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Live Oak Bancshares, Inc. (LOB)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered accelerating core earnings power: total revenue rose 14.0% QoQ to $143.747M, net interest margin expanded 8 bps to 3.28%, and pre-provision net revenue increased 29.4% QoQ to $54.454M .
  • Diluted EPS was $0.51 vs $0.21 in Q1 2025 (QoQ +$0.30); Wall Street consensus (S&P Global) Primary EPS was $0.50, implying a modest beat on EPS* .
  • Record Q2 loan originations of $1.53B (+9% QoQ; +30% YoY) alongside strong deposit growth of $198.8M drove linked-quarter loan growth of ~3% and improved funding mix via non-interest-bearing checking momentum .
  • Credit costs moderated (provision $23.3M, down ~$5.7M QoQ), with improving leading indicators (lower past dues, fewer new defaults) even as Q2 net charge-offs rose tactically to accelerate resolution of unlikely-to-recover loans .

What Went Well and What Went Wrong

What Went Well

  • Record Q2 production ($1.5266B) and healthy deposit growth (+$198.8M) underpinned revenue growth and margin expansion; NIM improved to 3.28% and net interest income rose 8.6% QoQ to $109.221M .
  • Gain-on-sale revenue strengthened: $322M of guaranteed loans sold at a 7% average premium, including ~$20M of USDA sales as that market showed signs of reopening .
  • Management emphasized momentum and modernization, with BJ Losch highlighting “positive momentum across all areas… positioning the company to transform… in an AI-driven world,” and Chip Mahan underscored AI use cases to do “more business with better customers” rather than simply cut overhead .

What Went Wrong

  • YoY earnings still below prior-year levels: net income of $23.428M vs $26.963M in Q2 2024; diluted EPS $0.51 vs $0.59 YoY .
  • Net charge-offs elevated at $31.445M (1.19% of average loans, annualized), reflecting deliberate actions to clear unlikely-to-recover loans; total historical-cost nonperforming loans remained high at $396.332M (though improved vs Q1) .
  • Total noninterest expense increased 6.3% QoQ to $89.293M (growth-related costs and ~$3M one-time items), with other expense and technology expense higher QoQ .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total revenue ($USD Thousands)125,479 128,067 126,113 143,747
Net interest income ($USD Thousands)91,320 97,474 100,532 109,221
Noninterest income ($USD Thousands)34,159 30,593 25,581 34,526
Total noninterest expense ($USD Thousands)77,656 81,257 84,017 89,293
Provision for credit losses ($USD Thousands)11,765 33,581 28,964 23,252
Net income attributable ($USD Thousands)26,963 9,900 9,717 23,428
Diluted EPS ($)0.59 0.22 0.21 0.51
Net interest margin (%)3.28 3.15 3.20 3.28
Efficiency ratio (%)61.89 63.45 66.62 62.12
Pre-provision net revenue ($USD Thousands)47,823 46,810 42,096 54,454

KPIs and Asset Quality

KPIQ2 2024Q4 2024Q1 2025Q2 2025
Loans & leases originated ($USD Thousands)1,171,141 1,421,118 1,396,223 1,526,592
Total deposits ($USD Thousands)10,707,031 11,760,494 12,395,945 12,594,790
Total assets ($USD Thousands)11,868,570 12,943,380 13,595,704 13,831,208
Outstanding balance of sold loans serviced ($USD Thousands)4,292,857 4,715,895 4,949,962 5,321,284
Allowance for credit losses to HFI loans (%)1.57 1.69 1.83 1.70
Net charge-offs ($USD Thousands)8,253 33,566 6,774 31,445
NCOs to average loans (%)0.38 1.39 0.27 1.19
Nonperforming loans & leases (historical cost, total $USD Thousands)160,092 304,297 422,900 396,332
Nonperforming loans (fair value, total $USD Thousands)61,160 63,988 68,038 69,326

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal quantitative guidance (revenue, margins, OpEx, tax, segments)2H 2025Not providedNot providedMaintained (no formal guidance)
Dividend per share ($)Quarterly$0.03$0.03Maintained
Funding/cost of deposits (pricing commentary)Near termRepricing down as market normalizesConsumer savings -10 bps; business savings -15 bps; maturing CDs renewed ~72 bps lower (Q2 execution; strategy continues)Ongoing downward repricing tailwind
Loan originations pipeline ($)Near termN/A~$3.8B pipeline; confidence in strong growthPositive outlook (qualitative)

Earnings Call Themes & Trends

TopicQ4 2024 MentionsQ1 2025 MentionsQ2 2025 Current PeriodTrend
AI/technology initiativesOngoing digital platform focus (nCino heritage) No explicit AI callout in PR“Modernizing the engine… positioning… in an AI-driven world”; multiple AI use cases; focus on scaling, not cost-cutting Accelerating
Funding mix & deposit strategyDeposit growth +$1.49B in 2024; NIM pressure Strong deposit growth +$635.5M; NIM +5 bps QoQ Continued deposit growth; checking momentum; repricing down of savings/CDs supports NIM Improving
SBA/USDA loan sales marketConsistent SBA demand; USDA choppy SBA demand present; gain-on-sale continued SBA demand “insanely consistent”; USDA sales resume (~$20M) with investor preference for downward rate protection Improving (USDA), Stable (SBA)
Small business credit cycleElevated provisions in 4Q; NCO spike Credit cycle pressure continues; provision $29.0M “End… near” as leading indicators improve; provision down QoQ; intentional NCOs to clear risk Moderating
Competitive landscape & SOP changesIndustry-wide adjustments Navigating uncertainty; execution consistency SOP reversals caused peers to pull back; LOB gaining share on consistency and brand strength Favorable
Regulatory/legal/macro (tariffs, scrutiny)Elevated scrutiny & macro cited generally Macro uncertainty reiterated Continued macro uncertainty acknowledged; focus on underwriting discipline Stable

Management Commentary

  • “The promise of the Live Oak business model was displayed this quarter, resulting in very positive momentum… positioning the company to transform what the employee and customer experience looks like in an AI-driven world.” — BJ Losch, President .
  • “Loan growth and the declining cost of funds… (downward repricing of savings; CDs rolling over lower; and growth in non-interest-bearing checking) are the primary drivers of quarter-over-quarter improvement.” — Walt Phifer, CFO .
  • “Do we have a number of use cases… with artificial intelligence? Yes… Do I think about that to reduce overhead dramatically? No, I think we can do more business with better customers across our entire spectrum.” — Chip Mahan, Chairman & CEO .

Q&A Highlights

  • Growth outlook: Q2 paydowns were ~$100M higher due to seven idiosyncratic loans; pipeline ~$3.8B supports continued strong growth (historical quarterly loan growth 3–5%) .
  • Funding cost competition: Opportunity to continue lowering consumer and business savings rates while maintaining growth; proactive repricing aligned to market normalization .
  • SBA/USDA secondary market: SBA demand steady with healthy premiums; USDA market re-opening due to investor desire for downward rate protection; premiums supported by fixed-rate structures and prepayment penalties .
  • Competitive dynamics: SOP changes led peers to adjust or exit small-dollar SBA; LOB’s consistent underwriting and execution gaining share .
  • Credit cycle confidence: Declining past dues and defaults, manageable non-accruals, and stronger servicing visibility reinforce view that the small business credit cycle is nearing its end .

Estimates Context

  • EPS vs Consensus: Q2 2025 Primary EPS consensus $0.50 vs actual $0.5263 — EPS beat; Q1 2025 $0.37 vs $0.2647 — miss; Q3 2025 consensus $0.60 (forward)*.
  • Revenue vs Consensus: Q2 2025 revenue consensus $140.9M vs S&P Global “actual” $120.225M — revenue miss using S&P’s revenue definition; note the company-reported total revenue was $143.747M (company definition includes net interest income and total noninterest income), highlighting definitional differences *.

EPS and Revenue vs S&P Global Consensus

MetricQ1 2025Q2 2025Q3 2025
EPS Consensus Mean ($)0.37*0.50*0.60*
EPS Actual (S&P Primary) ($)0.2647*0.5263*0.5866*
Revenue Consensus Mean ($)131.70M*140.90M*147.94M*
Revenue Actual (S&P) ($)97.149M*120.225M*123.521M*
Target Price Consensus Mean ($)42.5*42.5*42.5*
# EPS Estimates3*3*5*
# Revenue Estimates1*1*3*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core earnings power is inflecting: PPNR +29% QoQ with margin tailwinds from deposit repricing and business checking growth; expect continued NIM support as CDs roll over lower .
  • Lending momentum durable: record Q2 originations and a ~$3.8B pipeline suggest sustained growth; SBA demand remains robust and USDA market shows signs of revival .
  • Credit cycle moderating: leading indicators (past dues, defaults, non-accruals) improving; provision down QoQ; tactical NCOs should de-risk future periods .
  • Competitive positioning strengthening: SOP changes have advantaged LOB’s consistent underwriting and execution, supporting share gains in small-dollar SBA .
  • Strategic focus on AI modernization: management targets efficiency and customer experience improvements from AI use cases to scale the franchise without relying on headcount cuts .
  • Watch definitional differences on “revenue” vs consensus: company-reported total revenue ($143.747M) differs from S&P’s “revenue” actual ($120.225M); use EPS for cleaner beat/miss signal while monitoring margin trajectory and PPNR *.
  • Near-term catalysts: continued deposit repricing, checking growth, SBA gain-on-sale premiums, and potential consistency in USDA sales could drive estimate revisions and sentiment .

Appendix: Prior Two Quarters (for Trend)

  • Q1 2025 key measures: total revenue $126.113M; diluted EPS $0.21; provision $29.0M; record Q1 production $1.40B; deposit growth +$635.5M; NIM +5 bps to 3.20% .
  • Q4 2024 key measures: total revenue $128.067M; diluted EPS $0.22; provision $33.581M; FY 2024 loan production $5.16B; total assets $12.94B .
  • Q2 2025 earnings announcement logistics (date/call details) .