What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-10 · 294 added, 172 removed, 997 unchanged (32% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of March 31, 2024 (unaudited) and December 31, 2023*

As of June 30, 2024 (unaudited) and December 31, 2023*

(Dollars in thousands)

22 unchanged sentences

Shareholders’ equity

Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at March 31, 2024 and December 31, 2023

Class A common stock, no par value, 100,000,000 shares authorized, 44,938,673 and 44,617,673 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at June 30, 2024 and December 31, 2023

Class A common stock, no par value, 100,000,000 shares authorized, 45,003,856 and 44,617,673 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

356,381 344,568

Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at March 31, 2024 and December 31, 2023

Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at June 30, 2024 and December 31, 2023

Retained earnings 695,172 642,817

6 unchanged sentences

Condensed Consolidated Statements of Income

For the three months ended March 31, 2024 and 2023 (unaudited)

For the three and six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands, except per share data)

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Interest income

8 unchanged sentences

Net interest income 91,320 84,302 181,431 166,319

Provision for loan and lease credit losses 16,364 19,021

Net interest income after provision for loan and lease credit losses 73,747 62,996

Provision for credit losses 11,765 13,028 28,129 32,049

Net interest income after provision for credit losses 79,555 71,274 153,302 134,270

Noninterest income

2 unchanged sentences

Net gains on sales of loans 14,395 10,804 25,897 20,979

Net loss on loans accounted for under the fair value option ( 219 ) ( 4,529 )

Net gain (loss) on loans accounted for under the fair value option 172 1,728 ( 47 ) ( 2,801 )

Equity method investments (loss) income ( 1,767 ) ( 2,055 ) ( 6,789 ) ( 5,007 )

Equity security investments (losses) gains, net ( 529 ) 77

Equity security investments gains (losses), net 161 121 ( 368 ) 198

Lease income 2,423 2,535 4,876 5,070

11 unchanged sentences

Other loan origination and maintenance expense 3,659 3,442 7,570 7,369

Renewable energy tax credit investment (recovery) impairment ( 927 ) 69

Renewable energy tax credit investment impairment (recovery) 170 — ( 757 ) 69

FDIC insurance 2,649 5,061 5,849 8,464

2 unchanged sentences

Income before taxes 36,058 18,973 58,165 22,586

Income tax (benefit) expense ( 5,479 ) 3,215

Income tax expense 9,095 1,429 3,616 4,644

Net income $ 26,963 $ 17,544 $ 54,549 $ 17,942

4 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2024 and 2023 (unaudited)

For the three and six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income $ 26,963 $ 17,544 $ 54,549 $ 17,942

Other comprehensive (loss) income before tax:

Net unrealized (loss) gain on investment securities available-for-sale during the period ( 8,576 ) 10,432

Other comprehensive income (loss) before tax:

Net unrealized gain (loss) on investment securities available-for-sale during the period 964 ( 17,348 ) ( 7,612 ) ( 6,916 )

Reclassification adjustment for gain on sale of securities available-for-sale included in net income — — — —

Other comprehensive (loss) income before tax ( 8,576 ) 10,432

Income tax benefit (expense) 2,058 ( 2,509 )

Other comprehensive (loss) income, net of tax ( 6,518 ) 7,923

Other comprehensive income (loss) before tax 964 ( 17,348 ) ( 7,612 ) ( 6,916 )

Income tax (expense) benefit ( 231 ) 4,163 1,827 1,654

Other comprehensive income (loss), net of tax 733 ( 13,185 ) ( 5,785 ) ( 5,262 )

Total comprehensive income $ 27,696 $ 4,359 $ 48,764 $ 12,680

2 unchanged sentences

Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the three months ended March 31, 2024 and 2023 (unaudited)

For the three and six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)

6 unchanged sentences

Class A Class B

Balance at March 31, 2024

44,938,673 — $ 349,648 $ 669,307 $ ( 91,237 ) $ 927,718

Net income — — — 26,963 — 26,963

Other comprehensive income — — — — 733 733

Issuance of restricted stock 45,613 — — — — —

Tax withholding related to vesting of restricted stock and other

— — ( 337 ) — — ( 337 )

Stock option exercises 19,570 — 277 — — 277

Restricted stock compensation expense — — 6,793 — — 6,793

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense — — — 252 — 252

Cash dividends ($ 0.03 per share)

— — — ( 1,350 ) — ( 1,350 )

Balance at June 30, 2024

45,003,856 — $ 356,381 $ 695,172 $ ( 90,504 ) $ 961,049

Balance at March 31, 2023

44,290,840 — $ 334,672 $ 572,530 $ ( 84,395 ) $ 822,807

Net income — — — 17,544 — 17,544

Other comprehensive loss — — — — ( 13,185 ) ( 13,185 )

Issuance of restricted stock 38,145 — — — — —

Tax withholding related to vesting of restricted stock and other

— — ( 249 ) — — ( 249 )

Stock option exercises 22,730 — 297 — — 297

Stock option compensation expense — — 4 — — 4

Restricted stock compensation expense — — 6,308 — — 6,308

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense

— — — 292 — 292

Cash dividends ($ 0.03 per share)

— — — ( 1,330 ) — ( 1,330 )

Balance at June 30, 2023

44,351,715 — $ 341,032 $ 589,036 $ ( 97,580 ) $ 832,488

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Continued)

For the three and six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)

Six Months Ended

Common stock Retained

earnings Accumulated

comprehensive

income (loss)

Shares Amount

Class A Class B

Balance at December 31, 2023

7 unchanged sentences

Stock option exercises 198,415 — 1,406 — — 1,406

Stock option based compensation expense — — — — — —

Restricted stock compensation expense — — 13,099 — — 13,099

2 unchanged sentences

— — — ( 2,695 ) — ( 2,695 )

Balance at March 31, 2024

Balance at June 30, 2024

45,003,856 — $ 356,381 $ 695,172 $ ( 90,504 ) $ 961,049

2 unchanged sentences

Net income — — — 17,942 — 17,942

Other comprehensive income — — — — 7,923 7,923

Other comprehensive loss — — — — ( 5,262 ) ( 5,262 )

Issuance of restricted stock 201,019 — — — — —

3 unchanged sentences

Stock option exercises 58,393 — 664 — — 664

Stock option compensation expense — — 133 — — 133

Stock option based compensation expense — — 137 — — 137

Restricted stock compensation expense — — 12,348 — — 12,348

Adoption of ASU 2022-02

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense

— — — 676 — 676

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense — — — 578 — 578

Cash dividends ($ 0.06 per share)

— — — ( 2,657 ) — ( 2,657 )

Balance at March 31, 2023

Balance at June 30, 2023

44,351,715 — $ 341,032 $ 589,036 $ ( 97,580 ) $ 832,488

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2024 and 2023 (unaudited)

For the six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization 10,324 10,447

Provision for loan and lease credit losses 16,364 19,021

Provision for credit losses 28,129 32,049

(Accretion) amortization of (discount) premium on securities, net ( 497 ) 132

3 unchanged sentences

Net gains on sale of loans held for sale ( 25,897 ) ( 20,979 )

Net loss on sale of foreclosed assets 9 —

Net loss on loans accounted for under fair value option 47 2,801

Net change in servicing assets ( 2,937 ) ( 4,719 )

Net (gain) loss on disposal of property and equipment ( 4 ) 402

Net gain on disposal of long-lived asset ( 6,663 ) —

Net loss on disposal of property and equipment 177 402

Equity method investments loss (income) 6,789 5,007

Equity security investments losses (gains), net 368 ( 198 )

(Gain) loss on equity warrant assets ( 5,662 ) —

Gain on equity warrant assets ( 6,246 ) —

Renewable energy tax credit investment (recovery) impairment ( 757 ) 69

10 unchanged sentences

Proceeds from maturities, calls, and principal paydown of investment securities available-for-sale 77,679 49,235

Proceeds from SBA reimbursement/sale of foreclosed assets, net 583 —

Loan and lease originations and principal collections, net ( 613,385 ) ( 689,804 )

Proceeds from sale of long-lived asset 22,641 —

Purchases of equity security investments ( 3,676 ) ( 1,206 )

Purchases of equity method investments ( 1,872 ) ( 4,323 )

Proceeds from sale of equity security investment 535 —

Proceeds from equity security investment 957 —

Proceeds from equity method investments 524 —

Proceeds from sale of premises and equipment 978 —

1 unchanged sentence

Net cash used by investing activities ( 664,282 ) ( 837,776 )

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

For the three months ended March 31, 2024 and 2023 (unaudited)

For the six months ended June 30, 2024 and 2023 (unaudited)

(Dollars in thousands)

Three Months Ended

Six Months Ended

Cash flows from financing activities

14 unchanged sentences

Supplemental disclosures of noncash investing and financing activities

Unrealized holding (losses) gains on investment securities available-for-sale, net of taxes $ ( 6,518 ) $ 7,923

Unrealized holding losses on investment securities available-for-sale, net of taxes $ ( 5,785 ) $ ( 5,262 )

Transfers from loans and leases to foreclosed real estate and other repossessions or SBA receivable

38 unchanged sentences

Income from the sale of loans is comprised of loan servicing revenue and revaluation of related servicing rights along with net gains on sales of loans.

Offsetting these revenues are the cost of funding sources, provision for loan and lease credit losses, any costs related to foreclosed assets and other operating costs such as salaries and employee benefits, travel, professional services, advertising and marketing and tax expense.

Offsetting these revenues are the cost of funding sources, provision for credit losses, any costs related to foreclosed assets and other operating costs such as salaries and employee benefits, travel, professional services, advertising and marketing and tax expense.

The Company also has less routinely generated gains and losses arising from its financial technology investments predominantly in its Fintech segment.

2 unchanged sentences

In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included, and all intercompany transactions have been eliminated in consolidation.

Results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

Results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

The Condensed Consolidated Balance Sheet as of December 31, 2023 has been derived from the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities Exchange Commission ( “ SEC ” ) on February 22, 2024 (SEC File No.

11 unchanged sentences

Changes in Accounting Estimates

During the second quarter of 2024, the Company made enhancements to the qualitative framework of the allowance for credit losses.

The enhanced framework leverages quantifiable credit risk metrics as well as current and forecasted economic conditions to determine possible portfolio outcomes that are not captured in quantitatively modeled results.

The framework continues to consider risk factors which include, but are not limited to, changes in lending policies, economic and business conditions, nature and volume of portfolio, volume and severity of past due loans, value of underlying collateral, concentrations, and prepayment speeds.

The result of these changes was not material.

During the third quarter of 2023, the Company changed the valuation techniques used to estimate the fair value of servicing rights and loans measured at fair value as a result of rising interest rates and their impacts on market conditions.

The changes include aligning our net servicing income and loan fair value estimates with changes in forward interest rate curves.

The changes included aligning our net servicing income and loan fair value estimates with changes in forward interest rate curves.

Loan fair value estimates were also revised to utilize market participant credit loss information.

4 unchanged sentences

Long-Lived Asset Reclassified to Held for Sale

During the second quarter of 2024, the Company sold an aircraft that was previously reclassified as held for sale.

The $ 6.7 million gain on the sale of the aircraft is reflected in other income on the Condensed Consolidated Statements of Income.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

During the first quarter of 2024, the Company determined that retention of an idle building and accompanying land adjacent to its main campus was not best suited to serve future expansion plans.

As a result of this determination, the Company entered into a purchase and sale agreement with a third party with expected total proceeds, net of estimated expenses, of $ 20.9 million.

Accordingly, the $ 18.5 million carrying amount of the building and land, now considered held for sale, was reclassified from premises and equipment, net to other assets in the March 31, 2024 Unaudited Condensed Consolidated Balance Sheet.

Accordingly, the $ 18.5 million carrying amount of the building and land, was considered held for sale, and reclassified from premises and equipment, net to other assets in the Unaudited Condensed Consolidated Balance Sheet.

Any gain associated with the sale of the building will be recorded at the time of the sale.

Reclassifications

Certain reclassifications have been made to the prior period's Unaudited Condensed Consolidated Financial Statements to place them on a comparable basis with the current year.

Net income and shareholders' equity previously reported were not affected by these reclassifications.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Recent Accounting Pronouncements

8 unchanged sentences

Treasury rate.

As of March 31, 2024, the Company has transitioned all its LIBOR-based loan exposure to an alternative index.

As of March 31, 2024, the Company had transitioned all its LIBOR-based loan exposure to an alternative index.

The application of the standard did not have a material effect on the Consolidated Financial Statements.

27 unchanged sentences

The Company is currently evaluating the impact the amendments will have the Consolidated Financial Statements and related disclosures.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In March 2024, the FASB issued ASU 2024-01 “Compensation - Stock Compensation (Topic 718):

3 unchanged sentences

The Company does not believe this standard will have a material impact on its Consolidated Financial Statements.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In March 2024, the FASB issued ASU 2024-02 “Codification Improvements - Amendments to Remove References to the Concepts Statements” (“ASU 2024-02”).

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Basic earnings per share:

11 unchanged sentences

The carrying amount of securities and their approximate fair values are reflected in the following table:

March 31, 2024 Amortized

June 30, 2024 Amortized

government agencies $ 12,088 $ — $ 316 $ 11,772

2 unchanged sentences

Total $ 1,270,279 $ 670 $ 119,754 $ 1,151,195

December 31, 2023

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2023 Amortized

Cost Unrealized

Gains Unrealized

government agencies $ 17,809 $ 2 $ 282 $ 17,529

2 unchanged sentences

Total $ 1,237,633 $ 468 $ 111,941 $ 1,126,160

During the three months ended March 31, 2024, one security totaling $ 14.7 million was settled and one security totaling $ 2.5 million was called.

During the three months ended March 31, 2023, no securities were sold or settled.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Accrued interest receivable on available-for-sale securities totaled $ 3.4 million and $ 3.3 million at March 31, 2024 and December 31, 2023, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

During the three months ended June 30, 2024, one security totaling $ 155 thousand was settled and one security totaling $ 3.0 million matured.

During the six months ended June 30, 2024, two securities totaling $ 14.8 million were settled, one security totaling $ 2.5 million was called and one security totaling $ 3.0 million matured.

During the three and six months ended June 30, 2023, two mortgage-backed securities totaling $ 2.7 million were settled.

Accrued interest receivable on available-for-sale securities totaled $ 3.7 million and $ 3.3 million at June 30, 2024 and December 31, 2023, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

The following tables show debt securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

Less Than 12 Months 12 Months or More Total

March 31, 2024 Fair

June 30, 2024 Fair

government agencies $ — $ — $ 11,772 $ 316 $ 11,772 $ 316

8 unchanged sentences

Total $ 138,823 $ 3,431 $ 904,795 $ 108,510 $ 1,043,618 $ 111,941

At March 31, 2024, there were 416 mortgage-backed securities, five U.S.

At June 30, 2024, there were 423 mortgage-backed securities, four U.S.

government agencies and two municipal bonds in unrealized loss positions for greater than 12 months.

1 unchanged sentence

Unrealized losses at December 31, 2023 were comprised of 409 mortgage-backed securities, five U.S.

government agencies and two municipal bond in unrealized loss positions for greater than 12 months and 27 mortgage-backed securities in unrealized loss positions for less than 12 months.

government agencies and two municipal bonds in unrealized loss positions for greater than 12 months and 27 mortgage-backed securities in unrealized loss positions for less than 12 months.

These unrealized losses are primarily the result of non-credit-related volatility in the market and market interest rates.

Since none of the unrealized losses relate to the issuers' ability to honor redemption obligations, and the Company does not intend to sell the related securities and does not believe it is more likely than not that it will be required to sell the securities before recovery of amortized cost, none of the losses have been recognized in the Company’s Unaudited Condensed Consolidated Statements of Income.

All mortgage-backed securities in the Company’s portfolio at March 31, 2024 and December 31, 2023 were backed by U.S.

All mortgage-backed securities in the Company’s portfolio at June 30, 2024 and December 31, 2023 were backed by U.S.

government sponsored enterprises (“GSEs”).

2 unchanged sentences

The following is a summary of investment securities by maturity:

March 31, 2024

June 30, 2024

Available-for-Sale

7 unchanged sentences

One to five years 176,763 166,444

Five to ten years 230,064 202,872

Five to 10 years 221,724 196,487

After 10 years 837,275 754,461

1 unchanged sentence

Municipal bonds

Five to ten years 3,098 2,920

Five to 10 years 3,092 2,908

After 10 years 97 85

3 unchanged sentences

Actual results will differ as the loans underlying the mortgage-backed securities may prepay sooner than scheduled.

There were no investment securities pledged at March 31, 2024 or December 31, 2023.

There were no investment securities pledged at June 30, 2024 or December 31, 2023.

Equity Investments

4 unchanged sentences

Equity Method Accounting

The carrying amount and ownership percentage of each equity method investment at March 31, 2024 and December 31, 2023 is reflected in the following table:

March 31, 2024 December 31, 2023

The carrying amount and ownership percentage of each equity method investment at June 30, 2024 and December 31, 2023 is reflected in the following table:

June 30, 2024 December 31, 2023

Amount Ownership % Amount Ownership %

11 unchanged sentences

Total $ 114,527 $ 118,914

(1) Includes unfunded commitments of $ 5.0 million as of March 31, 2024 and December 31, 2023.

(2) Includes unfunded commitments of $ 559 thousand as of March 31, 2024 and December 31, 2023.

(3) Includes unfunded commitments of $ 6.2 million and $ 6.3 million as of March 31, 2024 and December 31, 2023, respectively.

(4) Includes unfunded commitments of $ 7.1 million as of March 31, 2024 and December 31, 2023.

(1) Includes unfunded commitments of $ 4.8 million and $ 5.0 million as of June 30, 2024 and December 31, 2023, respectively.

(2) Includes unfunded commitments of $ 536 thousand and $ 559 thousand as of June 30, 2024 and December 31, 2023, respectively.

(3) Includes unfunded commitments of $ 6.2 million and $ 6.3 million as of June 30, 2024 and December 31, 2023, respectively.

(4) Includes unfunded commitments of $ 7.0 million and $ 7.1 million as of June 30, 2024 and December 31, 2023, respectively.

(5) Investee is accounted for under equity method due to the Company's participation as an investment advisor.

(6) As of March 31, 2024, and December 31, 2023 Other investments include low income housing tax credit (“LIHTC”) in Estrella Landing Apartments LLC (“Estrella Landing”), in which the Company holds a 99.9 % limited member interest.

As of March 31, 2024, and December 31, 2023, there was an unfunded commitment of $ 6.4 million and $ 7.7 million, respectively, for Estrella Landing.

Also included in Other investments are solar income tax credit investments in Green Sun Tenant LLC (“Green Sun”), SVA 2021-2 TE Holdco LLC (“Sun Vest”), EG5 CSP1 Holding LLC (“HEP”) and HRE MM I LLC ("Heelstone"), which the Company holds a 99.0 % limited member interest in all investments.

As of March 31, 2024, there was an unfunded commitment of $ 1.0 million for Heelstone, while there was no unfunded commitment as of December 31, 2023.

(6) As of June 30, 2024, and December 31, 2023 Other investments include low income housing tax credit (“LIHTC”) in Estrella Landing Apartments LLC (“Estrella Landing”), in which the Company holds a 99.9 % limited member interest.

Also included in Other investments are solar income tax credit investments in Green Sun Tenant LLC (“Green Sun”), SVA 2021-2 TE Holdco LLC (“Sun Vest”), EG5 CSP1 Holding LLC (“HEP”) and HRE Lessee I, LLC ("Heelstone"), which the Company holds a 99.0 % limited member interest in all investments.

Also included are Cape Fear Collective Impact Opportunity 1 LLC (“Cape Fear Collective”), Cape Fear Collective Impact Opportunity 2 LLC (“Cape Fear Collective 2”) and OTR Fund I, LLC ("OTR") which the Company holds 91.0 %, 32.3 %, and 5.9 % of limited member interests, respectively.

As of June 30, 2024, Other investments also includes Capitala SBIC Fund VI, LP which the Company holds less than 1 % limited partner interest, but does maintain potential participation through a lending relationship, with an unfunded commitment of $ 750 thousand.

As of June 30, 2024, and December 31, 2023, there was an unfunded commitment of $ 6.4 million and $ 7.7 million, respectively, for Estrella Landing.

Live Oak Bancshares, Inc.

1 unchanged sentence

Equity Security Accounting

The carrying amount of the Company’s investments in non-marketable equity securities with no readily determinable fair value and amounts recognized in earnings on a cumulative basis as of March 31, 2024 and as of and for the three months ended March 31, 2024 and 2023 is reflected in the following table:

As of and for the three month period ended

Cumulative Adjustments March 31, 2024 March 31, 2023

The carrying amount of the Company’s investments in non-marketable equity securities with no readily determinable fair value and amounts recognized in earnings on a cumulative basis as of June 30, 2024 and as of and for the six months ended June 30, 2024 and 2023 is reflected in the following table:

As of and for the six month period ended

Cumulative Adjustments June 30, 2024 June 30, 2023

Carrying value (1)

5 unchanged sentences

Net upward (downward) change $ 48,568 $ ( 313 ) $ —

(1) Includes $ 2.3 million and $ 3.3 million in unfunded commitments as of March 31, 2024, and March 31, 2023, respectively.

(1) Includes $ 2.7 million and $ 2.8 million in unfunded commitments as of June 30, 2024, and June 30, 2023, respectively.

(2) Cumulative adjustments excludes $ 13.9 million in realized gains for sale of an investment in the second quarter of 2021.

For the three months ended March 31, 2024 and 2023 the Company recognized unrealized gains (losses) on all equity securities held at the reporting date of $( 490 ) thousand and $ 16 thousand, respectively.

For the three and six months ended June 30, 2024, the Company recognized unrealized gains (losses) on all equity securities held at the reporting date of $ 31 thousand and $( 269 ) thousand, respectively.

For the three and six months ended June 30, 2023, the Company recognized unrealized losses on all equity securities held at the reporting date of $ 20 thousand and $ 4 thousand, respectively.

Variable Interest Entities

16 unchanged sentences

Non-marketable and Other Equity Investments

The Company also has limited interests in several non-marketable funds, including Small Business Investment Company (“SBIC”) and venture capital funds, which are accounted for as equity security investments.

The Company also has limited interests in several non-marketable funds, including Small Business Investment Company (“SBIC”) and venture capital funds, which are generally accounted for as equity security investments.

After the initial commitment and over the course of the investment period, the Company will make capital contributions and receive profit and return of capital distributions as a result of fund performance until the funds wind down.

9 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

The following table provides a summary of the VIEs that the Company has not consolidated as of March 31, 2024 and December 31, 2023:

March 31, 2024 Investment Carrying Amount Maximum Exposure to Loss Liability Recognized Classification

The following table provides a summary of the VIEs that the Company has not consolidated as of June 30, 2024 and December 31, 2023:

June 30, 2024 Investment Carrying Amount Maximum Exposure to Loss Liability Recognized Classification

Solar tax credit investments $ 7,196 $ 39,994 $ 1,008 Other assets (1)

8 unchanged sentences

(1) Maximum exposure to loss represents $ 7.2 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $ 32.8 million.

(2) Maximum exposure to loss represents $ 15.6 million of investments.

As there are no tax credits allocated in the current year, there is no increase to the maximum exposure to loss related to recaptured tax credits on the $ 8.8 million LIHTC investment as of March 31, 2024.

(2) Maximum exposure to loss represents $ 15.4 million of investments and a scenario in which related tax credits are recaptured, collectively totaling $ 824 thousand.

(3) Maximum exposure to loss represents $ 6.7 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $ 42.2 million.

(4) Maximum exposure to loss represents $ 15.6 million of investments.

As there are no tax credits allocated in the current year, there is no increase to the maximum exposure to loss related to recaptured tax credits on the $ 8.8 million LIHTC investment.

As there are no tax credits allocated in 2023, there is no increase to the maximum exposure to loss related to recaptured tax credits on the $ 8.8 million LIHTC investment as of December 31, 2023.

Live Oak Bancshares, Inc.

9 unchanged sentences

Total Loans and Leases

March 31, 2024

June 30, 2024

Commercial & Industrial

66 unchanged sentences

Converted to Term Total (1)

March 31, 2024

June 30, 2024

Small Business Banking

50 unchanged sentences

Total $ — $ 5,621 $ 6,435 $ 1,058 $ 1,225 $ 525 $ 9,063 $ — $ 23,927

(1) Excludes $ 379.2 million and $ 388.0 million of loans accounted for under the fair value option as of March 31, 2024 and December 31, 2023, respectively.

(1) Excludes $ 363.0 million and $ 388.0 million of loans accounted for under the fair value option as of June 30, 2024 and December 31, 2023, respectively.

The following tables present guaranteed and unguaranteed loan and lease balances by asset quality indicator:

March 31, 2024 Loan and Lease

June 30, 2024 Loan and Lease

Guaranteed Balance Unguaranteed Balance % Guaranteed

11 unchanged sentences

Total $ 8,267,829 $ 2,967,395 $ 5,300,434 35.9 %

(1) Excludes $ 379.2 million and $ 388.0 million of loans accounted for under the fair value option as of March 31, 2024 and December 31, 2023, respectively.

(1) Excludes $ 363.0 million and $ 388.0 million of loans accounted for under the fair value option as of June 30, 2024 and December 31, 2023, respectively.

Nonaccrual Loans and Leases

As of March 31, 2024 and December 31, 2023 there were no loans greater than 90 days past due and still accruing.

There was no interest income recognized on nonaccrual loans and leases during the three months ended March 31, 2024 and 2023.

Accrued interest receivable on loans totaled $ 67.6 million and $ 63.5 million at March 31, 2024 and December 31, 2023 , respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Nonaccrual loans and leases held for investment as of March 31, 2024 and December 31, 2023 are as follows:

March 31, 2024 Loan and Lease

As of June 30, 2024 and December 31, 2023 there were no loans greater than 90 days past due and still accruing.

There was no interest income recognized on nonaccrual loans and leases during the three and six months ended June 30, 2024 and 2023.

Accrued interest receivable on loans totaled $ 70.2 million and $ 63.5 million at June 30, 2024 and December 31, 2023 , respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Nonaccrual loans and leases held for investment as of June 30, 2024 and December 31, 2023 are as follows:

June 30, 2024 Loan and Lease

Balance Unguaranteed Balance Unguaranteed

2 unchanged sentences

Small Business Banking $ 71,734 $ 62,734 $ 9,000 $ 403

Payroll Protection Program 4 4 — —

Energy & Infrastructure 11,030 7,141 3,889 2,178

39 unchanged sentences

The following table summarizes the amount of accrued interest reversed during the periods presented:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Commercial & Industrial $ 364 $ 833 $ 974 $ 1,697

Commercial Real Estate 219 285 338 871

Commercial Land 52 — 52 —

Construction & Development — — 30 56

Total $ 635 $ 1,118 $ 1,394 $ 2,624

The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses, as of March 31, 2024 and December 31, 2023:

The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses, as of June 30, 2024 and December 31, 2023:

Total Collateral-Dependent Loans Unguaranteed Portion

March 31, 2024 Real Estate Business Assets Other Real Estate Business Assets Other Allowance for Credit Losses

June 30, 2024 Real Estate Business Assets Other Real Estate Business Assets Other Allowance for Credit Losses

Commercial & Industrial

Small Business Banking $ 2,722 $ 13,841 $ — $ 418 $ 4,734 $ — $ 3,172

Specialty Lending — 4,711 — — 4,711 — —

Energy & Infrastructure — 3,022 — — 227 — 62

30 unchanged sentences

Real Estate Commercial

March 31, 2024

June 30, 2024

Beginning Balance $ 98,552 $ 4,292 $ 31,369 $ 4,828 $ 139,041

3 unchanged sentences

Ending Balance $ 108,166 $ 3,694 $ 23,540 $ 2,467 $ 137,867

March 31, 2023

June 30, 2023

Beginning Balance $ 72,058 $ 6,954 $ 25,062 $ 4,168 $ 108,242

Charge offs ( 2,198 ) — ( 278 ) — ( 2,476 )

Recoveries 558 — 764 — 1,322

Provision (Recovery) 8,989 ( 526 ) 4,360 205 13,028

Ending Balance $ 79,407 $ 6,428 $ 29,908 $ 4,373 $ 120,116

Six Months Ended Commercial

& Industrial Construction &

Development Commercial

Real Estate Commercial

June 30, 2024

Beginning Balance $ 87,581 $ 4,717 $ 28,864 $ 4,678 $ 125,840

Charge offs ( 11,744 ) ( 338 ) ( 105 ) ( 8 ) ( 12,195 )

Recoveries 512 — 267 — 779

Provision (Recoveries) 31,817 ( 685 ) ( 5,486 ) ( 2,203 ) 23,443

Ending Balance $ 108,166 $ 3,694 $ 23,540 $ 2,467 $ 137,867

June 30, 2023

Beginning Balance $ 64,995 $ 5,101 $ 22,901 $ 3,569 $ 96,566

Adoption of ASU 2022-02 ( 25 ) ( 166 ) ( 83 ) ( 402 ) ( 676 )

3 unchanged sentences

Ending Balance $ 79,407 $ 6,428 $ 29,908 $ 4,373 $ 120,116

During the three months ended March 31, 2024, the ACL increased as a result of specific reserve changes on individually evaluated loans and to a lesser extent continued growth of the loan and lease portfolio combined with charge-off related impacts.

During the three months ended June 30, 2024, the ACL decreased primarily as a result of a decrease in specific reserves on loans individually evaluated for impairment.

During the six months ended June 30, 2024, the ACL increased as a result of loan growth and changes in the macroeconomic outlook.

Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

During the three months ended March 31, 2023, the ACL increased as a result of continued loan growth, combined with portfolio trends and changes in the macroeconomic outlook.

During the three and six months ended June 30, 2023, the ACL increased as a result of continued loan growth, combined with portfolio trends and changes in the macroeconomic outlook.

Additionally, during the first quarter of 2023, certain assumptions were refined, drawing more heavily on internal data, in the calculations of PD, LGD, and prepayment rates.

These refinements increased the ACL by $ 1.5 million during the three months ended March 31, 2023.

These refinements increased the ACL by $ 1.5 million during the six months ended June 30, 2023.

Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Loan Modifications for Borrowers Experiencing Financial Difficulty

2 unchanged sentences

The Company typically does not offer principal forgiveness.

During the three months ended March 31, 2024, there were no loan modifications to borrowers experiencing financial difficulty.

The following table summarizes the amortized cost basis of loans that were modified during the three months ended March 31, 2023:

Three Months Ended March 31, 2023 Other-Than-Insignificant

Payment Delay Term Extension Interest Rate Reduction % of Total Class of

The following tables summarize the amortized cost basis of loans that were modified during the three and six months ended June 30, 2024 and June 30, 2023, respectively:

Three Months Ended June 30, 2024 Other-Than-Insignificant

Payment Delay Term Extension Interest Rate Reduction

Combination - Term Extension & Payment Delay % of Total Class of

Financing Receivable

1 unchanged sentence

Specialty Lending 2,333 — — — 0.12

Total $ 8,792 $ — $ — $ — 0.23 %

Six Months Ended June 30, 2024 Other-Than-Insignificant

Payment Delay Term Extension Interest Rate Reduction Combination - Term Extension & Payment Delay % of Total Class of

Financing Receivable

Small Business Banking $ 6,459 $ — $ — $ — 0.11 %

Specialty Lending 2,333 — — — 0.12

Total $ 8,792 $ — $ — $ — 0.23 %

Three Months Ended June 30, 2023 Other-Than-Insignificant

Payment Delay Term Extension Interest Rate Reduction Combination - Term Extension & Payment Delay % of Total Class of

Financing Receivable

Small Business Banking $ — $ — $ — $ 361 0.01 %

Specialty Lending — 4,427 — — 0.26

Total $ — $ 4,427 $ — $ 361 0.27 %

Six Months Ended June 30, 2023 Other-Than-Insignificant

Payment Delay Term Extension Interest Rate Reduction Combination - Term Extension & Payment Delay % of Total Class of

Financing Receivable

Small Business Banking $ — $ — $ 3,436 $ 361 0.08 %

Specialty Lending — 244 — 4,183 0.26 %

Energy & Infrastructure — 13,517 — — 2.14 %

Total $ — $ 13,761 $ 3,436 $ 4,544 2.48 %

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

As of March 31, 2024, the Company had no commitments to lend additional funds to these borrowers.

The following table presents an aging analysis of loans that were modified within the twelve months ended March 31, 2024:

As of June 30, 2024, the Company had no commitments to lend additional funds to these borrowers.

The following table presents an aging analysis of loans that were modified within the twelve months ended June 30, 2024:

Current 30-89 Days

2 unchanged sentences

Specialty Lending 2,333 — — —

Energy & Infrastructure 13,690 — — —

Total $ 23,851 $ — $ — $ —

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the prior period:

Three Months Ended March 31, 2023

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

There was no financial impacts related to the loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024.

The following tables summarize the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the prior periods presented:

Three Months Ended June 30, 2023

Weighted Average

2 unchanged sentences

Small Business Banking — % 161

Specialty Lending — 72

Six Months Ended June 30, 2023

Weighted Average

Interest Rate Reduction Weighted Average

Term Extension (in Months)

Small Business Banking 1.45 % 161

Specialty Lending — 72

Energy & Infrastructure — 12

Additionally, there were no loans that were modified within the twelve months ended March 31, 2024 that subsequently defaulted during the periods presented.

Additionally, there were no loans that were modified within the twelve months ended June 30, 2024 that subsequently defaulted during the periods presented.

The Company’s ACL is estimated using lifetime historical loan performance adjusted to reflect current conditions and reasonable and supportable forecasts.

5 unchanged sentences

Equipment purchased to fulfill commitments to commercial renewable energy projects is rented out under operating leases while leases of equipment outside of the renewable energy vertical are generally direct financing leases.

Accordingly, leased assets under operating leases are included in premises and equipment while leased assets under direct financing leases are included in loans and leases held for investment in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Accordingly, leased assets under operating leases are included in premises and equipment, net while leased assets under direct financing leases are included in loans and leases held for investment in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Direct Financing Leases

3 unchanged sentences

The net investment in direct finance leases included in loans and leases held for investment are as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Gross direct finance lease payments receivable $ 1,684 $ 2,335

3 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

Future minimum lease payments under finance leases are as follows:

As of March 31, 2024

Future minimum lease payments to be received under finance leases are as follows:

As of June 30, 2024

Total $ 1,684

Interest income of $ 18 thousand and $ 73 thousand was recognized in the three months ended March 31, 2024 and 2023, respectively.

Interest income of $ 48 thousand and $ 66 thousand was recognized in the three months ended June 30, 2024 and 2023, respectively.

Interest income of $ 66 thousand and $ 139 thousand was recognized in the six months ended June 30, 2024 and 2023, respectively.

Operating Leases

9 unchanged sentences

Repair and maintenance costs that do not extend the lives of the rental equipment are charged to equipment expense at the time the costs are incurred.

As of March 31, 2024 and December 31, 2023, the Company had a net investment of $ 100.7 million and $ 104.0 million, respectively, in assets included in premises and equipment that are subject to operating leases.

Of the net investment, the gross balance of the assets was $ 160.7 million and $ 162.3 million as of March 31, 2024 and December 31, 2023, respectively.

Accumulated depreciation was $ 60.0 million and $ 58.3 million as of March 31, 2024 and December 31, 2023, respectively.

Depreciation expense recognized on these assets was $ 2.4 million for the three months ended March 31, 2024 and 2023.

Lease income of $ 2.4 million was recognized in the three months ended March 31, 2024 and 2023.

As of June 30, 2024 and December 31, 2023, the Company had a net investment of $ 98.3 million and $ 104.0 million, respectively, in assets included in premises and equipment, net that are subject to operating leases.

Of the net investment, the gross balance of the assets was $ 160.7 million and $ 162.3 million as of June 30, 2024 and December 31, 2023, respectively.

Accumulated depreciation was $ 62.4 million and $ 58.3 million as of June 30, 2024 and December 31, 2023, respectively.

Depreciation expense recognized on these assets was $ 2.4 million for the three months ended June 30, 2024 and 2023.

Depreciation expense recognized on these assets was $ 4.7 million and $ 4.8 million for the six months ended June 30, 2024 and 2023, respectively.

Lease income of $ 2.3 million and $ 2.4 million was recognized in the three months ended June 30, 2024 and 2023, respectively.

Lease income of $ 4.7 million and $ 4.8 million was recognized in the six months ended June 30, 2024 and 2023, respectively.

A maturity analysis of future minimum lease payments to be received under non-cancelable operating leases is as follows:

As of March 31, 2024

As of June 30, 2024

Thereafter 9,708

4 unchanged sentences

Loans serviced for others are not included in the accompanying Unaudited Condensed Consolidated Balance Sheets.

The unpaid principal balance of loans serviced for others requiring recognition of a servicing asset was $ 3.15 billion and $ 3.09 billion at March 31, 2024 and December 31, 2023, respectively.

The unpaid principal balance for all loans serviced for others was $ 4.33 billion and $ 4.24 billion at March 31, 2024 and December 31, 2023, respectively.

The unpaid principal balance of loans serviced for others requiring recognition of a servicing asset was $ 3.26 billion and $ 3.09 billion at June 30, 2024 and December 31, 2023, respectively.

The unpaid principal balance for all loans serviced for others was $ 4.29 billion and $ 4.24 billion at June 30, 2024 and December 31, 2023, respectively.

The following table summarizes the activity pertaining to servicing rights measured at fair value:

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Balance at beginning of period $ 48,962 $ 29,357 $ 48,186 $ 26,323

5 unchanged sentences

Fair Value of Financial Instruments for further details about servicing assets measured at fair value.

The fair value of servicing rights was determined using a weighted average discount rate of 14.5 % on March 31, 2024 and 17.7 % on March 31, 2023.

The fair value of servicing rights was determined using a weighted average prepayment speed of 15.7 % on March 31, 2024 and 15.3 % on March 31, 2023, with the actual rate depending on the stratification of the specific right.

The fair value of servicing rights was determined using a weighted average discount rate of 14.5 % on June 30, 2024 and 17.3 % on June 30, 2023.

The fair value of servicing rights was determined using a weighted average prepayment speed of 15.7 % on June 30, 2024 and 15.8 % on June 30, 2023, with the actual rate depending on the stratification of the specific right.

Changes to fair value are reported in loan servicing asset revaluation within the Unaudited Condensed Consolidated Statements of Income.

As of March 31, 2024, the Company had servicing assets related to conventional commercial loans carried at amortized cost of $ 381 thousand .

As of June 30, 2024, the Company had servicing assets related to conventional commercial loans carried at amortized cost of $ 225 thousand .

Live Oak Bancshares, Inc.

10 unchanged sentences

Total borrowings $ 117,745 $ 23,354

As of March 31, 2024 and December 31, 2023, the Company’s unused borrowing capacity was $ 3.51 billion and $ 3.68 billion, respectively, based upon securities and loans identified as available for collateral.

As of June 30, 2024 and December 31, 2023, the Company’s unused borrowing capacity was $ 3.62 billion and $ 3.68 billion, respectively, based upon securities and loans identified as available for collateral.

Unused borrowing capacity consists of access through the Federal Reserve Bank's discount window, available lines of credit with the Federal Home Loan Bank and other correspondent banks, access to a repurchase agreement, and the Federal Reserve Bank's Bank Term Funding Program which ended March 11, 2024.

If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $ 6.19 billion and $ 6.28 billion as of March 31, 2024 and December 31, 2023, respectively.

If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $ 6.29 billion and $ 6.28 billion as of June 30, 2024 and December 31, 2023, respectively.

Fair Value of Financial Instruments

8 unchanged sentences

The table below provides a rollforward of the Level 3 equity warrant asset fair values:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Equity Warrant Assets 2024 2023 2024 2023

7 unchanged sentences

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis.

March 31, 2024 Total Level 1 Level 2 Level 3

June 30, 2024 Total Level 1 Level 2 Level 3

Investment securities available-for-sale

21 unchanged sentences

Total assets at fair value $ 1,566,901 $ — $ 1,127,720 $ 439,181

(1) During the three months ended March 31, 2024 there was no level 3 fair value adjustment gain or loss.

During the three months ended March 31, 2023, the Company recorded a level 3 fair value adjustment loss of $ 10 thousand.

(1) During the three and six months ended June 30, 2024 there was no level 3 fair value adjustment gain or loss.

During the three and six months ended June 30, 2023, the Company recorded a level 3 fair value adjustment gain of $ 1 thousand and loss of $ 9 thousand, respectively.

(2) See Note 7 for a rollforward of recurring Level 3 fair values for servicing assets.

10 unchanged sentences

In accordance with GAAP, any loans for which fair value was previously elected continue to be measured as such.

There were no loans accounted for under the fair value option that were 90 days or more past due and still accruing interest at March 31, 2024 or December 31, 2023.

The unpaid principal balance of unguaranteed exposure for nonaccruals was $ 10.2 million and $ 9.1 million at March 31, 2024 and December 31, 2023, respectively.

There were no loans accounted for under the fair value option that were 90 days or more past due and still accruing interest at June 30, 2024 or December 31, 2023.

The unpaid principal balance of unguaranteed exposure for nonaccruals was $ 11.3 million and $ 9.1 million at June 30, 2024 and December 31, 2023, respectively.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of loans accounted for under the fair value option at March 31, 2024 and December 31, 2023.

March 31, 2024

The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of loans accounted for under the fair value option at June 30, 2024 and December 31, 2023.

June 30, 2024

Total Loans Nonaccruals 90 Days or More Past Due

18 unchanged sentences

The following table presents the net gains (losses) from changes in fair value.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Gains (Losses) on Loans Accounted for under the Fair Value Option 2024 2023 2024 2023

Loans held for investment $ 172 $ 1,728 $ ( 47 ) $ ( 2,801 )

Losses related to borrower-specific credit risk were $ 0 and $ 3.2 million for the three months ended March 31, 2024 and 2023, respectively.

Losses related to borrower-specific credit risk were $ 0 for the three and six months ended June 30, 2024, respectively, and $ 291 thousand and $ 3.5 million for the three and six months ended June 30, 2023, respectively.

The following tables summarize the activity pertaining to loans accounted for under the fair value option:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Loans held for investment 2024 2023 2024 2023

7 unchanged sentences

The Company has no liabilities recorded at fair value on a non-recurring basis.

March 31, 2024 Total Level 1 Level 2 Level 3

June 30, 2024 Total Level 1 Level 2 Level 3

Collateral-dependent loans $ 2,476 $ — $ — $ 2,476

10 unchanged sentences

Level 3 Analysis

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of March 31, 2024 and December 31, 2023, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2024

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of June 30, 2024 and December 31, 2023, the significant unobservable inputs used in the fair value measurements were as follows:

June 30, 2024

Level 3 Assets with Significant Unobservable Inputs

48 unchanged sentences

The carrying amounts and estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis are as follows:

March 31, 2024 Carrying

June 30, 2024 Carrying

Identical Assets/Liabilities

35 unchanged sentences

A summary of the Company’s commitments is as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Commitments to extend credit (1)

15 unchanged sentences

Collateral held varies as specified above and is required in instances which the Company deems necessary.

The allowance for off-balance-sheet credit exposures was $ 5.8 million and $ 4.8 million at March 31, 2024 and December 31, 2023, respectively.

The allowance for off-balance-sheet credit exposures was $ 10.4 million and $ 4.8 million at June 30, 2024 and December 31, 2023, respectively.

During the three and six months ended June 30, 2024, the Company recorded $ 4.7 million and $ 5.6 million, respectively, in expense related to the allowance for off-balance sheet credit exposures.

During the three and six months ended June 30, 2023, the Company recorded $ 482 thousand and $ 3.2 million, respectively, in expense related to the allowance for off-balance sheet credit exposures.

Beginning in the second quarter of 2024, this expense was classified in the provision for credit losses.

This expense has historically been classified in other expense and that classification remains unchanged for prior periods.

Other Commitments

1 unchanged sentence

The total estimated cost to complete the construction program is approximately $ 38.9 million.

At March 31, 2024, the Company has paid and was committed to approximately $ 30.7 million of the total estimated amount.

As of March 31, 2024 and December 31, 2023, the Company recorded unfunded commitments to provide capital contributions for on-balance-sheet investments in the amount of $ 27.5 million and $ 29.0 million, respectively.

At June 30, 2024, the Company has paid and was committed to approximately $ 37.5 million of the total estimated amount.

As of June 30, 2024 and December 31, 2023, the Company recorded unfunded commitments to provide capital contributions for on-balance-sheet investments in the amount of $ 29.4 million and $ 29.0 million, respectively.

Concentrations of Credit Risk

The distribution of commitments to extend credit approximates the distribution of loans outstanding.

The Company generally does not have a significant number of credits to any single borrower or group of related borrowers whereby their retained unguaranteed exposure exceeds $ 20.0 million, except for twenty-eight relationships that have a retained unguaranteed exposure of $ 1.12 billion of which $ 694.6 million of the unguaranteed exposure has been disbursed.

The Company generally does not have a significant number of credits to any single borrower or group of related borrowers whereby their retained unguaranteed exposure exceeds $ 20.0 million, except for thirty-four relationships that have a retained unguaranteed exposure of $ 1.30 billion of which $ 811.8 million of the unguaranteed exposure has been disbursed.

Additionally, the Company has future minimum lease payments receivable under non-cancelable operating leases totaling $ 44.5 million, of which no relationships exceed $ 20.0 million.

The Company from time-to-time may have cash and cash equivalents on deposit with other financial institutions that exceed federally-insured limits.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company from time-to-time may have cash and cash equivalents on deposit with other financial institutions that exceed federally-insured limits.

Geographic Concentration s

The following table presents the geographic concentration of the Company's loan and lease portfolio at March 31, 2024:

The following table presents the geographic concentration of the Company's loan and lease portfolio at June 30, 2024:

Geographic Regions (1)

10 unchanged sentences

West consists of WA, OR, CA, NV, ID, MT, WY, CO, UT, AK and HI.

On March 20, 2015, the Company adopted the 2015 Omnibus Stock Incentive Plan (as amended and currently in effect, the “2015 Omnibus Stock Incentive Plan”) which replaced the previously existing Amended Incentive Stock Option Plan and Nonstatutory Stock Option Plan.

Subsequently on May 24, 2016, the 2015 Omnibus Stock Incentive Plan was amended and restated, and on May 15, 2018, the 2015 Omnibus Stock Incentive Plan was amended, to authorize awards covering a maximum of 7,000,000 and 8,750,000 common voting shares, respectively.

On May 11, 2021, the Amended and Restated 2015 Omnibus Stock Incentive Plan was amended to authorize awards covering a maximum of 10,750,000 common voting shares.

Subsequently on May 16, 2023, the 2015 Omnibus Stock Incentive Plan was amended to authorize awards covering a maximum of 13,750,000 common voting shares.

Options or restricted shares granted under the 2015 Omnibus Stock Incentive Plan expire no more than 10 years from date of grant.

Exercise prices under the 2015 Omnibus Stock Incentive Plan are set by the Board of Directors at the date of grant but shall not be less than 100 % of fair market value of the related stock at the date of the grant.

Forfeitures are recognized as they occur.

Restricted Stock

Restricted stock awards are authorized in the form of restricted stock awards or units (“RSU”s).

RSUs have a restriction based on the passage of time and may also have a restriction based on a non-market-related performance criteria.

The fair value of the RSUs is based on the closing price on the date of the grant.

For the three months ended March 31, 2024, 457,167 RSUs were granted with a weighted average grant date fair value of $ 39.40 .

At March 31, 2024, unrecognized compensation costs relating to RSUs amounted to $ 88.0 million which will be recognized over a weighted average period of 3.82 years.

The Company's management reporting process measures the performance of its operating segments based on internal operating structure, which is subject to change from time-to-time.

2 unchanged sentences

The primary source of revenue for this segment is net interest income and secondarily the origination and sale of government guaranteed loans.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Fintech - This segment is involved in making strategic investments into emerging financial technology companies.

1 unchanged sentence

The Fintech segment is comprised of the Company's direct wholly owned subsidiaries Live Oak Ventures and Canapi Advisors, and the investments held by those entities, as well as the Bank's investment in Apiture.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following tables provide financial information for the Company's segments.

1 unchanged sentence

Banking Fintech Other Consolidated

As of and for the three months ended March 31, 2024

As of and for the three months ended June 30, 2024

Interest income $ 198,368 $ 4 $ 76 $ 198,448

1 unchanged sentence

Net interest income (loss) 93,010 4 ( 1,694 ) 91,320

Provision for loan and lease credit losses 16,364 — — 16,364

Provision for credit losses 11,765 — — 11,765

Noninterest income 32,189 1,164 806 34,159

3 unchanged sentences

Total assets $ 11,730,203 $ 137,029 $ 1,338 $ 11,868,570

As of and for the three months ended March 31, 2023

As of and for the three months ended June 30, 2023

Interest income $ 169,586 $ 8 $ 118 $ 169,712

1 unchanged sentence

Net interest income (loss) 84,483 8 ( 189 ) 84,302

Provision for loan and lease credit losses 19,021 — — 19,021

Provision for credit losses 13,028 — — 13,028

Noninterest income 21,488 1,998 670 24,156

3 unchanged sentences

Total assets $ 10,642,872 $ 124,459 $ 51,865 $ 10,819,196

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Banking Fintech Other Consolidated

As of and for the six months ended June 30, 2024

Interest income $ 390,637 $ 27 $ 204 $ 390,868

Interest expense 207,356 — 2,081 209,437

Net interest income (loss) 183,281 27 ( 1,877 ) 181,431

Provision for credit losses 28,129 — — 28,129

Noninterest income 57,340 1,625 1,291 60,256

Noninterest expense 146,134 5,071 4,188 155,393

Income tax expense (benefit) 6,461 ( 868 ) ( 1,977 ) 3,616

Net income (loss) $ 59,897 $ ( 2,551 ) $ ( 2,797 ) $ 54,549

Total assets $ 11,730,203 $ 137,029 $ 1,338 $ 11,868,570

As of and for the six months ended June 30, 2023

Interest income $ 320,855 $ 20 $ 253 $ 321,128

Interest expense 154,180 — 629 154,809

Net interest income (loss) 166,675 20 ( 376 ) 166,319

Provision for credit losses 32,049 — — 32,049

Noninterest income 38,485 4,037 1,213 43,735

Noninterest expense 146,399 4,963 4,057 155,419

Income tax expense (benefit) 4,701 182 ( 239 ) 4,644

Net income (loss) $ 22,011 $ ( 1,088 ) $ ( 2,981 ) $ 17,942

Total assets $ 10,642,872 $ 124,459 $ 51,865 $ 10,819,196

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements