What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-03-18 · 395 added, 337 removed, 1848 unchanged (28% of the section changed)

4 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Live Oak Bancshares, Inc.

and subsidiaries (the Company) as of December 31, 2024, the related consolidated statement of income, comprehensive income, shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of Live Oak Bancshares, Inc.

and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 18, 2025 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2026 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

19 unchanged sentences

The Company has identified pools based on industry or market segment, and whether the receivable is secured by real estate or another form of collateral.

Expected credit losses for pooled loans and leases are estimated

using a discounted cash flow (DCF) methodology for each loan and lease which incorporates measurements of probability of default (PD), loss given default (LGD), prepayments, the estimated outstanding exposure at default (EAD), and the effective interest rate (EIR).

Expected credit losses for pooled loans and leases are estimated using a discounted cash flow

(DCF) methodology for each loan and lease which incorporates measurements of probability of default (PD), loss given default (LGD), prepayments, the estimated outstanding exposure at default (EAD), and the effective interest rate (EIR).

PD rates are calculated using the number of defaults divided by the number of loans available to default for 1-year observation periods over the lifetime of data available for a certain pool.

LGD rates are calculated by dividing the lifetime net charge-offs for each pool by the pool’s EAD.

PD and LGD rates are adjusted for forecasted national unemployment rates during a reasonable and supportable forecast period, using a single macroeconomic scenario.

PD and LGD rates are adjusted for forecasted Baa-rated Corporate yields during a reasonable and supportable forecast period, using a single macroeconomic scenario.

The Company has determined that four quarters represents a reasonable and supportable forecast period and adjusted loss rates revert back to historical loss rates over four quarters on a straight-line basis.

2 unchanged sentences

The Company considers a variety of qualitative factors to reflect its current judgment of various events and risks that are not measured within the quantitative modeling.

The qualitative framework is further informed by multiple alternative economic scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period- end ACL balance.

The qualitative framework is further informed by multiple alternative economic scenarios, as deemed applicable, aligned with weighted, quantifiable credit metrics to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance.

The evaluation of such factors is inherently imprecise and subjective as it requires management judgment based on underlying factors that are susceptible to changes.

2 unchanged sentences

Specifically, the assessment encompassed the evaluation of the methods and models used to estimate the PD and LGD and their significant assumptions.

Such significant assumptions include the selection of forecasted national unemployment rates as the sole economic variable.

Such significant assumptions include the selection of forecasted Baa-rated Corporate Bond yields as the sole economic variable.

The assessment also included the evaluation of the qualitative framework, including the incorporation of the multiple alternative economic scenarios, and judgmental management adjustments.

5 unchanged sentences

• continued use and appropriateness of the PD and LGD models, including the significant assumptions used in the PD and LGD models

• selection of forecasted national unemployment rates as the sole economic variable

• selection of forecasted Baa-rated Corporate bond yields as the sole economic variable

• performance monitoring of the PD and LGD models

15 unchanged sentences

Charlotte, North Carolina

March 18, 2025

February 26, 2026

Report of Independent Registered Public Accounting Firm

5 unchanged sentences

In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2024, the related consolidated statement of income, comprehensive income, shareholders’ equity, and cash flows for the year then ended December 31, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated March 18, 2025 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements), and our report dated February 26, 2026 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

A material weakness related to the following has been identified and included in management’s assessment.

• The Company did not sufficiently maintain effective control activities related to the loan review process primarily due to insufficient oversight, inadequate training of employees, lack of effective risk assessment, and ineffective monitoring activities.

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

• The Company did not sufficiently maintain effective control activities over the accounting for and classification of loan participation activity within the Consolidated Statements of Income and the Consolidated Statements of Cash Flows primarily due to insufficient oversight as it relates to inadequate training of employees, lack of effective risk assessment and monitoring activities.

The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

18 unchanged sentences

Charlotte, North Carolina

March 18, 2025

February 26, 2026

Report of Independent Registered Public Accounting Firm

2 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Live Oak Bancshares, Inc.

(the “Company”) as of December 31, 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited the adjustments to the 2023 and 2022 consolidated financial statements to retrospectively apply the changes in accounting for business segments, as described in Note 1 to the consolidated financial statements.

We have audited the accompanying consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows of Live Oak Bancshares, Inc.

(the “Company”) for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited the adjustments to the 2023 consolidated financial statements to retrospectively apply the changes in accounting for business segments, as described in Note 1 to the consolidated financial statements.

In our opinion, such adjustments are appropriate and have been properly applied.

1 unchanged sentence

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Forvis Mazars, LLP

1 unchanged sentence

Greenville, North Carolina

February 22, 2024 (except as to the changes in the reporting of the Company’s business segments discussed in Note 1, as to which the date is March 18, 2025)

February 22, 2024 (except as to the changes in the reporting of the Company’s business segments discussed in Note 1, as to which the date is March 18, 2025, and except as to the error correction discussed in Note 1 to the consolidated financial statements in Amendment No.

1 to the Annual Report on Form 10-K for the year ended December 31, 2024, as to which the date is November 17, 2025)

Live Oak Bancshares, Inc.

24 unchanged sentences

Shareholders’ equity

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

Series A Preferred stock, no par value, 1,000,000 shares authorized, 100,000 shares and 0 shares, issued and outstanding at December 31, 2025 and December 31, 2024, respectively

Class A common stock, no par value, 100,000,000 shares authorized, 46,032,402 and 45,359,425 , shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively

31 unchanged sentences

Net gain (loss) on loans accounted for under the fair value option 1,216 2,403 ( 3,539 )

Equity method investments (loss) income ( 10,921 ) ( 5,994 ) 144,250

Equity method investments income (loss) 17,387 ( 10,921 ) ( 5,994 )

Equity security investments gains (losses), net 5,733 553 ( 969 )

14 unchanged sentences

FDIC insurance 14,672 10,835 16,670

Contributions and donations — — 6,462

Other expense 18,245 12,411 17,152

6 unchanged sentences

105,871 77,474 73,898

Preferred stock dividends 3,048 — —

Net income attributable to common shareholders $ 102,823 $ 77,474 $ 73,898

Basic earnings per share $ 2.25 $ 1.72 $ 1.67

7 unchanged sentences

Net income $ 105,643 $ 77,417 $ 73,898

Other comprehensive income (loss) before tax:

Net unrealized gain (loss) on investment securities available-for-sale during the period 3,125 9,999 ( 124,032 )

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

Other comprehensive income (loss) before tax 3,125 9,999 ( 124,032 )

Income tax (expense) benefit ( 750 ) ( 2,400 ) 29,768

Other comprehensive income (loss), net of tax 2,375 7,599 ( 94,264 )

Other comprehensive income before tax:

Net unrealized gain on investment securities available-for-sale during the period 49,553 3,125 9,999

Other comprehensive income before tax 49,553 3,125 9,999

Income tax expense ( 11,892 ) ( 750 ) ( 2,400 )

Other comprehensive income, net of tax 37,661 2,375 7,599

Total comprehensive income 143,304 79,792 81,497

6 unchanged sentences

(Dollars in thousands, except per share data)

Common stock Retained earnings Accumulated

Preferred Stock Common stock Retained earnings Accumulated

comprehensive

income (loss) Non-Controlling Interest Total

Shares Amount

Class A Class B

Shares Amount Shares Amount

Series A Class A Class B

Balance at December 31, 2022 — $ — 44,061,244 — $ 330,854 $ 572,497 $ ( 92,318 ) $ — $ 811,033

Net income — — — — — 73,898 — — 73,898

Other comprehensive loss — — — — ( 94,264 ) — ( 94,264 )

Other comprehensive income — — — — — — 7,599 — 7,599

Issuance of restricted stock — — 373,616 — — — — — —

1 unchanged sentence

Employee stock purchase program — — 59,074 — 1,396 — — — 1,396

Non-voting common stock converted to voting common stock in private sale 125,024 ( 125,024 ) — — — — —

Stock option exercises — — 123,739 — 1,168 — — — 1,168

1 unchanged sentence

Restricted stock compensation expense — — — — 17,603 — — — 17,603

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 — — — — — 1,072 — — 1,072

Cash dividends ($ 0.12 per share)

Cash dividends ($ 0.12 per share) - common

— — — — — ( 5,326 ) — — ( 5,326 )

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

Net income — — — 73,898 — — 73,898

Net income (loss) — — — — — 77,474 — ( 57 ) 77,417

Other comprehensive income — — — — — — 2,375 — 2,375

5 unchanged sentences

Restricted stock compensation expense — — — — 26,205 — — — 26,205

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 — — — — — 881 — — 881

Cash dividends ($ 0.12 per share)

Contribution of non-controlling interest — — — — — — — 4,523 4,523

Cash dividends ($ 0.12 per share) - common

— — — — — ( 5,405 ) — — ( 5,405 )

3 unchanged sentences

Issuance of restricted stock — — 399,862 — — — — — —

Issuance of Series A preferred stock, net of issuance costs 100,000 96,266 — — — — — — 96,266

Tax withholding related to vesting of restricted stock and other — — — — ( 7,625 ) — — — ( 7,625 )

2 unchanged sentences

Restricted stock compensation expense — — — — 26,210 — — — 26,210

Reclassification of accumulated other comprehensive income due to tax rate adjustment — — — — — — 11 — 11

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense — — — — — ( 3,218 ) — — ( 3,218 )

Contributions of non-controlling interest — — — — — 4,523 4,523

Cash dividends ($ 0.12 per share)

Cash dividends - preferred — — — — — ( 3,047 ) — ( 3,047 )

Cash dividends ($ 0.12 per share) - common

— — — — — ( 5,488 ) — — ( 5,488 )

12 unchanged sentences

(Accretion) amortization of (discount) premium on securities, net of accretion ( 609 ) ( 721 ) 8

Deferred tax (benefit) expense ( 11,420 ) ( 22,161 ) 27,129

Deferred tax benefit ( 12,368 ) ( 11,420 ) ( 22,161 )

Originations of loans held for sale ( 1,306,231 ) ( 1,037,474 ) ( 877,083 )

1 unchanged sentence

Net gains on sale of loans held for sale ( 62,420 ) ( 49,770 ) ( 38,812 )

Net (gain) loss on impairment and sale of foreclosed assets ( 249 ) 751 ( 24 )

Net loss (gain) on impairment and sale of foreclosed assets 84 ( 249 ) 751

Net (gain) loss on loans accounted for under fair value option ( 1,216 ) ( 2,403 ) 3,539

3 unchanged sentences

Impairment on premises and equipment, net — — 499

Equity method investments loss (income) 10,921 5,994 ( 144,250 )

Equity method investments (income) loss ( 17,387 ) 10,921 5,994

Equity security investments (gains) losses, net ( 5,733 ) ( 553 ) 969

Gain on equity warrant assets ( 5,962 ) — —

Net loss (gain) on equity warrant assets 5,558 ( 5,962 ) —

Renewable energy tax credit investment impairment 735 530 14,644

1 unchanged sentence

Restricted stock compensation expense 26,210 26,205 17,603

Stock based compensation excess tax benefit (deficiency) 1,085 ( 1,004 ) 531

Stock based compensation excess tax (deficiency) benefit ( 942 ) 1,085 ( 1,004 )

Business combination contingent consideration fair value adjustment — ( 125 ) 125

6 unchanged sentences

Purchases of investment securities available-for-sale ( 301,169 ) ( 269,631 ) ( 215,595 )

Proceeds from sales, maturities, calls, and principal paydowns of investment securities available-for-sale 151,435 114,145 161,227

Proceeds from SBA reimbursement/sale of foreclosed assets, net 8,322 — 1,837

Proceeds from maturities, calls, and principal paydowns of investment securities available-for-sale 172,133 151,435 114,145

Proceeds from sale of foreclosed assets 9,389 8,322 —

Maturities of certificates of deposit with other banks — — 3,750

Purchases of loans previously sold ( 116,903 ) ( 51,172 ) ( 16,765 )

Loan and lease originations and principal collections, net ( 1,835,442 ) ( 1,574,912 ) ( 1,252,106 )

Net change in loans and leases ( 1,842,407 ) ( 1,572,657 ) ( 1,190,908 )

Proceeds from sale of long lived asset — 43,598 18,588

5 unchanged sentences

Purchases of premises and equipment, net ( 14,756 ) ( 49,307 ) ( 46,839 )

Net cash used by investing activities ( 2,079,101 ) ( 1,774,922 ) ( 1,442,344 )

Net cash used in investing activities ( 1,904,190 ) ( 1,699,413 ) ( 1,339,746 )

See Notes to Consolidated Financial Statements

10 unchanged sentences

Employee stock purchase program 1,221 1,449 1,396

Withholding cash issued in lieu of restricted stock and other ( 8,926 ) ( 6,725 ) ( 4,972 )

Proceeds from the issuance of preferred stock, net 96,266 — —

Tax withholding related to vesting of restricted stock and other ( 7,625 ) ( 8,926 ) ( 6,725 )

Contributions of non-controlling interest — 4,523 —

Shareholder dividend distributions ( 5,405 ) ( 5,326 ) ( 5,266 )

Shareholder dividend distributions - preferred ( 3,047 ) — —

Shareholder dividend distributions - common ( 5,488 ) ( 5,405 ) ( 5,326 )

Net cash provided by financing activities 2,002,052 1,568,893 1,320,755

6 unchanged sentences

Supplemental disclosures of noncash operating, investing, and financing activities

Unrealized holding gains (losses) on investment securities available-for-sale, net of taxes $ 2,375 $ 7,599 $ ( 94,264 )

Unrealized holding gains on investment securities available-for-sale, net of taxes $ 37,661 $ 2,375 $ 7,599

Transfers from loans and leases to foreclosed real estate and other repossessions or SBA receivable 69,914 16,676 39,901

Net transfers between foreclosed real estate and SBA receivable 954 497 —

Transfer asset from premises and equipment, net to held for sale assets 18,540 30,154 —

Transfer asset from premises and equipment, net to other assets — 18,540 30,154

Transfer of loans held for sale to loans and leases held for investment 166,583 168,303 275,408

Transfer of loans and leases held for investment to loans held for sale 143,327 86,178 178,482

Loans provided for sales of foreclosed assets 621 — —

Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense ( 3,218 ) 881 1,072

20 unchanged sentences

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 at the Company’s Wilmington, North Carolina headquarters.

12 unchanged sentences

Live Oak Private Wealth provides high-net-worth individuals and families with strategic wealth and investment management services.

During the first quarter of 2022, Jolley Asset Management, LLC (“JAM”) was merged into Live Oak Private Wealth.

JAM was previously a wholly owned subsidiary of Live Oak Private Wealth.

TLH holds land adjacent to the Bank's headquarters consisting of wetlands and other protected property for the use and enjoyment of the Bank's employees and customers.

1 unchanged sentence

Dollar amounts in all tables in the notes to consolidated financial statements have been presented in thousands, except percentage, time period, stock option, share and per share data.

The accounting and reporting policies of the Company and the Bank follow United States generally accepted accounting principles (“GAAP”) and general practices within the financial services industry.

The accounting and reporting policies of the Company and the Bank follow U.S.

generally accepted accounting principles (“GAAP”) and general practices within the financial services industry.

The following is a description of the significant accounting and reporting policies the Company follows in preparing and presenting its consolidated financial statements.

6 unchanged sentences

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity in a subsidiary not attributable, directly or indirectly, to the Company.

Non-controlling interests are presented as a separate component of equity in the consolidated balance sheets and the presentation of net income (loss) is modified to present the net income (loss) attributed to controlling and non-controlling interests.

Non-controlling interests are presented as a separate component of equity in the consolidated balance sheets and the presentation of net income is modified to present the net income attributed to controlling interest and net loss attributable to non-controlling interests.

The Company evaluates its relationships with other entities to identify whether they are a voting interest entity or variable interest entity (“VIE”).

15 unchanged sentences

Due to Canapi Advisors voluntarily withdrawing as an investment advisor to the Canapi Funds in the third quarter of 2024, the chief operating decision maker began evaluating the business on a consolidated basis.

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

Therefore, the Company has one significant operating segment as of December 31, 2024 and 2025, 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.

11 unchanged sentences

Notes to Consolidated Financial Statements

During the first quarter of 2023, the Company refined its allowance for credit losses (“ACL”) methodology for estimating probability of default (“PD”) and loss given default (“LGD”).

Additionally, the Company began using internally calculated prepayment rates based on its historical information.

These changes, based on the continued maturity of internal data, resulted in a $ 1.5 million increase in the ACL in the first quarter of 2023.

The Company also refined its methodology for estimating its reserve on unfunded loan commitments by incorporating historical utilization rates on unused lines of credit and updating probability assumptions related to construction loan commitments.

These changes resulted in a $ 2.4 million increase in the reserve on unfunded commitments in the first quarter of 2023.

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

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

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 an adjustment 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.

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

2 unchanged sentences

The result of these changes was not material.

During the third quarter of 2025, the Company made enhancements to the quantitative and qualitative components of the ACL estimate.

Within the quantitative component, the Company updated the method used to forecast the probability of default during a reasonable and supportable forecast period.

The Company changed the economic variable used in forecasting default rates from the national unemployment rate to the Baa-rated Corporate Bond Yield utilizing a linear regression and changed the default rate forecast starting point from 36 month historical default performance to the most recent 12 month trailing average default performance.

These changes were based on a statistical analysis of historical defaults and macroeconomic factors.

In conjunction with the enhancements made to the probability of default methodology, the Company made enhancements to the qualitative framework to introduce weighting of quantifiable credit metrics used in the qualitative ACL estimate to put more weight on the metrics that are the strongest indicators of credit risk in the portfolio.

The cumulative effect of these changes was not material.

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

Cash and Cash Equivalents

For the purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “cash and due from banks” and “federal funds sold.” Cash and cash equivalents have an initial maturity of three months or less.

For the purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “cash and due from banks.” Cash and cash equivalents have an initial maturity of three months or less.

Certificate of Deposit with other Banks

24 unchanged sentences

The Company generally accounts for equity investments either under the equity method or equity security accounting.

Earnings impacts are reflected in the equity method investments (loss) income and equity security investments (losses) gains, net line items on the consolidated statements of income .

Earnings impacts are reflected in the equity method investments income (loss) and equity security investments gains (losses), net line items on the consolidated statements of income .

Investments in in-substance common stock through which there is significant influence but not control over the investee are accounted for under the equity method.

The determination of whether the Company has significant influence over an investee requires judgement based on the facts and circumstances of each investment including, share type, level of ownership, power to control and legal structure.

The determination of whether the Company has significant influence over an investee requires judgment based on the facts and circumstances of each investment including, share type, level of ownership, power to control and legal structure.

Significant influence is generally presumed to exist in privately held companies where the Company owns at least 20 % of voting stock, or 5 % interest in limited partnerships or limited liability companies.

17 unchanged sentences

Prior to 2021, management elected to account for the retained participating interests in government guaranteed loans under the fair value option.

Those loans for which the fair value option were elected are measured at fair value and classified as either held for sale or held for investment, as outlined below.

Those loans for which the fair value option were elected and are still held are measured at fair value and classified as held for investment, as outlined below.

Not electing fair value generally results in a larger discount being recorded on the date of the sale.

9 unchanged sentences

Held for Sale

Management designates loans as held for sale based on its intent to sell loans, or portions of loans, in established secondary markets or to participant banks and credit unions.

Management designates loans as held for sale based on its intent to sell loans, or portions of loans, in established secondary markets.

Salability requirements of government guaranteed portions include, but are not limited to, full disbursement of the loan commitment amount.

1 unchanged sentence

Net unrealized losses, if any, on loans without a fair value election, are recognized through a valuation allowance and recorded as a charge to noninterest income.

The cost basis of loans held for sale includes unamortized loan origination fees and costs.

The pro-rata portion, based on the percent of the total loan sold, of the remaining deferred fees and costs are recognized as an adjustment to the gain on sale.

Transfers of loans, or portions of loans that meet the definition of a participating interest, are accounted for as sales on the transaction settlement date when control has been surrendered.

Control is deemed surrendered when the loans have been (1) legally isolated from the Company, (2) the transferee obtains the right to pledge or transfer the loans free of conditions that constrain it from using that right, and (3) the Company does not maintain effective control over the loans through a repurchase agreement or other means.

If the transfer is accounted for as a sale, the loans are derecognized from the Company’s consolidated balance sheet and a gain or loss is recognized in net gains on sales of loans line item on the consolidated statements of income.

If the transfer is accounted for as a sale, the loans are derecognized from the Company’s consolidated balance sheets and a gain or loss is recognized in net gains on sales of loans line item on the consolidated statements of income.

The carrying value of loans held for sale includes unamortized loan origination fees and costs.

The gain on sale recognized in income is the sum of the premium on the guaranteed loan and the fair value of the servicing assets recognized, less the discount recorded on the unguaranteed portion of the loan retained.

The pro-rata portion, based on the percent of the total loan sold, of the remaining deferred fees and costs are recognized as an adjustment to the gain on sale.

If the transfer does not satisfy the aforementioned control criteria, the transaction is recorded as a secured borrowing with the transferred loans remaining on the Company’s consolidated balance sheet and proceeds recognized as a liability.

6 unchanged sentences

The following summarizes the activity pertaining to loans held for sale for the years ended December 31, 2025 and 2024:

2025 2024 (1)

Balance at beginning of year $ 346,002 $ 387,037

5 unchanged sentences

Balance at end of period $ 420,055 $ 346,002

(1) Revisions were made to the 2024 proceeds from sale and gain on sale of loans lines as discussed further in subsection Revision of Previously Issued Financial Statements below.

Held for Investment

26 unchanged sentences

LGD rates are calculated by dividing the lifetime net charge-offs for each pool by the pool’s EAD.

PD and LGD rates are adjusted for forecasted national unemployment rates during a reasonable and supportable forecast period, using a single macroeconomic scenario.

PD rates are adjusted for forecasted Baa-rated Corporate Bond yields during a reasonable and supportable forecast period, using a single macroeconomic scenario.

Management has determined that four quarters represents a reasonable and supportable forecast period and adjusted loss rates revert back to a historical loss rate over four quarters on a straight-line basis.

2 unchanged sentences

The Company considers a variety of qualitative factors to reflect its current judgment of various events and risks that are not measured within the quantitative modeling, including lending policies and procedures, economic and business conditions, nature and volume of the loan and lease portfolio, experience of lending staff, volume and severity of credit risk metrics, quality of loan review, value of underlying collateral, loan and lease portfolio concentrations, and other external factors.

The qualitative component of the ACL is further informed by multiple alternative economic scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance.

The qualitative component of the ACL is further informed by multiple alternative economic scenarios, as deemed applicable, aligned with weighted, quantifiable credit metrics such as criticized and classified, substandard accruing, and past dues by loan pool to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance.

The evaluation process is inherently imprecise and subjective as it requires management judgment based on underlying factors that are susceptible to changes.

In 2023, management adjusted historical loss information for differences in current risk characteristics that are not considered within the quantitative modeling processes but were relevant in assessing the expected credit losses within the loan and lease pools.

These qualitative factor adjustments generally increased management’s estimate of expected credit losses based upon the estimated level of risk.

The various risk factors considered in qualitative adjustments included risk grading, delinquency levels, pool age, portfolio mix and growth rates, and the status of servicing efforts which may be impacted by natural disasters or health pandemics.

This evaluation was inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

Loans or leases that do not share risk characteristics are evaluated on an individual basis and are excluded from the pooled evaluation.

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• Any loan or lease that is on nonaccrual.

• Prior to January 1, 2023, any loan or lease that was restructured with an interest rate concession and met the definition of a troubled debt restructuring (“TDR”).

The Company estimates reserves on individually evaluated loans and leases using either a DCF methodology in conjunction with the evaluation of collateral values or strictly through the evaluation of collateral values.

Loan relationships which meet the criteria to be individually evaluated with unguaranteed exposure of less than $ 250 thousand are collectively evaluated using an average of loss rates applied to individually evaluated relationships with unguaranteed exposure between $ 250 thousand and $ 1 million.

When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Allowance for Off-Balance Sheet Credit Exposures

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The estimate is influenced by historical loss experience, adjusted for current risk characteristics, and economic forecasts.

The balance of the allowance for off-balance sheet credit exposures was $ 13.6 million and $ 4.8 million at December 31, 2024 and 2023, respectively, and is recorded in other liabilities in the consolidated balance sheet.

During the years ended December 31, 2024, 2023 and 2022, the Company recorded $ 8.8 million, $ 3.3 million and $ 794 thousand in expense related to the allowance for off-balance sheet credit exposures.

The balance of the allowance for off-balance sheet credit exposures was $ 16.4 million and $ 13.6 million at December 31, 2025 and 2024, respectively, and is recorded in other liabilities in the consolidated balance sheets.

During the years ended December 31, 2025, 2024 and 2023, the Company recorded $ 2.8 million, $ 8.8 million and $ 3.3 million in expense related to the allowance for off-balance sheet credit exposures.

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

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Unearned interest is recognized over the lease term on a basis which results in a constant rate of return on the unrecovered lease investment.

The term of each lease is generally 3 - 7 years which is consistent with the useful life of the equipment with no residual value.

The term of each lease is generally 3 years to 7 years which is consistent with the useful life of the equipment with no residual value.

The Company records expected credit losses on direct finance leases within the ACL.

Operating Leases

The term of each operating lease is generally 10 to 15 years.

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

The term of each operating lease is generally 10 years to 15 years.

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

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.

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

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

The Company evaluates the carrying value of rental equipment for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable.

If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value.

Any impairment loss is included in other expense on the consolidated statements of income.

The Company determines fair value based upon the condition of the rental equipment and the projected net cash flows from its rental and sale considering current market conditions.

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No impairment expense was recorded during the years ended December 31, 2025 and 2024.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Premises and Equipment

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Servicing assets related to conventional commercial loans are carried at amortized cost.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Servicing fee income is recorded for fees earned for servicing loans.

The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Derivative Financial Instruments

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Further, the Company does not use other derivative instruments to hedge economic risks stemming from equity warrant assets.

Equity warrant assets in certain private client companies are recorded as derivatives when they contain net settlement terms and other qualifying criteria.

Equity warrant assets entitle the Company to purchase a specific number of shares of stock at a specific price within a specific time period, generally 10 years.

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Similar to other loan fees, the yield adjustment related to grant date fair value of warrants is recognized over the life of that credit facility.

Any changes in fair value from the grant date fair value of equity warrant assets classified as derivatives are recognized as increases or decreases to other assets on the consolidated balance sheet and as net gains or losses on derivative instruments, in other noninterest income, a component of consolidated net income.

When a portfolio company is acquired, the Company may exercise these equity warrant assets for shares or cash.

Any changes in fair value from the grant date fair value of equity warrant assets classified as derivatives are recognized as increases or decreases to other assets on the consolidated balance sheet and as net gains or losses on equity warrant assets, in other noninterest income, a component of consolidated net income.

When a portfolio company is acquired, the Company will generally exercise these equity warrant assets for cash.

The fair value of equity warrant assets classified as derivatives is reviewed and updated quarterly using a Black-Scholes option pricing model.

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An impairment loss is recognized if the carrying value of the intangible asset with an indefinite life exceeds its fair value.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2025 and 2024, the Company had $ 1.8 million of goodwill.

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Intangible assets are almost entirely comprised of customer relationships that are being amortized using the straight-line method over 15 years.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

The Company had no impairment charges related to business combinations in 2025, 2024 or 2023.

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During the year, the building and land were sold for a gain of $ 2.4 million which is reflected in the 2024 consolidated statement of income in other noninterest income.

During 2023, the Company determined retention of two of its aircraft, was ineffective in serving the needs of an expanding nationwide customer base.

As a result of this determination, the Company marketed the aircraft for sale and accordingly reclassified them from premises and equipment, net to other assets.

The total amount reclassified out of premises and equipment, net was $ 30.2 million.

Prior to December 31, 2023, one aircraft was sold for a $ 4.4 million gain and is reflected in the 2023 consolidated statement of income in other noninterest income with one aircraft remaining in other assets with a carrying amount of $ 16.0 million at December 31, 2023.

During 2024, the Company sold the other aircraft for a gain of $ 6.7 million which is reflected in the 2024 consolidated statement of income in other noninterest income.

During 2024, the Company sold an aircraft previously classified as held for sale for a gain of $ 6.7 million which is reflected in the 2024 consolidated statement of income in other noninterest income.

During 2023, one aircraft previously classified as held for sale was sold for a $ 4.4 million gain and is reflected in the 2023 consolidated statement of income in other noninterest income

Preferred Stock

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 expenses, totaled $ 96.3 million.

Holders of the Series A Preferred Stock and Depositary Shares do 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.

During the year ended December 31, 2025, a cash dividend of $ 0.76189 per Depositary Share of the Company’s Series A Preferred Stock was declared and paid.

On June 11, 2014, the Company amended its Articles of Incorporation to create two classes of common stock.

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provided that holder is not the initial transferee or an affiliate of initial transferee and other conditions are met.

During 2022, 125,024 shares of Class B common stock (non-voting) were converted to Class A common stock (voting) in connection with private sales.

This conversion decreased the value of Class B common stock (non-voting) and increased the value of Class A common stock (voting) by $ 1.3 million.

Advertising Expense

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Realization of deferred tax assets is dependent upon the level of historical income, prudent and feasible tax planning strategies, reversals of deferred tax liabilities and estimates of future taxable income.

The Company uses the flow-through method of accounting for its solar investment tax credit investments, none of which qualify for proportional amortization.

The Company uses the proportional amortization method of accounting for its low income housing tax credits (“LIHTC”).

Under the proportional amortization method, eligible investment costs are amortized in proportion to the tax benefits received with the resulting amortization reported in income tax expense, which aligns with the associated tax credits and other tax benefits.

The flow-through method of accounting is used to account for solar investment tax credit investments, none of which qualify for proportional amortization.

Under the flow-through method, investment tax credits are recognized as a reduction to income tax expense immediately in the period that the credit is generated, to the extent permitted by tax law.

In accounting for any temporary difference that arise, the Company has elected the income statement method whereby deferred taxes are adjusted through income tax expense.

In accounting for any temporary difference that arises from tax credits, the Company has elected the income statement method whereby deferred taxes are adjusted through income tax expense.

The Company evaluates uncertain tax positions at the end of each reporting period.

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Basic earnings per share:

Net income attributable to Live Oak Bancshares, Inc.

$ 77,474 $ 73,898 $ 176,208

Net income attributable to common shareholders $ 102,823 $ 77,474 $ 73,898

Weighted-average basic shares outstanding 45,701,364 45,009,567 44,353,708

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Diluted earnings per share:

Net income attributable to Live Oak Bancshares, Inc., for diluted earnings per share $ 77,474 $ 73,898 $ 176,208

Net income attributable to common shareholders $ 102,823 $ 77,474 $ 73,898

Total weighted-average basic shares outstanding 45,701,364 45,009,567 44,353,708

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Notes to Consolidated Financial Statements

Revision of Previously Issued Financial Statements

Certain immaterial prior-period amounts in the Consolidated Statements of Income have been revised and are reflected below.

Specifically, there was a decrease in the line item for net gains on sales of loans, which was fully offset by a decrease in salaries and employee benefits, and travel expense.

The changes were presentation only and had no impact on previously reported net income, total assets, total liabilities, or shareholders’ equity.

The effect of the above revision on previously reported financial statements is presented below:

As previously reported Impact of revision As revised

Consolidated statement of income for the year ended December 31, 2024

Net gains on sales of loans $ 60,899 $ ( 11,129 ) $ 49,770

Total noninterest income 123,781 ( 11,129 ) 112,652

Salaries and employee benefits $ 183,268 $ ( 8,561 ) $ 174,707

Travel expense 9,738 ( 2,568 ) 7,170

Total noninterest expense 314,239 ( 11,129 ) 303,110

Consolidated statement of income for the year ended December 31, 2023

Net gains on sales of loans $ 46,545 $ ( 7,733 ) $ 38,812

Total noninterest income 111,733 ( 7,733 ) 104,000

Salaries and employee benefits $ 175,052 $ ( 5,960 ) $ 169,092

Travel expense 8,922 ( 1,773 ) 7,149

Total noninterest expense 322,885 ( 7,733 ) 315,152

Consolidated statement of cash flows for the year ended December 31, 2024

Operating activities:

Net gains on sale of loans held for sale $ ( 60,899 ) $ 11,129 $ ( 49,770 )

Net cash provided by operating activities 145,651 11,129 156,780

Investing activities:

Net change in loans and leases (1)

$ ( 1,561,528 ) $ ( 11,129 ) $ ( 1,572,657 )

Net cash used by investing activities ( 1,688,284 ) ( 11,129 ) ( 1,699,413 )

Consolidated statement of cash flows for the year ended December 31, 2023

Operating activities:

Net gains on sale of loans held for sale $ ( 46,545 ) $ 7,733 $ ( 38,812 )

Net cash provided by operating activities 177,162 7,733 184,895

Investing activities:

Net change in loans and leases (1)

$ ( 1,183,175 ) $ ( 7,733 ) $ ( 1,190,908 )

Net cash used by investing activities ( 1,332,013 ) ( 7,733 ) ( 1,339,746 )

(1) As previously reported balances incorporate the reclassification discussed in the Reclassifications subsection below.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Revisions pertaining to loans held for sale activity for the year ended December 31, 2024, within this footnote, are presented below:

As previously reported Impact of revision As revised

Gain on sale of loans $ 60,899 $ ( 11,129 ) $ 49,770

Principal collections, net of deferred fees and costs ( 16,839 ) 11,129 ( 5,710 )

Reclassifications

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

During the fourth quarter of 2025, within the Consolidated Statement of Cash Flows Investing activities, the line item entitled Purchases of loans previously sold was reclassified into Loan and lease originations and principal collections, net.

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

Loan and Lease Classes

During the fourth quarter of 2024, management made changes to loan and lease classes to align the presentation in the credit quality disclosures in Note 3.

Loans and Leases Held for Investment and Credit Quality with the Company’s method for monitoring and assessing credit risk.

As a result, loans and leases previously classified as Specialty Lending class and Energy & Infrastructure class in the 2023 financial statements were reclassified into the Commercial Banking class to reflect the current year classifications.

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

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 ASU can be adopted 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 December 31, 2024, the Company has 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.

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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 Company adopted this standard on December 31, 2024 with no material effect on its consolidated financial statements.

The amendments were applied retrospectively to all prior periods in the consolidated financial statements.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

In December 2023, the FASB issued ASU No.

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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 on the consolidated financial statements and related disclosures.

The Company adopted the standard on January 1, 2025 on a prospective basis and new income tax disclosure requirements are presented in Note 9.

Income Taxes.

Aside from complying with the new disclosure requirements, there was no material effect on the Company’s consolidated financial statements.

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

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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 on a prospective basis, 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 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 on a prospective basis, 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):

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

The guidance may be applied on a prospective or retrospective basis.

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 Consolidated Financial Statements

In September 2025, the FASB issued ASU 2025-06 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”).

ASU 2025-06 indicates an entity should start capitalizing software costs when both of the following occur:

(i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended.

The amendments in this standard will be effective for the Company on January 1, 2028.

The guidance may be applied on a prospective, modified, or retrospective transition basis.

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

In September 2025, the FASB issued ASU 2025-07 “Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606):

Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract” (“ASU 2025-07”).

ASU 2025-07 adds a scope exception from derivative accounting for nonexchange traded contracts with underlyings based on operations or activities specific to one of the parties to the contract.

It also clarifies that the revenue guidance in ASC 606 applies initially to share-based noncash consideration received from a customer for the transfer of goods or services.

The guidance in other ASCs, including derivatives (ASC 815) and equity securities (ASC 321), is not applied unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under ASC 606.

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

The guidance may be applied on a prospective or modified retrospective basis.

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

In December 2025, the FASB issued ASU 2025-11 “Interim Reporting (Topic 270):

Narrow-Scope Improvements” (“ASU 2025-11”).

The amendments clarify interim disclosure requirements and when Topic 270 applies as well as the addition of a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity.

The amendments in this standard will be effective for the Company on January 1, 2028.

The guidance may be applied on a prospective or retrospective basis.

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

In December 2025, the FASB issued ASU 2025-12 “Codification Improvements” (“ASU 2025-12”).

The amendments represent changes to the Codification to make incremental improvements to GAAP including technical corrections, clarifications, and minor improvements.

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

The guidance may generally be applied, by issue, on a prospective or retrospective basis.

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

Certain provisions are effective for 2025, including restoration of immediate expensing for domestic research and experimental expenditures and reinstatement of 100% bonus depreciation deduction for qualified property.

The Company evaluated the impact of this legislation, the effects of which have been recognized in the Consolidated Financial Statements and Notes.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Investment Securities

Available-for-Sale

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

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

December 31, 2025 Amortized Cost Unrealized Gains Unrealized Losses Fair Value

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

During the year ended December 31, 2025, two securities totaling $ 7.0 million matured, and twenty securities totaling $ 42.9 million were settled.

During the year ended December 31, 2024, one security totaling $ 3.0 million matured, one security totaling $ 2.5 million was called and ten securities totaling $ 27.0 million were settled.

During the year ended December 31, 2023, three securities totaling $ 13.0 million were called and four securities totaling $ 7.0 million were settled.

During the year ended December 31, 2022, two securities totaling $ 7.5 million matured and twenty securities totaling $ 36.5 million were settled.

Live Oak Bancshares, Inc.

Notes to 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.

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

At December 31, 2024, there were 404 mortgage-backed securities, three U.S.

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

At December 31, 2025, there were 357 mortgage-backed securities, one U.S.

government agency security and one municipal bonds in unrealized loss positions for greater than 12 months.

There were 18 mortgage-backed securities and two municipal bonds in unrealized loss positions for less than 12 months.

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

government agencies and two municipal bonds 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.

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

government agencies and two municipal bond for greater than 12 months.

There were 27 mortgage-backed securities in unrealized loss positions for less than 12 months.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

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 issuer’s 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 consolidated statement of income.

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

government sponsored enterprises (“GSEs”).

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

The following is a summary of investment securities by maturity:

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government agencies

Within one year $ 7,000 $ 6,963

One to five years $ 3,731 $ 3,718

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

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.

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

At December 31, 2025, investment securities with a fair value of $ 565.8 million and a carrying value of $ 610.1 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

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Total $ 36,698 $ 91,003

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

(1) On October 20, 2025, Apiture, Inc.

was sold to Computer Services, Inc.

and the Company recognized a $ 24.1 million gain in connection with the sale.

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

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

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

(6) Affordable Housing includes low income housing tax credit (“LIHTC”) in Estrella Landing Apartments LLC (“Estrella Landing”), in which the Company holds a 99.9 % limited member interest.

(7) Affordable Housing includes LIHTC in Estrella Landing Apartments LLC (“Estrella Landing”), in which the Company holds a 99.9 % limited member interest.

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 December 31, 2024 and December 31, 2023, there was an unfunded commitment of $ 1.7 million and $ 7.7 million, respectively for Estrella Landing.

(8) 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.

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

As of December 31, 2024, this investment category also includes the carried interest security related to Canapi Ventures Fund I, L.P.

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

Live Oak Bancshares, Inc.

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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 December 31, 2024 and for the years ended December 31, 2024, 2023 and 2022 is reflected in the following table:

Cumulative Adjustments 2024 2023 2022

The carrying amount of the Company’s investments in non-marketable equity securities with no readily determinable fair value for the years ended December 31, 2025, 2024 and 2023 is reflected in the following table:

2025 2024 2023

Carrying value (1)

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Upward changes for observable prices 1,128 409 —

50,901 409 — 2,022

Downward changes for observable prices ( 2,209 ) ( 369 ) ( 1,524 )

Net upward (downward) change (2)

$ ( 3,308 ) $ 40 $ ( 1,524 )

(1) Investment unfunded commitments of $ 6.1 million, $ 4.3 million, and $ 2.3 million as of December 31, 2025, 2024, and 2023, respectively.

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

For the twelve months ended December 31, 2024, 2023 and 2022, the Company recognized unrealized gains (losses) on all equity securities still held at the reporting date of $ 119 thousand, $( 1.5 ) million, and $ 1.9 million, respectively.

(2) The equity securities portfolio has recognized cumulative adjustments of $ 59.3 million over the life of the equity security portfolio as of December 31, 2025.

While the Company did not realize any significant equity security gains for the years ended December 31, 2024, and December 31, 2023, the Company realized a gain of $ 9.0 million on the equity security portfolio for the year ended December 31, 2025 due to the sale of a portfolio investment .

For the years ended December 31, 2025, 2024 and 2023, the Company recognized unrealized gains (losses) on all equity securities still held at the reporting date of $( 3.3 ) million, $ 119 thousand, and $( 1.5 ) million, respectively.

Variable Interest Entities

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 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 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

5 unchanged sentences

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.

During the years presented, the Company did not provide financial support to any VIE that it was not previously contractually required, nor does it intend to do so.

The Company’s investment in the unconsolidated VIEs are carried in other assets on the consolidated balance sheets.

The Company’s maximum exposure to loss from unconsolidated VIEs includes the investment recorded on the Company’s consolidated balance sheet and unfunded commitment.

11 unchanged sentences

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

Affordable housing 15,611 15,611 7,715 Other assets & other liabilities (6)

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

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 $ 4.2 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 $ 12.9 million of investments, $ 1.7 million in unfunded commitments and a scenario in which related tax credits are recaptured, collectively totaling $ 0.8 million.

(2) Maximum exposure to loss includes $ 13.5 million of investments and a scenario in which related tax credits are recaptured, collectively totaling $ 941 thousand.

(3) Maximum exposure to loss includes $ 19.0 million of current investments and $ 13.8 million in unfunded commitments.

1 unchanged sentence

(5) Maximum exposure to loss represents $ 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 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.

(6) Maximum exposure to loss includes $ 12.9 million of 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.

The following table provides a summary of the tax benefits the Company has received from VIEs as of December 31, 2025, 2024, and 2023:

The Year Ended December 31,

2025 2024 2023

Provision for income taxes:

3 unchanged sentences

( 868 ) ( 11,546 ) ( 16,390 )

Other tax benefits related to tax credit investments

Total $ ( 45 ) $ ( 10,440 ) $ ( 16,390 )

33 unchanged sentences

Small Business Banking includes loans to customers in verticals that generally have traditional loan structures.

Commercial Banking includes loans to customers in verticals that generally have atypical ownership structures as well as complex collateral arrangements, underwriting requirements, and servicing needs.

Commercial Banking includes loans to customers in verticals that may have atypical ownership structures as well as complex collateral arrangements, underwriting requirements, and servicing needs.

Commercial Banking also includes loans to customers that operate renewable energy projects, lodging facilities, and municipalities, and often utilize USDA or tax-exempt loan structures.

1 unchanged sentence

These loans and lease classes were determined based on industry risk characteristics and management’s method for monitoring credit risk and managing those lending divisions.

Accrued interest receivable on loans totaled $ 85.0 million and $ 80.7 million at December 31, 2025 and December 31, 2024, respectively, and is included in other assets in the accompanying consolidated balance sheet.

Past Due Loans and Leases

63 unchanged sentences

Pass (Risk Grades 10-47):

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

These loans and leases are not individually evaluated 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.

76 unchanged sentences

As of December 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 twelve months ended December 31, 2024 and 2023.

There was no interest income recognized on nonaccrual loans and leases during the years ended December 31, 2025 and 2024.

Nonaccrual loans and leases are generally included in the held for investment portfolio.

Accrued interest receivable on loans totaled $ 80.7 million and $ 63.5 million at December 31, 2024 and December 31, 2023, respectively, and is included in other assets in the accompanying consolidated balance sheet.

Nonaccrual loans and leases as of December 31, 2025 and December 31, 2024 are as follows:

39 unchanged sentences

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

Twelve Months Ended December 31,

Year Ended December 31,

Commercial & Industrial $ 3,137 $ 4,213

14 unchanged sentences

Total 17,477 91,426 — 4,937 4,118 — 1,424

Commercial Real Estate

Construction & Development

Small Business Banking 277 — — 277 — — —

Total 277 — — 277 — — —

Commercial Land

Commercial Real Estate

Small Business Banking 85,987 1,990 — 27,813 690 — 266

Commercial Banking 20,389 — — 15,425 — — —

Total 106,376 1,990 — 43,238 690 — 266

28 unchanged sentences

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

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

Charge offs ( 43,785 ) ( 338 ) ( 3,932 ) ( 24 ) ( 48,079 )

4 unchanged sentences

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

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

Charge offs ( 22,510 ) — ( 1,417 ) — ( 23,927 )

2 unchanged sentences

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

During the year ended December 31, 2025, the ACL increased primarily as a result of loan growth and charge-off activity amid a challenging macroeconomic environment, where elevated interest rates earlier in the year continued to pressure certain small business and commercial borrowers, despite more recent signs of stabilization in rate conditions.

Loss rates are adjusted for twelve month forecasted Baa-rated corporate bond yields followed by a twelve-month straight-line reversion period.

During the year ended December 31, 2024, the ACL increased primarily as a result of record loan growth combined with the impacts of the current and forecasted macroeconomic environment.

3 unchanged sentences

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

During the year ended December 31, 2022, the ACL increased primarily as a result of loan growth, charge-off experience impacts and changes in the macroeconomic outlook.

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

Loan Modifications for Borrowers Experiencing Financial Difficulty

5 unchanged sentences

The following tables summarize the amortized cost basis of loans that were modified during the periods presented.

Twelve Months Ended December 31, 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 $ 8,083 $ — $ — $ — 0.1 %

Commercial Banking 12,779 — 3,094 2,500 0.7

Total $ 20,862 $ — $ 3,094 $ 2,500 0.8 %

Twelve Months Ended December 31, 2023 Other-Than-Insignificant

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

Financing Receivable

Year Ended December 31, 2025 Small Business Banking Commercial Banking Total

Other-Than-Insignificant Payment Delay $ 8,605 $ 26,095 $ 34,700

Term Extension 37,145 — 37,145

Interest Rate Reduction 14,148 — 14,148

Combination - Term Extension, Payment Delay, & Interest Rate Reduction 3,048 — 3,048

Combination - Payment Delay & Interest Rate Reduction 5,929 — 5,929

Combination - Term Extension & Interest Rate Reduction 17,698 — 17,698

Combination - Term Extension & Payment Delay 6,808 — 6,808

Total Modifications $ 93,381 $ 26,095 $ 119,476

% of Total Class of Financing Receivable 1.3 % 0.6 % 1.9 %

Year Ended December 31, 2024

Other-Than-Insignificant Payment Delay $ 8,083 $ 12,779 $ 20,862

Term Extension — — —

Interest Rate Reduction — 3,094 3,094

Combination - Term Extension & Interest Rate Reduction — 2,500 2,500

Total Modifications $ 8,083 $ 18,373 $ 26,456

% of Total Class of Financing Receivable 0.1 % 0.7 % 0.8 %

Year Ended December 31, 2023

Other-Than-Insignificant Payment Delay $ 10,090 $ — $ 10,090

Term Extension 5,127 14,193 19,320

Interest Rate Reduction 3,330 — 3,330

Combination - Term Extension & Payment Delay 361 4,133 4,494

Total Modifications $ 18,908 $ 18,326 $ 37,234

% of Total Class of Financing Receivable 0.3 % 1.7 % 2.0 %

As of December 31, 2025 and December 31, 2024 , the Company had commitments to lend additional funds to these borrowers totaling $ 209.6 million and $ 6.3 million, respectively.

The following table presents an aging analysis of loans that were modified within the years ended December 31, 2025, 2024 and 2023 , respectively:

Year Ended December 31, 2025 Current 30-89 Days

Past Due 90 Days or More Past Due Total Past Due

Small Business Banking $ 90,122 $ 3,228 $ 31 $ 3,259

1 unchanged sentence

Total $ 116,217 $ 3,228 $ 31 $ 3,259

As of December 31, 2024 and December 31, 2023 , the Company had commitments to lend additional funds to these borrowers totaling $ 6.3 million and $ 1.2 million, respectively.

The following table presents an aging analysis of loans that were modified within the twelve months ended December 31, 2024 and December 31, 2023, respectively:

Twelve Months Ended December 31, 2024 Current 30-89 Days

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Year Ended December 31, 2024 Current 30-89 Days

Past Due 90 Days or More Past Due Total Past Due

2 unchanged sentences

Total $ 26,456 $ — $ — $ —

Twelve Months Ended December 31, 2023 Current 30-89 Days

Year Ended December 31, 2023 Current 30-89 Days

Past Due 90 Days or More Past Due Total Past Due

3 unchanged sentences

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

Twelve Months Ended December 31, 2024

Year Ended December 31, 2025

Weighted Average

2 unchanged sentences

Small Business Banking 3.50 % 62

Year Ended December 31, 2024

Weighted Average

Interest Rate Reduction Weighted Average

Term Extension (in Months)

Commercial Banking 5.00 % 7

Twelve Months Ended December 31, 2023

Year Ended December 31, 2023

Weighted Average

3 unchanged sentences

Commercial Banking — % 29

There were no loans that were modified within the twelve months ended December 31, 2024 and December 31, 2023, respectively, that subsequently defaulted during the periods presented.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

There were no loans that were modified within the twelve months ended December 31, 2025, 2024 and 2023 , respectively, 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.

Prior to January 1, 2023, a loan or lease was accounted for as a TDR if the Company, for reasons related to the borrower’s financial difficulties, restructured a loan or lease, and granted a concession to the borrower that it would not otherwise grant.

A TDR typically involved a more than short-term modification of terms such as a reduction of the interest rate below the current market rate for a loan or lease with similar risk characteristics or the waiving of certain financial covenants without corresponding offsetting compensation or additional support.

The following table represents the types of TDRs that were made during the periods presented:

Twelve months ended December 31, 2022

Interest Only Payment Deferral Extend Amortization Other (1)

Total TDRs (2)

Loans Recorded investment at period end Number of

Loans Recorded investment at period end

Commercial & Industrial

Small Business Banking — $ — 7 $ 8,795 3 $ 1,442 1 $ 490 11 $ 10,727

Commercial Banking — — 1 4,183 1 13,517 — — 2 17,700

Total — — 8 12,978 4 14,959 1 490 13 28,427

Commercial Real Estate

Small Business Banking 1 3,677 1 797 1 4,364 — — 3 8,838

Total 1 3,677 1 797 1 4,364 — — 3 8,838

Construction & Development

Small Business Banking — — — — — — 2 3,081 2 3,081

Total — — — — — — 2 3,081 2 3,081

Total 1 $ 3,677 9 $ 13,775 5 $ 19,323 3 $ 3,571 18 $ 40,346

(1) Includes one small business banking loan with extend amortization and a rate concession ($ 490 thousand) and two small business banking loans with extended amortization and interest only ($ 3.1 million).

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

Fair Value of Financial Instruments for additional information.

Restructurings made to improve a loan’s performance have varying degrees of success.

The following table presents TDRs that were modified within the twelve months ended December 31, 2022 that subsequently defaulted during the period:

Twelve months ended December 31, 2022

Interest Only Payment Deferral Extend Amortization Other Total TDRs (1)

Loans Recorded investment at period end Number of

Loans Recorded investment at period end

Commercial & Industrial

Small Business Banking — $ — 2 $ 940 2 $ 318 — $ — 4 $ 1,258

Total — $ — 2 $ 940 2 $ 318 — $ — 4 $ 1,258

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

Fair Value of Financial Instruments for additional information.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Lessor Equipment Leasing

2 unchanged sentences

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.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Direct Financing Leases

6 unchanged sentences

As of December 31, 2025 Amount

Interest income of $ 122 thousand, $ 253 thousand and $ 393 thousand was recognized in the twelve months ended December 31, 2024 , 2023 and 2022 , respectively.

Interest income of $ 39 thousand, $ 122 thousand and $ 253 thousand was recognized in the years ended December 31, 2025 , 2024 and 2023 , respectively.

Operating Leases

As of December 31, 2024 and 2023 , the Company had a net investment of $ 93.4 million and $ 104.0 million, respectively, in assets included in premises and equipment, net in the consolidated balance sheet that are subject to operating leases.

As of December 31, 2025 and 2024 , the Company had a net investment of $ 76.6 million and $ 93.4 million, respectively, in assets included in premises and equipment, net in the consolidated balance sheets 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 December 31, 2025 and 2024, respectively, and accumulated depreciation was $ 65.8 million and $ 66.2 million as of December 31, 2025 and 2024 , respectively.

Depreciation expense recognized on these assets for the twelve months ended December 31, 2024 , 2023 and 2022 was $ 9.6 million, $ 9.6 million and $ 9.7 million, respectively.

Depreciation expense recognized on these assets for the years ended December 31, 2025 , 2024 and 2023 was $ 9.7 million, $ 9.6 million and $ 9.6 million, respectively.

Lease income of $ 9.5 million, $ 9.4 million and $ 9.5 million was recognized in the twelve months ended December 31, 2025, 2024 and 2023, respectively.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

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

5 unchanged sentences

If it is determined to be or contain a lease, then the lease is classified as an operating or finance lease.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Right-of-use assets represent the Company's right to use an underlying asset for the lease term.

7 unchanged sentences

The Company does not apply the recognition and measurement requirements to any short-term leases (terms of twelve months or less).

Operating leases are included in other assets and other liabilities in the consolidated balance sheet.

Finance leases are included in other assets and borrowings in the consolidated balance sheet.

Operating leases are included in other assets and other liabilities in the consolidated balance sheets.

Finance leases are included in other assets and borrowings in the consolidated balance sheets.

Lease expense for operating leases and finance leases is included in occupancy expense in the consolidated statements of income and interest expense for finance leases is included in borrowings interest expense in the consolidated statements of income.

The Company has operating leases for real property and land.

These leases have remaining lease terms of 1 year to 22 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases.

These leases have remaining lease terms of less than 1 year to 21 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases.

The Company has concluded that it is reasonably certain it will exercise the options to extend for only one lease, which was therefore recognized as part of the right-of-use asset and lease liability.

The Company subleases a portion of certain office space and recognizes sublease income as presented in the table below.

The Company has a finance lease for business equipment, and it has a remaining lease term of approximately 1.58 years.

9 unchanged sentences

Total net lease cost $ 782 $ 1,255

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Supplemental disclosure for the consolidated balance sheets related to leases is as follows:

4 unchanged sentences

Finance lease liability 82 132

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

The weighted average remaining lease term and weighted average discount rate for leases are as follows:

15 unchanged sentences

Loans serviced for others are not included in the consolidated balance sheets.

The unpaid principal balances of loans serviced for others requiring recognition of a servicing asset were $ 3.46 billion, $ 3.09 billion and $ 2.67 billion at December 31, 2024, 2023 and 2022 , respectively.

The unpaid principal balance for all loans serviced for others was $ 4.72 billion, $ 4.24 billion and $ 3.48 billion at December 31, 2024, 2023 and 2022 , respectively.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

The unpaid principal balances of loans serviced for others requiring recognition of a servicing asset were $ 3.97 billion and $ 3.46 billion at December 31, 2025 and 2024 , respectively.

The unpaid principal balance for all loans serviced for others was $ 5.60 billion and $ 4.72 billion at December 31, 2025 and 2024 , respectively.

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

5 unchanged sentences

Balance at end of period $ 62,941 $ 55,788

(1) The twelve month period ended December 31, 2023, includes a $ 13.7 million increase related to change in estimate implemented on July 1, 2023.

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

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

At December 31, 2025, the key assumptions used to determine the fair value of the Company’s servicing rights included a weighted average prepayment speed equal to 16.2 % and a weighted average discount rate equal to 12.8 %.

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:

As of December.

31, 2025 As of December.

Fair value of servicing rights $ 62,941 $ 55,788

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

Prepayment Speed

20% increase ($ 3,794 ) ($ 3,459 )

10% increase ( 1,830 ) ( 1,785 )

Discount Rate

200 basis point increase ( 2,586 ) ( 2,603 )

100 basis point increase ( 1,189 ) ( 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 December 31, 2025 and 2024 , the Company had servicing assets related to conventional commercial loans carried at amortized cost of $ 214 thousand and $ 356 thousand, respectively.

14 unchanged sentences

Premises and equipment, net of depreciation $ 240,203 $ 264,059

Deposits on fixed assets at December 31, 2024 consist primarily of software development costs and campus improvement costs.

Deposits on fixed assets at December 31, 2025 consist primarily of plane deposits, software development costs, and campus improvement costs.

Depreciation expense for the years ended December 31, 2025, 2024 and 2023 amounted to $ 30.0 million, $ 23.4 million and $ 21.1 million, respectively.

Total capitalized interest of $ 769 thousand related to the Company’s newly constructed building at its headquarters campus was recorded for the year ended December 31, 2024.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

The types of deposits at December 31, 2024 and 2023 are:

The composition of deposits at December 31, 2025 and 2024 is as follows:

Noninterest-bearing deposits $ 515,051 $ 318,890

9 unchanged sentences

2026 $ 4,383,393

2027 1,070,894

Thereafter 149,694

11 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.

99,645 99,505

Other long term debt (1)

2 unchanged sentences

As of December 31, 2025 and 2024, the Company’s total unused borrowing capacity was $ 3.97 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, 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 approved borrowing capacity with all of the above sources is $ 7.54 billion and $ 6.10 billion as of December 31, 2025 and 2024, respectively.

5 unchanged sentences

These borrowings must be secured with eligible collateral approved by the Federal Home Loan Bank of Atlanta.

As of December 31, 2024 and 2023, there was $ 3.13 billion and $ 2.72 billion, respectively, of stated potential borrowing capacity available under this agreement, of which approximately $ 587.8 million and $ 111.7 million of securities are available for collateral, respectively.

As of December 31, 2025 and 2024, there was $ 4.37 billion and $ 3.13 billion, respectively, of stated potential borrowing capacity available under this agreement, of which approximately $ 808.3 million and $ 587.8 million of investment securities available-for-sale are available for collateral, respectively.

There is no collateral pledged and no advances outstanding as of December 31, 2025 or 2024.

12 unchanged sentences

As of December 31, 2025 and 2024, there was $ 100.0 million of available credit.

The Company could borrow funds from the Bank Term Funding Program (“BTFP”).

Under the BTFP, advances must be secured by pledging eligible securities owned by the Company on March 12, 2023.

BTFP advances could be requested for a term of up to one year at a fixed market rate until the program ended March 11, 2024.

As of December 31, 2024, there was no potential borrowing capacity available and no outstanding balance.

The Company has entered into a repurchase agreement with a third party for up to $ 5.0 million as of December 31, 2025 and 2024.

2 unchanged sentences

The Company had no outstanding balance on the repurchase agreement as of December 31, 2025 and 2024.

Effective January 1, 2025, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740).

The new disclosure requirements were applied prospectively.

Prior periods have not been restated.

The components of income tax expense for the years ended December 31 are as follows:

4 unchanged sentences

Total current tax expense 49,540 23,238 31,093

Deferred income tax (benefit) expense:

Deferred income tax benefit:

Federal ( 10,397 ) ( 9,439 ) ( 20,914 )

State ( 1,971 ) ( 1,981 ) ( 1,247 )

Total deferred tax (benefit) expense ( 11,420 ) ( 22,161 ) 27,129

Total deferred tax benefit ( 12,368 ) ( 11,420 ) ( 22,161 )

Federal 31,100 7,261 3,137

State 6,072 4,557 5,795

Income tax expense, as reported $ 37,172 $ 11,818 $ 8,932

Income tax expense computed at the statutory rate $ 29,991 21.0 %

State income tax expense, net of federal 4,797 3.4

Nontaxable or nondeductible items

Stock-based compensation expense 690 0.5

Low income housing tax credits, net of amortization ( 45 ) —

Research and development tax credits ( 610 ) ( 0.4 )

Other 2,349 1.6

Total income tax expense $ 37,172 26.0 %

For the year ended December 31, 2025, state and local income taxes in California, New York, and Illinois comprise the majority of the state income tax expense, net of federal category.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Reported income tax expense differed from the amounts computed by applying the U.S.

federal statutory income tax rate of 21 % in 2024 and 2023 to income before income taxes as follows:

2024 2023 2022

Income tax expense computed at the statutory rate $ 18,739 $ 17,394

2 unchanged sentences

Decrease in taxes due to investment tax credit ( 10,440 ) ( 16,390 )

Amended return net benefits — — ( 3,261 )

Other 529 1,528

Total income tax expense $ 11,818 $ 8,932

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Components of deferred tax assets and liabilities are as follows:

7 unchanged sentences

Operating lease liabilities 528 638

Unguaranteed loan discount — 319

Deferred loan fees and costs, net — 101

Other 1,634 702

8 unchanged sentences

Goodwill and intangibles 77 34

Capitalized research and experimentation costs 599 —

Total deferred tax liabilities 58,955 67,079

Net deferred tax asset $ 17,541 $ 17,056

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Income taxes paid, net of refunds, were as follows:

Federal $ 18,678

California 2,970

Total income taxes paid $ 26,594

The Company assesses the realizability of deferred tax assets at each reporting period and considers whether it is more likely than not that a deferred tax asset will not be realized.

9 unchanged sentences

Generally, the Company’s federal and state tax returns are no longer subject to examination by the taxing authorities for years prior to 2015.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Fair Value of Financial Instruments

15 unchanged sentences

In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Loans held for investment:

15 unchanged sentences

The Company classifies equity warrant assets within Level 3 of the valuation hierarchy.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

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

3 unchanged sentences

Issuances 436 798

Net gains on derivative instruments 5,962 19

Net (loss) gain on equity warrant assets ( 5,558 ) 5,962

Settlements ( 265 ) ( 2,472 )

13 unchanged sentences

Total assets at fair value $ 1,752,761 $ — $ 1,427,337 $ 325,424

Live Oak Bancshares, Inc.

Notes to 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 year ended December 31, 2024, the Company recorded a principal paydown of $ 1 thousand and a fair value adjustment loss of $ 1 thousand.

(1) During the year ended December 31, 2025, the Company recorded a principal paydown of $ 1 thousand and a fair value adjustment gain of $ 1 thousand.

During the year ended December 31, 2024, the Company recorded a principal paydown of $ 1 thousand and a fair value adjustment loss of $ 1 thousand.

(2) See Note 5 for a rollforward of recurring Level 3 fair values for servicing assets.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Fair Value Option

20 unchanged sentences

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

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

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

3 unchanged sentences

$ 1,216 $ 2,403 $ ( 3,539 )

Losses related to borrower-specific credit risk were $ 0 and $ 3.5 million for the twelve months ended December 31, 2024 and 2023, respectively.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

There were no losses related to borrower-specific credit risk for the years ended December 31, 2025 and 2024.

Losses related to borrower-specific credit risk was $ 3.5 million for the year ended December 31, 2023.

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

2 unchanged sentences

Balance at beginning of period $ 328,746 $ 388,036

Repurchases and issuances 25,192 22,955

Repurchases 19,534 25,192

Fair value changes 1,216 2,403

Transfers — —

Settlements ( 88,871 ) ( 86,885 )

13 unchanged sentences

Given the lack of observable market prices for identical properties and market discounts applied to appraised values, the Company generally classifies foreclosed assets as non-recurring Level 3.

Equity security investment with a non-readily determinable fair value:

Equity security investments are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

When impairment indicators are present, the investment will be fair valued and classified as non-recurring Level 3.

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

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

3 unchanged sentences

Foreclosed assets 6,877 — — 6,877

Equity security investment with a non-readily determinable fair value 2,101 — — 2,101

Total assets at fair value $ 29,597 $ — $ — $ 29,597

3 unchanged sentences

Total assets at fair value $ 19,029 $ — $ — $ 19,029

Live Oak Bancshares, Inc.

Notes to Consolidated Financial Statements

Level 3 Analysis

18 unchanged sentences

Foreclosed assets $ 6,877 Discounted appraisals Appraisal adjustments (2)

Equity security investment with a non-readily determinable fair value $ 2,101 Market Approach Revenue Multiple 3.75 N/A

Live Oak Bancshares, Inc.

18 unchanged sentences

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

10.0 % - 17.4 %

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

1 unchanged sentence

Estimated Fair Value of Other Financial Instruments

GAAP also requires disclosure of fair value information about financial instruments carried at book value on the consolidated balance sheet.

GAAP also requires disclosure of fair value information about financial instruments carried at book value on the consolidated balance sheets.

In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.

56 unchanged sentences

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

As of December 31, 2023, the Company was in the final phase of constructing a new facility to accommodate expansion of its main campus.

The total estimated cost to complete the construction program was approximately $ 37.0 million.

At December 31, 2023, the Company paid and was committed to approximately $ 21.5 million of the total estimated amount.

As of December 31, 2024, construction was complete and there was no additional committed balance.

Concentrations of Credit Risk

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

The Company does not have a significant number of credits to any single borrower or group of related borrowers whereby their retained exposure exceeds $ 20.0 million, except for fifty-one relationships that have a retained unguaranteed exposure of $ 2.15 billion of which $ 1.31 billion of the unguaranteed exposure has been disbursed.

The Company does not have a significant number of credits to any single borrower or group of related borrowers whereby their retained exposure exceeds $ 20.0 million, except for 75 relationships that have a retained unguaranteed exposure of $ 3.32 billion of which $ 2.33 billion of the unguaranteed exposure has been disbursed.

Additionally, the Company has future minimum lease payments receivable under non-cancelable operating leases totaling $ 28.5 million, of which no relationships exceed $ 20.0 million.

30 unchanged sentences

The Company adopted an Employee Stock Purchase Plan, or ESPP, on October 8, 2014, which was most recently amended and approved by the Company’s shareholders on May 21, 2024, within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended.

Under this plan, eligible employees are able to purchase available shares with post-tax dollars as of the grant date.

Under this plan, eligible employees are able to purchase available shares of the Company’s common stock with post-tax dollars as of the grant date.

In order for employees to be eligible to participate in this plan they must be employed or on an authorized leave of absence from the Company or any subsidiary immediately prior to the grant date.

13 unchanged sentences

Compensation cost relating to share-based payment transactions are recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued.

There was no compensation expense for stock options recognized for the year ended December 31, 2024.

For the years ended December 31, 2023 and 2022, the Company recognized $ 25 thousand and $ 753 thousand in compensation expense for stock options, respectively.

There was no compensation expense for stock options recognized for the years ended December 31, 2025 and 2024.

For the year ended December 31, 2023, the Company recognized $ 25 thousand in compensation expense for stock options.

Stock option activity under the 2015 Omnibus Stock Incentive Plan during the year ended December 31, 2025 is summarized below.

12 unchanged sentences

Vested ( 37,760 ) 6.60

Forfeited ( 8,626 ) 6.95

Non-vested at December 31, 2023 — —

Vested ( 37,760 ) 6.60

Non-vested at December 31, 2024 — —

15 unchanged sentences

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

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

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

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

11 unchanged sentences

The Company has an incentive compensation framework whereby full-time employees are eligible to receive an annual cash bonus payment plus the opportunity for an annual long-term incentive (“LTI”) equity grant in the form of RSUs.

Both cash bonus and LTI equity grants are based on each individual’s base pay and overall Company performance.

Both cash bonus and LTI equity grants are based on each individual’s base pay, performance and overall Company performance.

LTI grants are generally influenced by each individual’s tiered target as a percent of base pay.

Total expenses related to the cash bonus for employees were $ 17.9 million, $ 12.9 million and $ 1.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.

There were no discretionary special bonuses for December 31, 2024.

In addition, for the years ended December 31, 2023 and 2022 the Company had discretionary special bonuses of $ 4.5 million and $ 10.5 million, respectively, to most full-time employees.

There were no discretionary special bonuses for December 31, 2025 or 2024.

In addition, for the year ended December 31, 2023 the Company had discretionary special bonus of $ 4.5 million, to most full-time employees.

Live Oak Bancshares, Inc.

62 unchanged sentences

(“Apiture”), Canapi Funds, Cape Fear Collective 1 & 2, OTR, Estrella Landing, Green Sun, Sun Vest, HEP and Heelstone.

See Note 2 for information regarding the sale of Apiture.

Apiture is a digital banking solution for financial institutions.

15 unchanged sentences

One executive officer and one board member hold a combined total of 24 % interest in Medical Park Hotels.

During the year ended December 31, 2024, the Company paid Medical Park Hotels $ 183 thousand for room rentals to house employees, recruits and other business associates when visiting the Wilmington, North Carolina area.

During the years ended December 31, 2024, 2023 and 2022, the Company paid Apiture $ 3.8 million, $ 2.5 million and $ 2.0 million, respectively, for professional services.

During 2024, 2023 and 2022, the Company recognized income from Apiture of $ 217 thousand, $ 385 thousand and $ 438 thousand, respectively, for shared services and rent.

During the years ended December 31, 2025 and 2024, the Company paid Medical Park Hotels $ 147 thousand and $ 183 thousand, respectively, for room rentals to house employees, recruits and other business associates when visiting the Wilmington, North Carolina area.

Apiture was considered a related party through October 21, 2025, due to the Company’s equity method investment.

During the period from January 1, 2025, through October 21, 2025, the Company paid Apiture $ 3.8 million for professional services and recognized income from Apiture of $ 187 thousand for shared services and rent.

During the years ended December 31, 2024 and 2023, the Company paid Apiture $ 3.8 million and $ 2.5 million, respectively, for professional services.

During 2024 and 2023, the Company recognized income from Apiture of $ 217 thousand and $ 385 thousand, respectively, for shared services and rent.

As of December 31, 2025, Live Oak Bancshares, Inc.

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

The Company recognized $ 731 thousand of carried interest during the year ended December 31, 2024.

No carried interest was recognized during 2023 and 2022.

During the year ended December 31, 2022, the Company made charitable contributions in the amount of $ 310 thousand, to Collective Impact in New Hanover County, a 501(c)(3) charitable organization (“Collective Impact”).

There were no charitable contributions made during the years ended December 31, 2024 and 2023.

Cape Fear Collective Ventures, LLC, a wholly owned subsidiary of Collective Impact, manages each of Cape Fear Collective 1 & 2.

The Company recognized $ 500 thousand and $ 731 thousand of carried interest during the years ended December 31, 2025 and 2024, respectively.

No carried interest was recognized during 2023.

Live Oak Bancshares, Inc.

13 unchanged sentences

Shareholders' equity:

Preferred stock 96,266 —

Common stock 388,389 365,607

15 unchanged sentences

Noninterest income:

Other noninterest income 757 ( 290 ) ( 107 )

Total noninterest income 757 ( 290 ) ( 107 )

Other noninterest (loss) income ( 749 ) 757 ( 290 )

Total noninterest (loss) income ( 749 ) 757 ( 290 )

Noninterest expense:

13 unchanged sentences

105,871 77,474 73,898

Preferred stock dividends 3,048 — —

Net income attributable to common shareholders $ 102,823 $ 77,474 $ 73,898

Live Oak Bancshares, Inc.

10 unchanged sentences

( 18,210 ) ( 16,978 ) ( 10,474 )

Deferred tax (benefit) expense ( 680 ) ( 15 ) 434

Deferred tax benefit ( 279 ) ( 680 ) ( 15 )

Stock option compensation expense — — 272

6 unchanged sentences

Cash flows from investing activities

Capital (investment in) return on subsidiaries ( 96,041 ) ( 40,000 ) 121,750

Capital investment in subsidiaries ( 4,000 ) ( 96,041 ) ( 40,000 )

Purchases of equity security investments ( 213 ) ( 90 ) ( 132 )

Purchases of equity method investments ( 1,624 ) ( 1,181 ) ( 612 )

Net cash (used in) provided by investing activities ( 97,312 ) ( 40,744 ) 120,664

Net cash used in investing activities ( 5,837 ) ( 97,312 ) ( 40,744 )

Cash flows from financing activities

3 unchanged sentences

Employee stock purchase program 1,221 1,449 1,396

Proceeds from the issuance of preferred stock, net 96,266 — —

Withholding cash issued in lieu of restricted stock and other ( 7,625 ) ( 8,926 ) ( 6,725 )

Repurchase and retirement of shares — — —

Shareholder dividend distributions ( 5,405 ) ( 5,326 ) ( 5,266 )

Shareholder dividend distributions - common ( 5,488 ) ( 5,405 ) ( 5,326 )

Shareholder dividend distributions - preferred ( 3,047 ) — —

Net cash provided by (used in) financing activities 73,935 78,764 ( 19,336 )

4 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data