Live Oak Bancshares, Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 67 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders, Board of Directors, and Audit Committee Live Oak Bancshares, Inc.: Opinion on 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, 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 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the 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 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 included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. 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. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for credit losses evaluated on a collective basis As discussed in Notes 1 and 3 to the consolidated financial statements, as of December 31, 2025, the Company had an allowance for credit losses on loans and leases (ACL) of $192.3 million of which a substantial portion is related to the allowance for credit losses on loans and leases on a collective basis (the collective ACL). The collective ACL on loans and leases is estimated using models that incorporate relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. The Company’s historical credit loss experience provides the basis for the estimation of expected credit losses. The ACL is measured on a pooled basis using a quantitative modeling process when similar risk characteristics are present in the portfolio. 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 68 Table of Contents (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 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. Expected credit losses are estimated over the contractual term of the loan or lease, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions and renewals unless the extension or renewal options are included in the contract at the reporting date and are not unconditionally cancellable by the Company. 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, 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. We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the collective ACL due to significant complexity, subjectivity and measurement uncertainty. 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 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. The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACL including controls related to the: • development and continued appropriateness of the collective ACL methodology, including the qualitative framework • continued use and appropriateness of the PD and LGD models, including the significant assumptions used in the PD and LGD models • selection of forecasted Baa-rated Corporate bond yields as the sole economic variable • performance monitoring of the PD and LGD models • determination of the judgmental management adjustments • analysis of the collective ACL results, trends, and ratios. We evaluated the Company’s process to develop the collective ACL by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in: • evaluating the collective ACL methodology for compliance with U.S. generally accepted accounting principles • evaluating judgments made by the Company relative to the assessment and performance testing of the PD and LGD models by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices • assessing the conceptual soundness of the PD and LGD models by inspecting the model documentation to determine whether the models are suitable for their intended use • evaluating the selection of the economic variable by comparing them to the Company’s business environment and relevant industry practices 69 Table of Contents • evaluating the development of the qualitative framework and the effect of the resulting judgmental management adjustments on the collective ACL compared with relevant credit risk factors and consistency with credit trends associated with the Company’s portfolio We also assessed the sufficiency of the audit evidence obtained related to the collective ACL by evaluating the: • cumulative results of the audit procedures • qualitative aspects of the Company’s accounting practices • potential bias in the accounting estimate /s/ KPMG LLP We have served as the Company’s auditor since 2024. Charlotte, North Carolina February 26, 2026 70 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders, Board of Directors, and Audit Committee Live Oak Bancshares, Inc. Opinion on Internal Control Over Financial Reporting We have audited Live Oak Bancshares, Inc. and subsidiaries' (the Company) 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. 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 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 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. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 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 effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the 71 Table of Contents transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Charlotte, North Carolina February 26, 2026 72 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders, Board of Directors, and Audit Committee Live Oak Bancshares, Inc. Opinion on 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. Basis for Opinion 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 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 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 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 We served as the Company’s auditor from 2010 to 2024. 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, 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) 73 Table of Contents Live Oak Bancshares, Inc. Consolidated Balance Sheets (Dollars in thousands) December 31, 2025 December 31, 2024 Assets Cash and due from banks $ 864,904 $ 608,800 Certificate of deposit with other banks 250 250 Investment securities available-for-sale 1,427,401 1,248,203 Loans held for sale 420,055 346,002 Loans and leases held for investment (includes $ 260,625 and $ 328,746 measured at fair value, respectively) 11,973,622 10,233,374 Allowance for credit losses on loans and leases ( 192,264 ) ( 167,516 ) Net loans and leases 11,781,358 10,065,858 Premises and equipment, net 240,203 264,059 Foreclosed assets 8,208 1,944 Servicing assets (includes $ 62,941 and $ 55,788 measured at fair value, respectively) 63,155 56,144 Other assets 329,244 352,120 Total assets $ 15,134,778 $ 12,943,380 Liabilities and Shareholders’ Equity Liabilities Deposits: Noninterest-bearing $ 515,051 $ 318,890 Interest-bearing 13,173,608 11,441,604 Total deposits 13,688,659 11,760,494 Borrowings 102,404 112,820 Other liabilities 89,609 66,570 Total liabilities 13,880,672 11,939,884 Shareholders’ equity 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 96,266 — 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 388,389 365,607 Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at December 31, 2025 and December 31, 2024 — — Retained earnings 809,885 715,767 Accumulated other comprehensive loss ( 44,672 ) ( 82,344 ) Total shareholders' equity attributed to Live Oak Bancshares, Inc. 1,249,868 999,030 Non-controlling interest 4,238 4,466 Total shareholders’ equity 1,254,106 1,003,496 Total liabilities and shareholders’ equity $ 15,134,778 $ 12,943,380 See Notes to Consolidated Financial Statements 74 Table of Contents Live Oak Bancshares, Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) Years Ended December 31, 2025 2024 2023 Interest income Loans and fees on loans $ 830,580 $ 744,841 $ 623,667 Investment securities, taxable 47,591 38,413 33,497 Other interest earning assets 30,301 29,118 31,111 Total interest income 908,472 812,372 688,275 Interest expense Deposits 453,413 430,887 340,207 Borrowings 6,701 5,580 2,763 Total interest expense 460,114 436,467 342,970 Net interest income 448,358 375,905 345,305 Provision for credit losses 96,303 96,212 51,323 Net interest income after provision for credit losses 352,055 279,693 293,982 Noninterest income Loan servicing revenue 34,902 31,535 27,399 Loan servicing asset revaluation ( 16,077 ) ( 12,155 ) 4,886 Net gains on sales of loans 62,420 49,770 38,812 Net gain (loss) on loans accounted for under the fair value option 1,216 2,403 ( 3,539 ) Equity method investments income (loss) 17,387 ( 10,921 ) ( 5,994 ) Equity security investments gains (losses), net 5,733 553 ( 969 ) Lease income 10,051 9,756 10,007 Management fee income — 7,658 13,324 Other noninterest income 13,826 34,053 20,074 Total noninterest income 129,458 112,652 104,000 Noninterest expense Salaries and employee benefits 189,435 174,707 169,092 Travel expense 7,031 7,170 7,149 Professional services expense 10,752 11,023 7,737 Advertising and marketing expense 12,222 11,148 12,559 Occupancy expense 9,762 10,000 8,490 Technology expense 42,948 34,206 31,858 Equipment expense 14,427 13,826 14,997 Other loan origination and maintenance expense 18,469 17,254 14,804 Renewable energy tax credit investment impairment 735 530 14,644 FDIC insurance 14,672 10,835 16,670 Other expense 18,245 12,411 17,152 Total noninterest expense 338,698 303,110 315,152 Income before taxes 142,815 89,235 82,830 Income tax expense 37,172 11,818 8,932 Net income 105,643 77,417 73,898 Net loss attributable to non-controlling interest 228 57 — Net income attributable to Live Oak Bancshares, Inc. 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 Diluted earnings per share $ 2.23 $ 1.69 $ 1.64 See Notes to Consolidated Financial Statements 75 Table of Contents Live Oak Bancshares, Inc. Consolidated Statements of Comprehensive Income (Dollars in thousands) Years Ended December 31, 2025 2024 2023 Net income $ 105,643 $ 77,417 $ 73,898 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 Comprehensive loss attributable to non-controlling interest 228 57 — Total comprehensive income attributable to Live Oak Bancshares, Inc. $ 143,532 $ 79,849 $ 81,497 See Notes to Consolidated Financial Statements 76 Table of Contents Live Oak Bancshares, Inc. Consolidated Statements of Changes in Shareholders’ Equity (Dollars in thousands, except per share data) Preferred Stock Common stock Retained earnings Accumulated other comprehensive income (loss) Non-Controlling Interest Total equity 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 income — — — — — — 7,599 — 7,599 Issuance of restricted stock — — 373,616 — — — — — — Tax withholding related to vesting of restricted stock and other — — — — ( 6,725 ) — — — ( 6,725 ) Employee stock purchase program — — 59,074 — 1,396 — — — 1,396 Stock option exercises — — 123,739 — 1,168 — — — 1,168 Stock option compensation expense — — — — 272 — — — 272 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) - common — — — — — ( 5,326 ) — — ( 5,326 ) Balance at December 31, 2023 — $ — 44,617,673 — $ 344,568 $ 642,817 $ ( 84,719 ) $ — $ 902,666 Net income (loss) — — — — — 77,474 — ( 57 ) 77,417 Other comprehensive income — — — — — — 2,375 — 2,375 Issuance of restricted stock — — 399,806 — — — — — — Tax withholding related to vesting of restricted stock and other — — — — ( 8,926 ) — — — ( 8,926 ) Employee stock purchase program — — 34,930 — 1,449 — — — 1,449 Stock option exercises — — 307,016 — 2,311 — — — 2,311 Stock option compensation expense — — — — — — — — — Restricted stock compensation expense — — — — 26,205 — — — 26,205 Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense — — — — — 881 — — 881 Contribution of non-controlling interest — — — — — — — 4,523 4,523 Cash dividends ($ 0.12 per share) - common — — — — — ( 5,405 ) — — ( 5,405 ) Balance at December 31, 2024 — $ — 45,359,425 — $ 365,607 $ 715,767 $ ( 82,344 ) $ 4,466 $ 1,003,496 Net income (loss) — — — — — 105,871 — ( 228 ) 105,643 Other comprehensive income — — — — — — 37,661 — 37,661 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 ) Employee stock purchase program — — 38,418 — 1,221 — — — 1,221 Stock option exercises — 234,697 — 2,976 — — — 2,976 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 ) Cash dividends - preferred — — — — — ( 3,047 ) — ( 3,047 ) Cash dividends ($ 0.12 per share) - common — — — — — ( 5,488 ) — — ( 5,488 ) Balance at December 31, 2025 100,000 $ 96,266 46,032,402 — $ 388,389 $ 809,885 $ ( 44,672 ) $ 4,238 $ 1,254,106 See Notes to Consolidated Financial Statements 77 Table of Contents Live Oak Bancshares, Inc. Consolidated Statements of Cash Flows (Dollars in thousands) Years Ended December 31, 2025 2024 2023 Cash flows from operating activities Net income $ 105,643 $ 77,417 $ 73,898 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,398 23,282 21,271 Provision for credit losses 96,303 96,212 51,323 (Accretion) amortization of (discount) premium on securities, net of accretion ( 609 ) ( 721 ) 8 Deferred tax benefit ( 12,368 ) ( 11,420 ) ( 22,161 ) Originations of loans held for sale ( 1,306,231 ) ( 1,037,474 ) ( 877,083 ) Proceeds from sales of loans held for sale 1,259,906 1,040,444 919,894 Net gains on sale of loans held for sale ( 62,420 ) ( 49,770 ) ( 38,812 ) 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 Net change in servicing assets ( 7,011 ) ( 7,553 ) ( 22,268 ) Net gain on sale or disposal of long lived asset — ( 9,079 ) ( 4,411 ) Net loss on disposal of premises and equipment 3,766 113 377 Impairment on premises and equipment, net — — 499 Equity method investments (income) loss ( 17,387 ) 10,921 5,994 Equity security investments (gains) losses, net ( 5,733 ) ( 553 ) 969 Net loss (gain) on equity warrant assets 5,558 ( 5,962 ) — Renewable energy tax credit investment impairment 735 530 14,644 Stock option compensation expense — — 272 Restricted stock compensation expense 26,210 26,205 17,603 Stock based compensation excess tax (deficiency) benefit ( 942 ) 1,085 ( 1,004 ) Business combination contingent consideration fair value adjustment — ( 125 ) 125 Lease right-of-use assets and liabilities, net ( 25 ) 150 ( 59 ) Changes in assets and liabilities: Other assets 22,848 ( 12,284 ) 35,556 Other liabilities 20,733 18,014 3,970 Net cash provided by operating activities 158,242 156,780 184,895 Cash flows from investing activities Purchases of investment securities available-for-sale ( 301,169 ) ( 269,631 ) ( 215,595 ) 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 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 Purchases of equity security investments ( 5,308 ) ( 7,020 ) ( 3,390 ) Purchases of equity method investments ( 5,058 ) ( 8,458 ) ( 27,209 ) Proceeds from sale of equity security investments 10,960 1,901 — Proceeds from sale of equity method investments 67,665 1,361 7,612 Proceeds from sale of premises and equipment 4,361 1,043 100 Purchases of premises and equipment, net ( 14,756 ) ( 49,307 ) ( 46,839 ) Net cash used in investing activities ( 1,904,190 ) ( 1,699,413 ) ( 1,339,746 ) See Notes to Consolidated Financial Statements 78 Table of Contents Live Oak Bancshares, Inc. Consolidated Statements of Cash Flows (Continued) (Dollars in thousands) Years Ended December 31, 2025 2024 2023 Cash flows from financing activities Net increase in deposits $ 1,928,165 $ 1,485,475 $ 1,390,091 Proceeds from borrowings 161 99,703 2,906,071 Repayment of borrowings ( 10,577 ) ( 10,237 ) ( 2,965,920 ) Stock option exercises 2,976 2,311 1,168 Employee stock purchase program 1,221 1,449 1,396 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 - 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 Net increase in cash and cash equivalents 256,104 26,260 165,904 Cash and cash equivalents, beginning 608,800 582,540 416,636 Cash and cash equivalents, ending $ 864,904 $ 608,800 $ 582,540 Supplemental disclosure of cash flow information Interest paid $ 460,584 $ 436,847 $ 342,766 Income tax paid, net 26,594 38,907 5,303 Supplemental disclosures of noncash operating, investing, and financing activities 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 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 Equity method investment commitments — ( 18,358 ) 7,715 Equity security investment commitments — ( 583 ) — Change related to accounting change for ASU 2022-02 — — 676 See Notes to Consolidated Financial Statements 79 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 1. Organization and Summary of Significant Accounting Policies Organization Live Oak Bancshares, Inc. (collectively with its subsidiaries including Live Oak Banking Company, the “Company”) is a bank holding company headquartered in Wilmington, North Carolina incorporated under the laws of North Carolina in December 2008. The Company conducts business operations primarily through its commercial bank subsidiary, Live Oak Banking Company (the “Bank”). The Bank was organized and incorporated under the laws of the State of North Carolina on February 25, 2008 and commenced operations on May 12, 2008. The Bank has satellite sales offices across the United States. The Bank specializes in providing lending and deposit related services to small businesses nationwide. A significant portion of the loans originated by the Bank are partially guaranteed by the Small Business Administration (“SBA”) under the 7(a) Loan Program and the U.S. Department of Agriculture’s (“USDA”) Rural Energy for America Program (“REAP”), Water and Environmental Program (“WEP”), Business & Industry (“B&I”) and Community Facilities loan programs. These loans are to small businesses and professionals with what the Bank believes are lower risk characteristics. Industries, or “verticals,” on which the Bank focuses its lending efforts are carefully selected. The Bank also lends more broadly to select borrowers outside of those verticals. As of December 31, 2025, the Company’s wholly owned material subsidiaries were the Bank, Government Loan Solutions (“GLS”), Live Oak Grove, LLC (“Grove”) and Live Oak Ventures, Inc. (“Live Oak Ventures”). GLS is a management and technology consulting firm that advises and offers solutions and services to participants in the government guaranteed lending sector. GLS primarily provides services in connection with the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under SBA and USDA loan programs. The Grove provides Company employees and business visitors with on-site dining at the Company’s Wilmington, North Carolina headquarters. Live Oak Ventures’ purpose is investing in businesses that align with the Company's strategic initiative to be a leader in financial technology. Canapi Advisors, LLC (“Canapi Advisors”) was a wholly owned subsidiary providing investment advisory services to a series of funds (the “Canapi Funds”) focused on providing venture capital to new and emerging financial technology companies. During the third quarter of 2024, the Canapi Funds were restructured and Canapi Advisors voluntarily withdrew as an investment advisor to the funds. Canapi Advisors was subsequently dissolved in the fourth quarter of 2024. As of December 31, 2024, Live Oak Ventures consolidated its investment in Synply, Inc. as a result of its controlling interest in that entity. Synply is a cloud-based technology platform designed to simplify the loan syndication process for financial institutions. The non-controlling interest in Synply is disclosed according to the Company’s consolidation policy. The Bank’s wholly owned subsidiaries are Live Oak Number One, Inc., Live Oak Clean Energy Financing LLC (“LOCEF”), Live Oak Private Wealth, LLC (“Live Oak Private Wealth”) and Tiburon Land Holdings, LLC (“TLH”). Live Oak Number One, Inc. holds properties foreclosed on by the Bank. LOCEF provides financing to entities for renewable energy applications. Live Oak Private Wealth provides high-net-worth individuals and families with strategic wealth and investment management services. 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. Basis of Presentation 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 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. The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued. 80 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Consolidation Policy The consolidated financial statements include the financial statements of the Company and its directly and indirectly wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 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 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”). Voting interest entities are entities that generally (1) have sufficient equity to finance their activities and (2) provide the equity investors with power to make significant decisions relating to the entity’s operations. A voting interest entity is consolidated if the Company holds majority voting rights. The Company is considered to hold a controlling financial interest in a VIE when it is the primary beneficiary. A primary beneficiary has both (1) the power to direct the activities that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or right to receive benefits of a VIE that could potentially be significant to a VIE. The parties that make investment and investment decisions, or parties that can unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE. The Company considers all of its economic interests in the VIE when determining whether it has the obligation to absorb losses or the right to receive benefits from the VIE. For details on the Company’s VIE investments refer to Note 2. Securities, “Variable Interest Entities.” Business Segment Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the President of Live Oak Bancshares, Inc. and the Bank. In determining the appropriateness of segment definition, the Company considers the components of the business about which financial information is available and components the chief operating decision maker regularly evaluates relative to resource allocation and performance assessment. As of December 31, 2023, the Company disclosed two reportable operating segments: Banking and Fintech. 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 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. The chief operating decision maker assesses performance and decides how to allocate resources based on net income which is reported on the consolidated statements of income. The chief operating decision maker uses net income to evaluate income generated from total assets (return on assets) and profitability of the segment in relation to total shareholders’ equity (return on equity). The measures of segment assets and equity are reported on the consolidated balance sheets as total assets and total shareholders’ equity. Net income is also used to monitor budget versus actual results. All of these elements are used in assessing performance of the segment. Significant segment expenses are reported on the consolidated statements of income. Use of Estimates In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The allowance for credit losses is a material estimate that is particularly susceptible to significant change in the near term. 81 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements During the second quarter of 2024, the Company made enhancements to the qualitative framework of the allowance for credit losses. The enhanced framework leverages quantifiable credit risk metrics as well as current and forecasted economic conditions to determine possible portfolio outcomes that are not captured in quantitatively modeled results. The framework continues to consider risk factors which include, but are not limited to, changes in lending policies, economic and business conditions, nature and volume of portfolio, volume and severity of past due loans, value of underlying collateral, concentrations, and prepayment speeds. 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.” Cash and cash equivalents have an initial maturity of three months or less. Certificate of Deposit with other Banks The certificate of deposit with other banks has a maturity of December 2026 and bears interest at a rate of 3.75 %. All investments in certificates of deposit are with FDIC insured financial institutions and none exceed the maximum insurable amount of $ 250 thousand. Investments Debt Securities Debt securities that management has the positive intent and ability to hold to maturity are classified as held-to-maturity and recorded at amortized cost. Securities that may be sold prior to maturity are classified as available-for-sale and recorded at fair value. Unrealized gains and losses for available-for-sale investment securities, other than credit-related impairment losses, are excluded from earnings and reported in other comprehensive income. The Company’s entire portfolio of debt securities is classified as available-for-sale for the periods presented. Purchase premiums and discounts on debt securities are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sales of these securities are recorded on the trade date and are determined using the specific identification method. 82 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements When debt securities are in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. Debt securities that do not meet the aforementioned criteria are evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected from the security is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. Changes in the ACL are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale debt securities from the estimate of credit losses. Securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. Equity Investments Equity investments are generally non-marketable investments and are included in the other assets line in the consolidated balance sheets. 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 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 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. Qualitatively, significant influence can exist through the ability to influence the investee’s operating and financial policies through board involvement or other influence. Under the equity method, the Company recognizes its proportionate share of the results of operations of the investee based on most current information available. In instances where cash distributions vary at different points and/or are not directly linked to the Company’s ownership percentage, the investee’s net income or loss is allocated using the hypothetical liquidation at book value (“HLBV”) method. Investments that do not qualify as in-substance common stock, or through which the Company is not able to exercise significant influence over the investee, are accounted for as equity securities, whereby investments are measured at fair value with changes in fair value recognized in net income, unless those investments have no readily determinable fair value. Investments without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus changes in value resulting from observable price changes arising from orderly transactions . Management considers a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, market conditions, values for comparable securities, current and projected operating performance, exit strategies, financing transactions subsequent to the acquisition of the investment and a discount for certain investments that have lock-up restrictions or other features that indicate a discount to fair value is warranted. For equity securities not accounted for at fair value, any impairment is recognized with the full charge recorded in earnings. To determine whether an equity security may be impaired, the Company considers various indicators of impairment, including, but not limited to (1) the financial condition and near-term prospects of the issuer, (2) adverse market conditions and (3) bona-fide offers to purchase an equity interest in the investee below the carrying amount. 83 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Federal Home Loan Bank Stock Membership in the Federal Home Loan Bank of Atlanta (“FHLB”) requires ownership of FHLB stock. FHLB stock is restricted because it may only be sold to the FHLB and all sales must be at par. FHLB stock is carried at cost minus impairment, if any, and is recorded within other assets in the consolidated balance sheet. FHLB stock was $ 9.0 million and $ 7.8 million at December 31, 2025 and 2024, respectively. Loans and Leases Fair Value Option 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 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. This discount is subsequently accreted into interest income over the underlying loan’s remaining term using the effective interest method. Management made this change of election in alignment with its ongoing effort to reduce volatility and drive more predictable revenue. In accordance with accounting standards, any loans for which fair value was previously elected continue to be measured accordingly. Interest income is recognized in the same manner on loans reported at fair value as on non-fair value loans, except in regard to origination fees and costs which are recognized immediately upon fair value election. The changes in fair value of loans are reported in noninterest income. Fair value of loans includes adjustments for credit losses, market liquidity, and economic conditions. Management estimates the fair value of loans accounted for under the fair value option using a discounted cash flow (“DCF”) methodology. The estimate incorporates assumptions that market participants would use to estimate fair value of similar assets such as prepayment speeds, default and severity rates, and a discount rate. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. 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. Salability requirements of government guaranteed portions include, but are not limited to, full disbursement of the loan commitment amount. Loans held for sale are carried at the lower of cost or fair value. 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. 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 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. In accordance with SBA and USDA regulation, the Bank is required to retain 10 % and 7.5 % of the principal balance of any SBA 7(a) or USDA loan, respectively, comprised of unguaranteed dollars. With written consent from the SBA, the Bank may sell down to a 5 % exposure comprised of unguaranteed dollars. The Company occasionally transfers loans between the held for sale and held for investment classifications based on its intent and ability to hold or sell loans. Management’s intent to sell may be impacted by secondary market conditions, loan credit quality, or other factors. 84 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements 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 Originations 1,306,231 1,037,474 Proceeds from sale ( 1,259,906 ) ( 1,040,444 ) Gain on sale of loans 62,420 49,770 Principal collections, net of deferred fees and costs ( 11,436 ) ( 5,710 ) Non-cash transfers, net ( 23,256 ) ( 82,125 ) 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 Loans and leases receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are classified as held for investment and generally reported at their outstanding principal amount, net of unearned income unless the fair value option has been elected. For such loans not carried at fair value, loan origination fees and direct origination costs are deferred and recognized as an adjustment of the loan yield using the interest method. Discounts and premiums on any purchased loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Interest income on loans and leases is recognized as earned on a daily accrual basis at the applicable interest rate. Loans and leases designated as held for investment include those identified as more beneficial to hold for the long term as well as the required retention amount defined by the SBA and USDA. Loans and leases held for investment also consist of certain guaranteed and unguaranteed credits including nonaccrual, non-marketable, and risk grade 50 or worse as defined by internal risk rating metrics. Nonaccrual and Past Due Loans Past due status of loans and leases is determined based on contractual terms. Loans and leases are placed in nonaccrual status and the accrual of interest is discontinued if they become 90 days delinquent or there is evidence that the borrower’s ability to make the required payments is not probable. When interest accrual is discontinued, all unpaid accrued interest is reversed against current interest income. Loans and leases, or portions thereof, are charged off when deemed uncollectible. Al lowance for Credit Losses The ACL is a valuation account that is deducted from the amortized cost basis of loans and leases to present a net amount expected to be collected. The ACL is not applicable to loans held for sale and loans accounted for under the fair value option. Loans and leases are charged-off against the ACL when management believes the uncollectibility of a loan or lease balance is confirmed. Expected recoveries, included in the ACL, do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The Company’s ACL on loans and leases is estimated using models that incorporate relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. The Company’s historical credit loss experience provides the basis for the estimation of expected credit losses. 85 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The ACL is measured on a pooled basis using a quantitative modeling process when similar risk characteristics are present in the portfolio. 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. Additional information related to the portfolio segments can be found in Note 3. Loans and Leases Held for Investment and Credit Quality. Expected credit losses for pooled loans and leases are estimated using a DCF methodology for each loan and lease which incorporates measurements of PD, 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 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. Expected credit losses are estimated over the contractual term of the loan or lease, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions and renewals unless the extension or renewal options are included in the contract at the reporting date and are not unconditionally cancellable by the Company. 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, 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. Loans or leases that do not share risk characteristics are evaluated on an individual basis and are excluded from the pooled evaluation. This generally occurs when, based on current information and events, it is probable that the Company will be unable to collect all interest and principal payments due according to the originally contracted, or reasonably modified, terms of the loan or lease agreement. The Company has determined that loans and leases meeting the criteria defined below must be reviewed quarterly to determine if they should be evaluated for expected credit losses on an individual basis. • All commercial loans and leases classified substandard or worse. • Any loan or lease that is on nonaccrual. 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. 86 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Allowance for Off-Balance Sheet Credit Exposures Expected credit losses on off-balance sheet credit exposures is estimated over the contractual period in which the Company is exposed to such losses. The estimate of off-balance sheet credit exposures includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated losses. 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 $ 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. This expense was historically presented in other expense and that classification remains unchanged for prior periods. Equipment Leasing The Company may purchase new equipment for the purpose of leasing such equipment to customers within its verticals. Equipment purchased to fulfill commitments to commercial renewable energy projects is leased out under operating leases while leases of equipment outside of the renewable energy vertical are generally direct financing leases. Accordingly, leased assets under operating leases are included in premises and equipment while leased assets under direct financing leases are included in loans and leases held for investment in the consolidated balance sheet. Direct Financing Leases Interest income on direct financing leases is recognized when earned. 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 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 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. Rental revenue from operating leases is recognized on a straight-line basis over the term of the lease. Rental equipment is recorded at cost and depreciated to an estimated residual value on a straight-line basis over the estimated useful life. The useful lives generally range from 20 to 25 years and residual values generally range from 20 % to 50 %, however, they are subject to periodic evaluation. Changes in useful lives or residual values will impact depreciation expense and any gain or loss from the sale of used equipment. The estimated useful lives and residual values of the Company's leasing equipment are based on industry disposal experience and the Company's expectations for future sale prices. If the Company decides to sell or otherwise dispose of rental equipment, it is carried at the lower of cost or fair value less costs to sell or dispose. 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. 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. During the year ended December 31, 2023, the Company recognized impairment expense of $ 499 thousand related to rental equipment. No impairment expense was recorded during the years ended December 31, 2025 and 2024. 87 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Premises and Equipment All premises and equipment, excluding land, are carried at cost, less accumulated depreciation. Land is carried at cost. Additions and major replacements or improvements which extend useful lives of property or equipment are capitalized. Maintenance, repairs, and minor improvements are expensed as incurred. Upon retirement or other disposition of the assets, the cost and related depreciation are derecognized and any resulting gain or loss is reflected in income. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Depreciation is computed by the straight-line method over the following generally estimated useful lives: Years Buildings 39 Transportation 5 - 10 Land improvements 10 - 15 Furniture and equipment 5 - 10 Hardware and software 3 - 5 Solar panels 20 - 25 Foreclosed Assets Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less anticipated cost to sell at the date of foreclosure, establishing a new cost basis. Any write down at the time of transfer to foreclosed assets is charged to the allowance for credit losses on loans and leases. After foreclosure, valuations are periodically performed by management, and the real estate is carried at the lower of the carrying amount or fair value, less cost to sell. Subsequent write downs are charged to other expense. Costs relating to improvement of the property are capitalized while holding costs of the property are charged to other loan origination and maintenance expense in the period incurred. Servicing Assets All sales of loans are executed on a servicing retained basis. The standard SBA loan sale agreement is structured to provide the Company with a “servicing spread” paid from a portion of the interest cash flow of the loan. SBA regulations require the Bank to retain a portion of the cash flow from the interest payments received for a sold loan. The SBA retention requirement is at least 100 basis points in servicing spread while the Company's standard USDA loan sale agreement specifies a servicing spread of 40 basis points. The portion of the servicing spread that exceeds adequate compensation for the servicing function is recognized as a servicing asset, while any that is less is considered a servicing liability. Industry practice recognizes adequate compensation for servicing SBA and USDA loans as 25 basis points. Servicing assets related to SBA and USDA loan sales are recognized as separate assets measured at fair value when a loan is sold. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as adequate compensation for servicing, the discount rate, the custodial earnings rate, ancillary income, prepayment speeds and default rates and losses, with the prepayment speed and discount rate being the most sensitive assumptions. Servicing rights recognized through the sale of government guaranteed loans are carried at fair value as of the reporting date. Changes to fair value are reported in loan servicing asset revaluation in the consolidated statements of income. Servicing rights recognized through the sale of conventional loans are amortized over the period of estimated future net servicing life of the underlying assets and are evaluated quarterly for impairment by comparing the amortized cost to the estimated fair value. Servicing assets related to conventional commercial loans are carried at amortized cost. 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. 88 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Derivative Financial Instruments Equity Warrant Assets In connection with negotiated credit facilities and certain other services, the Company may obtain equity warrant assets giving the Company the right to acquire stock in private companies in certain verticals. These assets are held for prospective investment gains and are not used to hedge any economic risks. Further, the Company does not use other derivative instruments to hedge economic risks stemming from equity warrant assets. 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. Certain equity warrant assets contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events to prevent dilution of the Company’s implied ownership represented by the warrants. Certain warrant agreements contain net share settlement provisions, which permit the receipt of, upon exercise, a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a “cashless” exercise). These equity warrant assets are recorded at fair value and are classified as derivative assets, a component of other assets, on the consolidated balance sheet at the time they are obtained. The grant date fair values of equity warrant assets classified as derivatives received in connection with the issuance of a credit facility are deemed to be loan fees and recognized as an adjustment of loan yield through loan interest income. 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 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. For those equity warrant assets that do not contain net share settlement provisions, the Company considers these to be equity investments without readily determinable market values and records the asset at cost, subject to periodic impairment testing. Goodwill and Intangible Assets Goodwill is the purchase premium after adjusting for the fair value of net assets acquired. Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or when events or circumstances indicate a potential impairment, at the related reporting unit level. The goodwill impairment test involves comparing the fair value of the reporting unit with its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired; however, if the carrying value of the reporting unit exceeds its fair value, an impairment charge must be recorded. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit. An impairment loss establishes a new basis in the goodwill and subsequent reversals of goodwill impairment losses are not permitted under applicable accounting guidance. For intangible assets subject to amortization, the recoverability test is performed when a triggering event occurs and an impairment loss is recognized if the carrying value of the intangible asset is not recoverable and exceeds fair value. The carrying value of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. Intangible assets deemed to have indefinite useful lives are not subject to amortization. An impairment loss is recognized if the carrying value of the intangible asset with an indefinite life exceeds its fair value. As of December 31, 2025 and 2024, the Company had $ 1.8 million of goodwill. The carrying amounts and accumulated amortization of all intangible assets as of December 31, 2025 was $ 2.2 million and $ 879 thousand, respectively, while at December 31, 2024 the balances were $ 1.6 million and $ 726 thousand, respectively. Intangible assets are almost entirely comprised of customer relationships that are being amortized using the straight-line method over 15 years. 89 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The Company had no impairment charges related to business combinations in 2025, 2024 or 2023. Long-Lived Assets Impairment Evaluation The Company evaluates the carrying value of long-lived assets for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable. A key element in determining the recoverability of long-lived assets is the Company’s outlook as to the future market conditions. If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value. Long-Lived Assets Reclassified to Held for Sale During 2024, the Company determined retention of an idle building and accompanying land adjacent to its main campus was not best suited to serve future expansion plans. As a result of this determination, the $ 18.5 million carrying amount of the building and land was considered held for sale, and reclassified from premises and equipment, net to other assets in the consolidated balance sheet. 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 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. Common Stock On June 11, 2014, the Company amended its Articles of Incorporation to create two classes of common stock. These two classes are identified as Class A and Class B or Voting Common Stock and Non-Voting Common Stock, respectively, in the accompanying consolidated balance sheet and statements of changes in shareholders’ equity. Voting and Non-Voting Common Stock holders have identical rights and privileges, with the exception that Non-Voting Common shares have no voting power except in limited circumstances. Stock splits or dividends of Voting and Non-Voting Common Shares shall be in like stock (voting for voting and non-voting for non-voting). Any number of Non-Voting Common Stock may be converted to an equal number of Voting Common Stock at the option of the holder; provided that holder is not the initial transferee or an affiliate of initial transferee and other conditions are met. Advertising Expense Marketing costs are recognized in the month the event or advertisement takes place. These costs are included in advertising and marketing expense as presented in the consolidated statements of income. 90 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Income Taxes Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to business combinations or components of other comprehensive income). Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. The effect of a change in tax rates on deferred assets and liabilities is recognized in income taxes during the period that includes the enactment date. A valuation allowance, if needed, reduces deferred tax assets to the expected amount more likely than not to be realized. 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 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 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. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit recognized in the financial statements from any such position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Interest and/or penalties related to income taxes are reported as a component of income tax expense. Comprehensive Income Annual comprehensive income reflects the change in the Company’s equity during the year arising from transactions and events other than investment by and distributions to shareholders. The only components of other comprehensive income consist of realized and unrealized gains and losses related to investment securities available-for-sale. Stock Compensation Plans The Company recognizes compensation cost based on the fair value of the equity instruments issued. The expense measures the cost of employee services received in exchange for stock options and restricted stock based on the grant-date fair value of the award and recognizes the cost over the vesting period for all awards within an individual grant, including ones with graded vesting features. The fair value of restricted stock awards or units with a market price condition and implied service period are calculated using the Monte Carlo Simulation method. The impact of forfeitures on stock-based compensation expense is recognized as forfeitures occur. See Note 12. Benefit Plans for further discussion and detail. Fair Value of Financial Instruments GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair value hierarchy established per GAAP which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 10. Fair Value of Financial Instruments for further discussion and detail. 91 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Earnings Per Share Basic and diluted earnings per share are computed based on the weighted average number of shares outstanding during each period. Diluted earnings per share reflects the potential dilution that could occur, upon the exercise of stock options or upon the vesting of restricted stock grants, any of which would result in the issuance of common stock that would then share in the net income of the Company. December 31, 2025 2024 2023 Basic earnings per share: 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 Basic earnings per share $ 2.25 $ 1.72 $ 1.67 Diluted earnings per share: 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 Add effect of dilutive stock options and restricted stock grants 341,426 810,754 741,171 Total weighted-average diluted shares outstanding 46,042,790 45,820,321 45,094,879 Diluted earnings per share $ 2.23 $ 1.69 $ 1.64 Anti-dilutive stock options and restricted stock grants 1,181,187 494,481 1,233,230 Revenue Recognition The Company offers various services to customers that generate revenue. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. Incremental costs of obtaining a contract are expensed when incurred when the amortization period is one year or less. As of December 31, 2025, 2024 and 2023, remaining performance obligations consisted primarily of service based revenues for contracts with an original expected length of two years or less. Service based revenues are included in other noninterest income in the consolidated statements of income and consist of other recurring revenue streams from GLS to its clients for settlement, accounting and valuation for government guaranteed loan sales and holdings, fund investment advisory services performed by Canapi Advisors, and investment management and financial planning services provided by Live Oak Private Wealth. Fund investment advisory services performed by Canapi Advisors ended in the third quarter of 2024 when Canapi Advisors voluntarily withdrew as an investment advisor. Service Based Revenues GLS provides services when requested by clients. Each requested service represents a specific performance obligation with a transaction price outlined by a fee schedule. Revenue is recognized as the requested services are completed and payment is generally received the following month. Canapi Advisors provided investment advisory services to four financial technology venture funds where its performance obligations were satisfied over time. Fund management fees were based upon the contractual terms of the limited partnership agreements and were recognized as earned over the specified contract period, which was generally equal to the life of the individual fund. Fund management fees were calculated as a percentage of committed capital, net of any permitted offsets, and were collected in advance and recognized quarterly. Live Oak Private Wealth’s investment management and financial planning performance obligations are generally satisfied over time. Fees are recognized quarterly based on the quarter-end market value of the managed assets as valued by the custodian of the customer’s assets and the applicable fee rate. Payment is generally received within a quarter of service delivery. The Company does not earn performance-based incentives from investment management and financial planning services. Contracts with customers may be terminated at any time by either party. 92 Table of Contents Live Oak Bancshares, Inc. 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. 93 Table of Contents 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. 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 October 2023, the FASB issued ASU No. 2023-06 “Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company does not believe this standard will have a material impact on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). 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 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): Scope Application of Profits Interest and Similar Awards” (“ASU 2024-01”). 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 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 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): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires disaggregation of certain expense captions into specified categories within the footnotes. The amendments in this standard will be effective for the Company on January 1, 2027. The 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. 94 Table of Contents 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. 1, the U.S. 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. 95 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 2. Investment Securities Available-for-Sale 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 U.S. government agencies $ 13,603 $ 27 $ 13 $ 13,617 Mortgage-backed securities 1,469,440 8,327 67,088 1,410,679 Municipal bonds 3,151 — 46 3,105 Total $ 1,486,194 $ 8,354 $ 67,147 $ 1,427,401 December 31, 2024 U.S. government agencies $ 18,196 $ — $ 299 $ 17,897 Mortgage-backed securities 1,335,177 1,083 108,927 1,227,333 Municipal bonds 3,176 — 203 2,973 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. The following tables show debt securities available-for-sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position. Less Than 12 Months 12 Months or More Total December 31, 2025 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. government agencies $ — $ — $ 2,970 $ 13 $ 2,970 $ 13 Mortgage-backed securities 120,039 613 709,710 66,475 829,749 67,088 Municipal bonds 3,022 34 83 12 3,105 46 Total $ 123,061 $ 647 $ 712,763 $ 66,500 $ 835,824 $ 67,147 Less Than 12 Months 12 Months or More Total December 31, 2024 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. government agencies $ 8,036 $ 189 $ 9,861 $ 110 $ 17,897 $ 299 Mortgage-backed securities 265,934 4,173 859,819 104,754 1,125,753 108,927 Municipal bonds — — 2,973 203 2,973 203 Total $ 273,970 $ 4,362 $ 872,653 $ 105,067 $ 1,146,623 $ 109,429 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. 96 Table of Contents 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 statements 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”). The following is a summary of investment securities by maturity: December 31, 2025 Available-for-sale Amortized Cost Fair Value U.S. government agencies One to five years $ 3,731 $ 3,718 Five to ten years 9,872 9,899 Total 13,603 13,617 Mortgage-backed securities Within one year 27,840 27,641 One to five years 220,834 216,181 Five to ten years 188,251 175,839 After 10 years 1,032,515 991,018 Total 1,469,440 1,410,679 Municipal bonds Five to ten years 3,056 3,022 After 10 years 95 83 Total 3,151 3,105 Total $ 1,486,194 $ 1,427,401 The table above reflects contractual maturities. Actual results will differ as the loans underlying the mortgage-backed securities may repay sooner than scheduled. 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 Equity investments, largely comprised of non-marketable equity investments, are generally accounted for under either the equity method or equity security accounting. The below tables provide additional information related to investments accounted for under these two methods. 97 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Equity Method Accounting The carrying amount and ownership percentage of each equity method investment at December 31, 2025 and 2024 is reflected in the following table: 2025 2024 Amount Ownership % Amount Ownership % Apiture, Inc. (1) $ — — % $ 53,108 40.4 % Canapi Ventures SBIC Fund, LP (2) (6) 11,250 2.9 11,504 2.9 Canapi Ventures Fund, LP (3) (6) 1,374 1.5 1,438 1.5 Canapi Ventures Fund II, LP (4) (6) 3,558 1.6 2,193 1.6 Canapi Ventures SBIC Fund II, LP (5) (6) 2,625 2.9 1,238 2.9 Affordable housing (7) 13,457 Various 14,724 Various Solar tax credit investments (8) 4,203 99.0 5,309 99.0 Other (9) 231 Various 1,489 Various Total $ 36,698 $ 91,003 (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. (4) Investment unfunded commitments of $ 3.6 million and $ 5.2 million as of December 31, 2025 and December 31, 2024, respectively. (5) Investment unfunded commitments of $ 4.9 million and $ 6.5 million as of December 31, 2025 and December 31, 2024, respectively. (6) Investee is accounted for under equity method due to the Company's potential influence with investment advisor. (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. (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. This investment category also includes the carried interest security related to Canapi Ventures Fund I, L.P. 98 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Equity Security Accounting 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) $ 80,133 $ 79,662 $ 77,825 Carrying value adjustments: Impairment ( 2,227 ) — — Upward changes for observable prices 1,128 409 — 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) 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 Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in the fair value of an entity's net asset value. The primary beneficiary consolidates the VIE. The primary beneficiary is defined as the enterprise that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. Solar Renewable Energy Tax Credit Investments The Company has equity interests in several limited liability companies that own and operate solar renewable energy projects which are accounted for as equity method investments. Over the course of the investments, the Company will receive federal and state tax credits, tax-related benefits, and excess cash available for distribution, if any. The Company may be called to sell its interest in the limited partnerships through a call option once all investment tax credits have been recognized. Affordable Housing The Company has an equity investment in a limited liability company LIHTC that qualifies as an affordable housing project, managed by an unrelated general partner. The Company accounts for the investment under the proportional amortization method. Under this method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance as a component of income tax expense. 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 . 99 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Canapi Funds 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. Non-marketable and Other Equity Investments The Company also has limited interests in several non-marketable funds, including Small Business Investment Company (“SBIC”) and venture capital funds, which are accounted for as equity security investments. After the initial commitment and over the course of the investment period, the Company will make capital contributions and receive profit and return of capital distributions as a result of fund performance until the funds wind down. While the partnership agreements allow the Company to remove the general partner, this right is not deemed to be substantive as the general partner can only be removed for cause. All investments are generally non-redeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement. The above investments meet the criteria of a VIE, however, the Company is not the primary beneficiary of the entities, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities. 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. For solar tax credit investments, the balance sheet figures are net of any impairment recognized, and includes previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes the potential for loss from these investments is remote, the maximum exposure for solar tax credit investments was determined by assuming a scenario where related tax credits were recaptured. 100 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The following table provides a summary of the VIEs that the Company has not consolidated as of December 31, 2025 and 2024: December 31, 2025 Carrying Amount Maximum Exposure to Loss Liability Recognized Classification Solar tax credit investments $ 4,203 $ 27,644 $ — Other assets (1) Affordable housing 13,457 14,399 — Other assets (2) Canapi Funds 19,039 32,858 — Other assets (3) Non-marketable and other equity investments 4,872 10,976 — Other assets (4) December 31, 2024 Carrying Amount Maximum Exposure to Loss Liability Recognized Classification Solar tax credit investments $ 5,309 $ 38,107 $ — Other assets (5) Affordable housing 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 $ 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. (4) Maximum exposure to loss includes $ 4.9 million of current investments and $ 6.1 million in unfunded commitments. (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 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: Amortization of tax credit investments under proportional amortization $ 823 $ 1,106 $ — Tax credits from tax credit investments ( 868 ) ( 11,546 ) ( 16,390 ) Total $ ( 45 ) $ ( 10,440 ) $ ( 16,390 ) 101 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 3. Loans and Leases Held for Investment and Credit Quality Loan and Lease Portfolio Segments & Classes The following describes the risk characteristics relevant to each of the portfolio segments. Commercial and Industrial Commercial and industrial loans (“C&I”) receive similar underwriting treatment as commercial real estate loans in that the repayment source is analyzed to determine its ability to meet cash flow coverage requirements as set forth by Bank policies. Repayment of the Bank’s C&I loans generally comes from the generation of cash flow as the result of the borrower’s business operations. This business cycle itself brings a certain level of risk to the portfolio. In some instances, these loans may carry a higher degree of risk due to a variety of reasons – illiquid collateral, specialized equipment, highly depreciable assets, uncollectable accounts receivable, revolving balances, or simply being unsecured. As a result of these characteristics, the government guarantee on these loans, when applicable, is an important factor in mitigating risk. The Bank’s lease portfolio is included in the C&I segment. Construction and Development Construction and development loans are for the purpose of acquisition and development of land to be improved through the construction of commercial buildings. Such loans are usually paid off through the conversion to permanent financing for the long-term benefit of the borrower’s ongoing operations. At the completion of the project, if the loan is converted to permanent financing or if scheduled loan amortization begins, it is then reclassified to the Commercial Real Estate segment. Underwriting of construction and development loans typically includes analysis of not only the borrower’s financial condition and ability to meet the required debt obligations, but also the general market conditions associated with the area and type of project being funded. Commercial Real Estate Commercial real estate loans are extensions of credit secured by owner occupied and non-owner occupied collateral. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Such repayment of owner occupied loans is commonly derived from the successful ongoing operations of the business occupying the property. These typically include small businesses and professional practices. Commercial real estate loans may also include government guaranteed loans secured by collateral in the form of residential real estate. Repayment of such loans generally comes from the generation of cash flow as the result of the borrower’s business operations. Commercial Land Commercial land loans are extensions of credit secured by farmland. Such loans are often for land improvements related to agricultural endeavors that may include construction of new specialized facilities. These loans are usually repaid through the conversion to permanent financing, or if scheduled loan amortization begins, for the long-term benefit of the borrower’s ongoing operations. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. 102 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The loan and lease portfolio is further grouped into one of the following classes (also referred to as divisions): Small Business Banking, Commercial Banking, or Paycheck Protection Program. Small Business Banking includes loans to customers in verticals that generally have traditional loan structures. 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. Paycheck Protection Program (“PPP”) includes all loans originated under the PPP pursuant to the Coronavirus Aid, Relief, and Economic Security Act’s (“CARES Act”) economic relief program and carry a 100 % government guarantee. 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 Loans and leases are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans and leases less than 30 days past due and accruing are included within current loans and leases shown below. The following tables show an age analysis of past due loans and leases as of the dates presented. December 31, 2025 Current or Less than 30 Days Past Due 30-89 Days Past Due 90 Days or More Past Due Total Past Due Total Carried at Amortized Cost Loans Accounted for Under the Fair Value Option (1) Total Loans and Leases Commercial & Industrial Small Business Banking $ 2,369,278 $ 23,406 $ 127,090 $ 150,496 $ 2,519,774 $ 87,532 $ 2,607,306 Commercial Banking 2,833,724 8,702 111,857 120,559 2,954,283 40,832 2,995,115 Paycheck Protection Program 906 — — — 906 — 906 Total 5,203,908 32,108 238,947 271,055 5,474,963 128,364 5,603,327 Construction & Development Small Business Banking 749,117 — 1,025 1,025 750,142 — 750,142 Commercial Banking 69,538 — — — 69,538 — 69,538 Total 818,655 — 1,025 1,025 819,680 — 819,680 Commercial Real Estate Small Business Banking 3,267,787 12,640 88,089 100,729 3,368,516 91,876 3,460,392 Commercial Banking 1,383,615 4,613 23,257 27,870 1,411,485 15,912 1,427,397 Total 4,651,402 17,253 111,346 128,599 4,780,001 107,788 4,887,789 Commercial Land Small Business Banking 670,725 — 3,840 3,840 674,565 24,473 699,038 Total 670,725 — 3,840 3,840 674,565 24,473 699,038 Total $ 11,344,690 $ 49,361 $ 355,158 $ 404,519 $ 11,749,209 $ 260,625 $ 12,009,834 Retained Loan Discount and Net Deferred Costs $ ( 36,212 ) Loan and Leases, Net $ 11,973,622 Guaranteed Balance $ 2,974,552 $ 33,597 $ 301,737 $ 335,334 $ 3,309,886 $ 69,445 $ 3,379,331 % Guaranteed 26.2 % 68.1 % 85.0 % 82.9 % 28.2 % 26.6 % 28.1 % 103 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements December 31, 2024 Current or Less than 30 Days Past Due 30-89 Days Past Due 90 Days or More Past Due Total Past Due Total Carried at Amortized Cost Loans Accounted for Under the Fair Value Option (1) Total Loans and Leases Commercial & Industrial Small Business Banking $ 2,182,596 $ 37,966 $ 104,362 $ 142,328 $ 2,324,924 $ 119,378 $ 2,444,302 Commercial Banking 2,418,078 15,282 23,999 39,281 2,457,359 49,767 2,507,126 Paycheck Protection Program 2,361 — — — 2,361 — 2,361 Total 4,603,035 53,248 128,361 181,609 4,784,644 169,145 4,953,789 Construction & Development Small Business Banking 514,997 1,488 2,468 3,956 518,953 — 518,953 Commercial Banking 85,456 — — — 85,456 — 85,456 Total 600,453 1,488 2,468 3,956 604,409 — 604,409 Commercial Real Estate Small Business Banking 2,773,306 42,058 57,896 99,954 2,873,260 107,751 2,981,011 Commercial Banking 1,040,065 5,000 10,778 15,778 1,055,843 19,025 1,074,868 Total 3,813,371 47,058 68,674 115,732 3,929,103 126,776 4,055,879 Commercial Land Small Business Banking 610,920 2,209 3,324 5,533 616,453 32,825 649,278 Total 610,920 2,209 3,324 5,533 616,453 32,825 649,278 Total $ 9,627,779 $ 104,003 $ 202,827 $ 306,830 $ 9,934,609 $ 328,746 $ 10,263,355 Retained Loan Discount and Net Deferred Costs $ ( 29,981 ) Loan and Leases, Net $ 10,233,374 Guaranteed Balance $ 2,933,636 $ 58,235 $ 171,123 $ 229,358 $ 3,162,994 $ 77,514 $ 3,240,508 % Guaranteed 30.5 % 56.0 % 84.4 % 74.8 % 31.8 % 23.6 % 31.6 % (1) Retained portions of government guaranteed loans sold prior to January 1, 2021 are carried at fair value under FASB ASC Subtopic 825-10, Financial Instruments: Overall. See Note 10. Fair Value of Financial Instruments for additional information. Credit Quality Indicators The Bank uses internal loan and lease reviews to assess the performance of individual loans and leases. Each loan and lease is assigned a risk grade during the origination and closing process. Subsequent to origination, loans and lease risk grades are continually evaluated as information becomes available. The Bank performs an annual review of each borrower’s financial performance to validate the accuracy of the assigned risk grade. Additionally, the loan and lease portfolio is subject to annual independent review by an external firm. Pass (Risk Grades 10-47): 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. Special Mention (Risk Grade 50): These loans and leases show signs of weaknesses in either adequate sources of repayment or collateral. These loans and leases may contain underwriting guidelines tolerances and/or exceptions with no mitigating factors; and/or instances where adverse economic conditions develop subsequent to origination that do not jeopardize liquidation of the debt but substantially increase the level of risk. 104 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Substandard (Risk Grades 60-80): Loans and leases graded Substandard are inadequately protected by current sound net worth, paying capacity of the obligor, or pledged collateral. Loans and leases classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These loans and leases are consistently not meeting the repayment schedule. The following tables present credit quality indicators by portfolio class: Term Loans and Leases Amortized Cost Basis by Origination Year December 31, 2025 2025 2024 2023 2022 2021 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total (1) Small Business Banking Pass $ 1,513,435 $ 1,245,114 $ 936,083 $ 1,000,904 $ 827,847 $ 738,282 $ 154,210 $ 42,701 $ 6,458,576 Special Mention 17,102 68,453 64,411 93,132 50,885 80,251 8,763 6,721 389,718 Substandard 30,291 63,432 75,658 115,556 73,330 81,077 23,591 1,768 464,703 Total 1,560,828 1,376,999 1,076,152 1,209,592 952,062 899,610 186,564 51,190 7,312,997 Commercial Banking Pass 1,434,615 763,382 405,425 248,636 150,616 105,386 581,047 210,917 3,900,024 Special Mention 18,187 73,787 79,971 79,401 40,071 17,734 12,627 15,743 337,521 Substandard 9,000 5,419 — 23,919 107,596 30,552 14,562 6,713 197,761 Total 1,461,802 842,588 485,396 351,956 298,283 153,672 608,236 233,373 4,435,306 Paycheck Protection Program Pass — — — — 621 285 — — 906 Total — — — — 621 285 — — 906 Total $ 3,022,630 $ 2,219,587 $ 1,561,548 $ 1,561,548 $ 1,250,966 $ 1,053,567 $ 794,800 $ 284,563 $ 11,749,209 Year-To-Date Gross Charge-offs Small Business Banking $ 3,472 $ 5,518 $ 14,763 $ 12,693 $ 5,188 $ 5,453 $ 4,352 $ 2,523 $ 53,962 Commercial Banking — — — 3,386 9,772 171 337 6,547 20,213 Total $ 3,472 $ 5,518 $ 14,763 $ 16,079 $ 14,960 $ 5,624 $ 4,689 $ 9,070 $ 74,175 105 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Term Loans and Leases Amortized Cost Basis by Origination Year December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total (1) Small Business Banking Pass $ 1,112,351 $ 1,084,996 $ 1,323,982 $ 1,001,021 $ 528,008 $ 482,192 $ 124,370 $ 33,359 $ 5,690,279 Special Mention 7,041 46,047 77,638 61,906 31,575 83,693 22,729 2,790 333,419 Substandard 13,805 28,573 84,067 74,990 40,266 59,874 7,922 395 309,892 Total 1,133,197 1,159,616 1,485,687 1,137,917 599,849 625,759 155,021 36,544 6,333,590 Commercial Banking Pass 1,169,167 752,078 398,333 207,755 51,552 81,166 423,334 116,594 3,199,979 Special Mention — 16,483 88,464 36,165 24,018 17,569 9,555 4,245 196,499 Substandard — — 31,461 136,818 27,905 — 2,902 3,094 202,180 Total 1,169,167 768,561 518,258 380,738 103,475 98,735 435,791 123,933 3,598,658 Paycheck Protection Program Pass — — — 1,461 900 — — — 2,361 Total — — — 1,461 900 — — — 2,361 Total $ 2,302,364 $ 1,928,177 $ 2,003,945 $ 1,520,116 $ 704,224 $ 724,494 $ 590,812 $ 160,477 $ 9,934,609 Year-To-Date Gross Charge-offs Small Business Banking $ 652 $ 4,198 $ 18,630 $ 4,954 $ 3,462 $ 3,481 $ 3,555 $ 170 $ 39,102 Commercial Banking — 17 5,176 1,493 756 — 1,535 — 8,977 Total $ 652 $ 4,215 $ 23,806 $ 6,447 $ 4,218 $ 3,481 $ 5,090 $ 170 $ 48,079 (1) Excludes $ 260.6 million and $ 328.7 million of loans accounted for under the fair value option as of December 31, 2025 and December 31, 2024, respectively. 106 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The following tables present guaranteed and unguaranteed loan and lease balances by asset quality indicator: December 31, 2025 Loan and Lease Balance (1) Guaranteed Balance Unguaranteed Balance % Guaranteed Pass $ 10,359,506 $ 2,590,030 $ 7,769,476 25.0 % Special Mention 727,239 261,506 465,733 36.0 Substandard 662,464 458,350 204,114 69.2 Total $ 11,749,209 $ 3,309,886 $ 8,439,323 28.2 % December 31, 2024 Loan and Lease Balance (1) Guaranteed Balance Unguaranteed Balance % Guaranteed Pass $ 8,892,619 $ 2,644,310 $ 6,248,309 29.7 % Special Mention 529,918 172,015 357,903 32.5 Substandard 512,072 346,669 165,403 67.7 Total $ 9,934,609 $ 3,162,994 $ 6,771,615 31.8 % (1) Excludes $ 260.6 million and $ 328.7 million of loans accounted for under the fair value option as of December 31, 2025 and 2024, respectively. Nonaccrual Loans and Leases 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 years ended December 31, 2025 and 2024. Nonaccrual loans and leases are generally included in the held for investment portfolio. Nonaccrual loans and leases as of December 31, 2025 and December 31, 2024 are as follows: December 31, 2025 Loan and Lease Balance (1) Guaranteed Balance Unguaranteed Balance Unguaranteed Exposure with No ACL Commercial & Industrial Small Business Banking $ 195,342 $ 169,818 $ 25,524 $ 7,438 Commercial Banking 122,847 111,103 11,744 2,142 Total 318,189 280,921 37,268 9,580 Construction & Development Small Business Banking 13,282 10,620 2,662 1,342 Total 13,282 10,620 2,662 1,342 Commercial Real Estate Small Business Banking 127,141 91,099 36,042 17,207 Commercial Banking 36,098 11,454 24,644 16,417 Total 163,239 102,553 60,686 33,624 Commercial Land Small Business Banking 6,447 5,692 755 533 Total 6,447 5,692 755 533 Total $ 501,157 $ 399,786 $ 101,371 $ 45,079 107 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements December 31, 2024 Loan and Lease Balance (1) Guaranteed Balance Unguaranteed Balance Unguaranteed Exposure with No ACL Commercial & Industrial Small Business Banking $ 141,674 $ 116,596 $ 25,078 $ 5,219 Commercial Banking 39,282 26,300 12,982 3,816 Total 180,956 142,896 38,060 9,035 Construction & Development Small Business Banking 3,955 3,379 576 372 Total 3,955 3,379 576 372 Commercial Real Estate Small Business Banking 81,847 55,290 26,557 17,736 Commercial Banking 26,888 13,981 12,907 11,907 Total 108,735 69,271 39,464 29,643 Commercial Land Small Business Banking 10,651 7,339 3,312 173 Total 10,651 7,339 3,312 173 Total $ 304,297 $ 222,885 $ 81,412 $ 39,223 (1) Excludes loans accounted for under the fair value option. See Note 10. Fair Value of Financial Instruments for additional information. When a loan or lease is placed on nonaccrual status, any accrued interest is reversed from loan interest income. The following table summarizes the amount of accrued interest reversed during the periods presented: Year Ended December 31, 2025 (1) 2024 (1) Commercial & Industrial $ 3,137 $ 4,213 Construction & Development 411 74 Commercial Real Estate 3,042 1,699 Commercial Land 52 218 Total $ 6,642 $ 6,204 (1) Excludes loans accounted for under the fair value option. See Note 10. Fair Value of Financial Instruments for additional information. 108 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The following tables present the amortized cost basis of collateral-dependent loans and leases which are individually evaluated to determine expected credit losses, as of December 31, 2025 and 2024: Total Collateral-Dependent Loans Unguaranteed Portion December 31, 2025 Real Estate Business Assets Other Real Estate Business Assets Other Allowance for Credit Losses Commercial & Industrial Small Business Banking $ 17,477 $ 4,107 $ — $ 4,937 $ 374 $ — $ 824 Commercial Banking — 87,319 — — 3,744 — 600 Total 17,477 91,426 — 4,937 4,118 — 1,424 Construction & Development Small Business Banking 277 — — 277 — — — Total 277 — — 277 — — — 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 Total $ 124,130 $ 93,416 $ — $ 48,452 $ 4,808 $ — $ 1,690 Total Collateral-Dependent Loans Unguaranteed Portion December 31, 2024 Real Estate Business Assets Other Real Estate Business Assets Other Allowance for Credit Losses Commercial & Industrial Small Business Banking $ 6,693 $ 36,500 $ — $ 2,738 $ 12,061 $ — $ 8,299 Commercial Banking 101,001 26,788 — 13,704 11,350 — 4,374 Total 107,694 63,288 — 16,442 23,411 — 12,673 Commercial Real Estate Small Business Banking 53,306 6,327 — 22,239 1,061 — 890 Total 53,306 6,327 — 22,239 1,061 — 890 Commercial Land Small Business Banking 6,295 — — 2,713 — — 974 Total 6,295 — — 2,713 — — 974 Total $ 167,295 $ 69,615 $ — $ 41,394 $ 24,472 $ — $ 14,537 Allowance for Credit Losses – Loans and Leases The Company maintains the ACL at levels management believes represents the future expected credit losses in the loan and lease portfolios as of the balance sheet date. See Note 1. Organization and Summary of Significant Accounting Policies for a description of the methodologies used to estimate credit losses. 109 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The following tables detail activity in the allowance for credit losses for the periods presented: Commercial & Industrial Construction & Development Commercial Real Estate Commercial Land Total December 31, 2025 Beginning Balance $ 129,007 $ 4,943 $ 29,501 $ 4,065 $ 167,516 Charge offs ( 63,790 ) ( 958 ) ( 9,249 ) ( 178 ) ( 74,175 ) Recoveries 3,886 — 1,414 101 5,401 Provision 75,085 3,239 15,696 ( 498 ) 93,522 Ending Balance $ 144,188 $ 7,224 $ 37,362 $ 3,490 $ 192,264 December 31, 2024 Beginning Balance $ 87,581 $ 4,717 $ 28,864 $ 4,678 $ 125,840 Charge offs ( 43,785 ) ( 338 ) ( 3,932 ) ( 24 ) ( 48,079 ) Recoveries 741 — 638 8 1,387 Provision 84,470 564 3,931 ( 597 ) 88,368 Ending Balance $ 129,007 $ 4,943 $ 29,501 $ 4,065 $ 167,516 December 31, 2023 Beginning Balance $ 64,995 $ 5,101 $ 22,901 $ 3,569 $ 96,566 Adoption of ASU 2022-02 ( 25 ) ( 166 ) ( 83 ) ( 402 ) ( 676 ) Charge offs ( 22,510 ) — ( 1,417 ) — ( 23,927 ) Recoveries 839 — 1,715 — 2,554 Provision 44,282 ( 218 ) 5,748 1,511 51,323 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. Loss rates are adjusted for four quarters of forecasted unemployment followed by a four-quarter straight-line reversion period. During the year ended December 31, 2023, the ACL increased primarily as a result of loan growth and charge-off related impacts. Additionally, during the first quarter of 2023, certain assumptions were refined, drawing more heavily on internal data, in the calculations of PD, LGD and prepayment rates. 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 The Company may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness. 110 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The following tables summarize the amortized cost basis of loans that were modified during the periods presented. 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 Commercial Banking 26,095 — — — Total $ 116,217 $ 3,228 $ 31 $ 3,259 111 Table of Contents 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 Small Business Banking $ 8,083 $ — $ — $ — Commercial Banking 18,373 — — — Total $ 26,456 $ — $ — $ — Year Ended December 31, 2023 Current 30-89 Days Past Due 90 Days or More Past Due Total Past Due Small Business Banking $ 18,908 $ — $ — $ — Commercial Banking 18,326 — — — Total $ 37,234 $ — $ — $ — The following tables summarize the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the periods presented. Year Ended December 31, 2025 Weighted Average Interest Rate Reduction Weighted Average Term Extension (in Months) 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 Year Ended December 31, 2023 Weighted Average Interest Rate Reduction Weighted Average Term Extension (in Months) Small Business Banking 1.41 % 67 Commercial Banking — % 29 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. Upon determination that a modified loan, or portion of a modified loan, has subsequently been deemed uncollectible, the uncollectible portion is written off. The amortized cost basis is reduced by the uncollectible amount and the ACL is adjusted by the same amount. As a result, the impact of loss mitigation strategies is captured in the estimates of PD and LGD. Note 4. Leases Lessor Equipment Leasing The Company may purchase new equipment for the purpose of leasing such equipment to customers within its verticals. Equipment purchased to fulfill commitments to commercial renewable energy projects is rented out under operating leases while leases of equipment outside of the renewable energy vertical are generally direct financing leases. Accordingly, leased assets under operating leases are included in premises and equipment while leased assets under direct financing leases are included in loans and leases held for investment. 112 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Direct Financing Leases The gross lease payments receivable and the net investment included in loans and leases held for investment are as follows: As of December 31, 2025 2024 Gross direct finance lease payments receivable $ 96 $ 961 Less - unearned interest ( 1 ) ( 39 ) Net investment in direct financing leases $ 95 $ 922 Future minimum lease payments receivable under direct finance leases are as follows: As of December 31, 2025 Amount 2026 $ 96 Total $ 96 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, 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 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. A maturity analysis of future minimum lease payments receivable under non-cancelable operating leases is as follows: As of December 31, 2025 Amount 2026 $ 7,607 2027 7,347 2028 3,854 2029 2,399 2030 2,271 Thereafter 5,038 Total $ 28,516 Lessee Lease Arrangements The Company determines if an arrangement is or contains a lease at inception. If it is determined to be or contain a lease, then the lease is classified as an operating or finance lease. 113 Table of Contents 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. Lease liabilities represent the Company's obligation to make lease payments arising from the lease. When recognizing right-of-use assets and liabilities, the Company accounts for lease and non-lease components separately because such amounts are readily determinable under the lease contracts. Right-of-use assets and liabilities are measured on commencement date based on the present value of the lease payments over the lease term, discounted using the discount rate for the lease at commencement. The discount rate is the rate implicit in the lease, however, if that is not readily determinable, the Company will use its incremental borrowing rate. The right-of-use asset also includes any lease payments made before the commencement date and initial direct costs and excludes any lease incentives received. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. 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 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 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. There are no options to extend or terminate this lease. The components of lease expense are as follows: December 31, 2025 December 31, 2024 Operating lease cost $ 564 $ 891 Short-term lease cost 397 379 Finance lease cost: Amortization of right-of-use assets 49 22 Interest expense on lease liabilities 5 3 Sublease income ( 233 ) ( 40 ) Total net lease cost $ 782 $ 1,255 Supplemental disclosure for the consolidated balance sheets related to leases is as follows: December 31, 2025 December 31, 2024 Operating lease right-of-use asset $ 1,655 $ 2,106 Operating lease liability 2,161 2,636 Finance lease right-of-use asset 80 130 Finance lease liability 82 132 114 Table of Contents 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: December 31, 2025 December 31, 2024 Weighted average remaining lease term (years) Operating leases 11.36 10.73 Finance lease 1.58 2.58 Weighted average discount rate Operating leases 3.83 % 3.76 % Finance lease 4.40 % 4.40 % A maturity analysis of operating and finance lease liabilities is as follows: As of December 31, 2025 Operating Leases Finance Leases 2026 $ 542 $ 58 2027 510 27 2028 336 — 2029 212 — 2030 51 — Thereafter 1,027 — Total lease payments 2,678 85 Less: imputed interest ( 517 ) ( 3 ) Total lease liabilities $ 2,161 $ 82 Note 5. Servicing Assets 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 $ 3.97 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: 2025 2024 Balance at beginning of period $ 55,788 $ 48,186 Additions, net 23,230 19,757 Fair value changes: Due to changes in valuation inputs or assumptions (1) ( 1,989 ) 3 Decay due to increases in principal paydowns or runoff ( 14,088 ) ( 12,158 ) Balance at end of period $ 62,941 $ 55,788 See Note 10. Fair Value of Financial Instruments for further details about servicing assets measured at fair value. 115 Table of Contents 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. 31, 2024 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. Note 6. Premises and Equipment Components of Premises and Equipment Components of premises and equipment and total accumulated depreciation at December 31, 2025 and 2024 are as follows: 2025 2024 Buildings $ 90,958 $ 90,990 Land improvements 6,868 6,829 Furniture and equipment 27,451 27,830 Hardware and software 29,875 26,847 Leasehold improvements 7,541 7,421 Land 16,870 16,870 Transportation 44,135 44,144 Solar panels 142,405 159,672 Deposits on fixed assets 7,970 1,390 Premises and equipment, total 374,073 381,993 Less accumulated depreciation ( 133,870 ) ( 117,934 ) Premises and equipment, net of depreciation $ 240,203 $ 264,059 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. 116 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 7. Deposits The composition of deposits at December 31, 2025 and 2024 is as follows: 2025 2024 Noninterest-bearing deposits $ 515,051 $ 318,890 Interest-bearing deposits: Interest-bearing checking 415,152 351,284 Money market 163,989 147,533 Savings 6,711,000 5,282,812 Time deposits 5,883,467 5,659,975 Total 13,173,608 11,441,604 Total deposits $ 13,688,659 $ 11,760,494 The aggregate amount of time deposits in denominations of $250 thousand or more at December 31, 2025 and 2024 was approximately $ 653.5 million and $ 695.9 million, respectively. At December 31, 2025 the scheduled maturities of total time deposits are as follows: Year Amount 2026 $ 4,383,393 2027 1,070,894 2028 156,066 2029 93,824 2030 29,596 Thereafter 149,694 Total $ 5,883,467 117 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 8. Borrowings Total outstanding borrowings consisted of the following: December 31, 2025 December 31, 2024 Borrowings In March 2021, the Company entered into a 60 -month term loan agreement of $ 50.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 2.95 % with a monthly payment sufficient to fully amortize the loan, with all remaining unpaid principal and interest due at maturity on March 30, 2026 . The Company paid the Lender a non-refundable $ 325 thousand loan origination fee upon signing of the Note that is presented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan. $ 2,676 $ 13,184 In March 2024, the Company entered into a 60 -month term loan agreement of $ 100.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 5.95 % with monthly interest payments until maturity on March 28, 2029 , and $ 33.0 million of principal to be paid in year 4, and $ 67.0 million of principal to be paid in year 5. 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) 83 131 Total borrowings $ 102,404 $ 112,820 (1) Includes finance leases. 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, and access to a repurchase agreement. 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. See further details below on each type of unused borrowing available to the Company. The Company may borrow funds through the Federal Reserve Bank’s discount window. These borrowings are secured by qualifying loans and investment securities with a balance of $ 3.56 billion and $ 3.25 billion as of December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, the Company had approximately $ 2.93 billion and $ 2.73 billion, respectively, in borrowing capacity available under these arrangements with no outstanding balance as of December 31, 2025 or 2024. On June 18, 2018, the Company entered into a borrowing agreement with the Federal Home Loan Bank of Atlanta. These borrowings must be secured with eligible collateral approved by the Federal Home Loan Bank of Atlanta. 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. The Company may purchase federal funds through unsecured federal funds lines of credit with various correspondent banks, which totaled $ 130.0 million as of December 31, 2025 and 2024. These lines are intended for short-term borrowings and are subject to restrictions limiting the frequency and terms of advances. These lines of credit are payable on demand and bear interest based upon the daily federal funds rate. The Company had no outstanding balance on the lines of credit as of December 31, 2025 and 2024. 118 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements In September 2025, the Company modified a $ 100.0 million revolving line of credit with a third party correspondent bank. The line of credit is unsecured and accrues interest at 30-day SOFR plus 1.25 % with an interest rate floor of 2.75 % and an interest rate cap of 6.75 %. The line of credit was extended 12 months to a maturity date of October 10, 2028. Payments are interest only with all principal and accrued interest due at maturity. The terms of this loan require the Company to maintain minimum capital and debt service coverage ratios. The Company paid the Lender a non-refundable $ 250 thousand renewal fee upon modifying the Note that will be amortized into interest expense over the life of the loan. As of December 31, 2025 and 2024, there was $ 100.0 million of available credit. 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. At the time the Company enters into a transaction with the third party, the Company must transfer securities or other assets against the funds received. The terms of the agreement are set at market conditions at the time the Company enters into such transaction. The Company had no outstanding balance on the repurchase agreement as of December 31, 2025 and 2024. Note 9. Income Taxes 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: 2025 2024 2023 Current income tax expense: Federal $ 41,497 $ 16,700 $ 24,051 State 8,043 6,538 7,042 Total current tax expense 49,540 23,238 31,093 Deferred income tax benefit: Federal ( 10,397 ) ( 9,439 ) ( 20,914 ) State ( 1,971 ) ( 1,981 ) ( 1,247 ) Total deferred tax benefit ( 12,368 ) ( 11,420 ) ( 22,161 ) Totals: 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 2025 Percent 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 Tax credits 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. 119 Table of Contents 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 Income tax expense computed at the statutory rate $ 18,739 $ 17,394 State income tax expense, net of federal 3,184 4,316 Stock-based compensation expense ( 194 ) 2,084 Decrease in taxes due to investment tax credit ( 10,440 ) ( 16,390 ) Other 529 1,528 Total income tax expense $ 11,818 $ 8,932 Components of deferred tax assets and liabilities are as follows: 2025 2024 Deferred tax assets: Net unrealized losses on securities available for sale $ 14,352 $ 26,003 Allowance for loan and lease losses 46,935 40,564 Stock-based compensation expense 2,886 2,701 Capitalized research and experimentation costs — 6,205 Accrued expenses 6,162 4,029 Allowance for off-balance sheet credit exposures 3,999 3,293 Operating lease liabilities 528 638 Other 1,634 702 Total deferred tax assets 76,496 84,135 Deferred tax liabilities: Premises and equipment 30,595 35,831 Net unrealized gains on non-marketable and other equity securities 9,011 17,245 Mark to market on loans held for sale 14,396 11,968 Unguaranteed loan discount 194 34 Deferred loan fees and costs, net 3,281 1,415 Operating lease right-of-use assets 424 541 Goodwill and intangibles 77 34 Capitalized research and experimentation costs 599 — Other 378 11 Total deferred tax liabilities 58,955 67,079 Net deferred tax asset $ 17,541 $ 17,056 120 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Income taxes paid, net of refunds, were as follows: 2025 Federal $ 18,678 State California 2,970 Other 4,946 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. The realization of a deferred tax asset is dependent upon the generation of future taxable income during periods in which the related temporary difference becomes deductible or realizable prior to its expiration. The Company considers projected future taxable income, scheduled reversal of deferred tax liabilities, cessation of investing in renewable energy assets that generate investment tax credits and tax planning strategies in making this assessment. Based on these considerations, management believes it is more likely than not that the deferred tax assets will be realized. ASC 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. The Company does not have material uncertain tax positions, interest or penalties recorded in the consolidated balance sheets or statements of income as of or for the years ended December 31, 2025, 2024 and 2023. As of December 31, 2025, the Company was under audit by the Internal Revenue Service principally as it relates to prior energy credits. Due to the complexities of uncertainties, the ultimate resolution may result in a liability that is materially different from the current estimate. The Company files a consolidated income tax return in the U.S. federal tax jurisdiction. Generally, the Company’s federal and state tax returns are no longer subject to examination by the taxing authorities for years prior to 2015. Note 10. Fair Value of Financial Instruments Fair Value Hierarchy There are three levels of inputs in the fair value hierarchy that may be used to measure fair value. Financial instruments are considered Level 1 when valuation can be based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instruments are valued using quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation. Recurring Fair Value The following sections provide a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the fair value hierarchy: Investment securities available-for-sale : Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, discounted cash flow or at net asset value per share. Level 2 securities would include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. 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. 121 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Loans held for investment: The fair values of loans accounted for under the fair value option are determined using a DCF methodology. The estimate incorporates assumptions that market participants would use to estimate fair value of similar assets such as prepayment speeds, default and severity rates, and a discount rate. Due to the nature of the valuation inputs, loans held for investment are classified within Level 3 of the valuation hierarchy. Servicing assets: Servicing rights do not trade in an active, open market with readily observable prices. While sales of servicing rights do occur, the precise terms and conditions typically are not readily available. Accordingly, the Company estimates the fair value of servicing rights using discounted cash flow models incorporating numerous assumptions from the perspective of a market participant including servicing income, ancillary income, servicing costs, discount rates and prepayment speeds. Due to the nature of the valuation inputs, servicing rights are classified within Level 3 of the valuation hierarchy. Mutual fund: The mutual fund is registered with the Securities and Exchange Commission as a closed-end, non-diversified management investment company and operates as an interval fund. The fund primarily invests in the unguaranteed portion of SBA504 first lien loans secured by owner-occupied commercial real estate. This investment is valued using quoted prices in markets that are not active and is classified as Level 2 within the valuation hierarchy. Equity warrant assets: Fair value measurements of equity warrant assets of private companies are priced based on a Black-Scholes option pricing model to estimate the asset value by using stated strike prices, option expiration dates, risk-free interest rates and option volatility assumptions. Option volatility assumptions used in the Black-Scholes model are based on public companies that operate in similar industries as the companies in the Company’s private company portfolio. Values are further adjusted for a general lack of liquidity due to the private nature of the associated underlying company. The Company classifies equity warrant assets within Level 3 of the valuation hierarchy. The table below provides a rollforward of the Level 3 equity warrant asset fair values. Twelve months ended December 31, Equity Warrant Assets 2025 2024 Balance at beginning of period $ 7,162 $ 2,874 Issuances 436 798 Net (loss) gain on equity warrant assets ( 5,558 ) 5,962 Settlements ( 265 ) ( 2,472 ) Balance at end of period $ 1,775 $ 7,162 The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis. December 31, 2025 Total Level 1 Level 2 Level 3 Investment securities available-for-sale U.S. government agencies $ 13,617 $ — $ 13,617 $ — Mortgage-backed securities 1,410,679 — 1,410,679 — Municipal bonds (1) 3,105 — 3,022 83 Loans held for investment 260,625 — — 260,625 Servicing assets (2) 62,941 — — 62,941 Mutual fund 19 — 19 — Equity warrant assets 1,775 — — 1,775 Total assets at fair value $ 1,752,761 $ — $ 1,427,337 $ 325,424 122 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements December 31, 2024 Total Level 1 Level 2 Level 3 Investment securities available-for-sale U.S. government agencies $ 17,897 $ — $ 17,897 $ — Mortgage-backed securities 1,227,333 — 1,227,333 — Municipal bonds (1) 2,973 — 2,890 83 Loans held for investment 328,746 — — 328,746 Servicing assets (2) 55,788 — — 55,788 Mutual fund 458 — 458 — Equity warrant assets 7,162 — — 7,162 Total assets at fair value $ 1,640,357 $ — $ 1,248,578 $ 391,779 (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. Fair Value Option Until the first quarter of 2021, the Company had historically elected to account for retained participating interests of all government guaranteed loans under the fair value option in order to align the accounting presentation with the Company’s viewpoint of the economics of the loans. Interest income is recognized in the same manner on loans reported at fair value as on non-fair value loans, except in regard to origination fees and costs which are recognized immediately upon fair value election. Not electing fair value generally results in a larger discount being recorded on the date of the sale. This discount is subsequently accreted into interest income over the underlying loan’s remaining term using the effective interest method. Management made this change of election in alignment with its ongoing effort to reduce volatility and drive more predictable revenue. In accordance with GAAP, any loans for which fair value was previously elected continue to be measured as such. There were no loans accounted for under the fair value option that were 90 days or more past due and still accruing interest at December 31, 2025 or 2024. The unpaid principal balance of unguaranteed exposure for nonaccruals was $ 8.5 million and $ 10.0 million at December 31, 2025 and 2024, respectively. The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of loans accounted for under the fair value option at December 31, 2025 and December 31, 2024. December 31, 2025 Total Loans Nonaccruals 90 Days or More Past Due Fair Value Carrying Amount Unpaid Principal Balance Difference Fair Value Carrying Amount Unpaid Principal Balance Difference Fair Value Carrying Amount Unpaid Principal Balance Difference Fair Value Option Elections Loans held for investment $ 260,625 $ 269,851 $ ( 9,226 ) $ 61,602 $ 62,824 $ ( 1,222 ) $ 45,784 $ 46,824 $ ( 1,040 ) $ 260,625 $ 269,851 $ ( 9,226 ) $ 61,602 $ 62,824 $ ( 1,222 ) $ 45,784 $ 46,824 $ ( 1,040 ) December 31, 2024 Total Loans Nonaccruals 90 Days or More Past Due Fair Value Carrying Amount Unpaid Principal Balance Difference Fair Value Carrying Amount Unpaid Principal Balance Difference Fair Value Carrying Amount Unpaid Principal Balance Difference Fair Value Option Elections Loans held for investment $ 328,746 $ 342,150 $ ( 13,404 ) $ 63,386 $ 64,784 $ ( 1,398 ) $ 51,272 $ 52,528 $ ( 1,256 ) $ 328,746 $ 342,150 $ ( 13,404 ) $ 63,386 $ 64,784 $ ( 1,398 ) $ 51,272 $ 52,528 $ ( 1,256 ) 123 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The following table presents the net gains (losses) from changes in fair value. Twelve Months Ended December 31, Gains (Losses) on Loans Accounted for under the Fair Value Option 2025 2024 2023 Loans held for investment $ 1,216 $ 2,403 $ ( 3,539 ) $ 1,216 $ 2,403 $ ( 3,539 ) 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. Twelve Months Ended December 31, Loans held for investment 2025 2024 Balance at beginning of period $ 328,746 $ 388,036 Repurchases 19,534 25,192 Fair value changes 1,216 2,403 Settlements ( 88,871 ) ( 86,885 ) Balance at end of period $ 260,625 $ 328,746 Non-recurring Fair Value The following sections provide a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the fair value hierarchy: Collateral-dependent loans : Loans are considered collateral-dependent when the Company has determined that foreclosure of the collateral is probable or when a borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of collateral. A collateral-dependent loan’s ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan’s collateral is determined by appraisals, independent valuation, or management’s estimation of fair value which is then adjusted for the cost related to liquidation of the collateral. Collateral-dependent loans are generally classified as Level 3 based on management’s judgment and estimation. Loans with agreed upon sales prices are classified as Level 1. Foreclosed assets: Foreclosed real estate is adjusted to fair value less selling costs upon transfer of the loans to foreclosed real estate. Subsequently, foreclosed real estate is carried at the lower of carrying value or fair value less selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. 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. 124 Table of Contents 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. The Company has no liabilities recorded at fair value on a non-recurring basis. December 31, 2025 Total Level 1 Level 2 Level 3 Collateral-dependent loans $ 20,619 $ — $ — $ 20,619 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 December 31, 2024 Total Level 1 Level 2 Level 3 Collateral-dependent loans $ 17,085 $ — $ — $ 17,085 Foreclosed assets 1,944 — — 1,944 Total assets at fair value $ 19,029 $ — $ — $ 19,029 Level 3 Analysis For Level 3 assets measured at fair value on a recurring or non-recurring basis as of December 31, 2025 and December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows: December 31, 2025 Level 3 Assets with Significant Unobservable Inputs Fair Value Valuation Technique Significant Unobservable Inputs Range Weighted Average (1) Recurring fair value Municipal bond $ 83 Discounted expected cash flows Discount rate 7.0 % N/A Prepayment speed 5.0 % N/A Loans held for investment $ 260,625 Discounted expected cash flows Loss rate 0.0 % - 4.6 % 1.1 % Discount rate 6.7 % - 10.0 % 8.6 % Prepayment speed 15.1 % - 21.2 % 17.2 % Servicing assets $ 62,941 Discounted expected cash flows Discount rate 12.8 % 12.8 % Prepayment speed 12.0 % - 18.8 % 16.2 % Equity warrant assets $ 1,775 Black-Scholes option pricing model Volatility 13.1 % - 104.4 % 58.3 % Risk-free interest rate 3.7 % - 4.2 % 4.2 % Marketability discount 20.0 % - 100.0 % 20.4 % Remaining life 2.5 - 11.5 years 8.2 years Non-recurring fair value Collateral-dependent loans $ 20,619 Discounted appraisals Appraisal adjustments (2) 10.0 % - 82.7 % 39.7 % Foreclosed assets $ 6,877 Discounted appraisals Appraisal adjustments (2) 10.0 % 10.0 % Equity security investment with a non-readily determinable fair value $ 2,101 Market Approach Revenue Multiple 3.75 N/A 125 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements December 31, 2024 Level 3 Assets with Significant Unobservable Inputs Fair Value Valuation Technique Significant Unobservable Inputs Range Weighted Average (1) Recurring fair value Municipal Bond $ 83 Discounted expected cash flows Discount rate 7.2 % N/A Prepayment speed 5.0 % N/A Loans held for investment $ 328,746 Discounted expected cash flows Loss rate 0.0 % - 6.3 % 1.1 % Discount rate 7.0 % - 18.0 % 9.2 % Prepayment speed 14.3 % - 30.1 % 16.3 % Servicing assets $ 55,788 Discounted expected cash flows Discount rate 13.5 % 13.5 % Prepayment speed 11.9 % - 18.3 % 15.6 % Equity warrant assets $ 7,162 Black-Scholes option pricing model Volatility 13.1 % - 90.0 % 32.1 % Risk-free interest rate 4.5 % - 4.6 % 4.5 % Marketability discount 10.0 % - 25.0 % 13.8 % Remaining life 2.9 - 12.0 years 4.5 years Non-recurring fair value Collateral-dependent loans $ 17,085 Discounted appraisals Appraisal adjustments (2) 0.0 % - 95.8 % 45.4 % Foreclosed assets $ 1,944 Discounted appraisals Appraisal adjustments (2) 10.0 % 10.0 % (1) Weighted averages are determined by the relative fair value of the instruments or the relative contribution to the instruments fair value. (2) Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and other qualitative adjustments. 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 sheets. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value to the Company. 126 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The carrying amounts and estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis are as follows: December 31, 2025 Carrying Amount Quoted Price In Active Markets for Identical Assets/Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Financial assets Cash and due from banks $ 864,904 $ 864,904 $ — $ — $ 864,904 Certificates of deposit with other banks 250 250 — — 250 Loans held for sale 420,055 — — 440,928 440,928 Loans and leases held for investment, net of allowance for credit losses on loans and leases 11,520,733 — — 11,329,479 11,329,479 Financial liabilities Deposits 13,688,659 — 13,096,941 — 13,096,941 Borrowings 102,404 — — 110,782 110,782 December 31, 2024 Carrying Amount Quoted Price In Active Markets for Identical Assets/Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Financial assets Cash and due from banks $ 608,800 $ 608,800 $ — $ — $ 608,800 Certificates of deposit with other banks 250 250 — — 250 Loans held for sale 346,002 — — 367,993 367,993 Loans and leases held for investment, net of allowance for credit losses on loans and leases 9,737,112 — — 9,556,981 9,556,981 Financial liabilities Deposits 11,760,494 — 11,317,639 — 11,317,639 Borrowings 112,820 — — 121,026 121,026 Note 11. Commitments and Contingencies Litigation In the ordinary course of operations, the Company is at times involved in legal proceedings. In the opinion of management, as of December 31, 2025, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. Financial Instruments with Off-balance-sheet Risk The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, credit risk in excess of the amount recognized in the balance sheet. 127 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as for on-balance-sheet instruments. A summary of the Company’s commitments is as follows: December 31, 2025 December 31, 2024 Commitments to extend credit (1) (2) $ 4,099,313 $ 3,597,937 Standby letters of credit 51,842 7,365 Airplane purchase agreement commitments 48,636 — Total unfunded off-balance sheet credit risk $ 4,199,791 $ 3,605,302 (1) Includes unfunded overdraft protection. (2) Includes $ 1.27 billion and $ 1.20 billion at December 31, 2025 and 2024, respectively, for which loan commitment letters have been issued. Such letters do not represent a present obligation to extend credit due to the variety of conditions contained in the letters. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances which the Company deems necessary. Other Commitments See Note 2. Securities for unfunded commitments to provide capital contributions for equity fund investments as of December 31, 2025 and 2024. 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 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. The Company from time-to-time may have cash and cash equivalents on deposit with financial institutions that exceed federally-insured limits. 128 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Geographic Concentration s The following table presents the geographic concentration of the Company’s loan and lease portfolio at December 31, 2025: % of Total Geographic Regions (1) Midwest 12.8 % Northeast 18.2 Southeast 31.4 Southwest 13.9 West 23.2 Non-U.S. 0.5 Total 100.0 % (1) Concentrations are stated as a percentage of total unguaranteed loans held for investment. Midwest consists of ND, SD, NE, KS, MN, IA,WI, MO, IL, IN, MI and OH. Northeast consists of MD, DE, PA, NJ, NY, CT, RI, MA, VT, ME and NH. Southeast consists of AR, LA, MS, TN, AL, GA, FL, SC, KY, NC, VA, WV, DC, PR and VI. Southwest consists of AZ, NM, TX and OK. West consists of WA, OR, CA, NV, ID, MT, WY, CO, UT, AK and HI. Non-U.S. includes addressees with foreign domicile. Domicile is determined by the principal resident or business address of the entity. Note 12. Benefit Plans Defined Contribution Plan The Company maintains an employee benefit plan pursuant to Section 401(k) of the Internal Revenue Code. The plan covers substantially all employees. Participants may contribute a percentage of compensation, subject to a maximum allowed under the Code. In addition, the Company makes certain matching contributions and may make additional contributions at the discretion of the board of directors. Company expense relating to the plan for the years ended December 31, 2025, 2024 and 2023 amounted to $ 7.5 million, $ 6.7 million and $ 6.5 million, respectively. Flexible Benefits Plan The Company maintains a Flexible Benefits Plan which covers substantially all employees. Participants may set aside pre-tax dollars to provide for future expenses such as dependent care. Employee Stock Purchase Plan 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 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. ESPP stock purchases cannot exceed $ 25 thousand in fair market value per employee per calendar year. Options to purchase shares under the ESPP are granted at a 15 % discount to fair market value. Expense recognized in relation to the ESPP was $ 183 thousand, $ 217 thousand and $ 246 thousand for fiscal years 2025, 2024 and 2023, respectively. 129 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Stock Option Plans On March 20, 2015, the Company adopted the 2015 Omnibus Stock Incentive Plan (as amended and currently in effect, the “2015 Omnibus Stock Incentive Plan”) which replaced the previously existing Amended Incentive Stock Option Plan and Nonstatutory Stock Option Plan. Subsequently on May 24, 2016, the 2015 Omnibus Stock Incentive Plan was amended and restated, and on May 15, 2018, the 2015 Omnibus Stock Incentive Plan was amended, to authorize awards covering a maximum of 7,000,000 and 8,750,000 common voting shares, respectively. On May 11, 2021, the Amended and Restated 2015 Omnibus Stock Incentive Plan was amended to authorize awards covering a maximum of 10,750,000 common voting shares. Subsequently on May 16, 2023, 2015 Omnibus Stock Incentive Plan was amended to authorize awards covering a maximum of 13,750,000 common voting shares. Options or restricted shares granted under 2015 Omnibus Stock Incentive Plan expire no more than 10 years from date of grant. Exercise prices under the 2015 Omnibus Stock Incentive Plan are set by the Board of Directors at the date of grant but shall not be less than 100 % of fair market value of the related stock at the date of the grant. Forfeitures are recognized as they occur. 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 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. Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2024 332,386 $ 15.35 Exercised ( 278,413 ) 15.52 Forfeited ( 11,890 ) 15.75 Outstanding at December 31, 2025 42,083 $ 14.15 0.19 years $ 850,126 Exercisable at December 31, 2025 42,083 $ 14.15 0.19 years $ 850,126 The following is a summary of non-vested stock option activity for the Company for the years ended December 31, 2025, 2024 and 2023. Shares Weighted Average Grant Date Fair Value Non-vested at December 31, 2022 37,760 $ 6.60 Vested ( 37,760 ) 6.60 Non-vested at December 31, 2023 — — Vested — — Non-vested at December 31, 2024 — — Vested — — Non-vested at December 31, 2025 — $ — The total intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 was $ 4.6 million, $ 10.1 million and $ 2.8 million, respectively. At December 31, 2025, there was no unrecognized compensation costs relating to stock options. There were no options granted in 2025, 2024 or 2023. 130 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Restricted Stock Plan In 2010, the Company adopted a Restricted Stock Plan. Under this plan, a total of 1,350,000 shares of Common Stock were available for issuance to eligible employees. Restricted stock grants vested in equal installments ranging from immediate vesting to over a seven year period from the date of the grant. Under the 2015 Omnibus Stock Incentive Plan, which replaced the previously existing Restricted Stock Plan, 927,838 restricted stock units were granted during 2023 to eligible employees and outside directors at a weighted average grant date fair value of $ 34.83 . During 2024, 524,064 restricted stock units were granted to eligible employees and outside directors at a weighted average grant date fair value of $ 39.30 . The vesting of these grants was time based and had no market price conditions. During 2025, 654,178 restricted stock units were granted to eligible employees and outside directors at a weighted average grant date fair value of $ 33.70 , of which the vesting of all grants was time based. The fair value of each restricted stock unit is based on the market value of the Company’s stock on the date of the grant. 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 non-market-related performance criteria. The fair value of the RSUs is based on the closing price on the date of the grant. The following is a summary of non-vested RSU stock activity for the Company for the year ended December 31, 2025. Shares Weighted Average Grant Date Fair Value Non-vested at December 31, 2024 2,026,522 $ 39.66 Granted 654,178 33.70 Vested ( 623,727 ) 40.11 Forfeited ( 201,244 ) 37.56 Non-vested at December 31, 2025 1,855,729 $ 37.63 For the years ended December 31, 2025, 2024 and 2023, the Company recognized $ 26.1 million, $ 26.2 million and $ 17.6 million in compensation expense for RSUs, respectively. At December 31, 2025, unrecognized compensation costs relating to RSUs amounted to $ 55.9 million which will be recognized over a weighted average period of 3.01 years. Subsequently in February 2026, the Company granted 777,543 RSUs with a weighted average grant date fair value of $ 41.21 with unrecognized compensation expense of $ 32.0 million which will be recognized over a weighted average period of 4.99 years. Employee Incentive Compensation 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, 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, 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. 131 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 13. Regulatory Matters Dividends The Bank, as a North Carolina banking corporation, may pay dividends to shareholders provided the bank does not make distributions that reduce its capital below its applicable required capital, pursuant to North Carolina General Statutes Section 53C-4-7. However, regulatory authorities may limit payment of dividends by any bank when it is determined that such a limitation is in the public interest and is necessary to ensure financial soundness of the bank. Capital Requirements The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. The Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, includes quantitative measures designed to ensure capital adequacy. The Basel III Rules require the Company and the Bank to maintain (i) a minimum common equity Tier 1 ratio of 4.50 percent plus a 2.50 percent “capital conservation buffer” (effectively resulting in minimum common equity Tier 1 ratio of 7.00 percent), (ii) Tier 1 risk-based capital minimum of 6.00 percent plus the capital conservation buffer (effectively resulting in a minimum Tier 1 risk-based capital ratio of 8.50 percent), (iii) total risk-based capital ratio minimum of 8.00 percent plus the capital conservation buffer (effectively resulting in a minimum total risk-based capital ratio of 10.5 percent) and (iv) Tier 1 leverage capital ratio minimum of 4.00 percent. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios. Failure to meet minimum capital requirements may result in certain actions by regulators that could have a direct material effect on the consolidated financial statements. Based on the most recent notification from the Federal Deposit Insurance Corporation, the Bank is well capitalized under the regulatory framework for prompt corrective action. As of December 31, 2025, the Company and the Bank met all capital adequacy requirements to which they are subject and were not aware of any conditions or events that would change each entity’s well capitalized status. 132 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Capital amounts and ratios as of December 31, 2025 and 2024, are presented in the following table. Actual Minimum Capital Requirement Minimum To Be Well Capitalized Amount Ratio Amount Ratio Amount Ratio Consolidated - December 31, 2025 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,162,337 10.53 % $ 496,712 4.50 % N/A N/A Total Capital (to Risk-Weighted Assets) $ 1,397,451 12.66 % $ 883,043 8.00 % N/A N/A Tier 1 Capital (to Risk-Weighted Assets) $ 1,258,603 11.40 % $ 662,282 6.00 % N/A N/A Tier 1 Capital (to Average Assets) $ 1,258,603 8.48 % $ 593,767 4.00 % N/A N/A Bank - December 31, 2025 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,147,133 10.46 % $ 493,607 4.50 % $ 712,987 6.50 % Total Capital (to Risk-Weighted Assets) $ 1,285,129 11.72 % $ 877,523 8.00 % $ 1,096,904 10.00 % Tier 1 Capital (to Risk-Weighted Assets) $ 1,147,133 10.46 % $ 658,142 6.00 % $ 877,523 8.00 % Tier 1 Capital (to Average Assets) $ 1,147,133 7.77 % $ 590,666 4.00 % $ 738,333 5.00 % Consolidated - December 31, 2024 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,049,420 11.04 % $ 427,941 4.50 % N/A N/A Total Capital (to Risk-Weighted Assets) $ 1,169,061 12.29 % $ 760,784 8.00 % N/A N/A Tier 1 Capital (to Risk-Weighted Assets) $ 1,049,420 11.04 % $ 570,588 6.00 % N/A N/A Tier 1 Capital (to Average Assets) $ 1,049,420 8.21 % $ 511,293 4.00 % N/A N/A Bank - December 31, 2024 Common Equity Tier 1 (to Risk-Weighted Assets) $ 1,020,820 10.96 % $ 418,992 4.50 % $ 605,120 6.50 % Total Capital (to Risk-Weighted Assets) $ 1,138,006 12.22 % $ 744,874 8.00 % $ 931,093 10.00 % Tier 1 Capital (to Risk-Weighted Assets) $ 1,020,820 10.96 % $ 558,656 6.00 % $ 744,874 8.00 % Tier 1 Capital (to Average Assets) $ 1,020,820 8.04 % $ 507,725 4.00 % $ 634,657 5.00 % 133 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 14. Transactions with Related Parties The Company has entered into transactions with its directors, officers, significant shareholders, their affiliates, and equity method investments (“related parties”). Related parties include the following equity method investments: Apiture, Inc. (“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. The Canapi Funds are investment funds which focus on providing venture capital to new and emerging financial technology companies. Each of Cape Fear Collective 1 & 2 is a “qualified housing project” within the meaning of 12 CFR 362.3 and serves as a special purpose vehicle to purchase residential homes available for sale in the community. OTR is a Community Development Financial Institution (“CDFI”) certified by the U.S. Department of the Treasury. CDFIs provide credit and financial services to underserved markets and populations to help low-income and other disadvantaged people join the economic mainstream. Estrella Landing is a LIHTC investment that qualifies as an affordable housing project located in Wilmington, NC. Green Sun, Sun Vest, HEP, and Heelstone are solar income tax credit projects. See Note 2. Securities, section captioned “Equity Method Accounting,” for further detail on equity method investments. The following table provides related party loan activity during 2025: Amount Balance as of December 31, 2024 $ 21,208 Loan originations — Loan repayments ( 1,835 ) Balance as of December 31, 2025 $ 19,373 Deposits from related parties held by the Company as of December 31, 2025 and 2024 amounted to $ 30.8 million and $ 41.1 million, respectively. Medical Park Hotels, LLC (“Medical Park Hotels”) owns a hotel in the Wilmington, North Carolina area. One executive officer and one board member hold a combined total of 24 % interest in Medical Park Hotels. 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 $ 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. 134 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Note 15. Parent Company Only Financial Statements The following balance sheets, statements of income and statements of cash flows are for Live Oak Bancshares, Inc. Balance Sheets As of December 31, 2025 2024 Assets Cash and cash equivalents $ 122,439 $ 56,144 Investment in subsidiaries 1,223,652 1,048,715 Other assets 17,706 17,916 Total assets $ 1,363,797 $ 1,122,775 Liabilities and Shareholders' Equity Borrowings $ 102,321 $ 112,689 Other liabilities 7,370 6,590 Total liabilities 109,691 119,279 Shareholders' equity: Preferred stock 96,266 — Common stock 388,389 365,607 Retained earnings 809,885 715,767 Accumulated other comprehensive loss ( 44,672 ) ( 82,344 ) Total shareholders' equity attributed to Live Oak Bancshares, Inc. 1,249,868 999,030 Non-controlling interest 4,238 4,466 Total shareholders' equity 1,254,106 1,003,496 Total liabilities and shareholders' equity $ 1,363,797 $ 1,122,775 135 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Statements of Income Years ended December 31, 2025 2024 2023 Interest income $ 95 $ 281 $ 581 Interest expense 6,695 5,577 1,182 Net interest loss ( 6,600 ) ( 5,296 ) ( 601 ) Noninterest income: Other noninterest (loss) income ( 749 ) 757 ( 290 ) Total noninterest (loss) income ( 749 ) 757 ( 290 ) Noninterest expense: Salaries and employee benefits 1,357 1,213 1,549 Professional services expense 2,581 1,657 1,540 Other expense 2,811 3,020 2,384 Total noninterest expense 6,749 5,890 5,473 Net loss before equity in undistributed income of subsidiaries ( 14,098 ) ( 10,429 ) ( 6,364 ) Income tax benefit ( 3,312 ) ( 3,907 ) ( 1,010 ) Net loss ( 10,786 ) ( 6,522 ) ( 5,354 ) Equity in undistributed income of subsidiaries in excess of dividends from subsidiaries 116,429 83,939 79,252 Net income 105,643 77,417 73,898 Net loss attributable to non-controlling interest 228 57 — Net income attributable to Live Oak Bancshares, Inc. 105,871 77,474 73,898 Preferred stock dividends 3,048 — — Net income attributable to common shareholders $ 102,823 $ 77,474 $ 73,898 136 Table of Contents Live Oak Bancshares, Inc. Notes to Consolidated Financial Statements Statements of Cash Flows Years ended December 31, 2025 2024 2023 Cash flows from operating activities Net income $ 105,643 $ 77,417 $ 73,898 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Equity in undistributed net income of subsidiaries in excess of dividends of subsidiaries ( 116,429 ) ( 83,939 ) ( 79,252 ) Subsidiary vesting of restricted stock and other ( 18,210 ) ( 16,978 ) ( 10,474 ) Deferred tax benefit ( 279 ) ( 680 ) ( 15 ) Stock option compensation expense — — 272 Restricted stock compensation expense 26,210 26,205 17,603 Business combination contingent consideration fair value adjustments — ( 125 ) 125 Net change in other assets 203 ( 9,631 ) 36,283 Net change in other liabilities 1,059 526 299 Net cash (used in) provided by operating activities ( 1,803 ) ( 7,205 ) 38,739 Cash flows from investing activities 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 investing activities ( 5,837 ) ( 97,312 ) ( 40,744 ) Cash flows from financing activities Proceeds from borrowings 161 99,552 71 Repayment of borrowings ( 10,529 ) ( 10,217 ) ( 9,920 ) Stock option exercises 2,976 2,311 1,168 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 ) 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 ) Net change in cash and cash equivalents 66,295 ( 25,753 ) ( 21,341 ) Cash and cash equivalents at beginning of year 56,144 81,897 103,238 Cash and cash equivalents at end of year $ 122,439 $ 56,144 $ 81,897 137 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.