Live Oak's Distillery Provision Cuts Third-Quarter Earnings

The Tip Desk · October 27, 2026 · 3 min read

Provision expense of $54.7 million, including $17.0 million on the distillery book, left net income at $24.3 million, or $0.52 a share, as revenue rose 12.5%.

Live Oak Bancshares, Inc. (LOB) reported third-quarter 2026 net income attributable to common shareholders of $24.3 million, or $0.52 a diluted share, down from $34.7 million, or $0.74 a share, in the second quarter, as a $54.7 million provision for credit losses more than offset a 12.5% rise in revenue.

The provision, up $28.9 million from $25.8 million in the second quarter, was primarily driven by $17.0 million of decisive action on the stressed distillery portfolio and reserves to support continued loan growth, the company said. Income before taxes fell to $35.2 million from $45.8 million. The effective tax rate was 25.4%.

Operating leverage still improved. Total revenue of $175.6 million rose 12.5% from $156.1 million in the second quarter. Noninterest expense increased only 1.4% to $85.7 million. Pre-provision net revenue rose 25.6% to $89.9 million.

Net interest income was $133.0 million, up 6.1% from $125.3 million in the second quarter. Net interest margin declined 3 basis points to 3.30% from 3.33%. Average loans and leases held for investment were $13.02 billion, with a 6.88% yield. Average deposits were $14.27 billion at a 3.47% cost. Interest expense on deposits was $124.9 million.

Loan and lease production was $2.13 billion, up 37.8% from $1.55 billion in the second quarter. Total loans and leases reached $13.87 billion as of September 30, 2026. Deposits grew $920.6 million to $15.47 billion. Total assets were $17.0 billion.

Noninterest income was $42.6 million, up 38.4% from $30.8 million. Net gains on sales of loans were $20.9 million. Loan servicing revenue was $9.7 million. Other noninterest income was $14.6 million. Equity security investments recorded a $2.6 million loss.

Credit costs rose with the balance sheet. Net charge-offs were $32.1 million, or 1.00% of quarterly average loans and leases held for investment, annualized, versus $24.2 million, or 0.80%, in the second quarter. The allowance for credit losses on loans and leases held for investment was $213.6 million, or 1.62% of that book. Total nonperforming loans and leases at historical cost were $508.7 million. Unguaranteed nonperforming historical-cost loans and leases were $138.4 million, or 1.05% of loans and leases held for investment.

Common equity tier 1 capital was 9.94% of risk-weighted assets, down from 10.42% in the second quarter. Tangible book value per common share was $26.05. The efficiency ratio improved to 48.80% from 54.13%.

Chairman and CEO James S. (Chip) Mahan III said the franchise was getting stronger, that operating leverage was improving, that Live Oak Express continued to accelerate, and that the deposit franchise was gaining momentum. He said revenue growth was meaningfully outpacing expenses and that the operating-leverage momentum had helped absorb the elevated provision, which primarily supported record loan growth and action on the distillery-related portfolio.

The company hosts a conference call on October 22, 2026, to discuss results and outlook.