Prepared remarks
Hello, everyone. Thank you for joining us and welcome to the Second Quarter 2026 Live Oak Bancshares Incorporated Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Gregory W. Seward, general counsel. Gregory? Please go ahead.
Thank you, good morning, everyone. Welcome to Live Oak's Second Quarter 2026 Earnings Conference Call. We are webcasting live over the Internet, and this call is being recorded. To access the call over the Internet and review the presentation material that we will reference on the call, please visit our website at investor.liveoakbank.com and go to the Events and Presentations tab for supporting materials. Our earnings release is also available on our website. Before we get started, I would 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 actual results to differ materially from our expectations are detailed in the materials accompanying this call and in our SEC filings. Do not undertake to update the forward-looking statements to reflect the impact of 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 and in the presentation materials. Now I will turn the call over to our President, William C. Losch.
Thanks, Gregory. Good morning, everybody. Thanks for joining us. Let's get started on slide 4. Our strategy to create more sustainable earnings momentum here at Live Oak continues to work; you see it across all five themes on this slide. Reported EPS of $0.74 for the quarter, even with even stronger performance from the core operations. Our lending businesses continue to put up strong diversified numbers. $1.5 billion of loan originations across 33 industries this quarter. Our broader credit trends are stable to improving. Live Oak Express and business checking are both ramping and having a very meaningful impact on our results with far more to come. And as you would expect from Live Oak, our urgency on AI activation continues to accelerate. Turning to slide 5, you see the earnings momentum continues. And as proud as I am of our loan production results, what matters most is how you translate that into profitable operating leverage and credit quality. And you can see on slide 5 that those results are simply outstanding. With adjusted PPNR of 23% over Q2 2025 and adjusted EPS of $0.77, up 20% from this time last year. Core revenue grew 11% year over year while expenses grew just 3% and our efficiency ratio improved eight points from 61% last year to 53% on an adjusted basis. Over the last several quarters, turning to slide 6, we have been sharing with you progress on two key initiatives: Live Oak Express, our small-dollar program, and business checking. Both of these efforts launched in early 2024 and in just over two years, our teams have made significant gains. On slide 6, Live Oak Express posted a record quarter of $82 million in originations, up 63% from a year ago. These smaller loans are highly desirable on the secondary market. And we have generated $19 million of gain on sale over the last six quarters, about $0.30 of earnings accretion and growing. Our goal at cruise altitude is to produce at least $750 million annually supported by an AI-native loan origination platform. If you do the math on that kind of volume with those kinds of premiums, the future earnings impact on the way is substantial. Turning to slide 7, business checking continues to build deeper, more profitable customer relationships. Checking balances are up 63% year over year to $469 million and total checking and other DDA balances are now at $744 million. We are now at roughly 5% of checking and other DDA balances to total deposits, up from about 4% last quarter and from virtually zero 2.5 years ago. What makes this even more impressive is that the deposit base has been growing 10% to 15% a year over that time frame as well. And now over one-third of our new loan customers each quarter open a checking account with us, and 25% of our customers have both a loan and deposit account. Just four years ago, that was only 3%. This is absolutely phenomenal work by our lenders and our treasury management teams and there is a lot more to come. If you do the math, we have got $744 million of balances in just over 2.5 years that are 325 basis points or more better than the rest of our portfolio. This has improved our NII and pretax earnings by $25 million or $0.40 of EPS annualized and growing. The industry average has about a 25% DDA to total deposit mix. Our goal is just a minimum of 10%. On a current $14.5 billion deposit base that is growing 10% to 15% a year, that is massive upside to come as we become the primary bank for our customers and significantly improve our funding profile. On slide 8, you can see our credit trends over 10 years relative to all other SBA lenders. While default rates have moved higher across the industry over the last two years, Live Oak's performance continues to significantly outperform with a 10-year net charge-off ratio of 40 basis points compared to over 120 basis points for the industry as a whole. As Walt will discuss, our provision expense this quarter was driven roughly 45% by growth, 40% by an exited distillery portfolio, and 15% by macro and other factors. Let's pause on that for a second. Forty-five percent of our provision this quarter, or roughly $12 million, is from new loans that we have not had an opportunity to earn a penny on yet. CECL is not kind to growing companies like ours. I would much rather have our growth, which adds future revenue, driving higher provision than low growth and lower provision all day every day. Yet despite the CECL growth penalty, our production and revenue engine is more than powering through it, generating significant and sustainable earnings growth. I feel very good about our broader deposit credit trends. Aside from our exited distillery portfolio, which is only about one half of one percent of our total portfolio, trends are positive as evidenced by our metrics, particularly our total reserve coverage. Sitting here today with 87% of our loan portfolio originated at current or higher interest rates, we expect continued durability of these trends. I am very proud of our lending and credit teams for what they are delivering. Turning to slide 9, as you might expect, Live Oak is incredibly forward-leaning on how to harness the power of AI. Our AI activation and embrace of the technology is high. One hundred percent of our employees now have access to AI-native tools. We have 150 cloud super users, or roughly 15% of the company actively experimenting with cloud for enterprise and 90% of the groups across the company represented in that pilot. Our teams have now built more than 640 agents and skills across all our AI platforms. Our approach is multidimensional by design. First, to gain expertise and proprietary advantage through in-house efforts directly with AI providers. Second, through select co-design engagements to provide unique competitive advantages and knowledge building. And third, active use of frontier technology by AI leaders. At Live Oak, this is executive-led, not delegated. It is offensive, not defensive. And it is being executed like a massive merger integration and transformation to unlock the most long-term value by creating AI nativity across the organization. As excited as I am about our plans to create AI nativity across Live Oak, I am even more excited about our starting position. As we head into what is the most transformational technological change in my career, certainly, while we will generate plenty of productivity and efficiency gains from AI, so will everyone else eventually. Many will have efficiency and cost reduction as their primary focus. That will not be a competitive differentiator nor will it grow any business sustainably. Through incredibly hard work and dedication from our people, we have fundamentally changed the business model at Live Oak over the past three years and have created a much more consistent and sustainable business model, customer experience, earnings trajectory, and return profile with a long runway to go. In other words, our current strategy is working without AI. Therefore, AI is an accelerant to our strategy, not the strategy itself. This is going to allow us to play much more offense with AI with new capabilities, new products, new customer acquisition, and new distribution. As Chip says, second pitch, first inning, and we are ready to go. Thank you to all Live Oakers. I could not be more proud of how our people are taking care of customers, making our operations better and profitably growing our company. With that, Walt, how about running through some of the financial highlights?
Thanks, BJ. Good morning, everyone. Before I get into the numbers, let me frame the quarter this way. What you see in our Q2 results is not a single strong quarter. It is a continuation of a deliberate multi-quarter trend. The same drivers we have talked about for several quarters now—things like growing revenue faster than expenses, compounding our earnings power, and scaling our strategic initiatives—showed up again this quarter and, in some places, accelerated. And to us, that is what real momentum looks like: sustained and building across the business. Now let's dive into slide 12 and this breaks down the quarter across the six headlines we think matter most. Starting on the left-hand side of the page with our compounding earnings power and operating leverage: reported EPS in Q2 was $0.74, up 23% linked quarter and 45% year over year. And as BJ just noted, our adjusted EPS was $0.77 in Q2, up 20% from the prior year. This is excellent year over year growth. The key to this EPS growth is improved operating leverage. If you have tuned into our story over the past few years, you have heard that this has been an intentional focal area for us. Reported revenue grew 12% year over year while expenses declined 1%. As a result, with the year over year lens, Q2 reported PPNR of $72 million was up 32%. Our adjusted PPNR of $76 million was up 23%, and our efficiency ratio improved by seven percentage points, down to 54%. The middle of the page highlights our broad-based organic growth and expanding returns. Our loan book grew 4% linked quarter and 16% year over year to approximately $13 billion while our loan pipeline has climbed to $4.6 billion, a record high for the bank. Our lending teams continue to do a great job replenishing the pipeline to ensure future growth. And to fund that growth, we have also grown our deposit portfolio 16% year over year. We are very proud of these growth levels in highly competitive markets on both fronts. We are even more proud of the return on average common equity expansion of 251 basis points from just a year ago. High growth is great, but high growth with improving returns is even better. Sustainable 15% ROE and 15% plus annual EPS growth is our goal. With our current trajectory, that looks to be achievable in the next several quarters. Focusing on the right-hand side of the page, we are highly encouraged by the early success of our two key strategic initiatives: Live Oak Express and checking. As BJ mentioned, both of these initiatives continue to ramp nicely. Live Oak Express had its best quarter ever in Q2 with $82 million of loan originations and $5 million of gain on sale contribution. Checking balances increased 15% linked quarter and 63% compared to this time last year. Our Q2 provision expense of $26 million was driven by both our strong quarterly loan growth—which was approximately three times the balance growth we generated in Q1—and our exited distillery portfolio. Excluding this distillery portfolio, our broader portfolio credit trends improved, as evidenced in our unguaranteed ACL coverage of 2.01%, down 13 basis points from last quarter. Before moving on, there is one quick callout on the unique items front as noted on slide 11. Our effective tax rate was 19.9% this quarter, which included $2.7 million benefit from purchase tax credits and other one-time tax adjustments. Our adjusted EPS of $0.77 normalizes for that at a 24% tax rate. So with that framing in mind, let's dive into some of the select key highlights on the remaining slides. Jumping down to net interest income and margin trends on slide 15: net interest income in Q2 was $125 million, up 5% linked quarter and an impressive 15% year over year. Net interest margin expanded six basis points linked quarter to 3.33%. As the roll forward on the right shows, the quarter-over-quarter expansion was driven primarily by loan volume and mix, more than outweighing deposit funding impact. As I mentioned on our last earnings call, our primary focus is on controlling what we can control by aspiring to maintain spread discipline on the lending front and funding the bank's growth as efficiently as we can in a highly competitive market. From a macro perspective, we currently expect rates to remain flat in the near term. We believe that is a favorable backdrop for the bank's net interest income and NIM profile, and we expect our margin to remain generally stable as it has over the last three years while volume growth continues to be healthy. A quick note on guaranteed loan sales highlighted on slide 16: gain on sale from guaranteed loans was $17 million, up 13% linked quarter and in line with the prior year. SBA premiums remained steady, and Live Oak Express was a meaningful contributor at its highest quarterly gain-on-sale level to date of $5 million. Live Oak Express continues to grow, providing both efficient fee income as well as optionality in our loan sales strategy. That is a great place to be. I am proud of the expense and efficiency trends detailed on slide 17. Total noninterest expense was $85 million in Q2, down 1% compared to both linked quarter and prior year quarter. This, coupled with our 12% year over year revenue growth, is operating leverage in action and it is how we have improved our efficiency ratio to 54% in Q2—seven points better than a year ago. As a high-growth and innovative bank, we remain committed to investing in key areas such as lending and Live Oak Express, checking, risk management, and AI and technology. But our focus is doing so in a way that drives better scale, better efficiency, and a stronger earnings profile over time. Lastly, turning to the credit trends detailed on slide 18: the primary metric and trends to focus on this page is the unguaranteed ACL coverage ratio shown in the top left graph. As this is the most holistic metric to think directionally about the total loan portfolio's credit health, the declining trend represents improving broader portfolio trend, strong high-quality growth, and our focus on proactively identifying and then exiting troubled credit. Three other notable items on this page include the Q2 provision attribution summarized on the top right. As BJ mentioned, Q2's provision expense was largely driven by two factors: strong loan growth, which we refer to as good provision, which was almost half of the provision for the quarter, as well as specific impairments related to our exited distillery portfolio. As you can see in the table on the bottom of the page, over 30 days past due remain very low, and nonaccruals remain largely flat quarter over quarter. The net charge-off increase was driven by the exited distillery portfolio, which accounted for approximately 50% of the loans charged off in the quarter. The net charge-off trends otherwise were very encouraging. Lastly, given the possibility of additional rate hikes, we do find comfort in the fact that approximately 87% of our loan portfolio has been originated at current or higher rates. To wrap up, our earnings momentum is sustainable and building. Operating leverage is increasingly working in our favor. Our growth engine and strategic initiatives are gaining traction. And our credit profile remains sound. Thank you to the Live Oak team for another strong quarter. And with that, back to BJ for his closing remarks before Q&A.
Thanks, Walt. Great summary. Let's go to questions.
Questions and answers
We will now begin the question and answer session. If you would like to ask a question, press star 1. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Janet Lee with TD Securities. Your line is open. Please go ahead.
Hey. Good morning, guys. This is Billy Young stepping in for Janet. How are you?
Billy, how are you doing?
How's it going, Billy?
Doing well. Just to elaborate on your relatively stable NIM outlook: I think you previously had a range. Should we expect it to generally remain in that range over the back half of the year?
This is Walter. Sorry about that, I think you cut out on that question. Could you do us a favor and repeat? I apologize about that. Can you hear me now?
I just wanted you to articulate the comment on the relatively stable NIM outlook relative to your prior expectation of low- to mid-3.30s. It seems you expect it generally to remain in this range over the back half of this year.
Yeah. Again, thanks, Billy, for repeating that. This is Walt. I think that is right. There are two primary factors influencing the margin here in the near term. You have the heavy growth, which is great and tends to help with expansion. On the deposit front, the competition there has been pretty intense. We have seen multiple competitors attacking via cash promotions and exception-based pricing. So growth will help expand margin and deposit competition helps compress NIM. Given where we have been over the last two to three years with an average NIM of about 3.33% to 3.35%, that feels appropriate given where we are today.
Got it. Thank you for that. And then just secondly, your net charge-off trends are very encouraging. Though we have seen some continued upward pressure on non-NPLs, can you comment on your line of sight on negative risk migration in your book at this point? And any updated thoughts about where we sit with respect to the small business credit cycle?
Okay.
Yeah.
This is Michael Cairns. Happy to take that question. When I look back, there has been a lot of discussion on the call already about the distillery portfolio, which is a really small component of our loan assets. I take a broader view and look at how the portfolio as a whole where we are actively lending is performing. We have $13 billion worth of loans and are very active in SBA and commercial. Looking across the quarter, our credit metrics are very stable even including those distillery loans. We saw a substantial improvement over the quarter in our criticized and classified loans, particularly in our commercial portfolio. Our SBA portfolio continues to outperform the industry as well. On default trends, we saw positive risk-rate migration across the board. Our past dues remain very low. All of that is a good signal to us that we think our bank is past the credit cycle that we have been discussing in prior quarters and we are in a good position to move forward.
That is great to hear. Maybe one quick follow-up: do you see any other near-term opportunities to perhaps exit any other portfolio similar to the distillery exit?
No. Obviously, I have spent a lot of time with the credit team thinking about all of the macroeconomic risks that exist out there. We are watching interest rates, building assumptions into our underwriting to anticipate rising rates, and watching factors like tariffs, fuel costs, and inflation and how that impacts our customers. If there is any area I watch more specifically, it is anything related to consumer discretionary spending. But our portfolio has held up really well, and I have not seen any particular segment showing outsized deterioration so far.
Great. Thank you very much. I will step back.
Your next question comes from the line of Eric Spector with Cantor Fitzgerald. Your line is open. Please go ahead.
Hey, good morning. Thanks for taking the questions. Maybe just starting off on loan growth. Production was impressive this quarter. Appreciate the color on the record pipelines. Curious how you think about that 10% to 15% growth target in a flat to slightly higher rate environment and how we should think about the cadence of growth through the back half of the year; could we potentially see upside to that 10% to 15% growth level?
Yeah. This is BJ. I feel great about it and I am continually impressed with our lenders and our people. They constantly find new referral sources, network across existing customers, build partnerships, and get more production. Activity remains very high. Chip and I were talking about it the other day: two years ago pipelines were half of where they are today. To continue to build that pipeline and keep it strong is fantastic. Looking forward, we see continued momentum. We can see three to six months out in our pipeline in terms of what will ultimately turn into production, and we feel really good about that. One thing I will add when Walter was talking about margins: I am also very impressed with what our lenders are doing with pricing and pricing discipline. We have seen an increase in new origination pricing even as production has continued to rise, particularly on the small business side. That is not taking more risk or remixing our portfolio; that is our lenders understanding the marketplace and the value we provide, and customers recognizing that and being willing to pay for our services. I am very pleased with the discipline the lenders have and the pipelines they are building.
That is helpful color. The funding story was a standout this quarter with impressive NII growth and lower deposit costs. How much room do you see to bring deposit costs down further in a stable rate environment? Maybe some color on the competitive environment for new deposits?
I will start with that, Eric. Our deposit team is doing a fantastic job. There are multiple ways to continue to grow our deposits. You have to be competitive in pricing and our team does a good job understanding the market on both the consumer and business savings sides as well as customer CDs. They are also creative in marketing strategies. What we see most pressure from is not stated rates but exception-based pricing from competitors. We do what we can to combat that when needed. Broadly, our deposit strategy is working; it is diversified across channels and products. As we noted earlier, the checking story is substantial upside; that is where we continue to lead by building the product out and adding merchant services. We are confident we can continue to fund our growth going forward, and I appreciate the deposit team's work.
Great. And then last one for me: on expenses, you have talked about mid-single-digit expense growth in the past. Expenses were down this quarter, but you continue to invest in innovation and AI. Can you talk about how you think about the expense outlook going forward?
For expense outlook, I still think low-single-digit to mid-single-digit growth is appropriate. It is a fine balance on how we are investing. We are focusing on creating capacity through efficiencies elsewhere in the bank and reinvesting that capacity in AI, Live Oak Express, and checking. Over the last roughly six quarters, the average quarterly expense has been about $85 million; that is where we were in Q1 and again in Q2, and I think that is appropriate looking forward.
Great. Thank you for taking the questions, and congrats on a great quarter.
Thank you.
Your next question comes from the line of David Feaster with Raymond James. Your line is open. Please go ahead.
Hey, good morning, everybody.
Hey, David.
I wanted to circle back to the credit front for a minute. It really does feel like things are stabilizing looking at your numbers, especially given the distillery book runoff. You mentioned being past the credit cycle. Is that commentary specific to the SBA credit cycle or broad? Maybe what are you seeing more on the traditional commercial portfolio and underlying credit trends in that book?
This is Michael. That is a great question. When I referenced the SBA credit cycle, our commercial portfolio has held up very well outside of the distillery segment. If we did not have the distillery segment in our portfolio today, we would be discussing a much lower net charge-off quarter and provision well below $20 million. So I feel really good about where our portfolio is landing on both the commercial and SBA sides. From my view, it was a strong credit quarter for us.
Okay. That is helpful. Switching to the funding side again: you have done a great job on the business checking initiative. It sounds like there are still investments coming. You said a third of your new clients open checking accounts. What will it take to get a real step change in the growth rate and balances within business checking?
This is BJ. I think we are seeing big step changes already. Two and a half years ago we really did not have a checking account product, and today we have about 5% of our deposits in noninterest or other DDA. That is incredibly impressive. On our path to getting to 10% plus, I am increasingly confident we can do that. A lot of our initial growth in the first 18 months was driven more on the commercial side and some larger balances as we matured our treasury offering to be attractive to small business customers and trained our lenders to sell checking. We are introducing merchant services now, which is very important to small business customers. That is a lifeblood of how they do business and therefore needed for checking accounts. With merchant services, we see further tailwind to grow checking balances. I feel really good about the trajectory.
Okay. That is great. Going back to expenses, I think what you have done on expense control and driving positive operating leverage is underappreciated. Where are these savings coming from? Is this trimming fat or being more tactical with investing and AI initiatives that are enabling optimization? And what other initiatives are you investing in?
Thanks, David. I will start. On the efficiency side, we are finding capacity across the bank in many directions. Some of that is organizational structure, some is consolidating vendors and systems, and some is being very intentional about where we decide to invest in new headcount. We are rethinking marketing strategies and diving into KPIs across departments to measure historical trends and identify efficiencies. It is a much more intentional approach to expenses than in the past. On the investment side, we mentioned Live Oak Express, the AI data platform, and expanding those teams, as well as product and marketing investment on checking.
On the AI side, many of the efficiencies we have seen over the past year and a half had nothing to do with AI yet; they are driven by an intentional focus. Our current AI investments include enterprise licenses to AI platforms across the company and partnering with AI companies on process transformation—how to get from step one to step nine without going through steps two through eight. These efforts aim to transform processes for both employees and customers.
David, I would also add Live Oak is not your typical bank.
You know, Chip has created a culture here in the DNA that is forward-leaning and innovation-led and that is what makes it special.
What Chip and the founders have also done is create a culture of care where people love this place. One of our mantras is how do we make it simpler, easier, and faster for our people to serve our customers? That shows up every day in hiring, process improvements, where to take cost out, and how to streamline. Creating that culture takes a long time; we have had it for 17 years. It is a key reason why our people continually find ways to improve.
On the flip side, because we are forward-leaning and innovation-led, we are spending millions on forward-leaning initiatives.
Live Oak Express required several million dollars to stand up. Checking required several million to stand up an entire treasury management platform and team. Risk management and scaling required several million. Our AI-native new loan origination platform with Canapi required several million. We have made these investments because our people are taking care of our customers and reinvesting into what will make us successful in the future.
One more thing I will add: it is impressive what this team and company has done on expenses. If you do the math on the first half of 2025 versus the first half of 2026, our total revenue is up 15% and our expenses are up 2%. We are not sacrificing customer experience, loan pipelines, or the ability to grow revenue. That ability to identify bad costs and allocate to good costs is a very special quality of this place.
That is super helpful. Thank you.
Your next question comes from the line of Crispin Love with Peter Sandler. Your line is open. Please go ahead.
Hey. Good morning. This is Ben Graham in for Crispin Love. Thanks so much for taking the question. You are very close to small businesses and I am wondering what you are seeing now related to the health of the small business owner today, given monthly and quarterly financials you get, survey work, and the conversations you have. Is it improving, stable? I am curious about what you are seeing there. Thanks.
I will start.
Or Chip, but I would say the one word I continually use—and it is very apt today for our small business customers—is resilient. We do a quarterly poll survey, see portfolio trends, and review quarterly financials. Our small business customers treat this as their lifeblood and they will do whatever they can to make the business profitable. When certain industries or customers have struggles with sales, they optimize cost structures, deplete cash reserves temporarily, or delay capital investment. At other times, they use that to their advantage. We feel really good about our customers and our people's ability to serve those customers.
The servicing team and our verticalized approach give us insight into individual segments and the broader view. We have real conversations with customers and understand where they are. Across the small business community as a whole, people are experiencing inflation and are concerned about potential rate increases. But the quality of the borrowers—resilience and character—we look for those traits at underwriting. From my vantage point, the positive risk-grade migration and portfolio improvements reflect how our customers are faring.
Let me add a little color: before Mike was chief credit officer, he led family entertainment lending at the bank. Two weeks ago I saw an entertainment center in Iowa and the owner was doing great. Yesterday I saw a manufacturing company that had fallen on hard times and is now thriving. We financed a buyer who turned the business around. We live the American dream every day.
Awesome. Thank you so much for the color there. A follow-up on Live Oak Express: congrats on the record quarter in originations. On the $750 million targeted future annual production, could you give more color on the timeline?
This will be a multiyear trajectory. From nothing two years ago to likely ending this year near $300 million of production is a good start. Our new loan origination platform will help, and we are doing a lot of top-of-funnel work to optimize marketing and referrals. Those two things will be in place by the end of this year and should lead to a step change into next year. It will take a couple of years to reach cruise altitude and $750 million is hopefully just the beginning; we think we can go north of that over time.
Awesome. That is it for me. Thanks so much for taking my questions.
Thanks, Ben.
Your next question comes from the line of Emily Lee with KBW. Your line is open. Please go ahead.
Hey, everyone. This is Emily on for Tim Switzer. Thanks for taking my question.
Hey, Emily.
Yeah.
Hi.
On Live Oak Express, you continue to target that $750 million of annual production over the next few years. Where do you expect average gain-on-sale premiums to settle over time with the growth of Express, given that the higher-premium business?
Hi, Emily. Our premium has been very consistent in the 1.09 to 1.11 range. With our pricing power and focus, and given historical secondary market behavior for small loans, anywhere from 1.09 up to 1.13 feels reasonable and consistent going forward.
Okay. Thank you. You talked a lot about your approach to technology and AI innovation. Could you speak more on your partnership with Canapi AI and any progress there? Do you still expect those efficiencies to cut the time it takes to close an SBA loan from its current average of two months to two weeks?
Absolutely. We are still in pilot with Canapi in our Live Oak Express area. We are working in a componentized way across the loan life cycle—lending, underwriting, closing, construction, servicing—to make sure each piece is right. We have put loans through the Live Oak Express platform already and closed some. We expect to do more over the next few months and then have a full rollout for Live Oak Express with Canapi by the end of the year. We will then transition to building it out for the rest of our small business verticals and beyond. The teams working on this are excited about the ease of doing their jobs and the improved customer experience. More to come, and we feel really good about delivery.
That is great to hear. My last question on credit: with the provision this quarter being primarily driven by growth and given your commentary on current pipelines, where do you expect provisioning to go moving forward?
Hi, Emily. In the past we have talked about provisioning normalizing somewhere in the $20 million to $25 million range. With the growth and the pipeline we have today, that feels appropriate to me. That is a healthy level and, given our compounding earnings power, I would take that any day.
To reiterate, we have built a more sustainable business model and earnings engine. If provisioning is $20 to $25 million—one quarter could be as low as $15 million and another as high as $25 million—that variability is manageable because of what we are doing on the front end to drive revenue, acquisition, and disciplined credit quality. I am encouraged by our ability to earn through fluctuations in quarterly provisions.
Great to hear. Thank you for taking my questions, and congrats on the quarter.
There are no further questions at this time. I will now turn the call back to Live Oak Bank President, BJ Losch, for closing remarks.
Chip, any thoughts?
Yeah. To our investors, I would close with two words: fun and faster. I was reflecting on this call this morning about how blessed I have been since 1995 putting the first bank on the Internet and evolving how we treat every customer as if they were the only customer. Today we are cloud-native and API-first. This time will be different. Large language models are progressing beyond our wildest imagination. We focus on $500 thousand to $5 million revenue businesses—there are 3.5 million of those in this country—and we have been at it 18 years with about 10,000 customers. As I talk with our people, I say two words: curious and tedious. I am 1000% convinced that all of our people have been very curious about artificial intelligence. With this new technology we can take tedious tasks out of the business, which means we will have more fun. Every day I see emails from people: ‘‘I used it and I saved an hour,’’ ‘‘I used it and I saved five hours,’’ ‘‘Three of us got together and we saved ten hours.’’ I do not think our focus will be to eliminate staff, but if we can reduce tedious work and free up time, we can get more customers. That is where you see this business today: fun and faster. Thank you for joining us and we will see you next quarter.
This concludes today's call. Thank you for attending. You may now disconnect.