What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-18 compared with 2024-02-22 · 62 added, 103 removed, 95 unchanged (63% of the section changed)

2 unchanged sentences

As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures.

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of the end of the period covered by this Annual Report on Form 10-K because of the material weakness in internal control over financial reporting described below.

Notwithstanding the material weakness, based on additional analyses and other procedures performed, management believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, the Company’s financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The Company did not have a restatement of current or prior periods as a result of this material weakness in internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).

the Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the Company’s financial statements.

Because of its inherent limitations, internal control over financial reporting might not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2023, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control-Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.

Based on the assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2023.

FORVIS, LLP, the independent registered public accounting firm, audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K and has issued an audit report on the Company’s internal control over financial reporting as of December 31, 2023.

This report entitled “Report of Independent Registered Public Accounting Firm” appears in Item 8.

The Company’s management, with participation of the CEO and CFO, under the oversight of the Company’s Board of Directors, evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, based on the framework established in “Internal Control-Integrated Framework (2013),” issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.

A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Based on the assessment, and subsequent to our filing of a Form 12b-25 on March 4, 2025, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2024, as management did not sufficiently maintain effective control activities related to the loan review process.

The ineffective controls impacted the Company’s ability to timely identify risk rating downgrades and the related impact to the allowance for credit losses (“ACL”) on loans and leases and related disclosures.

Management concluded that this material weakness was primarily due to (1) insufficient oversight of the control environment as it relates to the loan review process by the Company’s Risk Committee of the Board of Directors, (2) inadequate training of employees relative to internal controls over financial reporting over the loan review process, and (3) lack of effective risk assessment process and monitoring activities responsive to both risks in the loan portfolio and the current economic environment, including the continued appropriateness of control design and level of documentation.

These control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Therefore, we concluded that the deficiencies represent a material weakness in the Company’s internal control over financial reporting and the Company’s internal control over financial reporting was not effective as of December 31, 2024.

The Company did not have a restatement of current or prior periods as a result of this material weakness in internal control over financial reporting.

KPMG LLP, the Company’s independent registered public accounting firm, audited the 2024 consolidated financial statements of the Company included in this Annual Report on Form 10-K and has issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024.

KPMG LLP’s report entitled “Report of Independent Registered Public Accounting Firm” appears in Item 8.

Remediation Status of Reported Material Weakness

The Company is currently working to remediate the material weakness described above, including assessing the need for additional remediation steps and implementing additional measures to remediate the underlying causes that gave rise to the material weakness.

The Company is committed to maintaining a strong internal control environment and to ensuring that proper oversight and a consistent tone is communicated throughout the organization.

The Company expects that existing deficiencies will be remediated through implementation of processes and controls designed to ensure compliance with GAAP.

Specifically, we are in the process of strengthening our internal control over financial reporting as follows:

• Enhancing the depth and breadth of our independent loan review function to make the appropriate changes to the scoping approach, timing, risk assessment, and related processes.

• Increasing the frequency and nature of reporting from our independent loan review function to the Risk Committee to support the Board of Directors’ role in overseeing risk.

• Enhancing internal control training, including focus on risk assessment, design, monitoring, and documentation with regards to the Company’s loan review process.

We believe that these actions will remediate the material weakness.

The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

Except for the material weakness in internal control over financial reporting described above, there have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

Insider Trading Arrangements - During the quarter ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted , modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement:

as such terms are defined in Item 408 of Regulation S-K).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

2 unchanged sentences

The information required by Item 10 will be included in the Company’s definitive proxy statement for the 2025 Annual Meeting of Shareholders (the “Proxy Statement”), under the headings “Proposal 1:

Election of Directors,” “Qualifications of Directors,” “Code of Ethics and Conflict of Interest Policy,” “Director Relationships,” “Committees of the Board or Directors,” “Executive Officers,” “Report of the Audit Committee,” and “Delinquent Section 16(a) Reports” and is incorporated herein by reference.

Election of Directors,” “Qualifications of Directors,” “Code of Ethics and Conflict of Interest Policy,” “Director Relationships,” “Committees of the Board or Directors,” “Executive Officers,” “Report of the Audit Committee,” “Insider Trading Policy,” and “Delinquent Section 16(a) Reports” and is incorporated herein by reference.

The Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the end of our 2024 fiscal year.

9 unchanged sentences

Ratification of Independent Auditors” and is incorporated herein by reference.

The Independent Registered Public Accounting Firm is FORVIS, LLP (Public Company Accounting Oversight Board Firm ID No.

The Independent Registered Public Accounting Firm for 2024 is KPMG LLP (Public Company Accounting Oversight Board Firm ID No.

185 ) located in Charlotte, North Carolina .

The Independent Registered Public Accounting Firm for 2023 was Forvis Mazars, LLP (Public Company Accounting Oversight Board Firm ID No.

686) located in Greenville, North Carolina.

2 unchanged sentences

The following financial statements are filed as part of this Report.

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2024 and 2023

19 unchanged sentences

10.3.1 Second Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 of the current report on Form 8-K filed on May 12, 2021) #

10.3.2 Amendment to Second Amended and Restated 2014 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 of the registration statement on Form S-8, filed on August 6, 2024) #

10.4.1 2015 Omnibus Stock Incentive Plan as Amended and Restated effective May 24, 2016 (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed on May 27, 2016) #

1 unchanged sentence

10.4.3 Amendment to 2015 Omnibus Stock Incentive Plan dated May 11, 2021 (incorporated by reference to Exhibit 10.1 of the current report on Form 8-K filed on May 12, 2021) #

10.4.4 Amendment to 2015 Omnibus Stock Incentive Plan dated November 14, 2023* #

10.5.1 Software Service Agreement between Live Oak Banking Company and nCino, LLC, dated November 1, 2012 (incorporated by reference to Exhibit 10.10 of the registration statement on Form S-1 filed on June 19, 2015)

10.5.2 Amendment to Software Service Agreement dated October 9, 2015, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.7.2 of the 2015 10-K)

10.5.3 Amendment to Software Service Agreement dated September 5, 2018, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.3 of the 2021 10-K)

10.5.4 Amendment to Software Service Agreement dated September 21, 2018, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.4 of the 2021 10-K)

10.5.5 Renewal Amendment to Software Service Agreement dated January 18, 2019, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.3 of the 2018 10-K)

10.5.6 Amendment to Software Service Agreement dated April 1, 2020, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.1 of the quarterly report on Form 10-Q, filed on August 5, 2020)

10.5.7 Amendment to Software Service Agreement dated April 5, 2020, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.2 of the quarterly report on Form 10-Q, filed on August 5, 2020)

10.5.8 Amendment to Software Service Agreement dated April 24, 2020, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.3 of the quarterly report on Form 10-Q, filed on August 5, 2020)

10.5.9 Amendment to Software Service Agreement dated December 1, 2020, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.9 of the 2021 10-K)

10.5.10 Amendment to Software Service Agreement dated January 13, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.10 of the 2021 10-K)

10.5.11 Amendment to Software Service Agreement dated January 15, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.11 of the 2021 10-K)

10.5.12 Amendment to Software Service Agreement dated January 23, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.12 of the 2021 10-K)

10.5.13 Amendment to Software Service Agreement dated January 28, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.13 of the 2021 10-K)

10.5.14 Amendment to Software Service Agreement dated February 23, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.14 of the 2021 10-K)

10.5.15 Amendment to Software Service Agreement dated March 8, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.1.1 of the quarterly report on Form 10-Q, filed on May 5, 2021)

10.5.16 Amendment to Software Service Agreement dated April 6, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.1.2 of the quarterly report on Form 10-Q, filed on May 5, 2021)

10.5.17 Amendment to Software Service Agreement dated May 21, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.1.1 of the quarterly report on Form 10-Q, filed on August 4, 2021)

10.5.18 Amendment to Software Service Agreement dated June 11, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.1.2 of the quarterly report on Form 10-Q, filed on August 4, 2021)

10.5.19 Amendment to Software Service Agreement dated July 23, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.1.3 of the quarterly report on Form 10-Q, filed on August 4, 2021)

10.5.20 Amendment to Software Service Agreement dated November 4, 2021, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.20 of the 2022 10-K)

10.5.21 Amendment to Software Service Agreement dated October 4, 2022, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.3.1 of the quarterly report on Form 10-Q, filed on November 2, 2022)

10.5.22 Amendment to Software Service Agreement dated October 16, 2022, between Live Oak Banking Company and nCino Inc.

(incorporated by reference to Exhibit 10.3.2 of the quarterly report on Form 10-Q, filed on No v ember 2, 2022)

10.5.23 Amendment to Software Service Agreement dated November 3, 2022, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.23 of the annual report on Form 10-K, filed on February 2 3, 202 3)

10.5.24 Amendment to Software Service Agreement dated November 15, 2022, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.24 of the annual report on Form 10-K, filed on February 23, 2023)

10.5.25 Amendment to Software Service Agreement dated January 30, 2023, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.5.25 of the annual report on Form 10-K, filed on February 23, 2023)

10.5.26 Amendment to Software Service Agreement dated March 28, 2023 , between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q, filed on May 3, 2023 )

10.5.27 Amendment to Software Service Agreement dated June 5, 2023, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.1 of the quarterly report on Form 10-Q, filed on August 2, 2023)

10.5.28 Amendment to Software Service Agreement dated June 5, 2023, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.2 of the quarterly report on Form 10-Q, filed on August 2, 2023)

10.5.29 Amendment to Software Service Agreement dated June 8, 2023, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.3 of the quarterly report on Form 10-Q, filed on August 2, 2023)

10.5.30 Amendment to Software Service Agreement dated July 14, 2023, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.4 of the quarterly report on Form 10-Q, filed on August 2, 2023)

10.5.31 Amendment to Software Service Agreement dated July 21, 2023, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.2.5 of the quarterly report on Form 10-Q, filed on August 2, 2023)

10.5.32 Amendment to Software Service Agreement dated September 12 , 2023, between Live Oak Banking Company and nCino, Inc.

(incorporated by reference to Exhibit 10.

1 of the quarterly report on Form 10-Q, filed on November 3 , 2023)

10.5.33 Amendment to Software Service Agreement dated November 2, 2023, between Live Oak Banking Company and nCino, Inc.

10.4.4 Amendment to 2015 Omnibus Stock Incentive Plan dated November 23, 2023 (incorporated by reference to Exhibit 10.4.4 of the annual report on Form 10-K, filed on February 22, 2024) #

Form of Stock Option Award Agreement for executive officers under the 2015 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.8 of the 2015 10-K) #

1 unchanged sentence

Form of RSU Award Agreement for certain executive officers (incorporated by reference to Exhibit 99.2 of the current report on Form 8-K filed on February 24, 2021) #

10.6.4 RSU Award Agreement for M.

Huntley Garriott, Jr.

(incorporated by reference to Exhibit 99.3 of the current report on Form 8-K filed on February 24, 2021) #

RSU Award Agreement for William C.

1 unchanged sentence

Form of RSU Award Agreement for certain executive officers (incorporated by reference to Exhibit 99.1 of the current report on Form 8-K filed on February 18, 2022) #

10.6.7 Form of 202 3 RSU Award Agreement for non-employee directors (incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q filed on August 2 , 202 3 ) #

Form of RSU Award Agreement for certain executive officers (incorporated by reference to Exhibit 99.1 of the current report on Form 8-K filed on February 17, 2023) #

Letter Amendment to Form of RSU Award Agreements for certain executive officers* #

Form of RSU Award Agreement for certain executive officers (incorporated by reference to Exhibit 99.1 of the current report on Form 8-K filed on February 16, 2024) #

Letter Amendment to Form of RSU Award Agreements for certain executive officers (incorporated by reference to Exhibit 10.6.9 of the annual report on Form 10-K filed February 22, 2024) #

Form of 2024 RSU Award Agreement for non-employee directors (incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q filed on August 6, 2024) #

F orm of RSU Award Agreement for certain executive officers (incorporated by re ference to Exhibit 99.1 of the current report on Form 8-K filed on February 14, 2025)

16.1 Letter from Forvis Mazars, LLP dated August 9, 2024 (incorporated by reference to Exhibit 16.1 of the current report on Form 8-K filed on August 9, 2024)

19.1 Live Oak Bancshares, Inc.

Insider Trading Policy *

21.1 Subsidiaries of the Registrant*

23.1 Consent of the Independent Registered Public Accounting Firm - FORVIS, LLP*

23.1 Consent of the Independent Registered Public Accounting Firm - KPMG, LLP*

23.2 Consent of the Independent Registered Public Accounting Firm - Forvis Mazars, LLP*

31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

1 unchanged sentence

32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

97 L ive Oak Bancshares, Inc.

Clawback Policy, adopted by the Board of Directors on November 8 , 2023*

97 Live Oak Bancshares, Inc.

Clawback Policy (incorporated by reference to Exhibit 97 to the annual report on Form 10-K filed February 22, 2024)

101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

15 unchanged sentences

Live Oak Bancshares, Inc.

February 22, 2024

March 18, 2025

Chairman and Chief Executive Officer

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Mahan III February 22, 2024

Mahan III March 18, 2025

Chairman and Chief Executive Officer

1 unchanged sentence

/s/ Walter J.

Phifer February 22, 2024

Phifer March 18, 2025

Chief Financial Officer

1 unchanged sentence

Wesley Sutherland

Wesley Sutherland February 22, 2024

Wesley Sutherland March 18, 2025

Chief Accounting Officer

1 unchanged sentence

/s/ William L.

Williams III February 22, 2024

Williams III March 18, 2025

Vice Chairman of the Board of Directors

Bradford February 22, 2024

Bradford March 18, 2025

/s/ William H.

Cameron February 22, 2024

Glossman February 22, 2024

Hoffsis February 22, 2024

Lucht February 22, 2024

Cameron March 18, 2025

Glossman March 18, 2025

Hoffsis March 18, 2025

Lucht March 18, 2025

/s/ Miltom E.

Petty February 22, 2024

Underwood February 22, 2024

Petty March 18, 2025

Underwood March 18, 2025

/s/ Yousef A.

Valine February 22, 2024

Valine March 18, 2025

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-K

Item 9A. Controls and Procedures