Live Oak Bancshares (NYSE:LOB) executives said second-quarter 2026 results reflected continued operating momentum, supported by loan growth, improving efficiency, expanding checking balances and rising contributions from its Live Oak Express small-dollar SBA lending program.
The company reported earnings per share of $0.74 for the quarter. Walt Phifer, chief financial officer of Live Oak Bancshares, said adjusted EPS was $0.77, up 20% from the prior year, normalized for a 24% tax rate. The quarter’s effective tax rate was 19.9%, including $2.7 million of benefit from purchased tax credits and other one-time tax adjustments.
Loan Growth and Operating Leverage Drive Results
BJ Losch, president of Live Oak Bank, said the company generated $1.5 billion of loan originations across 33 industries during the quarter. Phifer said the loan book grew 4% from the prior quarter and 16% year over year to approximately $13 billion, while the loan pipeline reached a record $4.6 billion.
Revenue growth outpaced expenses. Phifer said reported revenue increased 12% year over year, while expenses declined 1%. Reported pre-provision net revenue was $72 million, up 32% from the prior-year quarter, while adjusted PPNR was $76 million, up 23%. The reported efficiency ratio improved to 54%, seven percentage points better than a year ago. Losch said the adjusted efficiency ratio improved to 53% from 61% a year earlier.
Phifer said Live Oak’s return on average common equity expanded by 251 basis points from a year ago, and he reiterated the company’s goal of achieving a sustainable 15% ROE and more than 15% annual EPS growth. “With our current trajectory, that looks to be achievable in the next several quarters,” he said.
Net Interest Income Rises as Margin Remains Stable
Net interest income was $125 million in the second quarter, up 5% sequentially and 15% year over year. Net interest margin expanded 6 basis points from the prior quarter to 3.33%.
In response to a question from Bill Young of TD Securities, Phifer said Live Oak expects its margin to remain in the low- to mid-330 basis point range in the near term. He said loan growth supports margin expansion, while intense deposit competition creates pressure.
“Growth will help expand NIM. Deposit competition helps compress NIM,” Phifer said. “Given where we’ve been over the last, say, two to three years with an average NIM, let’s call it 330 to 335, that feels appropriate given where we’re at today.”
Phifer said the company expects interest rates to remain flat in the near term, which he described as a favorable backdrop for Live Oak’s net interest income and margin profile.
Live Oak Express and Checking Balances Expand
Executives highlighted two strategic initiatives: Live Oak Express and business checking. Losch said Live Oak Express recorded $82 million of originations in the quarter, up 63% from a year ago. Phifer said the program contributed $5 million of gain on sale in the quarter, its highest quarterly level to date.
Losch said Live Oak Express has generated $19 million of gain on sale over the last six quarters, equal to about $0.30 of earnings accretion. The company’s long-term goal is for the platform to produce at least $750 million annually, supported by an AI-native loan origination platform.
During the Q&A session, Losch said Live Oak Express could end the year at about $300 million of production, with the $750 million target representing a multi-year trajectory.
Business checking balances rose 63% year over year to $469 million. Total checking and other demand deposit account balances reached $744 million. Losch said those balances now represent roughly 5% of total deposits, up from virtually zero two and a half years ago. The company’s minimum goal is 10%.
Losch said more than one-third of new loan customers each quarter now open a checking account with Live Oak, and 25% of customers have both a loan and deposit account, up from 3% four years ago. He said checking and other DDA balances have improved net interest income and pre-tax earnings by $25 million, or about $0.40 of EPS annualized.
Credit Trends Described as Stable to Improving
Live Oak recorded provision expense of $26 million in the quarter. Losch said roughly 45% of the provision was driven by growth, 40% by an exited distillery portfolio and 15% by macroeconomic and other factors. He said the distillery portfolio represents about one-half of 1% of the total portfolio.
Phifer said unguaranteed allowance for credit losses coverage was 2.01%, down 13 basis points from the prior quarter. He said past-due loans over 30 days remained very low and non-accrual loans were largely flat quarter over quarter. The increase in net charge-offs was driven by the exited distillery portfolio, which accounted for about half of loans charged off during the quarter.
Michael Karnes, chief credit officer of Live Oak Bank, said broader credit metrics were stable even including the distillery loans. He said the company saw “substantial improvement” in criticized and classified loans, particularly in the commercial portfolio, and positive risk-rating migration across the book.
“All of that is a good signal to us that we think that our bank is past the credit cycle that we’ve been discussing in prior quarters, and we’re in a good position to move forward,” Karnes said.
Karnes said he continues to monitor macroeconomic risks, including interest rates, tariffs, fuel costs and inflation, with particular attention to segments tied to consumer discretionary spending. However, he said he has not seen any segment show outsized deterioration.
AI Investments Remain a Focus
Executives also emphasized Live Oak’s use of artificial intelligence across the company. Losch said 100% of employees have access to AI-native tools, 150 employees are “Claude super users,” and teams have built more than 640 agents and skills across AI platforms.
Losch described AI as an accelerant rather than the company’s core strategy, saying Live Oak’s current strategy is already working without it. He said the company is using AI to support new capabilities, products, customer acquisition and distribution.
Asked by Emily Lee of KBW about Live Oak’s partnership with Cascading AI, Losch said the company remains in pilot with Casca for Live Oak Express and expects a full rollout for that product by the end of the year. He said the company still expects the technology to help reduce the time needed to close an SBA loan from about two months to about two weeks.
Phifer said Live Oak continues to expect low- to mid-single-digit expense growth, despite ongoing investments in Live Oak Express, checking, risk management, AI and technology. He said quarterly expenses have averaged about $85 million over the past six quarters, including the first and second quarters of 2026.
In closing remarks, a Live Oak representative referred to as Chip said the company’s AI focus is aimed at removing tedious work and allowing employees to serve more customers, rather than eliminating staff.
About Live Oak Bancshares (NYSE:LOB)
Live Oak Bancshares, Inc is a bank holding company headquartered in Wilmington, North Carolina, and operates through its subsidiary Live Oak Banking Company. Founded in 2008, the company leverages a branchless, technology-driven platform to deliver specialty lending and deposit products across the United States. Live Oak Bancshares completed its initial public offering in February 2018 and trades on the NYSE under the ticker symbol LOB.
The company’s primary focus is on originating and servicing commercial loans for small businesses in select industry verticals.
