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What changed in Live Oak Bancshares, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Live Oak Bancshares, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+355 added−355 removedSource: 10-K (2026-02-27) vs 10-K (2025-03-18)

Top changes in Live Oak Bancshares, Inc.'s 2025 10-K

355 paragraphs added · 355 removed · 291 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

47 edited+3 added−9 removed160 unchanged
Biggest changeThe Company also competes with other federally and state-chartered financial institutions such as community banks and credit unions, finance and business development companies, peer-to-peer and marketplace lenders and other non-bank lenders.
Biggest changeThe Company also faces competition from non-bank entities, such as finance and business development companies, peer-to-peer and marketplace lenders, other non-bank lenders, and financial technology companies. These non-bank entities are not subject to the same regulatory restrictions as banks and bank holding companies. As a result, they may be able to operate with greater flexibility and lower cost structures.
Live Oak Bank’s respective loan policies establish limits on loan to value ratios that are equal to or less than those established in such regulations. Commercial Real Estate Concentrations Lending operations of commercial banks may be subject to enhanced scrutiny by federal banking regulators based on a bank’s concentration of commercial real estate (“CRE”) loans.
Live Oak Bank’s loan policies establish limits on loan to value ratios that are equal to or less than those established in such regulations. Commercial Real Estate Concentrations Lending operations of commercial banks may be subject to enhanced scrutiny by federal banking regulators based on a bank’s concentration of commercial real estate (“CRE”) loans.
Subsidiaries In addition to the Bank, Bancshares directly or indirectly held the following wholly owned material subsidiaries as of December 31, 2024: • Live Oak Ventures, Inc., formed in August 2016 for the purpose of investing in businesses that align with the Company's strategic initiative to be a leader in financial technology; • Live Oak Grove, LLC, formed in February 2015 for the purpose of providing Company employees and business visitors with on-site dining at the Company’s Wilmington, North Carolina headquarters; and • Government Loan Solutions, Inc.
Subsidiaries In addition to the Bank, Bancshares directly or indirectly held the following wholly owned material subsidiaries as of December 31, 2025: • Live Oak Ventures, Inc., formed in August 2016 for the purpose of investing in businesses that align with the Company's strategic initiative to be a leader in financial technology; • Live Oak Grove, LLC, formed in February 2015 for the purpose of providing Company employees and business visitors with on-site dining at the Company’s Wilmington, North Carolina headquarters; and • Government Loan Solutions, Inc.
Human Capital and Workplace Initiatives The Company strives to foster a welcoming, supportive, and equitable environment for all employees. To accomplish this, the Company focuses on engagement, awareness, training, accountability, education, and communication. During 2024, the Company continued to support programming through its Employee Resource Groups (“ERG”) and interest groups.
Human Capital and Workplace Initiatives The Company strives to foster a welcoming, supportive, and equitable environment for all employees. To accomplish this, the Company focuses on engagement, awareness, training, accountability, education, and communication. During 2025, the Company continued to support programming through its Employee Resource Groups (“ERG”) and interest groups.
It is this industry vertical expertise, product knowledge and our culture that differentiate the Company and allow us to provide an unprecedented customer experience and live our mission to fuel the growth of small business across the country and be America’s Small Business Bank.
It is this industry vertical expertise, product knowledge and our culture that differentiate the Company and allow us to provide an unprecedented customer service and live our mission to fuel the growth of small business across the country and be America’s Small Business Bank.
The Company has certain training programs and resources in place to meet the needs of various roles, skill sets, and departments across the Company, including: • Internally and externally led manager training and professional development; • Internally led “lunch and learn” meetings for role-specific skills; • Internally led credit committee meetings open to all employees for participation; • Web-based learning modules and training for personal and professional development, skill-based learning, leadership development, and management functions; • Formal cross-department teams tasked with technology, initiative roll-outs, and change management; and • Tuition reimbursement for job-specific certifications and required continuing education.
The Company has certain training programs and resources in place to meet the needs of various roles, skill sets, and departments across the Company, including: • Internally and externally led manager training and professional development; • Internally led “lunch and learn” meetings for role-specific skills; • Peer-to-peer learning networks for managerial responsibilities and leadership development; • Internally led credit committee meetings open to all employees for participation; • Web-based learning modules and training for personal and professional development, skill-based learning, leadership development, and management functions; • Formal cross-department teams tasked with technology, initiative roll-outs, and change management; and • Tuition reimbursement for job-specific certifications and required continuing education.
The FDIC may terminate insurance of deposits upon a finding that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The law also gives the FDIC enhanced discretion to set assessment rate levels.
The FDIC may terminate insurance of deposits upon a finding that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. 10 Table of Contents The law also gives the FDIC enhanced discretion to set assessment rate levels.
At December 31, 2024, Live Oak Bank was “well capitalized” and therefore not subject to any limitations with respect to its brokered deposits. Basel III.
At December 31, 2025, Live Oak Bank was “well capitalized” and therefore not subject to any limitations with respect to its brokered deposits. Basel III.
The Company cannot predict with certainty what changes, if any, will be made to existing federal and state legislation and regulations or the effect that such changes may have on the Company's business and results of operations.
The Company cannot predict with certainty what changes, if any, will be made to existing federal and state legislation and regulations or the effect that such changes may have on the Company's business and results of operations. 15 Table of Contents
These guidelines provide for a minimum ratio of Tier 1 capital to average total on-balance sheet assets, less goodwill and certain other intangible assets, of 4% for bank holding companies. Bancshares’ ratio at December 31, 2024 was 8.21% compared to 8.58% at December 31, 2023.
These guidelines provide for a minimum ratio of Tier 1 capital to average total on-balance sheet assets, less goodwill and certain other intangible assets, of 4% for bank holding companies. Bancshares’ ratio at December 31, 2025 was 8.48% compared to 8.21% at December 31, 2024.
As of December 31, 2024, Live Oak Bank had capital levels that qualify as “well capitalized” under the applicable regulations.
As of December 31, 2025, Live Oak Bank had capital levels that qualify as “well capitalized” under the applicable regulations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report. The Company's voting common stock trades on the New York Stock Exchange LLC (the “NYSE”) under the symbol “LOB.” As of January 31, 2025, there were 207 holders of record of the Company's voting common stock.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Report. The Company's voting common stock trades on the New York Stock Exchange LLC (the “NYSE”) under the symbol “LOB.” As of January 31, 2026, there were 200 holders of record of the Company's voting common stock.
The Company and ERG leadership and membership remain committed to celebrating and supporting a wide variety of locally owned small business through on-campus events that showcase a broad range of entrepreneurs in the surrounding communities. Our commitment to providing and enhancing a support infrastructure for people with underrepresented backgrounds remains a strategic initiative.
The Company and ERG leadership and membership remain committed to celebrating and supporting a wide variety of locally owned small businesses through on-campus events that showcase a broad range of entrepreneurs in the surrounding communities. Our commitment to providing and enhancing a support infrastructure for people of all backgrounds remains a strategic initiative.
Changes in applicable law or regulation, and in their application by regulators, may have a material effect on the business of the Company and the Bank. The Company and the Bank will continue to closely monitor developments and changes.
Changes in applicable law or regulation, and in their application by regulators, may have a material effect on the business of the Company and the Bank. The Company and the Bank closely monitor developments and changes.
Tiburon Land Holdings, LLC was formed in the third quarter of 2022 as a subsidiary of the Bank to hold land adjacent to the Bank’s headquarters consisting of wetlands and other protected property for the use and enjoyment of the Bank’s employees and customers. The Company’s operations are managed along one significant operating segment.
Tiburon Land Holdings, LLC was formed in 2022 as a subsidiary of the Bank to hold land adjacent to the Bank’s headquarters consisting of wetlands and other protected property for the use and enjoyment of the Bank’s employees and customers. 4 Table of Contents The Company’s operations are managed along one significant operating segment.
The FHLBs provide a central credit facility primarily for member institutions. As a member of the FHLB of Atlanta, the Bank is required to acquire and hold shares of capital stock in the FHLB of Atlanta. The Bank was in compliance with this requirement with investment in FHLB of Atlanta stock of $7.8 million at December 31, 2024.
The FHLBs provide a central credit facility primarily for member institutions. As a member of the FHLB of Atlanta, the Bank is required to acquire and hold shares of capital stock in the FHLB of Atlanta. The Bank was in compliance with this requirement with investment in FHLB of Atlanta stock of $9.0 million at December 31, 2025.
At December 31, 2024, the Company's risk-based capital ratios, as calculated under applicable capital standards were 11.04% common equity Tier 1 capital to risk weighted assets, 11.04% Tier 1 capital to risk weighted assets, and 12.29% total capital to risk weighted assets. 8 Table of Contents In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies.
At December 31, 2025, the Company's risk-based capital ratios, as calculated under applicable capital standards were 10.53% common equity Tier 1 capital to risk weighted assets, 11.40% Tier 1 capital to risk weighted assets, and 12.66% total capital to risk weighted assets. 8 Table of Contents In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies.
We believe our people provide significant value to our Company and its shareholders. Demographics As of December 31, 2024, the Company had 1,008 full-time employees, 17 part-time employees and 27 independent contractors. None of the Company’s employees are covered by a collective bargaining agreement, and management considers relations with employees to be good.
We believe our people provide significant value to our Company and its shareholders. Demographics As of December 31, 2025, the Company had 1,027 full-time employees, 13 part-time employees and 37 independent contractors. None of the Company’s employees are covered by a collective bargaining agreement, and management considers relations with employees to be good.
To this end, we communicate with our workforce through a variety of channels and encourage open and direct communication, including: • Periodic company-wide “all hands” meetings; • Regularly scheduled town hall-style meetings that are led by our key executives and held quarterly, or more often as needed, with a focus on our people, culture, strategy, and performance; • Periodic posts from Company leadership via our internal enterprise social media network and intranet; and • An open-door environment that encourages communication, collaboration and the free-flow of information and ideas. 3 Table of Contents Collaboration, both within and between business units, is a hallmark of our approach to service delivery and value creation for our customers and stakeholders.
To this end, we communicate with our workforce through a variety of channels and encourage open and direct communication, including: • Periodic company-wide “all hands” meetings; • Regularly scheduled town hall-style meetings that are led by our key executives and held quarterly, or more often as needed, with a focus on our people, culture, strategy, and performance; • Periodic posts from Company leadership via our internal enterprise social media network and intranet; and 3 Table of Contents • An open-door environment that encourages communication, collaboration and the free-flow of information and ideas.
Although the Company’s federal income tax liability is determined under provisions of the Code, which is applicable to all taxpayers, Sections 581 through 597 of the Code provide special rules that apply specifically to financial institutions.
Although the Company’s federal income tax liability is determined under provisions of the Code, which is applicable to all taxpayers, Sections 581 through 585 and Section 597 of the Code provide special rules that apply specifically to banks.
Except as otherwise expressly stated in these documents, the information contained on our website or available by hyperlink from our website is not part of this Report and is not incorporated into this Report or any other documents we file with, or furnish to, the SEC.
These documents also are available in print to any shareholder who requests a copy. Except as otherwise expressly stated in these documents, the information contained on our website or available by hyperlink from our website is not part of this Report and is not incorporated into this Report or any other documents we file with, or furnish to, the SEC.
The nature of future monetary policies and the effect of these policies on the Company's business and earnings cannot be predicted. 14 Table of Contents Dodd-Frank Act The Dodd-Frank Act was signed into law in 2010 and implemented many changes in the way financial and banking operations are regulated in the United States, including through the creation of a new resolution authority, mandating higher capital and liquidity requirements, requiring banks to pay increased fees to regulatory agencies and numerous other provisions intended to strengthen the financial services sector.
Dodd-Frank Act The Dodd-Frank Act was signed into law in 2010 and implemented many changes in the way financial and banking operations are regulated in the United States, including through the creation of a new resolution authority, mandating higher capital and liquidity requirements, requiring banks to pay increased fees to regulatory agencies and numerous other provisions intended to strengthen the financial services sector.
LOCEF was formed in November 2016 as a subsidiary of Bancshares for the purpose of providing financing to entities for renewable energy applications.
In 2019, Live Oak Clean Energy Financing LLC (“LOCEF”) became a subsidiary of the Bank. LOCEF was formed in November 2016 as a subsidiary of Bancshares for the purpose of providing financing to entities for renewable energy applications.
Assessments are based on the average consolidated total assets less tangible equity of a financial institution. The assessment rates for an insured depository institution vary according to the level of risk incurred in its activities.
Assessments are based on the average consolidated total assets less tangible equity of a financial institution. The assessment rates for an insured depository institution vary according to the level of risk incurred in its activities. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits.
The Federal Reserve’s monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future.
The Federal Reserve’s monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effect of these policies on the Company's business and earnings cannot be predicted.
Consequently, in addition to the rules promulgated by the SEC, Bancshares must also comply with the listing standards applicable to NYSE-listed companies.
Bancshares’ voting common stock and its depositary shares are listed on the NYSE. Consequently, in addition to the rules promulgated by the SEC, Bancshares must also comply with the listing standards applicable to NYSE-listed companies.
In addition to the regulation and supervision summarized below, Bancshares is a reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”) and is required to file reports with the SEC and otherwise comply with federal securities laws. Bancshares’ voting common stock is listed on the NYSE.
Any changes to the regulatory framework applicable to the Company could have a material adverse impact on its operations. In addition to the regulation and supervision summarized below, Bancshares is a reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”) and is required to file reports with the SEC and otherwise comply with federal securities laws.
Documents available on the website include: (i) the Company's Code of Ethics and Conflict of Interest Policy; (ii) charters for the Audit, Risk, Compensation, and Nominating and Corporate Governance Committees of the Board of Directors, and (iii) the Company’s Corporate Governance Guidelines. These documents also are available in print to any shareholder who requests a copy.
The Company maintains a website at www.liveoak.bank. Documents available on the website include: (i) the Company's Code of Ethics and Conflict of Interest Policy; (ii) charters for the Audit, Risk, Compensation, and Nominating and Corporate Governance Committees of the Board of Directors, and (iii) the Company’s Corporate Governance Guidelines.
Banking legislation and regulations may limit the Company's growth and the return to its investors by restricting certain of its activities. In addition, capital requirements could be changed and have the effect of restricting the activities of the Company or requiring additional capital to be maintained.
In addition, capital requirements could be changed and have the effect of restricting the activities of the Company or requiring additional capital to be maintained.
The Bank received an “Outstanding” rating in its last Community Reinvestment Act examination, which was conducted as of December 28, 2021.
The Bank received a “Satisfactory” rating in its last Community Reinvestment Act examination, which was conducted as of March 11, 2025.
Competition Commercial banking in the United States is extremely competitive. The Company competes with national banking organizations, including the largest commercial banks headquartered in the country, all of which have small business lending divisions.
Collaboration, both within and between business units, is a hallmark of our approach to service delivery and value creation for our customers and stakeholders. Competition Commercial banking in the United States is extremely competitive. The Company competes with national banking organizations, including the largest commercial banks headquartered in the country, all of which have small business lending divisions.
The federal banking agencies have also issued guidance designed to help ensure that incentive compensation policies at banking organizations do not encourage excessive risk-taking or undermine the safety and soundness of the banking organization.
Limitations on Incentive Compensation The Federal Reserve reviews incentive compensation arrangements of bank holding companies such as Bancshares as part of its regular, risk-focused supervisory process. 13 Table of Contents The federal banking agencies have also issued guidance designed to help ensure that incentive compensation policies at banking organizations do not encourage excessive risk-taking or undermine the safety and soundness of the banking organization.
In 2018, the Bank formed Live Oak Private Wealth, LLC (“LOPW”), a registered investment advisor that provides high-net-worth individuals and families with strategic wealth and investment management services. In 2019, Live Oak Clean Energy Financing LLC (“LOCEF”) became a subsidiary of the Bank.
In 2010, the Bank formed Live Oak Number One, Inc., a wholly owned subsidiary, to hold properties foreclosed on by the Bank. In 2018, the Bank formed Live Oak Private Wealth, LLC (“LOPW”), a registered investment advisor that provides high-net-worth individuals and families with strategic wealth and investment management services.
One of the Company's principal advantages is the technology-based platform it uses, which management believes has accelerated the Company's ability to issue proposals, complete credit due diligence, finalize commitments and improve the overall customer experience. The Company believes that its personnel also provide a competitive advantage because they include industry participants with relevant experience in the Company's identified verticals.
Despite the intense level of competition among small business lenders, the Company believes that it occupies a lending category distinct from its competitors. One of the Company's principal advantages is the technology-based platform it uses, which management believes has accelerated the Company's ability to issue proposals, complete credit due diligence, finalize commitments and improve the overall customer experience.
Real Estate Lending Evaluations The federal regulators have adopted uniform standards for evaluations of loans secured by real estate or made to finance improvements to real estate.
The nature and timing of any changes in such policies and their effect on the Company's business and results of operations cannot be predicted. Real Estate Lending Evaluations The federal regulators have adopted uniform standards for evaluations of loans secured by real estate or made to finance improvements to real estate.
This framework includes federal and state laws, regulations, policy statements, guidance, and other interpretative materials that define the obligations and requirements for financial institutions. Regulations of banks and their holding companies is subject to continual revision, through legislative changes, regulatory revisions, and the evolving supervisory objectives of federal and state banking agency examiners and supervisory staff.
Regulation of banks and their holding companies is subject to continual revision, through legislative changes, regulatory revisions, and the evolving supervisory objectives of federal and state banking agency examiners and supervisory staff. It is not possible to predict the content or timing of changes to the laws and regulations that may impact the business of the Company.
For further discussion, see the section captioned “Business Segment” within Note 1. Organization and Summary of Significant Accounting Policies in the notes to consolidated financial statements included in Item 8.
For further discussion, see the section captioned “Business Segment” within “Note 1. Organization and Summary of Significant Accounting Policies” in the notes to consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” elsewhere in this report. SUPERVISION AND REGULATION General The Company is subject to extensive regulation in connection with its respective activities and operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Impact of Asset Growth. Federal and State Taxation Bancshares and its subsidiaries file a consolidated federal income tax return and various state tax returns on either a consolidated or separate entity basis as required by state-specific tax regulations.
As of December 31, 2025, the Company and the Bank each had total assets of $15.13 billion and $15.06 billion, respectively. Federal and State Taxation Bancshares and its subsidiaries file a consolidated federal income tax return and various state tax returns on either a consolidated or separate entity basis as required by state-specific tax regulations.
Many of the Company's competitors have higher legal lending limits and are also able to provide a wider array of services and make greater use of media advertising given their size and resources. Despite the intense level of competition among small business lenders, the Company believes that it occupies a lending category distinct from its competitors.
The Company also competes with other federally and state-chartered financial institutions such as community banks and credit unions. Many of the Company's competitors have higher legal lending limits and are also able to provide a wider array of services and make greater use of media advertising given their size and resources.
The Dodd-Frank Act and its implementing regulations impose various additional requirements on bank holding companies and banks with $10 billion or more in total consolidated assets. As of December 31, 2024, the Company and the Bank each had total assets of $12.94 billion and $12.86 billion, respectively. See Item 7.
It is not currently known what, if any, of the CFPB’s policies or directives will ultimately continue. 14 Table of Contents The Dodd-Frank Act and its implementing regulations impose various additional requirements on bank holding companies and banks with $10 billion or more in total consolidated assets.
(“GLS”), a management and technology consulting firm that specializes in the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under the SBA 7(a) loan program and USDA-guaranteed loans. In 2010, the Bank formed Live Oak Number One, Inc., a wholly owned subsidiary, to hold properties foreclosed on by the Bank.
(“GLS”), a management and technology consulting firm that advises and offers solutions and services to participants in the government guaranteed lending sector. GLS primarily provides services in connection with the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under the SBA 7(a) loan programs and USDA guaranteed loans.
As of December 31, 2024, the Bank's C&D concentration as a percentage of bank capital totaled 65.0% and the Bank's CRE concentration, excluding owner-occupied loans, as a percentage of capital totaled 198.9%. 13 Table of Contents Limitations on Incentive Compensation The Federal Reserve reviews incentive compensation arrangements of bank holding companies such as Bancshares as part of its regular, risk-focused supervisory process.
As of December 31, 2025, the Bank's C&D concentration as a percentage of bank capital totaled 76.0% and the Bank's CRE concentration, excluding owner-occupied loans, as a percentage of capital totaled 239.9%.
The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits. 10 Table of Contents Live Oak Bank’s insurance assessments during 2024 and 2023 were $10.8 million and $16.7 million, respectively.
Live Oak Bank’s insurance assessments during 2025 and 2024 were $14.7 million and $10.8 million, respectively.
The nature and timing of any changes in such policies and their effect on the Company's business and results of operations cannot be predicted. Current and future legislation and the policies established by federal and state regulatory authorities will affect the Company's future operations.
Evolving Legislation and Regulatory Action Current and future legislation and the policies established by federal and state regulatory authorities will affect the Company's future operations. Banking legislation and regulations may limit the Company's growth and the return to its investors by restricting certain of its activities.
Congress or the federal bank regulatory agencies may modify or rescind rule making and regulatory guidance issued under the prior administration. However, the timing and impact of any changes to the regulatory, enforcement, and supervisory priorities of the federal bank regulatory agencies is not known at this time.
The federal government’s approach to regulation of the financial services industry can vary depending on the political parties in control of the White House and Congress. Congress or the federal bank regulatory agencies may modify or rescind rule making and regulatory guidance issued under prior administrations.
However, as noted above, the acting director of the CFPB instructed its staff to cease all supervision and examination activity. It is not currently known what, if any, of the CFPB’s policies or directives will continue.
However, the CFPB has been largely inactive since early 2025, when its acting director instructed CFPB staff to cease all supervision and examination activity.
Compliance by Bancshares and the Bank with these capital requirements affects their respective operations by increasing the amount of capital required to conduct operations. The FDIC has set the minimum required Community Bank Leverage Ratio (“CBLR”) at 9%. A qualifying community banking organization may elect to use the CBLR framework if its CBLR is greater than 9%.
Compliance by Bancshares and the Bank with these capital requirements affects their respective operations by increasing the amount of capital required to conduct operations. Acquisitions The Company must comply with numerous laws related to any potential acquisition activity.
Removed
The Company's principal executive office is located at 1741 Tiburon Drive, Wilmington, North Carolina 28403, telephone number (910) 790-5867. The Company maintains a website at www.liveoak.bank.
Added
The Company’s depositary shares, each representing a 1/40 th interest in a share of 8.375% fixed rate series A non-cumulative perpetual preferred stock, no par value per share (the “depositary shares”) trade on the NYSE under the symbol “LOB/PA”. The Company's principal executive office is located at 1741 Tiburon Drive, Wilmington, North Carolina 28403, telephone number (910) 790-5867.
Removed
Financial Statements and Supplementary Data elsewhere in this report. 4 Table of Contents SUPERVISION AND REGULATION General The Company is subject to extensive regulation in connection with its respective activities and operations. The framework under which the Company is supervised and examined is complex.
Added
The Company believes that its personnel also provide a competitive advantage because they include industry participants with relevant experience in the Company's identified verticals.
Removed
It is not possible to predict the content or timing of changes to the laws and regulations that may impact the business of the Company. Any changes to the regulatory framework applicable to the Company could have a material adverse impact on its operations.
Added
The framework under which the Company is supervised and examined is complex. This framework includes federal and state laws, regulations, policy statements, guidance, and other interpretative materials that define the obligations and requirements for financial institutions.
Removed
As a result of the 2024 presidential and congressional elections, control of the White House and Congress shifted to the Republican Party in January 2025. The new administration has taken action in its first several weeks in office that indicate its intention to generally reduce federal regulation of the financial services industry.
Removed
For example, on February 8, 2025, the acting director of the Consumer Financial Protection Bureau (the “CFPB”) issued a notice to its staff to cease all supervision and examination activity. It is currently unknown what, if any, of the CFPB’s policies or directives will continue.
Removed
A qualifying community banking organization that has chosen the proposed framework is not required to calculate the existing risk-based and leverage capital requirements. A bank is also considered to have met the capital ratio requirements to be well capitalized for the agencies’ prompt corrective action rules provided it has a CBLR greater than 9%.
Removed
The Company has not elected to implement the CBLR framework at this time. Acquisitions The Company must comply with numerous laws related to any potential acquisition activity.
Removed
In conjunction with the Amended Restoration Plan, the FDIC Board increased deposit insurance assessment rates by two basis points for all insured depository institutions, effective in 2023.
Removed
Evolving Legislation and Regulatory Action New laws or regulations or changes to existing laws and regulations, including changes in interpretation or enforcement, could materially adversely affect the Company's financial condition or results of operations.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+39 added−10 removed167 unchanged
Biggest changeRisks Related to Our Business • Increased delinquencies and credit losses could have a material adverse effect on our business, financial condition or results of operations. • Changes to the SBA or other government-guaranteed lending programs by the federal government, or the loss of our status as an SBA Preferred Lender, could have a material adverse effect on our business. • A prolonged U.S. government shutdown or default by the U.S. on government obligations would harm our results of operations. • Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business operations. • Changes in our ability to use, or the terms of our use of, intellectual property owned by other third parties could have a material adverse effect on our business. • We must effectively manage risks in connection with our information systems and those of our third-party service providers, which may experience disruption, failure, or security breaches, including those caused by cyber-attacks. • We have identified a material weakness in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in a loss of investor confidence and adversely impact the trading price of our securities. • The valuation of our investment securities, loans, and servicing rights is subject to change based on market conditions and various factors that are beyond our control. • We must maintain an appropriate allowance for credit losses. • Errors in the assumptions used to compute gains on sale of loans could result in material revenue misstatements. • We must effectively manage our liquidity risk. • We must effectively manage our interest rate risks. • Increases in the amount of other real estate owned could result in additional losses, costs and expenses. • We are subject to environmental liability risk associated with our lending activities. • Real property appraisals may not accurately reflect the net value of the collateral that we can realize. • We must effectively manage our counterparty risk. • Our expansion strategy, including new lines of business, new products, acquisitions, and investments, exposes us to risks. • Our investments in tax-advantaged projects may not generate returns as anticipated and may have an adverse effect on our financial results. 16 Table of Contents • Our investments in other companies may be illiquid and may subject us to material financial, reputational and strategic risks. • We are less able to diversify our lending risks than larger financial institutions. • Our directors and executive officers own a significant amount of our outstanding common stock, which could limit other shareholders’ ability to influence corporate matters and may hinder a third party from acquiring control of the Company.
Biggest changeRisks Related to Our Business • Increased delinquencies and credit losses could have a material adverse effect on our business, financial condition or results of operations. • Changes to the SBA or other government-guaranteed lending programs by the federal government, or the loss of our status as an SBA Preferred Lender, could have a material adverse effect on our business. • A prolonged U.S. government shutdown or default by the U.S. on government obligations would harm our results of operations. • Our deployment and use of artificial intelligence presents risks and challenges that may adversely impact our business. • Pandemics, natural disasters (including hurricanes), global climate change, acts of terrorism, social unrest, and global conflicts could disrupt our operations which may have a negative impact on our business operations. • Changes in our ability to use, or the terms of our use of, intellectual property owned by other third parties could have a material adverse effect on our business. • We face risks in connection with our information systems and those of our third-party service providers, which may experience disruption, failure, or security breaches, including those caused by cyber-attacks. • We have identified material weaknesses in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in a loss of investor confidence and adversely impact the trading price of our securities. • The restatement of our financial statements could affect investor confidence and expose us to additional risks and uncertainties, which could materially and adversely affect our business, operations, and financial condition. • The valuation of our investment securities, loans, and servicing rights is subject to change based on market conditions and various factors that are beyond our control. • We must maintain an appropriate allowance for credit losses. • Errors in the assumptions used to compute gains on sale of loans could result in material revenue misstatements. • We must effectively manage our liquidity risk. • We must effectively manage our interest rate risk. 16 Table of Contents • Increases in the amount of other real estate owned could result in additional losses, costs and expenses. • We are subject to environmental liability risk associated with our lending activities. • Real property appraisals may not accurately reflect the net value of the collateral that we can realize. • We must effectively manage our counterparty risk. • Our expansion strategy, including new lines of business, new products, acquisitions, and investments, exposes us to risks. • Our investments in tax-advantaged projects may not generate returns as anticipated and may have an adverse effect on our financial results. • Our investments in other companies may be illiquid and may subject us to material financial, reputational and strategic risks. • We are less able to diversify our lending risks than larger financial institutions. • Our directors and executive officers own a significant amount of our outstanding common stock, which could limit other shareholders’ ability to influence corporate matters and may hinder a third party from acquiring control of the Company.
In addition, federal regulators and many federal and state laws and regulations require companies to notify individuals of data security breaches involving their personal information. Certain security breaches and other data incidents also require notice to regulators, the media, and/or other parties.
In addition, federal regulators and many federal and state laws and regulations require companies to notify individuals of security breaches and other data incidents involving their personal information. Certain security breaches and other data incidents also require notice to regulators, the media, and/or other parties.
The amount of other real estate owned, or OREO, may increase significantly, resulting in additional losses, and costs and expenses that will negatively affect our operations. In connection with our banking business, we take title to real estate collateral from time to time through foreclosure or otherwise in connection with efforts to collect debts previously contracted.
The amount of other real estate owned, or OREO, may increase significantly, resulting in additional losses, costs and expenses that will negatively affect our operations. In connection with our banking business, we take title to real estate collateral from time to time through foreclosure or otherwise in connection with efforts to collect debts previously contracted.
If we or the Bank fail to meet applicable minimum capital requirements or cease to be well capitalized, such failure would cause us and the Bank to be subject to regulatory restrictions and could adversely affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on common stock and/or repurchase shares, our ability to make acquisitions, and our business, results of operations and financial condition, generally.
If we or the Bank fail to meet applicable minimum capital requirements or cease to be well capitalized, such failure would cause us and the Bank to be subject to regulatory restrictions and could adversely affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on common or preferred stock and/or repurchase shares, our ability to make acquisitions, and our business, results of operations and financial condition, generally.
Risks Related to Our Common Stock • The trading volume in our common stock is less than that of larger financial institutions. • There can be no assurance that we will continue to pay cash dividends. • Federal laws and regulations impose restrictions on the ownership of our common stock. • Anti-takeover provisions in our governing documents could adversely affect our shareholders. • An investment in our common stock is not an insured deposit.
Risks Related to Our Securities • The trading volume in our common stock is less than that of larger financial institutions. • There can be no assurance that we will continue to pay cash dividends on our common stock. • Federal laws and regulations impose restrictions on the ownership of our common stock. • Anti-takeover provisions in our governing documents could adversely affect our shareholders. • An investment in our securities is not an insured deposit.
Continuing deterioration in economic conditions affecting borrowers; new information regarding existing loans and loan commitments; and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans and off-balance sheet credit exposures.
Deterioration in economic conditions affecting borrowers; new information regarding existing loans and loan commitments; and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans and off-balance sheet credit exposures.
The increased use of mobile and cloud technologies, as well as the increase in remote work, can heighten these and other operational risks. We may fail to promptly identify or adequately address any such failures, interruptions or security breaches when they occur.
The increased use of mobile and cloud technologies, as well as the increase in remote work, can heighten these and other operational risks. We may fail to promptly identify or adequately address any such failures, interruptions, security breaches and other threats when they occur.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, results of operations and financial condition. 24 Table of Contents Our use of appraisals in deciding whether to make a loan secured by real property or how to value the loan in the future may not accurately reflect the net value of the collateral that we can realize.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, results of operations and financial condition. 25 Table of Contents Our use of appraisals in deciding whether to make a loan secured by real property or how to value the loan in the future may not accurately reflect the net value of the collateral that we can realize.
Significant errors in the assumptions used to compute gains on sale of loans could result in material revenue misstatements, which may have a material adverse effect on our business, results of operations and profitability. 22 Table of Contents Our rental equipment is subject to residual value risk upon disposition, and may not sell at the prices or in the quantities we expect.
Significant errors in the assumptions used to compute gains on sale of loans could result in material revenue misstatements, which may have a material adverse effect on our business, results of operations and profitability. 23 Table of Contents Our rental equipment is subject to residual value risk upon disposition, and may not sell at the prices or in the quantities we expect.
Our access to borrowed funds could become limited in the future, and we may be required to pay above market rates for additional borrowed funds, if we are able to obtain them at all, which may adversely affect our business, results of operations and financial condition. 23 Table of Contents Changes in the interest rate environment could reduce our net interest income, which could reduce our profitability.
Our access to borrowed funds could become limited in the future, and we may be required to pay above market rates for additional borrowed funds, if we are able to obtain them at all, which may adversely affect our business, results of operations and financial condition. 24 Table of Contents Changes in the interest rate environment could reduce our net interest income, which could reduce our profitability.
In addition, adjustments to the ACL on available-for-sale investment securities would negatively affect the Company’s earnings and regulatory capital ratios. 21 Table of Contents Our ACL may prove to be insufficient to absorb lifetime losses on loans, leases and off-balance sheet credit exposures. We maintain allowances for credit losses on loans, leases, and off-balance sheet credit exposures.
In addition, adjustments to the ACL on available-for-sale investment securities would negatively affect the Company’s earnings and regulatory capital ratios. 22 Table of Contents Our ACL may prove to be insufficient to absorb lifetime losses on loans, leases and off-balance sheet credit exposures. We maintain allowances for credit losses on loans, leases, and off-balance sheet credit exposures.
The results of this testing of our investments for potential impairment may be adversely affected by a variety of factors, including market conditions, general economic conditions and unfavorable changes in the businesses underlying the investments. Impairments or write-downs of these assets may result in charges that adversely affect our results of operations. See Note 1.
The results of this testing of our investments for potential impairment may be adversely affected by a variety of factors, including market conditions, general economic conditions and unfavorable changes in the businesses underlying the investments. Impairments or write-downs of these assets may result in charges that adversely affect our results of operations. See “Note 1.
Any damage to our reputation, whether arising from legal, regulatory, supervisory or enforcement actions, matters affecting our financial reporting or compliance with SEC and exchange listing requirements, negative publicity, the conduct of our business or otherwise could have a material adverse effect on our business, results of operations and financial condition. Item 1B.
Any damage to our reputation, whether arising from legal, regulatory, supervisory or enforcement actions, matters affecting our financial reporting or compliance with SEC and exchange listing requirements, negative publicity, the conduct of our business or otherwise could have a material adverse effect on our business, results of operations and financial condition.
Organization and Summary of Significant Accounting Policies to the consolidated financial statements for further discussion related to our process for determining the appropriate level of the ACL. The valuation of our loans measured at fair value is based on estimates and subject to fluctuation based on market conditions and other factors that are beyond our control.
Organization and Summary of Significant Accounting Policies” to the consolidated financial statements for further discussion related to our process for determining the appropriate level of the ACL. The valuation of our loans measured at fair value is based on estimates and subject to fluctuation based on market conditions and other factors that are beyond our control.
Factors that could adversely affect our access to liquidity sources include a decrease in the level of our business activity due to a market downturn, failures of or interruptions to our next-generation banking platform, our lack of access to a traditional branch banking network designed to generate core deposits, and adverse regulatory action against us.
Factors that could adversely affect our access to liquidity sources include a decrease in the level of our business activity due to a market downturn, failures of or interruptions to our banking platform, our lack of access to a traditional branch banking network designed to generate core deposits, and adverse regulatory action against us.
For information regarding the ownership of our outstanding stock by our executive officers and directors and related entities, see “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters” in this Report. Risks Related to Our Regulatory Environment We are subject to extensive regulation that could limit or restrict our activities.
For information regarding the ownership of our outstanding securities by our executive officers and directors and related entities, see “Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters” in this Report. Risks Related to Our Regulatory Environment We are subject to extensive regulation that could limit or restrict our activities.
There can be no assurance that we will successfully identify appropriate opportunities, that we will be able to negotiate or finance such activities or that such activities, if undertaken, will be successful. 25 Table of Contents Our ability to execute strategic activities and new business initiatives successfully will depend on a variety of factors.
There can be no assurance that we will successfully identify appropriate opportunities, that we will be able to negotiate or finance such activities or that such activities, if undertaken, will be successful. 26 Table of Contents Our ability to execute strategic activities and new business initiatives successfully will depend on a variety of factors.
We anticipate that gains on the sale of loans will continue to comprise a meaningful component of our revenue in 2025. The determination of gains is based on assumptions regarding the value of unguaranteed loans retained, servicing rights retained and deferred fees and costs. The value of retained unguaranteed loans and servicing rights is determined as described above.
We anticipate that gains on the sale of loans will continue to comprise a meaningful component of our revenue in 2026. The determination of gains is based on assumptions regarding the value of unguaranteed loans retained, servicing rights retained and deferred fees and costs. The value of retained unguaranteed loans and servicing rights is determined as described above.
If we are unable to remediate this material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, result in violations of applicable securities laws, result in an inability to meet NYSE listing requirements, negatively affect investor confidence in the accuracy and completeness of our financial statements, and adversely impact the trading price of our securities.
If we are unable to remediate these material weaknesses, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, result in violations of applicable securities laws, result in an inability to meet NYSE listing requirements, negatively affect investor confidence in the accuracy and completeness of our financial statements, and adversely impact the trading price of our securities.
Any increase in the ACL on loans and/or off-balance sheet credit exposures will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our business, financial condition and results of operations. See Note 1.
Any increase in the ACL on loans and/or off-balance sheet credit exposures will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our business, financial condition and results of operations. See “Note 1.
Organization and Summary of Significant Accounting Policies under the subheading entitled “Investments” for more information. Any earnings from our financial technology investments can be volatile and difficult to predict. Furthermore, we invest in many of these financial technology companies for strategic purposes.
Organization and Summary of Significant Accounting Policies” under the subheading entitled “Investments” for more information. Any earnings from our financial technology investments can be volatile and difficult to predict. Furthermore, we invest in many of these financial technology companies for strategic purposes.
These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, monetary tapering actions by the Federal Reserve, and changes in market interest rates and potential instability in the capital markets.
These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, monetary policy actions by the Federal Reserve, and changes in market interest rates and potential instability in the capital markets.
Our collection of such customer and company data is subject to extensive regulation and oversight. 19 Table of Contents Cloud technologies, including third-party cloud infrastructure, are also critical to the operation of our systems, and our reliance on cloud technologies continues to grow.
Our collection of such customer and company data is subject to extensive regulation and oversight. 20 Table of Contents Cloud technologies, including third-party cloud infrastructure, are also critical to the operation of our systems, and our reliance on cloud technologies continues to grow.
If this technology is not successfully developed and implemented at our Bank, if we were to lose access to any of this technology, or if we were only able to access the technology on less favorable terms, we would not be able to offer our customers the next-generation banking platform services that we intend to offer, and our business, financial condition, results of operations and prospects could be materially and adversely affected.
If this technology is not successfully developed and implemented at our Bank, if we were to lose access to any of this technology, or if we were only able to access the technology on less favorable terms, we would not be able to offer our customers the banking services that we intend to offer, and our business, financial condition, results of operations and prospects could be materially and adversely affected.
The equity securities of the companies in which we and Canapi Ventures invest are at the time of acquisition unmarketable and illiquid, and there can be no assurance that a ready market for these securities will ever exist.
The equity securities of the companies in which we invest are at the time of acquisition unmarketable and illiquid, and there can be no assurance that a ready market for these securities will ever exist.
Any of these impacts, or any other impacts resulting from the events described above, could have a material adverse effect on our liquidity and our current and/or projected business operations and financial condition and results of operations.
Any of these impacts, or any other impacts resulting from the events described above, could have a material adverse effect on our liquidity and our current and/or projected business operations and financial condition, results of operations, and the value of our securities.
General Risk Factors • We compete with larger financial institutions and other financial service providers. • We must attract, retain, and develop key personnel. • Our risk management framework may not effectively mitigate risks or losses to us. • Hurricanes or other adverse weather events could disrupt our operations. • Damage to our business reputation could adversely impact our business and results of operations. 17 Table of Contents Risks Related to Our Business We may experience increased delinquencies and credit losses, which could have a material adverse effect on our capital, financial condition, and results of operations.
General Risk Factors • We compete with larger financial institutions and other financial service providers. • We must attract, retain, and develop key personnel. • Our risk management framework may not effectively mitigate risks or losses to us. • Damage to our business reputation could adversely impact our business and results of operations. 17 Table of Contents Risks Related to Our Business We may experience increased delinquencies and credit losses, which could have a material adverse effect on our capital, financial condition, and results of operations.
We sell the guaranteed portion of some of our SBA 7(a) loans in the secondary market. These sales have resulted in premium income for us at the time of sale and created a stream of future servicing income. We may not be able to continue originating these loans or selling them in the secondary market.
We have historically sold the guaranteed portion of some of our SBA 7(a) loans in the secondary market. These sales have resulted in premium income for us at the time of sale and created a stream of future servicing income. We may not be able to continue originating these loans or selling them in the secondary market.
The security and integrity of our systems and the technology we use, including services and solutions provided by third-party vendors, could be threatened by a variety of interruptions or information security breaches, including those caused by computer hacking, cyber-attacks, electronic fraudulent activity or attempted theft of financial assets or information.
The security and integrity of our systems and the technology we use, including services and solutions provided by third-party vendors, could be threatened by a variety of interruptions, information security breaches and other threats, including those caused by computer hacking, cyber-attacks, electronic fraudulent activity, errors or attempted theft of financial assets or information.
If conditions are worse than forecast, we could experience higher charge-offs and delinquencies than is provided in the ACL on loans and leases, which could materially adversely affect our business, results of operations and financial condition. Deterioration in the commercial soundness of our counterparties could adversely affect us.
If conditions are worse than forecast, we could experience higher charge-offs and delinquencies than is provided in the ACL on loans and leases, which could materially adversely affect our business, results of operations and financial condition. 28 Table of Contents Deterioration in the commercial soundness of our counterparties could adversely affect us.
There can be no assurance that the value at which we carry these assets will necessarily reflect the amount which could be realized upon a sale or other liquidity event. 27 Table of Contents Our investments and/or financings in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on our financial results.
There can be no assurance that the value at which we carry these assets will necessarily reflect the amount which could be realized upon a sale or other liquidity event. Our investments and/or financings in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on our financial results.
Any changes to the SBA program, including changes to the level of guarantee provided by the federal government on SBA loans, may also have a material adverse effect on our business. We anticipate that gains on the sale of loans will comprise a meaningful component of our revenue in 2025.
Any changes to the SBA program, including changes to the level of guarantee provided by the federal government on SBA loans, may also have a material adverse effect on our business. We currently anticipate that gains on the sale of loans will comprise a meaningful component of our revenue in 2026.
Any of these factors, among others, could cause impairments and realized or unrealized losses in future periods and declines in other comprehensive income, which could materially and adversely affect our business, results of operations, financial condition and prospects, as well as the value of our common stock.
Any of these factors, among others, could cause impairments and realized or unrealized losses in future periods and declines in other comprehensive income, which could materially and adversely affect our business, results of operations, financial condition and prospects, as well as the value of our securities.
Item 1A. RISK FACTORS An investment in Live Oak Bancshares, Inc.’s common stock involves certain risks. The following discussion highlights the risks that management believes are material for the Company, but do not necessarily include all the risks that we may face.
Item 1A. RISK FACTORS An investment in Live Oak Bancshares, Inc.’s securities involves certain risks. The following discussion highlights the risks that management believes are material for the Company, but do not necessarily include all the risks that we may face.
Our investments in financial technology companies and initiatives, including our investment in Apiture, subject us to material financial, reputational and strategic risks. Our investments in various financial technology companies have had a significant impact on our results of operations, and we anticipate they will continue to have a significant impact on our results of operations in the future.
Our investments in financial technology companies and initiatives subject us to material financial, reputational and strategic risks. Our investments in various financial technology companies have had a significant impact on our results of operations, and we anticipate they will continue to have a significant impact on our results of operations in the future.
If we lose our status as a Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect on our financial results.
If we lose our status as a Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect on our business, results of operations and financial condition.
In addition, our implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively.
In addition, our implementation of certain new technologies, such as those related to AI, automation and algorithms, in our business processes may have unintended consequences due to their limitations or our failure to use them effectively.
Actions by monetary and fiscal authorities, including the Federal Reserve, could have an adverse effect on our deposit levels, loan demand, or business and earnings, as well as the value of our common stock.
Actions by monetary and fiscal authorities, including the Federal Reserve, could have an adverse effect on our deposit levels, loan demand, or business and earnings, as well as the value of our securities.
An investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section. As a result, if you acquire shares of our common stock, you may lose some or all of your investment. 32 Table of Contents General Risk Factors We face strong competition from a diverse group of competitors.
An investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section. As a result, if you acquire our securities, you may lose some or all of your investment. General Risk Factors We face strong competition from a diverse group of competitors.
Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations. Pandemics, natural disasters, global climate change, acts of terrorism, global conflicts or other similar events have in the past, and may in the future have, a negative impact on our business and operations.
Pandemics, natural disasters (including hurricanes), global climate change, acts of terrorism, social unrest, global conflicts or other similar events have in the past, and may in the future have, a negative impact on our business and operations.
Data incidents including those involving phishing, hacking, misdirected communications and other inadvertent disclosures, and other incidents results in unauthorized access to and/or acquisition of confidential and proprietary information, including personal information, can and do occur.
Security breaches and other data incidents, including those involving phishing, hacking, misdirected communications and other inadvertent disclosures, resulting in unauthorized access to and/or acquisition of confidential and proprietary information, including personal information, can and do occur.
These mandatory disclosures regarding a security breach and other data incidents are costly to implement and often lead to widespread negative publicity, which may cause customers, borrowers, employees, vendors, partners or investors to lose confidence in the effectiveness of our data security measures.
These mandatory disclosures are costly to implement and often lead to widespread negative publicity, which may cause customers, borrowers, employees, vendors, partners or investors to lose confidence in the effectiveness of our data security measures.
The fair value of our investment securities can fluctuate due to factors outside of our control. As of December 31, 2024, the fair value of our available for sale securities portfolio was approximately $1.25 billion.
The fair value of our investment securities can fluctuate due to factors outside of our control. As of December 31, 2025, the fair value of our available for sale securities portfolio was approximately $1.43 billion.
As of December 31, 2024, the Company and the Bank had total assets of $12.94 billion and $12.86 billion, respectively. As a result, we are subject to additional requirements including, but not limited to, establishing a dedicated risk committee of our Board, calculating our FDIC deposit insurance assessment using the large bank pricing rule and more frequent regulatory examinations.
As of December 31, 2025, the Company and the Bank had total assets of $15.13 billion and $15.06 billion, respectively. As a result, we are subject to additional requirements including, but not limited to, establishing a dedicated risk committee of our Board, calculating our FDIC deposit insurance assessment using the large bank pricing rule and more frequent regulatory examinations.
Sales by these holders of a substantial number of shares could significantly reduce the market price of our common stock. There can be no assurance that we will continue to pay cash dividends. Although we have historically paid cash dividends, there is no assurance that we will continue to pay cash dividends.
Sales by these holders of a substantial number of shares could significantly reduce the market price of our common stock. There can be no assurance that we will continue to pay cash dividends on our common stock.
As a result, declines in the value of our OREO will have a negative effect on our business, results of operations and financial condition. As of December 31, 2024, we had three OREO properties with an aggregate carrying value of $1.9 million. We are subject to environmental liability risk associated with our lending activities.
As a result, declines in the value of our OREO will have a negative effect on our business, results of operations and financial condition. As of December 31, 2025, we had eight OREO properties with an aggregate carrying value of $8.2 million. We are subject to environmental liability risk associated with our lending activities.
Furthermore, it may be difficult for holders to resell their shares at prices they find attractive, or at all. Future sales of shares of our common stock by existing shareholders could depress the market price of our common stock. Live Oak Bancshares, Inc. had 45,403,593 shares of common stock outstanding at January 31, 2025.
Furthermore, it may be difficult for holders to resell their shares at prices they find attractive, or at all. Future sales of shares of our common stock by existing shareholders could depress the market price of our common stock. Live Oak Bancshares, Inc. had 46,049,402 shares of common stock outstanding at January 31, 2026.
Also, as of January 31, 2025, there were 2,016,375 outstanding restricted stock units that vest over time that, when vested, will result in additional shares becoming available for sale. A large portion of these shares, options and restricted stock units are held by a relatively small number of persons.
Also, as of January 31, 2026, there were 1,828,510 outstanding restricted stock units that vest over time that, when vested, will result in additional shares becoming available for sale. A large portion of these shares, options and restricted stock units are held by a relatively small number of persons.
Shares of Live Oak Bancshares, Inc.’s common stock are not savings accounts, deposits or other obligations of any depository institution and are not insured or guaranteed by the FDIC or any other governmental agency or instrumentality, any other deposit insurance fund or by any other public or private entity.
Live Oak Bancshares, Inc.’s securities are not insured deposits and may lose value. Live Oak Bancshares, Inc.’s securities are not savings accounts, deposits or other obligations of any depository institution and are not insured or guaranteed by the FDIC or any other governmental agency or instrumentality, any other deposit insurance fund or by any other public or private entity.
In addition, as of January 31, 2025, there were outstanding options to purchase 287,671 shares of our common stock that, if exercised, will result in these additional shares becoming available for sale.
In addition, as of January 31, 2026, there were outstanding options to purchase 25,083 shares of our common stock that, if exercised, will result in these additional shares becoming available for sale.
Our common stock is listed for quotation on the NYSE under the ticker symbol “LOB”. The average daily trading volume for our common stock is less than that of larger financial institutions. Due to its relatively low trading volume, sales of our common stock may place significant downward pressure on the market price of our common stock.
The average daily trading volume for our common stock is less than that of larger financial institutions. Due to its relatively low trading volume, sales of our common stock may place significant downward pressure on the market price of our common stock.
The circumstances or market conditions under which such companies will seek additional capital is unpredictable. It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable. Our investments in other companies may be illiquid.
It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable. Our investments in other companies may be illiquid.
We expect that federal and state bank regulators will continue to increase their oversight, inspection and investigatory role over our deposit operations and the financial services industry generally.
We expect that federal and state bank regulators will continue to increase their oversight, inspection and investigatory role over our deposit operations.
In addition, banks with total assets of at least $10 billion are primarily examined by the CFPB with respect to federal consumer protection laws and regulations. In the first quarter of 2023, the Company and the Bank each first exceeded $10 billion in total assets.
In addition, banks with total assets of at least $10 billion are primarily examined by the CFPB with respect to federal consumer protection laws and regulations, however, there is currently uncertainty surrounding the ongoing operations of the CFPB. In the first quarter of 2023, the Company and the Bank each first exceeded $10 billion in total assets.
Efforts intended to ensure that our collection, use, disclosure, maintenance, and protection of personal information complies with all applicable laws and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, may pose a variety of challenges, including the following: • Our compliance and operating costs may increase. • The development of new products or services may be hindered, our ability to offer existing products or services may be curtailed, and the manner in which we offer products and services to customers may be impacted. • Our efforts may require significant time, attention, and oversite of management, which may result in reduced focus on other operations. • We may be required to structure our business, operations, and systems in less efficient ways. 31 Table of Contents Risks Related to Our Common Stock The low trading volume in our common stock may adversely affect your ability to resell shares at prices that you find attractive or at all.
Efforts intended to ensure that our collection, use, disclosure, maintenance, and protection of personal information complies with all applicable laws and regulations in all relevant jurisdictions, including where the laws of different jurisdictions are in conflict, may pose a variety of challenges, including the following: • Our compliance and operating costs may increase. • The development of new products or services may be hindered, our ability to offer existing products or services may be curtailed, and the manner in which we offer products and services to customers may be impacted. • Our efforts may require significant time, attention, and oversite of management, which may result in reduced focus on other operations. • We may be required to structure our business, operations, and systems in less efficient ways.
We also rely on vendors and third parties to provide software and other services that are important to the operation of our next-generation banking platform. Our future strategy and success depend on our ability to access to these technology services and successfully implement them.
We also rely on vendors and third parties to provide software and other services that are important to the operation of our banking platform. These services may include or utilize AI and related technologies. Our future strategy and success depend on our ability to access to these technology services and successfully implement them.
As disclosed in Part II - Item 9A. Controls and Procedures, management has identified a material weakness in our internal control over financial reporting. As a result, management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2024. The Company is currently working to remediate the material weakness.
Controls and Procedures, management has identified material weaknesses in our internal control over financial reporting. As a result, management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2025. The Company is currently working to remediate the material weaknesses.
Canapi Ventures invests in early to growth-stage companies that may include companies that utilize advanced science, technology, engineering and/or mathematics to innovate in the financial technology market. Investments in these companies involve a high degree of business and financial risk that can result in substantial losses.
We invest, directly and indirectly, in early to growth-stage companies that may include companies that utilize advanced science, technology, engineering and/or mathematics, including AI technologies, to innovate in the financial technology market. Investments in these companies involve a high degree of business and financial risk that can result in substantial losses.
Any failures, interruptions or security breaches, including with respect to our information systems or our vendors’ information systems, or any perception that our security measures are inadequate, could negatively impact our operations, damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, and expose us to civil litigation, enforcement actions by governmental agencies, regulatory fines or other damages or losses, including those not covered by insurance.
Any failures, interruptions, security breaches, or other data incidents, including with respect to our information systems or our vendors’ information systems, or any perception that our security measures are inadequate, could negatively impact our operations, damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, and expose us to civil litigation, enforcement actions by governmental agencies, regulatory fines or other damages or losses, including those not covered by insurance. 21 Table of Contents Our business is dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party providers.
Our reputation is very important to sustain our business, as we rely on our relationships with our current, former and potential customers, our technology and other strategic partners, our shareholders, and the industries that we serve.
Our business reputation is important and any damage to it could have a material adverse effect on our business. Our reputation is very important to sustain our business, as we rely on our relationships with our current, former and potential customers, our technology and other strategic partners, our shareholders, and the industries that we serve.
Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we and our partners and collaborators may be unable to anticipate these techniques or to implement adequate preventative measures.
Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we and our partners and collaborators may be unable to anticipate these techniques or to implement adequate preventative measures, including with respect to cyberthreats posed by emerging technologies, such as AI and quantum computing.
Future payment of cash dividends, if any, will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, economic conditions, and such other factors as the board may deem relevant.
Future payment of cash dividends on our common stock, if any, will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, economic conditions, and such other factors as the board may deem relevant. 32 Table of Contents The Company’s common stock is subordinate to the Company’s existing and future preferred stock.
States legislatures have also been actively debating and passing new comprehensive privacy laws. We expect that the body of privacy and data security laws and regulations that may apply to us will continue to grow. These laws and regulations are continually evolving and are subject to potentially differing interpretations, including as to their scope and applicability to our business.
We expect that the body of privacy and data security laws and regulations that may apply to us will continue to grow. 31 Table of Contents These laws and regulations are continually evolving and are subject to potentially differing interpretations, including as to their scope and applicability to our business.
The banking business is highly competitive, and we experience strong competition from many other financial institutions, including some of the largest commercial banks headquartered in the country, as well as other federally and state chartered financial institutions such as community banks and credit unions, finance and business development companies, commercial and consumer finance companies, peer-to-peer and marketplace lenders, securities brokerage firms, insurance companies, money market and mutual funds and other non-bank lenders.
The banking business is highly competitive, and we experience strong competition from many other financial institutions, including some of the largest commercial banks headquartered in the country, as well as other federally and state chartered financial institutions such as community banks and credit unions, finance and business development companies, commercial and consumer finance companies, peer-to-peer and marketplace lenders, securities brokerage firms, insurance companies, money market and mutual funds, fintech lenders, and other non-bank lenders. 33 Table of Contents We compete with these institutions both in attracting deposits and in making loans, primarily on the basis of the interest rates we pay and yield on these products.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar events, have in the past and may in the future lead to erosion of customer confidence in the banking system, deposit volatility, liquidity issues, stock price volatility, increased regulatory scrutiny and other adverse developments. 30 Table of Contents Similarly, inflation and rapid increases in interest rates have led to a decline in the fair value of previously issued government securities with interest rates below current market interest rates.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar events, have in the past and may in the future lead to erosion of customer confidence in the banking system, deposit volatility, liquidity issues, stock price volatility, increased regulatory scrutiny and other adverse developments.
Our business is dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party providers. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations.
The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations.
Accidental or willful security breaches or other unauthorized access to our systems can cause confidential customer, borrower, employee, vendor, partner or investor information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information can also expose us to liability related to the loss of the information, time-consuming and expensive litigation, and negative publicity.
Accidental or willful security breaches or other unauthorized access to our systems can cause confidential customer, borrower, employee, vendor, partner or investor information to be stolen and used for criminal purposes.
If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could materially adversely affect our business, financial condition, results of operations and prospects, as well as the value of our common stock. 20 Table of Contents We have identified a material weakness in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in a loss of investor confidence and adversely impact the trading price of our securities.
If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could materially adversely affect our business, financial condition, results of operations and prospects, as well as the value of our securities.
Should we fail to comply with these regulatory requirements, federal and state regulators could impose additional restrictions on the activities of the Company and the Bank, which could materially and adversely affect our business, results of operations and financial condition.
Should we fail to comply with these regulatory requirements, federal and state regulators could impose additional restrictions on the activities of the Company and the Bank, which could materially and adversely affect our business, results of operations and financial condition. 29 Table of Contents The laws and regulations applicable to the banking industry change frequently and may continue to change, and we cannot predict the effects of these changes on our business and profitability.
This is an inherently uncertain process, and our allowance for credit losses may not be sufficient to absorb future loan losses or prevent a material adverse effect on our business, results of operations and financial condition. 28 Table of Contents Insiders have substantial control over us, and this control may limit our shareholders’ ability to influence corporate matters and may delay or prevent a third party from acquiring control over us.
This is an inherently uncertain process, and our allowance for credit losses may not be sufficient to absorb future loan losses or prevent a material adverse effect on our business, results of operations and financial condition.
Hurricanes or other adverse weather events could disrupt our operations, which could have an adverse effect on our business or results of operations. North Carolina’s coastal region is affected, from time to time, by adverse weather events, particularly hurricanes, the nature and severity of which may be impacted by climate change.
North Carolina’s coastal region is affected, from time to time, by adverse weather events, particularly hurricanes, the nature and severity of which may be impacted by climate change. We cannot predict whether, or to what extent, damage caused by future hurricanes or other weather events will affect our operations.
Additionally, although some of these companies may already have a commercially successful product or product line at the time of investment, technology products and services often have a more limited market or life span than products in other industries. Thus, the ultimate success of these companies may depend on their ability to continually innovate in increasingly competitive markets.
These companies tend to lack management depth, to have limited or no history of operations and to not have attained profitability. Additionally, although some of these companies may already have a commercially successful product or product line at the time of investment, technology products and services often have a more limited market or life span than products in other industries.
We cannot predict whether, or to what extent, damage caused by future hurricanes or other weather events will affect our operations. Weather events could cause a disruption in our day-to-day business activities and could have a material adverse effect on our business, results of operations and financial condition.
Weather events could cause a disruption in our day-to-day business activities and could have a material adverse effect on our business, results of operations and financial condition.
If we fail to meet these capital and other regulatory requirements, our financial condition, liquidity and results of operations could be materially and adversely affected. 29 Table of Contents Although we comply with all current applicable capital requirements, we may be subject to more stringent regulatory capital requirements in the future, and we may need additional capital in order to meet those requirements.
Although we comply with all current applicable capital requirements, we may be subject to more stringent regulatory capital requirements in the future, and we may need additional capital in order to meet those requirements.
We have incurred significant expenses in connection with these compliance obligations and expect to continue to incur expenses to address heightened regulatory requirements. These additional regulatory requirements and increased compliance expenses could have a material adverse effect on our business, financial condition and results of operations.
We have incurred significant expenses in connection with these compliance obligations and expect to continue to incur expenses to address heightened regulatory requirements.
In addition, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. We expect competition to continue to intensify due to financial institution consolidation, legislative, regulatory and technological changes, and the emergence of alternative banking sources.
We expect competition to continue to intensify due to financial institution consolidation, legislative, regulatory and technological changes, including advances in AI and automation, and the emergence of alternative banking sources.
As of January 31, 2025, our directors and executive officers and their related entities own, in the aggregate, approximately 23.3% of our outstanding common stock. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.
The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.
Additional risks and uncertainties that are not currently known or that management does not currently deem material could also have a material adverse impact on our business, results of our operations and financial condition.
Additional risks and uncertainties that are not currently known or that management does not currently deem material could also have a material adverse impact on our business, results of our operations and financial condition. You should carefully consider the risk factors and uncertainties described below and elsewhere in this Report in evaluating an investment in Live Oak Bancshares, Inc.’s securities.
The market for qualified employees in the businesses in which we operate is competitive, and we may not be successful in attracting, hiring or retaining key personnel.
The market for qualified employees in the businesses in which we operate is competitive, and we may not be successful in attracting, hiring or retaining key personnel. Our inability to attract, hire or retain key personnel could have a material adverse effect on our business, results of operations and financial condition.
You should carefully consider the risk factors and uncertainties described below and elsewhere in this Report in evaluating an investment in Live Oak Bancshares, Inc.’s common stock. 15 Table of Contents Summary of Risk Factors The following is a summary of the most significant risks and uncertainties that we believe could adversely affect our business, financial condition or results of operations.
Summary of Risk Factors The following is a summary of the most significant risks and uncertainties that we believe could adversely affect our business, financial condition or results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company also receives periodic threat intelligence reports from vendors, peers, and industry information sharing and analysis centers. The Company maintains a relationship with a leading incident response firm to assist the Company in responding to cybersecurity incidents, if appropriate. Oversight of Third-party Risks Our third-party service providers, suppliers, vendors, and partners face cybersecurity risks that could impact us.
Biggest changeThe Company maintains a relationship with a leading incident response firm to assist the Company in responding to cybersecurity incidents, if appropriate. Oversight of Third-party Risks Our third-party service providers, suppliers, vendors, and partners face cybersecurity risks that could impact us. Therefore, the Company has developed and implemented processes to oversee and manage these risks.
It includes the following elements: • Identification and assessment of cybersecurity threats based on periodic internal and external assessments and monitoring, information from internal stakeholders, and external publications and resources. 34 Table of Contents • Technical and organizational safeguards designed to protect against identified threats, including documented policies and procedures, employee training and awareness, and technical controls. • Processes to detect the occurrence of cybersecurity events and incidents, maintenance, and periodic testing of incident response and recovery and business continuity plans and processes. • A third-party risk management program to manage cybersecurity risks associated with our service providers, suppliers, and vendors using a risk-based approach that focuses on cybersecurity risks associated with critical service providers, suppliers, and vendors.
It includes the following elements: • Identification and assessment of cybersecurity threats based on periodic internal and external assessments and monitoring, information from internal stakeholders, and external publications and resources. 35 Table of Contents • Technical and organizational safeguards designed to protect against identified threats, including documented policies and procedures, employee training and awareness, and technical controls. • Processes to detect the occurrence of cybersecurity events and incidents, maintenance, and periodic testing of incident response and recovery and business continuity plans and processes. • A third-party risk management program to manage cybersecurity risks associated with our service providers, suppliers, and vendors using a risk-based approach that focuses on cybersecurity risks associated with critical service providers, suppliers, and vendors.
Governance Managing cybersecurity risk is a key focus for the Board of Directors. The Company seeks to ensure effective governance in managing risks associated with cybersecurity threats, as more thoroughly described below. 35 Table of Contents Board of Directors Oversight The Risk Committee of the Board of Directors is responsible for the oversight of risks from cybersecurity threats.
Governance Managing cybersecurity risk is a key focus for the Board of Directors. The Company seeks to ensure effective governance in managing risks associated with cybersecurity threats, as more thoroughly described below. 36 Table of Contents Board of Directors Oversight The Risk Committee of the Board of Directors is responsible for the oversight of risks from cybersecurity threats.
This enables the highest levels of management to be kept abreast of the Company’s cybersecurity posture and potential risks facing the Company. Furthermore, significant cybersecurity matters and strategic risk management decisions are escalated to the Risk Committee of the Board of Directors, where appropriate. 36 Table of Contents
This enables the highest levels of management to be kept abreast of the Company’s cybersecurity posture and potential risks facing the Company. Furthermore, significant cybersecurity matters and strategic risk management decisions are escalated to the Risk Committee of the Board of Directors, where appropriate.
The CISO is also responsible for informing the Information Security Committee of cybersecurity incidents, which in turn reviews the impact of incidents and monitors the Company’s mitigation and remediation efforts. Depending on the nature of the incident, this process also provides for escalating notice to the Risk Committee of the Board of Directors.
Information Security leadership are also responsible for informing the Information Security Committee of cybersecurity incidents, which in turn reviews the impact of incidents and monitors the Company’s mitigation and remediation efforts. Depending on the nature of the incident, this process also provides for escalating notice to the Risk Committee of the Board of Directors.
In the event of a cybersecurity incident, we have an established incident response plan that requires prompt notification of the CISO or the CISO’s designee, who in turn engages with the corporate Incident Response Team (IRT) to respond to the incident.
In the event of a cybersecurity incident, we have an established incident response plan that requires prompt notification to Information Security leadership, who in turn engages with the corporate Incident Response Team (IRT) to respond to the incident.
These processes assist management and the Risk Committee in staying informed of and monitoring the prevention, detection, mitigation, and remediation of cybersecurity incidents. Reporting to Board of Directors The CISO, in his capacity, periodically informs the Information Security Committee, Corporate Risk Committee and Board’s Risk Committee of cybersecurity risks and incidents.
These processes assist management and the Risk Committee in staying informed of and monitoring the prevention, detection, mitigation, and remediation of cybersecurity incidents. 37 Table of Contents Reporting to Board of Directors Information Security leadership periodically inform the Information Security Committee, Corporate Risk Committee and Board’s Risk Committee of cybersecurity risks and incidents.
Such quarterly reporting may include, but is not limited to, key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues.
Information Security leadership, in conjunction with the Corporate Risk Committee, make quarterly reports to the Risk Committee of the Board of Directors. Such quarterly reporting may include, but is not limited to, key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues.
In addition to quarterly reporting to the Board’s Risk Committee, the Company’s incident response processes include escalation to management when an incident is suspected. Risk Management Personnel Primary responsibility for assessing, monitoring, and managing our Cybersecurity Program rests with the CISO, Mr. Richard Friedberg.
In addition to quarterly reporting to the Board’s Risk Committee, the Company’s incident response processes include escalation to management when an incident is suspected. Risk Management Personnel Primary responsibility for assessing, monitoring, and managing our Cybersecurity Program rests with the Interim Information Security Officer, supported by two Interim Deputy Chief Information Security Officers and the broader Information Security function.
Monitoring Cybersecurity Incidents The CISO is continually informed of and monitors cybersecurity risks and incidents through real-time updates, including a partnership with a managed security service provider. Periodic Information Security Committee meetings cover key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues.
Periodic Information Security Committee meetings cover key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues.
As described below, where appropriate, strategic risk management decisions are escalated to the Risk Committee, and the Risk Committee receives periodic reports on cybersecurity matters from management.
As described below, where appropriate, strategic risk management decisions are escalated to the Risk Committee, and the Risk Committee receives periodic reports on cybersecurity matters from management. Management’s Role in Cybersecurity Risk Management Management convenes a standing Information Security Committee to monitor, measure, and report key indicators, risk assessments, and security measures to the management Corporate Risk Committee.
The Company also periodically engages third parties for assessments of specific products, services, or applications. The Company leverages various software and service providers as part of its Cybersecurity Program, including a managed security service provider and a service provider that helps monitor third-party suppliers.
The Company also periodically engages third parties for assessments of specific products, services, or applications. The Company leverages various software and service providers as part of its Cybersecurity Program that assist with various services, including monitoring third-party suppliers. The Company also receives periodic threat intelligence reports from vendors, peers, and industry information sharing and analysis centers.
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Therefore, the Company has developed and implemented processes to oversee and manage these risks.
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The Chief Information and Digital Officer, Renato Derraik, also serves as Interim Information Security Officer. Mr.
Removed
Management’s Role in Cybersecurity Risk Management The Chief Information Security Officer (“CISO”) of the Bank and a standing management Information Security Committee monitor, measure, and report key indicators, risk assessments, and security measures to the management Corporate Risk Committee. The CISO, in conjunction with the Corporate Risk Committee, makes quarterly reports to, the Risk Committee of the Board of Directors.
Added
Derraik has served as the Bank’s Chief Information and Digital Officer since June 2021 and has over 25 years of experience leading technology, digital, and operating model transformations, including leadership roles overseeing digital innovation and transformation at a large financial services company, and advising global organizations on technology and digital transformations.
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With over 25 years of experience in the field of cybersecurity, his background includes extensive experience across the financial sector, technology sector, and U.S. government. Mr. Friedberg is also an adjunct faculty member at Carnegie Mellon University, teaching risk and cyber practices. Mr.
Added
This experience supports his oversight of cybersecurity risk management, including integrating cybersecurity risk considerations into technology strategy, operations, governance, and risk reporting. The Interim Information Security Officer is supported by Scott McMichael and George Werbacher, who serve as the Interim Deputy Chief Information Security Officers. Mr.
Removed
Friedberg holds a Bachelor of Science from Carnegie Mellon University, a Master of Business Administration from George Washington University, and maintains certification as a Certified Information Systems Security Professional and Certified Information Security Manager.
Added
McMichael leads cybersecurity risk management and governance, including enterprise cyber risk oversight, training and awareness, portfolio oversight, regulatory alignment, and third-party information security risk management. He brings over 20 years of experience in financial services governance, security, and risk leadership, including senior leadership roles at Capital One Financial Corporation and Navy Federal Credit Union. Mr.
Added
McMichael holds a Juris Doctor from the University of Richmond School of Law. Mr. Werbacher leads key security controls and operations, including detection and response, incident management, vulnerability management, and cloud and network security.
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He brings over a decade of cybersecurity leadership experience across financial services and technology, including senior security roles at Capital One Financial Corporation, Truist Financial Corporation, and Blackbaud Inc. Mr. Werbacher holds a Master of Science in Information Security and Policy Management from Carnegie Mellon University. Mr. McMichael and Mr.
Added
Werbacher are both graduates of the Carnegie Mellon Executive Education CISO program. Monitoring Cybersecurity Incidents Information Security leadership are continually informed of and monitor cybersecurity risks and incidents through real-time updates, including a partnership with a managed security service provider.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeA 2020 1,698 Leased Wilmington, NC Office 106 Market Street, Ste. 200 2021 5,110 Leased Charlotte, NC Office 1018 Jay Street, Ste. 300 2023 7,645 Leased The Company believes that its properties are maintained in good operating condition and are suitable and adequate for its operational needs.
Biggest changeA 2020 1,698 Leased Durham, NC Office 411 W. Chapel Hill Street Ste. 940 2026 1,700 Leased The Company believes that its properties are maintained in good operating condition and are suitable and adequate for its operational needs.
Office Address Year Opened Approximate Square Footage Owned or Leased Wilmington, NC Main Offices 1741 Tiburon Dr 2013 36,000 Owned 1757 Tiburon Dr 2015 55,000 1805 Tiburon Dr 2019 64,000 1811 Tiburon Dr 2019 24,000 1817 Tiburon Dr 2024 67,000 Santa Rosa, CA Office 100 B St Ste. 100 2015 2,386 Leased Roseville, CA Office 1223 Pleasant Grove Blvd Ste. 120 2016 1,416 Leased Wilmington Flight Operations 1890 Trask Dr 2017 25,500 Owned Rocky Mount, NC Office 210 Bryant St, Ste.
Office Address Year Opened Approximate Square Footage Owned or Leased Wilmington, NC Main Offices 1741 Tiburon Dr 2013 36,000 Owned 1757 Tiburon Dr 2015 55,000 1805 Tiburon Dr 2019 64,000 1811 Tiburon Dr 2019 24,000 1817 Tiburon Dr 2024 67,000 Santa Rosa, CA Office 100 B St Ste. 100 2015 2,386 Leased Wilmington Flight Operations 1890 Trask Dr 2017 26,500 Owned Rocky Mount, NC Office 210 Bryant St, Ste.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn addition, the Company is not aware of any threatened litigation, unasserted claims or assessments that could have a material adverse effect on its business, operating results or financial condition. Item 4. MINE SAFETY DISCLOSURES Not applicable. 37 Table of Contents PART II
Biggest changeIn addition, the Company is not aware of any threatened litigation, unasserted claims or assessments that could have a material adverse effect on its business, operating results or financial condition. Item 4. MINE SAFETY DISCLOSURES Not applicable. 38 Table of Contents PART II
Item 3. LEGAL PROCEEDINGS In the ordinary course of operations, the Company is at times involved in legal proceedings. In the opinion of management, as of December 31, 2024, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.
Item 3. LEGAL PROCEEDINGS In the ordinary course of operations, the Company is at times involved in legal proceedings. In the opinion of management, as of December 31, 2025, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of January 31, 2025, there were 45,403,593 voting shares outstanding and 207 holders of record for Bancshares’ common stock. Dividend Policy The timing and amount of cash dividends paid depends on Bancshares’ earnings, capital requirements, financial condition and other relevant factors.
Biggest changeHolders As of January 31, 2026, there were 46,049,402 voting shares outstanding and 200 holders of record for Bancshares’ common stock. Dividend Policy The timing and amount of cash dividends paid on common stock depends on Bancshares’ earnings, capital requirements, financial condition and other relevant factors.
See “Supervision and Regulation” under Item 1 of this Report for more information on restrictions on Bancshares’ ability to declare and pay dividends. Bancshares can offer no assurance that the Board of Directors will continue to declare or pay cash dividends in any future period. Recent Sales of Unregistered Securities None.
See “Supervision and Regulation” under Item 1 of this Report for more information on restrictions on Bancshares’ ability to declare and pay dividends. Bancshares can offer no assurance that the Board of Directors will continue to declare or pay cash dividends on common stock in any future period. Recent Sales of Unregistered Securities None.
Stock Performance Graph The stock performance graph required by Item 201(e) of Regulation S-K is incorporated into this Report by reference from Bancshares annual report to shareholders for the year ended December 31, 2024, which will be posted on the Company’s website and furnished to the SEC subsequent to the date of this Report.
Stock Performance Graph The stock performance graph required by Item 201(e) of Regulation S-K is incorporated into this Report by reference from Bancshares annual report to shareholders for the year ended December 31, 2025, which will be posted on the Company’s website and furnished to the SEC subsequent to the date of this Report.
Although Bancshares has historically paid quarterly cash dividends to its shareholders in the past, and currently expects to pay comparable quarterly cash dividends in the future, shareholders are not entitled to receive dividends.
Although Bancshares has historically paid quarterly cash dividends to its common stock shareholders in the past, and currently expects to pay comparable quarterly cash dividends in the future, common stock shareholders are not entitled to receive dividends.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 68 Reports of Independent Registered Public Accounting Firms 74 Consolidated Balance Sheets as of December 31, 2024 and 2023 75 Consolidated Statements of Income for the Years Ended December 31, 2024, 2023 and 2022 76 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022 77 Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2024, 2023 and 2022 78 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022 79 Notes to Consolidated Financial Statements 81
Biggest changeFinancial Statements and Supplementary Data 67 Reports of Independent Registered Public Accounting Firms 68 Consolidated Balance Sheets as of December 31, 202 5 and 202 4 74 Consolidated Statements of Income for the Years Ended December 31, 202 5 , 202 4 and 202 3 75 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 5 , 202 4 and 202 3 76 Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 202 5 , 202 4 and 202 3 77 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 5 , 202 4 , and 202 3 78 Notes to Consolidated Financial Statements 80
Item 6. [Reserved] 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 66 Item 8.
Item 6. [Reserved] 39 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 40 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 65 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLoan fees are included in interest income on loans. 2024 2023 2022 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Interest-earning assets: Interest-earning balances in other banks $ 556,108 $ 29,118 5.24 % $ 584,691 $ 29,487 5.04 % $ 228,866 $ 3,465 1.51 % Federal funds sold — — — 34,529 1,624 4.70 109,473 2,796 2.55 Investment securities 1,283,161 38,413 2.99 1,237,458 33,497 2.71 995,481 19,667 1.98 Loans held for sale 372,803 34,903 9.36 539,197 48,235 8.95 952,606 58,943 6.19 Loans and leases held for investment (1) 9,285,908 709,938 7.65 7,905,875 575,432 7.28 6,174,763 359,602 5.82 Total interest-earning assets 11,497,980 812,372 7.07 10,301,750 688,275 6.68 8,461,189 444,473 5.25 Less: Allowance for credit losses on loans and leases (138,766) (110,855) (67,234) Noninterest-earning assets 557,297 493,968 576,524 Total assets $ 11,916,511 $ 10,684,863 $ 8,970,479 Interest-bearing liabilities: Interest-bearing checking $ 326,410 $ 17,692 5.42 % $ 231,413 $ 12,718 5.50 % $ — $ — — % Savings 4,934,818 198,612 4.02 4,428,306 171,151 3.86 3,903,151 57,740 1.48 Money market accounts 131,636 739 0.56 125,279 721 0.58 100,684 303 0.30 Certificates of deposit 5,133,511 213,844 4.17 4,695,161 155,617 3.31 3,849,203 56,992 1.48 Total deposits 10,526,375 430,887 4.09 9,480,159 340,207 3.59 7,853,038 115,035 1.46 Other borrowings 94,512 5,580 5.90 61,743 2,763 4.48 122,946 1,937 1.58 Total interest-bearing liabilities 10,620,887 436,467 4.11 9,541,902 342,970 3.59 7,975,984 116,972 1.47 Noninterest-bearing deposits 239,078 215,327 125,062 Noninterest-bearing liabilities 80,549 74,046 65,619 Shareholders' equity 975,215 853,588 803,814 Non-controlling interest 782 — — Total liabilities and shareholders' equity $ 11,916,511 $ 10,684,863 $ 8,970,479 Net interest income and interest rate spread $ 375,905 2.96 % $ 345,305 3.09 % $ 327,501 3.78 % Net interest margin 3.27 % 3.35 % 3.87 % Ratio of average interest-earning assets to average interest-bearing liabilities 108.26 % 107.96 % 106.08 % (1) Average loan and lease balances include non-accruing loans and leases. 44 Table of Contents Rate/Volume Analysis.
Biggest changeLoan fees are included in interest income on loans. 2025 2024 2023 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Interest-earning assets: Interest-earning balances in other banks $ 703,886 $ 30,301 4.30 % $ 556,108 $ 29,118 5.24 % $ 584,691 $ 29,487 5.04 % Federal funds sold — — — — — — 34,529 1,624 4.70 Investment securities 1,418,580 47,591 3.35 1,283,161 38,413 2.99 1,237,458 33,497 2.71 Loans held for sale 401,771 32,963 8.20 372,803 34,903 9.36 539,197 48,235 8.95 Loans and leases held for investment (1) 11,068,810 797,617 7.21 9,285,908 709,938 7.65 7,905,875 575,432 7.28 Total interest-earning assets 13,593,047 908,472 6.68 11,497,980 812,372 7.07 10,301,750 688,275 6.68 Less: Allowance for credit losses on loans and leases (179,962) (138,766) (110,855) Noninterest-earning assets 537,794 557,297 493,968 Total assets $ 13,950,879 $ 11,916,511 $ 10,684,863 Interest-bearing liabilities: Interest-bearing checking $ 370,562 $ 16,171 4.36 % $ 326,410 $ 17,692 5.42 % $ 231,413 $ 12,718 5.50 % Savings 6,310,054 224,458 3.56 4,934,818 198,612 4.02 4,428,306 171,151 3.86 Money market accounts 133,566 429 0.32 131,636 739 0.56 125,279 721 0.58 Certificates of deposit 5,431,128 212,355 3.91 5,133,511 213,844 4.17 4,695,161 155,617 3.31 Total deposits 12,245,310 453,413 3.70 10,526,375 430,887 4.09 9,480,159 340,207 3.59 Other borrowings 108,062 6,701 6.20 94,512 5,580 5.90 61,743 2,763 4.48 Total interest-bearing liabilities 12,353,372 460,114 3.72 10,620,887 436,467 4.11 9,541,902 342,970 3.59 Noninterest-bearing deposits 403,508 239,078 215,327 Noninterest-bearing liabilities 64,630 80,549 74,046 Shareholders' equity 1,124,974 975,215 853,588 Non-controlling interest 4,395 782 — Total liabilities and shareholders' equity $ 13,950,879 $ 11,916,511 $ 10,684,863 Net interest income and interest rate spread $ 448,358 2.96 % $ 375,905 2.96 % $ 345,305 3.09 % Net interest margin 3.30 % 3.27 % 3.35 % Ratio of average interest-earning assets to average interest-bearing liabilities 110.04 % 108.26 % 107.96 % (1) Average loan and lease balances include non-accruing loans and leases. 45 Table of Contents Rate/Volume Analysis.
Organization and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements and are an integral part of the Company’s consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company’s reported results of operations and financial position. The Company’s most critical accounting estimate is listed below.
Organization and Summary of Significant Accounting Policies” in the accompanying notes to the consolidated financial statements and are an integral part of the Company’s consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company’s reported results of operations and financial position. The Company’s most critical accounting estimate is listed below.
Accordingly, no assurance can be given that management’s ongoing evaluation of the loan and lease portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the ACL, thus adversely affecting the Company’s operating results. Additional information on the ACL is presented in Note 3.
Accordingly, no assurance can be given that management’s ongoing evaluation of the loan and lease portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the ACL, thus adversely affecting the Company’s operating results. Additional information on the ACL is presented in “Note 3.
Contractual Obligations The Company has entered into significant fixed and determinable contractual obligations for future payments. See the accompanying notes to the consolidated financial statements for expected timing of payments as of December 31, 2024. These include operating leases (Note 4. Leases), time deposits with stated maturity dates (Note 7. Deposits) and borrowings (Note 8. Borrowings).
Contractual Obligations The Company has entered into significant fixed and determinable contractual obligations for future payments. See the accompanying notes to the consolidated financial statements for expected timing of payments as of December 31, 2025. These include operating leases (Note 4. Leases), time deposits with stated maturity dates (Note 7. Deposits) and borrowings (Note 8. Borrowings).
To determine the ACL as of December 31, 2024, the Company utilized an external baseline forecast to generate its quantitatively modeled expected losses and considered alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions.
To determine the ACL as of December 31, 2025, the Company utilized an external baseline forecast to generate its quantitatively modeled expected losses and considered alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions.
This estimate requires the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. Allowance for credit losses (ACL) The Company’s ACL at December 31, 2024 represents the Company’s current estimate of the lifetime credit losses expected from its loan and lease portfolio.
This estimate requires the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. Allowance for credit losses (ACL) The Company’s ACL at December 31, 2025 represents the Company’s current estimate of the lifetime credit losses expected from its loan and lease portfolio.
TLH holds land adjacent to the Bank's headquarters consisting of wetlands and other protected property for the use and enjoyment of the Bank's employees and customers. 39 Table of Contents The Company generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans.
TLH holds land adjacent to the Bank's headquarters consisting of wetlands and other protected property for the use and enjoyment of the Bank's employees and customers. 40 Table of Contents The Company generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans.
In September 2024, the Company modified a $100.0 million revolving line of credit with a third party correspondent bank. The line of credit is unsecured and accrues interest at 30-day SOFR plus 1.25%, with an interest rate cap of 6.75% and an interest rate floor of 2.75%.
In September 2025, the Company modified a $100.0 million revolving line of credit with a third party correspondent bank. The line of credit is unsecured and accrues interest at 30-day SOFR plus 1.25%, with an interest rate cap of 6.75% and an interest rate floor of 2.75%.
The line of credit was extended 12 months to a maturity date of October 10, 2027. Payments are interest only with all principal and accrued interest due at maturity. The terms of this loan require the Company to maintain minimum capital and debt service coverage ratios.
The line of credit was extended 12 months to a maturity date of October 10, 2028. Payments are interest only with all principal and accrued interest due at maturity. The terms of this loan require the Company to maintain minimum capital and debt service coverage ratios.
The Bank also lends more broadly to select borrowers outside of those verticals. As of December 31, 2024, the Company’s wholly owned material subsidiaries were the Bank, Government Loan Solutions (“GLS”), Live Oak Grove, LLC (“Grove”) and Live Oak Ventures, Inc. (“Live Oak Ventures”).
The Bank also lends more broadly to select borrowers outside of those verticals. As of December 31, 2025 , the Company’s wholly owned material subsidiaries were the Bank, Government Loan Solutions (“GLS”), Live Oak Grove, LLC (“Grove”) and Live Oak Ventures, Inc. (“Live Oak Ventures”).
The Company paid the Lender a non-refundable $250 thousand renewal fee in September 2024 that will be amortized into interest expense over the life of the loan. As of December 31, 2024 and 2023 there was $100.0 million of available credit .
The Company paid the lender a non-refundable $250 thousand renewal fee in September 2025 that will be amortized into interest expense over the life of the loan. As of December 31, 2025 and 2024 there was $100.0 million of available credit .
While the efficiency ratio is a measure of productivity, its value reflects the unique attributes of the “high-touch business model” the Company employs. 64 Table of Contents The Company believes these non-GAAP financial measures provide useful information to management and investors that is supplementary to the financial condition, results of operations and cash flows computed in accordance with GAAP; however, the Company acknowledges that non-GAAP financial measures have a number of limitations.
While the efficiency ratio is a measure of productivity, its value also reflects the unique attributes of the “high-touch business model” the Company employs. 63 Table of Contents The Company believes these non-GAAP financial measures provide useful information to management and investors that is supplementary to the financial condition, results of operations and cash flows computed in accordance with GAAP; however, the Company acknowledges that non-GAAP financial measures have a number of limitations.
The Company also has less routinely generated gains and losses arising from its financial technology investments. 40 Table of Contents Executive Summary The table below sets forth selected consolidated financial data as of the dates or for the periods indicated.
The Company also has less routinely generated gains and losses arising from its financial technology investments. 41 Table of Contents Executive Summary The table below sets forth selected consolidated financial data as of the dates or for the periods indicated.
This increase was primarily due to the growth of the Company’s customer base in the savings and time deposit products, enhanced by a nationwide marketing campaign with attractive rates and additional wholesale funding, to support the significant loan growth in 2024.
This increase was primarily due to the growth of the Company’s customer base in the savings and time deposit products, enhanced by a nationwide marketing campaign with attractive rates and additional wholesale funding, to support the significant loan growth in 2025.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The following presents management’s discussion and analysis (“MD&A”) of the more significant factors that affected the Company's financial condition and results of operations for the year ended December 31, 2024 as compared to December 31, 2023.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The following presents management’s discussion and analysis (“MD&A”) of the more significant factors that affected the Company's financial condition and results of operations for the year ended December 31, 2025 as compared to December 31, 2024.
The increase in the investment portfolio for 2024 was to support earnings through additional yield compared to cash alternatives, continue to provide a contingent funding source and act as a mechanism to manage the Company’s interest rate risk.
The increase in the investment portfolio for 2025 was to support earnings through additional yield compared to cash alternatives, continue to provide a contingent funding source and act as a mechanism to manage the Company’s interest rate risk.
Income from the retention of loans consists principally of interest income. Income from the sale of loans consists of loan servicing revenue and revaluation of related servicing assets along with net gains on sales of loans.
Income from the retention of loans consists principally of interest income. Income from the sale of loans is comprised of loan servicing revenue and revaluation of related servicing assets along with net gains on sales of loans.
Loans and Leases Held for Investment and Credit Quality in the notes to consolidated financial statements for further details of the factors considered by the Company in estimating the necessary level of the ACL. 63 Table of Contents Non-GAAP Measures Some of the financial measures included in our selected historical consolidated financial data and elsewhere in this Report are not measures of financial performance recognized by GAAP.
Loans and Leases Held for Investment and Credit Quality” in the notes to consolidated financial statements for further details of the factors considered by the Company in estimating the necessary level of the ACL. 62 Table of Contents Non-GAAP Measures Some of the financial measures included in our selected historical consolidated financial data and elsewhere in this Report are not measures of financial performance recognized by GAAP.
Other Considerations While management utilizes its best judgment and information available, the ultimate adequacy of our ACL is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, and changes in interest rates. See Note 1. Organization and Summary of Significant Accounting Policies and Note 3.
Other Considerations While management utilizes its best judgment and information available, the ultimate adequacy of our ACL is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, and changes in interest rates. See “Note 1. Organization and Summary of Significant Accounting Policies” and “Note 3.
These non-GAAP financial measures are: “tangible shareholders’ equity;” “tangible assets;” “tangible shareholders’ equity to tangible assets;” “tangible book value per share;” and “efficiency ratio.” Management uses these non-GAAP financial measures in its analysis of the Company’s performance. • “Tangible shareho lders’ equity” is total shareholders’ equity less goodwill and other intangible assets.
These non-GAAP financial measures are: “tangible shareholders’ equity;” “tangible assets;” “tangible shareholders’ equity to tangible assets;” “tangible book value per share;” and “efficiency ratio.” Management uses these non-GAAP financial measures in its analysis of the Company’s performance. • “Tangible shareho lders’ equity” is total shareholders’ equity less preferred stock, non-controlling interest, goodwill and other intangible assets.
Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Common Equity Tier 1 Capital, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets. 61 Table of Contents Capital amounts and ratios as of December 31, 2024, 2023 and 2022 are presented in the table below.
Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Common Equity Tier 1 Capital, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets. 60 Table of Contents Capital amounts and ratios as of December 31, 2025, 2024 and 2023 are presented in the table below.
There can be no assurance that any further decreases or increases in the Federal Funds rate will occur, and if they do, the amount and timing of actual adjustments are subject to change. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk for information about the Company’s sensitivity to interest rates. 43 Table of Contents Average Balances and Yields.
There can be no assurance that any further decreases or increases in the Federal Funds rate will occur, and if they do, the amount and timing of actual adjustments are subject to change. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for information about the Company’s sensitivity to interest rates. 44 Table of Contents Average Balances and Yields.
Construction loans typically have extended build out periods that inherently result in longer lead times between origination and the ultimate sale date. Approximately 27.0% of the held for sale portfolio is aged between one and two years.
Construction loans typically have extended build out periods that inherently result in longer lead times between origination and the ultimate sale date. Approximately 28.8% of the held for sale portfolio is aged between one and two years.
The following table provides information with respect to commercial real estate loans as of December 31, 2024.
The following table provides information with respect to commercial real estate loans as of December 31, 2025.
Off-Balance Sheet Arrangements In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.
Off-Balance Sheet Arrangements In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the consolidated financial statements included in Item 8 of this Report. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.
Management believes the ACL of $167.5 million at December 31, 2024 is appropriate in light of the risk inherent in the loan and lease portfolio. Management’s judgments are based on numerous assumptions about current and expected events that it believes to be reasonable, but which may or may not prove to be valid.
Management believes the ACL of $192.3 million at December 31, 2025 is appropriate in light of the risk inherent in the loan and lease portfolio. Management’s judgments are based on numerous assumptions about current and expected events that it believes to be reasonable, but which may or may not prove to be valid.
Actual results may differ from these estimates under different assumptions or conditions. 62 Table of Contents The Company’s accounting policies, including those for the Company’s critical accounting estimates are described in detail in Note 1.
Actual results may differ from these estimates under different assumptions or conditions. 61 Table of Contents The Company’s accounting policies, including those for the Company’s critical accounting estimates are described in detail in “Note 1.
Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Tangible book value per share” is defined as total equity reduced by goodwill and other intangible assets divided by total common shares outstanding.
Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Tangible book value per share” is defined as total equity reduced by preferred stock, non-controlling interest, goodwill and other intangible assets divided by total common shares outstanding.
Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Tangible shareholders’ equity to tangible assets” is defined as the ratio of shareholders’ equity less goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets.
Management has not considered loan servicing rights as an intangible asset for purposes of this calculation. • “Tangible shareholders’ equity to tangible assets” is defined as the ratio of shareholders’ equity less preferred stock, non-controlling interest, goodwill and other intangible assets, divided by total assets less goodwill and other intangible assets.
At December 31, 2024 and December 31, 2023, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 1.3% and 0.8%, respectively.
At December 31, 2025 and December 31, 2024, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 0.9% and 1.3%, respectively.
Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management’s belief that the greater magnitude of risk resides in this portion, the ratio at December 31, 2024 and 2023 was 7.2% and 4.3%, respectively.
Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management’s belief that the greater magnitude of risk resides in this portion, the ratio at December 31, 2025 and 2024 was 7.9% and 7.2%, respectively.
Total nonperforming unguaranteed loans and leases as a percentage of total loans and leases held for investment, excluding loans measured at fair value, increased from 0.48% at the end of 2023 to 0.82% at the end of 2024.
Total nonperforming unguaranteed loans and leases as a percentage of total loans and leases held for investment, excluding loans measured at fair value, increased from 0.82% at the end of 2024 to 0.87% at the end of 2025.
At December 31, 2024, the effective duration of the overall available-for-sale securities portfolio was approximately 3.72 years. 58 Table of Contents The following table sets forth the stated maturities and weighted average yields of investment securities at December 31, 2024. Weighted average yields were calculated using amortized cost and coupon rate at the balance sheet date.
At December 31, 2025, the effective duration of the overall available-for-sale securities portfolio was approximately 3.14 years. 57 Table of Contents The following table sets forth the stated maturities and weighted average yields of investment securities at December 31, 2025. Weighted average yields were calculated using amortized cost and coupon rate at the balance sheet date.
Net charge-offs are a key element of historical experience in the Company's estimation of the allowance for credit lo sses on loans and leases. 45 Table of Contents In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $9.1 million and $7.2 million accounted for under the fair value option at December 31, 2024 and 2023, respectively, totaled $81.4 million, which was 0.82% of the held for investment loan and lease portfolio carried at historical cost at December 31, 2024, compared to $39.3 million, or 0.48% of loans and leases held for investment carried at historical cost at December 31, 2023.
Net charge-offs are a key element of historical experience in the Company's estimation of the allowance for credit lo sses on loans and leases. 46 Table of Contents In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $7.7 million and $9.1 million accounted for under the fair value option at December 31, 2025 and 2024, respectively, totaled $101.4 million, which was 0.87% of the held for investment loan and lease portfolio carried at historical cost at December 31, 2025, compared to $81.4 million, or 0.82% of loans and leases held for investment carried at historical cost at December 31, 2024.
Risk Grades 50 through 80 represent the spectrum of criticized and classified loans and leases. For a complete description of the risk grading system, see “Credit Quality Indicators” in Note 3 to the notes to consolidated financial statements.
Risk Grades 50 through 80 represent the spectrum of criticized and classified loans and leases. For a complete description of the risk grading system, see “Credit Quality Indicators” in Note 3 to the notes to consolidated financial statements included in Item 8 of this Report.
(4) Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost). 41 Table of Contents The following is a summary of the Company's financial highlights and events for 2024: • Record year of loan production with total loans and leases held for sale and investment increasing by $1.56 billion, or 17.3%.
(4) Loans accounted for under the fair value option only (excludes loans and leases carried at historical cost). 42 Table of Contents The following is a summary of the Company's financial highlights and events for 2025: • Record year of loan production with total loans and leases held for sale and investment increasing by $1.81 billion, or 17.1%.
To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% baseline weighting and a 100% adverse scenario weighting for quantitative modeled results. This scenario would result in an incremental quantitative impact to the ACL of approximately $33.5 million at December 31, 2024.
To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% baseline weighting and a 100% adverse scenario weighting for quantitative modeled results. This scenario would result in an incremental quantitative impact to the ACL of approximately $10.0 million at December 31, 2025.
As of December 31, 2024 and 2023, the cumulative total outstanding balance of loans sold since May 2007 totaled $4.72 billion and $4.24 billion, respectively. The Company generally continues to service loans after the date of sale.
As of December 31, 2025 and 2024, the cumulative total outstanding balance of loans sold since May 2007 totaled $5.60 billion and $4.72 billion, respectively. The Company generally continues to service loans after the date of sale.
Additionally, the Company believes that its underwriting and credit quality standards have remained high and continues to consider changing economic conditions in a rising interest rate environment. Loans and leases that experience insignificant payment delays and payment shortfalls are generally not individually evaluated for the purpose of estimating the allowance for credit losses.
The Company believes that its underwriting and credit quality standards have remained high and continues to consider changing economic conditions as well as the current interest rate environment. Loans and leases that experience insignificant payment delays and payment shortfalls are generally not individually evaluated for the purpose of estimating the allowance for credit losses.
For a comparison of 2023 results to 2022 and other 2022 information not included herein, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of the 2023 Form 10-K filed with the SEC on February 22, 2024 .
For a comparison of 2024 results to 2023 and other 2023 information not included herein, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of the 2024 Form 10-K/A filed with the SEC on November 17, 2025 .
As of December 31, 2024 , and December 31, 2023 , potential problem (also referred to as criticized) and classified loans and leases, excluding loans measured at fair value, totaled $1.04 billion and $785.2 million, respectively. The following is a discussion of these loans and leases.
As of December 31, 2025 , and December 31, 2024 , potential problem (also referred to as criticized) and classified loans and leases, excluding loans measured at fair value, totaled $1.39 billion and $1.04 billion, respectively. The following is a discussion of these loans and leases.
Management implements a proactive approach to identifying and classifying loans and leases as special mention (also referred to as criticized), Risk Grade 50. At December 31, 2024, and December 31, 2023, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $529.9 million and $599.2 million, respectively, for a year-over-year decrease of $69.3 million.
Management implements a proactive approach to identifying and classifying loans and leases as special mention (also referred to as criticized), Risk Grade 50. At December 31, 2025, and December 31, 2024, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $727.2 million and $529.9 million, respectively, for a year-over-year increase of $197.3 million.
Additionally, the Company maintains a guaranteed and unguaranteed loan portfolio that is also a contingent liquidity source, whether via pledging to the Federal Reserve Discount Window or through liquidation. 60 Table of Contents At December 31, 2024, $621.4 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $626.8 million available to be pledged as collateral.
Additionally, the Company maintains a guaranteed and unguaranteed loan portfolio that is also a contingent liquidity source, whether via pledging to the Federal Reserve Discount Window or through liquidation. 59 Table of Contents At December 31, 2025, $565.8 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $861.6 million available to be pledged as collateral.
The decrease in noninterest expense was predominately driven by the following items. Salaries and employee benefits : Total personnel expense for 2024 increased by $8.2 million, or 4.7%, compared to 2023 . The increase in salaries and employee benefits was principally related to continued investment in human resources to support strategic and growth initiatives.
The increase in noninterest expense was predominately driven by the following items. Salaries and employee benefits : Total perso nnel expense for 2025 increased by $14.7 million, or 8.4%, compared to 2024 . The increase in salaries and employee benefits was principally related to continued investment in human resources to support strategic and growth initiatives.
As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, repres ented 26.7% at December 31, 2024, compared to 14.6% at December 31, 2023.
As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, repres ented 39.0% at December 31, 2025, compared to 26.7% at December 31, 2024.
At December 31, 2024, approximately 97.4% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days.
At December 31, 2025, approximately 99.7% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days.
This compares to the December 31, 2023 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled $344.8 million and total portfolio unguaranteed exposure risk was $440.3 million, or 8.3% of total held for investment unguaranteed exposure carried at historical cost. 54 Table of Contents As of December 31, 2024 and December 31, 2023, loans and leases carried at historical cost within the following verticals comprise the largest portion of the tot al potential problem and classified loans and leases: As of December 31, 2024 As of December 31, 2023 Vertical % of Criticized and Classified Loans and Leases Vertical % of Criticized and Classified Loans and Leases General Lending 15.1% Senior Housing 16.5% Bioenergy 11.1 Bioenergy 14.4 Senior Housing 9.9 General Lending 12.2 Healthcare 6.9 Search Fund Lending 8.6 Sponsor Finance 5.5 Wine & Craft Beverage 5.6 Wine & Craft Beverage 5.3 Healthcare 3.9 Search Fund Lending 5.0 Hotels 3.3 Community Facilities 4.8 Self Storage 3.3 Self Storage 4.6 Senior Care 3.2 % of Total Criticized and Classified Loans 68.2% % of Total Criticized and Classified Loans 71.0% Of the above listed verticals, Bioenergy, Senior Housing, Sponsor Finance, Community Facilities and Hotels is within the Company’s Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division.
This compares to the December 31, 2024 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled $518.7 million and total portfolio unguaranteed exposure risk was $523.3 million, or 7.8% of total held for investment unguaranteed exposure carried at historical cost. 53 Table of Contents As of December 31, 2025 and December 31, 2024, loans and leases carried at historical cost within the following verticals comprise the largest portion of the tot al potential problem and classified loans and leases: As of December 31, 2025 As of December 31, 2024 Vertical % of Criticized and Classified Loans and Leases Vertical % of Criticized and Classified Loans and Leases General Lending 11.8% General Lending 15.1% Solar Energy 7.5 Bioenergy 11.1 Senior Housing 6.1 Senior Housing 9.9 Bioenergy 6.1 Healthcare 6.9 Sponsor Finance 6.1 Sponsor Finance 5.5 Auto Care + Auto Dealerships 5.9 Wine & Craft Beverage 5.3 Healthcare 5.4 Search Fund Lending 5.0 Self Storage 5.4 Community Facilities 4.8 RV Parks 4.0 Self Storage 4.6 % of Total Criticized and Classified Loans 58.3% % of Total Criticized and Classified Loans 68.2% Of the above listed verticals, Solar Energy, Bioenergy, Senior Housing, Sponsor Finance and Community Facilities is within the Company’s Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division.
Total full-time equivalent employees increased from 952 at December 31, 2023 to 1,014 at December 31, 2024 . Salaries and employee benefits expense included $26.4 million of stock-based compensation for 2024 , compared to $17.9 million for 2023 .
Total full-time equivalent employees increased from 1,014 at December 31, 2024 to 1,031 at December 31, 2025 . Salaries and employee benefits expense included $26.3 million of stock-based compensation for 2025 , compared to $26.4 million for 2024 .
As of December 31, 2024, $9.05 billion, or 59.1%, of total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust on either a calendar monthly or calendar quarterly basis using the prime lending rate or other variable indices.
As of December 31, 2025, $12.23 billion, or 67.8%, of total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust on either a calendar monthly or calendar quarterly basis using the prime lending rate or other variable indices.
Loans and Leases Held for Investment and Credit Quality of the consolidated financial statements in this report.
Loans and Leases Held for Investment and Credit Quality” of the notes to consolidated financial statements in this report.
Loan and Lease Maturity As of December 31, 2024, $13.10 billion, or 85.5%, of the total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust at specified dates based on the prime lending rate or other variable indices.
Loan and Lease Maturity As of December 31, 2025, $15.86 billion, or 88.0%, of the total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust at specified dates based on the prime lending rate or other variable indices.
As of December 31, 2024 and 2023, the total outstanding balance of loans and leases, including those serviced for others, was $15.32 billion and $13.28 billion, respectively.
As of December 31, 2025 and 2024, the total outstanding balance of loans and leases, including those serviced for others, was $18.03 billion and $15.32 billion, respectively.
Beginning in the second quarter of 2024, expense related to off-balance sheet credit exposures was also included in the provision for credit losses in response to growth in the amount of loans with applicable off-balance sheet credit risk. See Note 1 under the subheading Allowance for Off-Balance Sheet Credit Exposures for additional information.
Beginning in the second quarter of 2024, the expense related to off-balance sheet credit exposures was also included in the provision for credit losses in response to growth in the amount of loans with applicable off-balance sheet credit risk.
The Company has continued to purchase mortgage-backed securities in order to obtain a favorable yield versus cash alternatives while still maintaining a low risk profile within the investment portfolio.
The Company has continued to purchase mortgage-backed securities with the goal of obtaining a favorable yield versus cash alternatives while still maintaining a low risk profile within the investment portfolio.
Typically, collections of interest and principal received on a nonaccrual loan or lease are applied to the outstanding principal as determined at the time of collection of the loan or lease. Total nonperforming assets, including loans measured at fair value, at December 31, 2024 were $371.7 million, which represented a $179.5 million, or 93.4%, increase from December 31, 2023.
Typically, collections of interest and principal received on a nonaccrual loan or lease are applied to the outstanding principal as determined at the time of collection of the loan or lease. Total nonperforming assets, including loans measured at fair value, at December 31, 2025 were $572.2 million, which represented a $200.5 million, or 53.9%, increase from December 31, 2024.
At December 31, 2024 , the portion o f criticized and classified loans and leases guaranteed by the SBA or USDA totaled $518.7 million and total portfolio unguaranteed exposure risk was $523.3 million, or 7.8% of total held for investment unguaranteed exposure carried at historic al cost.
At December 31, 2025 , the portion o f criticized and classified loans and leases guaranteed by the SBA or USDA totaled $669.8 million and total portfolio unguaranteed exposure risk was $719.9 million, or 8.6% of total held for investment unguaranteed exposure carried at historic al cost.
Allowance for Credit Losses on Loans and Leases The ACL of $125.8 million at December 31, 2023 , increased by $41.7 million, or 33.1%, to $167.5 million at December 31, 2024 . The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.7% and 1.5% at December 31, 2024 and 2023 , respectively.
Allowance for Credit Losses on Loans and Leases The ACL of $167.5 million at December 31, 2024 , increased by $24.7 million, or 14.8%, to $192.3 million at December 31, 2025 . The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.6% and 1.7% at December 31, 2025 and 2024 , respectively.
Of those deposits, $293.1 million was uninsured and 98.6% of the uninsured time deposit accounts were scheduled to mature within one year.
Of those deposits, $283.5 million was uninsured and 98.3% of the uninsured time deposit accounts were scheduled to mature within one year.
Due to the nature of a branchless bank and the relatively low overhead required for deposit gathering, the rates the Bank offers are generally above the industry average. For 2024, net interest income increased $30.6 million, or 8.9%, to $375.9 million compared to $345.3 million for 2023.
Due to the nature of a branchless bank and the relatively low overhead required for deposit gathering, the rates the Bank offers are generally above the industry average. For 2025, net interest income increased $72.5 million, or 19.3%, to $448.4 million compared to $375.9 million for 2024.
As of and for the Year Ended December 31, 2024 2023 2022 Income Statement Data Net income attributable to Live Oak Bancshares, Inc. $ 77,474 $ 73,898 $ 176,208 Per Common Share Net income, diluted $ 1.69 $ 1.64 $ 3.92 Dividends declared 0.12 0.12 0.12 Book value 22.12 20.23 18.41 Tangible book value (1) 22.05 20.15 18.32 Performance Ratios Return on average assets 0.65 % 0.69 % 1.96 % Return on average equity 7.94 8.66 21.92 Net interest margin 3.27 3.35 3.87 Efficiency ratio (1) 62.89 70.65 55.57 Noninterest income to total revenue 24.77 24.45 42.09 Dividend payout ratio 6.97 7.20 2.99 Selected Loan Metrics Loans and leases originated $ 5,155,244 $ 3,946,873 $ 4,007,621 Outstanding balance of sold loans serviced 4,715,895 4,238,328 3,481,885 Asset Quality Ratios Allowance for credit losses to loans and leases held for investment (2) 1.69 % 1.53 % 1.41 % Net charge-offs (2) $ 46,692 $ 21,373 $ 7,961 Net charge-offs to average loans and leases held for investment (2) (3) 0.52 % 0.28 % 0.14 % Nonperforming loans and leases at historical cost (2) Unguaranteed $ 81,412 $ 39,285 $ 18,784 Guaranteed 222,885 95,678 54,608 Total 304,297 134,963 73,392 Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (2) 0.82 % 0.48 % 0.27 % Nonperforming loans at fair value (4) Unguaranteed $ 9,115 $ 7,230 $ 6,678 Guaranteed 54,873 41,244 38,212 Total 63,988 48,474 44,890 Unguaranteed nonperforming fair value loans to loans held for investment (4) 2.77 % 1.86 % 1.35 % Consolidated Capital Ratios Common equity tier 1 capital (to risk-weighted assets) 11.04 % 11.73 % 12.47 % Tier 1 leverage capital (to average assets) 8.21 8.58 9.26 (1) See "Non-GAAP Measures" presented at the conclusion of this Item 7 for more information and a reconciliation to the most closely related GAAP measure.
As of and for the Year Ended December 31, 2025 2024 2023 Income Statement Data Net income attributable to common shareholders $ 102,823 $ 77,474 $ 73,898 Per Common Share Net income, diluted $ 2.23 $ 1.69 $ 1.64 Dividends declared - common 0.12 0.12 0.12 Book value per common share 25.06 22.12 20.23 Tangible book value per common share (1) 24.97 22.05 20.15 Performance Ratios Return on average assets 0.74 % 0.65 % 0.69 % Return on average common equity 9.47 7.94 8.66 Net interest margin 3.30 3.27 3.35 Efficiency ratio (1) 58.62 62.04 70.14 Noninterest income to total revenue 22.40 23.06 23.15 Dividend payout ratio 5.33 6.97 7.20 Selected Loan Metrics Loans and leases originated $ 6,209,639 $ 5,155,244 $ 3,946,873 Outstanding balance of sold loans serviced 5,599,724 4,715,895 4,238,328 Asset Quality Ratios Allowance for credit losses to loans and leases held for investment (2) 1.64 % 1.69 % 1.53 % Net charge-offs (2) $ 68,774 $ 46,692 $ 21,373 Net charge-offs to average loans and leases held for investment (2) (3) 0.63 % 0.52 % 0.28 % Nonperforming loans and leases at historical cost (2) Unguaranteed $ 101,371 $ 81,412 $ 39,285 Guaranteed 399,786 222,885 95,678 Total 501,157 304,297 134,963 Unguaranteed nonperforming historical cost loans and leases, to loans and leases held for investment (2) 0.87 % 0.82 % 0.48 % Nonperforming loans at fair value (4) Unguaranteed $ 7,715 $ 9,115 $ 7,230 Guaranteed 53,887 54,873 41,244 Total 61,602 63,988 48,474 Unguaranteed nonperforming fair value loans to loans held for investment (4) 2.96 % 2.77 % 1.86 % Consolidated Capital Ratios Common equity tier 1 capital (to risk-weighted assets) 10.53 % 11.04 % 11.73 % Tier 1 leverage capital (to average assets) 8.48 8.21 8.58 (1) See "Non-GAAP Measures" presented at the conclusion of this Item 7 for more information and a reconciliation to the most closely related GAAP measure.
This also included purchases of $263.9 million in mortgage-backed securities, including $42.9 million for purposes of complying with the Community Reinvestment Act and purchases of $66.4 million in collateralized mortgage obligations to diversify the reinvestment of portfolio cash flows. The investment securities portfolio consists entirely of available-for-sale securities.
This also included purchases of $301.0 million in mortgage-backed securities, including $84.3 million for purposes of complying with the Community Reinvestment Act and purchases of $106.2 million in collateralized mortgage obligations to diversify the reinvestment of portfolio cash flows. The investment securities portfolio consists entirely of available-for-sale securities.
Net Gain (Loss) on Loans Accounted for Under the Fair Value Option : For 2024, the Company had a net gain on loans accounted for under the fair value option of $2.4 million compared to a net loss of $3.5 million for 2023, a positive change of $5.9 million.
Net Gain (Loss) on Loans Accounted for Under the Fair Value Option : For 2025, the Company had a net gain on loans accounted for under the fair value option of $1.2 million compared to a net gain of $2.4 million for 2024, a negative change of $1.2 million.
Total deposits were $11.76 billion at December 31, 2024 , an increase of $1.49 billion, or 14.5%, from $10.28 billion at December 31, 2023 . The increase in total deposits from the prior period was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels.
Total deposits were $13.69 billion at December 31, 2025 , an increase of $1.93 billion, or 16.4%, from $11.76 billion at December 31, 2024 . The increase in total deposits from the prior period was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels.
Loans and leases maturing in greater than five years total $6.51 billion of the total $10.26 billion. The variable rate portion of the total held for investment loans and leases is 87.9%, which reflects the Company’s strategy to minimize interest rate risk through the use of variable rate products.
Loans and leases maturing in greater than five years total $7.01 billion of the total $12.01 billion. The variable rate portion of the total held for investment loans and leases is 90.8%, which reflects the Company’s strategy to minimize interest rate risk through the use of variable rate products.
At December 31, 2024, the total amount of these four liquidity source items was $4.20 billion, or 32.4% of total assets, a decrease of 5.4% of total assets from $4.26 billion, or 37.8% of total assets, at December 31, 2023. Loans and other assets are funded primarily by customer deposits, brokered deposits and loan sales.
At December 31, 2025, the total amount of these four liquidity source items was $4.89 billion, or 32.3% of total assets, a decrease of 0.1% of total assets from $4.20 billion, or 32.4% of total assets, at December 31, 2024. Investments in loans, securities and other assets are funded primarily by customer deposits, brokered deposits and loan sales.
As indicated in the rate/volume table below, the overall increase discussed above is reflected in increased interest income of $124.1 million outpacing growth in interest expense of $93.5 million for 2024 compared to 2023. The net interest margin decreased from 3.35% for 2023 to 3.27% for 2024 .
As indicated in the rate/volume table below, the overall increase discussed above is reflected in increased interest income of $96.1 million outpacing growth in interest expense of $23.6 million for 2025 compared to 2024. The net interest margin slightly increased from 3.27% for 2024 to 3.30% for 2025 .
Management’s non-GAAP measures are not necessarily comparable to similarly named measures represented by other companies, as they may be calculated differently. 42 Table of Contents Results of Operations The Company reported net income attributable to Live Oak Bancshares, Inc. of $77.5 million, or $1.69 per diluted share, for 2024 compared to $73.9 million, or $1.64 per diluted share, for 2023.
Management’s non-GAAP measures are not necessarily comparable to similarly named measures represented by other companies, as they may be calculated differently. 43 Table of Contents Results of Operations The Company reported net income attributable to common shareholders of $102.8 million, or $2.23 per diluted share, for 2025 compared to $77.5 million, or $1.69 per diluted share, for 2024.
For 2024, there was a net loss on loan servicing asset revaluation of $12.2 million compared to a net gain of $4.9 million for 2023, resulting in a negative change of $17.0 million.
For 2025, there was a net loss on loan servicing asset revaluation of $16.1 million compared to a net loss of $12.2 million for 2024, resulting in a negative change of $3.9 million.
The maturity profile of uninsured time deposits at December 31, 2024 is as follows: Maturity Period Three months or less More than three months to six months More than six months to twelve months More than twelve months Amount of time deposits in uninsured accounts $ 96,713 $ 63,987 $ 128,125 $ 4,247 Borrowings Total borrowings increased $89.5 million at December 31, 2024 from December 31, 2023 as a result of the following: In March 2024, the Company entered into a 60-month term loan agreement of $100.0 million with a third party correspondent bank.
The maturity profile of uninsured time deposits at December 31, 2025 is as follows: Maturity Period Three months or less More than three months to six months More than six months to twelve months More than twelve months Amount of time deposits in uninsured accounts $ 98,317 $ 60,545 $ 119,755 $ 4,913 Borrowings Total borrowings decreased $10.4 million at December 31, 2025 from December 31, 2024 as a result of the following: In March 2024, the Company entered into a 60-month term loan agreement of $100.0 million with a third party correspondent bank.
Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, for the years ended December 31, 2024 and 2023 , were 0.52% and 0.28%, respectively. • Increased total noninterest income of $12.0 million, or 10.8%, and decreased total noninterest expense of $8.6 million, or 2.7%.
Net charge-offs as a percentage of average held for investment loans and leases carried at amortized cost, for the years ended December 31, 2025 and 2024 , were 0.63% and 0.52%, respectively. ◦ Increased total noninterest income of $16.8 million, or 14.9%, and increased total noninterest expense of $35.6 million, or 11.7%.
The carrying amount of loans accounted for under the fair value option at December 31, 2024 and 2023 was $328.7 million (all classified as held for investment) and $388.0 million (all classified as held for investment), respectively, a decrease of $59.3 million, or 15.3%.
The carrying amount of loans accounted for under the fair value option at December 31, 2025 and 2024 was $260.6 million (all classified as held for investment) and $328.7 million (all classified as held for investment), respectively, a decrease of $68.1 million, or 20.7%.
In January 2025, the Federal Reserve decided to maintain the federal funds upper target rate at 4.5%. The Federal Reserve released its most current federal funds target rate midpoint projections at its previous meeting in December 2024 which implied a decrease of approximately 50 basis points to 3.9% by the end of 2025.
The Federal Reserve released its most current federal funds target rate midpoint projections at its previous meeting in December 2025 which implied a decrease of approximately 25 basis points to 3.4% by the end of 2026 and a decrease of approximately 25 basis points to 3.1% by the end of 2027.
Nonperforming assets, excluding loans measured at fair value, at December 31, 2024 were $306.2 million, which represented a $164.8 million, or 116.5%, increase from December 31, 2023 . These nonperforming assets, at December 31, 2024 were comprised of $304.3 million in nonaccrual loans and leases and $1.9 million in foreclosed assets.
Nonperforming assets, excluding loans measured at fair value, at December 31, 2025 were $509.4 million, which represented a $203.1 million, or 66.3%, increase from December 31, 2024 . These nonperforming assets, at December 31, 2025 were comprised of $501.2 million in nonaccrual loans and leases and $8.2 million in foreclosed assets.
(2) Average loans and leases held for investment, at amortized cost. Investment Securities Investment securities totaled $1.25 billion at December 31, 2024, an increase of $122.0 million, or 10.8%, compared to $1.13 billion at December 31, 2023.
(2) Average loans and leases held for investment, at amortized cost. Investment Securities Investment securities totaled $1.43 billion at December 31, 2025, an increase of $179.2 million, or 14.4%, compared to $1.25 billion at December 31, 2024.
Net charge-offs for loans and leases carried at historical cost were $46.7 million, or 0.52% of average loans and leases held for investment at amortized cost, excluding loans measured at fair value, for 2024, compared to net charge-offs of $21.4 million, or 0.28%, for 2023, an increase of $25.3 million, or 118.5%.
Net charge-offs for loans and leases carried at historical cost were $68.8 million, or 0.63% of average loans and leases held for investment at amortized cost, excluding loans measured at fair value, for 2025, compared to net charge-offs of $46.7 million, or 0.52%, for 2024, an increase of $22.1 million, or 47.3%.
Of the above listed verticals, Sponsor Finance, Solar Energy, Venture Banking, Asset-Based Lending, Senior Housing, and Bioenergy are within the Company’s Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division.
Of the above listed verticals, Solar Energy, Sponsor Finance, Government Contractors, Emerging Markets and Senior Housing are within the Company’s Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division.
Total loans and leases 90 or more days past due increased $131.0 million, or 105.1%, compared to December 31, 2023. This increase was comprised of a $6.4 million increase in unguaranteed exposure combined with a $124.6 million increase in the guaranteed portion of past due loans compared to December 31, 2023.
Total loans and leases 90 or more days past due increased $146.8 million, or 57.4%, compared to December 31, 2024. This increase was comprised of a $20.4 million increase in unguaranteed exposure combined with a $126.5 million increase in the guaranteed portion of past due loans compared to December 31, 2024.
As of December 31, 2024, the Company also has $351.0 million in brokered deposits with $225.7 million scheduled to mature in less than a year and $125.3 million scheduled to mature within one to three years.
As of December 31, 2025, the Company also has $401.0 million in brokered deposits with $350.9 million scheduled to mature in less than a year and $50.1 million scheduled to mature within one to three years.
Total loan originations in 2024 were $5.16 billion compared to $3.95 billion in 2023, an increase of 30.6%.
Total loan originations in 2025 were $6.21 billion compared to $5.16 billion in 2024, an increase of 20.5%.
For more information, see Note 2. Securities and Note 11. Commitments and Contingencies in the accompanying notes to the consolidated financial statements. Asset/Liability Management and Interest Rate Sensitivity One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with changes in interest rates.
Commitments and Contingencies” in the accompanying notes to the consolidated financial statements included in Item 8 of this Report. Asset/Liability Management and Interest Rate Sensitivity One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with changes in interest rates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeEstimated Increase/Decrease in Net Interest Income Estimated Percentage Change in EVE Basis Point ("bp") Change in Interest Rates 12 Months Ending December 31, 2025 12 Months Ending December 31, 2026 As of December 31, 2024 +300 10.3 6.8 (10.0) +200 7.0 4.6 (6.2) +100 3.5 2.3 (2.7) -100 (3.2) (2.1) 1.0 -200 (5.4) (3.5) 0.9 -300 (6.6) (4.3) 1.0 Rates are increased instantaneously at the beginning of the projection.
Biggest changeEstimated Increase/Decrease in Net Interest Income Estimated Percentage Change in EVE Basis Point ("bp") Change in Interest Rates 12 Months Ending December 31, 2026 12 Months Ending December 31, 2027 As of December 31, 2025 +300 17.7% 12.3% (7.7)% +200 12.1 8.4 (4.9) +100 5.9 4.2 (2.3) -100 (4.7) (3.4) 1.6 -200 (7.3) (5.6) 2.3 -300 (8.2) (6.8) 3.0 Rates are increased instantaneously at the beginning of the projection.
The simulation uses projected repricing of assets and liabilities at December 31, 2024 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Critical model assumptions such as loan and investment prepayment rates, deposit decay rates, deposit betas and lags and assumed replacement pricing can have a significant impact on interest income simulation.
The simulation uses projected repricing of assets and liabilities at December 31, 2025 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Critical model assumptions such as loan and investment prepayment rates, deposit decay rates, deposit betas and lags and assumed replacement pricing can have a significant impact on interest income simulation.
EVE and NII simulations are completed routinely and presented to the Asset/Liability Committee. The simulations provide an estimate of the impact of changes in interest rates on equity and net interest income under a range of assumptions, under instantaneous parallel interest rate shocks assuming a static balance sheet.
EVE and NII simulations are completed regularly and presented to the Asset/Liability Committee. The simulations provide an estimate of the impact of changes in interest rates on equity and net interest income under a range of assumptions, and under instantaneous parallel interest rate shocks assuming a static balance sheet.
The simulation analysis incorporates management’s current assessment of the risk that pricing margins will change adversely over time due to competition or other factors. 66 Table of Contents The table below sets forth an approximation of the Company’s NII sensitivity exposure for the 12-month periods ending December 31, 2025 and 2026 and the Company’s EVE sensitivity at December 31, 2024 under instantaneous parallel interest rate shocks assuming a static balance sheet.
The simulation analysis incorporates management’s current assessment of the risk that pricing margins will change adversely over time due to competition or other factors. 65 Table of Contents The table below sets forth an approximation of the Company’s NII sensitivity exposure for the 12-month periods ending December 31, 2026 and 2027 and the Company’s EVE sensitivity at December 31, 2025 under instantaneous parallel interest rate shocks assuming a static balance sheet.
Regular, robust modeling of various interest rate outcomes allows the Company to properly assess and manage potential risks from various rate shifts . 67 Table of Contents
Regular, robust modeling of various interest rate outcomes allows the Company to properly assess and manage potential risks from various rate shifts . 66 Table of Contents
Adherence to relevant policies is monitored on an ongoing basis by the Asset/Liability Committee. The Company has a total cumulative gap in interest-earning assets and interest-bearing liabilities of 4.9% as of December 31, 2024, indicating that, overall, assets will reprice before liabilities during the expected life of the instruments.
Adherence to relevant policies is monitored on an ongoing basis by the Asset/Liability Committee. The Company has a total cumulative gap in interest-earning assets and interest-bearing liabilities of 6.9% as of December 31, 2025, indicating that, overall, assets will reprice before liabilities during the expected life of the instruments.
As of December 31, 2023, the Company had a cumulative gap in interest-earning assets and interest-bearing liabilities of 5.0%, indicating that, overall, assets will reprice before liabilities during the expected life of the instruments.
As of December 31, 2024, the Company had a cumulative gap in interest-earning assets and interest-bearing liabilities of 4.9%, indicating that, overall, assets will reprice before liabilities during the expected life of the instruments.

Other LOB 10-K year-over-year comparisons