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Live Oak Bancshares, Inc. (LOB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $0.22 on net income of $9.9M; total revenue was $128.1M, down 1% QoQ but up 7% YoY, with NIM compressing to 3.15% (down 18 bps QoQ) due to timing effects from Fed cuts and elevated nonaccruals dragging ~$3M of NII and ~11 bps of NIM .
  • Loan originations were $1.42B (second-largest quarter ever), driving 4% linked-quarter loan growth; deposit engine remained resilient with business checking balances up 46% QoQ to ~$212M and total deposits up to $11.76B (+3% QoQ) .
  • Provision for credit losses remained elevated at $33.6M, driven primarily by the SBA portfolio and growth; net charge-offs rose to $33.6M as the company proactively moved defaults through impairment/charge-off .
  • Management reiterated a path to a ~3.50% NIM “towards the end of 2025,” potentially slipping into early 2026; secondary market demand remained strong with ~$278M sold at ~7% average premium in Q4, providing liquidity and fee income .
  • S&P Global consensus estimates were unavailable at time of retrieval; therefore, estimate comparisons are not shown (see Estimates Context) [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • Strong production and balance-sheet growth: Q4 originations of $1.42B (+45% YoY) and loans held for investment up 4% QoQ; 2024 originations reached a record ~$5.16B, total assets +14.8% YoY to $12.94B .
  • Deposit franchise deepening: business checking balances grew 46% QoQ to ~$212M; ~35% of new loan customers also opened checking accounts; checking/savings CDs tied to checking carry ~2.47% blended cost, ~160 bps below bank average .
  • Secondary market strength: sold ~$278M of guaranteed SBA loans in Q4 at ~7% average premium; small-dollar SBA gain-on-sale premiums typically north of 110% .

Selected quotes

  • “Live Oak enters 2025 with some really excellent business momentum… pipelines are still near all-time highs” — BJ Losch .
  • “Our loan production yields ~8.5%, ~100 bps above portfolio yield (~7.5%)” — Walt Phifer .
  • “The AI wave is here… we can either learn how to surf or drown” — BJ Losch .

What Went Wrong

  • Margin compression and nonaccrual drag: NIM fell 18 bps QoQ to 3.15 as Fed’s late-September cut repriced assets ahead of deposits; nonaccruals reduced NII by ~$3M and compressed NIM by ~11 bps .
  • Elevated provision and charge-offs: provision remained high at $33.6M (SBA-driven), and net charge-offs rose to $33.6M as defaults were moved through impairment/charge-off; unguaranteed nonperforming loans increased .
  • EPS and PPNR pressure vs Q3: EPS fell to $0.22 (from $0.28 in Q3) on higher provision and slightly higher OpEx (variable costs incl. FDIC), while total revenue decreased $1.9M QoQ .

Financial Results

MetricQ4 2023Q1 2024Q2 2024Q3 2024Q4 2024
Total revenue ($USD Millions)$119.7 $116.2 $125.5 $129.9 $128.1
Net interest income ($USD Millions)$89.6 $90.1 $91.3 $97.0 $97.5
Total noninterest income ($USD Millions)$30.1 $26.1 $34.2 $32.9 $30.6
Diluted EPS ($USD)$0.36 $0.60 $0.59 $0.28 $0.22
Net income ($USD Millions)$16.2 $27.6 $27.0 $13.0 $9.9
Net interest margin (%)3.32 3.33 3.28 3.33 3.15

KPIs and Balance Sheet

MetricQ4 2023Q1 2024Q2 2024Q3 2024Q4 2024
Loans & leases originated ($USD Millions)$981.7 $805.1 $1,171.1 $1,757.9 $1,421.1
Loans & leases HFI ($USD Millions)$8,633.8 $8,912.6 $9,172.1 $9,831.9 $10,233.4
Total deposits ($USD Millions)$10,275.0 $10,383.4 $10,707.0 $11,400.5 $11,760.5
Business checking balances ($USD Millions)——~$125 ~$145 ~$212
Guaranteed loan sale premium (%)105 (Q3’23) —106 107 ~7% avg prem in Q4 sales

Asset Quality and Credit

MetricQ4 2023Q1 2024Q2 2024Q3 2024Q4 2024
Provision for credit losses ($USD Millions)$9.0 $16.4 $11.8 $34.5 $33.6
Net charge-offs ($USD Thousands)$4,428 $3,163 $8,253 $1,710 $33,566
Allowance ratio (ACL / HFI loans at historical cost, %)1.53% 1.63% 1.57% 1.78% 1.69%
Unguaranteed nonperforming loans ($USD Thousands)$39,285 $43,117 $37,340 $49,398 $81,412
Nonaccrual impact (drag on NII; NIM bps)————~$3M; ~11 bps

Note: LOB does not disclose formal operating segments with revenue and margin detail in these materials; segment breakdown not applicable .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net interest margin (NIM) targetFY 2025Aim for ~3.50% by end of 2025 Still targeting ~3.50% towards end of 2025; could slip to early 2026 depending on Fed and deposit market Maintained (timeline risk)
Small-dollar SBA (Live Oak Express) productionFY 2025~$125M produced in 2024; business ramping “Would be disappointed if we didn’t do more than double” 2025 production vs 2024 Raised
Business checking penetrationMulti-yearBuilding from immaterial base; ~12–14% of customers with loan+deposit by late 2024 Goal of 10–15% of deposit mix in checking over several years Clarified long-term target
CD repricing tailwindQ1 2025Expected tailwind as renewals below maturing rates CDs renewing ~100 bps below maturing rates; large Q1 maturity event supports margin stabilization Maintained
Dividend per shareQ4 2024$0.03 declared in prior quarters $0.03 declared Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
AI/technology initiativesAccelerated tech investment; exploring embedded banking; strong API chassis; early partnerships (Anatomy Financial) “AI wave is here”; using AI to streamline processes; bullish on efficiency and scalability Improving
Small-dollar SBA (Express)~$125–130M 2024; approvals in 4–12 business days; strong premiums (1.11–1.17) Expect >2x production in 2025; tech-enabled origination-to-servicing platform Improving
Secondary market demandQ2/Q3 premiums ~106–107%; volumes ~$250–$267M; strong demand Q4 sales ~$278M; average premium ~7%; more pool assemblers increasing demand Stable/Improving
Deposit strategy and checkingBusiness checking balances to $145M in Q3; cost of funds ~2.45% for checking-linked deposits Balances up 46% QoQ to ~$212M; blended cost ~2.47% (160 bps below bank average) Improving
NIM trajectoryTarget 3.50%+ in 2025; CD tailwinds as rates fall; timing matters Near-term NIM similar in Q1 due to Jan 1 loan repricing; 3.50% still targeted by end of 2025, maybe early 2026 Mixed (timeline risk)
Credit quality/provisionQ3 elevated provision (3 specific commercial credits); proactive reserving; low net charge-offs Q4 provision elevated (SBA-driven, broad-based); proactive charge-offs; past dues reduced to ~$15M Mixed
Macro/tariffs/regulatorySBA universe performance relative to peers strong; pipeline buoyed by sentiment Sentiment improving; too early to judge new administration; familiarity with SBA leadership Improving sentiment
Embedded bankingCo-developing with partners; long-term moonshot Continued focus; progress not detailed but remains strategic Stable

Management Commentary

  • “Loan pipelines are still near all-time highs… small dollar SBA 7(a) loan offering and acquiring checking relationships are continuing to ramp” — BJ Losch .
  • “Our loan production yields of approximately 8.5%… are 100 bps above our current portfolio yield of approximately 7.5%” — Walt Phifer .
  • “Q4 nonaccrual levels caused a drag on net interest income of approximately $3 million and compressed our margin by 11 bps” — Walt Phifer .
  • “We went from virtually none to $125 million of small dollar loans closed in 2024 and expect to do much more… I would be disappointed if we didn’t do more than double that in 2025” — BJ Losch .
  • “The AI wave is here… we are confident we will successfully ride the wave” — BJ Losch .
  • “We could have been more creative in helping these folks… and we will” — Chip Mahan, on helping borrowers through stress .

Q&A Highlights

  • Provision drivers: Majority tied to SBA portfolio and broad-based small business challenges (rates, labor, inflation); commercial portfolio largely stable aside from previously disclosed credits .
  • NIM outlook: Near-term similar in Q1 given Jan 1 loan repricing; 3.50% NIM objective still targeted by end-2025, possibly early 2026, contingent on Fed and deposit market .
  • Macro/regime change: Too early to know; small business sentiment improved pre-election; optimistic pipelines; favorable SBA leadership known to LOB .
  • Secondary market: Demand remains strong with premiums ~107% in H2; increased pool assembler activity supports liquidity and gain-on-sale economics .
  • Operational initiatives: Hiring revenue-generating talent; treasury management build-out; AI adoption to reduce manual processes and scale underwriting/operations .
  • Small-dollar SBA 2025: Expect more than 2x 2024 production; now supported by full Express tech stack .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable at retrieval time due to a data access error; therefore, estimate comparisons are not included. Values retrieved from S&P Global were not available.
  • Implication: Near-term estimate frameworks may factor management’s commentary on (a) NIM staying similar in Q1 due to timing effects, (b) CD repricing tailwinds, (c) elevated provision tied to SBA portfolio normalization, and (d) strong originations and deposit deepening to sustain NII growth .

Key Takeaways for Investors

  • Growth engine intact: Record 2024 originations ($5.16B) and strong Q4 ($1.42B) underpin NII resilience despite near-term NIM compression; pipelines remain near all-time highs .
  • Margin path: Expect NIM stabilization in Q1 and progression toward ~3.50% by end-2025/early-2026, aided by CD renewals ~100 bps below maturing rates; timeline hinges on Fed and deposit market .
  • Deposit mix upgrade: Rapid checking growth (46% QoQ to ~$212M) lowers blended funding cost (~2.47%), offering persistent margin tailwinds as penetration rises .
  • Secondary market optionality: Robust SBA demand/premiums (~7% avg in Q4 sales; small-loan premiums >110%) provide fee income and balance-sheet flexibility .
  • Credit normalization: Elevated provision and net charge-offs reflect proactive resolution; nearly one-third of portfolio is government-guaranteed, providing capital and credit advantages .
  • 2025 catalysts: More than 2x small-dollar SBA production, continued checking penetration, and AI-enabled process efficiencies can drive operating leverage and fee/NII accretion .
  • Trading/PM lens: Near-term prints may be sensitive to credit headlines and NIM trajectory; clarity on deposit repricing, Express ramp, and secondary market economics are positive narrative drivers .

Additional references

  • Q4 2024 press release and 8-K financial tables .
  • Prior quarters (Q2/Q3 2024) press releases and call transcripts for trend context .
  • Other Q4-period press releases: date-of-call (Jan 8, 2025) and Live Oak Ventures investment in Sunbound (Dec 4, 2024) .