Live Oak Bancshares: 3 Key Takeaways for Long-Term Investors

The Motley Fool · 1d ago

Key Points

  • Preprovision net revenue rose 33% year over year to $88 million.

  • Live Oak Express loan originations rose 173% to $107 million.

  • Checking deposit balances grew 39% year over year to $500 million.

On its third-quarter 2026 earnings call, held on Oct. 22, 2026, Live Oak Bancshares (NYSE:LOB) reported earnings per share of $0.52. Management took a $17 million credit provision on an exited distillery portfolio during the quarter. Preprovision net revenue, which measures profit before setting aside cash for potential credit losses, expanded 33% year over year to $88 million. Three takeaways from management's comments show how the business is positioned.

1. Aggressive Bad Loan Write-Downs Clear Portfolio Drag

Management set aside $17 million in loan loss provisions for its exited distillery portfolio, reducing earnings by $0.27 per share. Strong preprovision net revenue allowed Live Oak Bancshares to absorb the charge without slowing operations.

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.
-- BJ Losch, President

2. Small-Dollar SBA Lending Drives Fee Income Expansion

Originations in Live Oak Express, the bank's Small Business Administration (SBA) small-dollar loan division, surged 173% year over year to $107 million. Selling guaranteed loan portions generated $7 million in fee income during the quarter.

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.
-- BJ Losch, President

3. Relationship Checking Accounts Lower Total Funding Costs

Business checking balances exceeded $500 million, growing 39% year over year and providing funding at a lower cost than retail certificates of deposit. Deepening customer relationships helps retain deposits as bank competition for funding increases.

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%.
-- BJ Losch, President

Looking Ahead

Originations reached $2.1 billion across 34 industries, showing ongoing client borrowing demand. Scale in Small Business Administration lending and automated credit tools protect loan quality, while management monitors deposit-pricing competition.

Better portfolio management, better aggregated credit data, and faster credit work are exactly what help us see things earlier.
-- BJ Losch, President

Net interest income expanded 15% year over year to $133 million. Management expects revenue expansion to match overall balance sheet growth.

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.
-- Walt Phifer, Chief Financial Officer

The Motley Fool has positions in and recommends Live Oak Bancshares. The Motley Fool has a disclosure policy.