Q3 2025 Live Oak Bancshares Inc Earnings Call

Speaker #3: Good morning , ladies and gentlemen , and welcome to the Live Oak Bancshares . Third quarter 2020 Earnings Conference Call . At this time , all lines are in a listen only mode .

Michael Cairns: Good morning, ladies and gentlemen, and welcome to the Live Oak Bancshares Inc. Third Quarter 2025 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press *0 for the operator. I would now like to turn the conference call over to Gregory Seward, General Counsel and Chief Risk Officer. Please go ahead.

Speaker #3: Following the presentation , we will conduct a question and answer session . If at any time during this call require immediate assistance , please press star zero .

Speaker #3: For the operator . I would now like to turn the conference call over to Greg , general Counsel and Chief Risk Officer . Please go ahead .

Speaker #4: Thank you . Good morning everyone . Welcome to Live Oaks third quarter 2020 earnings Conference Call . We are webcasting live over the internet , and this call is being recorded .

Walter Phifer: Thank you. Good morning, everyone. Welcome to Live Oak Bancshares Inc.'s Third Quarter 2025 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 materials 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.

Speaker #4: To access the call over the internet and review the presentation materials that we will reference on the call , please visit our website at investor Live Oak Bancshares, Inc. and go to the events and Presentations tab for supporting materials .

Speaker #4: 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 .

Speaker #4: 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 .

Speaker #4: We 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 .

Walter Phifer: We 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. I will now turn the call over to James “Chip” Mahan, our Chairman and Chief Executive Officer.

Speaker #4: 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 .

Speaker #4: I will now turn the call over to Chip mahan , our chairman and Chief Executive Officer .

Speaker #5: Good morning , all . And BJ's going to kick us off .

[Analyst]: Good morning all, and BJ is going to kick us off.

Speaker #6: Good morning everybody . Let's get started with a big shout out to all of Live Oak and our customers . On slide four we're proud to be recognized as the number one SBA seven lender for 2025 .

William Losch III: Good morning, everybody. Let's get started with a big shout-out to all of Live Oakers and our customers on slide four. We're proud to be recognized as the number one SBA 7(a) lender for 2025 and by an impressive margin. Not only did we provide over $2.8 billion of loans to small businesses, but we also increased our production by 44% over last year, and our market share increased from 6.4% to 7.7%. Yet, we still have plenty of room to grow in the program. Turning to slide five, we know what we are good at, and we're keeping the main thing the main thing by ensuring our existing vertical lending and deposit gathering activities are our number one priority. This performance is top of the class from a growth perspective. Loan production up 22%, loan outstandings growth up 17%, customer deposit growth up 20%, and PP&R up 24%.

Speaker #6: And by an impressive margin . Not only did we provide over $2.8 billion of loans to small businesses , but we also increased our production by 44% over last year , and our market share increased from 6.4% to 7.7% .

Speaker #6: And yet we still have plenty of room to grow in the program . Turning to slide five . We know what we are good at and we're keeping the main thing .

Speaker #6: The main thing by ensuring our existing vertical lending and deposit gathering activities are our number one priority . This performance is top of the class from a growth perspective .

Speaker #6: Loan production up 22% . Loan Outstandings growth up 17% . Customer deposit growth up 20% and Ppnr up 24% . These results reflect the hard work of all our teams have done to create outcomes that are more consistent and sustainable over time .

William Losch III: These results reflect the hard work all our teams have done to create outcomes that are more consistent and sustainable over time. That's our goal. To ensure our profitable growth trajectory continues over the medium term, we are extending our customer product offerings by adding checking and small-dollar SBA loan capabilities. Both of these efforts launched in early 2024, and in a little over 18 months, our teams have made significant gains in winning customer checking relationships and serving more small business borrowers. On the checking front, we ended the quarter with $363 million of checking balances, or 4% of our total deposit base, up from only 2% this time last year. This increase is even more impressive when you consider that our total deposit base grew 17% year over year.

Speaker #6: That's our goal to ensure our profitable growth trajectory continues over the medium term . We are extending our customer product offerings by adding , checking and small dollar SBA loan capabilities .

Speaker #6: Both of these efforts launched in early 2024 and in a little over 18 months , our teams have made significant gains in winning customer checking , relationships and serving more small business borrowers on the checking front .

Speaker #6: We ended the quarter with 363 million of checking balances , or 4% of our total deposit base , up from only 2% this time last year .

Speaker #6: This increase is even more impressive when you consider that our total deposit base grew 17% year over year . We have about one third of our new loan customers opening a checking account with us each quarter , and we expect that percentage to increase as we add more capabilities , such as merchants , services .

William Losch III: We have about one-third of our new loan customers opening a checking account with us each quarter, and we expect that percentage to increase as we add more capabilities such as merchant services. At the beginning of 2024, only roughly 6% of our customers had both a loan and deposit relationship with us. Today, that percentage is 20%. All this is leading to deeper relationships with customers, better insight into customer cash flows, and meaningful reductions in the cost of deposits, both now and over time. On the small-dollar 7(a) 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 and are leading to a nice gain on sale increase. We are continuing our efforts to make it simpler, easier, faster, and more efficient for our people to serve our customers.

Speaker #6: At the beginning of 2024 , only roughly 66% of our customers had both a loan and deposit relationship with us . Today , that percentage is 20% .

Speaker #6: All this is leading to deeper relationships with customers . Better insight into customer cash flows and meaningful reductions in the cost of deposits .

Speaker #6: Both now and over time . On the small dollar seven front , what we call live oak Express production is ramping up meaningfully and will continue to do so .

Speaker #6: These loans are also very desirable on the secondary market and are leading to a nice gain on sale increase . We are continuing our efforts to make it simpler , easier , faster and more efficient for our people to serve our customers and in Live Oak Express , we will be piloting an AI enabled loan origination solution to do just that , which will significantly improve our speed to close for the borrower and the efficiency of our process from the lender .

William Losch III: In Live Oak Express, we will be piloting an AI-enabled loan origination solution to do just that, which will significantly improve our speed to close for the borrower and the efficiency of our process from the lender all the way through to servicing and loan operations. The tangible result of our efforts is showcased on slide six. As you can see, the true earnings power of the company is strong in PP&R, revenue, and pretax income on both a quarter-over-quarter and year-over-year basis. We continue to be very focused on building more consistent and sustainable profitability. Healthy revenue growth continues, and with appropriate supportive expense growth, operating leverage is strong. With credit impacts moderating in line with our expectations, a significant improvement is evident in our pretax income results. In short, our momentum continues with more to come. Walt, how about running through some of the financial highlights?

Speaker #6: All the way through to servicing and loan operations . The tangible result of our efforts is showcased on slide six . As you can see , the true earnings power of the company is strong in Ppnr revenue and pre-tax income on both a quarter over quarter and year over year basis .

Speaker #6: We continue to be very focused on building more consistent and sustainable profitability , healthy revenue growth continues and with appropriate supportive expense growth , operating leverage is strong with credit impacts moderating in line with our expectations .

Speaker #6: A significant improvement is evident in our pre-tax income results . In short , our momentum continues with more to come . So with that , Walt , how about running through some of the financial highlights ?

Speaker #5: Thanks , BJ . Good morning everyone . Diving into the quarter on page eight for Q3 earnings per share of $0.55 increased 8% linked quarter and almost doubled compared to Q3 of 2020 .

Walter Phifer: Thanks, BJ. Good morning, everyone. Diving into the quarter on page eight, our Q3 earnings per share of $0.55 increased 8% in the quarter and almost doubled compared to Q3 of 2024. This outstanding growth was aided by the 7% link quarter and 24% versus prior year increase in core operating leverage that BJ just highlighted, as well as a lower quarterly provision expense. The 7% quarter-over-quarter improvement in core operating leverage was driven by a 6% quarter-over-quarter increase in net interest income, aided by $551 million, or 5% link quarter in loan balance growth, and five basis points of margin expansion to 3.33%. On the growth front, our small business and commercial banking lenders, as well as our loan support teams, continue to generate high-caliber loans while replenishing their pipelines. Our deposits business continues to fund the bank in an extremely competitive market.

Speaker #5: For . This outstanding growth was aided by the 7% linked quarter in 24% versus prior year increase in core operating leverage that BJ just highlighted , as well as a lower quarterly provision expense .

Speaker #5: The 7% quarter over quarter improvement in core operating leverage was driven by a 6% quarter over quarter increase in net interest income , aided by $551 million , or 5% linked quarter in loan balance growth and five basis points of margin expansion to 3.33% .

Speaker #5: On the growth front . Our small business and commercial banking lenders , as well as our loan support teams , continue to generate a high caliber loans while replenishing their pipelines .

Speaker #5: Our deposits business continues to fund the bank in in an extremely competitive market . And as BJ mentioned , we continue to be encouraged by the momentum in our two focused initiatives of growing non-interest bearing business checking balances and originating small dollar SBA seven loans via our Live Oak Express product .

Walter Phifer: As BJ mentioned, we continue to be encouraged by the momentum in our two focus initiatives of growing non-interest-bearing business checking balances and originating small-dollar SBA 7(a) loans via our Live Oak Express product. Quarterly provision expense was $22 million and was lower for the fourth consecutive quarter. Our reserve and resulting quarterly provision expense continue to be driven by strong loan growth and our navigation of the small business credit cycle that we have discussed over the past few quarters. Lastly, on the capital front, we successfully raised $100 million with our inaugural preferred offering, generating quality tier-one growth capital to support our growth aspirations. Next quarter, we will have another earnings and capital accretive event with Aperture's recent sale, which will result in a $24 million one-time gain while also removing approximately $6 million of annual pass-through losses from our income statement.

Speaker #5: Quarterly provision expense was $22 million and was lower for the fourth consecutive quarter. Our reserve and resulting quarterly provision expense continue to be driven by strong loan growth and our navigation of the small business credit cycle that we have discussed over the past few quarters.

Speaker #5: Lastly , on the capital front , we successfully raised $100 million with our inaugural preferred offering , generating quality tier one growth capital to support our growth aspirations .

Speaker #5: Next quarter , we will have another earnings and capital accretive event with apertures for sale , which will result in a $24 million one time gain , while also removing approximately $6 million of annual pass through losses from our income statement .

Speaker #5: Page nine provides a financial snapshot of our Q3 earnings results on the top left , with quarter over quarter demonstrated improvement across all major profitability and growth metrics highlighted on the bottom left .

Walter Phifer: Page nine provides a financial snapshot of our Q3 earnings results on the top left, with quarter-over-quarter demonstrated improvement across all major profitability and growth metrics highlighted on the bottom left. I'd like to briefly highlight two other items on this page, the first being the bottom right corner of this slide where we capture notable non-core items each quarter as they arise. Specifically, in Q3 of 2025, these items collectively had an estimated negative impact of approximately $1.5 million on our reported earnings. The second item is the tax expense line. Similar to last year, we had a seasonal increase in the third quarter effective tax rate that was driven by compensation-related accounting treatment in the tax calculation. Slide 10 highlights our loan originations by vertical and business units. A few things to note here.

Speaker #5: I'd like to briefly highlight two other items on this page . The first being the bottom right corner of this slide where we capture notable non-core items each quarter as they arise .

Speaker #5: Specifically in Q3 of 2025 . These items collectively had an estimated negative impact of approximately $1.5 million on our reported earnings . The second item is the tax expense line .

Speaker #5: Similar to last year, we had a seasonal increase in the third quarter. The effective tax rate was driven by compensation-related accounting treatment in the tax calculation.

Speaker #5: Slide ten highlights our loan originations by vertical and business units . Few things to note here as shown on the right hand side of the page , our Q3 2025 loan originations totaled totaled approximately $1.65 billion , an 8% increase linked quarter , driven primarily by our commercial banking segment .

Walter Phifer: As shown on the right-hand side of the page, our Q3 2025 loan originations totaled approximately $1.65 billion, an 8% increase linked quarter driven primarily by our commercial banking segment. Production momentum in 2025 remains strong across our spectrum of verticals, with approximately two-thirds of our verticals originating more production year to date in 2025 than they did in year to date 2024. Lastly, the bottom right of the page highlights the linked quarter-over-quarter and year-over-year loan portfolio growth trends by lending segment, with both segments providing double-digit year-over-year growth rates. Slide 11 illustrates quarter-over-quarter loan and deposit balance growth, highlighting the strong, consistent growth trends on both fronts. Our total loan portfolio grew approximately 5% in the quarter, with year-over-year loan balances increasing approximately 17%. Outstanding, durable growth that you don't often see across the current industry landscape.

Speaker #5: Production momentum in 2025 remained strong across our spectrum of verticals , with approximately two thirds of our verticals originating more production year to date in 2025 than they did in year to date 2024 .

Speaker #5: Lastly , the bottom right of the page highlights the linked quarter over quarter and year over year loan portfolio growth trends by Lending segment , with both segments providing double digit year over year growth rates .

Speaker #5: Slide 11 illustrates quarter over quarter loan and deposit balance growth , highlighting the strong , consistent growth trends on both fronts . Our total loan portfolio grew approximately 5% linked quarter with year over year loan balances increasing approximately 17% .

Speaker #5: Outstanding durable growth that you don't often see across the current industry landscape . The approximately 3% increase in customer deposits was consistent with Q2 2020 fours customer deposit growth rate , while our year over year customer deposit growth rate was an outstanding 20% .

Walter Phifer: The approximately 3% linked quarter increase in customer deposits was consistent with Q2 2024's customer deposit growth rate, while our year-over-year customer deposit growth rate was an outstanding 20%. As you can see in the second half of 2024's growth rates on the bottom of the page, we typically experience a slower seasonal growth rate in the second half of the year on the customer deposit front and expect the second half of 2025 to be no different. Year-to-date growth in customer deposits has primarily been driven by our consumer and business savings products, as we have remained competitively priced in the market to support our aforementioned loan growth and via our business checking growth, which we highlight on our growth trends on page 12. We saw a nice ramp in business checking in Q3 of 2025, with checking balances increasing 26% linked quarter to $363 million.

Speaker #5: As you can see in the second half of 2024 , growth rates on the bottom of the page , we typically experience a slower seasonal growth rate in the second half of the year on the customer deposit front , and expect the second half of 2025 to be no different .

Speaker #5: Year to date growth in customer deposits has primarily been driven by our consumer and business savings products , as we have remained competitively priced in the market to support our aforementioned loan growth .

Speaker #5: Envy our business growth , which we highlight on our growth trends . On page 12 , we saw a nice ramp in business checking in Q3 of 2025 with checking balances , increasing 26% linked quarter to $363 million .

Speaker #5: Our total low cost deposits , including noninterest bearing checking balances as well as low cost collateral construction and loan reserve accounts , now totals approximately 4% of our total deposit bases , a 2% or two x increase year over year .

Walter Phifer: Our total low-cost deposits, including non-interest-bearing checking balances as well as low-cost collateral construction and loan reserve accounts, now total approximately 4% of our total deposit base, a 2% or 2X increase year over year. As BJ highlighted, adding non-interest-bearing deposits to our primarily competitively market-priced customer deposits and wholesale deposit portfolio is substantially accretive to our earnings profile. These deposits not only enhance our margin efficiency, but also strengthen the overall resilience of our funding mix with deeper customer relationships. As such, they remain a key strategic priority for us as we head into 2026 and beyond. Net interest income and margin trends are highlighted on slide 13. In Q2 of 2025, sorry, Q3 of 2025, we saw our quarterly net interest income increase $6 million, or 6% link quarter, and $23 million, or 19% compared to Q3 of 2024.

Speaker #5: As BJ highlighted, adding noninterest-bearing deposits to our primarily competitively market-priced customer deposits and wholesale deposit portfolio is substantially accretive to our earnings profile.

Speaker #5: These deposits not only enhance our margin efficiency , but also strengthen the overall resilience of our funding mix with deeper customer relationships . As such , they remain a key strategic priority for us as we head into 2026 and beyond .

Speaker #5: Net interest , income and margin trends are highlighted on a slide 13 . In Q2 of 2025 , Q3 I'm sorry , Q3 of 2025 , we saw our quarterly net interest income increased $6 million , or 6% linked quarter in $23 million , or 19% , compared to Q3 of 2024 .

Speaker #5: Our net interest margin also expanded another five basis points to 3.33% . Our third consecutive quarter of margin expansion , aided both by growth as well as continued deposit repricing .

Walter Phifer: Our net interest margin also expanded another five basis points to 3.33%, our third consecutive quarter of margin expansion, aided both by growth as well as continued deposit repricing as highlighted on the bottom of the table in the middle of the page. As the Fed cut in September, and we expect more cuts to come in the very near future, perhaps as early as next week, here is a general reminder of how this impacts our net interest income and margin trajectories. The first is we have an asset-sensitive balance sheet with approximately two-thirds of our loans being variable and tied to either SOFR or PRIME. The second is our funding base is predominantly in liquid savings accounts, short-term customer CDs, and broker deposits. Since the Fed began easing last December, our blended savings cumulative downward beta is approximately 44%.

Speaker #5: As highlighted on the bottom of the table in the middle of the page . As the fed cut in September and we expect more cuts to come in the very near future , perhaps as early as next week .

Speaker #5: Here is a general reminder of how this impacts our net interest income and margin trajectories . The first is we have an asset sensitive balance sheet with approximately two thirds of our loans being variable and tied to either sofr or prime .

Speaker #5: The second is our funding base, which is predominantly in liquid savings accounts, short-term customer CDs, and broker deposits. Since the Fed began easing last December, our blended savings cumulative downward beta is approximately 44%.

Speaker #5: This is largely a result of us not pricing to the top of the market . While the fed was tightening and as such , we have let the top of the market reprice down towards us through 2025 .

Walter Phifer: This is largely a result of us not pricing to the top of the market while the Fed was tightening, and as such, we have let the top of the market reprice down towards us through 2025. Ultimately, we monitor both deposit market and funding levels closely, ensuring that we continue to support our loan growth appropriately while also adjusting pricing to support margin aspirations and profitability. Our current outlook is that the Fed cuts 25 basis points in October and December of 2025, followed by three additional 25 basis point cuts in March, June, and September of 2026. Yet Fed forecasts vary, and as such, we showed you net interest income and margin outlooks. We evaluate a gauntlet of forward-looking scenarios to assess the potential cone of net interest income and margin outcomes.

Speaker #5: Ultimately , we monitor both deposit market and funding levels closely , ensuring that we continue to support our loan growth appropriately while also adjusting pricing to support margin aspirations and profitability .

Speaker #5: Our current outlook is that the fed cuts 25 basis points in October and December of 2025 , followed by three additional 25 basis point cuts in March , June and September of 2026 .

Speaker #5: Yet Fed forecast vary and as such we so do net interest income and margin outlooks . We evaluate a gauntlet of forward looking scenarios to assess the potential of net interest income and margin outcomes , and generally speaking , larger or more frequent .

Walter Phifer: Generally speaking, larger or more frequent Fed cuts provide more margin compression in the near term, while flat interest rates, less cuts, and less frequent cuts provide more margin opportunity. Ultimately, assuming that the deposit market is rational and reprices appropriately, our margin typically recovers relatively quickly due to the short-term nature of our funding base. What really matters, however, is not simply the margin but the net interest income generated. Our net interest income performance is more resilient due to our strong growth. To drive this point home, over the last six years, 24 out of 26 quarters experienced stable or growth in net interest income, despite our net interest margin peaking at 4% and valuing at 2.56% over the same timeframe. Moving to guarantee loan sale trends on slide 14, the secondary market continues to provide consistent earnings while acting as a good source of recycled liquidity.

Speaker #5: Cuts provide more margin compression in the near term , while flat interest rates , less cuts and less frequent cuts provide more margin opportunity .

Speaker #5: Ultimately , assuming that the deposit market is rational and reprices appropriately , our margin typically recovers relatively quickly due to the short term nature of our funding base .

Speaker #5: Ultimately , what really matters , however , is not simply the margin , but the net interest income generated and our net interest income performance is more more resilient due to our strong growth .

Speaker #5: To drive this point home over the last six years , 24 out of 26 quarters experienced stable or growth in net interest income .

Speaker #5: Despite our net interest margin peaking at 4% and valuing at 2.5% , 5.6% over the same time frame . Moving to guaranteed loan sale trends on slide 14 , the secondary market continues to provide consistent earnings while acting as a good source of recycled liquidity .

Speaker #5: We added some depth to this page this quarter to provide insight into our gain on sale composition and to highlight the accretive contribution we are already realizing from our small loan SBA origination efforts .

Walter Phifer: We added some depth to this page this quarter to provide insight into our gain on sale composition and to highlight the accretive contribution we are already realizing from our small loan SBA origination efforts. Our quarterly gain on sale remains primarily driven by our typical larger SBA loan sales, which have provided a consistent $13 million to $15 million a quarter of gain on sale at an average premium in the $106 to $107 range. We've now had two consecutive quarters of USDA loan sales, which is encouraging, yet ultimately the timing and execution of these sales is driven by the completion of the underlying projects, rate environment, and investor demand.

Speaker #5: Our quarterly gain on sale remains primarily driven by our typical larger SBA loan sales , which have provided and consistent 13 to $15 million a quarter of gain on sale at an average premium in the 106 to 107 range .

Speaker #5: We've now had two consecutive quarters of USDA loan sales , which is encouraging . Yet ultimately , the timing execution of these sales is driven by the completion of the underlying projects rate environment and investor demand .

Speaker #5: Similar to my comments on growing, checking balances, our focus on ramping our Live Express origination is providing immediate results with our small loan.

Walter Phifer: Similar to my comments on growing checking balances, our focus on ramping our Live Oak Express origination is providing immediate results, with our small loan SBA sales providing for $12 million in year-to-date gain on sale, approximately 4X or $9 million more compared to year-to-date 2024, while also providing for approximately 20% of our year-to-date total gain on sale compared to only 8% in year-to-date 2024. To help ramp this product going forward, we remain focused on both filling the top of the funnel through partnerships and lender referrals, while also leveraging AI to make the origination and servicing more efficient for our people and our customers. Expense trends are detailed on slide 15. Q3 reported non-interest expense of $87 million decreased approximately $2 million, or approximately 2% link quarter. We remain focused on supporting our growth via good calls while also working to improve efficiency.

Speaker #5: SBA sales providing for $12 million in year to date gain on sale approximately four x or $9 million more compared to year to date of 2024 .

Speaker #5: While also providing for approximately 20% of our year to date total gain on sale , compared to only 8% in year to date 2024 .

Speaker #5: To help ramp this product going forward , we remain focused on both filling the top of the funnel through partnerships and lender referrals , while also leveraging AI to make the origination and servicing more efficient for our people and our customers .

Speaker #5: Expense trends are detailed on slide 15 . Q3 reported noninterest expense of $87 million decreased approximately $2 million , or approximately 2% , linked quarter .

Speaker #5: We remain focused on supporting our growth via good costs , while also working to improve efficiency . This renewed focus on growing revenues faster than expenses , expenses and improving operating leverage really began back in the third quarter of 2023 .

Walter Phifer: This renewed focus on growing revenues faster than expenses and improving operating leverage really began back in the third quarter of 2023. You can see the results of that focus on the right-hand side of this page, with loan production, core operating leverage, and revenue growth all significantly outweighing our expense growth compared to the third quarter of 2025 to the third quarter of 2023. We are keenly focused on improving both our customer and employee experiences, embracing the automation and AI wave across our entire business, and enhancing our current technology stack, all with the resulting goal of creating internal and external raving fans, improving efficiency, and providing for a solid, mature foundation that will support our growth.

Speaker #5: You can see the results of that focus on the right hand side of this page with loan production core operating leverage and revenue growth , all significantly outweighing our expense growth .

Speaker #5: With compared to the third quarter of 2020 . Comparing the third quarter of 2025 to the third quarter of 2023 , we are keenly focused on improving both our customer and employee experiences , embracing the automation and AI ways across our entire business , and enhancing our current technology stack , all with the resulting goal of creating internal and external raving fans , improving efficiency , and providing for a solid , mature foundation that will support our growth .

Speaker #5: Turning the credit . Slide 16 provides insight into the portfolio with a view of key credit ratio trends in the table at the top , with visual visualization of over 30 over 30 day past dues , non-accruals and provision trends on the bottom , our our over 30 days past dues remain low for the fourth consecutive quarter with $16 million or 14 basis points of are held for investment loan portfolio past due as of September 30th .

Walter Phifer: Turning to credit, slide 16 provides insight into the portfolio with a view of key credit ratio trends in the table at the top, with visualization of over 30-day past dues, non-approvals, and provision trends on the bottom. Our over 30-day past dues remain low for the fourth consecutive quarter, with $16 million or 14 basis points of our held-for-investment loan portfolio past due as of September 30th. The amount of non-approval loans increased to $85 million or 73 basis points of our unguaranteed held-for-investment loan portfolio in Q3. Non-approval balances remain very manageable as our servicing team continues to support SBA customers impacted by the small business credit cycle. Provision expense of $22 million improved in Q3 and was influenced by strong $551 million quarter-over-quarter loan growth, what we often refer to as good provision and portfolio performance.

Speaker #5: The amount Non-accrual loans increased to $85 million , or 73 basis points of our Unguaranteed held for investment loan portfolio in Q3 . Non-accrual balances remained very manageable as our servicing team continues to support SBA customers impacted by the small business credit cycle provision expense in $22 million improved in Q3 and was and was influenced by strong $551 million quarter over quarter loan growth .

Speaker #5: What we often refer to as good provision . And for folio performance , while quarter over quarter provision will fluctuate based on growth in portfolio activity , we remain comfortable with our reserves .

Walter Phifer: While quarter-over-quarter provision will fluctuate based on growth and portfolio activity, we remain comfortable with our reserves. Last page for me. Our capital strength was bolstered in Q3 of 2025 with our preferred issuance, as shown on page 17. The $100 million issuance added approximately 90 basis points of total risk-based capital and approximately 70 basis points of tier-one leverage, excellent tier-one growth capital. Our equity method investment, Aperture, will provide for an additional capital accretive event in Q4 with Aperture's recent sale closing in October. In addition, the removal of approximately $6 million of pass-through losses going forward will largely help fund the annual preferred dividends on the preferred issuance. Thank you again for joining this morning. With that, I'll turn it back over to BJ for his closing comments before we head to Q&A.

Speaker #5: Last page for me on capital . Our capital strength was bolstered in Q3 of 2025 with our preferred issuance as shown on page 17 .

Speaker #5: The $100 million issuance added approximately 90 basis points of total risk based capital and approximately 70 basis points of tier one leverage . Excellent tier one growth capital .

Speaker #5: Our equity method investment aperture will provide for additional capital accretive event in Q4 with Aperture's recent sale closing in October . In addition , the removal of approximately $6 million of pass through losses going forward will largely help fund the annual preferred dividend .

Speaker #5: Dividends on the preferred issuance . Thank you again for joining this morning . And with that , I'll turn it back over to Vijay for his closing comments before we head to Q&A .

Speaker #6: Great . Thanks , Walt . Momentum is building . We're focused on the biggest and best opportunities , and we're modernizing our activities to take full advantage of the AI driven possibilities that are right in front of us .

William Losch III: Great. Thanks, Walt. Momentum's building. We're focused on the biggest and best opportunities, and we're modernizing our activities to take full advantage of the AI-driven possibilities that are right in front of us. With a big thank you to all Live Oakers and our customers, let's take some questions.

Speaker #6: So with a big thank you to all of and our customers , let's take some questions .

Speaker #3: Thank you . We will now begin the question and answer session . Should you wish to ask a question , please press star one on your telephone keypad .

Operator: Thank you. We will now begin the question-and-answer session. Should you wish to ask a question, please press *1 on your telephone keypad. Should you wish to cancel your request, please press *2. If you are using a speakerphone, please lift your handset before pressing any keys. Once again, that is *1. Should you wish to ask a question? Your first question is from Dave Rodster from Cantor. Your line is now open.

Speaker #3: Should you wish to cancel your request , please press star two . If you are using a speakerphone , please lift your handset before pressing any keys .

Speaker #3: Once again , that is star one . Could you wish to ask a question ? Your first question is from Dave Rochester from Cantor .

Speaker #3: Your line is open .

Speaker #7: Hey , good morning guys . Hey , Dave . Dave . Morning . Morning . Can you just on start with credit . Can you give a little more color around the increase in the NPAs this quarter and talk about the new defaults , trends as well .

Walter Phifer: Hey, good morning, guys.

William Losch III: Hey, Dave. Morning.

Walter Phifer: Good morning.

[Analyst]: Morning. Can you just start with credit? Can you get a little more color around the increase in the NPAs this quarter and talk about the new defaults trends as well? On the charge-offs, I would imagine you're expecting those to decline. If there's any reason why those would remain elevated, I would love to hear.

Speaker #7: And then just on charge offs , I would imagine you're expecting those to decline . But if there's any reason why those that remain elevated .

Speaker #7: We'd love to hear .

Speaker #5: Yeah . This is Mike .

William Losch III: Yeah. This is Michael Cairns, Chief Credit Officer. Happy to take that. I look at this quarter as just a continuation of where we were last quarter. Fortunately, not all credit metrics always move in a perfectly linear way. We saw some non-performing balances tick up a little bit, but still a very manageable balance there. This all kind of came from our SBA portfolio. Nothing caught us by surprise. These are loans that we've been tracking and are related to similar stress that these small business owners have faced over the last few quarters, which we've talked about quite a bit. I think about non-performing assets as far as balances. Not all non-performing assets are created equally. When you look at default count, this is also up as well, but not in a dramatic way. The other things I look at are past dues.

Speaker #4: Barnes , chief .

Speaker #5: Credit Officer . Happy to take that . So I look at this quarter as just .

Speaker #6: A continuation of where we were last quarter . Fortunately , not all .

Speaker #5: Credit .

Speaker #6: Metrics always move in a perfectly linear way . So we saw some non-accrual balances tick .

Speaker #5: Up a little bit .

Speaker #6: But still a very manageable .

Speaker #5: Balance . There .

Speaker #6: And not. This all kind of came.

Speaker #5: From our .

Speaker #6: SBA portfolio .

Speaker #5: Nothing caught us by surprise. These are loans that we've been tracking and are.

Speaker #6: Related to .

Speaker #5: Similar stress .

Speaker #6: That the .

Speaker #5: Small business owners have . faced over the last few quarters , which we've talked about quite a bit . So I think . about Non-accruals as far as balances , not all non-accruals .

Speaker #5: are created .

Speaker #6: Equally .

Speaker #5: So when you look at default .

Speaker #6: Count .

Speaker #5: That is also up as well , but .

Speaker #6: Not in a dramatic way .

Speaker #5: The other .

Speaker #6: Things I look at . are past dues .

Speaker #5: So with an .

William Losch III: With an SBA portfolio as large as ours, having 14 basis points worth of past dues is something I'm incredibly proud of and how our team has managed that. To me, that's an indication that our servicing team is on the portfolio and taking care of it. Reserve levels came down. Not all non-performing assets turned into, you know, charge-offs, to your question. While that has ticked down, we still have really healthy coverage on the portfolio. I feel good about where we are in reserves. There's a lot of, you know, economic uncertainty out there that has been discussed by, you know, other banks. What we control is, or what we focus on is what we can control. Sound underwriting, which we continue to have.

Speaker #6: SBA .

Speaker #5: Portfolio , as large as ours , having 14 basis points worth of past dues is something I'm incredibly proud of .

Speaker #6: And how our team .

Speaker #5: Is manage that .

Speaker #6: And to me .

Speaker #5: That's an indication .

Speaker #6: That our servicing team is on on the portfolio and taking care of it . Reserve levels came down . So not all non-accruals turn into .

Speaker #5: You know , charge offs to your .

Speaker #6: Question . And so , you know , while that has ticked .

Speaker #5: On , we still have a really healthy coverage on the portfolio . I feel good about where we are on reserves . And so there's a lot of , you .

Speaker #6: Know , economic uncertainty out .

Speaker #5: There that has been .

Speaker #6: Discussed by , you know , other banks . And what we control is . or what we focus on is what we .

Speaker #5: Can control .

Speaker #6: Sound underwriting, which we continue to have.

Speaker #5: I talked about .

William Losch III: I talked about that last quarter, and we continue to focus on not stretching our credit quality, which we have not done, and heavily servicing the portfolio. For an example, we are now going through our annual risk rate process for the entire SBA portfolio, and we will have a servicing team member and a credit officer assessing the risk rate for every meaningful balance within that portfolio. That's above and beyond our day-to-day servicing that we do, which is interacting with our customers, collecting financial information, spreading that, talking through that with our customers, and doing site visits. We've got a lot of hands and eyes on the portfolio. As I sit here today, I think what we're finding is that while there has historically been a little bit of a cycle in the SBA industry, our small business owners have remained relatively resilient in the face of that.

Speaker #6: That last quarter , and we continue to focus on not stretching .

Speaker #5: On credit quality , which .

Speaker #6: We have not done . And heavily servicing the portfolio . So , for example , we are now going through our annual risk rate .

Speaker #6: process for the entire SBA .

Speaker #5: Portfolio , and we will .

Speaker #6: Have a servicing team member and .

Speaker #5: A credit .

Speaker #6: Officer .

Speaker #5: Assessing the risk rate .

Speaker #6: For every meaningful balance within that portfolio . And that's above and beyond our day to day servicing . That we do , which is interacting with our customers , collecting financial information , spreading that , talking through that with our customers , and doing site visits .

Speaker #5: So .

Speaker #6: A lot of hands and eyes on the portfolio . And I think as I sit here today , I think what we're finding is that while there has historically been a little bit of a cycle in the SBA industry , our small business owners have remained relatively resilient in the face of that .

Speaker #7: Appreciate that . And then how are you thinking about the potential for an extended government shutdown and what that can do for , you know , on both the loan side , in terms of loan growth ?

[Analyst]: Appreciate that. You know, how are you thinking about the potential for an extended government shutdown and what that can do for, you know, on both the loan side in terms of loan growth and then credit? When do things start to potentially get rough? What are you guys worried about on this front?

Speaker #7: And then credit ? And when do things start to potentially get rough ? What are you guys worried about on this front ?

Speaker #5: Hey , Dave , this is Walt . Pfeiffer , our CFO . I'll start on the , you know , on the loan growth side and secondary market side , and then , Michael can jump in on the credit .

Walter Phifer: Yep. Hey, Dave. This is Walter Phifer, our CFO. I'll start on the loan growth side and secondary market side, and then Michael can jump in on the credit. Unfortunately, government shutdowns are something we've had practice with over the years. We have a pretty extensive playbook that we pull out when these things happen. The first and pretty much the initial action that we take anytime there's a potential for a shutdown is we look at our pipeline, especially our SBA loans, and start to pull PLPs, the right to reserve that SBA funding. Coming into this shutdown, our team really, really pushed in September. We had about $900 million of PLPs pooled so that we could continue to operate business as usual and get that capital off to the small businesses. From a growth standpoint, that feels really good.

Speaker #5: You know , unfortunately , government shutdowns , you know , something we've had practice with over the years . So you know we have a pretty extensive playbook .

Speaker #5: You know , that we pull out when these things happen . And the first and pretty much , you know , it's kind of the initial action that we take anytime there's a potential for a shutdown is we look at our pipeline , especially our SBA loans , and start to pull LPs the right to reserve that , you know , that SBA funding , you know , coming into this shutdown , we've our team really , really pushed in September .

Speaker #5: We've had about $900 million of LPs pulled so that we could continue to operate business as usual , and get that capital out to the small businesses , you know , so from a growth standpoint , that feels really good .

Speaker #5: Now , obviously , the longer the shutdown , you know , you you've kind of get in through , you know , the the end of the quarter .

Walter Phifer: Obviously, the longer the shutdown, you can kind of get in through the end of the quarter. The PLPs there eventually run out, and then Michael and his team will assess bridge loans as appropriate. The other big impact for us is on the secondary markets. We typically don't sell any of our loans in the first 30 to 45 days of any given quarter. Right now, we haven't seen an impact at all of the current shutdown. Once the shutdown ends, the secondary market opens up pretty quickly, and we get our loan sales out, we settle. I'd say right now, if the shutdown extended past Thanksgiving, that may impact us here in the near term in Q4 in terms of secondary market sale execution. Once the market opens, we'd get back out there, and we'd catch up later in the quarter or going into Q1 of next year.

Speaker #5: You know the LPs there . You know eventually run out . And then Michael and his team will assess bridge loans . You know as appropriate .

Speaker #5: The other big impact for us is is on the secondary markets . Now we typically don't sell any of our loans in the first 30 to 45 days of any given quarter .

Speaker #5: So right now , you know , we haven't seen an impact at all of the current shutdown . Once the shutdown ends , we , you know , the secondary market opens up pretty quickly .

Speaker #5: And , you know , we get our loan sales out and we settle . I'd say right now , you know , the shutdown extended past Thanksgiving .

Speaker #5: You know that may impact us here in the near term in the Q4 in terms of secondary market sale execution , you know , but once the market opens , we , you know , we'd get back out there and we'd and we'd catch up .

Speaker #5: You know, later, later in the quarter or going into Q1 of next year.

Speaker #7: For all the color there , maybe just one last one . If I could just switching gears to the AI enhancements you've been talking about in terms of processing times and whatnot , can you just quantify what those benefits could be ?

[Analyst]: Appreciate all the color there. Maybe just one last one, if I could, just switching gears to the AI enhancements you've been talking about in terms of processing times and whatnot. Can you just quantify what those benefits could be? It sounds like, you know, you guys just overall look very favorably at what AI can do to the expense base and how you can potentially keep that more stable. If you could just talk about that a little bit, that'd be great. Thanks.

Speaker #7: And then it sounds like , you know , you guys just overall look very favorably at what AI can do to the expense base .

Speaker #7: And how you can potentially keep that more stable . If you just talk about that a little bit , that'd be great . Thanks .

Speaker #6: Sure . The history of Live Oak and the gentleman sitting next to me is one of innovation and looking at what's coming down the pike in terms of technology , technology enhancements and the art of the possible and AI .

William Losch III: Sure. The history of Live Oak and the gentleman sitting next to me is one of innovation and looking at what's coming down the pike in terms of technology, technology enhancements, and the art of the possible. AI, we think, could be bigger than any of the meaningful step changes in technological advancement from the internet to cloud computing. They were big. We think AI is even bigger. What we're doing is we're spending a significant amount of time educating our people on all the tools available. Developers are all using Cursor and understanding how to code in AI, but the rest of our organization is learning to use prompts and build agents for specific processes.

Speaker #6: We think could be bigger than any of the meaningful step changes in technological advancement from the internet to cloud computing . They were big .

Speaker #6: We think AI is even bigger . And so what we're doing is we're spending a significant amount of time educating our people on all the tools available .

Speaker #6: So developers are all using cursor and understanding how to code in AI . But the rest of our organization is learning to use prompts and build agents for specific processes .

Speaker #6: And , you know , we have people in our insurance group that are literally building their own agents to automate a lot of the follow up that we have to do with insurance companies to ensure that our borrowers have the appropriate insurance .

William Losch III: We have people in our insurance group that are literally building their own agents to automate a lot of the follow-up that we have to do with insurance companies to ensure that our borrowers have the appropriate insurance. That's being done at an individual level, not just an institutional level. Renato Derek and his technology team are way out in front of what a lot of others are doing, and we're building significant agentic AI solutions both in-house and with partners to drive across the company. I think a unique opportunity that we have at Live Oak is that we are growing so fast. I think there's a lot of both excitement and trepidation about what AI might do and how that impacts the employee base and what that means for them.

Speaker #6: And that's being done at an individual level , not just in institutional level . And then Renato , Derek and his technology team are way out in front of what a lot of others are doing .

Speaker #6: And we're we're building significant agentic AI solutions , both in-house and with partners to drive across the company . And I think a unique opportunity that we have at Live Oak is that we are growing so fast .

Speaker #6: I think there's a lot of both excitement and trepidation about what AI might do and how that impacts us . The employee base and what that means for them .

Speaker #6: And I think because we have so much growth opportunity over the next several years , that what that will mean is , you know , AI will help the productivity of our people over time .

William Losch III: I think because we have so much growth opportunity over the next several years, what that'll mean is AI will help the productivity of our people over time, and maybe we have to grow our employee base and our expense base a lot less to generate the same level of revenue as opposed to maybe some others, particularly in our industry, that aren't seeing nearly as much top-line growth and have to use AI to reduce cost. I think our operating leverage because of our use of AI could exponentially grow our profitability while also making it easier for our people to do business, have more capacity to serve customers, and make the customer experience far better. The world of opportunity is endless out there, and we're already working on capturing a lot of it. I know I've talked a long time, but very excited about this.

Speaker #6: And maybe we have to grow our employee base and our expense base a lot less to generate the same level of revenue as opposed to maybe some others , particularly in our industry , that aren't seeing nearly as much top line growth .

Speaker #6: And have to use AI to reduce cost . And so I think our operating leverage , because of our use of AI , could exponentially grow our profitability while also making our make it easier for our people to do business , have more capacity to to serve customers and make the customer experience far better .

Speaker #6: So , you know , the world of opportunity is endless out there . And we're we're already working on capturing a lot of it .

Speaker #6: I know I've talked to a long time , but very excited about this . I did mention , you know , we're we're doing a lot of piloting , particularly around our loan origination platform , starting with our small dollar loans and looking at a platform that is completely AI driven and incredibly , incredibly easy to use all the way from the lender .

William Losch III: I did mention we're doing a lot of piloting, particularly around our loan origination platform, starting with our small-dollar loans and looking at a platform that is completely AI-driven and incredibly, incredibly easy to use, all the way from the lender back to servicing and operations. A little bit more to come on that, but that's just one example where we're already ahead and putting major things in practice that are going to help us over the long term.

Speaker #6: Back to servicing and operations . And so a little bit more to come on that . But that's just one example where we're already ahead and putting major things in practice that are going to help us over the long term .

Speaker #7: Sounds like that'll be a pretty solid competitive advantage for you guys. Thanks again. I appreciate it.

[Analyst]: Sounds like that will be a pretty solid competitive advantage for you guys. Thanks again. Appreciate it.

Speaker #6: Thanks , Dave .

William Losch III: Thanks, Dave.

Speaker #3: Thank you . Your next question is from Tim Switzer from CCB . Your line is open .

Operator: Thank you. Your next question is from Timothy Switzer from KBW. Your line is now open.

Speaker #8: Hey . Good morning . Thank you for taking my question . The first one I have is hey there . First question I have is on the trajectory for the margin .

Walter Phifer: Hey, good morning. Thank you for taking my question.

William Losch III: Sure.

Walter Phifer: The first one I have is hey there. First question I have is on the trajectory for the margin. You know, we're reentering the rate cut cycle, and you know, I think you guys are long-term beneficiaries from rate cuts as long as, you know, assuming we get a steeper yield curve. You know, assuming we get one or two more in the back half of this year and maybe another one next year, how does that impact the near term then? Maybe what's the timeline for when we start to see it rebound and reflect back higher? Yep. Hey, Tim. This is Walt. I'll jump in on that one. I think you got to leverage a lot of the comments I made earlier.

Speaker #8: You know , we're reentering the rate cut cycle . And , you know , I think you guys are long term beneficiaries from rate cuts .

Speaker #8: As long as we're assuming we get a steeper yield curve. But, you know, assuming we get one or two more in the back half of this year and maybe another one next year, how does that impact the near term?

Speaker #8: Then and then , you know , maybe what's the timeline for when we start to see it rebound and inflect back higher ?

Speaker #5: Yeah . Hey , Tim . This Walt , I'll jump in on that one . You know , I think you got to leverage a lot of the comments I made in kind of earlier .

Speaker #5: You know , I think if you look at kind of the models you see out there , I think they were perfect coming into this before there was an October cut .

Walter Phifer: I think if you look at the models you see out there, I think that they were appropriate coming into this before there was an October cut. Now there's an October cut, so you have to flush that through. From a margin specifically, being an asset-sensitive bank, you see some margin variation. You take that plus our growth, it limits what you do in terms of quickly repricing deposits. We tend to take the approach of we see where the market goes, and then we slot ourselves there appropriately to make sure that we can continue to fund that growth with obviously help with profitability. As you think about when it recovers, I think if you look at the past few years and anytime we've had the Fed ease, it's pretty quickly, right?

Speaker #5: Now there's an October October cut . So you have to kind of flush that through , you know . But from a margin specifically , you know , being an asset bank , you know , you see some margin variation , you know , with and you take that .

Speaker #5: Plus our growth , you know , it limits , you know , what you can do in terms of , you know , quickly repricing deposits .

Speaker #5: We tend to take the approach of we see where the market goes . And then we slot ourselves there . You know , you know , appropriately to make sure that we can continue to fund that growth .

Speaker #5: But you know obviously help with , you profitability . You know , from your kind of long as you think about when you recovers .

Speaker #5: I mean , I think if you look at the past few years and anytime , you know , we've had the , the fed ease up .

Speaker #5: It's pretty quickly . Right . And I think you can see even on the page on 13 kind of in the middle of that page , you saw the same thing where Nim compressed , but then it recovered pretty much the next quarter started to to grow again and got back there within a year .

Walter Phifer: I think you can see even on the page on 13, in the middle of that page, you saw the same thing where NIM compressed, but then it recovered pretty much the next quarter, started to grow again, and got back there within a year. That's really a testament to, one, our deposit team as well as our treasury team, but as well as our short-term funding nature. Most of our CDs and our brokered deposits are within a year in terms of terms. It recovers pretty quickly. Again, as I mentioned, I'd reorient you to net interest income and growth, right? BJ always has this saying that you can't spend margin. That kind of always stuck with me. At 330 margin, 333 margin is pretty healthy.

Speaker #5: And that's really a testament to what our deposits team , as well as our treasury team , but as well as our kind of our short term funding nature .

Speaker #5: So , you know , most of our CDs and our brokered deposits are within a year in terms of kind of terms . So it recovers pretty quickly .

Speaker #5: But again , you know , as I mentioned , I , you know , kind of reorient you to net interest income and growth rate .

Speaker #5: BJ always has this saying that you can't spend margin that kind of always stuck with me . And , you know , at 330 margin .

Speaker #5: 333 margin is pretty healthy . And if you can grow your net interest income , you know , quarter over quarter , despite that margin kind of variation , that's a fantastic story in my mind .

Walter Phifer: If you can grow your net interest income quarter over quarter, despite that margin kind of variation, that's a fantastic story in my mind. We kind of think about that on margin, but also think about it on the net interest income side.

Speaker #5: You know , so we , you know , kind of think about that margin , also about on the net income side .

Speaker #8: Gotcha . That was very helpful . Thank you . And I also want to ask about kind of the competition you're seeing broadly in the SBA space .

William Losch III: Gotcha. That was very helpful. Thank you. I also want to ask about kind of the competition you're seeing broadly in the SBA space. With, I guess, the government shutdowns impacting things, you obviously have the credit cycle that seems to be hitting some of your competitors harder than you, and all the rule changes that were implemented, I guess, almost two quarters ago. Have you seen easing competition at all? Has that created some opportunities for you? Yeah. Tim, this is BJ. The way I would describe it is this is what we do. This is how we grew up. We know the SBA market, we think, better than anybody. We've seen tons of things. We've seen SOP changes. We've seen government shutdowns. We've seen non-bank lenders come into the market. We've seen non-bank lenders go out of the market. We've seen big banks try to do SBA.

Speaker #8: You know , with I guess the government shutdowns impacting things . You obviously have the credit cycle that seems to be hitting some of your competitors harder than you .

Speaker #8: And all the rule changes that were implemented . You know , I guess almost two quarters ago . So have you seen , you know , easing competition at all ?

Speaker #8: And has that created some opportunities for you ?

Speaker #6: Yeah , Tim , this is this is BJ . The way I would describe it . Is this is what we do . This is how we grew up .

Speaker #6: And we know the SBA market , we think better than anybody . And we've seen tons of things . We've seen SOP changes .

Speaker #6: We've seen government shutdowns . We've seen non-bank lenders come into the market . We've seen non-bank lenders go out of the market . We've seen big banks try to do SBA .

Speaker #6: We've seen them pull out of SBA . All the while , all we're doing is growing the number of verticals and the number of customers that we serve through the SBA .

William Losch III: We've seen them pull out of SBA. All the while, all we're doing is growing the number of verticals and the number of customers that we serve through the SBA. We don't believe that we have a peer in SBA lending. We will see different pockets of competition in different verticals, and some competitors are better than others in those verticals. By and large, we actually just control what we can control in terms of making ourselves better all the time, every day. I think, obviously, it's showing up in our results and in our numbers, and we'll continue to do that.

Speaker #6: So , you know , we don't we don't believe that we have a peer in SBA lending . We will see different pockets of competition in different verticals .

Speaker #6: And some competitors are better than others in those verticals . But by and large , we actually just , you know , control what we can control in terms of , you know , making ourselves better all the time , every day .

Speaker #6: And so I think obviously it's showing up in our in our results and in our numbers . And we'll continue to do that .

Speaker #8: Got it. And then the last question I have is, it seemed like previously most of your commentary around the credit or credit performance was that it was pretty broad-based and more related to certain vintages rather than industries.

Walter Phifer: Got it. The last question I have is, you know, it seemed like previously most of your commentary around the credit out or the credit performance was that it was pretty broad-based and more related to certain vintages rather than industries. Now that we're a little bit, you know, had a little bit longer time for the kind of the impact of tariffs and everything else going on, have you seen any industries that are maybe struggling or under a little bit more pressure than others?

Speaker #8: But now that we're a little bit , you know , a little bit longer , time for the kind of the impact of tariffs and everything else going on .

Speaker #8: Have you seen any industries that are maybe struggling or under a little bit more pressure than others ?

Speaker #6: Yeah , I think Tim , on the tariff side , really very little . I'd say , you know , it's a little bit more .

William Losch III: Yeah, I think, Tim, on the tariff side, really very little, I'd say. It's a little bit more, yes, the rising rates in the vintages from 2021 and 2022 showed some significant stress. I think where we see more stress than not, and by the way, it's not broad-based across all of our verticals, it's a handful where they don't have as much pricing power, yet their cost to goods sold are going up. The struggle of trying to just maintain profitability, that's where we've seen a little bit of stress. As Michael kind of talked about, there isn't anything that is surprising us at this point. We kind of know where that tension is, and everything is kind of performing relative to our expectations.

Speaker #6: Yes . The the rise in rates in the vintages from 21 and 22 showed , you know , some significant stress . I think , where we see more stress than not .

Speaker #6: And by the way , it's not broad based across all of our verticals . You know , it's it's a handful is where they don't have as much pricing power yet .

Speaker #6: Their cost of goods sold are going up . And so , you know , the struggle of trying to just maintain profitability and , you know , that's where we've seen a little bit of of stress .

Speaker #6: But as Michael kind of talked about , there is there isn't anything that is surprising us at this point . We kind of know where that tension is .

Speaker #6: And , you know , everything is kind of performing relative to our expectations .

Speaker #8: Interesting . Good to know . Thank you for answering my questions .

Walter Phifer: Interesting. Good to know. Thank you for answering my questions.

Speaker #6: Sure .

William Losch III: Sure.

Speaker #3: Thank you. Your next question is from David Feaster from Raymond James. Your line is now open.

Operator: Thank you. Your next question is from David Feaster from Raymond James. Your line is now open.

Speaker #9: Hey good morning everybody .

[Analyst]: Hey, good morning, everybody.

Speaker #5: David .

Walter Phifer: David.

Speaker #6: Hey .

Speaker #5: David .

[Analyst]: Hey, David. I wanted to talk about the kind of the credit and tech side in one sense. You know, you talked about maintaining strong underwriting and that you guys are going to be, you know, going through the risk weighting, updating some of those. I'm just curious, given the broader uncertainty and pressures that we're seeing, again, we talked about the tariffs and all these different things, have you adjusted underwriting standards or your criteria at all? Then using technology and AI, is there, you know, we talked about the growth side and improving profitability, but is there opportunities to use tech or AI or whatever it may be to help underwriting or earlier credit identification and just kind of help mitigate the credit risk?

Speaker #9: I wanted to talk about the kind of the credit and tech side in one . In one sense , you talked about maintaining strong underwriting and that you guys are going to be , you know , going through the risk weighting , updating some of those .

Speaker #9: I'm just curious , you know , given the broader uncertainty and pressures that we're seeing . Again , we talked about the tariffs and all these different things .

Speaker #9: Have you adjusted underwriting standards or your criteria at all ? And then using technology in AI , is there . You know , we talked about the growth side and improving profitability .

Speaker #9: But is there opportunities to use tech or AI or whatever it may be to help underwriting or earlier credit identification and just kind of help mitigate the credit risk ?

Speaker #6: Yeah . Hey , David , I'll start . Michael , I'm sure we'll we'll jump in , you know , underwriting standards , you know , to be pretty consistent with our customers .

William Losch III: Yeah. Hey, David. I'll start. Michael, I'm sure we'll jump in. On underwriting standards, we try to be pretty consistent with our customers so they understand, and our lenders so that they understand what we're interested in and what we're not. With that said, there will be times when we'll modify the credit box, let's say. For instance, we'll say we really want to require direct management experience or direct operating experience in a certain vertical if we're going to end credit in that vertical. That's an example of how we might, quote, "tighten" underwriting, to make sure that we have borrowers that are going to be able to operate their businesses successfully. We're constantly tweaking that across our 40 verticals, and we've always done that. I think that will continue. In terms of AI, absolutely.

Speaker #6: So they understand kind of and our lenders so that they understand what we're interested in and what we're not . With that said , though , there will be times when we'll , you know , modify the credit box .

Speaker #6: Let's say , for instance , we'll say , you know , we we , we really want to require direct management experience or direct operating experience in a certain vertical .

Speaker #6: If we're going to end , you know , credit in that vertical , that's an example of how we might quote tighten underwriting is , you know , to make sure that we have borrowers that are going to be able to operate their businesses successfully .

Speaker #6: So we're constantly tweaking that across our 40 verticals . And we've always done that . And I think that that will continue in terms of AI .

Speaker #6: Absolutely . You know , so for instance , you know , one of the things that we're looking at in pilot from a new loan origination and servicing platform is the ability .

William Losch III: For instance, one of the things that we're looking at in pilot from a new loan origination and servicing platform is the ability to actually ingest documents and have them read by AI and started to do spreads and create a credit memo. Imagine we've got all this documentation from an HVAC company, and AI is ingesting all this information specifically on this HVAC customer in a certain market. At the same time, it's going out and using Copilot or ChatGPT to actually build a business analysis around what that market looks like, what the demand in the market looks like, what the overall industry is doing, and how it's performing, how that looks relative to the financials that we're ingesting, how that looks relative to our existing HVAC or service contractor portfolio that we have in credit. That's what we're piloting.

Speaker #6: To actually ingest documents and have them read by AI and started to do spreads and create a credit memo . So , you know , imagine , you know , we've got all this documentation from , you know , an HVAC company and AI is ingesting all this information specifically on this HVAC customer in a certain market .

Speaker #6: But at the same time , it's going out and using Copilot or ChatGPT to actually build a business analysis around what that market looks like , what the demand in the market looks like , what the overall industry doing and how it's performing , how that looks relative to the financials that we're ingesting , how that looks like , you know , relative to our our existing HVAC or service contractor portfolio that we have in credit , that's what we're piloting .

Speaker #6: Those are the types of things that we're looking at in terms of using AI . So it doesn't it doesn't replace the human aspect of reviewing all that .

William Losch III: Those are the types of things that we're looking at in terms of using AI. It doesn't replace the human aspect of reviewing all that, but in terms of streamlining the ability to analyze, do data entry, ingest information, do competitive analysis, and understand trends, it's going to be incredibly impactful for our ability to get loans closed, approved, not approved, and it's just going to make us a lot better and give the customer a lot better experience.

Speaker #6: But in terms of streamlining the ability to analyze do data entry , ingest information , do competitive analysis and understand trends , it's going to be incredibly impactful for our ability to to get loans closed , approved , not approved .

Speaker #6: And it's just going to make us a lot better . And give customer a lot better experience .

Speaker #9: Okay . That's helpful . And then I was hoping you could maybe elaborate a bit on on the government shutdown and kind of how all this works , you know , appreciate your commentary on this already .

Walter Phifer: Okay. That's helpful. I was hoping you could maybe elaborate a bit on the government shutdown and kind of how all this works. I appreciate your commentary on this already, but it sounds like assuming that this gets figured out pretty quickly, you think that you're still going to be able to kind of sustain this pace of organic growth quarter over quarter. Does that imply that the SBA works through the backlog of loans pretty quickly once we get back up and running? Do you backfill maybe some of that gap with more conventional lending in the short term? Is it kind of just a timing issue and maybe this quarter might be a little bit weaker and we see some slippage into 2026? I'm just kind of curious how you think about all that. There's a lot of uncertainty.

Speaker #9: But , you know , it sounds like assuming that this gets figured out pretty quickly , that you think that you're still going to be able to kind of sustain this pace of organic growth quarter over quarter .

Speaker #9: I mean , does that imply that the SBA , you know , works through the backlog of loans pretty quickly once we get back up and running or do you backfill maybe some of that gap with more conventional lending in the short term , or just do we is it kind of just a timing issue ?

Speaker #9: And maybe this quarter might be a little bit weaker. We see some slippage into 2026. Just kind of curious how you think about all that.

Speaker #9: It's there's a lot of uncertainty . So just any help on on how you think this kind of plays out is helpful .

Walter Phifer: Any help on how you think this kind of plays out is helpful.

Speaker #5: Yeah . Hey David it's wall I'll start . Yeah I think you you know when the from the SBA perspective , once the government opens , they're pretty quick to catch up .

William Losch III: Yeah. Hey, David. It's Walt. Start.

[Company Representative]: I think from the SBA's perspective, once the government opens, they're pretty quick to catch up. I don't really see if it wraps up here in the next, call it, week or two. I really don't see an impact, really government shutdown-driven, on our SBA growth or production for the quarter, largely because of us pulling the PLPs towards the end of September, like I mentioned earlier.

Speaker #5: You know , I don't really see if it's , you know , wraps up here in the next call a week or two .

Speaker #5: You know I really don't see an impact . You know , really government shutdown driven on our SBA growth or production . You know , for the quarter , largely because of us pulling the Plps , you know , towards the end of September , like I , mentioned .

Speaker #6: Earlier , you might want to explain what a pulling a PLP means .

[Company Representative]: You might want to explain what pulling a PLP means.

Speaker #5: Yeah , pulling a PLP , it's so the SBA has a certain amount that they'll allocate each year in terms of funding , pulling PLP reserves .

[Company Representative]: Yeah, pulling a PLP, it's like, the SBA has a certain amount that they'll allocate each year in terms of funding. Pulling a PLP reserves, every SBA loan has an SBA PLP number. It's a reservation for that funding from the SBA program. You can't originate an SBA loan without that SBA number or that authorization.

Speaker #5: It's every SBA loan has an SBA , PLP number . It's a it's a reservation for that funding , you know , from the SBA program .

Speaker #5: So you can't originate an SBA loan without that SBA number or that authorization. So you.

Speaker #10: Have to be a preferred lender .

James Mahan: You have to be a preferred lender.

Speaker #5: Have to be a preferred lender . Yeah , that's PLP preferred lender program , you know , to to define the acronym , which I'm known to use quite a bit of acronyms .

[Company Representative]: Have to be a preferred lender. Yeah, that's PLP's Preferred Lender Program, you know, to define the acronym, which I'm known to use quite a bit of acronyms. Yeah, from, you know, David, from kind of a growth standpoint, really don't expect much of a change here in the last quarter, if they can wrap it up here in the next, call it, week or two. I don't think we'll need to tap into the conventional side. That's always something we do for a much more extended shutdown if we run out of those SBA reservations. That's where Michael and his team come in and we'll look at small, short-term bridge loans. Overall, this is, like I said, unfortunately, something that we've kind of gotten used to on how to deal. The other last thing I'd say is we have a Government Relations Manager that sits up in D.C.

Speaker #5: But yeah , from , you know , David , from kind of growth standpoint , I really don't expect much of a change .

Speaker #5: You know , here in , in the last quarter , if they can , you know , wrap it up here in the next call it , you know , week or two , I don't think we'll need to tap into the conventional side .

Speaker #5: That's always something we do for a much more extended shutdown . If we run out of those , you kind of SBA , you know , reservations .

Speaker #5: And that's where Michael and his team come in . And we'll look at , you know , small short term bridge loans . But overall you know this is like I said , unfortunately , something that we've kind of gotten used to on , you know , how to deal .

Speaker #5: And , you know , the other last thing I'd say is we have government relations manager that sits up in D.C. her name is Dawn Thompson .

[Company Representative]: Her name's Dawn Thompson. She's fantastic. She lets us know kind of what's going on, as it's going on. We kind of feel like we are always in the know on how things are progressing. She's keeping us up to date, daily at this point.

Speaker #5: She's fantastic . She lets us know kind of what's going on at what's going on . So we kind of feel like we , you know , we're always kind of , you know , in the know on how things are progressing .

Speaker #5: And she's , you know , keeping us up to date daily at this point .

Speaker #9: Okay . That's helpful . And then , you know , maybe just kind of staying on some of the exciting parts about the business .

[Company Representative]: Okay. That's helpful. Maybe just kind of staying on some of the exciting parts about the business, I wanted to get an update on kind of where we are with the embedded finance build-out, how that's going, and the growth potential there. Maybe on, you know, you guys are kind of ahead of the curve on most things. How do you think about, like, just given the market expansion to stablecoins, how do you expect to play there? Are there opportunities? Just kind of curious what you guys are looking at. Is that a potential opportunity for some deposit growth for y'all? Just wanted to touch on those two topics.

Speaker #9: You guys , I wanted to get an update on kind of where we are with , with the embedded finance build out how that's going and the growth potential there .

Speaker #9: And then just , you know , maybe on , you know , you guys are kind of ahead of the curve on , on most things .

Speaker #9: You know , how do you think about like just given the market expansion is stablecoin . How do you expect to play there ?

Speaker #9: Are there opportunities that like just kind of curious what you guys are are looking at ? Is that a potential opportunity for some some deposit growth for you all ?

Speaker #9: Just just wanted to touch on those two topics .

Speaker #6: Sure . Hey , David , it's BJ , so embedded . It continues to be built out . And and we think it's one of our moonshots .

Michael Cairns: Sure. Hey, David, it's BJ. Embedded continues to be built out and we think it's one of our moon shots, something that really could be meaningful over the next three to five years. We did do a pivot on how we were building it out earlier in the year. We were doing a lot of in-house building. With AI and what's going on in the marketplace, we found a partner that was quite a bit ahead of where we were. We thought that we could leverage that partnership to accelerate our embedded banking growth. We moved to a different platform, which slowed down our pipeline building in terms of relationships. We've got one live, we've got several on the hopper, and we think over time, we'll talk about that a little bit more.

Speaker #6: So something that really could be meaningful over the next 3 to 5 years . We did do a pivot on how we were building it out earlier in the year .

Speaker #6: We were doing a lot of in-house building , but again , with AI and what's going on in the marketplace and , you know , we've we've found a partner that was quite a bit ahead of where we were .

Speaker #6: And we thought that that we could leverage that partnership to accelerate our embedded banking growth . So we kind of , you know , we kind of moved to a different platform with slowed down our pipeline building in terms of relationships .

Speaker #6: But we've got one live. We've got several in the hopper. And we think over time we'll talk about that a little bit more.

Speaker #6: I'd rather actually put points on the board from an embedded banking perspective and then tell you about it, as opposed to tell you it's coming.

Michael Cairns: I'd rather actually put points on the board from an embedded banking perspective and then tell you about it as opposed to tell you it's coming. That's where we are on embedded. It's still very much on our roadmap. On stablecoins, it's very interesting. We have a new board member, Patrick McHenry, who you would have seen in the press release, that when he was in Washington in Congress, he was incredibly involved in the Genius Act and what's going on with stablecoins. We kind of have an inside baseball view, so to speak, of what's going on, how that could impact things, and how people are looking to use it. We are actively studying how we would participate in stablecoins, and we want to stay ahead of that curve as much as we can as it continues to evolve.

Speaker #6: So , you know , that's kind of where we are embedded . It's it's still very much on our on our roadmap on , on stable , on stablecoins .

Speaker #6: You know , it's very interesting . We have a new board member , Patrick McHenry , who you would have seen in press release that when he was in Washington , in Congress , he was incredibly involved in the genius act and what's going on with stablecoins .

Speaker #6: And so , you know , we kind of have an inside baseball view . So to speak , of what's going on , how that could impact things .

Speaker #6: And what , you know , how how people are looking to use it . So we are actively studying how we would participate in stablecoins .

Speaker #6: And we want to stay ahead of that curve as much as we can, as it continues to evolve.

Speaker #9: Okay, that's helpful. Thanks, everybody.

[Company Representative]: Okay, that's helpful. Thanks, everybody.

Speaker #11: Thank you .

[Company Representative]: Thank you.

Speaker #3: Thank you . Once again , please press star one should you wish to ask a question and your next question is from Steve Alexopoulos from TD Cohen .

Walter Phifer: Thank you once again. Please press star one should you wish to ask a question. Your next question is from Steve Alexipoulos from TD Cowen. Your line is now open.

Speaker #3: Your line is now open .

Speaker #12: Hi guys . This is Bill young actually on for Steve . How are you ?

[Analyst]: Hi, guys. This is Bill Young, actually on for Steve. How are you?

Speaker #6: Hey , Billy .

[Company Representative]: Hey, Billy.

Speaker #5: Hey .

Speaker #11: Billy .

[Company Representative]: Hey, Billy.

Speaker #12: Hey . Just to circle on the credit mini cycle topic one more time . You know , in recent quarters you've spoken about being more aggressive on getting ahead of problem loans and writing them off with more aggressive charge offs .

[Analyst]: Hey, just to circle on the credit mini-cycle topic one more time, you know, in recent quarters, you've spoken of being more aggressive on getting ahead of problem loans and writing them off with more aggressive charge-offs in your book. We did see a bigger step down in net charge-offs this quarter despite the increase in non-performing assets. Can you speak to your visibility on kind of the future loss trajectory and your confidence level in terms of how far ahead you've gotten on these issues so far this cycle?

Speaker #12: In your book . And we did see a bigger step down in net charge offs this quarter , despite the increase in NPAs .

Speaker #12: So, can you speak to your visibility on the future loss trajectory and your confidence level in terms of how far ahead you've gotten on these issues?

Speaker #12: So far this cycle ?

Speaker #6: Yeah , I think that .

Michael Cairns: Yeah, I think that this is Michael here. I'll take that. I think in past quarters, we had discussed the fact that we had changed our philosophy on being more proactive in charging off loans. Our Special Assets team, in spirit with the SBA program, does everything that we can to help our business, our borrowers, navigate whatever challenges are in front of them. We will hold on with our customers longer than most and do everything we can to help. In the past, we have held some of those before in non-accrual and not charged them off. We changed our philosophy. We're charging them off when we feel like it's past the point of, you know, getting back to repayment quickly. Even though those loans are not charged off, they're not out of mind. We track those loans. We still work with our customers.

Speaker #5: This is Michael here .

Speaker #6: I'll take that . So I think in the past quarters , we had discussed the fact that we had changed our philosophy on being more proactive in charging off loans .

Speaker #6: Are special assets team is and in spirit with the SBA program does everything that we can to help our business .

Speaker #5: Our borrowers .

Speaker #6: ...navigate whatever challenges are in front of them. So we will hold on with our customers longer than most and do everything we can.

Speaker #5: To .

Speaker #11: Help . In the past , we have held some of those with in Non-accrual and not charged them off . We changed our philosophy .

Speaker #11: We're charging them off when we feel like it's past the point of , you know , getting back to repayment quickly while even though those loans are not charged off , they're not out of mind .

Speaker #11: We track those loans . We still work with our customers . But so I would say that we are right on top of where we should be .

Michael Cairns: I would say that we are right on top of where we should be as far as charge-offs. We'll continue to be proactive in dealing with that and not let them linger on our balance sheet. I think we're doing a good job there.

Speaker #11: As far as charge-offs, we'll continue to be proactive in dealing with that and not let them linger on our balance sheet.

Speaker #11: But , you know , I , I think we're doing a good job there .

Speaker #12: Okay , great . And then it was nice to see the , you know , return on tangible common equity , return back to double digits this quarter .

[Analyst]: Okay. Great. It was nice to see the return on tangible common equity return back to double digits this quarter. Can you just maybe lay out what you see as kind of a sustainable path for returns can move to in the next year or two?

Speaker #12: So, can you just maybe lay out what you see as kind of a sustainable path for returns as we move into the next year or two?

Speaker #6: Yeah , I think Billy would . When we talk about a lot here is getting to a 15 and 15 , which is consistent and sustainable .

Michael Cairns: Yeah, I think, Billy, what we talk about a lot here is getting to a 15 and 15, which is consistent and sustainable 15% returns on equity with 15% or more EPS growth a year. To do that, you've got to make sure that your business model can sustain that kind of performance, which means doing things around the checking portfolio to provide more of a ballast for your funding costs. It is always having growth initiatives like Live Oak Express that are going to incrementally move your B income line up further. It looks like expense discipline and a moderation of credit. All of those things the Senior Leadership Team talks about constantly is how do we get back not only to those levels, but consistently build a business model that stays at those levels.

Speaker #6: 15% returns on equity with 15% or more EPs growth a year . And to do that , you've got to make sure that your business model can sustain that kind of performance , which means , you know , doing things around the checking portfolio to provide more of a ballast for your funding costs .

Speaker #6: It is always growth initiatives like Live Oak Express that are going to incrementally move your fee income line up further. It looks like expense discipline and a moderation of credit.

Speaker #6: All of those things the senior leadership team talks about constantly is how do we get back ? Not only to those levels , but consistently build a business model that stays at those levels .

Speaker #6: And so I'm highly confident that we're going to be able to get there in the near term , near medium term , let's say over the next 18 to 24 months .

Michael Cairns: I'm highly confident that we're going to be able to get there in the near term, near medium term, let's say over the next 18 to 24 months.

Speaker #12: Great . And my last question , you know , with your pending aperture sale and some activity among your peers , you know , such as MBB with their Victor sale , as you think about Live Oak Ventures and some potential percolation of activity in Silicon Valley , are you beginning to see a bigger opportunity in the near term to harvest some of your investments ?

[Analyst]: Great. My last question, with your pending Aperture sale and some activity among your peers, such as MVB with their Victor sale, as you think about Live Oak Ventures and some potential percolation of activity in Silicon Valley, are you beginning to see a bigger opportunity in the near term to harvest some of your investments?

Speaker #6: I'll talk a little bit about ventures . Our ventures , portfolio specifically , but Chip knows more than any of us about broadly what's going on in venture .

Michael Cairns: I'll talk a little bit about Ventures, our Ventures portfolio specifically. Chip knows more than any of us about broadly what's going on in Ventures, so I'll let him talk about that. Aperture was one of the two largest portfolio companies that we had in our Ventures portfolio, and we just exited with a nice, nice gain there. The other largest that we have is GreenLight Technologies, which is a fantastic company. The other ones are smaller and still in growth mode. I think Aperture was probably the largest in terms of harvesting. The portfolio will probably stay the way it is for quite some time in terms of exits. I think that we'll continue to incrementally add venture portfolio companies as we continue to look at new technology that we want to use inside the company.

Speaker #6: So I'll let him talk about that. But, you know, Aperture was one of the two largest portfolio companies that we had in our ventures.

Speaker #6: Portfolio . And obviously we just exited with a nice , nice gain there . The other largest that we have is greenlight Technologies , which you know , is a fantastic company .

Speaker #6: The other ones are smaller and still in growth mode . And so , you know , I think aperture was probably , you know , kind of the largest in terms of harvesting .

Speaker #6: And , you know , the portfolio will probably stay the way it is for quite some time in terms of terms of exits , I think that we'll continue to incrementally add venture portfolio companies as we continue to look at new technology that we want to use inside the company .

Speaker #6: That's always been what we use . Live Oak Ventures for . And so you'll probably see more of that from us . But , you know , aperture was probably the the largest exit that you'll see in a while .

Michael Cairns: That's always been what we use Live Oak Ventures for, and you'll probably see more of that from us. Aperture was probably the largest exit that you'll see in a while. Chip, what do you see more broadly?

Speaker #6: Chip , what do you what are you seeing more broadly ?

Speaker #10: Well, I think most of this relates to Canopy. You know, we look at probably four companies a day in Canopy.

James Mahan: I think most of this relates to Canopy. You know, we look at probably four companies a day in Canopy. That gives Live Oak a sneak peek, you know, before anybody else if there's anything interesting there that we may want to invest in. I would say that the euphoria of the pricing in that business after COVID has reinstated itself with artificial intelligence. Venture firms are throwing an enormous amount of money at these companies where they're fundamentally pre-revenue. We're trying to take a bit of a circumspect view there because, as you know, at Canopy, we raised $1.5 billion from 70 banks. Our bank LPs are right there by our side as we look at interesting opportunities on a daily basis.

Speaker #10: So that gives live Oak a , a sneak peek . You know , before anybody else , if there's anything interesting there that we may want to invest in , I would say that the euphoria of the pricing in that business after Covid has reinstated itself with artificial intelligence venture firms are throwing enormous amount of money at these companies where fundamentally pre-revenue .

Speaker #10: And we're trying to take a bit of a circumspect view . There because , as you know , at canopy , we raised $1.5 billion from 70 banks and our bank .

Speaker #10: LPs are right there by our side as we look at interesting opportunities on a daily basis.

Speaker #12: Great. Thank you for taking my questions, guys.

[Analyst]: Great. Thank you for taking my questions, guys.

Speaker #6: Thanks , Billy .

Michael Cairns: Thanks, Billy.

Speaker #3: Thank you . There are no further questions at this time . I will now hand the call back over to chairman and CEO Chip Mehan for final comments .

Walter Phifer: Thank you. There are no further questions at this time. I will now hand the call back over to Chairman and CEO James “Chip” Mahan for final comments.

Speaker #10: As always, thank you for attending, and we'll see you in 90 days.

James Mahan: As always, thanks for attending, and we'll see you in 90 days.

Speaker #3: Thank you . Ladies and gentlemen , the conference has now ended . Thank you all for joining . You may all disconnect your lines .

Walter Phifer: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining, and we will disconnect your lines.