Live Oak Bancshares (LOB)

Digital small business lender Live Oak Bancshares (NYSE:LOB) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 12.4% year on year to $146.1 million. Its GAAP profit of $0.55 per share was 6.8% below 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).

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Thankfully, Live Oak Bancshares’s 15.4% annualized revenue growth over the last five years was incredible. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Live Oak Bancshares’s annualized revenue growth of 10.9% 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’s year-on-year revenue growth was 12.4%, and its $146.1 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 72% of the company’s total revenue during the last five years, meaning lending operations are Live Oak Bancshares’s largest source of revenue.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

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 astounding 11% compounded annual growth rate over the last five years. However, this performance was lower than its 15.4% annualized revenue growth, telling 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 6.2% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Live Oak Bancshares reported EPS of $0.55, up from $0.28 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Live Oak Bancshares’s full-year EPS of $1.49 to grow 107%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

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. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Live Oak Bancshares’s TBVPS grew at an incredible 10.7% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 11.9% annually over the last two years from $19.12 to $23.96 per share.

Over the next 12 months, Consensus estimates call for Live Oak Bancshares’s TBVPS to grow by 11.7% to $26.76, top-notch 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 11.2%, 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 15.4%, exceptional 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.

It was encouraging to see Live Oak Bancshares beat analysts’ net interest income expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. On the other hand, its EPS missed Wall Street’s estimates. Overall, this was a mixed quarter. The stock remained flat at $34.65 immediately following the results.

Updated: December 4, 2025 at 11:28 PM EST

Before making an investment decision, investors should account for Live Oak Bancshares’s business fundamentals and valuation in addition to what happened in the latest quarter.

Live Oak Bancshares is a fine business. First off, its revenue growth was impressive over the last five years and is expected to accelerate over the next 12 months. And while its net interest margin indicates a disadvantaged starting point for the overall profitability of the business, its anticipated efficiency ratio over the next year signals it will gain leverage on its fixed costs. On top of that, 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. Looking at the banking landscape right now, Live Oak Bancshares trades at a pretty interesting price. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $42.50 on the company (compared to the current share price of $32.83), implying they see 29.5% upside in buying Live Oak Bancshares in the short term.