Live Oak Bancshares, Inc. 10-Q

Item 5. Other Information Subsequent to the Company's earnings release on April 24, 2024, the Company identified that a renewable energy tax credit investment made in the fourth quarter of 2023 became eligible for increased levels of tax credits in the first quarter of 2024. Under the Inflation Reduction Act of 2022, certain circumstances allow for enhanced investment tax credits, if requirements, including locations within an energy community, are satisfied. At the time of the investment in 2023, the location of the investee was not within a previously declared energy community. On March 22, 2024, the Internal Revenue Service released Notice 2024-30 which expanded the qualifying list of energy communities. This expanded list included the Company's 2023 investment. The Company became eligible for incremental federal investment tax credits of $10.6 million and, combined with other related impacts, resulted in increased net income of $11.0 million, or $0.24 per diluted share, in the first quarter of 2024. As a result of the items described above, certain of the GAAP financial results for the three months ended March 31, 2024 furnished in Exhibit 99.1 to the Current Report on Form 8-K filed on April 24, 2024 (the “Form 8-K”), differ from the financial results disclosed in this Quarterly Report on Form 10-Q. The Company's Unaudited Condensed Consolidated Statement of Income for the three months ended March 31, 2024 and the Unaudited Condensed Consolidated Balance Sheet as of March 31, 2024 furnished in Exhibit 99.1 to the Form 8-K did not reflect the additional investment tax credit and related impacts due to the timing of this new information. The Unaudited Condensed Consolidated Financial Statements and the accompanying disclosures presented in this Quarterly Report on Form 10-Q reflect these adjustments. The following tables present the Company’s Unaudited Condensed Consolidated Statement of Income for the three months ended March 31, 2024 and the Unaudited Condensed Consolidated Balance Sheet as of March 31, 2024 as adjusted for the additional tax credits and related impacts discussed above. 58 Table of Contents Live Oak Bancshares, Inc. Quarterly Statements of Income (unaudited) (Dollars in thousands, except per share data) Three Months Ended March 31, 2024 As Furnished Adjustments As Adjusted Interest income Loans and fees on loans $ 176,010 $ — $ 176,010 Investment securities, taxable 8,954 — 8,954 Other interest earning assets 7,456 — 7,456 Total interest income 192,420 — 192,420 Interest expense Deposits 101,998 — 101,998 Borrowings 311 — 311 Total interest expense 102,309 — 102,309 Net interest income 90,111 — 90,111 Provision for loan and lease credit losses 16,364 — 16,364 Net interest income after provision for loan and lease credit losses 73,747 — 73,747 Noninterest income Loan servicing revenue 7,624 — 7,624 Loan servicing asset revaluation (2,744) — (2,744) Net gains on sales of loans 11,502 — 11,502 Net loss on loans accounted for under the fair value option (219) — (219) Equity method investments (loss) income (5,022) — (5,022) Equity security investments (losses) gains, net (529) — (529) Lease income 2,453 — 2,453 Management fee income 3,271 — 3,271 Other noninterest income 9,761 — 9,761 Total noninterest income 26,097 — 26,097 Noninterest expense Salaries and employee benefits 47,275 — 47,275 Travel expense 2,438 — 2,438 Professional services expense 1,878 — 1,878 Advertising and marketing expense 3,692 — 3,692 Occupancy expense 2,247 — 2,247 Technology expense 7,723 — 7,723 Equipment expense 3,074 — 3,074 Other loan origination and maintenance expense 3,911 — 3,911 Renewable energy tax credit investment impairment (recovery) 15 (942) (927) FDIC insurance 3,200 — 3,200 Other expense 3,226 — 3,226 Total noninterest expense 78,679 (942) 77,737 Income before taxes 21,165 942 22,107 Income tax (benefit) expense 4,617 (10,096) (5,479) Net income $ 16,548 $ 11,038 $ 27,586 Earnings per share Basic $ 0.37 $ 0.25 $ 0.62 Diluted $ 0.36 $ 0.24 $ 0.60 Weighted average shares outstanding Basic 44,762,308 — 44,762,308 Diluted 45,641,210 — 45,641,210 59 Table of Contents Live Oak Bancshares, Inc. Quarterly Balance Sheets (unaudited) (Dollars in thousands) As of the quarter ended March 31, 2024 As Furnished Adjustments As Adjusted Assets Cash and due from banks $ 597,394 $ — $ 597,394 Certificates of deposit with other banks 250 — 250 Investment securities available-for-sale 1,120,622 — 1,120,622 Loans held for sale 310,749 — 310,749 Loans and leases held for investment (1) 8,912,561 — 8,912,561 Allowance for credit losses on loans and leases (139,041) — (139,041) Net loans and leases 8,773,520 — 8,773,520 Premises and equipment, net 258,071 — 258,071 Foreclosed assets 8,561 — 8,561 Servicing assets 49,343 — 49,343 Other assets 384,790 2,269 387,059 Total assets $ 11,503,300 $ 2,269 $ 11,505,569 Liabilities and shareholders’ equity Liabilities Deposits: Noninterest-bearing $ 226,668 $ — $ 226,668 Interest-bearing 10,156,693 — 10,156,693 Total deposits 10,383,361 — 10,383,361 Borrowings 120,242 — 120,242 Other liabilities 83,017 (8,769) 74,248 Total liabilities 10,586,620 (8,769) 10,577,851 Shareholders’ equity Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding — — — Class A common stock (voting) 349,648 — 349,648 Class B common stock (non-voting) — — — Retained earnings 658,269 11,038 669,307 Accumulated other comprehensive loss (91,237) — (91,237) Total shareholders' equity 916,680 11,038 927,718 Total liabilities and shareholders’ equity $ 11,503,300 $ 2,269 $ 11,505,569 (1) Includes $379.2 million, $388.0 million, $410.1 million, $441.8 million and $467.0 million measured at fair value for the quarters ended March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 2023, respectively. 60 Table of Contents Item 6. Exhibits. Exhibits to this report are listed in the Index to Exhibits section of this report. INDEX TO EXHIBITS Exhibit No. Description of Exhibit 3.1 Amended and Restated Articles of Incorporation of Live Oak Bancshares, Inc. (incorporated by reference to Exhibit 3.1 of the registration statement on Form S-1, filed on June 19, 2015) 3.2 Amended Bylaws of Live Oak Bancshares, Inc. (incorporated by reference to Exhibit 3.2 of the amended registration statement on Form S-1, filed on July 13, 2015) 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the registration statement on Form S-1, filed on June 19, 2015) 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** 101 Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023; (ii) Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2024 and 2023; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023; (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2024 and 2023; (v) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements* 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Indicates a document being filed with this Form 10-Q. ** Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. 61 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Live Oak Bancshares, Inc. (Registrant) Date: May 10, 2024 By: / s / Walter J. Phifer Walter J. Phifer Chief Financial Officer 62