Live Oak Bancshares (LOB)

Digital small business lender Live Oak Bancshares (NYSE:LOB) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 29.9% year on year to $172.9 million. Its GAAP profit of $0.95 per share was 18.3% above analysts’ consensus estimates.

Company Overview

Founded during the 2008 financial crisis with a vision to reimagine small business banking through technology, Live Oak Bancshares (NYSE:LOB) is a bank holding company that specializes in providing online banking services and SBA-guaranteed loans to small businesses across targeted industries nationwide.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Live Oak Bancshares competes with traditional small business lenders like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC), as well as with digital-first financial institutions such as First Internet Bancorp (NASDAQ:INBK) and specialized SBA lenders like Newtek Business Services (NASDAQ:NEWT).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Over the last five years, Live Oak Bancshares grew its revenue at an excellent 16.9% compounded annual growth rate. Its growth beat the average banking company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Live Oak Bancshares’s annualized revenue growth of 15.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Live Oak Bancshares reported robust year-on-year revenue growth of 29.9%, and its $172.9 million of revenue topped Wall Street estimates by 14.9%.

Net interest income made up 75.2% of the company’s total revenue during the last five years, meaning lending operations are Live Oak Bancshares’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Live Oak Bancshares’s EPS grew at an unimpressive 9.7% compounded annual growth rate over the last five years, lower than its 16.9% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Live Oak Bancshares, its two-year annual EPS growth of 16.7% was higher than its five-year trend. This acceleration made it one of the faster-growing banking companies in recent history.

In Q4, Live Oak Bancshares reported EPS of $0.95, up from $0.21 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Live Oak Bancshares’s full-year EPS of $2.23 to grow 30.7%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Live Oak Bancshares’s TBVPS grew at an incredible 13.3% annual clip over the last five years. TBVPS growth has recently decelerated a bit to 11.1% annual growth over the last two years (from $20.23 to $24.97 per share).

Over the next 12 months, Consensus estimates call for Live Oak Bancshares’s TBVPS to grow by 13.4% to $28.31, decent growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Live Oak Bancshares has averaged a Tier 1 capital ratio of 11%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Live Oak Bancshares has averaged an ROE of 15.2%, impressive for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Live Oak Bancshares has a strong competitive moat.

We were impressed by how significantly Live Oak Bancshares blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its tangible book value per share missed. Zooming out, we think this was a solid print. The stock remained flat at $39 immediately following the results.

Updated: January 21, 2026 at 11:29 PM EST

Before deciding whether to buy Live Oak Bancshares or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There are some positives when it comes to Live Oak Bancshares’s fundamentals. To begin with, the its revenue growth was impressive over the last five years, and analysts believe it can continue growing at these levels. And while Live Oak Bancshares’s weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders, its projected EPS for the next year implies the company’s fundamentals will improve.

Live Oak Bancshares’s P/B ratio based on the next 12 months is 1.3x. When scanning the banking space, Live Oak Bancshares trades at a fair valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $42.50 on the company (compared to the current share price of $40.42), implying they see 5.1% upside in buying Live Oak Bancshares in the short term.