Live Oak Bancshares’ third quarter results drew a negative market reaction, with management emphasizing strong growth in small business lending and customer deposit expansion as primary drivers. The company’s leadership pointed to a 22% increase in loan production and a 17% rise in loan outstandings, alongside significant momentum in business checking account adoption. Despite these advances, the quarter saw higher nonaccrual loan balances and non-GAAP profit and operating income falling short of Wall Street consensus. Chief Credit Officer Michael Cairns acknowledged the uptick in nonperforming assets, attributing it to persistent stress in the small business sector but described the situation as manageable, emphasizing “a lot of hands and eyes on the portfolio.”
Is now the time to buy LOB? Find out in our full research report (it’s free for active Edge members).
Live Oak Bancshares (LOB) Q3 CY2025 Highlights:
- Revenue: $146.1 million vs analyst estimates of $146.6 million (12.4% year-on-year growth, in line)
- Adjusted EPS: $0.59 vs analyst expectations of $0.60 (2.2% miss)
- Adjusted Operating Income: $43.96 million vs analyst estimates of $61.34 million (30.1% margin, 28.3% miss)
- Market Capitalization: $1.48 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are 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.
Our Top 5 Analyst Questions From Live Oak Bancshares’s Q3 Earnings Call
- David Rochester (Cantor): Sought clarity on credit trends and nonperforming asset increases. Chief Credit Officer Michael Cairns said nonaccruals rose due to ongoing small business stress, but controls and reserves remain strong, and past-due levels are low.
- Timothy Switzer (KBW): Asked about the trajectory for net interest margin given expected rate cuts. CFO Walter Phifer explained that while rate cuts create margin pressure, net interest income growth remains a priority due to consistent loan and deposit expansion.
- David Feaster (Raymond James): Inquired about AI’s role in underwriting and risk management. COO BJ Losch described pilots where AI ingests loan documents and enhances credit memo preparation, improving efficiency but not replacing human oversight.
- Bill Young (TD Cowen): Questioned the sustainability of improved return on tangible common equity. Cairns outlined the goal of achieving consistent 15% returns and 15% EPS growth, driven by deposit growth, fee income, and credit moderation.
- David Feaster (Raymond James): Asked about embedded finance and stablecoin opportunities. Losch indicated a strategic pivot to an external partner for embedded banking and ongoing evaluation of stablecoins, with support from a new board member with policy expertise.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will monitor (1) the pace of checking account and deposit growth as Live Oak rolls out new banking services, (2) tangible progress in AI-enabled loan origination and process automation, and (3) stabilization in small business credit quality, especially as the credit cycle evolves. Additionally, we are watching the impact of the Apiture sale on reported earnings and the company’s ability to maintain operating leverage amid changing interest rates.
Live Oak Bancshares currently trades at $32.29, down from $34.68 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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