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Item 9A. Controls and Procedures

2026-02-27 compared with 2025-03-18 · 44 added, 32 removed, 125 unchanged (38% of the section changed)

5 unchanged sentences

generally accepted accounting principles (“GAAP”).

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

Management's Report on Internal Control over Financial Reporting

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

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

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

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

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

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

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

Based on the assessment, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2025, as management did not sufficiently maintain effective control activities related to accounting for and classification of loan participation activity within the Consolidated Statements of Income (“SOI”) and the Consolidated Statements of Cash Flows (“SCF”).

The ineffective controls over the accounting for and presentation of loan participation activity impacted (1) the SOI classification of deferred loan costs being classified as non-interest expense instead of as an offset to gains on sale of loans, which resulted in misstatements between non-interest income and non-interest expense with no impact to net income and (2) the SCF classification of cash flows between operating and investing activities associated with the proceeds received from the sale of loan participations which resulted in quantitively material misstatements to participation loan activities between operating and investing activities within the SCF.

Management concluded that this material weakness was primarily due to (1) insufficient oversight of the control environment as it relates to inadequate training of employees relative to internal controls over financial reporting over the review of loan participation activity within the SOI and SCF, and (2) lack of effective risk assessment process and monitoring activities responsive to the classification of cash proceeds from the sale of loan participations in the SCF and SOI in compliance with applicable GAAP requirements.

This control deficiency creates a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Therefore, we concluded that this deficiency represents a material weakness in the Company’s internal control over financial reporting and the Company’s internal control over financial reporting was not effective as of December 31, 2025.

KPMG LLP, the Company’s independent registered public accounting firm, audited the 2024 consolidated financial statements of the Company included in this Annual Report on Form 10-K and has issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025.

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

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

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

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

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

Specifically, we are in the process of strengthening our internal control over loan participation activity as follows:

• Enhance cash flow preparation and review controls to ensure underlying participation loan information used is complete and accurate, is representative of business activities and is aligned with disclosure requirements.

• Provide training specific to loan participation accounting and related SCF classification to ensure compliance with GAAP for lending activities, including internal control considerations with a focus on risk assessment, design and monitoring.

• Enhance oversight of loan participation activities to ensure accounting accuracy particularly related to sale transactions.

We believe that these actions will remediate the material weakness.

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

Remediation of Previously Reported Material Weakness

With oversight from the Audit Committee and input from the Board of Directors, we devoted substantial resources to implement internal controls over financial reporting to enhance the control environment and strengthen communication protocols related to the loan review process.

The Company's remediation efforts focused on enhancing the depth and breadth of the independent loan review function coupled with internal control trainings for individuals responsible for the risk assessment, design, monitoring and documentation of the Company's loan review process and increased reporting to the Company's Risk Committee of the Board of Directors through the Company's independent loan review function.

Management has completed testing of the implemented controls and found them to be operating effectively.

As a result, management has concluded that the material weakness in internal control over financial reporting related to the loan review process has been remediated as of December 31, 2025.

Changes in Internal Control over Financial Reporting

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

Except for the loan review process remediation and the material weakness in internal control over financial reporting described above related to loan participation activity, there have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

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

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

(b) Insider Trading Arrangements - During the quarter ended December 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted , modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined in Item 408 of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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

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

The Independent Registered Public Accounting Firm for 2025 and 2024 is KPMG LLP (Public Company Accounting Oversight Board Firm ID No.

185 ) located in Charlotte, North Carolina .

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(incorporated by reference to Exhibit 3.1 of the registration statement on Form S-1, filed on June 19, 2015)

3.2 Articles of Amendment designating the 8.375% Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.2 of the Form 8-A, filed on August 4, 2025)

3.3 Amended Bylaws of Live Oak Bancshares, Inc.

1 unchanged sentence

4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the registration statement on Form S-1, filed on June 19, 2015)

4.2 Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.3 of the annual report on Form 10-K, filed on February 27, 2020)

4.2 Deposit Agreement, by and among Live Oak Bancshares, Inc., and Broadridge Corporate Issuer Solutions, LLC, and the Holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K, filed on August 4, 2025)

4.3 Form of Depositary Receipt representing the Depositary Shares (included as Exhibit A to Exhibit 4.2 hereto) (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K, filed on August 4, 2025)

4.4 Description of Securities Registered under Section 12 of the Exchange Act *

10.1 2008 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 of the registration statement on Form S-1, filed on June 19, 2015) #

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

A mendment to the 2015 Om nibus Stock Incentive Plan dated May 16, 2023 (incorporated by reference to Exhibit 10.4 of the registration statement on Form S- 8, filed on August 4 , 2023 ) #

Amendment to 2015 Omnibus Stock Incentive Plan dated November 14 , 2023 (incorporated by reference to Exhibit 10.4.4 of the annual report on Form 10-K, filed on February 22, 2024) #

1 unchanged sentence

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

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

RSU Award Agreement for William C.

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

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

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

Form of 2025 RSU Award for non-employee directors (incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q , filed on August 5, 2025) #

RSU Award Agreement for Mark M.

RSU Award Agreement for Walter J.

Phifer (incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q , filed on November 17, 2025) #

Form of RSU Award Agreeme nt for certa in executive officers (incorporated by reference to Exhibit 99.1 of the current report on Form 8-K , filed on February 13 , 2026 #

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

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97 Live Oak Bancshares, Inc.

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

Clawback Policy *

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

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Live Oak Bancshares, Inc.

March 18, 2025

February 26, 2026

Chairman and Chief Executive Officer

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

Mahan III March 18, 2025

Mahan III February 26, 2026

Chairman and Chief Executive Officer

1 unchanged sentence

/s/ Walter J.

Phifer March 18, 2025

Phifer February 26, 2026

Chief Financial Officer

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Wesley Sutherland

Wesley Sutherland March 18, 2025

Wesley Sutherland February 26, 2026

Chief Accounting Officer

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/s/ William L.

Williams III March 18, 2025

Williams III February 26, 2026

Vice Chairman of the Board of Directors

Bradford March 18, 2025

Bradford February 26, 2026

/s/ William H.

Cameron March 18, 2025

Glossman March 18, 2025

Hoffsis March 18, 2025

Lucht March 18, 2025

Cameron February 26, 2026

Lucht February 26, 2026

/s/ Jeffrey W.

Lunsford February 26, 2026

/s/ Patrick T.

McHenry February 26, 2026

/s/ Miltom E.

Petty March 18, 2025

Underwood March 18, 2025

Petty February 26, 2026

Underwood February 26, 2026

/s/ Yousef A.

Valine March 18, 2025

Valine February 26, 2026

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

What changed 10-K

Item 9A. Controls and Procedures