What changed in this filing

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Item 1. Financial Statements

2025-08-05 compared with 2025-05-07 · 282 added, 167 removed, 973 unchanged (32% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

As of June 30, 2025 (unaudited) and December 31, 2024

(Dollars in thousands)

22 unchanged sentences

Shareholders’ equity

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

Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at June 30, 2025 and December 31, 2024

Class A common stock, no par value, 100,000,000 shares authorized, 45,686,081 and 45,359,425 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

377,953 365,607

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

Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at June 30, 2025 and December 31, 2024

Retained earnings 746,450 715,767

8 unchanged sentences

Condensed Consolidated Statements of Income

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

For the three and six months ended June 30, 2025 and 2024 (unaudited)

(Dollars in thousands, except per share data)

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Interest income

14 unchanged sentences

Net gains on sales of loans 21,641 14,395 40,289 25,897

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

Net gain (loss) on loans accounted for under the fair value option 1,082 172 48 ( 47 )

Equity method investments (loss) income ( 2,716 ) ( 1,767 ) ( 4,955 ) ( 6,789 )

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

Equity security investments gains, net 1,004 161 1,024 ( 368 )

Lease income 3,103 2,423 5,676 4,876

16 unchanged sentences

Income before taxes 31,202 36,058 44,334 58,165

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

Income tax expense 7,815 9,095 11,279 3,616

Net income 23,387 26,963 33,055 54,549

7 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

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

For the three and six months ended June 30, 2025 and 2024 (unaudited)

(Dollars in thousands)

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Net income $ 23,387 $ 26,963 $ 33,055 $ 54,549

12 unchanged sentences

Condensed Consolidated Statements of Changes in Shareholders’ Equity

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

For the three and six months ended June 30, 2025 and 2024 (unaudited)

(Dollars in thousands)

6 unchanged sentences

Class A Class B

Balance at March 31, 2025

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

Net income — — — 23,428 — ( 41 ) 23,387

Other comprehensive income — — — — 6,184 — 6,184

Issuance of restricted stock 36,720 — — — — — —

Tax withholding related to vesting of restricted stock and other

— — ( 293 ) — — — ( 293 )

Stock option exercises 59,728 — 788 — — — 788

Restricted stock compensation expense — — 6,945 — — — 6,945

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense — — — 176 — — 176

Cash dividends ($ 0.03 per share)

— — — ( 1,369 ) — — ( 1,369 )

Balance at June 30, 2025

45,686,081 — $ 377,953 $ 746,450 $ ( 61,514 ) 4,376 $ 1,067,265

Balance at March 31, 2024

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

Net income — — — 26,963 — — 26,963

Other comprehensive income — — — — 733 — 733

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

Tax withholding related to vesting of restricted stock and other

— — ( 337 ) — — — ( 337 )

Stock option exercises 19,570 — 277 — — — 277

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

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

— — — 252 — — 252

Cash dividends ($ 0.03 per share)

— — — ( 1,350 ) — — ( 1,350 )

Balance at June 30, 2024

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

Live Oak Bancshares, Inc.

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

For the three and six months ended June 30, 2025 and 2024 (unaudited)

(Dollars in thousands)

Six Months Ended

Common stock Retained

earnings Accumulated

comprehensive

income (loss)

Non-controlling interest Total

Shares Amount

Class A Class B

Balance at December 31, 2024

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

45,359,425 — $ 365,607 $ 715,767 $ ( 82,344 ) $ 4,466 $ 1,003,496

Net income — — — 33,145 — ( 90 ) 33,055

Other comprehensive income — — — — 20,830 — 20,830

8 unchanged sentences

— — — ( 2,736 ) — — ( 2,736 )

Balance at March 31, 2025

Balance at June 30, 2025

45,686,081 — $ 377,953 $ 746,450 $ ( 61,514 ) $ 4,376 $ 1,067,265

Balance at December 31, 2023

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

Net income — — — 54,549 — — 54,549

7 unchanged sentences

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense — — — 501 — — 501

— — — 249 — — 249

Cash dividends ($ 0.06 per share)

— — — ( 2,695 ) — — ( 2,695 )

Balance at March 31, 2024

Balance at June 30, 2024

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

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows

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

For the six months ended June 30, 2025 and 2024 (unaudited)

(Dollars in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

9 unchanged sentences

Net loss on impairment or sale of foreclosed assets 12 9

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

Net (gains) loss on loans accounted for under fair value option ( 48 ) 47

Net change in servicing assets ( 4,215 ) ( 2,937 )

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

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

Net loss on disposal of property and equipment 3,122 177

Equity method investments loss (income) 4,955 6,789

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

Equity security investments (gains) losses, net ( 1,024 ) 368

Loss (gain) on equity warrant assets 419 ( 6,246 )

Renewable energy tax credit investment recovery — ( 927 )

Renewable energy tax credit investment impairment (recovery) 270 ( 757 )

Restricted stock compensation expense 13,612 13,099

8 unchanged sentences

Proceeds from maturities, calls, and principal paydowns of investment securities available-for-sale 77,572 77,679

Proceeds from sale of foreclosed assets 827 583

Purchases of loans previously sold ( 45,257 ) ( 35,928 )

Loan and lease originations and principal collections, net ( 984,384 ) ( 577,457 )

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

Purchases of equity security investments ( 4,471 ) ( 3,676 )

5 unchanged sentences

Net cash used by investing activities ( 1,084,324 ) ( 664,282 )

See Notes to Unaudited Condensed Consolidated Financial Statements

Live Oak Bancshares, Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

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

For the six months ended June 30, 2025 and 2024 (unaudited)

(Dollars in thousands)

Three Months Ended

Six Months Ended

Cash flows from financing activities

16 unchanged sentences

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

Net transfers between foreclosed assets and SBA receivable 33 —

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

4 unchanged sentences

Equity method investment commitments — 1,508

Equity security investment commitments — 1,000

See Notes to Unaudited Condensed Consolidated Financial Statements

13 unchanged sentences

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

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

As of June 30, 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.

8 unchanged sentences

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 ” ) 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.

14 unchanged sentences

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

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

Results of operations for the three and six months ended June 30, 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.

19 unchanged sentences

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

Use of Estimates

In preparing unaudited condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

The allowance for credit losses is a material estimate that is particularly susceptible to significant change in the near term.

Changes in Accounting Estimates

3 unchanged sentences

The result of these changes was not material.

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.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

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.

17 unchanged sentences

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

Aside from complying with the new disclosure requirements, the Company does not believe this standard will have a material impact on its consolidated financial statements.

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

12 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

Legislative Developments

On July 4, 2025, H.R.

fiscal-year 2025 budget reconciliation legislation, commonly known as the One Big Beautiful Bill Act (“OBBB”), was signed into law, implementing changes in tax and other provisions.

The Company does not currently believe the impacts of the OBBB will be material to the consolidated financial statements and related disclosures .

Earnings Per Share

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Basic earnings per share:

11 unchanged sentences

Available-for-Sale

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

March 31, 2025 Amortized

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

June 30, 2025 Amortized

government agencies $ 13,919 $ 77 $ 38 $ 13,958

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 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

During the three months ended June 30, 2025, four securities totaling $ 11.3 million were settled and one security totaling $ 4.0 million matured.

During the six months ended June 30, 2025, seven securities totaling $ 16.9 million were settled and one security totaling $ 4.0 million matured.

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

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

Accrued interest receivable on available-for-sale securities totaled $ 4.7 million and $ 4.2 million at June 30, 2025 and December 31, 2024, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

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

Less Than 12 Months 12 Months or More Total

March 31, 2025 Fair

June 30, 2025 Fair

government agencies $ — $ — $ 5,939 $ 38 $ 5,939 $ 38

8 unchanged sentences

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

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 34 mortgage-backed securities and one U.S.

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

At June 30, 2025, there were 395 mortgage-backed securities, two U.S.

government agencies and one municipal bond in unrealized loss positions for greater than 12 months.

There were 35 mortgage-backed securities and two municipal bonds 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.

4 unchanged sentences

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

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

All mortgage-backed securities in the Company’s portfolio at June 30, 2025 and December 31, 2024 were backed by U.S.

government sponsored enterprises (“GSEs”).

2 unchanged sentences

The following is a summary of investment securities by maturity:

March 31, 2025

June 30, 2025

Available-for-Sale

18 unchanged sentences

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

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.

At June 30, 2025, investment securities with a fair value of $ 597.0 million and amortized cost of $ 654.2 million were pledged to support unused borrowing capacity.

At December 31, 2024, investment securities with a fair value of $ 621.4 million and amortized cost 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 March 31, 2025 and December 31, 2024 is reflected in the following table:

March 31, 2025 December 31, 2024

The carrying amount and ownership percentage of each equity method investment at June 30, 2025 and December 31, 2024 is reflected in the following table:

June 30, 2025 December 31, 2024

Amount Ownership % Amount Ownership %

15 unchanged sentences

Total $ 86,254 $ 91,003

(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.

(1) Investment unfunded commitments of $ 4.8 million and $ 5.0 million as of June 30, 2025 and December 31, 2024, respectively.

(2) Investment unfunded commitments of $ 472 thousand and $ 492 thousand as of June 30, 2025 and December 31, 2024, respectively.

(3) Investment unfunded commitments of $ 4.5 million and $ 5.2 million as of June 30, 2025 and December 31, 2024, respectively.

(4) Investment unfunded commitments of $ 6.1 million and $ 6.5 million as of June 30, 2025 and December 31, 2024, respectively.

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

As of December 31, 2024, the Company had an unfunded commitment of $ 1.7 million in Estrella Landing.

There was no unfunded commitment as of June 30, 2025.

(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.

4 unchanged sentences

Equity Security Accounting

The carrying amount of the Company’s investments in non-marketable equity securities with no readily determinable fair value and amounts recognized in earnings on a cumulative basis as of March 31, 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

The carrying amount of the Company’s investments in non-marketable equity securities with no readily determinable fair value and amounts recognized in earnings on a cumulative basis as of June 30, 2025 and as of and for the six months ended June 30, 2025 and 2024 is reflected in the following table:

As of and for the six month period ended

Cumulative Adjustments June 30, 2025 June 30, 2024

Carrying value (1)

3 unchanged sentences

Upward changes for observable prices (2)

52,029 1,128 56

Downward changes for observable prices ( 2,342 ) ( 173 ) ( 369 )

Net upward (downward) change $ 49,687 $ 955 $ ( 313 )

(1) Investment unfunded commitments of $ 5.4 million and $ 2.3 million as of March 31, 2025 and March 31, 2024, respectively.

(1) Investment unfunded commitments of $ 5.3 million and $ 2.7 million as of June 30, 2025, and June 30, 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 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.

For the three and six months ended June 30, 2025, the Company recognized unrealized gains on all equity securities held at the reporting date of $ 959 thousand and $ 966 thousand, respectively.

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

Variable Interest Entities (“VIE”s)

11 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.

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

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

Non-marketable and Other Equity Investments

11 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

The following table provides a summary of the VIEs that the Company has not consolidated as of March 31, 2025 and December 31, 2024:

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

The following table provides a summary of the VIEs that the Company has not consolidated as of June 30, 2025 and December 31, 2024:

June 30, 2025 Investment Carrying Amount Maximum Exposure to Loss Liability Recognized Classification

Solar tax credit investments $ 4,340 $ 27,781 $ — Other assets (1)

2 unchanged sentences

Non-marketable and other equity investments 5,175 10,505 — Other assets (4)

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

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

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

3 unchanged sentences

(1) Maximum exposure to loss includes $ 4.3 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.

(2) Maximum exposure to loss includes $ 14.0 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $ 941 thousand.

(3) Maximum exposure to loss includes $ 17.7 million of current investments and $ 15.8 million in unfunded commitments.

15 unchanged sentences

Total Loans and Leases

March 31, 2025

June 30, 2025

Commercial & Industrial

51 unchanged sentences

Fair Value of Financial Instruments for additional information.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Credit Quality Indicators

1 unchanged sentence

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.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Term Loans and Leases Amortized Cost Basis by Origination Year

2 unchanged sentences

Converted to Term Total (1)

March 31, 2025

June 30, 2025

Small Business Banking

14 unchanged sentences

Small Business Banking $ — $ 3,442 $ 6,465 $ 6,597 $ 2,616 $ 3,839 $ 3,174 $ 50 $ 26,183

Commercial Banking — — — 2,249 9,759 — — 1,679 13,687

Total $ — $ 3,442 $ 6,465 $ 8,846 $ 12,375 $ 3,839 $ 3,174 $ 1,729 $ 39,870

20 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

Gross Charge-offs

Year-To-Date Gross Charge-offs

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

1 unchanged sentence

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

(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.

(1) Excludes $ 303.8 million and $ 328.7 million of loans accounted for under the fair value option as of June 30, 2025 and December 31, 2024, respectively.

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

March 31, 2025 Loan and Lease

June 30, 2025 Loan and Lease

Guaranteed Balance Unguaranteed Balance % Guaranteed

9 unchanged sentences

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

(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.

(1) Excludes $ 303.8 million and $ 328.7 million of loans accounted for under the fair value option as of June 30, 2025 and December 31, 2024, respectively.

Live Oak Bancshares, Inc.

1 unchanged sentence

Nonaccrual Loans and Leases

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

As of June 30, 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 and six months ended June 30, 2025 and 2024.

Accrued interest receivable on loans totaled $ 79.8 million and $ 80.7 million at June 30, 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 June 30, 2025 and December 31, 2024 are as follows:

June 30, 2025 Loan and Lease

Balance Unguaranteed Balance Unguaranteed

3 unchanged sentences

Commercial Banking 126,378 112,832 13,546 13,546

Payroll Protection Program 260 260 — —

Total 280,589 253,010 27,579 19,533

34 unchanged sentences

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

Three Months Ended March 31,

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

Commercial & Industrial $ 597 $ 364 $ 1,041 $ 974

Commercial Real Estate 284 219 774 338

Commercial Land 52 52 52 52

Construction & Development — — — 30

Total $ 933 $ 635 $ 1,867 $ 1,394

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:

(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 June 30, 2025 and December 31, 2024:

Total Collateral-Dependent Loans Unguaranteed Portion

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

June 30, 2025 Real Estate Business Assets Real Estate Business Assets Allowance for Credit Losses

Commercial & Industrial

4 unchanged sentences

Small Business Banking 48,859 — 12,604 — 186

Commercial Banking 11,103 — 11,103 — —

Total 48,859 — 12,604 — 186

25 unchanged sentences

Real Estate Commercial

March 31, 2025

June 30, 2025

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

1 unchanged sentence

Recoveries 731 — 771 — 1,502

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

Provision (Recovery) 19,166 324 5,098 ( 1,096 ) 23,492

Ending Balance $ 138,960 $ 6,036 $ 34,248 $ 2,987 $ 182,231

March 31, 2024

June 30, 2024

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

3 unchanged sentences

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

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.

Six Months Ended Commercial

& Industrial Construction &

Development Commercial

Real Estate Commercial

June 30, 2025

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

Charge offs ( 36,840 ) — ( 2,852 ) ( 178 ) ( 39,870 )

Recoveries 771 — 862 18 1,651

Provision (Recovery) 46,022 1,093 6,737 ( 918 ) 52,934

Ending Balance $ 138,960 $ 6,036 $ 34,248 $ 2,987 $ 182,231

June 30, 2024

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

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

Recoveries 512 — 267 — 779

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

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

During the three months ended June 30, 2025, the ACL decreased primarily as a result of moderating credit trends and net charge-offs of individually evaluated loans with specific reserves recorded in prior periods.

During the six months ended June 30, 2025, the ACL increased as a result of growth in the loan and lease portfolio, the impact of the macroeconomic environment on our small business and commercial borrowers, and changes in the macroeconomic outlook.

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

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

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

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

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

5 unchanged sentences

The Company typically does not offer principal forgiveness.

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

The following tables summarize the amortized cost basis of loans that were modified during the three and six months ended June 30, 2025 and June 30, 2024, respectively:

Three Months Ended June 30, 2025 Other-Than-Insignificant

Payment Delay Term Extension

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

Financing Receivable

Small Business Banking $ — $ 10,893 $ 9,820 0.16 %

Commercial Banking 5,527 — — 0.21

Total $ 5,527 $ 10,893 $ 9,820 0.37 %

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

Six Months Ended June 30, 2025 Other-Than-Insignificant

Payment Delay 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 $ — $ 14,448 $ 9,862 $ 3,020 $ 3,009 $ 10,010 0.45 %

Commercial Banking 5,527 — — — — — 0.21

Total $ 5,527 $ 14,448 $ 9,862 $ 3,020 $ 3,009 $ 10,010 0.66 %

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

Payment Delay % of Total Class of

Financing Receivable

Small Business Banking $ 6,459 0.11 %

Commercial Banking 2,333 0.12

Total $ 8,792 0.23 %

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

Payment Delay % of Total Class of

Financing Receivable

Small Business Banking $ 6,459 0.11 %

Commercial Banking 2,333 0.12

Total $ 8,792 0.23 %

As of June 30, 2025, the Company had commitments to lend additional funds to these borrowers totaling $ 28 thousand.

As of December 31, 2024, the Company had commitments to lend additional funds to these borrowers totaling $ 6.3 million.

The following table presents an aging analysis of loans that were modified within the twelve months ended June 30, 2025 and June 30, 2024, respectively:

June 30, 2025 Current 30-89 Days

Past Due 90 Days or More Past Due Total Past Due

2 unchanged sentences

Total $ 62,944 $ — $ 2,243 $ 2,243

March 31, 2024 Current 30-89 Days

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2024 Current 30-89 Days

Past Due 90 Days or More Past Due Total Past Due

2 unchanged sentences

Total $ 23,851 $ — $ — $ —

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

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

Three Months Ended June 30, 2025

Weighted Average

2 unchanged sentences

Small Business Banking 2.48 % 54

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.

Six Months Ended June 30, 2025

Weighted Average

Interest Rate Reduction Weighted Average

Term Extension (in Months)

Small Business Banking 4.32 % 51

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

Additionally, there were no loans that were modified within the twelve months ended June 30, 2025 and June 30, 2024 that subsequently defaulted during the periods presented.

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

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

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

Direct Financing Leases

3 unchanged sentences

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Gross direct finance lease payments receivable $ 474 $ 961

1 unchanged sentence

Net investment in direct financing leases $ 464 $ 922

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.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

As of June 30, 2025

Interest income of $ 12 thousand and $ 48 thousand was recognized in the three months ended June 30, 2025 and 2024, respectively.

Interest income of $ 29 thousand and $ 66 thousand was recognized in the six months ended June 30, 2025 and 2024, respectively.

Operating Leases

1 unchanged sentence

The Company retains ownership of the equipment and associated tax benefits such as investment tax credits and accelerated depreciation.

At the end of the lease term, the lessee has the option to renew the lease for two additional terms or purchase the equipment at the then-current fair market value.

At the end of the lease term, the lessee has the option to renew the lease for two additional terms or purchase the equipment at the then-current fair value.

Rental revenue from operating leases is recognized on a straight-line basis over the term of the lease.

5 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.

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.

As of June 30, 2025 and December 31, 2024, the Company had a net investment of $ 81.2 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 $ 142.4 million and $ 159.7 million as of June 30, 2025 and December 31, 2024, respectively.

Accumulated depreciation was $ 61.2 million and $ 66.2 million as of June 30, 2025 and December 31, 2024, respectively.

Depreciation expense recognized on these assets was $ 2.5 million and $ 2.4 million for the three months ended June 30, 2025 and 2024.

Depreciation expense recognized on these assets was $ 5.1 million and $ 4.7 million for the six months ended June 30, 2025 and 2024, respectively.

Lease income of $ 3.0 million and $ 2.3 million was recognized in the three months ended June 30, 2025 and 2024, respectively.

Lease income of $ 5.5 million and $ 4.7 million was recognized in the six months ended June 30, 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 March 31, 2025

As of June 30, 2025

Thereafter 7,309

Total $ 34,401

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Servicing Assets

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 $ 3.57 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 unpaid principal balance of loans serviced for others requiring recognition of a servicing asset was $ 3.76 billion and $ 3.46 billion at June 30, 2025 and December 31, 2024, respectively.

The unpaid principal balance for all loans serviced for others was $ 5.32 billion and $ 4.72 billion at June 30, 2025 and December 31, 2024, respectively.

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

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Balance at beginning of period $ 56,684 $ 48,962 $ 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 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.

The fair value of servicing rights was determined using a weighted average discount rate of 13.5 % on June 30, 2025 and 14.5 % on June 30, 2024.

The fair value of servicing rights was determined using a weighted average prepayment speed of 16.0 % on June 30, 2025 and 15.7 % on June 30, 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.

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:

12 unchanged sentences

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.

As of June 30, 2025 and December 31, 2024, the Company had servicing assets related to conventional commercial loans carried at amortized cost of $ 274 thousand and $ 356 thousand, respectively.

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Total outstanding borrowings consisted of the following:

11 unchanged sentences

(1) Includes finance leases.

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.

As of June 30, 2025 and December 31, 2024, the Company’s unused borrowing capacity was $ 3.78 billion and $ 3.55 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, and access to a repurchase agreement.

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.

If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $ 6.48 billion and $ 6.10 billion as of June 30, 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 March 31,

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

Equity Warrant Assets 2025 2024 2025 2024

5 unchanged sentences

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

March 31, 2025 Total Level 1 Level 2 Level 3

June 30, 2025 Total Level 1 Level 2 Level 3

Investment securities available-for-sale

9 unchanged sentences

Total assets at fair value $ 1,696,199 $ — $ 1,325,468 $ 370,731

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2024 Total Level 1 Level 2 Level 3

10 unchanged sentences

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

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

(1) During the three and six months ended June 30, 2025 and June 30, 2024 there were no level 3 fair value adjustment gains or losses.

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

(3) Included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see Note 10.

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

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 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

There were no loans accounted for under the fair value option that were 90 days or more past due and still accruing interest at June 30, 2025 or December 31, 2024.

The unpaid principal balance of unguaranteed exposure for nonaccruals was $ 9.9 million and $ 10.0 million at June 30, 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 June 30, 2025 and December 31, 2024.

June 30, 2025

Total Loans Nonaccruals 90 Days or More Past Due

8 unchanged sentences

$ 303,818 $ 315,724 $ ( 11,907 ) $ 69,326 $ 70,799 $ ( 1,473 ) $ 59,768 $ 61,140 $ ( 1,372 )

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2024

10 unchanged sentences

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

Three Months Ended March 31,

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

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

1 unchanged sentence

$ 1,082 $ 172 $ 48 $ ( 47 )

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

Three Months Ended March 31,

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

Loans held for investment 2025 2024 2025 2024

7 unchanged sentences

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

March 31, 2025 Total Level 1 Level 2 Level 3

June 30, 2025 Total Level 1 Level 2 Level 3

Collateral-dependent loans $ 14,750 $ — $ — $ 14,750

10 unchanged sentences

Level 3 Analysis

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

March 31, 2025

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of June 30, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows:

June 30, 2025

Level 3 Assets with Significant Unobservable Inputs

16 unchanged sentences

Foreclosed assets $ 4,210 Discounted appraisals Appraisal adjustments (2)

10.0 % 10.0 %

Live Oak Bancshares, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

December 31, 2024

20 unchanged sentences

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

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:

March 31, 2025 Carrying

June 30, 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:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Commitments to extend credit (1) (2)

3 unchanged sentences

(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.

(2) Includes $ 1.77 billion and $ 1.20 billion at June 30, 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.

9 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 $ 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.

The allowance for off-balance-sheet credit exposures was $ 12.9 million and $ 13.6 million at June 30, 2025 and December 31, 2024, respectively.

During the three and six months ended June 30, 2025, the Company recorded $ 240 thousand and $ 718 thousand in recoveries related to the allowance for off-balance-sheet credit exposures, respectively.

During the three and six months ended June 30, 2024, the Company recorded $ 4.7 million and $ 5.6 million in expense 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 was historically presented in other expense and that classification remains unchanged for prior periods.

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

Other Commitments

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

Investments for unfunded commitments to provide capital contributions for equity fund investments as of June 30, 2025 and December 31, 2024.

Concentrations of Credit Risk

3 unchanged sentences

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 March 31, 2025 :

The following table presents the geographic concentration of the Company's loan and lease portfolio at June 30, 2025:

Geographic Regions (1)

12 unchanged sentences

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

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

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.

Subsequent Event

On August 4, 2025, the Company issued and sold 4,000,000 depositary shares (the “Depositary Shares”), each representing a 1/40th interest in a share of the Company’s 8.375 % Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock, no par value per share (the “Series A Preferred Stock”), with a liquidation preference of $ 1,000 per share of Series A Preferred Stock (equivalent to $ 25 per depositary Share), which represents $ 100,000,000 in aggregate liquidation preference.

Net proceeds, after underwriting discounts and estimated expenses, total approximately $ 96.2 million.

Holders of the Series A Preferred Stock will not have voting rights, except with respect to certain changes in the terms of the preferred stock, certain dividend non-payments and as otherwise required by applicable law.

The Company may redeem the Series A Preferred Stock at its option, (i) in whole or in part, from time to time, on any dividend payment date on or after September 15, 2030 or (ii) in whole but not in part, at any time within 90 days following a regulatory capital treatment event, in either case at a redemption price equal to $ 1,000 per share (equivalent to $ 25 per depositary share), plus any declared and unpaid dividends.

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