Live Oak Bancshares, Inc.

Before we get started, I'd like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties. Factors that may cause action results that differ materially from our expectations are detailed in the materials accompanying this call, circumstances or events that may arise after the date of today's call. Information about any non-GAAP financial measures referenced, including reconciliation of those measures to GAAP measures, can also be found in our SEC filings into the presentation materials. I will now turn the call over to our president, BJ Losch. Great.

Thanks, Greg. Good morning, everybody. Thanks for joining us. Let's get started on slide four. 2025 was quite an interesting year. And here at Live Oak, I'm really, really proud of the way we navigated through those interesting times. Macro uncertainty persisted throughout the year. whether it was doge or tariffs or the uncertain economy, and ultimately three rate decreases from the Fed late in the year, we continued to navigate through a small business credit cycle, and our loan portfolio showed continued credit stabilization over the course of the year. We significantly improved our operating processes and controls. We successfully executed on our first preferred offering, and we finished the year nicely with some outside venture gains from our ventures portfolio. And yet, even with that busy and potentially distracting backdrop, we produced some excellent results, as you can see on slide five. A few of the biggest highlights were record loan production, 17% loan growth, 27% core PPNR growth, 17% revenue growth, and 13% tangible book value growth. in addition to accelerating our momentum in our key growth initiatives of Live Oak Express and checking. I'm particularly proud of this two year view of our production on slide six, 57% growth in loan production across both our small business and commercial groups, and importantly, strong pipelines heading into 2026. And as proud as I am of those production results, What matters most is how you translate that into profitable operating leverage. And you can see on slide seven that those results are simply outstanding, with adjusted PPNR of 27% over 2024 and adjusted EPS of 49%. New customer acquisition and growth like this doesn't just happen by accident. Our people and how we deliver excellent customer service make the difference. Our goal is to continue this momentum and deliver earnings outcomes that are more consistent and sustainable over time. While credit has been top of mind for us and for investors over the past year, perspective is always important. And on slide eight, you can see our credit trends over 10 years relative to all other SBA lenders. And while default rates have moved higher over the last two years, as PPP and stimulus tailwinds have burned off, and rates rose rapidly, Live Oak's performance has consistently been well ahead of peers. Thankfully, we know small businesses and are great credit managers, and we're hopeful that these trends start to moderate back towards the long-term trend lines sooner rather than later. Finally, we continue extending our customer product offerings with checking and small dollar SBA loan capabilities. Both of these efforts launched in early 2024 And in just 24 months, our teams have made significant gains in winning customer checking relationships and serving more small business borrowers. At the beginning of 2024, only roughly 6% of our customers had both a loan and deposit relationship with us. Today, that percentage is 22%. And we've got a lot more runway to travel. On the small dollar 7A front, what we call Live Oak Express, Production is ramping up meaningfully and will continue to do so. These loans are also very desirable on the secondary market that are leading to nice gain on sale increases. There's a lot more upside to this business as well. We're just starting. I couldn't be prouder of how our people are taking care of customers, making our operations better, and profitably growing our company. Thank you to all LiveOakers for the momentum that they have built heading into 2026. And with that, Walt, how about running through some of the financial highlights for the quarter?

Thanks, BJ. Good morning, everyone. As outlined on page 11, we had an outstanding end to our 2025 campaign, with Q4 producing $44 million in net income and 95 cents of earnings per share, both of which were approximately three times Q4 of 2024. Our strong performance was aided by excellent growth in core profitability trends, as seen in both our reported and adjusted PPNR improvement year-over-year, generally improving credit trends in our fourth consecutive quarter of lower-to-stable provision expense, and $28 million in net gains in our ventures investment portfolio, primarily driven by the $24 million gain from the aperture sale. Growth remains excellent. As Q4's loan production of $1.6 billion capped off our highest year of loan production in company history with $6.2 billion, driving the 17% annual loan balance growth. Outstanding loan origination that you just won't see replicated broadly across the industry. And we love to see the progress across our two focus initiatives of growing business checking and originating Live Oak Express loans. Business checking balances of $377 million doubled year-over-year, materially benefiting our interest expense lines while Live Oak Express contributed $12 million towards our gain on sales totals in 2025. Now let's get into the details on the following pages. Page 12 provides a financial snapshot of our Q4 earnings results, with quarter-over-quarter demonstrated improvement across all major profitability and growth metrics. On the bottom right of the page, you will see several notable items included within our reported results, headlined by the $28 million net investment gains from our Live Oak Ventures Investment Portfolio, In addition, we had approximately $11 million of offsets from warrant losses, capitalized software accelerated depreciation, severance, and allocation of funding to our donor-advised fund. I continue to be very excited about our operating leverage trends highlighted on slide 13, as was BJ. Q4's adjusted PPNR of $64 million, as detailed in slide 28, is 21% higher than Q4 of 2024, while our adjusted EPS has doubled over the same time period. That doesn't tell the full story, as it includes approximately $5 million of accelerated depreciation of capitalized software and severance expenses, as well as an intentional decision to delay some loan sales until 2026, which we'll touch on more shortly, due to the large aforementioned investment gains. Slide 14 breaks down the $1.6 million of loan originations by vertical and business unit. A few quick things to hit on here. Approximately 70% of our verticals originated more production in 2025 than they did in 2024. And both small business and commercial lending teams delivered double-digit year-over-year balance sheet growth rates. Slide 15 illustrates our loan and deposit balance growth, highlighting the strong, consistent trends on both fronts. Our total loan portfolio grew approximately 4% in late quarter, with year-over-year loan balances increasing approximately 17%. That's just outstanding, durable growth. Q4's customer deposit growth was slightly down late quarter, as was expected due to typical Q4 seasonality, yet our year-over-year customer deposit growth rate was 18%, which is fantastic growth in a very, very competitive market. As I mentioned earlier, we continue to be very excited about the momentum we are seeing in business checking, as highlighted on page 16. We saw our fourth consecutive quarter of growth, with checking balances increasing 4% in late quarter to $377 million. and are highly encouraged by our progress in deepening customer relationships. As BJ noted, 22% of our customers now have both a loan and a deposit account with us, and 37% of new loan customers also open a checking account in Q4. Our total low-cost deposits, including non-interest-bearing checking balances, low-cost collateral construction, and loan reserve accounts, now totals approximately 4% of our total deposit base, a 2x increase year-over-year, and tremendously accretive to our earnings profile. Our net interest income and margin trends are detailed on slide 17. In Q4 of 2025, we saw our quarterly net interest income increase $8 million, or 7% in late quarter, and $26 million, or 26%, compared to Q4 of 2024. Driving the Q4 increase in net interest income were both our continued outstanding growth, as well as our net interest margin expansion of five basis points quarter over quarter, aided by our deposit portfolio repricing downwards in response to the 50 basis points of Fed cuts in Q4. while our variable quarterly adjust loan portfolio did not reprice until January 1st. As in the past, when we have seen large Fed moves downward to 50 basis points in a quarter, you will see near-term compression as our deposit pricing and strong volume catch up, and we continue our upward trajectory on net interest income. Historically, our model operates well in a lower interest rate environment. Once we navigate the journey down as our deposit pricing adjusts, Currently, our base outlook for the Fed consists of three Fed cuts in March, June, and September of 2026. Any less cuts or cuts later in the year will provide an earnings opportunity for the bank. Moving to guaranteed loan sale trends on slide 18, gain on sale was intentionally down this quarter as our large investment gains provided loan sale flexibility, essentially allowing us to delay sales until a future quarter while increasing our loans held for sale by approximately $60 million quarter over quarter, to maximize net interest income for a few additional months. This is a similar tactic that we have deployed in the past when we have large investment gains. Looking back at 2025, we are more than pleased with the momentum that we are seeing in our Live Oak Express product and the immediate impact it has had on our earnings. Providing for a meaningful 20% of our gain on sale for $12 million, a 2x what it contributed in 2024, we remain very focused on ramping our Live Oak Express originations as that will continue to be the primary driver of our gain on sale growth going forward. Expense and efficiency trends are detailed on slide 19. Q3 reported non-interest expense of $89 million included approximately $6.6 million of one-time expenses, detailed within a notable item section back on slide 12. We remain heavily focused on improving both our customer and our employee experiences and implementing technology and operational improvements across our entire business, all with the goal of creating raving fans, moderating expense growth and thus improving efficiency, and providing a solid, mature foundation to support our growth. Taking a look at credit on slide 20, over 30 days past due remain low for the fifth consecutive quarter with $10 million or nine basis points of our held for investment loan portfolio past due as of December 31st. The amount of non-accrual loans increased to $110 million or 91 basis points of our unguaranteed held for investment loan portfolio in Q4. The late quarter increase in here was primarily driven by SBA credits, and it's consistent with the broader SBA industry trends, which LIVO continues to outperform. Our reserve levels declined modestly in line with the improving trends in past dues, classified assets, and net charge-offs. Altogether, improvements across these metrics show that the uptick in non-accruals is manageable. Capital levels remain healthy and robust, as shown on page 21. Q4 strong results matched our asset growth, keeping our capital levels relatively flat late quarter. A few thoughts on the forward outlook. We are very optimistic about the opportunity in front of us in 2026 and beyond. On the revenue front, we generally see a stable or low-rate environment coupled with continued strong loan growth as a favorable backdrop for our bank's growth, margin, and credit outlook. Our two strategic initiatives in business checking and live express are ramping nicely with plenty of runway to continue to drive deeper relationships, increase fee revenue, and lower funding costs. We have refocused our expense base and investments on the best opportunities, which will moderate the growth rate while better supporting strong revenue growth. The possibilities that AI and tech innovation provides across the bank are enticing and will enhance our customer service and efficiency with active efforts ongoing. And above all else, We have an amazing culture, team, and brand here at Live Oak Bank that is irreplicable. With that being said, thank you again for joining this morning. BJ, back to you for closing comments before we head to Q&A.