Live Oak Bancshares Reports $9.7 Million Net Income in Q1 2025, Down from $27.6 Million in Q1 2024

Live Oak Bancshares, Inc. reported a net income of $9.7 million, or $0.21 per diluted share, for the first quarter of 2025, a significant decrease from the $27.6 million, or $0.60 per diluted share, recorded in the same period of 2024. This decline in profitability was primarily attributed to a 77% increase in the provision for credit losses, which rose to $29 million from $16.4 million year-over-year. Additionally, management fee income dropped to zero due to the restructuring of the Canapi Funds, and other noninterest income fell by 58.6%, largely due to a prior year gain from equity warrant assets. The effective tax rate also shifted from a benefit of 24.8% in 2024 to an expense of 26.4% in 2025, further impacting net income.

Total assets increased by 5% to $13.60 billion as of March 31, 2025, compared to $12.94 billion at the end of 2024. This growth was driven by a $482.5 million increase in loans and leases held for investment and held for sale, totaling $11.06 billion. Total deposits also rose by 5.4% to $12.40 billion, reflecting strong deposit growth to support the expanding loan portfolio. The company’s allowance for credit losses increased to $190.2 million, representing 1.8% of loans held for investment, up from 1.7% at the end of 2024.

Operationally, Live Oak Bancshares saw a notable increase in net interest income, which rose by 11.6% to $100.5 million, driven by a 17.2% increase in average interest-earning assets. However, the net interest margin decreased from 3.33% to 3.20% due to a decline in the yield on interest-earning assets. The company reported a significant increase in net gains on sales of loans, which rose by 62.1% to $18.6 million, reflecting a higher volume of guaranteed loans sold.

Looking ahead, Live Oak Bancshares anticipates continued challenges in the macroeconomic environment, particularly concerning credit quality and borrower performance. The company remains focused on managing its loan portfolio and maintaining adequate liquidity, with total liquidity sources amounting to $4.58 billion, or 33.7% of total assets. The management emphasizes a proactive approach to identifying and resolving problem loans, particularly in light of the increased levels of nonperforming assets, which rose to $494.7 million, a 33.1% increase from the previous quarter. The company’s strategic focus will remain on supporting small businesses while navigating the evolving economic landscape.