Four, Live Oak Express and business checking are now generating meaningful profit and have a long runway ahead. Five, deploying AI is front and center for us, and our adoption continues to accelerate. We've only scratched the surface of what's possible. First of those five is about actively dealing with a challenge head-on, which is who we are, and the others are about continuing to build a company with strong, sustainable operating earnings and growth. Overall provision this quarter was $55 million. Four pieces, and they shouldn't be looked at the same way, and you can see that on slide five. First, $17 million or 31% on the exited distillery portfolio. More on that in a moment. Second, $16 million or 30% of the total from loan growth. We added more than $700 million of loan balance growth this quarter, a record. As I've said before, CECL is not kind to growing companies like ours. That $16 million is a reserve against loans we haven't had a chance to earn a penny on yet. I'll take that trade over low growth and lower provision all day, every day. Third, $13 million or 24% of the provisioning was in commercial banking from six relationships across three verticals, not concentrated. Since these are larger loans, we will see more of a mix of impairments, charge-offs, and recoveries in any given quarter, making results more lumpy. Fourth, $9 million or 16% of provisioning was in small business, where it was diversified with no single industry driving it and consistent with the history of our book. Turning to slide six on distillery. As we talked about last quarter, we exited this vertical in 2024, over two years ago, and we're at workout only. While eight of the 13 loans are still accruing, we have 98% of the portfolio classified and have dedicated workout resources for all of them, with every remaining loan under enhanced monitoring. What happened industry-wide is pretty straightforward if you read the news. Second straight year of declining U.S. spirits demand, resulting in further excess barrel inventory across the industry, which is driving a sharp decline in collateral values. We've now recognized $29 million of provision year to date on this portfolio through specific reserves and net charge-offs. That portfolio is about one-half of 1% of our total loan book. So of course, this hurts, but it's manageable given our PPNR strength. We have a saying at Live Oak that when you have to eat something unpleasant, you don't take small bites, and that's exactly what we've done here. Every quarter, we've taken every charge and every impairment we could reasonably support as soon as we could support it. We have not spread this out to smooth the quarter, and we're not going to with this or any challenge we have. From here, what we watch is collateral realization versus our current estimates, ongoing performance of those businesses, and active cooperation from our borrowers. We've been proactive with each relationship and exposure and will continue to be. We've made significant progress working the book in the last six months. We'll continue to be transparent as we work through the rest of the exposures. Now turning to slide seven, let's move beyond the distillery noise and look at the fantastic operating earnings, which are outstanding. Adjusted revenue grew 15% year-over-year to $172 million, while adjusted expenses grew only 1%. 15 and 1. 15x operating leverage. That produced record adjusted PPNR of $88 million, up 33% from a year ago and 16% from just last quarter, with our adjusted efficiency ratio improving 7 points year-over-year from 56% to 49%. We've built an operating model that produces $88 million of pre-provision earnings a quarter and growing. That's the number that matters most to me because it is the number that allows us to absorb actions like we did this quarter. On that last point, slide eight demonstrates just how much we have improved the business over the last two years. Go back two years to the third quarter of 2024. Adjusted PPNR was $53 million. Today, it's $88 million, up 64%. Adjusted revenue is up 31% over that stretch, while expenses are up 9%. Over 3x operating leverage. Total assets are up 35%. Now, look at the provision. Q3 2024, we took $35 million in provision and delivered $19 million of adjusted pre-tax income. This quarter, we took $55 million, $20 million more, and still delivered $33 million of pre-tax income. That is 74% more pre-tax income in just two years while absorbing substantially more provision. Excluding distillery was $50 million, 163% above where we were just two years ago. That's excellent operating leverage, and it earns us the flexibility to deal with the problem and keep momentum moving forward. Flexibility we did not have two years ago. It is the reason we can take the big bite and still earn money, still grow 16%, and still fund every initiative that matters to us. Turning to slide nine, the biggest driver of that performance continues to be our small business franchise, the engine of this company. We are the number one SBA lender in the country by dollar amount again, and it's not even close. Our deep expertise across 30 verticals, along with an unmatched speed and quality of execution is why. The business is clearly demonstrating soundness and profitability along with that growth. Our default performance continues to significantly outperform the broader SBA industry. This is a portfolio we have underwritten through multiple cycles and is doing exactly what we expect it to do. A key initiative to extend our SBA scope is on slide 10. Live Oak Express, our small dollar SBA 7(a) business, posted another record with $107 million of originations, up 173% from a year ago and up from $82 million last quarter. This is a fee-generating, capital-efficient engine for us. We sell more than 75% of the guaranteed portion at strong gain on sale premiums, which recycles liquidity. We earn servicing fees, and we retain the roughly 25% unguaranteed portion on the balance sheet, which earns recurring net interest income. Gain on sale from Express was $7 million this quarter, up 250% year-over-year. We've now generated $18 million over the last five quarters, about $0.30 of earnings accretion and growing. This is just fantastic work by our Live Oak Express team and everyone involved. Our target at cruise altitude remains over $750 million annually in this business. And again, do the math on that kind of volume at those premiums. The earnings impact still in front of us is substantial. Turning to slide 11, our second key initiative, growing checking to deepen relationships and lower our funding costs. Checking balances crossed a $500 million this quarter, up 39% year-over-year, with total relationship deposits at now $1.3 billion. Why it matters is cost and stickiness. Our relationship deposit base only costs us 184 basis points compared with our overall deposit cost of 347. And the relationship depth keeps building. 25% of our customers now have both a loan and deposit account, up from 20% a year ago, and four years ago, that number was only 3%. We're at roughly 5% of checking and DDA to total deposits, with our target at 10% and above. On a deposit base of about $15.5 billion growing 16% a year, that is an enormous amount of funding improvement still ahead of us. Phenomenal work by our lenders and our treasury management teams, and there's a lot more to come. Moving to slide 12, our AI efforts continue to accelerate. 100% of our employees have access to AI native tools, and we now have 200 Claude super users across the company with a bank-wide rollout of Claude for Enterprise kicking off this fall, which will unlock even more capabilities. Our people are building real things, as you can see on the bottom left. But we have been smart about it, building common skills and prompts and requiring training while also encouraging innovation. I'd point you to the credit side of that list on purpose. Better portfolio management, better aggregated credit data, and faster credit work are exactly what help us see things earlier. What I like to say about AI is today is not tomorrow. The technology is advancing rapidly, so we're dreaming big about how to use it to accelerate our strategy. Thank you to all Live Oakers. I could not be more proud of how our people are taking care of customers, making our operations better, and profitably growing this company. With that, Walt, why don't you take us through a few more financial details? Walt Phifer: Thanks, BJ. Good morning, everyone. BJ hit the highlights, so I'll go straight to the numbers behind them. The EPS bridge, growth in funding, our margin performance, credit trends across our two lending business units, and capital. Turning to slide 15, as BJ noted, reported figures are on the left with reported EPS of $0.52, driven by reported PPNR of $90 million, up 26% linked quarter and 53% year-over-year, and offset by an elevated provision that supported record loan growth, distillery actions, and the portfolio changes across the two lending business units. The right-hand side of the page walks you from the reported to adjusted EPS. Adjusted EPS was $0.49 in the quarter, and the bottom right shows that excluding the $0.27 drag from the distillery actions, adjusted EPS would have been the $0.76 BJ referred to. Slides 16 and 17 highlight our consistent, outstanding growth trends. Q3 originations were well diversified across 34 different industries and totaled $2.1 billion, up 38% linked quarter and 29% year-over-year, and a record quarter of production for the bank. That production drove period end loans to $13.9 billion, up 6% linked quarter and 16% year-over-year. While we funded that growth with approximately $920 million in new deposits, with our customer deposit channels contributing about 75% of that growth in a highly competitive market. Moving to slide 18, net interest income grew to $133 million, up 6% linked quarter to 15% year-over-year, in line with our balance sheet growth. Net interest margin of 3.30% remained in line with the last five quarters. Loan volume and mix added about 14 basis points, offset by higher funding costs reflecting both our need to fund our strong loan growth, as well as that very competitive deposit market. We will take that trade every day. A relatively stable margin and substantially more net interest income dollars. Looking ahead, we still view a flat to rising rate environment as a favorable backdrop for our balance sheet, with volume growth remaining the primary driver of net interest income and funding competition and growth needs, the key variables for the margin performance. Highlighted on slide 19, gain on sale of guaranteed loans was $19 million for the quarter, up 12% both linked quarter and year-over-year, while premiums helped steady overall. Live Oak Express contributed a record $7 million, nearly 40% of Q3's total gain on sale. The success of Live Oak Express in the third quarter also provided us with the opportunity to sell more seasoned, larger SBA loans while still growing the gain on sale line and maintaining an average premium of 7% on total sales for the quarter. Earlier, BJ gave you the adjusted view of operating leverage. While slide 20 shows our operating leverage on a reported basis. Reported revenue grew 23% year-over-year, while expenses grew 3%. The reported efficiency ratio improved to 49%, approximately 1,000 basis points better than a year ago and 500 basis points better than just linked quarter. Credit trends are detailed on slide 21, with further granularity provided this quarter by splitting out trends across our two lending business units. Small business banking credit performance remained stable. Past dues remain low at 9 basis points and nonaccruals of 1.10% and net charge-offs of 1.07% were consistent with recent quarters. In commercial banking, past dues are essentially zero, nonaccruals of 1.17%, and net charge-offs of 86 basis points reflect the distillery portfolio actions, which the majority of this portfolio sits within this business unit, as well as the six credits BJ [audio distortion]. The commercial banking ratios have been, and will continue to be, lumpy given the size of these loans and the timing of impairments and recoveries. Our unguaranteed reserve coverage increased 5 basis points to 2.06% in the third quarter, reflecting growth, portfolio changes, and a more uncertain macroeconomic backdrop. Lastly, capital levels are detailed on slide 22. Roughly 37% of our assets are cash or government guaranteed, with a guaranteed loan mix about nine times the industry. Given our uniquely large guaranteed loan portfolio, we focus on two metrics that measure capital against our true credit risk, the unguaranteed loan book. First, our Mahan ratio. Tier one capital plus reserves and fair value mark as a percent of unguaranteed loans was a strong 15.4%. Second, the tangible common equity version of that ratio, shown on the bottom right of the page, was 14%. We believe that our capital position relative to the true risk on our balance sheet remains healthy. With that, thank you for your time. I'll turn it back over to BJ for his closing remarks before the Q&A. BJ Losch: Great. Thanks, Walt. Just quickly, let me close where I started. This quarter, we realized something unfortunate, $17 million on distillery. We took it head-on, and that's how we'll always operate on any challenge. You can count on us for that. At the same time, record originations of $2.1 billion across 34 industries. Record adjusted PPNR. Loans and deposits each up 16%. A sub 50% efficiency ratio and improving. Record quarters in both of our key initiatives. The franchise we have and are building is stronger than the quarter we just reported. The quarter we just reported is the proof because it took a $17 million hit and kept moving. We understand that the best way out is through on things like this, and we'll continue to build our momentum while we do it. Again, with a big thank you to all Live Oakers and our customers, let's take some questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of David Feaster with Raymond James. Your line is open. Please go ahead. David Feaster: Hey, good morning, everybody. BJ Losch: Hey, David. Michael Cairns: Good morning, David. David Feaster: Let's maybe just dig in a little bit more on the credit front. Obviously, some pretty aggressive actions here. I was hoping you could touch on, we've talked about the distillery book for a while. I guess, could you maybe just elaborate on what led to the changes you saw this quarter and what lessons you've learned as you've gone through this process since we exited the book, we've had some lagging credit issues. Then, so touch on that a bit, and then the other migration that you saw, any color on those loans, and just how you think about credit here as rates are rising and what you see on the horizon as you stress the book from higher rates. Michael Cairns: Hey, good morning. It's Michael. I'll take all of that. As BJ and Walt highlighted on the call, distillery's obviously the biggest mover for our book during the quarter. Whenever you would classify an entire loan portfolio, you're going to see that in the metrics, and we've done that. We've also reserved heavily in anticipation of exiting every single one of these credits. We have about $60 million in exposure remaining to work out of. As BJ mentioned, some of these customers continue to pay us, so we're working with the customers hand-in-hand. The $60 million is backed by conservative collateral estimates, and we're going to work towards exiting that as safely and quickly as possible. When you look at the bigger picture, our SBA portfolio actually performed pretty well this quarter. It was a really quiet quarter from that book. We didn't see a lot of risk grade migration. Our borrowers are really resilient. I think we're doing a good job underwriting. I think that's a sign of that. Where my focus is on the SBA book, particularly because of the fact that these are small businesses, is I'm thinking a lot about interest rates and where interest rates are headed. At underwriting, we are being pretty conservative with our shocking of interest rates at origination and assuming that these borrowers are going to be operating at some point over the life of their loan in an elevated interest rate environment. So we're making sure we have that cushion on the front end. As we highlighted in the deck, our existing portfolio is well prepared for elevated rates, as long as we see them coming in and anticipating that. So we're thinking about all of that. On the commercial book, there's a handful of loans that migrated during the quarter. Again, reminder that our commercial book carries larger exposures than our SBA book. But what comes with those larger exposures is a more sophisticated borrower that has significant capital invested into these businesses. In almost every case, those sponsors are contributing additional equity toward the turnaround plan at the business level. So there's a potential pathway for recovery of virtually all of those loans. But when a few of them move, you're going to see them in the numbers. As I look at everything that we've just talked about, industry specific to distillery, but within our commercial and SBA book, we're not seeing broad signs of credit deterioration. Just some risks playing out that we underwrite to that we're going to have to navigate through on an individual loan level. And like I said, our customers are working with us through that. David Feaster: Okay. That's helpful. Then maybe switching gears to loan growth. Loan growth has been tremendous. We saw a pretty sharp increase in production, especially on the commercial front. I guess, curious, what drove that? How demand's trending as rates are rising, both in the SBA book and the commercial book. Just the health of a client from your perspective and just again, as rates are rising and where you're seeing demand today. BJ Losch: Yeah. Hey, David. It's BJ. I'll take that one. Starting on the small business side, I really think it's two factors. Number one, I've said it before, is we are the well-known engine, particularly in SBA on the small business side. That halo of who we are and what our lenders do is very important. That engine continues to deliver excellent production. But on the other side as well is there's been a lot of change in SBA world the last couple of years. SOP changes and going back to the beginning of this administration and a lot of uncertainty. What you've actually seen, what we've seen, is a lot of lenders exit SBA. You have to know how to do this business really well. You have to. That's who we are. That's what we do. We've seen market share come to us in addition to our lenders continuing to do what they do every day. That has generated further production. Not to mention, like we said, introducing a relatively new small dollar loan option for our customers that is driving even more growth. On the commercial side, we've seen different dynamics because they're different businesses, whether it's on our project finance side, like seniors housing or solar, or on the sponsor finance side which is more private equity based. There's different dynamics going on over there. Project management, I would say, or excuse me, project finance, collateral-based lending has probably been a little bit stronger over the last year, and that's where we've seen growth and strength on the commercial side. But it's been pretty balanced and broad-based as well. We feel really good about the growth. We monitor it very closely. At the same time we're celebrating growth, we're also asking the question about soundness and making sure that stays front and center. We think we have a pretty good balance. David Feaster: That's helpful. Maybe just last one from me. Just wanted to touch on the outlook for the margin here. Obviously, there's a lot of moving parts, right? You're highly asset sensitive. There is some timing differences as loans reset versus funding costs. We've got increasing competition. I suspect you're seeing that on the commercial front and then funding competition's intensifying. Could you just help us think through the margin trajectory, kind of just taking all these factors together and where you see things headed? Walt Phifer: Yeah, Dave, that's a great question. It's Walt. I think you hit on a lot of the variables there. The 330 margin that we had here in third quarter was right in line with our expectations and what we talked about in the past couple of quarters. Really no changes to the expectations moving forward. As mentioned earlier, net interest income's where I tend to focus a lot on, right? The dollars that we earn is really driven by growth. The margin will be influenced by that growth as well as our deposit market competition. You mentioned our asset sensitivity. Look, if the Fed continues to raise rates there's potential for upside to the margin. The two things I keep focusing on are the growth, which BJ just went and discussed, as well as the point that you just made on the deposit market competition and what you're seeing there in stated rates, but also what you're seeing in exception-based pricing and in market promotions. I don't think any of those things, whether growth or deposit market competition, are going to change here greatly in the near term. So where I sit in my seat, my overall assumption is that the margin remains relatively stable, and our net interest income will continue to grow at the same pace as our balance sheet. David Feaster: Perfect. That's helpful. Thank you. Walt Phifer: Thanks, David. Operator: Your next question comes from the line of Crispin Love with Piper Sandler. Your line is open. Please go ahead. Ben Graham: Hey, good morning. This is Ben Graham in for Crispin Love. Thanks so much for taking my question. As you mentioned, you're very close to your small businesses and just wondering if you could discuss what you're seeing now related to health of the small business owner today, given the monthly financials you get, survey work you do, et cetera. Just wondering if it's improving, stable or yeah, just curious on what you're seeing there. Thank you. BJ Losch: Yeah, Ben, it's BJ. Again, I'll use the word resiliency. When we see problems with customers, it's not always, but the majority of the time it's some kind of life event or business event that causes deterioration in the business, as opposed to a small business owner not being able to manage their business through higher gas prices or higher energy prices. Small business owners, that is who they are. That's their livelihood. We tend to see that they will do everything in their power to make sure that they can keep their businesses active and healthy. We're not really seeing a ton of change like Michael talked about in the portfolio itself or in the financials that we're seeing right now. Obviously, we're constantly monitoring that and requesting financials every 90 days for all those small business customers. We are on top of that. We feel good right now. But to Michael's point, moving forward, we are underwriting new production at higher rates than where we are today, anticipating potential stress and debt service coverage going forward. We want to make sure that we and customers are prepared for that. We never want to put a customer in a position to not be able to have a prosperous business or pay us back. That's what we'll continue to do. Ben Graham: Awesome. Thank you so much. That's it from me. I'll step back. BJ Losch: Thanks, Ben. Operator: Your next question comes from the line of Dave Rochester with Cantor. Your line is open. Please go ahead. Dave Rochester: Hey, good morning, guys. Walt Phifer: Hey, Dave. Dave Rochester: I know you've done a lot of work on the distillery books. This hasn't been the only quarter you've taken other reserves. I was just wondering what the total mark is now that you have on that $60 million that you've kept at this point. Then, given your outlook on small business credit, which sounds positive in the larger commercial credit overall, how are you thinking about the provision trend in Q4 and next year, and the likelihood that you can return to that $20 million-$25 million normal provision range? Thanks. Michael Cairns: Yeah. This is Mike. I'll start on the distillery question. To answer your question, $60 million is our outstanding unreserved balance against that portfolio. What we do is we charge off the excess of what we don't think will be collectible. What we're talking about there is $60 million that is secured with collateral, and we take, in my view, a very conservative estimate of what that collateral value is. Walt Phifer: Then Dave, this is Walt, I'll jump in on the provision expense. Dave Rochester: Yeah. Walt Phifer: Yeah. To take that $55 million that we have, we'll break it down in two halves. We had the distillery of the $17 million. That leaves essentially $38 million across three different pieces. BJ kind of walked through $16 million of that. $38 million is growth related. It's CECL on record production. We reserve the date a loan goes on the books before we even earn a penny. That piece is always going to move with our volume, and we have no intention to stop growing. So you see some variability there. $9 million or so on small business. That's normal portfolio changes, diversified. That book's really performing in line with its history and our expectations. Then commercial is the other piece. That's $13 million, and that's really where a lot of our variability lives. For perspective, let's just talk about the last three quarters. The first quarter, we had three new impairments across two verticals. Otherwise, pretty stable migration. Second quarter, we had zero new impairments, positive migration across the rest of the portfolio. Then this quarter, we had six impairments with positive migration elsewhere. Same book, really three different outcomes across three different quarters. Then it kind of runs both directions as well. If you think about that was the focus on impairments, but then you also have recoveries, and they can be very lumpy as well. Net charge-offs in commercial were actually negative in the first quarter because recoveries ran ahead of our charge-offs. We had net recoveries in Q2 as well, but then we had zero in Q3. Really the point here is that resolutions can swing a quarter just as much as an individual impairment. That brings us back to the run rate. We've talked about past. I'm not going to replace that range that we've discussed with a new one. I'm not going to tell you that this steps down next quarter either. What I think is looking forward, the commercial book is really going to be lumpy in both directions, and that's for a lot of reasons we've talked about. Loans are larger. It's just the nature of that book. What's not going to change is how we handle all that. Every one of these credits is analyzed, reserved on its own facts, and as soon as we get to the point where we can reasonably support impairing it, we impair it. That's what we did this quarter, is what we'll do next quarter and so on. So really our focus, and BJ hit on this earlier in terms of PPNR. Our earnings power is going to help allow us to continue to move up and to the right. It's just not always going to be a linear line. I think that'll be the focus for us this year. It'll be focus for us next year and so on. I think we've done a pretty good job at it. Dave Rochester: Yeah. All right. Appreciate the color there. Just back on the distillery book, you're saying that any kind of reserve you've already taken has already been charged off. So that $60 million is the outstanding balance you have left after the marks with no additional reserve applied to it. Is that right? Michael Cairns: Yeah. We have charged off everything that we can. There is a small amount of reserve there. But the unreserved component of those loans is about $60 million. Dave Rochester: Got it. Okay, great. Then switching to expenses, how are you thinking about the trajectory here as you head into the end of the year and then next year? You guys have done a great job in keeping a lid on growth there, and you've talked about seeing ways to use AI to keep expense growth more limited, especially I think going into next year. So how should we be thinking about that quarterly trajectory going forward? Walt Phifer: Hey, Dave, this is Walt again. Thanks for the question. Look, I think our team's done a really great job over the past years at culling inefficiency, implementing automation, and now we're starting to leverage AI. At the same time, we're confident we're a growth organization, and we still want to invest heavily into especially the strategic initiatives that BJ mentioned about Live Oak Express and checking, as well as new products. It's a balance. We work at this pretty hard each and every day. Look, from an expense outlook standpoint, I'd expect modest expense growth, right? As we continue to find ways to really look at supporting those initiatives with continued improvement in our efficiency ratio because we're attacking both sides of that ratio, right? The expenses through finding inefficiencies and opportunities, like you mentioned, leveraging AI and things of the like. The more fun side of that is really attacking the revenue side. That's what we're doing really well right now between our main engine as well as Live Oak Express. So modest growth and expenses with continued improvement in our efficiency ratio over time. Operator: Your next question comes from the line of Emily Lee with KBW. Your line is open. Please go ahead. Emily Lee: Hey, everyone. It's Emily. Thanks for taking my question. Walt Phifer: Good morning. Michael Cairns: Morning, Emily. Emily Lee: Yeah. Just to touch on Live Oak's business checking initiative, can you just expand a bit more on the progress made? You've been really successful in deepening the relationships with the percentage of customers, with both a loan and deposit account continuing to move up. Are there any incremental product capabilities or investments needed to deepen those relationships? Just any update there? BJ Losch: Sure, Emily. This is BJ. We're incredibly pleased with the progress that we've seen in checking. For a lending organization for most of our life to, in two years, go from virtually no checking relationships to 5% of our deposit base, to me, is incredible work by our team. We have a lot more to go. I think the first couple of years it's been more driven by commercial customers, which are used to when they are accessing new credit, they know that a lot of times they're going to have to move their operating accounts. About 60% of that $500 million or so has come from commercial the first couple of years. 40% from small business, which as you might imagine, are much smaller balances, but there's more customers there. One of the key priorities we have this year, certainly going into next year, is the introduction of merchant services, which we think will really be compelling for our small business customers to move over. Then obviously, if they are running their merchant services transactions through our operating account, that is incredibly sticky, that is incredibly active. We are literally giving them more income, the way that we are working with them on merchant services, and we are getting more higher sticky balances over time. So I expect over time, that 40/60 split to actually move more towards small business over time, and that will continue to accelerate our checking account growth. So very pleased with that. The other side of it that maybe we do not talk about as much, but that is really important is other DDA. It is things like control accounts or cash collateral accounts on some of our commercial-oriented or project finance businesses that are very low cost as well, and very sticky through the life of the relationship that we have on those side. So we are actively pursuing those as well, which obviously is accretive to our cost of funds in addition to checking. Emily Lee: That is a very helpful color. Thank you. Then just moving back to the NIM. For each additional 25 basis point rate hike, is there an expected incremental impact to the NIM or quarterly NII that you guys have? Walt Phifer: Yeah. Hey, Emily. It's Walt, look, that really depends, broad in some of the variables we talked about, growth and deposit competition. But look, I think our team has done a really good job pricing on the asset side. I think we are doing a good job finding the right positioning on the funding side. I will speak more to net interest income. Typically, 25 basis points can really equates anywhere from $5 million-$10 million on an annual basis of accretion. So I think I will stop there. I think that is probably the key point for me. I think margin will move up and down, really depending on growth and deposit competition. Emily Lee: Great. Well, thank you guys for taking my questions. Congrats on the quarter. Walt Phifer: Thanks. Operator: Your next question comes from the line of Janet Lee with TD Cowen. Your line is open. Please go ahead. Noah Castanon: Good morning. This is Noah Castanon for Janet Lee. Michael Cairns: Hey, Noah. Speaker 9: Noah, following up with the deposit conversation, can you provide us with an update on the competitive deposit environment and how you see deposit costs trending from here? And also if you could provide the spot deposit cost today relative to the 3Q average. Walt Phifer: Hey, Noah, this is Walt. I'll start there. We'll start, I guess, with the overall deposit market. I think you probably heard BJ and I say the word "competitive" quite a bit here on the call, and I think that's probably the best word to describe it. Like I mentioned, it's not just competitive in stated rates. There's a variety of ways banks right now are trying to raise funding. You obviously got to have a stated rate that's competitive with the market, but you're also trying to combat on cash-based promotions or exception-based pricing or relationship-based pricing and marketing campaigns. I guess the best way to describe it, there's a variety of channels that we continue to work and compete on. I think our team does a really good job at leveraging and really monitoring where the growth's coming from. We'll switch between consumer and business savings or retail CDs using brokers to help fund on a short-term basis some of the gaps that we need to support the strong loan growth. Stated rate, so right now our average for the quarter was 3.47%. Stated rate's trending a little bit higher than that as you would expect given the September Fed hike. That's typically what happens, right? A Fed hike at the end of the quarter, our deposit pricing really reacts pretty quickly. That's what we assume in our modeling, typically elevated betas and whatnot. Like I said, a lot of that's really just to support our growth. Speaker 9: Got it. Thank you for that. Then just going back to the credit conversation, I know the inflection story has been discussed a lot. Is there any update on that timeline and more specifically, any timeline you can provide on the distillery portfolio and how long it will take to work this book completely off the balance sheet? Michael Cairns: This is Michael. Yeah. So we identified this vertical as having headwinds back in 2024, and at that time we stopped actively lending, and we have since that time been working through this book. Our goal is to exit as quickly as possible on every one of these credits. However, as I mentioned earlier, some of our borrowers continue to pay, so I am not going to walk someone out of the bank if they are paying on their loan. The timeline there depends significantly on a lot of different variables. But we are taking active measures to exit as quickly as we can. Speaker 9: Great. Thank you. Operator: There are no further questions at this time. I will now turn the call back to Live Oak Bank Chairman and CEO, Chip Mahan, for closing remarks. Chip Mahan: Yeah. Thanks to everyone for dialing in today, and we will see you in 90 days. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Live Oak Bancshares, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Live Oak Bancshares wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $350,756!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,363,905!* Now, it's worth noting Stock Advisor's total average return is 922% — a market-crushing outperformance compared to 213% for the S&P 500. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Management emphasized a 'big bite' approach to credit challenges, taking a $17 million provision to aggressively write down the exited distillery portfolio rather than smoothing losses over multiple quarters. - The company achieved record adjusted PPNR of $88 million, driven by 15x operating leverage where adjusted revenue grew 15% while expenses remained nearly flat at 1% growth. - Small business lending remains the core engine, with Live Oak maintaining its position as the nation's top SBA lender by dollar volume despite significant industry-wide regulatory and competitive shifts. - The 'Live Oak Express' initiative is scaling rapidly as a capital-efficient model, generating $7 million in gain-on-sale premiums this quarter by recycling liquidity through guaranteed loan sales. - Strategic focus has shifted toward deepening customer relationships, evidenced by checking balances crossing $500 million and 25% of customers now holding both loan and deposit accounts. - AI adoption is being treated as a core operational strategy, with 100% employee access to native tools and a bank-wide rollout of Claude for Enterprise to accelerate credit analysis and portfolio management. - Management views a flat-to-rising rate environment as a favorable backdrop, with volume growth expected to be the primary driver of net interest income moving forward. - The company is targeting a checking and DDA mix of 10% or above of total deposits, up from the current 5%, to structurally lower long-term funding costs. - Live Oak Express is projected to reach a 'cruise altitude' of over $750 million in annual originations, which management expects will provide substantial future earnings accretion. - Future provisioning will likely remain 'lumpy' due to the nature of larger commercial banking exposures and the timing of specific impairments versus recoveries. - Guidance assumes modest expense growth as the bank balances investments in new products like merchant services with efficiency gains from AI and automation. - The distillery portfolio, representing 0.5% of total loans, saw 98% of its remaining $60 million exposure classified as management works toward a total exit from the vertical. - Declining U.S. spirits demand and excess barrel inventory have driven sharp declines in collateral values, necessitating $29 million in year-to-date provisions for this specific book. - CECL accounting requirements resulted in a $16 million provision purely due to record loan growth, representing reserves against new loans that have not yet generated interest income. - Commercial banking credit metrics were impacted by six specific relationships across three verticals, though management noted these are larger, sophisticated borrowers often contributing additional equity. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Management confirmed $60 million in unreserved exposure remains, backed by what they describe as conservative collateral estimates. - The exit timeline is variable because some borrowers continue to pay, and the bank will not force out performing customers while actively seeking safe exits for the rest. - Borrowers are described as resilient, with defaults typically driven by specific life or business events rather than macro pressures like energy costs. - New production is being underwritten with interest rate shocks to ensure borrowers have sufficient debt service coverage if rates remain elevated. - Management expects NIM to remain relatively stable, with net interest income growing in tandem with balance sheet expansion. - Deposit competition is intensifying not just in stated rates, but through exception-based pricing and relationship-based marketing promotions. - The upcoming introduction of merchant services is viewed as a critical 'sticky' feature to attract small business operating accounts. - Management expects this to shift the checking mix more toward small business customers, who currently represent 40% of checking balances compared to 60% for commercial.

- Interested in Live Oak Bancshares, Inc.? Here are five stocks we like better. - Q3 EPS was $0.52, reduced by approximately $0.27 per share from a $17 million provision tied to Live Oak's exited distillery lending portfolio. Management said the remaining portfolio is under enhanced monitoring, with about $60 million of unreserved exposure still outstanding. - Underlying operations were strong: record loan originations reached $2.1 billion, loans grew 16% year over year to $13.9 billion, and adjusted pre-provision net revenue rose 33% to a record $88 million. The adjusted efficiency ratio improved to 49%. - Growth initiatives continued to gain momentum, with Live Oak Express originations up 173% year over year to $107 million and business checking balances surpassing $500 million. Management also highlighted stable credit trends outside the distillery portfolio, ongoing deposit growth and expanded use of AI tools. Live Oak Bancshares (NYSE:LOB) reported third-quarter 2026 earnings per share of $0.52, as the bank recorded a $17 million provision tied to its exited distillery lending portfolio. President BJ Losch said the charge reduced earnings by about $0.27 per share, while management emphasized record loan production, improving operating leverage and growth in its Express lending and business checking initiatives. "We reported EPS at $0.52, as obviously not the number we wanted to print and not the number you expected from us," Losch said. He characterized the quarter's underlying operating results as among the strongest in the company's history. → Aurora Rejects Curaleaf's Higher Bid, But the Takeover Fight Isn't Over Total provision expense was $55 million during the quarter. The distillery portfolio accounted for $17 million, or 31%, of the total. Live Oak exited the distillery lending vertical in 2024 and is now managing the remaining loans through workout efforts. The bank said declining U.S. spirits demand and excess barrel inventory have pressured collateral values across the industry. Live Oak has recognized $29 million of provisions year to date through specific reserves and net charge-offs on the portfolio, which represents roughly one-half of 1% of its total loan book. → Could Quantinuum's Breakthrough Make Its Sell-Off a Bargain? Losch said 98% of the remaining distillery portfolio is classified, with all remaining credits under enhanced monitoring. Eight of the 13 loans were still accruing at quarter-end. The company has dedicated workout resources to the portfolio and said it will monitor collateral realization, borrower performance and borrower cooperation. Chief Credit Officer Michael Cairns said the company had about $60 million of unreserved exposure remaining in the portfolio, backed by what he described as conservative collateral estimates. He said Live Oak intends to exit the remaining credits as safely and quickly as possible, though some borrowers continue to make payments. → IonQ's Bold Expansion Could Leave Shareholders Paying the Price Outside of distillery lending, management said small-business banking credit trends remained stable. Small-business past dues were 9 basis points, nonaccrual loans were 1.10%, and net charge-offs were 1.07%, consistent with recent quarters. Commercial banking past dues were essentially zero, while nonaccruals were 1.17% and net charge-offs were 86 basis points, reflecting distillery actions and several larger commercial credit impairments. Cairns said Live Oak was not seeing broad-based credit deterioration across its SBA and commercial books. He noted that commercial credit results can be more volatile because of the larger size of those loans and the timing of impairments, recoveries and charge-offs. Third-quarter originations totaled a record $2.1 billion across 34 industries, up 38% from the prior quarter and 29% from a year earlier. Period-end loans reached $13.9 billion, increasing 6% sequentially and 16% year over year. Losch said $16 million of the quarter's provision was associated with loan growth, as the bank added more than $700 million in loan balances. Under the current expected credit loss, or CECL, accounting framework, Live Oak reserves for loans when they are originated, before earning interest income on them. Adjusted revenue increased 15% year over year to $172 million, while adjusted expenses increased 1%, according to management. Adjusted pre-provision net revenue, or PPNR, reached a record $88 million, up 33% from a year earlier and 16% from the prior quarter. The adjusted efficiency ratio improved to 49% from 56% a year ago. On a reported basis, Chief Financial Officer Walt Phifer said revenue rose 23% year over year while expenses grew 3%, producing a reported efficiency ratio of 49%. Net interest income was $133 million, up 6% sequentially and 15% from a year earlier. Net interest margin held at 3.30%, in line with the preceding five quarters. Phifer said loan volume and mix added about 14 basis points to the margin, offset by higher funding costs amid strong loan growth and a competitive deposit market. Management expects a relatively stable margin in the near term, with balance-sheet growth serving as the primary driver of net interest income. Phifer said a 25-basis-point rate increase could contribute roughly $5 million to $10 million of annual net interest income, though the ultimate effect depends on growth and deposit competition. Live Oak Express, the company's small-dollar SBA 7(a) lending operation, originated a record $107 million during the quarter, up 173% from a year earlier and from $82 million in the prior quarter. The business generated $7 million in gain-on-sale revenue, up 250% year over year. Live Oak generally sells more than 75% of the guaranteed portion of Express loans, while retaining the unguaranteed portion on its balance sheet. The company said Express has generated $18 million of gain-on-sale revenue over the last five quarters and continues to target more than $750 million in annual originations at "cruise altitude." Total gain on sale of guaranteed loans was $19 million in the quarter, up 12% both sequentially and year over year. Live Oak Express represented nearly 40% of that total. The company also continued to expand its business checking platform. Checking balances surpassed $500 million, up 39% from a year earlier, while total relationship deposits reached $1.3 billion. Relationship deposits carried an average cost of 1.84%, compared with the company's overall deposit cost of 3.47%. About 25% of Live Oak customers now have both a loan and deposit account, up from 20% a year ago and 3% four years ago. Losch said the company plans to introduce merchant services as a way to further deepen small-business customer relationships and increase sticky operating-account balances. Live Oak funded loan growth with approximately $920 million in new deposits during the quarter, with customer deposit channels accounting for about 75% of that growth. Management described the funding market as highly competitive, citing stated rates, promotional offers, exception pricing and relationship-based pricing as factors affecting deposit costs. The company said roughly 37% of assets were cash or government-guaranteed at quarter-end. Its Mahan ratio, which measures Tier 1 capital, reserves and fair-value marks against unguaranteed loans, was 15.4%. The tangible common equity version of that measure was 14%. Live Oak also said it is expanding its use of artificial intelligence. All employees have access to AI-native tools, and the company has 200 Claude "super users." A bank-wide Claude for Enterprise rollout was scheduled to begin in the fall, with management highlighting potential uses in portfolio management, credit data aggregation and faster credit work. Live Oak Bancshares, Inc is the parent company of Live Oak Bank, a digital-focused financial institution headquartered in Wilmington, North Carolina. Founded in 2008, the company specializes in providing banking services to small and mid-sized businesses, with a particular emphasis on loans to owners of professional and industry-specific businesses. Through Live Oak Bank, the company offers commercial lending, Small Business Administration (SBA) loans, business deposits, treasury management and other financial services. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "What Live Oak Bancshares (LOB) Said on Its Q3 Earnings Call" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

WILMINGTON, N.C., Oct. 21, 2026 (GLOBE NEWSWIRE) -- Live Oak Bancshares, Inc. (NYSE: LOB) ("Live Oak" or "the Company") today reported third quarter of 2026 net income attributable to common shareholders of $24.3 million, or $0.52 per diluted common share. Live Oak's performance in the quarter, compared to the second quarter of 2026 and third quarter of 2025, includes these notable items: - Net interest income increased 6.1% and 15.2% compared to the second quarter of 2026 and third quarter of 2025, respectively. Net interest margin decreased 3 basis points during the third quarter of 2026 from 3.33% for the second quarter of 2026 and third quarter of 2025 to 3.30% - Revenue (comprised of net interest income and noninterest income) increased 12.5% and 23.4% compared to the second quarter of 2026 and third quarter of 2025, respectively, and noninterest expense increased 1.4% and 2.6% compared to the second quarter of 2026 and third quarter of 2025, respectively, which generated a 25.6% and 52.9% increase in pre-provision net revenue1 compared to the second quarter of 2026 and third quarter of 2025, respectively - Strong loan production of $2.1 billion accompanied by strong deposit growth of $920.6 million during the third quarter of 2026, compared to June 30, 2026, with total assets growing by 5.8% and 15.7% to $17.0 billion as of September 30, 2026, compared to June 30, 2026 and September 30, 2025, respectively - Provision expense for credit losses of $54.7 million for the third quarter of 2026, increased $28.9 million and $32.5 million compared to the second quarter of 2026 and third quarter of 2025, respectively. The provision in the third quarter of 2026 was primarily driven by decisive action of $17.0 million related to the stressed distillery portfolio and reserves to support continued loan growth "The fundamental story at Live Oak is that our franchise is getting stronger. Our operating leverage is improving, Live Oak Express continues to accelerate, and our deposit franchise is marching with gaining momentum," said Live Oak Chairman and CEO James S. (Chip) Mahan III. "The earnings power of this business is expanding because revenue growth is meaningfully outpacing expenses, our loan origination engine is running strong, and our strategic initiatives are delivering results. This operating leverage momentum has aided in absorbing the elevated provision expense in the quarter, which primarily supported record loan growth while also our continued efforts to decisively act to address stress in our distillery-related portfolio. As I think about our operating earnings model, strong loan pipeline, and the possibilities that AI may unlock for both our customers and our employees, I am truly excited about Live Oak's future." Conference Call Live Oak will host a conference call to discuss the Company's financial results and business outlook tomorrow, October 22, 2026, at 9:00 a.m. ET. The call will be accessible by telephone and webcast. A supplementary slide presentation will be posted to the website prior to the event, and a replay will be available for 12 months following the event. The conference call details are as follows: Live Telephone Dial-In U.S.: 833.461.5787 Meeting ID: 300 750 082 Live Webcast Log-In Webcast Link: investor.liveoakbank.com Registration: Name and Email Required Analyst Registration To participate in Q&A, analysts must receive a unique passcode. Please follow instructions located at investor.liveoakbank.com. (1) See accompanying GAAP to Non-GAAP Reconciliation. Third Quarter 2026 Key Measures (Dollars in thousands, except per share data) | | | | | | 3Q 2026 Change vs. | | | | | | | 2Q 2026 | | 3Q 2025 | 3Q 2026 | | 2Q 2026 | | 3Q 2025 | | $ | | % | | $ | | % Total revenue (1) | $ | 175,646 | | | $ | 156,145 | | | $ | 142,330 | | | $ | 19,501 | | | 12.5 | % | | $ | 33,316 | | | 23.4 | % Total noninterest expense | | 85,720 | | | | 84,525 | | | | 83,516 | | | | 1,195 | | | 1.4 | | | | 2,204 | | | 2.6 | Provision for credit losses | | 54,700 | | | | 25,800 | | | | 22,242 | | | | 28,900 | | | 112.0 | | | | 32,458 | | | 145.9 | Income before taxes | | 35,226 | | | | 45,820 | | | | 36,572 | | | | (10,594 | ) | | (23.1 | ) | | | (1,346 | ) | | (3.7 | ) Effective tax rate | | 25.4 | % | | | 19.9 | % | | | 27.6 | % | | n/a | | n/a | | n/a | | n/a Net income attributable to common shareholders | $ | 24,260 | | | $ | 34,701 | | | $ | 25,562 | | | $ | (10,441 | ) | | (30.1) % | | $ | (1,302 | ) | | (5.1) % Diluted earnings per common share | | 0.52 | | | | 0.74 | | | | 0.55 | | | | (0.22 | ) | | (29.7 | ) | | | (0.03 | ) | | (5.5 | ) Loan and lease production | | 2,133,637 | | | | 1,548,432 | | | | 1,648,711 | | | | 585,205 | | | 37.8 | | | | 484,926 | | | 29.4 | Total loans and leases | | 13,869,854 | | | | 13,142,671 | | | | 11,915,511 | | | | 727,183 | | | 5.5 | | | | 1,954,343 | | | 16.4 | Total assets | | 16,965,575 | | | | 16,038,141 | | | | 14,665,902 | | | | 927,434 | | | 5.8 | | | | 2,299,673 | | | 15.7 | Total deposits | | 15,468,175 | | | | 14,547,526 | | | | 13,290,723 | | | | 920,649 | | | 6.3 | | | | 2,177,452 | | | 16.4 | | | | | | | | | | | | | | | | | | | | | | | | | | (1) Total revenue consists of net interest income and total noninterest income. Important Note Regarding Forward-Looking Statements Statements in this press release that are based on other than historical data or that express the Company's plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company's expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration ("SBA") rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company's status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; the impacts of any pandemic or public health situation on trade (including supply chains and export levels), travel, employee productivity and other economic activities that may have a destabilizing and negative effect on financial markets, economic activity and customer behavior; risks relating to the deployment and use of artificial intelligence by the Company, its customers, and counterparties; a reduction in or the termination of the Company's ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems or those of its third-party service providers; risks relating to the material weakness we identified in our internal control over financial reporting; technological risks and developments, including cyber threats, attacks, or events; competition from other lenders; the Company's ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company's business; changes in political and economic conditions, including any prolonged U.S. government shutdown; the impact of heightened regulatory scrutiny of financial products and services and the Company's ability to comply with regulatory requirements and expectations; changes in tariffs and trade barriers, including potential changes in U.S. and international trade policies and the resulting impact on the Company and its customers; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget; adverse results, including related fees and expenses, from pending or future lawsuits, government investigations or private actions; and the other factors discussed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") and available at the SEC's Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments. About Live Oak Bancshares, Inc. Live Oak Bancshares, Inc. (NYSE: LOB) is a financial holding company and the parent company of Live Oak Bank. Live Oak Bancshares and its subsidiaries partner with businesses that share a groundbreaking focus on service and technology to redefine banking. To learn more, visit www.liveoak.bank. Contacts: Walter J. Phifer | CFO | Investor Relations | 910.218.2196 Claire Parker | Corporate Communications | Media Relations | 910.597.1592 Live Oak Bancshares, Inc. Quarterly Statements of Income (unaudited) (Dollars in thousands, except per share data) | Three Months Ended | | 3Q 2026 Change vs. | 3Q 2026 | | 2Q 2026 | | 1Q 2026 | | 4Q 2025 | | 3Q 2025 | | 2Q 2026 | | 3Q 2025 Interest income | | | | | | | | | | | % | | % Loans and fees on loans | $ | 237,270 | | | $ | 221,705 | | | $ | 214,129 | | | $ | 218,852 | | | $ | 211,599 | | | 7.0 | | | 12.1 | Investment securities, taxable | | 14,254 | | | | 13,411 | | | | 13,009 | | | | 12,679 | | | | 12,175 | | | 6.3 | | | 17.1 | Other interest earning assets | | 7,953 | | | | 6,601 | | | | 6,726 | | | | 8,124 | | | | 7,654 | | | 20.5 | | | 3.9 | Total interest income | | 259,477 | | | | 241,717 | | | | 233,864 | | | | 239,655 | | | | 231,428 | | | 7.3 | | | 12.1 | Interest expense | | | | | | | | | | | | | Deposits | | 124,850 | | | | 114,776 | | | | 112,847 | | | | 114,879 | | | | 114,266 | | | 8.8 | | | 9.3 | Borrowings | | 1,618 | | | | 1,603 | | | | 1,617 | | | | 1,656 | | | | 1,677 | | | 0.9 | | | (3.5 | ) Total interest expense | | 126,468 | | | | 116,379 | | | | 114,464 | | | | 116,535 | | | | 115,943 | | | 8.7 | | | 9.1 | Net interest income | | 133,009 | | | | 125,338 | | | | 119,400 | | | | 123,120 | | | | 115,485 | | | 6.1 | | | 15.2 | Provision for credit losses | | 54,700 | | | | 25,800 | | | | 20,100 | | | | 21,845 | | | | 22,242 | | | 112.0 | | | 145.9 | Net interest income after provision for credit losses | | 78,309 | | | | 99,538 | | | | 99,300 | | | | 101,275 | | | | 93,243 | | | (21.3 | ) | | (16.0 | ) Noninterest income | | | | | | | | | | | | | Loan servicing revenue | | 9,710 | | | | 9,194 | | | | 9,094 | | | | 9,227 | | | | 8,812 | | | 5.6 | | | 10.2 | Loan servicing asset revaluation | | (2,605 | ) | | | (4,278 | ) | | | (3,487 | ) | | | (3,932 | ) | | | (4,360 | ) | | 39.1 | | | 40.3 | Net gains on sales of loans | | 20,893 | | | | 17,554 | | | | 15,425 | | | | 12,313 | | | | 17,099 | | | 19.0 | | | 22.2 | Net (loss) gain on loans accounted for under the fair value option | | (66 | ) | | | 291 | | | | (1,165 | ) | | | 1,518 | | | | (350 | ) | | (122.7 | ) | | 81.1 | Equity method investments income (loss) | | 553 | | | | 74 | | | | (817 | ) | | | 23,812 | | | | (1,470 | ) | | 647.3 | | | 137.6 | Equity security investments (losses) gains, net | | (2,573 | ) | | | — | | | | — | | | | 4,691 | | | | 18 | | | (100.0 | ) | | (14,394.4 | ) Lease income | | 2,088 | | | | 2,238 | | | | 2,135 | | | | 2,196 | | | | 2,179 | | | (6.7 | ) | | (4.2 | ) Other noninterest income | | 14,637 | | | | 5,734 | | | | 4,889 | | | | (38 | ) | | | 4,917 | | | 155.3 | | | 197.7 | Total noninterest income | | 42,637 | | | | 30,807 | | | | 26,074 | | | | 49,787 | | | | 26,845 | | | 38.4 | | | 58.8 | Noninterest expense | | | | | | | | | | | | | Salaries and employee benefits | | 46,918 | | | | 48,776 | | | | 49,354 | | | | 47,988 | | | | 49,910 | | | (3.8 | ) | | (6.0 | ) Travel expense | | 1,756 | | | | 1,933 | | | | 1,463 | | | | 1,715 | | | | 1,618 | | | (9.2 | ) | | 8.5 | Professional services expense | | 2,924 | | | | 2,938 | | | | 2,516 | | | | 2,855 | | | | 1,999 | | | (0.5 | ) | | 46.3 | Advertising and marketing expense | | 2,314 | | | | 2,734 | | | | 3,051 | | | | 2,298 | | | | 1,839 | | | (15.4 | ) | | 25.8 | Occupancy expense | | 2,384 | | | | 2,364 | | | | 2,410 | | | | 2,317 | | | | 2,339 | | | 0.8 | | | 1.9 | Technology expense | | 10,263 | | | | 9,608 | | | | 9,749 | | | | 13,397 | | | | 10,234 | | | 6.8 | | | 0.3 | Equipment expense | | 3,595 | | | | 3,662 | | | | 3,693 | | | | 3,677 | | | | 3,320 | | | (1.8 | ) | | 8.3 | Other loan origination and maintenance expense | | 5,101 | | | | 4,864 | | | | 5,919 | | | | 4,917 | | | | 4,777 | | | 4.9 | | | 6.8 | Renewable energy tax credit investment impairment | | 310 | | | | 26 | | | | — | | | | 129 | | | | 336 | | | 1,092.3 | | | (7.7 | ) FDIC insurance | | 4,197 | | | | 4,788 | | | | 4,401 | | | | 3,933 | | | | 3,643 | | | (12.3 | ) | | 15.2 | Other expense | | 5,958 | | | | 2,832 | | | | 2,737 | | | | 5,927 | | | | 3,501 | | | 110.4 | | | 70.2 | Total noninterest expense | | 85,720 | | | | 84,525 | | | | 85,293 | | | | 89,153 | | | | 83,516 | | | 1.4 | | | 2.6 | Income before taxes | | 35,226 | | | | 45,820 | | | | 40,081 | | | | 61,909 | | | | 36,572 | | | (23.1 | ) | | (3.7 | ) Income tax expense | | 8,961 | | | | 9,116 | | | | 10,134 | | | | 15,787 | | | | 10,106 | | | (1.7 | ) | | (11.3 | ) Net income | | 26,265 | | | | 36,704 | | | | 29,947 | | | | 46,122 | | | | 26,466 | | | (28.4 | ) | | (0.8 | ) Net loss attributable to non-controlling interest | | 88 | | | | 91 | | | | 93 | | | | 88 | | | | 50 | | | (3.3 | ) | | 76.0 | Net income attributable to Live Oak Bancshares, Inc. | | 26,353 | | | | 36,795 | | | | 30,040 | | | | 46,210 | | | | 26,516 | | | (28.4 | ) | | (0.6 | ) Preferred stock dividends | | 2,093 | | | | 2,094 | | | | 2,094 | | | | 2,094 | | | | 954 | | | — | | | 119.4 | Net income attributable to common shareholders | $ | 24,260 | | | $ | 34,701 | | | $ | 27,946 | | | $ | 44,116 | | | $ | 25,562 | | | (30.1 | ) | | (5.1 | ) Earnings per common share | | | | | | | | | | | | | Basic | $ | 0.52 | | | $ | 0.75 | | | $ | 0.61 | | | $ | 0.96 | | | $ | 0.56 | | | (30.7 | ) | | (7.1 | ) Diluted | $ | 0.52 | | | $ | 0.74 | | | $ | 0.60 | | | $ | 0.95 | | | $ | 0.55 | | | (29.7 | ) | | (5.5 | ) Weighted average shares outstanding | | | | | | | | | | | | | Basic | | 46,325,262 | | | | 46,265,757 | | | | 46,138,609 | | | | 45,906,268 | | | | 45,780,794 | | | | | Diluted | | 46,869,123 | | | | 46,594,482 | | | | 46,509,040 | | | | 46,298,408 | | | | 46,216,958 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Live Oak Bancshares, Inc. Quarterly Balance Sheets (unaudited) (Dollars in thousands) | As of the quarter ended | | 3Q 2026 Change vs. | 3Q 2026 | | 2Q 2026 | | 1Q 2026 | | 4Q 2025 | | 3Q 2025 | | 2Q 2026 | | 3Q 2025 Assets | | | | | | | | | | | % | | % Cash and due from banks | $ | 1,099,902 | | | $ | 927,630 | | | $ | 816,135 | | | $ | 864,904 | | | $ | 892,445 | | | 18.6 | | | 23.2 | Certificates of deposit with other banks | | 250 | | | | 250 | | | | 250 | | | | 250 | | | | 250 | | | — | | | — | Investment securities available-for-sale | | 1,500,709 | | | | 1,467,855 | | | | 1,434,538 | | | | 1,427,401 | | | | 1,373,219 | | | 2.2 | | | 9.3 | Loans held for sale | | 496,807 | | | | 511,812 | | | | 435,313 | | | | 420,055 | | | | 360,693 | | | (2.9 | ) | | 37.7 | Loans and leases held for investment (1) | | 13,373,047 | | | | 12,630,859 | | | | 12,158,216 | | | | 11,973,622 | | | | 11,554,818 | | | 5.9 | | | 15.7 | Allowance for credit losses on loans and leases | | (213,630 | ) | | | (193,417 | ) | | | (193,279 | ) | | | (192,264 | ) | | | (185,700 | ) | | (10.5 | ) | | (15.0 | ) Net loans and leases | | 13,159,417 | | | | 12,437,442 | | | | 11,964,937 | | | | 11,781,358 | | | | 11,369,118 | | | 5.8 | | | 15.7 | Premises and equipment, net | | 220,894 | | | | 231,198 | | | | 235,329 | | | | 240,203 | | | | 241,140 | | | (4.5 | ) | | (8.4 | ) Foreclosed assets | | 8,484 | | | | 11,017 | | | | 12,005 | | | | 8,208 | | | | 11,024 | | | (23.0 | ) | | (23.0 | ) Servicing assets | | 71,215 | | | | 66,733 | | | | 64,677 | | | | 63,155 | | | | 62,491 | | | 6.7 | | | 14.0 | Other assets | | 407,897 | | | | 384,204 | | | | 336,849 | | | | 329,244 | | | | 355,522 | | | 6.2 | | | 14.7 | Total assets | $ | 16,965,575 | | | $ | 16,038,141 | | | $ | 15,300,033 | | | $ | 15,134,778 | | | $ | 14,665,902 | | | 5.8 | | | 15.7 | Liabilities and shareholders' equity | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | Deposits: | | | | | | | | | | | | | Noninterest-bearing | $ | 638,332 | | | $ | 605,237 | | | $ | 510,917 | | | $ | 515,051 | | | $ | 494,019 | | | 5.5 | | | 29.2 | Interest-bearing | | 14,829,843 | | | | 13,942,289 | | | | 13,324,141 | | | | 13,173,608 | | | | 12,796,704 | | | 6.4 | | | 15.9 | Total deposits | | 15,468,175 | | | | 14,547,526 | | | | 13,835,058 | | | | 13,688,659 | | | | 13,290,723 | | | 6.3 | | | 16.4 | Borrowings | | 99,793 | | | | 99,766 | | | | 99,746 | | | | 102,404 | | | | 105,045 | | | — | | | (5.0 | ) Other liabilities | | 85,373 | | | | 73,931 | | | | 83,468 | | | | 89,609 | | | | 67,585 | | | 15.5 | | | 26.3 | Total liabilities | | 15,653,341 | | | | 14,721,223 | | | | 14,018,272 | | | | 13,880,672 | | | | 13,463,353 | | | 6.3 | | | 16.3 | Shareholders' equity | | | | | | | | | | | | | Preferred stock | | 96,266 | | | | 96,266 | | | | 96,266 | | | | 96,266 | | | | 96,266 | | | — | | | — | Class A common stock (voting) | | 404,119 | | | | 399,396 | | | | 392,258 | | | | 388,389 | | | | 383,288 | | | 1.2 | | | 5.4 | Retained earnings | | 892,626 | | | | 869,757 | | | | 836,444 | | | | 809,885 | | | | 770,820 | | | 2.6 | | | 15.8 | Accumulated other comprehensive loss | | (84,743 | ) | | | (52,555 | ) | | | (47,352 | ) | | | (44,672 | ) | | | (52,151 | ) | | (61.2 | ) | | (62.5 | ) Total shareholders' equity attributed to Live Oak Bancshares, Inc. | | 1,308,268 | | | | 1,312,864 | | | | 1,277,616 | | | | 1,249,868 | | | | 1,198,223 | | | (0.4 | ) | | 9.2 | Non-controlling interest | | 3,966 | | | | 4,054 | | | | 4,145 | | | | 4,238 | | | | 4,326 | | | (2.2 | ) | | (8.3 | ) Total shareholders' equity | | 1,312,234 | | | | 1,316,918 | | | | 1,281,761 | | | | 1,254,106 | | | | 1,202,549 | | | (0.4 | ) | | 9.1 | Total liabilities and shareholders' equity | $ | 16,965,575 | | | $ | 16,038,141 | | | $ | 15,300,033 | | | $ | 15,134,778 | | | $ | 14,665,902 | | | 5.8 | | | 15.7 | | | | | | | | | | | | | | | | | | | | | | | | | | (1) Includes $216.6 million, $232.1 million, $244.9 million, $260.6 million and $280.3 million loans measured at fair value for the quarters ended September 30, 2026, June 30, 2026, March 31, 2026, December 31, 2025, and September 30, 2025, respectively. Live Oak Bancshares, Inc. Statements of Income (unaudited) (Dollars in thousands, except per share data) | Nine Months Ended | September 30, 2026 | | September 30, 2025 Interest income | | | Loans and fees on loans | $ | 673,104 | | | $ | 611,728 | Investment securities, taxable | | 40,674 | | | | 34,912 | Other interest earning assets | | 21,280 | | | | 22,177 | Total interest income | | 735,058 | | | | 668,817 | Interest expense | | | Deposits | | 352,473 | | | | 338,534 | Borrowings | | 4,838 | | | | 5,045 | Total interest expense | | 357,311 | | | | 343,579 | Net interest income | | 377,747 | | | | 325,328 | Provision for credit losses | | 100,600 | | | | 74,458 | Net interest income after provision for credit losses | | 277,147 | | | | 250,780 | Noninterest income | | | Loan servicing revenue | | 27,998 | | | | 25,675 | Loan servicing asset revaluation | | (10,370 | ) | | | (12,145 | ) Net gains on sales of loans | | 53,872 | | | | 50,107 | Net loss on loans accounted for under the fair value option | | (940 | ) | | | (302 | ) Equity method investments (loss) income | | (190 | ) | | | (6,425 | ) Equity security investments gain (losses), net | | (2,573 | ) | | | 1,042 | Lease income | | 6,461 | | | | 7,855 | Other noninterest income | | 25,260 | | | | 13,864 | Total noninterest income | | 99,518 | | | | 79,671 | Noninterest expense | | | Salaries and employee benefits | | 145,048 | | | | 141,447 | Travel expense | | 5,152 | | | | 5,316 | Professional services expense | | 8,378 | | | | 7,897 | Advertising and marketing expense | | 8,099 | | | | 9,924 | Occupancy expense | | 7,158 | | | | 7,445 | Technology expense | | 29,620 | | | | 29,551 | Equipment expense | | 10,950 | | | | 10,750 | Other loan origination and maintenance expense | | 15,884 | | | | 13,552 | Renewable energy tax credit investment impairment | | 336 | | | | 606 | FDIC insurance | | 13,386 | | | | 10,739 | Other expense | | 11,527 | | | | 12,318 | Total noninterest expense | | 255,538 | | | | 249,545 | Income before taxes | | 121,127 | | | | 80,906 | Income tax expense | | 28,211 | | | | 21,385 | Net income | | 92,916 | | | | 59,521 | Net loss attributable to non-controlling interest | | 272 | | | | 140 | Net income attributable to Live Oak Bancshares, Inc. | | 93,188 | | | | 59,661 | Preferred stock dividends | | 6,281 | | | | 954 | Net income attributable to common shareholders | $ | 86,907 | | | $ | 58,707 | Earnings per common share | | | Basic | $ | 1.88 | | | $ | 1.29 | Diluted | $ | 1.86 | | | $ | 1.28 | Weighted average shares outstanding | | | Basic | | 46,243,893 | | | | 45,632,313 | Diluted | | 46,658,232 | | | | 45,956,835 | | | | | | | | Live Oak Bancshares, Inc. Quarterly Selected Financial Data (Dollars in thousands, except per share data) | As of and for the three months ended | 3Q 2026 | | 2Q 2026 | | 1Q 2026 | | 4Q 2025 | | 3Q 2025 Income Statement Data | | | | | | | | | Net income attributable to common shareholders | $ | 24,260 | | | $ | 34,701 | | | $ | 27,946 | | | $ | 44,116 | | | $ | 25,562 | Per Common Share | | | | | | | | | Net income, diluted | $ | 0.52 | | | $ | 0.74 | | | $ | 0.60 | | | $ | 0.95 | | | $ | 0.55 | Dividends declared - common | | 0.03 | | | | 0.03 | | | | 0.03 | | | | 0.03 | | | | 0.03 | Book value per common share | | 26.13 | | | | 26.29 | | | | 25.55 | | | | 25.06 | | | | 24.03 | Tangible book value per common share (1) | | 26.05 | | | | 26.20 | | | | 25.46 | | | | 24.97 | | | | 23.96 | Performance Ratios | | | | | | | | | Return on average assets (annualized) | | 0.59 | % | | | 0.90 | % | | | 0.74 | % | | | 1.19 | % | | | 0.72 | % Return on average common equity (annualized) | | 7.70 | | | | 11.36 | | | | 9.39 | | | | 15.25 | | | | 9.32 | Net interest margin | | 3.30 | | | | 3.33 | | | | 3.27 | | | | 3.38 | | | | 3.33 | Efficiency ratio (1) | | 48.80 | | | | 54.13 | | | | 58.63 | | | | 51.56 | | | | 58.68 | Noninterest income to total revenue | | 24.27 | | | | 19.73 | | | | 17.92 | | | | 28.79 | | | | 18.86 | Selected Loan Metrics | | | | | | | | | Loans and leases originated | $ | 2,133,637 | | | $ | 1,548,432 | | | $ | 1,368,311 | | | $ | 1,638,113 | | | $ | 1,648,711 | Outstanding balance of sold loans serviced | | 6,338,443 | | | | 5,991,590 | | | | 5,943,787 | | | | 5,599,724 | | | | 5,563,363 | Asset Quality Ratios | | | | | | | | | Allowance for credit losses to loans and leases held for investment (3) | | 1.62 | % | | | 1.56 | % | | | 1.62 | % | | | 1.64 | % | | | 1.65 | % Net charge-offs (3) | $ | 32,087 | | | $ | 24,162 | | | $ | 18,585 | | | $ | 13,739 | | | $ | 16,816 | Net charge-offs to average loans and leases held for investment (2) (3) | | 1.00 | % | | | 0.80 | % | | | 0.63 | % | | | 0.48 | % | | | 0.61 | % | | | | | | | | | Nonperforming loans and leases at historical cost (3) | | | | | | | | | Unguaranteed | $ | 138,422 | | | $ | 124,336 | | | $ | 116,791 | | | $ | 101,371 | | | $ | 76,887 | Guaranteed | | 370,267 | | | | 346,419 | | | | 327,409 | | | | 399,786 | | | | 379,381 | Total | | 508,689 | | | | 470,755 | | | | 444,200 | | | | 501,157 | | | | 456,268 | Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (3) | | 1.05 | % | | | 1.00 | % | | | 0.98 | % | | | 0.87 | % | | | 0.68 | % | | | | | | | | | Nonperforming loans at fair value (4) | | | | | | | | | Unguaranteed | $ | 11,607 | | | $ | 6,623 | | | $ | 6,884 | | | $ | 7,715 | | | $ | 6,775 | Guaranteed | | 46,300 | | | | 52,695 | | | | 54,679 | | | | 53,887 | | | | 54,887 | Total | | 57,907 | | | | 59,318 | | | | 61,563 | | | | 61,602 | | | | 61,662 | Unguaranteed nonperforming fair value loans to fair value loans held for investment (4) | | 5.36 | % | | | 2.85 | % | | | 2.81 | % | | | 2.96 | % | | | 2.42 | % | | | | | | | | | Capital Ratios | | | | | | | | | Common equity tier 1 capital (to risk-weighted assets) | | 9.94 | % | | | 10.42 | % | | | 10.63 | % | | | 10.53 | % | | | 10.51 | % Tier 1 leverage capital (to average assets) | | 8.23 | | | | 8.59 | | | | 8.47 | | | | 8.48 | | | | 8.57 | | | | | | | | | | | | | | | | | | | | Notes to Quarterly Selected Financial Data (1) See accompanying GAAP to Non-GAAP Reconciliation. (2) Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized. (3) Loans and leases at historical cost only (excludes loans measured at fair value). (4) Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost). Live Oak Bancshares, Inc. Quarterly Average Balances and Net Interest Margin (Dollars in thousands) | Three Months Ended September 30, 2026 | | Three Months Ended June 30, 2026 | | Three Months Ended September 30, 2025 | Average Balance | | Interest | | Average Yield/ Rate | | Average Balance | | Interest | | Average Yield/ Rate | | Average Balance | | Interest | | Average Yield/ Rate Interest-earning assets: | | | | | | | | | | | | | | | | | Interest-earning balances in other banks | $ | 818,936 | | | $ | 7,953 | | 3.85 | % | | $ | 710,110 | | | $ | 6,601 | | 3.73 | % | | $ | 701,059 | | | $ | 7,654 | | 4.33 | % Investment securities | | 1,577,763 | | | | 14,254 | | 3.58 | | | | 1,519,670 | | | | 13,411 | | 3.54 | | | | 1,418,810 | | | | 12,175 | | 3.40 | Loans held for sale | | 571,358 | | | | 11,460 | | 7.96 | | | | 527,857 | | | | 10,441 | | 7.93 | | | | 396,084 | | | | 8,103 | | 8.12 | Loans and leases held for investment (1) | | 13,022,914 | | | | 225,810 | | 6.88 | | | | 12,322,003 | | | | 211,264 | | 6.88 | | | | 11,249,234 | | | | 203,496 | | 7.18 | Total interest-earning assets | | 15,990,971 | | | | 259,477 | | 6.44 | | | | 15,079,640 | | | | 241,717 | | 6.43 | | | | 13,765,187 | | | | 231,428 | | 6.67 | Less: Allowance for credit losses on loans and leases | | (192,700 | ) | | | | | | | (193,304 | ) | | | | | | | (182,001 | ) | | | | Noninterest-earning assets | | 586,176 | | | | | | | | 537,352 | | | | | | | | 530,529 | | | | | Total assets | $ | 16,384,447 | | | | | | | $ | 15,423,688 | | | | | | | $ | 14,113,715 | | | | | Interest-bearing liabilities: | | | | | | | | | | | | | | | | | Savings | $ | 7,661,348 | | | $ | 64,020 | | 3.32 | % | | $ | 7,170,652 | | | $ | 58,289 | | 3.26 | % | | $ | 6,608,380 | | | $ | 58,657 | | 3.52 | % Certificates of deposit | | 5,856,418 | | | | 55,322 | | 3.75 | | | | 5,637,001 | | | | 51,968 | | 3.70 | | | | 5,272,818 | | | | 51,443 | | 3.87 | Other interest-bearing deposits | | 747,469 | | | | 5,508 | | 2.92 | | | | 629,105 | | | | 4,519 | | 2.88 | | | | 498,455 | | | | 4,166 | | 3.32 | Total deposits | | 14,265,235 | | | | 124,850 | | 3.47 | | | | 13,436,758 | | | | 114,776 | | 3.43 | | | | 12,379,653 | | | | 114,266 | | 3.66 | Borrowings | | 99,761 | | | | 1,618 | | 6.43 | | | | 99,743 | | | | 1,603 | | 6.45 | | | | 106,744 | | | | 1,677 | | 6.23 | Total interest-bearing liabilities | | 14,364,996 | | | | 126,468 | | 3.49 | | | | 13,536,501 | | | | 116,379 | | 3.45 | | | | 12,486,397 | | | | 115,943 | | 3.68 | Noninterest-bearing deposits | | 594,809 | | | | | | | | 536,054 | | | | | | | | 401,916 | | | | | Noninterest-bearing liabilities | | 64,497 | | | | | | | | 29,222 | | | | | | | | 63,133 | | | | | Shareholders' equity | | 1,356,092 | | | | | | | | 1,317,767 | | | | | | | | 1,157,893 | | | | | Non-controlling interest | | 4,053 | | | | | | | | 4,144 | | | | | | | | 4,376 | | | | | Total liabilities and shareholders' equity | $ | 16,384,447 | | | | | | | $ | 15,423,688 | | | | | | | $ | 14,113,715 | | | | | Net interest income and interest rate spread | | | $ | 133,009 | | 2.95 | % | | | | $ | 125,338 | | 2.98 | % | | | | $ | 115,485 | | 2.99 | % Net interest margin | | | | | 3.30 | | | | | | | 3.33 | | | | | | | 3.33 | Ratio of average interest-earning assets to average interest-bearing liabilities | | | | | 111.32 | % | | | | | | 111.40 | % | | | | | | 110.24 | % | | | | | | | | | | | | | | | | | | | | (1) Average loan and lease balances include non-accruing loans and leases. Live Oak Bancshares, Inc. GAAP to Non-GAAP Reconciliation (Dollars in thousands) | As of and for the three months ended | 3Q 2026 | | 2Q 2026 | | 1Q 2026 | | 4Q 2025 | | 3Q 2025 Total shareholders' equity | $ | 1,312,234 | | | $ | 1,316,918 | | | $ | 1,281,761 | | | $ | 1,254,106 | | | $ | 1,202,549 | Less: | | | | | | | | | Preferred stock | | 96,266 | | | | 96,266 | | | | 96,266 | | | | 96,266 | | | | 96,266 | Non-controlling interest | | 3,966 | | | | 4,054 | | | | 4,145 | | | | 4,238 | | | | 4,326 | Total common shareholders' equity | $ | 1,212,002 | | | $ | 1,216,598 | | | $ | 1,181,350 | | | $ | 1,153,602 | | | $ | 1,101,957 | Less: | | | | | | | | | Goodwill | | 1,797 | | | | 1,797 | | | | 1,797 | | | | 1,797 | | | | 1,797 | Other intangible assets | | 1,937 | | | | 2,013 | | | | 2,089 | | | | 2,165 | | | | 1,453 | Tangible common shareholders' equity (a) | $ | 1,208,268 | | | $ | 1,212,788 | | | $ | 1,177,464 | | | $ | 1,149,640 | | | $ | 1,098,707 | Shares outstanding (c) | | 46,377,874 | | | | 46,283,620 | | | | 46,240,691 | | | | 46,032,402 | | | | 45,855,739 | Total assets | $ | 16,965,575 | | | $ | 16,038,141 | | | $ | 15,300,033 | | | $ | 15,134,778 | | | $ | 14,665,902 | Less: | | | | | | | | | Goodwill | | 1,797 | | | | 1,797 | | | | 1,797 | | | | 1,797 | | | | 1,797 | Other intangible assets | | 1,937 | | | | 2,013 | | | | 2,089 | | | | 2,165 | | | | 1,453 | Tangible assets (b) | $ | 16,961,841 | | | $ | 16,034,331 | | | $ | 15,296,147 | | | $ | 15,130,816 | | | $ | 14,662,652 | Tangible common shareholders' equity to tangible assets (a/b) | | 7.12 | % | | | 7.56 | % | | | 7.70 | % | | | 7.60 | % | | | 7.49 | % Tangible book value per common share (a/c) | $ | 26.05 | | | $ | 26.20 | | | $ | 25.46 | | | $ | 24.97 | | | $ | 23.96 | Efficiency ratio: | | | | | | | | | Noninterest expense (d) | $ | 85,720 | | | $ | 84,525 | | | $ | 85,293 | | | $ | 89,153 | | | $ | 83,516 | Net interest income | | 133,009 | | | | 125,338 | | | | 119,400 | | | | 123,120 | | | | 115,485 | Noninterest income | | 42,637 | | | | 30,807 | | | | 26,074 | | | | 49,787 | | | | 26,845 | Total revenue (e) | $ | 175,646 | | | $ | 156,145 | | | $ | 145,474 | | | $ | 172,907 | | | $ | 142,330 | Efficiency ratio (d/e) | | 48.80 | % | | | 54.13 | % | | | 58.63 | % | | | 51.56 | % | | | 58.68 | % Pre-provision net revenue (e-d) | $ | 89,926 | | | $ | 71,620 | | | $ | 60,181 | | | $ | 83,754 | | | $ | 58,814 | | | | | | | | | | | | | | | | | | | | This press release presents non-GAAP financial measures. The adjustments to reconcile from the non-GAAP financial measures to the applicable GAAP financial measure are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results. The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company. The non-GAAP financial measures are used by management to assess the performance of the Company's business for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.

Live Oak Bancshares (LOB) came out with quarterly earnings of $0.52 per share, missing the Zacks Consensus Estimate of $0.64 per share. This compares to earnings of $0.55 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -18.75%. A quarter ago, it was expected that this bank holding company would post earnings of $0.64 per share when it actually produced earnings of $0.74, delivering a surprise of +15.63%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Live Oak Bancshares, which belongs to the Zacks Banks - Southeast industry, posted revenues of $175.65 million for the quarter ended September 2026, surpassing the Zacks Consensus Estimate by 4.86%. This compares to year-ago revenues of $146.1 million. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Live Oak Bancshares shares have added about 2.9% since the beginning of the year versus the S&P 500's gain of 12.7%. While Live Oak Bancshares has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Live Oak Bancshares was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.89 on $169.55 million in revenues for the coming quarter and $2.96 on $639.5 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Banks - Southeast is currently in the top 28% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, TowneBank (TOWN), has yet to report results for the quarter ended September 2026. This community bank is expected to post quarterly earnings of $0.82 per share in its upcoming report, which represents a year-over-year change of -1.2%. The consensus EPS estimate for the quarter has been revised 0.6% higher over the last 30 days to the current level. TowneBank's revenues are expected to be $250.72 million, up 15.7% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Live Oak Bancshares, Inc. (LOB) : Free Stock Analysis Report Towne Bank (TOWN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research