LOB — Live Oak Bancshares, Inc.

Summary of Live Oak Bancshares, Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Earnings Per Share (EPS): Reported at $0.60, a threefold increase year-over-year; adjusted EPS was $0.70, up 8% from Q4 2025 and 94% from Q1 2025.
• Revenue Growth: Revenue increased by 18% year-over-year.
• Pre-Provision Net Revenue (PPNR): Reported at $60 million, up 43% year-over-year; adjusted PPNR was $66 million, a 30% increase.
• Loan Growth: Total loans grew 2% quarter-over-quarter and 14% year-over-year, reaching approximately $12.6 billion.
• Customer Deposits: Increased by 3% linked quarter and 13% year-over-year, totaling approximately $9.9 billion.
• Net Interest Income: Approximately $119 million, with a net interest margin of 3.27%, reflecting a year-over-year increase of 19%.

2. Strategic Updates and Business Highlights:

• Continued focus on small-dollar SBA lending and checking account growth, with significant progress in both areas.
• Noninterest-bearing deposits grew to over $400 million, with a goal to exceed 10% of total deposits (currently at 4%).
• Live Oak Express has originated $140 million in small-dollar loans, with an annual target of $750 million.
• The company is investing in technology and innovation, particularly an AI-native loan origination platform, to enhance efficiency and customer experience.

3. Forward Guidance and Outlook:

• The pipeline for loan production is at an all-time high, with expectations for low to mid-teens loan growth in a stable interest rate environment.
• The company anticipates maintaining a stable net interest margin and expects continued improvement in efficiency ratios, targeting the low to mid-50s.
• Management is optimistic about achieving a 15% return on equity and 15% earnings growth over the long term.

4. Bad News, Challenges, or Points of Concern:

• Credit Quality: Nonaccrual loans increased slightly, with 27% coming from exited verticals, particularly in the whiskey distillery sector, which has been impacted by changing consumer preferences.
• Market Conditions: Ongoing macroeconomic uncertainties, including fuel costs, could indirectly affect small businesses, although Live Oak's portfolio is not heavily exposed to these risks.
• Loan Payoffs: Elevated payoff activity was noted, which may impact future loan growth rates.

5. Notable Q&A Insights:

• Management discussed the dynamics of net interest margin (NIM), emphasizing that a flat Fed environment would stabilize NIM and allow for growth-driven expansion.
• The company is seeing strong demand for Live Oak Express, with expectations to exceed the $750 million production target.
• There was a focus on the importance of building customer relationships, with a significant increase in customers holding both loans and deposit accounts.
• Management expressed confidence in their credit quality and portfolio stability, despite some challenges in specific verticals.

Overall, Live Oak Bancshares demonstrated strong financial performance in Q1 2026, with strategic initiatives aimed at enhancing customer relationships and leveraging technology for growth. However, they remain vigilant about credit quality and external economic pressures.