Live Oak(US:LOB)2026-01-22 15:02Financial Data and Key Metrics Changes - The company reported a record net income of $44 million and earnings per share of $0.95 for Q4 2025, both approximately three times higher than Q4 2024 [9] - Loan production reached $1.6 billion in Q4, contributing to a total of $6.2 billion for the year, marking a 17% annual loan balance growth [9][10] - Adjusted PP&R increased by 27% year-over-year, while adjusted EPS rose by 49% [6][11] Business Line Data and Key Metrics Changes - Business Checking balances doubled year-over-year to $377 million, significantly benefiting the interest expense line [10] - Live Oak Express contributed $12 million to gain on sales in 2025, a 100% increase from 2024 [16] - Approximately 70% of verticals saw increased production in 2025 compared to 2024, with both small business and commercial lending teams achieving double-digit growth rates [11] Market Data and Key Metrics Changes - Year-over-year customer deposit growth was 18%, despite a slight decline linked quarter due to typical Q4 seasonality [12][14] - The company’s total loan portfolio grew approximately 4% linked quarter, with a 17% increase year-over-year [12][14] Company Strategy and Development Direction - The company aims to maintain momentum in earnings outcomes that are consistent and sustainable over time, focusing on business checking and Live Oak Express as key growth initiatives [7][19] - The company is investing in technology and operational improvements to enhance customer service and efficiency, with a focus on becoming an AI-native bank [19][70] - The company is strategically moderating expense growth while supporting strong revenue growth, with an expected single-digit year-over-year growth rate in expenses [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth opportunities in 2026 and beyond, citing a stable or low-rate environment as favorable for growth, margin, and credit outlook [19] - The company is focused on deepening customer relationships and increasing fee revenue through its strategic initiatives [19] - Management noted that while credit trends have improved, the company remains vigilant about maintaining credit quality amid industry challenges [45] Other Important Information - The company experienced a slight increase in non-accrual loans to $110 million, primarily driven by SBA credits, but overall credit metrics remain stable [18][45] - The company’s capital levels are healthy, with Q4 results matching asset growth and keeping capital levels relatively flat linked quarter [18] Q&A Session Summary Question: Can you discuss the dynamics of NII and NIM for the first quarter? - Management indicated that NIM and NII may experience compression in the near term due to Fed cuts, but growth will help restore upward momentum [24][25] Question: What is the outlook for gain on sale income? - Management expects gain on sale income in Q1 to be more in line with historical levels, with a typical increase in the latter part of the quarter [28][30] Question: How do you view the trajectory of margins with the anticipated Fed cuts? - Management anticipates that stable environments will allow for NIM expansion throughout the year, driven by growth [37] Question: What is the expected growth rate for expenses moving forward? - Management expects expense growth to moderate to single digits year-over-year as they focus on strategic investments [41][42] Question: Can you provide insights on credit trends and non-accrual loans? - Management noted that while non-accrual loans increased, overall credit quality remains stable, and they expect some relief for borrowers in 2026 due to interest rate cuts [45][46] Question: What are the expectations for Live Oak Express in 2026? - Management expressed an aspirational goal of reaching $1 billion in production over time, with ongoing efforts to build capabilities and improve efficiency [58][60]