What happened

Shares of Live Oak Bancshares (LOB 4.19%) plummeted 14.6% in August, according to S&P Global Market Intelligence. The regional bank currently trades at just over $31 per share, up about 3.7% year to date. 

It trailed the major indexes in August, as the S&P 500 dropped 1.6%, the Dow Jones Industrial Average fell 2.4%, and the Nasdaq Composite declined 1.7%.

So what

Live Oak Bancshares is the holding company for Live Oak Bank, based in Wilmington, N.C. It is the 129th largest bank in the U.S. with about $10.7 billion in assets.

Live Oak struggled in what was a difficult month for regional banks in particular. That is evident by the fact that the KBW Nasdaq Regional Banking Index was down 8.2% in August.

The primary culprit that sent banks reeling was a report from credit rating agency Moody's in early August that downgraded 10 regional banks, saying they could be subject to profitability pressures due to a variety of factors, including still-high interest rates and the potential for a slowing economy, among others.

Live Oak was not on the list of the 10 bank stocks that were downgraded by Moody's, but it rattled the entire industry and brought industry stocks down across the board.

However, Live Oak sank a little further than others, perhaps on the news that it had a management change. The company tapped chief financial officer William Losch to serve as president, replacing Huntley Garriott, who had been president since 2018. A news release did not indicate where he was going or why.

Now what

Live Oak has gotten through the banking industry turmoil better than many of its competitors. In the second quarter, it saw deposits climb 5% from the first quarter to $9.9 billion, and it grew its loan portfolio by 2% over the first quarter and 18% year over year.

Still, high interest rates have taken a huge bite out of earnings as deposit costs have skyrocketed for all banks.

This remains a tenuous time for regional banks for a variety of reasons: the economy, interest rates, the potential for further regulations, and consolidation. Live Oak has fared better than most, but its valuation is high with a price-to-earnings ratio of 23.

It is probably best to tread cautiously with regional banks right now.