What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-05 · 293 added, 503 removed, 847 unchanged (48% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

As of March 31, 2025 (unaudited) and December 31, 2024

(Dollars in thousands)

September 30,

2025 December 31,

21 unchanged sentences

Shareholders’ equity

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

Class A common stock, no par value, 100,000,000 shares authorized, 45,151,691 and 44,617,673 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at March 31, 2025 and December 31, 2024

Class A common stock, no par value, 100,000,000 shares authorized, 45,589,633 and 45,359,425 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

370,513 365,607

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

Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at March 31, 2025 and December 31, 2024

Retained earnings 724,215 715,767

Accumulated other comprehensive loss ( 67,698 ) ( 82,344 )

Total shareholders' equity attributed to Live Oak Bancshares, Inc.

1,027,030 999,030

Non-controlling interest 4,417 4,466

Total shareholders’ equity 1,031,447 1,003,496

3 unchanged sentences

Condensed Consolidated Statements of Income

For the three and nine months ended September 30, 2024 and 2023 (unaudited)

For the three months ended March 31, 2025 and 2024 (unaudited)

(Dollars in thousands, except per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Interest income

14 unchanged sentences

Net gains on sales of loans 18,648 11,502

Net gain (loss) on loans accounted for under the fair value option 2,255 ( 568 ) 2,208 ( 3,369 )

Net loss on loans accounted for under the fair value option ( 1,034 ) ( 219 )

Equity method investments (loss) income ( 2,239 ) ( 5,022 )

13 unchanged sentences

Other loan origination and maintenance expense 4,585 3,911

Renewable energy tax credit investment impairment (recovery) 115 — ( 642 ) 69

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

FDIC insurance 3,551 3,200

2 unchanged sentences

Income before taxes 13,132 22,107

Income tax expense 4,816 2,967 8,432 7,611

Income tax expense (benefit) 3,464 ( 5,479 )

Net income 9,668 27,586

Net loss attributable to non-controlling interest 49 —

Net income attributable to Live Oak Bancshares, Inc.

$ 9,717 $ 27,586

Basic earnings per share $ 0.21 $ 0.62

3 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

For the three and nine months ended September 30, 2024 and 2023 (unaudited)

For the three months ended March 31, 2025 and 2024 (unaudited)

(Dollars in thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income $ 9,668 $ 27,586

6 unchanged sentences

Total comprehensive income 24,314 21,068

Comprehensive loss attributable to non-controlling interest 49 —

Total comprehensive income attributable to Live Oak Bancshares, Inc.

$ 24,363 $ 21,068

See Notes to Unaudited Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the three and nine months ended September 30, 2024 and 2023 (unaudited)

For the three months ended March 31, 2025 and 2024 (unaudited)

(Dollars in thousands)

3 unchanged sentences

comprehensive

(loss) income Total

Shares Amount

Class A Class B

Balance at June 30, 2024

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

Net income — — — 13,025 — 13,025

Other comprehensive income — — — — 29,309 29,309

Issuance of restricted stock 78,402 — — — — —

Tax withholding related to vesting of restricted stock and other

— — ( 2,356 ) — — ( 2,356 )

Employee stock purchase program 16,445 — 747 — — 747

Stock option exercises 52,988 — 539 — — 539

Restricted stock compensation expense — — 6,614 — — 6,614

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense — — — 183 — 183

Cash dividends ($ 0.03 per share)

— — — ( 1,354 ) — ( 1,354 )

Balance at September 30, 2024

45,151,691 — $ 361,925 $ 707,026 $ ( 61,195 ) $ 1,007,756

Balance at June 30, 2023

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

Net income — — — 39,793 — 39,793

Other comprehensive loss — — — — ( 20,740 ) ( 20,740 )

Issuance of restricted stock 63,694 — — — — —

Tax withholding related to vesting of restricted stock and other

— — ( 1,348 ) — — ( 1,348 )

Employee stock purchase program 28,015 — 765 — — 765

Stock option exercises 36,791 — 263 — — 263

Stock option compensation expense — — 135 — — 135

Restricted stock compensation expense — — 82 — — 82

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

— — — 263 — 263

Cash dividends ($ 0.03 per share)

— — — ( 1,333 ) — ( 1,333 )

Balance at September 30, 2023

44,480,215 — $ 340,929 $ 627,759 $ ( 118,320 ) $ 850,368

Live Oak Bancshares, Inc.

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

For the three and nine months ended September 30, 2024 and 2023 (unaudited)

(Dollars in thousands)

Nine Months Ended

Common stock Retained

earnings Accumulated

comprehensive

income (loss)

(loss) income Non-controlling interest Total

Shares Amount

1 unchanged sentence

Balance at December 31, 2024 45,359,425 — $ 365,607 $ 715,767 $ ( 82,344 ) $ 4,466 $ 1,003,496

44,617,673 — $ 344,568 $ 642,817 $ ( 84,719 ) $ 902,666

Net income — — — 67,574 — 67,574

Net income (loss) — — — 9,717 — ( 49 ) 9,668

Other comprehensive income — — — — 14,646 — 14,646

4 unchanged sentences

Stock option exercises 63,409 — 758 — — — 758

Stock option based compensation expense — — — — — —

Restricted stock compensation expense — — 6,667 — — — 6,667

2 unchanged sentences

— — — ( 1,367 ) — — ( 1,367 )

Balance at September 30, 2024

Balance at March 31, 2025

45,589,633 — $ 370,513 $ 724,215 $ ( 67,698 ) $ 4,417 $ 1,031,447

Balance at December 31, 2023 44,617,673 — $ 344,568 $ 642,817 $ ( 84,719 ) $ — $ 902,666

44,061,244 — $ 330,854 $ 572,497 $ ( 92,318 ) $ 811,033

Net income — — — 27,586 — — 27,586

5 unchanged sentences

Stock option exercises 178,845 — 1,129 — — — 1,129

Stock option based compensation expense — — 272 — — 272

Restricted stock compensation expense — — 6,306 — — — 6,306

Adoption of ASU 2022-02

— — — 676 — 676

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

— — — 249 — — 249

Cash dividends ($ 0.03 per share)

— — — ( 1,345 ) — — ( 1,345 )

Balance at September 30, 2023

Balance at March 31, 2024

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

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2024 and 2023 (unaudited)

For the three months ended March 31, 2025 and 2024 (unaudited)

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

3 unchanged sentences

Provision for credit losses 28,964 16,364

(Accretion) amortization of (discount) premium on securities, net ( 631 ) 63

Accretion of discount on securities, net ( 83 ) ( 355 )

Deferred tax benefit ( 1,009 ) ( 6,888 )

2 unchanged sentences

Net gains on sale of loans held for sale ( 18,648 ) ( 11,502 )

Net loss on sale of foreclosed assets 9 —

Net (gain) loss on loans accounted for under fair value option ( 2,208 ) 3,369

Net loss on impairment or sale of foreclosed assets 34 —

Net loss on loans accounted for under fair value option 1,034 219

Net change in servicing assets ( 767 ) ( 752 )

Net gain on disposal of long-lived assets ( 9,079 ) —

Net loss on disposal of property and equipment 177 377

Net loss (gain) on disposal of property and equipment 24 ( 4 )

Equity method investments loss (income) 2,239 5,022

Equity security investments (gains) losses, net ( 541 ) 585

Gain on equity warrant assets ( 6,119 ) —

Renewable energy tax credit investment (recovery) impairment ( 642 ) 69

Stock option compensation expense — 272

Equity security investments losses (gains), net ( 20 ) 529

Loss (gain) on equity warrant assets 304 ( 5,662 )

Renewable energy tax credit investment recovery — ( 927 )

Restricted stock compensation expense 6,667 6,306

Stock based compensation excess tax benefit (deficiency) 729 ( 915 )

Stock based compensation excess tax (deficiency) benefit ( 156 ) 889

Lease right-of-use assets and liabilities, net ( 14 ) ( 11 )

5 unchanged sentences

Purchases of investment securities available-for-sale ( 76,965 ) ( 46,176 )

Proceeds from maturities, calls, and principal paydown of investment securities available-for-sale 113,394 79,241

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

Maturities of certificates of deposits with other banks — 250

Proceeds from maturities, calls, and principal paydowns of investment securities available-for-sale 31,842 43,493

Purchases of loans previously sold ( 23,607 ) ( 22,425 )

Loan and lease originations and principal collections, net ( 524,894 ) ( 228,713 )

Proceeds from sale of long-lived asset 43,598 —

Purchases of equity security investments ( 3,433 ) ( 3,279 )

Purchases of equity method investments ( 424 ) ( 1,435 )

Proceeds from equity security investment 1,177 —

Proceeds from equity method investments 1,338 6,878

Proceeds from sale of equity security investments 160 535

Proceeds from sale of equity method investments 129 —

Proceeds from sale of premises and equipment 222 978

1 unchanged sentence

Net cash used by investing activities ( 599,264 ) ( 278,698 )

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

For the nine months ended September 30, 2024 and 2023 (unaudited)

For the three months ended March 31, 2025 and 2024 (unaudited)

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from financing activities

4 unchanged sentences

Employee stock purchase program 659 702

Withholding cash issued in lieu of restricted stock and other ( 5,750 ) ( 4,950 )

Tax withholding related to vesting of restricted stock and other ( 3,178 ) ( 3,057 )

Shareholder dividend distributions ( 1,367 ) ( 1,345 )

9 unchanged sentences

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

10,351 34,864

Transfer from premises and equipment, net to other assets — 18,540

4 unchanged sentences

Equity method investment commitments — 1,008

Equity security investment commitments 2,500 —

See Notes to Unaudited Condensed Consolidated Financial Statements

8 unchanged sentences

The Bank specializes in providing lending and deposit related services to small businesses nationwide.

A significant portion of the loans originated by the Bank are guaranteed by the Small Business Administration (“SBA”) under the 7(a) Loan Program and the U.S.

A significant portion of the loans originated by the Bank are partially guaranteed by the Small Business Administration (“SBA”) under the 7(a) Loan Program and the U.S.

Department of Agriculture’s ( “ USDA”) Rural Energy for America Program (“REAP”), Water and Environmental Program (“WEP”), Business & Industry ( “ B&I”) and Community Facilities loan programs.

2 unchanged sentences

The Bank also lends more broadly to select borrowers outside of those verticals.

The Company’s wholly owned material subsidiaries are the Bank, Government Loan Solutions, Inc.

(“GLS”), Live Oak Grove, LLC (“Grove”), Live Oak Ventures, Inc.

(“Live Oak Ventures”), and Canapi Advisors, LLC (“Canapi Advisors”).

As of March 31, 2025, t he Company’s wholly owned material subsidiaries are the Bank, Government Loan Solutions, Inc.

(“GLS”), Live Oak Grove, LLC (“Grove”), and Live Oak Ventures, Inc.

(“Live Oak Ventures”).

GLS is a management and technology consulting firm that advises and offers solutions and services to participants in the government guaranteed lending sector.

GLS primarily provides services in connection with the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under the SBA 7(a) loan programs and USDA guaranteed loans.

The Grove provides Company employees and business visitors with on-site dining.

The Grove provides Company employees and business visitors with on-site dining at the Company's Wilmington, North Carolina headquarters.

Live Oak Ventures’ purpose is investing in businesses that align with the Company's strategic initiative to be a leader in financial technology.

Canapi Advisors provided investment advisory services to a series of funds (the“Canapi Funds”) focused on providing venture capital to new and emerging financial technology companies.

Canapi Advisors, LLC (“Canapi Advisors”) was a wholly owned subsidiary providing investment advisory services to a series of funds (the “Canapi Funds”) focused on providing venture capital to new and emerging financial technology companies.

During the third quarter of 2024, the Canapi Funds were restructured and Canapi Advisors voluntarily withdrew as an investment advisor to the funds.

As of September 30, 2024, Live Oak Bancshares, Inc.

and two Company Directors held carried interest in Canapi Ventures Fund, LP.

Canapi Advisors was subsequently dissolved in the fourth quarter of 2024.

During the fourth quarter of 2024, Live Oak Ventures consolidated its investment in Synply, Inc.

as a result of its controlling interest in that entity.

Synply is a cloud-based technology platform designed to simplify the loan syndication process for financial institutions.

The non-controlling interest in Synply is disclosed according to the Company’s consolidation policy.

The Bank’s wholly owned subsidiaries are Live Oak Number One, Inc., Live Oak Clean Energy Financing LLC (“LOCEF”), Live Oak Private Wealth, LLC (“Live Oak Private Wealth”) and Tiburon Land Holdings, LLC (“TLH”).

8 unchanged sentences

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.

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

Live Oak Bancshares, Inc.

1 unchanged sentence

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 and nine months ended September 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.

Results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2025.

The Condensed Consolidated Balance Sheet as of December 31, 2024 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, 2024, filed with the Securities Exchange Commission ( “ SEC ” ) on March 18, 2025 (SEC File No.

001-37497) (the “ 2024 Form 10-K ” ).

7 unchanged sentences

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Management has determined that the Company has two reportable operating segments:

Banking and Fintech, as discussed more fully in Note 11.

The Company’s chief operating decision maker is the President of Live Oak Bancshares, Inc.

and the Bank.

In determining the appropriateness of segment definition, the Company considers the components of the business about which financial information is available and components the chief operating decision maker regularly evaluates relative to resource allocation and performance assessment.

Management has determined that the Company has one significant operating segment, which is providing a banking platform for small businesses nationwide.

The banking platform generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans.

The chief operating decision maker assesses performance and decides how to allocate resources based on net income which is reported on the consolidated statements of income.

The chief operating decision maker uses net income to evaluate income generated from total assets (return on assets) and profitability of the segment in relation to total shareholders’ equity (return on equity).

The measures of segment assets and equity are reported on the consolidated balance sheets as total assets and total shareholders’ equity.

Net income is also used to monitor budget versus actual results.

All of these elements are used in assessing performance of the segment.

Significant segment expenses are reported on the consolidated statements of income.

Changes in Accounting Estimates

3 unchanged sentences

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 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.

These revisions provide estimates that the Company believes are more representative of fair value while transitioning from unobservable inputs to those that are more observable.

These estimate changes were implemented as of July 1, 2023 and resulted in nonrecurring adjustments to increase the estimated value of the servicing asset by $ 13.7 million and loans measured at fair value by $ 1.3 million.

This adjustment also increased noninterest income by a corresponding $ 15.0 million.

These refinements have been accounted for as changes in accounting estimates under Financial Accounting Standards Board ( “ FASB ” ) Accounting Standards Codification ( “ ASC ” ) 250, Accounting Changes and Error Corrections , with prospective application beginning in the period of change.

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

Long-Lived Asset Reclassified to Held for Sale

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.

3 unchanged sentences

Reclassifications

Certain reclassifications have been made to the prior period's condensed consolidated financial statements to place them on a comparable basis with the current year.

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.

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update (“ASU”) No.

2020-04 “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”).

ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

In December 2022, ASU 2022-06 “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848” was issued deferring the sunset date of Topic 848.

As subsequently amended, the guidance in the ASU can be applied by the Company through December 31, 2024.

To address the discontinuance of LIBOR, the Company stopped originating variable LIBOR-based loans effective December 31, 2021 and started to negotiate loans using the preferred replacement index, the Secured Overnight Financing Rate (“SOFR”) or a relevant duration U.S.

Treasury rate.

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.

In June 2022, the FASB issued ASU No.

2022-03 “Fair Value Measurement (Topic 820) Fair Value Measurement of Equity Securities Subject to Contractual Restrictions” (“ASU 2022-03”).

ASU 2022-03 indicates a contractual sale restriction on equity securities should not be considered in measuring fair value, however, disclosure should be made about such restrictions.

The Company adopted the standard on January 1, 2024 with no material effect on its Consolidated Financial Statements.

In March 2023, the FASB issued ASU No.

2023-02 “Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”).

ASU 2023-02 permits companies to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

The Company adopted the standard on January 1, 2024 with no material effect on its Consolidated Financial Statements.

In October 2023, the FASB issued ASU No.

In October 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-06 “Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”).

3 unchanged sentences

The Company does not believe this standard will have a material impact on its consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in this standard will be effective for the Company for the fiscal year ended December 31, 2024 and subsequent interim periods.

The amendments will be applied retrospectively to all prior periods in the Consolidated Financial Statements.

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

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In December 2023, the FASB issued ASU No.

2 unchanged sentences

ASU 2023-09 requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide more transparency by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation table and (ii) income taxes paid, net of refunds, to be disaggregated by jurisdiction based on an established threshold.

The amendments in this standard will be effective for the Company on January 1, 2025.

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

ASU 2023-09 is effective January 1, 2025 and impacts the Company’s annual income tax disclosure.

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

1 unchanged sentence

ASU 2024-01 adds an illustrative example to clarify how an entity should determine whether a profits interest or similar award is within the scope of ASC 718.

The amendments in this standard will be effective for the Company on January 1, 2025.

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

The Company adopted the standard on January 1, 2025, with no material effect on its 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”).

ASU 2024-02 removes references to various Concepts Statements in the Codification.

The Company adopted the standard on January 1, 2025, with no material effect on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”).

ASU 2024-03 requires disaggregation of certain expense captions into specified categories within the footnotes.

The amendments in this standard will be effective for the Company on January 1, 2027.

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

The Company is currently evaluating the impact the amendments will have on the consolidated financial statements and related disclosures.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Earnings Per Share

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Basic earnings per share:

Net income $ 13,025 $ 39,793 $ 67,574 $ 57,735

Net income attributable to Live Oak Bancshares, Inc.

$ 9,717 $ 27,586

Weighted-average basic shares outstanding 45,377,965 44,762,308

1 unchanged sentence

Diluted earnings per share:

Net income, for diluted earnings per share $ 13,025 $ 39,793 $ 67,574 $ 57,735

Net income attributable to Live Oak Bancshares, Inc., for diluted earnings per share $ 9,717 $ 27,586

Total weighted-average basic shares outstanding 45,377,965 44,762,308

3 unchanged sentences

Anti-dilutive stock options and restricted stock grants 1,499,126 459,599

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Available-for-Sale

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

September 30, 2024 Amortized

March 31, 2025 Amortized

government agencies $ 17,912 $ 13 $ 68 $ 17,857

3 unchanged sentences

December 31, 2024 Amortized

Cost Unrealized

Gains Unrealized

government agencies $ 18,196 $ — $ 299 $ 17,897

2 unchanged sentences

Total $ 1,356,549 $ 1,083 $ 109,429 $ 1,248,203

During the three months ended September 30, 2024, four securities totaling $ 3.7 million were settled.

During the nine months ended September 30, 2024, six securities totaling $ 18.5 million were settled, one security totaling $ 2.5 million was called and one security totaling $ 3.0 million matured.

During the three months ended September 30, 2023, two mortgage-backed securities totaling $ 4.3 million were settled.

During the nine months ended September 30, 2023, four mortgage-backed securities totaling $ 7.0 million were settled.

Accrued interest receivable on available-for-sale securities totaled $ 4.0 million and $ 3.3 million at September 30, 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 March 31, 2025, three securities totaling $ 5.6 million were settled.

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.

Accrued interest receivable on available-for-sale securities totaled $ 4.5 million and $ 4.2 million at March 31, 2025 and December 31, 2024, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

September 30, 2024 Fair

March 31, 2025 Fair

government agencies $ 1,020 $ 3 $ 9,909 $ 65 $ 10,929 $ 68

8 unchanged sentences

Total $ 273,970 $ 4,362 $ 872,653 $ 105,067 $ 1,146,623 $ 109,429

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

At September 30, 2024, there were 406 mortgage-backed securities, three U.S.

At March 31, 2025, there were 402 mortgage-backed securities, three U.S.

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

There were 15 mortgage-backed securities in unrealized loss positions for less than 12 months.

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

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.

There were 34 mortgage-backed securities and one U.S.

government agency in unrealized loss positions for less than 12 months.

Unrealized losses at December 31, 2024 were comprised of 404 mortgage-backed securities, three U.S.

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

There were 59 mortgage-backed securities and two U.S.

government agencies 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 September 30, 2024 and December 31, 2023 were backed by U.S.

All mortgage-backed securities in the Company’s portfolio at March 31, 2025 and December 31, 2024 were backed by U.S.

government sponsored enterprises (“GSEs”).

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following is a summary of investment securities by maturity:

September 30, 2024

March 31, 2025

Available-for-Sale

3 unchanged sentences

One to five years 3,997 3,948

Five to ten years 6,915 6,928

Total 17,912 17,857

2 unchanged sentences

One to five years 215,854 209,408

Five to 10 years 217,264 200,263

Five to ten years 214,097 194,625

After 10 years 920,486 857,639

1 unchanged sentence

Municipal bonds

Five to 10 years 3,086 3,024

Five to ten years 3,074 2,967

After 10 years 96 83

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 September 30, 2024 or December 31, 2023.

At March 31, 2025, investment securities with a market value of $ 611.3 million and a carrying value of $ 674.1 million were pledged to support unused borrowing capacity.

At December 31, 2024, investment securities with a market value of $ 621.4 million and a carrying value of $ 695.1 million were pledged to support unused borrowing capacity.

Equity Investments

4 unchanged sentences

Equity Method Accounting

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

September 30, 2024 December 31, 2023

The carrying amount and ownership percentage of each equity method investment at March 31, 2025 and December 31, 2024 is reflected in the following table:

March 31, 2025 December 31, 2024

Amount Ownership % Amount Ownership %

15 unchanged sentences

Total $ 87,036 $ 91,003

(1) Includes unfunded commitments of $ 5.5 million and $ 5.0 million as of September 30, 2024 and December 31, 2023, respectively.

(2) Includes unfunded commitments of $ 555 thousand and $ 559 thousand as of September 30, 2024 and December 31, 2023, respectively.

(3) Includes unfunded commitments of $ 6.1 million and $ 6.3 million as of September 30, 2024 and December 31, 2023, respectively.

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

(1) Investment unfunded commitments of $ 4.8 million and $ 5.0 million as of March 31, 2025 and December 31, 2024, respectively.

(2) Investment unfunded commitments of $ 492 thousand as of March 31, 2025 and December 31, 2024.

(3) Investment unfunded commitments of $ 4.9 million and $ 5.2 million as of March 31, 2025 and December 31, 2024, respectively.

(4) Investment unfunded commitments of $ 6.5 million as of March 31, 2025 and December 31, 2024.

(5) Investee is accounted for under equity method due to the Company's potential influence with investment advisor.

1 unchanged sentence

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

As of September 30, 2024, and December 31, 2023, there was an unfunded commitment of $ 1.8 million and $ 7.7 million, respectively for Estrella Landing.

As of March 31, 2025 and December 31, 2024, there was an unfunded commitment of $ 1.7 million for Estrella Landing.

(7) Solar tax credit investments includes 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.

As of September 30, 2024, and December 31, 2023, there was an unfunded commitment of $ 1.0 million and $ 0.0 million for Heelstone, respectively.

(8) Other investments includes OTR Fund I, LLC ( “ OTR ” ) which the Company holds 5.9 % of limited member interests.

As of September 30, 2024, this investment category also includes the carried interest security related to Canapi Ventures Fund I, LP.

This investment category also includes the carried interest security related to Canapi Ventures Fund I, L.P.

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 September 30, 2024 and as of and for the nine months ended September 30, 2024 and 2023 is reflected in the following table:

As of and for the nine month period ended

Cumulative Adjustments September 30, 2024 September 30, 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 March 31, 2025 and as of and for the three months ended March 31, 2025 and 2024 is reflected in the following table:

As of and for the three month period ended

Cumulative Adjustments March 31, 2025 March 31, 2024

Carrying value (1)

5 unchanged sentences

Net upward (downward) change $ 48,732 $ — $ ( 313 )

(1) Includes $ 4.4 million and $ 2.6 million in unfunded commitments as of September 30, 2024, and September 30, 2023, respectively.

(1) Investment unfunded commitments of $ 5.4 million and $ 2.3 million as of March 31, 2025 and March 31, 2024, 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 and nine months ended September 30, 2024, the Company recognized unrealized gains (losses) on all equity securities held at the reporting date of $ 383 thousand and $ 114 thousand, respectively.

For the three and nine months ended September 30, 2023, the Company recognized unrealized losses on all equity securities held at the reporting date of $ 1.0 million.

Variable Interest Entities

Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in the fair value of an entity's net asset value (a “VIE”).

For the three months ended March 31, 2025 and 2024, the Company recognized unrealized gains (losses) on all equity securities held at the reporting date of $ 8 thousand and $( 490 ) thousand, respectively.

Variable Interest Entities ( “ VIE ”s )

Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in the fair value of an entity's net asset value.

The primary beneficiary consolidates the VIE.

9 unchanged sentences

The Company also has equity interests in two limited liability companies that invest in the acquisition, rehabilitation, or new construction of local qualified housing projects which are accounted for as equity method investments.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company’s limited partnership investments in the Canapi Funds focus on providing venture capital to new and emerging financial technology companies.

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.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 generally 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 accounted for as equity security investments.

While the partnership agreements allow the Company to remove the general partner, this right is not deemed to be substantive as the general partner can only be removed for cause.

All investments are generally non-redeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund.

All above investments meet the criteria of a VIE, however, the Company is not the primary beneficiary of the entities, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities.

The Company’s investment in the unconsolidated VIEs are carried in other assets and the Company’s unfunded capital and other commitments related to the unconsolidated VIEs are carried in other liabilities on the Unaudited Condensed Consolidated Balance Sheets.

The Company’s maximum exposure to loss from unconsolidated VIEs includes the investment recorded on the Company’s Unaudited Condensed Consolidated Balance Sheets.

Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement.

The above investments meet the criteria of a VIE, however, the Company is not the primary beneficiary of the entities, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities.

The Company’s investment in the unconsolidated VIEs are carried in other assets on the Unaudited Condensed Consolidated Balance Sheets.

The Company’s maximum exposure to loss from unconsolidated VIEs includes the investment recorded on the Company’s Unaudited Condensed Consolidated Balance Sheets and unfunded commitment.

For solar tax credit investments, the balance sheet figures are net of any impairment recognized, and includes previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level.

While the Company believes the potential for loss from these investments is remote, the maximum exposure for LIHTC and solar tax credit investments was determined by assuming a scenario where related tax credits were recaptured.

While the Company believes the potential for loss from these investments is remote, the maximum exposure for solar tax credit investments was determined by assuming a scenario where related tax credits were recaptured.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

September 30, 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 March 31, 2025 and December 31, 2024:

March 31, 2025 Carrying Amount Maximum Exposure to Loss Liability Recognized Classification

Solar tax credit investments $ 4,404 $ 27,845 $ — Other assets (1)

Affordable housing 15,105 15,929 1,784 Other assets & other liabilities (2)

Canapi Funds 34,116 34,116 19,192 Other assets & other liabilities

Non-marketable and other equity investments 10,194 10,194 4,370 Other assets & other liabilities

December 31, 2023 Investment Carrying Amount Maximum Exposure to Loss Liability Recognized Classification

Affordable housing 12,665 15,305 — Other assets (2)

Canapi Funds 17,280 34,021 — Other assets (3)

Non-marketable and other equity investments 5,331 10,700 — Other assets (4)

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

Solar tax credit investments $ 5,309 $ 38,107 $ — Other assets (5)

Affordable housing 15,611 15,611 7,715 Other assets & other liabilities (4)

Canapi Funds 35,300 35,300 18,930 Other assets & other liabilities

Non-marketable and other equity investments 8,840 8,840 2,321 Other assets & other liabilities

(1) Maximum exposure to loss represents $ 6.8 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 $ 15.1 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 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.

Affordable housing 12,940 15,463 — Other assets (6)

Canapi Funds 17,104 34,269 — Other assets (7)

Non-marketable and other equity investments 5,290 9,591 — Other assets (8)

(1) Maximum exposure to loss includes $ 4.4 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $ 23.4 million.

(2) Maximum exposure to loss includes $ 12.7 million of current investments, $ 1.7 million in unfunded commitments, and a scenario in which related tax credits are recaptured, collectively totaling $ 941 thousand.

(3) Maximum exposure to loss includes $ 17.3 million of current investments and $ 16.7 million in unfunded commitments.

(4) Maximum exposure to loss includes $ 5.3 million of current investments and $ 5.4 million in unfunded commitments.

(5) Maximum exposure to loss includes $ 5.3 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $ 32.8 million.

(6) Maximum exposure to loss includes $ 12.9 million of current investments, $ 1.7 million in unfunded commitments, and a scenario in which related tax credits are recaptured, collectively totaling $ 824 thousand.

(7) Maximum exposure to loss includes $ 17.1 million of current investments and $ 17.2 million in unfunded commitments.

(8) Maximum exposure to loss includes $ 5.3 million of current investments and $ 4.3 million in unfunded commitments.

Live Oak Bancshares, Inc.

9 unchanged sentences

Total Loans and Leases

September 30, 2024

March 31, 2025

Commercial & Industrial

Small Business Banking $ 2,251,813 $ 25,540 $ 121,830 $ 147,370 $ 2,399,183 $ 112,013 $ 2,511,196

Specialty Lending 1,332,391 13,417 — 13,417 1,345,808 4,565 1,350,373

Energy & Infrastructure 917,696 261 19,605 19,866 937,562 45,491 983,053

Commercial Banking 2,535,684 2,544 39,022 41,566 2,577,250 48,658 2,625,908

Paycheck Protection Program 1,399 101 260 361 1,760 — 1,760

2 unchanged sentences

Small Business Banking 585,725 — 2,468 2,468 588,193 — 588,193

Specialty Lending 51,388 — — — 51,388 — 51,388

Energy & Infrastructure 15,442 — — — 15,442 — 15,442

Commercial Banking 86,236 — — — 86,236 — 86,236

Total 671,961 — 2,468 2,468 674,429 — 674,429

1 unchanged sentence

Small Business Banking 2,849,422 20,918 82,618 103,536 2,952,958 106,478 3,059,436

Specialty Lending 819,434 12,852 — 12,852 832,286 — 832,286

Energy & Infrastructure 223,372 9,146 2,799 11,945 235,317 18,982 254,299

Commercial Banking 1,137,275 15,990 10,451 26,441 1,163,716 19,091 1,182,807

Total 3,986,697 36,908 93,069 129,977 4,116,674 125,569 4,242,243

18 unchanged sentences

Small Business Banking $ 2,182,596 $ 37,966 $ 104,362 $ 142,328 $ 2,324,924 $ 119,378 $ 2,444,302

Specialty Lending 1,131,493 — — — 1,131,493 7,829 1,139,322

Energy & Infrastructure 842,907 2,806 4,044 6,850 849,757 46,185 895,942

Commercial Banking 2,418,078 15,282 23,999 39,281 2,457,359 49,767 2,507,126

Paycheck Protection Program 2,361 — — — 2,361 — 2,361

2 unchanged sentences

Small Business Banking 514,997 1,488 2,468 3,956 518,953 — 518,953

Specialty Lending 47,419 — — — 47,419 — 47,419

Energy & Infrastructure 7,541 — — — 7,541 — 7,541

Commercial Banking 85,456 — — — 85,456 — 85,456

Total 600,453 1,488 2,468 3,956 604,409 — 604,409

1 unchanged sentence

Small Business Banking 2,773,306 42,058 57,896 99,954 2,873,260 107,751 2,981,011

Specialty Lending 511,712 — 12,032 12,032 523,744 — 523,744

Energy & Infrastructure 158,613 — 3,072 3,072 161,685 17,751 179,436

Commercial Banking 1,040,065 5,000 10,778 15,778 1,055,843 19,025 1,074,868

Total 3,813,371 47,058 68,674 115,732 3,929,103 126,776 4,055,879

12 unchanged sentences

Credit Quality Indicators

The Bank uses internal loan and lease reviews to assess the performance of individual loans and leases.

Each loan and lease is assigned a risk grade during the origination and closing process.

Subsequent to origination, loans and lease risk grades are continually evaluated as information becomes available.

The Bank performs an annual review of each borrower's financial performance to validate the accuracy of the assigned risk grade.

Additionally, the loan and lease portfolio is subject to annual independent review by an external firm.

These loans and leases are not impaired and have no known issues that could significantly impact their quality.

There are seven categories within the Pass classification depending on the strength of the borrower, including credits that warrant additional management attention but are not currently Special Mention.

Special Mention:

These loans and leases show signs of weaknesses in either adequate sources of repayment or collateral.

These loans and leases may contain underwriting guideline tolerances and/or exceptions with no mitigating factors;

and/or instances where adverse economic conditions develop subsequent to origination that do not jeopardize liquidation of the debt but substantially increase the level of risk.

Loans and leases graded Substandard are inadequately protected by current sound net worth, paying capacity of the obligor, or pledged collateral.

Loans and leases classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt;

are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

These loans and leases are consistently not meeting the repayment schedule.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following tables present asset quality indicators by portfolio class and origination year.

Loans and Leases Held for Investment and Credit Quality in the Company’s 2024 Form 10-K for additional discussion around the asset quality indicators that the Company uses to manage and monitor credit risk.

Term Loans and Leases Amortized Cost Basis by Origination Year

2 unchanged sentences

Converted to Term Total (1)

September 30, 2024

March 31, 2025

Small Business Banking

3 unchanged sentences

Total 321,935 1,229,780 1,169,769 1,423,128 1,101,069 1,129,907 167,516 39,379 6,582,483

Specialty Lending

Pass 641,027 430,420 262,384 160,179 25,222 2,429 367,088 134,325 2,023,074

Special Mention — 11,350 58,310 35,023 36,148 — 22,396 3,907 167,134

Substandard — 1,042 17,876 12,046 — — 4,436 3,874 39,274

Total 641,027 442,812 338,570 207,248 61,370 2,429 393,920 142,106 2,229,482

Energy & Infrastructure

Commercial Banking

Pass 244,185 1,121,801 700,250 395,072 188,678 120,302 531,286 137,117 3,438,691

8 unchanged sentences

Small Business Banking $ — $ 1,822 $ 1,269 $ 2,135 $ 76 $ 1,152 $ 469 $ — $ 6,923

Energy & Infrastructure $ — $ — $ — $ 153 $ 273 $ — $ — $ — $ 426

Total $ — $ 1,822 $ 1,269 $ 2,135 $ 76 $ 1,152 $ 469 $ — $ 6,923

11 unchanged sentences

Total 1,133,197 1,159,616 1,485,687 1,137,917 599,849 625,759 155,021 36,544 6,333,590

Specialty Lending

Pass 640,596 337,880 226,170 21,286 9,103 112 210,460 58,441 1,504,048

Special Mention 8,858 52,767 35,453 43,080 9,223 — 20,547 5,417 175,345

Substandard — — 12,032 — — — 7,203 4,028 23,263

Total 649,454 390,647 273,655 64,366 18,326 112 238,210 67,886 1,702,656

Energy & Infrastructure

Commercial Banking

Pass 1,169,167 752,078 398,333 207,755 51,552 81,166 423,334 116,594 3,199,979

6 unchanged sentences

Total $ 2,302,364 $ 1,928,177 $ 2,003,945 $ 1,520,116 $ 704,224 $ 724,494 $ 590,812 $ 160,477 $ 9,934,609

Current Period Gross Charge-offs

Gross Charge-offs

Small Business Banking $ 652 $ 4,198 $ 18,630 $ 4,954 $ 3,462 $ 3,481 $ 3,555 $ 170 $ 39,102

Specialty Lending — — — — — — 7,966 — 7,966

Commercial Banking — 17 5,176 1,493 756 — 1,535 — 8,977

Total $ 652 $ 4,215 $ 23,806 $ 6,447 $ 4,218 $ 3,481 $ 5,090 $ 170 $ 48,079

(1) Excludes $ 343.4 million and $ 388.0 million of loans accounted for under the fair value option as of September 30, 2024 and December 31, 2023, respectively.

(1) Excludes $ 316.8 million and $ 328.7 million of loans accounted for under the fair value option as of March 31, 2025 and December 31, 2024, respectively.

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

September 30, 2024 Loan and Lease

March 31, 2025 Loan and Lease

Guaranteed Balance Unguaranteed Balance % Guaranteed

3 unchanged sentences

Total $ 10,411,445 $ 3,198,325 $ 7,213,120 30.7 %

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2024 Loan and Lease

4 unchanged sentences

Total $ 9,934,609 $ 3,162,994 $ 6,771,615 31.8 %

(1) Excludes $ 343.4 million and $ 388.0 million of loans accounted for under the fair value option as of September 30, 2024 and December 31, 2023, respectively.

(1) Excludes $ 316.8 million and $ 328.7 million of loans accounted for under the fair value option as of March 31, 2025 and December 31, 2024, respectively.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Nonaccrual Loans and Leases

As of September 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 nine months ended September 30, 2024 and 2023.

Accrued interest receivable on loans totaled $ 74.7 million and $ 63.5 million at September 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 September 30, 2024 and December 31, 2023 are as follows:

September 30, 2024 Loan and Lease

As of March 31, 2025 and December 31, 2024, 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, 2025 and 2024.

Accrued interest receivable on loans totaled $ 84.6 million and $ 80.7 million at March 31, 2025 and December 31, 2024 , 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, 2025 and December 31, 2024 are as follows:

March 31, 2025 Loan and Lease

Balance Unguaranteed Balance Unguaranteed

Exposure with No ACL

Exposure with No Allowance for Credit Losses (“ACL”)

Commercial & Industrial

Small Business Banking $ 152,494 $ 126,631 $ 25,863 $ 4,484

Energy & Infrastructure 19,606 15,866 3,740 135

Commercial Banking 136,231 109,371 26,860 3,810

Payroll Protection Program 260 260 — —

Total 288,985 236,262 52,723 8,294

4 unchanged sentences

Small Business Banking 94,727 63,701 31,026 20,865

Specialty Lending 11,304 — 11,304 11,304

Energy & Infrastructure 10,942 10,128 814 814

Commercial Banking 26,441 13,591 12,850 11,874

Total 121,168 77,292 43,876 32,739

3 unchanged sentences

Total $ 422,900 $ 322,993 $ 99,907 $ 41,201

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2024 Loan and Lease Balance (1)

3 unchanged sentences

Small Business Banking $ 141,674 $ 116,596 $ 25,078 $ 5,219

Energy & Infrastructure 6,850 2,794 4,056 2,546

Commercial Banking 39,282 26,300 12,982 3,816

Total 180,956 142,896 38,060 9,035

4 unchanged sentences

Small Business Banking 81,847 55,290 26,557 17,736

Specialty Lending 12,032 — 12,032 12,032

Energy & Infrastructure 3,072 2,799 273 —

Commercial Banking 26,888 13,981 12,907 11,907

Total 108,735 69,271 39,464 29,643

9 unchanged sentences

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Commercial & Industrial $ 444 $ 610

Commercial Real Estate 490 119

Commercial Land 28 — 80 —

Construction & Development — 30

Total $ 934 $ 759

(1) Excludes loans accounted for under the fair value option.

Fair Value of Financial Instruments for additional information.

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 September 30, 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 March 31, 2025 and December 31, 2024:

Total Collateral-Dependent Loans Unguaranteed Portion

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

March 31, 2025 Real Estate Business Assets Real Estate Business Assets Allowance for Credit Losses

Commercial & Industrial

Small Business Banking $ 32,991 $ 20,299 $ 9,484 $ 6,974 $ 9,266

Specialty Lending — 14,976 — — 14,976 — 7,181

Energy & Infrastructure 94,131 2,869 — 13,350 74 — —

Commercial Banking 2,869 16,525 74 9,812 3,100

Total 35,860 36,824 9,558 16,786 12,366

1 unchanged sentence

Small Business Banking 67,093 — 25,814 — 1,426

Commercial Banking 11,103 — 11,103 — —

Total 78,196 — 36,917 — 1,426

4 unchanged sentences

Total Collateral-Dependent Loans Unguaranteed Portion

December 31, 2023 Real Estate Business Assets Other Real Estate Business Assets Other Allowance for Credit Losses

December 31, 2024 Real Estate Business Assets Real Estate Business Assets Allowance for Credit Losses

Commercial & Industrial

Small Business Banking $ 6,693 $ 36,500 $ 2,738 $ 12,061 $ 8,299

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

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

Commercial Banking 101,001 26,788 13,704 11,350 4,374

Total 107,694 63,288 16,442 23,411 12,673

15 unchanged sentences

Real Estate Commercial

September 30, 2024

March 31, 2025

Beginning Balance $ 129,007 $ 4,943 $ 29,501 $ 4,065 $ 167,516

1 unchanged sentence

Recoveries 40 — 91 18 149

Provision (Recovery) 26,580 291 4,437 1,272 32,580

Provision 26,856 769 1,639 178 29,442

Ending Balance $ 149,916 $ 5,712 $ 30,295 $ 4,261 $ 190,184

September 30, 2023

March 31, 2024

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

3 unchanged sentences

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

Nine Months Ended Commercial

& Industrial Construction &

Development Commercial

Real Estate Commercial

September 30, 2024

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

Charge offs ( 13,483 ) ( 338 ) ( 378 ) ( 24 ) ( 14,223 )

Recoveries 553 — 536 8 1,097

Provision (Recoveries) 58,397 ( 394 ) ( 1,049 ) ( 931 ) 56,023

Ending Balance $ 133,048 $ 3,985 $ 27,973 $ 3,731 $ 168,737

September 30, 2023

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

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

Charge offs ( 17,564 ) — ( 979 ) — ( 18,543 )

Recoveries 685 — 913 — 1,598

Provision 32,727 1,045 7,152 1,404 42,328

Ending Balance $ 80,818 $ 5,980 $ 29,904 $ 4,571 $ 121,273

During the three months ended September 30, 2024, the ACL increased primarily as a result of an increase in specific reserves on loans individually evaluated for impairment.

During the nine months ended September 30, 2024, the ACL increased as a result of specific reserve changes on individually evaluated loans and continued growth of the loan and lease portfolio.

During the three months ended March 31, 2025, the ACL increased as a result of loan growth amid a challenging macroeconomic environment which included specific reserve changes on individually evaluated loans.

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

During the three and nine months ended September 30, 2023, the ACL increased as a result of continued loan growth, combined with specific reserve changes on individually evaluated loans and charge-off related impacts.

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 nine months ended September 30, 2023.

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.

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

5 unchanged sentences

The Company typically does not offer principal forgiveness.

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

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

Payment Delay Term Extension Interest Rate Reduction

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

Financing Receivable

Small Business Banking $ 2,014 $ — $ — $ — 0.03 %

Specialty Lending — — 3,478 2,500 0.16

Total $ 2,014 $ — $ 3,478 $ 2,500 0.19 %

Nine Months Ended September 30, 2024 Other-Than-Insignificant

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

Financing Receivable

Small Business Banking $ 8,278 $ — $ — $ — 0.14 %

Specialty Lending — — 3,478 2,500 0.16

Total $ 8,278 $ — $ 3,478 $ 2,500 0.30 %

Three Months Ended September 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 $ 10,117 $ 5,184 $ — $ — 0.28 %

Total $ 10,117 $ 5,184 $ — $ — 0.28 %

Nine Months Ended September 30, 2023 Other-Than-Insignificant

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

The following table summarizes the amortized cost basis of loans that were modified during the three months ended March 31, 2025:

Three Months Ended March 31, 2025 Term Extension Interest Rate Reduction Combination - Term Extension, Other-Than-Insignificant Payment Delay & Interest Rate Reduction

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

Financing Receivable

Small Business Banking $ 3,601 $ 2,243 $ 3,057 $ 3,009 $ 193 0.2 %

Specialty Lending — 399 — 4,164 0.30

Energy & Infrastructure — 13,485 — — 1.66

Total $ 3,601 $ 2,243 $ 3,057 $ 3,009 $ 193 0.2 %

As of September 30, 2024, the Company had $ 6.3 million in 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 September 30, 2024 and September 30, 2023, respectively:

September 30, 2024 Current 30-89 Days

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

As of March 31, 2025, the Company had commitments to lend additional funds to these borrowers totaling $ 28 thousand.

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, 2025, and March 31, 2024, respectively:

March 31, 2025 Current 30-89 Days

Past Due 90 Days or More Past Due Total Past Due

Small Business Banking $ 17,644 $ — $ 2,243 $ 2,243

Specialty Lending 5,978 — — —

Commercial Banking 17,576 — — —

Total $ 35,220 $ — $ 2,243 $ 2,243

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2023 Current 30-89 Days

March 31, 2024 Current 30-89 Days

Past Due 90 Days or More Past Due Total Past Due

Small Business Banking $ 15,286 $ — $ — $ —

Specialty Lending 4,563 — — —

Energy & Infrastructure 13,485 — — —

Commercial Banking 17,691 — — —

Total $ 32,977 $ — $ — $ —

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

Three Months Ended September 30, 2024

Weighted Average

Interest Rate Reduction Weighted Average

Term Extension (in Months)

Specialty Lending 5.00 % 7

Nine Months Ended September 30, 2024

Weighted Average

Interest Rate Reduction Weighted Average

Term Extension (in Months)

Specialty Lending 5.00 % 7

Three Months Ended September 30, 2023

Weighted Average

Interest Rate Reduction Weighted Average

Term Extension (in Months)

Small Business Banking — % 60

Nine Months Ended September 30, 2023

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

Three Months Ended March 31, 2025

Weighted Average

2 unchanged sentences

Small Business Banking 1.81 % 44

Specialty Lending — 70

Energy & Infrastructure — 12

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

Additionally, there were no loans that were modified within the twelve months ended March 31, 2025 and March 31, 2024 that subsequently defaulted during the period presented.

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

2 unchanged sentences

As a result, the impact of loss mitigation strategies is captured in the estimates of PD and LGD.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Lessor Equipment Leasing

1 unchanged sentence

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, 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.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

Direct Financing Leases

3 unchanged sentences

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Gross direct finance lease payments receivable $ 710 $ 961

1 unchanged sentence

Net investment in direct financing leases $ 688 $ 922

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

As of September 30, 2024

Total $ 1,357

Interest income of $ 29 thousand and $ 72 thousand was recognized in the three months ended September 30, 2024 and 2023, respectively.

Interest income of $ 95 thousand and $ 211 thousand was recognized in the nine months ended September 30, 2024 and 2023, respectively.

Future minimum lease payments under finance leases are as follows:

As of March 31, 2025

Interest income of $ 17 thousand and $ 18 thousand was recognized in the three months ended March 31, 2025 and 2024, 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 September 30, 2024 and December 31, 2023, the Company had a net investment of $ 96.0 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 September 30, 2024 and December 31, 2023, respectively.

Accumulated depreciation was $ 64.7 million and $ 58.3 million as of September 30, 2024 and December 31, 2023, respectively.

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

Depreciation expense recognized on these assets was $ 7.1 million and $ 7.2 million for the nine months ended September 30, 2024 and 2023, respectively.

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

Lease income of $ 7.1 million was recognized in the nine months ended September 30, 2024 and 2023.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

As of March 31, 2025 and December 31, 2024, the Company had a net investment of $ 90.7 million and $ 93.4 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 $ 159.3 million and $ 159.7 million as of March 31, 2025 and December 31, 2024, respectively.

Accumulated depreciation was $ 68.6 million and $ 66.2 million as of March 31, 2025 and December 31, 2024, respectively.

Depreciation expense recognized on these assets was $ 2.6 million and $ 2.4 million for the three months ended March 31, 2025 and 2024, respectively.

Lease income of $ 2.5 million and $ 2.4 million was recognized in the three months ended March 31, 2025 and 2024, respectively.

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

As of September 30, 2024

As of March 31, 2025

Thereafter 7,308

2 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 $ 3.38 billion and $ 3.09 billion at September 30, 2024 and December 31, 2023, respectively.

The unpaid principal balance for all loans serviced for others was $ 4.45 billion and $ 4.24 billion at September 30, 2024 and December 31, 2023, respectively.

The unpaid principal balance of loans serviced for others requiring recognition of a servicing asset was $ 3.57 billion and $ 3.46 billion at March 31, 2025 and December 31, 2024, respectively.

The unpaid principal balance for all loans serviced for others was $ 4.95 billion and $ 4.72 billion at March 31, 2025 and December 31, 2024, respectively.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Balance at beginning of period $ 55,788 $ 48,186

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 September 30, 2024 and 15.0 % on September 30, 2023.

The fair value of servicing rights was determined using a weighted average prepayment speed of 15.7 % on September 30, 2024 and 15.3 % on September 30, 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 13.5 % on March 31, 2025 and 14.5 % on March 31, 2024.

The fair value of servicing rights was determined using a weighted average prepayment speed of 16.0 % on March 31, 2025 and 15.7 % on March 31, 2024, 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 September 30, 2024, the Company had servicing assets related to conventional commercial loans carried at amortized cost of $ 258 thousand.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The table below reflects the sensitivity of the current fair value of servicing assets to immediate adverse changes in the above key assumptions with all other assumptions remaining static:

31, 2025 As of December.

Fair value of servicing rights $ 56,684 $ 55,788

Incremental Increase (Decrease) in Value Incremental Increase (Decrease) in Value

Prepayment Speed

20% increase ($ 3,390 ) ($ 3,459 )

10% increase ( 1,699 ) ( 1,785 )

Discount Rate

200 basis point increase ( 2,469 ) ( 2,603 )

100 basis point increase ( 1,209 ) ( 1,331 )

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance.

As indicated, changes in fair value based on changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear.

Also, in this table, the effect of a variation in a particular assumption on the fair value of the servicing rights is calculated without changing any other assumption.

Changes in one factor may result in changes in another.

As of March 31, 2025 and 2024, the Company had servicing assets related to conventional commercial loans carried at amortized cost of $ 227 thousand and $ 381 thousand, respectively.

Total outstanding borrowings consisted of the following:

September 30,

2025 December 31,

6 unchanged sentences

The Company paid the Lender a non-refundable $ 600 thousand loan origination fee upon signing of the Note that is represented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan.

99,540 99,505

Other long term debt (1)

1 unchanged sentence

(1) Includes finance leases.

As of September 30, 2024 and December 31, 2023, the Company’s unused borrowing capacity was $ 3.69 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 $ 6.37 billion and $ 6.28 billion as of September 30, 2024 and December 31, 2023, respectively.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

As of March 31, 2025 and December 31, 2024, the Company’s unused borrowing capacity was $ 3.80 billion and $ 3.55 billion, respectively, based upon securities and loans identified as available for collateral.

If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $ 6.36 billion and $ 6.10 billion as of March 31, 2025 and December 31, 2024, respectively.

Fair Value of Financial Instruments

6 unchanged sentences

Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Recurring Fair Value

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Equity Warrant Assets 2025 2024

5 unchanged sentences

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

September 30, 2024 Total Level 1 Level 2 Level 3

March 31, 2025 Total Level 1 Level 2 Level 3

Investment securities available-for-sale

US government agencies $ 11,194 $ — $ 11,194 $ —

government agencies $ 17,857 $ — $ 17,857 $ —

Mortgage-backed securities 1,291,773 — 1,291,773 —

7 unchanged sentences

Total assets at fair value $ 1,693,547 $ — $ 1,312,938 $ 380,609

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2024 Total Level 1 Level 2 Level 3

Investment securities available-for-sale

US government agencies $ 17,529 $ — $ 17,529 $ —

government agencies $ 17,897 $ — $ 17,897 $ —

Mortgage-backed securities 1,227,333 — 1,227,333 —

7 unchanged sentences

Total assets at fair value $ 1,640,357 $ — $ 1,248,578 $ 391,779

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

During the three months ended September 30, 2023, there was no level 3 fair value adjustment gain or loss.

During the nine months ended September 30, 2023, the Company recorded a level 3 fair value adjustment loss of $ 9 thousand.

(1) During the three months ended March 31, 2025 and March 31, 2024 there was no level 3 fair value adjustment gain or loss.

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

1 unchanged sentence

Fair Value of Financial Instruments in the Company’s 2024 Form 10-K.

Additionally, see Note 1.

Basis of Presentation of the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for information related to changes in valuation techniques for the Company's loan servicing assets and loans accounted for under the fair value option.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Fair Value Option

5 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 September 30, 2024 or December 31, 2023.

The unpaid principal balance of unguaranteed exposure for nonaccruals was $ 9.5 million and $ 9.1 million at September 30, 2024 and December 31, 2023, respectively.

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 September 30, 2024 and December 31, 2023.

September 30, 2024

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, 2025 or December 31, 2024.

The unpaid principal balance of unguaranteed exposure for nonaccruals was $ 10.8 million and $ 10.0 million at March 31, 2025 and December 31, 2024, respectively.

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, 2025 and December 31, 2024.

March 31, 2025

Total Loans Nonaccruals 90 Days or More Past Due

7 unchanged sentences

Loans held for investment $ 316,807 $ 331,203 $ ( 14,396 ) $ 68,038 $ 69,662 $ ( 1,623 ) $ 54,226 $ 55,503 $ ( 1,277 )

$ 316,807 $ 331,203 $ ( 14,396 ) $ 68,038 $ 69,662 $ ( 1,623 ) $ 54,226 $ 55,503 $ ( 1,277 )

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2024

8 unchanged sentences

Loans held for investment $ 328,746 $ 342,150 $ ( 13,404 ) $ 63,386 $ 64,784 $ ( 1,398 ) $ 51,272 $ 52,528 $ ( 1,256 )

$ 328,746 $ 342,150 $ ( 13,404 ) $ 63,386 $ 64,784 $ ( 1,398 ) $ 51,272 $ 52,528 $ ( 1,256 )

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Gains (Losses) on Loans Accounted for under the Fair Value Option 2025 2024

Loans held for investment $ ( 1,034 ) $ ( 219 )

Gains and (losses) related to borrower-specific credit risk were $ 0 for the three and nine months ended September 30, 2024, and $ 0 and $ 3.5 million for the three and nine months ended September 30, 2023, respectively.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

$ ( 1,034 ) $ ( 219 )

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

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Loans held for investment 2025 2024

2 unchanged sentences

Fair value changes ( 1,034 ) ( 219 )

2,255 ( 568 ) 2,208 ( 3,369 )

Settlements ( 17,157 ) ( 17,160 )

Balance at end of period $ 316,807 $ 379,222

(1) Three and nine month periods ended September 30, 2023 include a $ 1.3 million increase related to change in estimate implemented on July 1, 2023.

Basis of Presentation for additional information.

Non-Recurring Fair Value

1 unchanged sentence

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

September 30, 2024 Total Level 1 Level 2 Level 3

March 31, 2025 Total Level 1 Level 2 Level 3

Collateral-dependent loans $ 17,602 $ — $ — $ 17,602

Foreclosed assets 668 — — 668

Total assets at fair value $ 18,270 $ — $ — $ 18,270

8 unchanged sentences

Level 3 Analysis

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

September 30, 2024

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of March 31, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows:

March 31, 2025

Level 3 Assets with Significant Unobservable Inputs

15 unchanged sentences

0.0 % - 95.3 %

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Foreclosed assets $ 668 Discounted appraisals Appraisal adjustments (2)

10.0 % 10.0 %

December 31, 2024

20 unchanged sentences

Foreclosed assets $ 1,944 Discounted appraisals Appraisal adjustments (2)

10.0 % - 17.4 %

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Weighted averages are determined by the relative fair value of the instruments or the relative contribution to the instruments fair value.

2 unchanged sentences

GAAP also requires disclosure of the fair value of financial instruments carried at book value on the Unaudited Condensed Consolidated Balance Sheets.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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:

September 30, 2024 Carrying

March 31, 2025 Carrying

Identical Assets/Liabilities

23 unchanged sentences

Borrowings 112,820 — — 121,026 121,026

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Commitments and Contingencies

5 unchanged sentences

These instruments involve, to varying degrees, credit risk in excess of the amount recognized in the balance sheet.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.

1 unchanged sentence

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Commitments to extend credit (1) (2)

1 unchanged sentence

Standby letters of credit 8,487 7,365

Airplane purchase agreement commitments — 9,000

Total unfunded off-balance-sheet credit risk $ 3,617,794 $ 3,605,302

(1) Includes unfunded overdraft protection.

(2) Includes $ 1.19 billion and $ 1.20 billion at March 31, 2025 and December 31, 2024, respectively, for which loan commitment letters have been issued.

Such letters do not represent a present obligation to extend credit due to the variety of conditions contained in the letters.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

4 unchanged sentences

Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties.

Commitment letters are issued after approval of the loan by the Credit Department and generally expire ninety days after issuance.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

2 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 $ 12.4 million and $ 4.8 million at September 30, 2024 and December 31, 2023, respectively.

During the three and nine months ended September 30, 2024, the Company recorded $ 1.9 million and $ 7.5 million, respectively, in expense related to the allowance for off-balance sheet credit exposures.

During the three and nine months ended September 30, 2023, the Company recorded a $ 161 thousand expense reversal and $ 3.1 million in expense, respectively, related to the allowance for off-balance sheet credit exposures.

The allowance for off-balance-sheet credit exposures was $ 13.1 million and $ 13.6 million at March 31, 2025 and December 31, 2024, respectively.

For the three months ended March 31, 2025 and March 31, 2024, the Company recorded $ 478 thousand in recoveries and $ 906 thousand in expenses related to the allowance for off-balance-sheet credit exposures, respectively.

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

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

This expense was historically presented in other expense and that classification remains unchanged for prior periods.

Other Commitments

As of September 30, 2024 and December 31, 2023, the Company recorded unfunded commitments to provide capital contributions for on-balance-sheet investments in the amount of $ 26.4 million and $ 29.0 million, respectively.

Securities for unfunded commitments to provide capital contributions for equity fund investments as of March 31, 2025 and December 31, 2024 .

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 forty-four relationships that have a retained unguaranteed exposure of $ 1.71 billion of which $ 1.12 billion 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 55 relationships that have a retained unguaranteed exposure of $ 2.26 billion of which $ 1.50 billion of the unguaranteed exposure has been disbursed.

Additionally, the Company has future minimum lease payments receivable under non-cancelable operating leases totaling $ 37.4 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

Geographic Concentration s

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

The following table presents the geographic concentration of the Company's loan and lease portfolio at March 31, 2025 :

Geographic Regions (1)

Southeast 32.1 %

Midwest 12.1 %

Northeast 17.0

Southeast 31.8

Southwest 13.1

8 unchanged sentences

Domicile is determined by the principal resident or business address of the entity.

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.

Accordingly, the Company operates two reportable segments for management reporting purposes as discussed below:

Banking - This segment specializes in providing financing services to small businesses nationwide in targeted industries and deposit-related services to small businesses, consumers and other customers nationwide.

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

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

The primary sources of revenue for this segment are principally gains and losses on equity method and equity security investments and management fees.

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.

The information provided under the caption “Other” represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company, other non-bank subsidiaries and elimination adjustments to reconcile the results of the operating segments to the Unaudited Condensed Consolidated Financial Statements prepared in conformity with GAAP.

Banking Fintech Other Consolidated

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

Interest income $ 208,897 $ 3 $ 36 $ 208,936

Interest expense 110,176 — 1,760 111,936

Net interest income (loss) 98,721 3 ( 1,724 ) 97,000

Provision for credit losses 34,502 — — 34,502

Noninterest income 31,196 ( 56 ) 1,792 32,932

Noninterest expense 73,383 1,469 2,737 77,589

Income tax expense (benefit) 5,824 ( 411 ) ( 597 ) 4,816

Net income (loss) $ 16,208 $ ( 1,111 ) $ ( 2,072 ) $ 13,025

Total assets $ 12,470,278 $ 137,272 $ ( 204 ) $ 12,607,346

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

Interest income $ 180,416 $ ( 6 ) $ 201 $ 180,611

Interest expense 90,914 — 287 91,201

Net interest income (loss) 89,502 ( 6 ) ( 86 ) 89,410

Provision for credit losses 10,279 — — 10,279

Noninterest income 35,730 1,652 509 37,891

Noninterest expense 69,480 3,069 1,713 74,262

Income tax expense (benefit) 3,084 ( 5 ) ( 112 ) 2,967

Net income (loss) $ 42,389 $ ( 1,418 ) $ ( 1,178 ) $ 39,793

Total assets $ 10,800,881 $ 110,914 $ 38,665 $ 10,950,460

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.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Banking Fintech Other Consolidated

As of and for the nine months ended September 30, 2024

Interest income $ 599,534 $ 30 $ 240 $ 599,804

Interest expense 317,532 — 3,841 321,373

Net interest income (loss) 282,002 30 ( 3,601 ) 278,431

Provision for credit losses 62,631 — — 62,631

Noninterest income 88,536 1,569 3,083 93,188

Noninterest expense 219,517 6,540 6,925 232,982

Income tax expense (benefit) 12,285 ( 1,279 ) ( 2,574 ) 8,432

Net income (loss) $ 76,105 $ ( 3,662 ) $ ( 4,869 ) $ 67,574

Total assets $ 12,470,278 $ 137,272 $ ( 204 ) $ 12,607,346

As of and for the nine months ended September 30, 2023

Interest income $ 501,271 $ 14 $ 454 $ 501,739

Interest expense 245,094 — 916 246,010

Net interest income (loss) 256,177 14 ( 462 ) 255,729

Provision for credit losses 42,328 — — 42,328

Noninterest income 74,215 5,689 1,722 81,626

Noninterest expense 215,879 8,032 5,770 229,681

Income tax expense (benefit) 7,785 177 ( 351 ) 7,611

Net income (loss) $ 64,400 $ ( 2,506 ) $ ( 4,159 ) $ 57,735

Total assets $ 10,800,881 $ 110,914 $ 38,665 $ 10,950,460

For the three months ended March 31, 2025 , 551,911 RSUs were granted with a weighted average grant date fair value of $ 34.54 .

At March 31, 2025 , unrecognized compensation costs relating to RSUs amounted to $ 79.2 million which will be recognized over a weighted average period of 3.48 years.

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