# EDGAR Filing Document

**Accession Number:** 0001462120
**File Stem:** 0001462120-26-000039
**Filing Date:** 2026-5
**Character Count:** 216932
**Document Hash:** 8da7d30a5f94fcacd587ae03be1704a4
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001462120-26-000039.hdr.sgml**: 20260505

**ACCESSION NUMBER**: 0001462120-26-000039

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 84

**CONFORMED PERIOD OF REPORT**: 20260331

**FILED AS OF DATE**: 20260505

**DATE AS OF CHANGE**: 20260505

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Live Oak Bancshares, Inc.
- **CENTRAL INDEX KEY:** 0001462120
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 264596286
- **STATE OF INCORPORATION:** NC
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-37497
- **FILM NUMBER:** 26943962

**BUSINESS ADDRESS:**
- **STREET 1:** 1741 TIBURON DRIVE
- **CITY:** WILMINGTON
- **STATE:** NC
- **ZIP:** 28403
- **BUSINESS PHONE:** 910-790-5867

**MAIL ADDRESS:**
- **STREET 1:** 1741 TIBURON DRIVE
- **CITY:** WILMINGTON
- **STATE:** NC
- **ZIP:** 28403

?xml version='1.0' encoding='ASCII'? lob-20260331

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

⌧ **Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**For the quarterly period ended March 31, 2026**

**or**

□ **Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**For the transition period from ________ to ________.**

**Commission file number: 001-37497**

![LiveOakBancsharesLogo.jpg](lob-20260331_g1.jpg)

**LIVE OAK BANCSHARES, INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **North Carolina** | **26-4596286** |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| **1741 Tiburon Drive**<br>**Wilmington, North Carolina** | **28403** |
| (Address of principal executive offices) | (Zip Code) |

---

**(910) 790-5867**

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| **Voting Common Stock, no par value per share** | **LOB** | **New York Stock Exchange LLC** |
| **Depositary Shares, Each Representing a 1/40th Interest in a Share of 8.375% Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock, no par value per share** | **LOB/PA** | **New York Stock Exchange LLC** |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ⌧ | Accelerated filer | □ |
| Non-accelerated filer | □ | Smaller reporting company | □ |
| | | Emerging growth company | □ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes □ No ⌧

**APPLICABLE ONLY TO CORPORATE ISSUERS:**

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of May 4, 2026, there were 46,262,391 shares of the registrant's voting common stock outstanding.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Form 10-Q**

**For the Quarterly Period Ended March 31, 2026**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| | | **Page** |
| | **[PART I. FINANCIAL INFORMATION](#ic5c14571a54d4781ae660cff4d3f0c4c_13)** | |
| [Item 1.](#ic5c14571a54d4781ae660cff4d3f0c4c_16) | <u>[Financial Statements (Unaudited)](#ic5c14571a54d4781ae660cff4d3f0c4c_16)</u> | [1](#ic5c14571a54d4781ae660cff4d3f0c4c_16) |
|  | <u>[Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025](#ic5c14571a54d4781ae660cff4d3f0c4c_19)</u> | [1](#ic5c14571a54d4781ae660cff4d3f0c4c_19) |
|  | <u>[Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2026 and 2025](#ic5c14571a54d4781ae660cff4d3f0c4c_22)</u> | [2](#ic5c14571a54d4781ae660cff4d3f0c4c_22) |
|  | <u>[Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2026 and 2025](#ic5c14571a54d4781ae660cff4d3f0c4c_25)</u> | [3](#ic5c14571a54d4781ae660cff4d3f0c4c_25) |
|  | <u>[Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2026 and 2025](#ic5c14571a54d4781ae660cff4d3f0c4c_28)</u> | [4](#ic5c14571a54d4781ae660cff4d3f0c4c_28) |
|  | <u>[Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025](#ic5c14571a54d4781ae660cff4d3f0c4c_34)</u> | [5](#ic5c14571a54d4781ae660cff4d3f0c4c_34) |
|  | <u>[Notes to Unaudited Condensed Consolidated Financial Statements](#ic5c14571a54d4781ae660cff4d3f0c4c_37)</u> | [7](#ic5c14571a54d4781ae660cff4d3f0c4c_37) |
| [Item 2.](#ic5c14571a54d4781ae660cff4d3f0c4c_88) | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#ic5c14571a54d4781ae660cff4d3f0c4c_88)</u> | [35](#ic5c14571a54d4781ae660cff4d3f0c4c_88) |
| [Item 3.](#ic5c14571a54d4781ae660cff4d3f0c4c_124) | <u>[Quantitative and Qualitative Disclosures about Market Risk](#ic5c14571a54d4781ae660cff4d3f0c4c_124)</u> | [51](#ic5c14571a54d4781ae660cff4d3f0c4c_124) |
| [Item 4.](#ic5c14571a54d4781ae660cff4d3f0c4c_127) | <u>[Controls and Procedures](#ic5c14571a54d4781ae660cff4d3f0c4c_127)</u> | [53](#ic5c14571a54d4781ae660cff4d3f0c4c_127) |
|  | **[PART II. OTHER INFORMATION](#ic5c14571a54d4781ae660cff4d3f0c4c_130)** |  |
| [Item 1.](#ic5c14571a54d4781ae660cff4d3f0c4c_133) | <u>[Legal Proceedings](#ic5c14571a54d4781ae660cff4d3f0c4c_133)</u> | [55](#ic5c14571a54d4781ae660cff4d3f0c4c_133) |
| [Item 1A.](#ic5c14571a54d4781ae660cff4d3f0c4c_136) | <u>[Risk Factors](#ic5c14571a54d4781ae660cff4d3f0c4c_136)</u> | [55](#ic5c14571a54d4781ae660cff4d3f0c4c_136) |
| [Item 2.](#ic5c14571a54d4781ae660cff4d3f0c4c_139) | <u>[Unregistered Sales of Equity Securities and Use of Proceeds](#ic5c14571a54d4781ae660cff4d3f0c4c_139)</u> | [55](#ic5c14571a54d4781ae660cff4d3f0c4c_139) |
| [Item 3.](#ic5c14571a54d4781ae660cff4d3f0c4c_142) | <u>[Defaults Upon Senior Securities](#ic5c14571a54d4781ae660cff4d3f0c4c_142)</u> | [55](#ic5c14571a54d4781ae660cff4d3f0c4c_142) |
| [Item 4.](#ic5c14571a54d4781ae660cff4d3f0c4c_145) | <u>[Mine Safety Disclosures](#ic5c14571a54d4781ae660cff4d3f0c4c_145)</u> | [55](#ic5c14571a54d4781ae660cff4d3f0c4c_145) |
| [Item 5.](#ic5c14571a54d4781ae660cff4d3f0c4c_148) | <u>[Other Information](#ic5c14571a54d4781ae660cff4d3f0c4c_148)</u> | [55](#ic5c14571a54d4781ae660cff4d3f0c4c_148) |
| [Item 6.](#ic5c14571a54d4781ae660cff4d3f0c4c_154) | <u>[Exhibits](#ic5c14571a54d4781ae660cff4d3f0c4c_154)</u> | [56](#ic5c14571a54d4781ae660cff4d3f0c4c_154) |
|  | <u>[Index to Exhibits](#ic5c14571a54d4781ae660cff4d3f0c4c_157)</u> | [56](#ic5c14571a54d4781ae660cff4d3f0c4c_157) |
|  | <u>[Signatures](#ic5c14571a54d4781ae660cff4d3f0c4c_160)</u> | [57](#ic5c14571a54d4781ae660cff4d3f0c4c_160) |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Balance Sheets**

***As of March 31, 2026 (unaudited) and December 31, 2025***

(Dollars in thousands)

---

| | | |
|:---|:---|:---|
| | **March 31,<br>2026** | **December 31,<br>2025** |
| **Assets** | | |
| Cash and due from banks | $816135 | $864904 |
| Certificates of deposit with other banks | 250 | 250 |
| Investment securities available-for-sale | 1434538 | 1427401 |
| Loans held for sale | 435313 | 420055 |
| Loans and leases held for investment (includes $244,940 and $260,625 measured at fair value, respectively) | 12158216 | 11973622 |
| Allowance for credit losses on loans and leases | (193279) | (192264) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loans and leases | 11964937 | 11781358 |
| Premises and equipment, net | 235329 | 240203 |
| Foreclosed assets | 12005 | 8208 |
| Servicing assets (includes $64,520 and $62,941 measured at fair value, respectively) | 64677 | 63155 |
| Other assets | 336849 | 329244 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $15300033 | $15134778 |
| **Liabilities and shareholders' equity** |  |  |
| ***Liabilities*** |  |  |
| Deposits: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noninterest-bearing | $510917 | $515051 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest-bearing | 13324141 | 13173608 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 13835058 | 13688659 |
| Borrowings | 99746 | 102404 |
| Other liabilities | 83468 | 89609 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 14018272 | 13880672 |
| ***Shareholders' equity*** |  |  |
| Series A Preferred stock, no par value, 1,000,000 shares authorized, 100,000 shares, issued and outstanding at March 31, 2026 and December 31, 2025 | 96266 | 96266 |
| Class A common stock, no par value, 100,000,000 shares authorized, 46,240,691 and 46,032,402 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively | 392258 | 388389 |
| Retained earnings | 836444 | 809885 |
| Accumulated other comprehensive loss | (47352) | (44672) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity attributed to Live Oak Bancshares, Inc. | 1277616 | 1249868 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest | 4145 | 4238 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 1281761 | 1254106 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $15300033 | $15134778 |

---

***See Notes to Unaudited Condensed Consolidated Financial Statements***

------

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Income**

***For the three months ended March 31, 2026 and 2025 (unaudited)***

(Dollars in thousands, except per share data)

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| ***Interest income*** |  |  |
| &nbsp;&nbsp;&nbsp;Loans and fees on loans | $214129 | $195616 |
| &nbsp;&nbsp;&nbsp;Investment securities, taxable | 13009 | 11089 |
| &nbsp;&nbsp;&nbsp;Other interest earning assets | 6726 | 6400 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest income | 233864 | 213105 |
| ***Interest expense*** |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 112847 | 110888 |
| &nbsp;&nbsp;&nbsp;Borrowings | 1617 | 1685 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | 114464 | 112573 |
| &nbsp;&nbsp;&nbsp;Net interest income | 119400 | 100532 |
| ***Provision for credit losses*** | 20100 | 28964 |
| &nbsp;&nbsp;&nbsp;Net interest income after provision for credit losses | 99300 | 71568 |
| ***Noninterest income*** |  |  |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 9094 | 8298 |
| &nbsp;&nbsp;&nbsp;Loan servicing asset revaluation | (3487) | (4728) |
| &nbsp;&nbsp;&nbsp;Net gains on sales of loans | 15425 | 15438 |
| &nbsp;&nbsp;&nbsp;Net loss on loans accounted for under the fair value option | (1165) | (1034) |
| &nbsp;&nbsp;&nbsp;Equity method investments (loss) income | (817) | (2239) |
| &nbsp;&nbsp;&nbsp;Equity security investments gains, net |  | 20 |
| &nbsp;&nbsp;&nbsp;Lease income | 2135 | 2573 |
| &nbsp;&nbsp;&nbsp;Other noninterest income | 4889 | 4043 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | 26074 | 22371 |
| ***Noninterest expense*** |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | 49354 | 45529 |
| &nbsp;&nbsp;&nbsp;Travel expense | 1463 | 2064 |
| &nbsp;&nbsp;&nbsp;Professional services expense | 2516 | 3024 |
| &nbsp;&nbsp;&nbsp;Advertising and marketing expense | 3051 | 3665 |
| &nbsp;&nbsp;&nbsp;Occupancy expense | 2410 | 2737 |
| &nbsp;&nbsp;&nbsp;Technology expense | 9749 | 9251 |
| &nbsp;&nbsp;&nbsp;Equipment expense | 3693 | 3745 |
| &nbsp;&nbsp;&nbsp;Other loan origination and maintenance expense | 5919 | 4585 |
| &nbsp;&nbsp;&nbsp;FDIC insurance | 4401 | 3551 |
| &nbsp;&nbsp;&nbsp;Other expense | 2737 | 2656 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | 85293 | 80807 |
| ***Income before taxes*** | 40081 | 13132 |
| &nbsp;&nbsp;&nbsp;Income tax expense | 10134 | 3464 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income | 29947 | 9668 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss attributable to non-controlling interest | 93 | 49 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to Live Oak Bancshares, Inc. | 30040 | 9717 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock dividends | 2094 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to common shareholders | $27946 | $9717 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share | $0.61 | $0.21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted earnings per share | $0.60 | $0.21 |

---

***See Notes to Unaudited Condensed Consolidated Financial Statements***

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Comprehensive Income**

***For the three months ended March 31, 2026 and 2025 (unaudited)***

(Dollars in thousands)

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| Net income | $29947 | $9668 |
| Other comprehensive (loss) income before tax: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net unrealized (loss) gain on investment securities available-for-sale during the period | (3526) | 19271 |
| Other comprehensive (loss) income before tax | (3526) | 19271 |
| &nbsp;&nbsp;&nbsp;Income tax benefit (expense) | 846 | (4625) |
| Other comprehensive (loss) income, net of tax | (2680) | 14646 |
| Total comprehensive income | 27267 | 24314 |
| Comprehensive loss attributable to non-controlling interest | 93 | 49 |
| Total comprehensive income attributable to Live Oak Bancshares, Inc. | $27360 | $24363 |

---

***See Notes to Unaudited Condensed Consolidated Financial Statements***

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Changes in Shareholders' Equity**

***For the three months ended March 31, 2026 and 2025 (unaudited)***

(Dollars in thousands)

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
| | **Preferred Stock** | **Preferred Stock** | **Common stock** | **Common stock** | **Common stock** | **Retained <br>earnings** | **Accumulated<br>other<br>comprehensive<br>(loss) income** | **Non-controlling interest** | **Total <br>equity** |
| | **Shares** | **Amount** | **Shares** | **Shares** | **Amount** | **Retained <br>earnings** | **Accumulated<br>other<br>comprehensive<br>(loss) income** | **Non-controlling interest** | **Total <br>equity** |
| | **Series A** | **Amount** | **Class A** | **Class B** | **Amount** | **Retained <br>earnings** | **Accumulated<br>other<br>comprehensive<br>(loss) income** | **Non-controlling interest** | **Total <br>equity** |
| **Balance at December 31, 2025** | 100000 | $96266 | 46032402 |  | $388389 | $809885 | $(44672) | $4238 | $1254106 |
| &nbsp;&nbsp;&nbsp;Net income (loss) |  |  |  |  |  | 30040 |  | (93) | 29947 |
| &nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  |  |  |  | (2680) |  | (2680) |
| &nbsp;&nbsp;&nbsp;Issuance of restricted stock |  |  | 154541 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other |  |  |  |  | (3994) |  |  |  | (3994) |
| &nbsp;&nbsp;&nbsp;Employee stock purchase program |  |  | 17665 |  | 484 |  |  |  | 484 |
| &nbsp;&nbsp;&nbsp;Stock option exercises |  |  | 36083 |  | 499 |  |  |  | 499 |
| &nbsp;&nbsp;&nbsp;Restricted stock compensation expense |  |  |  |  | 6880 |  |  |  | 6880 |
| &nbsp;&nbsp;&nbsp;Cash dividends - preferred |  |  |  |  |  | (2094) |  |  | (2094) |
| &nbsp;&nbsp;&nbsp;Cash dividends ($0.03 per share) - common |  |  |  |  |  | (1387) |  |  | (1387) |
| **Balance at March 31, 2026** | 100000 | $96266 | 46240691 |  | $392258 | $836444 | $(47352) | $4145 | $1281761 |
| **Balance at December 31, 2024** |  | $— | 45359425 |  | $365607 | $715767 | $(82344) | $4466 | $1003496 |
| &nbsp;&nbsp;&nbsp;Net income (loss) |  |  |  |  |  | 9717 |  | (49) | 9668 |
| &nbsp;&nbsp;&nbsp;Other comprehensive income |  |  |  |  |  |  | 14646 |  | 14646 |
| &nbsp;&nbsp;&nbsp;Issuance of restricted stock |  |  | 143784 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other |  |  |  |  | (3178) |  |  |  | (3178) |
| &nbsp;&nbsp;&nbsp;Employee stock purchase program |  |  | 23015 |  | 659 |  |  |  | 659 |
| &nbsp;&nbsp;&nbsp;Stock option exercises |  |  | 63409 |  | 758 |  |  |  | 758 |
| &nbsp;&nbsp;&nbsp;Restricted stock compensation expense |  |  |  |  | 6667 |  |  |  | 6667 |
| &nbsp;&nbsp;&nbsp;Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense |  |  |  |  |  | 98 |  |  | 98 |
| &nbsp;&nbsp;&nbsp;Cash dividends ($0.03 per share) - common |  |  |  |  |  | (1367) |  |  | (1367) |
| **Balance at March 31, 2025** |  | $— | 45589633 |  | $370513 | $724215 | $(67698) | $4417 | $1031447 |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Cash Flows**

***For the three months ended March 31, 2026 and 2025 (unaudited)***

(Dollars in thousands)

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| ***Cash flows from operating activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $29947 | $9668 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 6940 | 6974 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 20100 | 28964 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of discount on securities, net | (155) | (83) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax benefit | (598) | (1009) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Originations of loans held for sale | (325627) | (349091) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales of loans held for sale | 294218 | 284340 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net gains on sale of loans held for sale | (15425) | (15438) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss on impairment or sale of foreclosed assets | 140 | 34 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss on loans accounted for under fair value option | 1165 | 1034 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net change in servicing assets | (1522) | (767) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss on disposal of property and equipment |  | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds received from government guaranteed receivables | 73948 | 5169 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity method investments loss (income) | 817 | 2239 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity security investments (gains) losses, net |  | (20) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (gain) loss on equity warrant assets | (26) | 304 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted stock compensation expense | 6880 | 6667 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock based compensation excess tax deficiency | (48) | (156) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease right-of-use assets and liabilities, net | (26) | (14) |
| &nbsp;&nbsp;&nbsp;Changes in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | 3341 | (705) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other liabilities | (6685) | (7901) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities | 87384 | (29767) |
| ***Cash flows from investing activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Purchases of investment securities available-for-sale | (58702) | (76965) |
| &nbsp;&nbsp;&nbsp;Proceeds from maturities, calls, and principal paydowns of investment securities available-for-sale | 48194 | 31842 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of foreclosed assets | 227 |  |
| &nbsp;&nbsp;&nbsp;Loan and lease originations and principal collections, net | (262125) | (413757) |
| &nbsp;&nbsp;&nbsp;Purchases of equity security investments | (66) | (3433) |
| &nbsp;&nbsp;&nbsp;Purchases of equity method investments |  | (424) |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of equity security investments | 358 | 160 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of equity method investments | 759 | 129 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of premises and equipment |  | 222 |
| &nbsp;&nbsp;&nbsp;Purchases of premises and equipment, net | (2047) | (2294) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by investing activities | (273402) | (464520) |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Cash Flows (Continued)**

***For the three months ended March 31, 2026 and 2025 (unaudited)***

(Dollars in thousands)

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| ***Cash flows from financing activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Net increase in deposits | $146399 | $635451 |
| &nbsp;&nbsp;&nbsp;Proceeds from borrowings | 36 | 43 |
| &nbsp;&nbsp;&nbsp;Repayment of borrowings | (2694) | (2616) |
| &nbsp;&nbsp;&nbsp;Stock option exercises | 499 | 758 |
| &nbsp;&nbsp;&nbsp;Employee stock purchase program | 484 | 659 |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other | (3994) | (3178) |
| &nbsp;&nbsp;&nbsp;Shareholder dividend distributions - preferred | (2094) |  |
| &nbsp;&nbsp;&nbsp;Shareholder dividend distributions - common | (1387) | (1367) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 137249 | 629750 |
| Net increase in cash and cash equivalents | (48769) | 135463 |
| ***Cash and cash equivalents, beginning*** | 864904 | 608800 |
| ***Cash and cash equivalents, ending*** | $816135 | $744263 |
| ***Supplemental disclosures of cash flow information*** |  |  |
| &nbsp;&nbsp;&nbsp;Interest paid | $114351 | $112098 |
| &nbsp;&nbsp;&nbsp;Income tax paid, net | 291 | 172 |
| ***Supplemental disclosures of noncash investing and financing activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Unrealized holding (losses) gains on investment securities available-for-sale, net of taxes | $(2680) | $14646 |
| &nbsp;&nbsp;&nbsp;Transfers from loans and leases to foreclosed real estate and other repossessions or government guaranteed receivable | 84979 | 3648 |
| &nbsp;&nbsp;&nbsp;Net transfers between foreclosed assets and government guaranteed receivable | 214 |  |
| &nbsp;&nbsp;&nbsp;Transfer of loans held for sale to loans and leases held for investment | 32153 | 68015 |
| &nbsp;&nbsp;&nbsp;Transfer of loans and leases held for investment to loans held for sale | 890 | 8978 |
| &nbsp;&nbsp;&nbsp;Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense |  | 98 |

---

***See Notes to Unaudited Condensed Consolidated Financial Statements***

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

**Note 1. Basis of Presentation**

***Nature of Operations***

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 the State 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 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 March 31, 2026, the Company's wholly owned material subsidiaries are the Bank, Government Loan Solutions, Inc. ("GLS"), Live Oak Grove, LLC ("Grove"), and Live Oak Ventures, Inc. ("Live Oak Ventures"). GLS is a management and technology consulting firm that advises and offers solutions and services to participants in the government guaranteed lending sector. GLS primarily provides services in connection with the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under the SBA 7(a) loan programs and USDA guaranteed loans. The Grove provides Company employees and business visitors with on-site dining 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. During the fourth quarter of 2024, Live Oak Ventures consolidated its investment in Synply, Inc. ("Synply") as a result of its controlling interest in that entity. Synply is a cloud-based technology platform designed to simplify the loan syndication process for financial institutions. 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.

The Company generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. Income from the retention of loans is comprised principally of interest income. Income from the sale of loans is comprised of loan servicing revenue and revaluation of related servicing rights along with net gains on sales of loans. Offsetting these revenues are the cost of funding sources, provision for credit losses, any costs related to foreclosed assets and other operating costs such as salaries and employee benefits, travel, professional services, advertising and marketing and tax expense. The Company also has less routinely generated gains and losses arising from its financial technology investments.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***General***

In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included, and all intercompany transactions have been eliminated in consolidation. Results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2026. The Condensed Consolidated Balance Sheet as of December 31, 2025 has been derived from the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the Securities Exchange Commission ("SEC") on February 27, 2025 (SEC File No. 001-37497) (the "2025 Form 10-K"). A summary description of the significant accounting policies followed by the Company is set forth in Note 1 of the Notes to Consolidated Financial Statements in the Company's 2025 Form 10-K. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and footnotes in the Company's 2025 Form 10-K.

The preparation of financial statements in conformity with United States ("U.S.") generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

Amounts in all tables in the Notes to Unaudited Condensed Consolidated Financial Statements have been presented in thousands, except percentage, time period, share and per share data or where otherwise indicated.

***Business Segments***

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

Management has determined that the Company has one significant operating segment, which is providing a banking platform for 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 unaudited condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The allowance for credit losses ("ACL") is a material estimate that is particularly susceptible to significant change in the near term.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***Changes in Accounting Estimates***

During the first quarter of 2026, the Company enhanced both the quantitative and qualitative components of its ACL estimation process. The Company changed the quantitative component from a discounted cash flow model to a probability of default ("PD") x loss given default ("LGD") x exposure at default ("EAD") based credit loss forecasting model to estimate expected credit losses, which incorporates a two-year reasonable-and-supportable forecast period influenced by multiple economic variables followed by a one-year reversion to long-run assumptions. Prior to the change, the Company forecasted losses over a one-year reasonable-and-supportable forecast period using a single economic variable. In connection with the implementation of this model, the Company enhanced its qualitative framework to better incorporate and align qualitative adjustments with the updated model. The cumulative effect 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 PD 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 logistic 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 PD 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.

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

***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 will not have voting rights, except with respect to certain changes in the terms of the preferred stock, certain dividend non-payments and as otherwise required by applicable law. The Company may redeem the Series A Preferred Stock at its option, (i) in whole or in part, from time to time, on any dividend payment date on or after September 15, 2030 or (ii) in whole but not in part, at any time within 90 days following a regulatory capital treatment event, in either case at a redemption price equal to $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends.

During three months ended March 31, 2026, a cash dividend of $0.52344 per Depositary Share of its Series A Preferred Stock was declared and paid.

***Revision of Previously Issued Financial Statements***

As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, certain immaterial prior-period amounts in the Unaudited Condensed 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.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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 three months ended March 31, 2025** | | | |
| Net gains on sales of loans | $18648 | $(3210) | $15438 |
| Total noninterest income | 25581 | (3210) | 22371 |
| Salaries and employee benefits | $48008 | $(2479) | $45529 |
| Travel expense | 2795 | (731) | 2064 |
| Total noninterest expense | 84017 | (3210) | 80807 |
| **Consolidated statement of cash flows for the three months ended March 31, 2025** |  |  |  |
| Operating activities: |  |  |  |
| Net gains on sale of loans held for sale | $(18648) | $3210 | $(15438) |
| Net cash provided by operating activities | (32977) | 3210 | (29767) |
| Investing activities: |  |  |  |
| Net change in loans and leases | $(410547) | $(3210) | $(413757) |
| Net cash used by investing activities | (461310) | (3210) | (464520) |

---

***Reclassifications***

Certain reclassifications have been made to the prior period's Unaudited Condensed Consolidated Financial Statements to place them on a comparable basis with the current year. Net income and shareholders' equity previously reported were not affected by these reclassifications.

**Note 2. Recent Accounting Pronouncements**

*Accounting Standards Issued But Not Currently Effective*

In November 2024, the FASB issued Accounting Standards Update ("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.

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.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed 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.

**Note 3. 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.

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| **Basic earnings per share:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to common shareholders | $27946 | $9717 |
| Weighted-average basic shares outstanding | 46138609 | 45377965 |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share | $0.61 | $0.21 |
| **Diluted earnings per share:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to common shareholders | $27946 | $9717 |
| Total weighted-average basic shares outstanding | 46138609 | 45377965 |
| &nbsp;&nbsp;&nbsp;&nbsp;Add effect of dilutive stock options and restricted stock grants | 370431 | 376534 |
| Total weighted-average diluted shares outstanding | 46509040 | 45754499 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted earnings per share | $0.60 | $0.21 |
| Anti-dilutive stock options and restricted stock grants | 574708 | 1499126 |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

**Note 4. Investments**

***Available-for-Sale***

The amortized cost, estimated fair value and unrealized gains (losses) are reflected in the following table:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Amortized**<br>**Cost** | **Unrealized**<br>**Gains** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** |
| U.S. government agencies | $20274 | $18 | $38 | $20254 |
| Mortgage-backed securities | 1473438 | 6378 | 68596 | 1411220 |
| Municipal bonds | 3145 |  | 81 | 3064 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1496857 | $6396 | $68715 | $1434538 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>** | **Amortized<br>Cost** | **Unrealized<br>Gains** | **Unrealized<br>Losses** | **Fair<br>Value** |
| U.S. government agencies | $13603 | $27 | $13 | $13617 |
| Mortgage-backed securities | 1469440 | 8327 | 67088 | 1410679 |
| Municipal bonds | 3151 |  | 46 | 3105 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1486194 | $8354 | $67147 | $1427401 |

---

During the three months ended March 31, 2026, ten securities totaling $18.0 million were settled. During the three months ended March 31, 2025, three securities totaling $5.6 million were settled.

Accrued interest receivable on available-for-sale securities totaled $5.2 million and $5.1 million at March 31, 2026 and December 31, 2025, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
| **<u>March 31, 2026</u>** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** |
| U.S. government agencies | $9788 | $23 | $2971 | $15 | $12759 | $38 |
| Mortgage-backed securities | 332876 | 2733 | 641838 | 65863 | 974714 | 68596 |
| Municipal bonds | 707 | 5 | 2357 | 76 | 3064 | 81 |
| &nbsp;&nbsp;&nbsp;Total | $343371 | $2761 | $647166 | $65954 | $990537 | $68715 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
| **<u>December 31, 2025</u>** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** |
| U.S. government agencies | $— | $— | $2970 | $13 | $2970 | $13 |
| Mortgage-backed securities | 120039 | 613 | 709710 | 66475 | 829749 | 67088 |
| Municipal bonds | 3022 | 34 | 83 | 12 | 3105 | 46 |
| &nbsp;&nbsp;&nbsp;Total | $123061 | $647 | $712763 | $66500 | $835824 | $67147 |

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<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

At March 31, 2026, there were 340 mortgage-backed securities, one U.S. government agency and two municipal bonds in unrealized loss positions for greater than 12 months. There were 55 mortgage-backed securities, two U.S. government agencies and one municipal bond in unrealized loss positions for less than 12 months. Unrealized losses at December 31, 2025 were comprised of 357 mortgage-backed securities, one U.S. government agency and one municipal bond 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.

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

All mortgage-backed securities in the Company's portfolio at March 31, 2026 and December 31, 2025 were backed by U.S. government sponsored enterprises ("GSEs").

The following is a summary of investment securities by maturity:

---

| | | |
|:---|:---|:---|
| | **March 31, 2026** | **March 31, 2026** |
| | **Available-for-Sale** | **Available-for-Sale** |
| | **Amortized Cost** | **Fair Value** |
| U.S. government agencies |  |  |
| &nbsp;&nbsp;&nbsp;One to five years | $3463 | $3450 |
| &nbsp;&nbsp;&nbsp;Five to ten years | 16811 | 16804 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 20274 | 20254 |
| Mortgage-backed securities |  |  |
| &nbsp;&nbsp;&nbsp;Within one year | 35542 | 35304 |
| &nbsp;&nbsp;&nbsp;One to five years | 232369 | 225174 |
| &nbsp;&nbsp;&nbsp;Five to ten years | 170883 | 159877 |
| &nbsp;&nbsp;&nbsp;After 10 years | 1034644 | 990865 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1473438 | 1411220 |
| Municipal bonds |  |  |
| &nbsp;&nbsp;&nbsp;Five to ten years | 3050 | 2981 |
| &nbsp;&nbsp;&nbsp;After 10 years | 95 | 83 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 3145 | 3064 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $1496857 | $1434538 |

---

The table above reflects contractual maturities. Actual results will differ as the loans underlying the mortgage-backed securities may prepay sooner than scheduled.

At March 31, 2026, investment securities with a fair value of $540.0 million and amortized cost of $583.5 million were pledged to support unused borrowing capacity. At December 31, 2025, investment securities with a fair value of $565.8 million and amortized cost of $610.1 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 and are included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. The below tables provide additional information related to investments accounted for under these two methods.

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<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

*Equity Method Accounting*

The carrying amount and ownership percentage of each equity method investment at March 31, 2026 and December 31, 2025 is reflected in the following table:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **March 31, 2026** | **March 31, 2026** | **December 31, 2025** | **December 31, 2025** |
| | **Amount** | **Ownership %** | **Amount** | **Ownership %** |
| Canapi Ventures SBIC Fund, LP <sup>(1) (5)</sup> | $11126 | 2.9% | $11250 | 2.9% |
| Canapi Ventures Fund, LP <sup>(2) (5)</sup> | 1356 | 1.5 | 1374 | 1.5 |
| Canapi Ventures Fund II, LP <sup>(3) (5)</sup> | 3479 | 1.6 | 3558 | 1.6 |
| Canapi Ventures SBIC Fund II, LP <sup>(4) (5)</sup> | 2570 | 2.9 | 2625 | 2.9 |
| Affordable housing <sup>(6)</sup> | 13216 | Various | 13457 | Various |
| Solar tax credit investments <sup>(7)</sup> | 3550 | 99.0 | 4203 | 99.0 |
| Other <sup>(8)</sup> | 105 | Various | 231 | Various |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $35402 |  | $36698 |  |

---

(1) Investment unfunded commitments of $4.8 million as of March 31, 2026 and December 31, 2025.

(2) Investment unfunded commitments of $472 thousand as of March 31, 2026 and December 31, 2025.

(3) Investment unfunded commitments of $3.6 million as of March 31, 2026 and December 31, 2025.

(4) Investment unfunded commitments of $4.9 million as of March 31, 2026 and December 31, 2025.

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

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

(7) Solar tax credit investments includes Green Sun Tenant LLC ("Green Sun"), SVA 2021-2 TE Holdco LLC ("Sun Vest"), EG5 CSP1 Holding LLC ("HEP"), and HRE Lessee I, LLC ("Heelstone"), which the Company holds a 99.0% limited member interest in all investments.

(8) 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.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed 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 three months ended March 31, 2026 and 2025 is reflected in the following table:

---

| | | |
|:---|:---|:---|
| | **As of and for the three month period ended** | **As of and for the three month period ended** |
| | **March 31, 2026** | **March 31, 2025** |
| Carrying value <sup>(1)</sup> | $79861 | $83069 |
| Carrying value adjustments: |  |  |
| Impairment |  |  |
| Upward changes for observable prices <sup>(2)</sup> |  |  |
| Downward changes for observable prices |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net upward (downward) change | $— | $— |

---

(1) Investment unfunded commitments of $6.0 million and $5.4 million as of March 31, 2026, and March 31, 2025, respectively.

(2) The equity securities portfolio has recognized cumulative adjustments of $59.3 million over the life of the equity security portfolio as of March 31, 2026.

For the three months ended March 31, 2026, the Company did not recognize any unrealized gains on equity securities held at the reporting date. For the three months ended March 31, 2025, the Company recognized unrealized gains on all equity securities held at the reporting date of $8 thousand.

***Variable Interest Entities ("VIE"s)***

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

*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 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.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

*Non-marketable and Other Equity Investments*

The Company also has limited interests in several non-marketable funds, including Small Business Investment Company ("SBIC"), venture capital funds, and a reciprocal deposit network, all of which are accounted for as equity security investments. For fund 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. The Company's investment in the unconsolidated VIEs are carried in other assets on the Unaudited Condensed Consolidated Balance Sheets.

The Company's maximum exposure to loss from unconsolidated VIEs includes the investment recorded on the Company's Unaudited Condensed Consolidated Balance Sheets and unfunded commitment. For solar tax credit investments, the balance sheet figures are net of any impairment recognized, and includes previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes the potential for loss from these investments is remote, the maximum exposure for solar tax credit investments was determined by assuming a scenario where related tax credits were recaptured.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

The following table provides a summary of the VIEs that the Company has not consolidated as of March 31, 2026 and December 31, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Investment Carrying Amount** | **Maximum Exposure to Loss** | **Liability Recognized** | **Classification** |
| Solar tax credit investments | $3550 | $17634 | $— | Other assets <sup>(1)</sup> |
| Affordable housing | 13216 | 14158 |  | Other assets <sup>(2)</sup> |
| Canapi Funds | 18636 | 32455 |  | Other assets <sup>(3)</sup> |
| Non-marketable and other equity investments | 4580 | 10619 |  | Other assets <sup>(4)</sup> |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>** | **Investment Carrying Amount** | **Maximum Exposure to Loss** | **Liability Recognized** | **Classification** |
| Solar tax credit investments | $4203 | $27644 | $— | Other assets <sup>(5)</sup> |
| Affordable housing | 13457 | 14399 |  | Other assets <sup>(6)</sup> |
| Canapi Funds | 19039 | 32858 |  | Other assets <sup>(7)</sup> |
| Non-marketable and other equity investments | 4872 | 10976 |  | Other assets <sup>(8)</sup> |

---

(1) Maximum exposure to loss includes $3.6 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $14.0 million.

(2) Maximum exposure to loss includes $13.2 million of current investments and a scenario in which $941 thousand in related tax credits are recaptured.

(3) Maximum exposure to loss includes $18.6 million of current investments and $13.8 million in unfunded commitments.

(4) Maximum exposure to loss includes $4.6 million of current investments and $6.0 million in unfunded commitments.

(5) 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.

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

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

(8) Maximum exposure to loss includes $4.9 million of current investments and $6.1 million in unfunded commitments.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

**Note 5. Loans and Leases Held for Investment and Credit Quality**

The following tables present total loans and leases held for investment and an aging analysis for the Company's portfolio segments. 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.

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Current or Less than 30 Days<br>Past Due** | **30-89 Days<br>Past Due** | **30-89 Days<br>Past Due** | **90 Days or More Past Due** | **90 Days or More Past Due** | **Total Past Due** | **Total Past Due** | **Total Carried at Amortized<br>Cost** | **Loans Accounted for Under**<br>**the Fair Value Option** <sup>(1)</sup>  | **Loans Accounted for Under**<br>**the Fair Value Option** <sup>(1)</sup>  | **Total Loans and Leases** |
| **<u>March 31, 2026</u>** | | | | | | | | | | | |
| **Commercial & Industrial** | | | | | | | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 2385254 | $| 29234 | $| 127717 | $| 156951 | 2542205 | $| 79425 | 2621630 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 2997549 | 4298 | 4298 | 38053 | 38053 | 42351 | 42351 | 3039900 | 40011 | 40011 | 3079911 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 5382803 | 33532 | 33532 | 165770 | 165770 | 199302 | 199302 | 5582105 | 119436 | 119436 | 5701541 |
| **Construction & Development** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 705561 | 2072 | 2072 | 2561 | 2561 | 4633 | 4633 | 710194 |  |  | 710194 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 70974 |  |  |  |  |  |  | 70974 |  |  | 70974 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 776535 | 2072 | 2072 | 2561 | 2561 | 4633 | 4633 | 781168 |  |  | 781168 |
| **Commercial Real Estate** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 3474441 | 30573 | 30573 | 90179 | 90179 | 120752 | 120752 | 3595193 | 87717 | 87717 | 3682910 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 1273900 | 7920 | 7920 | 27671 | 27671 | 35591 | 35591 | 1309491 | 13490 | 13490 | 1322981 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 4748341 | 38493 | 38493 | 117850 | 117850 | 156343 | 156343 | 4904684 | 101207 | 101207 | 5005891 |
| **Commercial Land** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 677434 | 2140 | 2140 | 3279 | 3279 | 5419 | 5419 | 682853 | 24297 | 24297 | 707150 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 677434 | 2140 | 2140 | 3279 | 3279 | 5419 | 5419 | 682853 | 24297 | 24297 | 707150 |
| Total | 11585113 | $| 76237 | $| 289460 | $| 365697 | 11950810 | $| 244940 | 12195750 |
| Retained Loan Discount and Net Deferred Costs |  |  |  |  |  |  |  |  |  |  | (37534) |
| Loans and Leases, Net |  |  |  |  |  |  |  |  |  |  | 12158216 |
| Guaranteed Balance | 2972452 | $| 44866 | $| 231802 | $| 276668 | 3249120 | $| 67614 | 3316734 |
| % Guaranteed | 25.7% | 58.9% | 58.9% | 80.1% | 80.1% | 75.7% | 75.7% | 27.2% | 27.6% | 27.6% | 27.2% |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Current or Less than 30 Days<br>Past Due** | **30-89 Days**<br>**Past Due** | **30-89 Days**<br>**Past Due** | **90 Days or More Past Due** | **90 Days or More Past Due** | **Total Past Due** | **Total Past Due** | **Total Carried at Amortized<br>Cost** | **Loans Accounted for Under**<br>**the Fair Value Option** <sup>(1)</sup>  | **Loans Accounted for Under**<br>**the Fair Value Option** <sup>(1)</sup>  | **Total Loans and Leases** |
| **<u>December 31, 2025</u>** | | | | | | | | | | | |
| **Commercial & Industrial** | | | | | | | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 2370184 | $| 23406 | $| 127090 | $| 150496 | 2520680 | $| 87532 | 2608212 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 2833724 | 9 | 9 | 112 | 112 | 121 | 121 | 2954283 | 41 | 41 | 2995115 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 5203908 | 32108 | 32108 | 238947 | 238947 | 271055 | 271055 | 5474963 | 128364 | 128364 | 5603327 |
| **Construction & Development** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 749117 |  |  | 1025 | 1025 | 1025 | 1025 | 750142 |  |  | 750142 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 69538 |  |  |  |  |  |  | 69538 |  |  | 69538 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 818655 |  |  | 1025 | 1025 | 1025 | 1025 | 819680 |  |  | 819680 |
| **Commercial Real Estate** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 3267787 | 12640 | 12640 | 88089 | 88089 | 100729 | 100729 | 3368516 | 91876 | 91876 | 3460392 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 1383615 | 4613 | 4613 | 23257 | 23257 | 27870 | 27870 | 1411485 | 15912 | 15912 | 1427397 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 4651402 | 17253 | 17253 | 111346 | 111346 | 128599 | 128599 | 4780001 | 107788 | 107788 | 4887789 |
| **Commercial Land** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 670725 |  |  | 3840 | 3840 | 3840 | 3840 | 674565 | 24473 | 24473 | 699038 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 670725 |  |  | 3840 | 3840 | 3840 | 3840 | 674565 | 24473 | 24473 | 699038 |
| Total | 11344690 | $| 49361 | $| 355158 | $| 404519 | 11749209 | $| 260625 | 12009834 |
| Retained Loan Discount and Net Deferred Costs |  |  |  |  |  |  |  |  |  |  | (36212) |
| Loans and Leases, Net |  |  |  |  |  |  |  |  |  |  | 11973622 |
| Guaranteed Balance | 2974552 | $| 33597 | $| 301737 | $| 335334 | 3309886 | $| 69445 | 3379331 |
| % Guaranteed | 26.2% | 68.1% | 68.1% | 85.0% | 85.0% | 82.9% | 82.9% | 28.2% | 26.6% | 26.6% | 28.1% |

---

(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 7. Fair Value of Financial Instruments for additional information.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***Credit Quality Indicators***

The following tables present asset quality indicators by portfolio class and origination year. See Note 3. Loans and Leases Held for Investment and Credit Quality in the Company's 2025 Form 10-K for additional discussion around the asset quality indicators that the Company uses to manage and monitor credit risk.

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | | | |
| | **2026** | **2025** | **2024** | **2023** | **2022** | **Prior** |<br>**Revolving Loans<br>Amortized Cost Basis** |<br>**Revolving Loans<br>Converted to Term** |<br>**Total** <sup>(1)</sup> |
| **<u>March 31, 2026</u>** |  |  |  |  |  |  |  |  |  |
| **Small Business Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $321192 | $1625580 | $1213414 | $889433 | $927780 | $1459411 | $168292 | $47640 | $6652742 |
| &nbsp;&nbsp;&nbsp;Special Mention | 300 | 19060 | 71508 | 63721 | 120549 | 129151 | 13045 | 3937 | 421271 |
| &nbsp;&nbsp;&nbsp;Substandard |  | 32542 | 69217 | 82384 | 109558 | 138067 | 22311 | 2353 | 456432 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 321492 | 1677182 | 1354139 | 1035538 | 1157887 | 1726629 | 203648 | 53930 | 7530445 |
| **Commercial Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | 242374 | 1354678 | 766280 | 379858 | 225877 | 194580 | 597731 | 202423 | 3963801 |
| &nbsp;&nbsp;&nbsp;Special Mention |  | 13013 | 63444 | 95976 | 74633 | 42506 | 18844 | 13027 | 321443 |
| &nbsp;&nbsp;&nbsp;Substandard |  | 19207 | 8339 |  | 23581 | 52368 | 21718 | 9908 | 135121 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 242374 | 1386898 | 838063 | 475834 | 324091 | 289454 | 638293 | 225358 | 4420365 |
| Total | $563866 | $3064080 | $2192202 | $1511372 | $1481978 | $2016083 | $841941 | $279288 | $11950810 |
| **Year-To-Date Gross Charge-offs** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Small Business Banking | $— | $1524 | $3993 | $6085 | $1471 | $6179 | $1216 | $254 | $20722 |
| &nbsp;&nbsp;&nbsp;Commercial Banking |  |  |  |  |  | 155 | 1107 |  | 1262 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $— | $1524 | $3993 | $6085 | $1471 | $6334 | $2323 | $254 | $21984 |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | **Term Loans and Leases Amortized Cost Basis by Origination Year** | | | |
| | **2025** | **2024** | **2023** | **2022** | **2021** | **Prior** |<br>**Revolving Loans<br>Amortized Cost Basis** |<br>**Revolving Loans<br>Converted to Term** |<br>**Total** <sup>(1)</sup> |
| **<u>December 31, 2025</u>** |  |  |  |  |  |  |  |  |  |
| **Small Business Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $1513435 | $1245114 | $936083 | $1000904 | $828468 | $738567 | $154210 | $42701 | $6458577 |
| &nbsp;&nbsp;&nbsp;Special Mention | 17102 | 68453 | 64411 | 93132 | 50885 | 80251 | 8763 | 6721 | 389718 |
| &nbsp;&nbsp;&nbsp;Substandard | 30291 | 63432 | 75658 | 115556 | 73330 | 81077 | 23591 | 1768 | 464703 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1560828 | 1376999 | 1076152 | 1209592 | 952683 | 899895 | 186564 | 51190 | 7312997 |
| **Commercial Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | 1434615 | 763382 | 405425 | 248636 | 150616 | 105386 | 581047 | 210917 | 3900024 |
| &nbsp;&nbsp;&nbsp;Special Mention | 18187 | 73787 | 79971 | 79401 | 40071 | 17734 | 12627 | 15743 | 337521 |
| &nbsp;&nbsp;&nbsp;Substandard | 9000 | 5419 |  | 23919 | 107596 | 30552 | 14562 | 6713 | 197761 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1461802 | 842588 | 485396 | 351956 | 298283 | 153672 | 608236 | 233373 | 4435306 |
| Total | $3022630 | $2219587 | $1561548 | $1561548 | $1250966 | $1053567 | $794800 | $284563 | $11749209 |
| **Year-To-Date Gross Charge-offs** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Small Business Banking | $3472 | $5518 | $14763 | $12693 | $5188 | $5453 | $4352 | $2523 | $53962 |
| &nbsp;&nbsp;&nbsp;Commercial Banking |  |  |  | 3386 | 9772 | 171 | 337 | 6547 | 20213 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $3472 | $5518 | $14763 | $16079 | $14960 | $5624 | $4689 | $9070 | $74175 |

---

(1) Excludes $244.9 million and $260.6 million of loans accounted for under the fair value option as of March 31, 2026 and December 31, 2025, respectively.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Loan and Lease**<br>**Balance** <sup>(1)</sup> | **Guaranteed Balance** | **Unguaranteed Balance** | **% Guaranteed** |
| Pass | $10616543 | $2595739 | $8020804 | 24.4% |
| Special Mention | 742714 | 280454 | 462260 | 37.8 |
| Substandard | 591553 | 372928 | 218625 | 63.0 |
| Total | $11950810 | $3249121 | $8701689 | 27.2% |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>** | **Loan and Lease**<br>**Balance** <sup>(1)</sup> | **Guaranteed Balance** | **Unguaranteed Balance** | **% Guaranteed** |
| Pass | $10359506 | $2590030 | $7769476 | 25.0% |
| Special Mention | 727239 | 261506 | 465733 | 36.0 |
| Substandard | 662464 | 458350 | 204114 | 69.2 |
| Total | $11749209 | $3309886 | $8439323 | 28.2% |

---

(1) Excludes $244.9 million and $260.6 million of loans accounted for under the fair value option as of March 31, 2026 and December 31, 2025, respectively.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***Nonaccrual Loans and Leases***

As of March 31, 2026 and December 31, 2025 there were no loans greater than 90 days past due and still accruing. There was no interest income recognized on nonaccrual loans and leases during the three months ended March 31, 2026 and 2025. Accrued interest receivable on loans totaled $83.8 million and $85.0 million at March 31, 2026 and December 31, 2025, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Nonaccrual loans and leases held for investment as of March 31, 2026 and December 31, 2025 are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Loan and Lease**<br>**Balance** <sup>(1)</sup> | **Guaranteed<br>Balance** | **Unguaranteed Balance** | **Unguaranteed<br>Exposure with No ACL** |
| **Commercial & Industrial** | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $190033 | $168255 | $21778 | $13234 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 54641 | 29936 | 24705 | 19378 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 244674 | 198191 | 46483 | 32612 |
| **Construction & Development** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 12915 | 10481 | 2434 | 1042 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 12915 | 10481 | 2434 | 1042 |
| **Commercial Real Estate** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 146514 | 103341 | 43173 | 25483 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 35591 | 11274 | 24317 | 16397 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 182105 | 114615 | 67490 | 41880 |
| **Commercial Land** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 4506 | 4122 | 384 | 145 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 4506 | 4122 | 384 | 145 |
| Total | $444200 | $327409 | $116791 | $75679 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>** | **Loan and Lease Balance** <sup>(1)</sup> | **Guaranteed<br>Balance** | **Unguaranteed Balance** | **Unguaranteed<br>Exposure with No ACL** |
| **Commercial & Industrial** | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $195342 | $169818 | $25524 | $7438 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 122847 | 111103 | 11744 | 2142 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 318189 | 280921 | 37268 | 9580 |
| **Construction & Development** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 13282 | 10620 | 2662 | 1342 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 13282 | 10620 | 2662 | 1342 |
| **Commercial Real Estate** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 127141 | 91099 | 36042 | 17207 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 36098 | 11454 | 24644 | 16417 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 163239 | 102553 | 60686 | 33624 |
| **Commercial Land** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 6447 | 5692 | 755 | 533 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 6447 | 5692 | 755 | 533 |
| Total | $501157 | $399786 | $101371 | $45079 |

---

(1) Excludes loans accounted for under the fair value option. See Note 7. Fair Value of Financial Instruments for additional information.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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:

---

| | | |
|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| | **2026** <sup>(1)</sup> | **2025** <sup>(1)</sup> |
| Commercial & Industrial | $886 | $444 |
| Commercial Real Estate | 392 | 490 |
| Commercial Land | 19 |  |
| Construction & Development | 215 |  |
| &nbsp;&nbsp;Total | $1512 | $934 |

---

(1) Excludes loans accounted for under the fair value option. See Note 7. Fair Value of Financial Instruments for additional information.

The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses, as of March 31, 2026 and December 31, 2025:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Total Collateral-Dependent Loans** | **Total Collateral-Dependent Loans** | **Unguaranteed Portion** | **Unguaranteed Portion** | **Unguaranteed Portion** |
| **<u>March 31, 2026</u>** | **Real Estate** | **Business Assets** | **Real Estate** | **Business Assets** | **Allowance for Credit Losses** |
| **Commercial & Industrial** | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $22421 | $7991 | $6252 | $3476 | $50 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking |  | 22619 |  | 17661 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 22421 | 30610 | 6252 | 21137 | 50 |
| **Construction & Development** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 96 |  | 96 |  | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 96 |  | 96 |  | 11 |
| **Commercial Real Estate** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 112163 |  | 38070 |  | 322 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 27754 | 5098 | 24063 | 314 | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 139917 | 5098 | 62133 | 314 | 329 |
| Total | $162434 | $35708 | $68481 | $21451 | $390 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Total Collateral-Dependent Loans** | **Total Collateral-Dependent Loans** | **Unguaranteed Portion** | **Unguaranteed Portion** | **Unguaranteed Portion** |
| **<u>December 31, 2025</u>** | **Real Estate** | **Business Assets** | **Real Estate** | **Business Assets** | **Allowance for Credit Losses** |
| **Commercial & Industrial** | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $17477 | $4107 | $4937 | $374 | $824 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking |  | 87319 |  | 3744 | 600 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 17477 | 91426 | 4937 | 4118 | 1424 |
| **Construction & Development** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 277 |  | 277 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 277 |  | 277 |  |  |
| **Commercial Real Estate** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 85987 | 1990 | 27813 | 690 | 266 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 20389 |  | 15425 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 106376 | 1990 | 43238 | 690 | 266 |
| Total | $124130 | $93416 | $48452 | $4808 | $1690 |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***Allowance for Credit Losses - Loans and Leases***

See Note 1. Basis of Presentation above for a description of enhancements made to the ACL during the first quarter of 2026 and Note 1. Organization and Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in the Company's 2025 Form 10-K for a description of the methodologies used to estimate the ACL prior to January 1, 2026.

The following table details activity in the ACL by portfolio segment allowance for the periods presented:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Three Months Ended** | **Commercial<br>& Industrial** | **Construction &<br>Development** | **Commercial<br>Real Estate** | **Commercial<br>Land** | **Total** |
| **<u>March 31, 2026</u>** | | | | | |
| Beginning Balance | $144188 | $7224 | $37362 | $3490 | $192264 |
| Charge offs | (18657) | (209) | (3118) |  | (21984) |
| Recoveries | 2971 | 50 | 378 |  | 3399 |
| Provision | 10709 | 409 | 9921 | (1439) | 19600 |
| Ending Balance | $139211 | $7474 | $44543 | $2051 | $193279 |
| **<u>March 31, 2025</u>** |  |  |  |  |  |
| Beginning Balance | $129007 | $4943 | $29501 | $4065 | $167516 |
| Charge offs | (5987) |  | (936) |  | (6923) |
| Recoveries | 40 |  | 91 | 18 | 149 |
| Provision | 26856 | 769 | 1639 | 178 | 29442 |
| Ending Balance | $149916 | $5712 | $30295 | $4261 | $190184 |

---

During the three months ended March 31, 2026, the ACL increased primarily as a result of loan growth and charge off impacts amid a challenging macroeconomic environment, where elevated interest rates and inflationary pressures have placed financial strain on some small business and commercial borrowers. Loss rates are adjusted for multiple two year forecasted economic variables followed by a twelve-month straight-line reversion period.

During the three months ended March 31, 2025, the ACL increased as a result of loan growth amid a challenging macroeconomic environment which included specific reserve changes on individually evaluated loans. Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***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.

The following tables summarize the amortized cost basis of loans that were modified during the three months ended March 31, 2026 and March 31, 2025, respectively:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Three Months Ended March 31, 2026** | **Other-Than-Insignificant <br>Payment Delay** | **Term Extension** | **Interest Rate Reduction** | **Combination - Other-Than-Insignificant Payment Delay & Interest Rate Reduction** | **Combination - Term Extension & Interest Rate Reduction** | **Total Modifications** | **% of Total Class of <br>Financing Receivable** |
| &nbsp;&nbsp;Small Business Banking | $6837 | $13610 | $13127 | $7774 | $1141 | $42489 | 0.56% |
| &nbsp;&nbsp;Commercial Banking | 738 |  |  |  |  | 738 | 0.02 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $7575 | $13610 | $13127 | $7774 | $1141 | $43227 | 0.58% |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Three Months Ended March 31, 2025** | **Term Extension** | **Interest Rate Reduction** | **Combination - Term Extension, Other-Than-Insignificant Payment Delay & Interest Rate Reduction** | **Combination - Term Extension & Other-Than-Insignificant Payment Delay** | **Combination - Term Extension & Interest Rate Reduction** | **Total Modifications** | **% of Total Class of <br>Financing Receivable** |
| &nbsp;&nbsp;Small Business Banking | $3601 | $2243 | $3057 | $3009 | $193 | $12103 | 0.20% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $3601 | $2243 | $3057 | $3009 | $193 | $12103 | 0.20% |

---

As of March 31, 2026, the Company had commitments to lend additional funds to these borrowers totaling $698 thousand. As of March 31, 2025, the Company had commitments to lend additional funds to these borrowers totaling $28 thousand.

The following table presents an aging analysis of loans that were modified within the twelve months ended March 31, 2026 and March 31, 2025, respectively:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Current** | **30-89 Days<br>Past Due** | **90 Days or More Past Due** | **Total Past Due** |
| Small Business Banking | $117347 | $3287 | $390 | $3677 |
| Commercial Banking | 6121 |  |  |  |
| &nbsp;&nbsp;Total | $123468 | $3287 | $390 | $3677 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2025</u>** | **Current** | **30-89 Days<br>Past Due** | **90 Days or More Past Due** | **Total Past Due** |
| Small Business Banking | $17644 | $— | $2243 | $2243 |
| Commercial Banking | 17576 |  |  |  |
| &nbsp;&nbsp;Total | $35220 | $— | $2243 | $2243 |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

---

| | | |
|:---|:---|:---|
| | **Three Months Ended March 31, 2026** | **Three Months Ended March 31, 2026** |
| | **Weighted Average<br>Interest Rate Reduction** | **Weighted Average<br>Term Extension (in Months)** |
| Small Business Banking | 5.99% | 37 |

---

---

| | | |
|:---|:---|:---|
| | **Three Months Ended March 31, 2025** | **Three Months Ended March 31, 2025** |
| | **Weighted Average<br>Interest Rate Reduction** | **Weighted Average<br>Term Extension (in Months)** |
| Small Business Banking | 1.81% | 44 |

---

The following table presents the loans that were modified during the preceding twelve months and subsequently defaulted during the period.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Three Months Ended March 31, 2026** | **Other-Than-Insignificant Payment Delay** | **Term Extension** | **Interest Rate Reduction** | **Total** |
| Small Business Banking | $4997 | $— | $— | $4997 |
| Commercial Banking |  | 2336 |  | 2336 |
| &nbsp;&nbsp;Total | $4997 | $2336 | $— | $7333 |

---

At March 31, 2025, there were no loans that defaulted after being modified during the preceding twelve months.

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 6. Servicing Assets**

Loans serviced for others are not included in the accompanying Unaudited Condensed Consolidated Balance Sheets. The unpaid principal balance of loans serviced for others requiring recognition of a servicing asset was $4.09 billion and $3.96 billion at March 31, 2026 and December 31, 2025, respectively. The unpaid principal balance for all loans serviced for others was $5.94 billion and $5.60 billion at March 31, 2026 and December 31, 2025, respectively.

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

---

| | | |
|:---|:---|:---|
| | **Three Months Ended<br>March 31,** | **Three Months Ended<br>March 31,** |
| | **2026** | **2025** |
| Balance at beginning of period | $62941 | $55788 |
| Additions, net | 5066 | 5624 |
| Fair value changes: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Due to changes in valuation inputs or assumptions | 39 | (1095) |
| &nbsp;&nbsp;&nbsp;&nbsp;Decay due to increases in principal paydowns or runoff | (3526) | (3633) |
| Balance at end of period | $64520 | $56684 |

---

See Note 7. Fair Value of Financial Instruments for further details about servicing assets measured at fair value.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

The fair value of servicing rights was determined using a weighted average discount rate of 12.8% at March 31, 2026 and 13.5% at March 31, 2025. The fair value of servicing rights was determined using a weighted average prepayment speed of 16.6% at March 31, 2026 and 16.0% at March 31, 2025, with the actual rate depending on the stratification of the specific right. Changes to fair value are reported in loan servicing asset revaluation within the Unaudited Condensed Consolidated Statements of Income.

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 March 31, 2026** | **As of December 31, 2025** |
| Fair value of servicing rights | $64520 | $62941 |
|  | **Incremental Increase (Decrease) in Value** | **Incremental Increase (Decrease) in Value** |
| **<u>Prepayment Speed</u>** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;20% increase | ($3960) | ($3794) |
| &nbsp;&nbsp;&nbsp;&nbsp;10% increase | (1928) | (1830) |
| **<u>Discount Rate</u>** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase | (2678) | (2586) |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase | (1248) | (1189) |

---

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the servicing rights is calculated without changing any other assumption. Changes in one factor may result in changes in another.

As of March 31, 2026 and December 31, 2025, the Company had servicing assets related to conventional commercial loans carried at amortized cost of $157 thousand and $214 thousand, respectively.

**Note 7. 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 table below provides a rollforward of the fair value of the Level 3 equity warrant assets:

---

| | | |
|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| **<u>Equity Warrant Assets</u>** | **2026** | **2025** |
| Balance at beginning of period | $1775 | $7162 |
| New equity warrant assets | 118 | 217 |
| Changes in fair value, net | 26 | (304) |
| Settlements | (3) | (40) |
| Balance at end of period | $1916 | $7035 |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Investment securities available-for-sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. government agencies | $20254 | $— | $20254 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 1411220 |  | 1411220 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal bonds <sup>(1)</sup> | 3064 |  | 2981 | 83 |
| Loans held for investment <sup>(2)</sup> | 244940 |  |  | 244940 |
| Servicing assets <sup>(3)</sup> | 64520 |  |  | 64520 |
| Equity warrant assets | 1916 |  |  | 1916 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $1745914 | $— | $1434455 | $311459 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Investment securities available-for-sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. government agencies | $13617 | $— | $13617 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 1410679 |  | 1410679 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal bonds <sup>(1)</sup> | 3105 |  | 3022 | 83 |
| Loans held for investment <sup>(2)</sup> | 260625 |  |  | 260625 |
| Servicing assets <sup>(3)</sup> | 62941 |  |  | 62941 |
| Mutual fund <sup>(4)</sup> | 19 |  | 19 |  |
| Equity warrant assets | 1775 |  |  | 1775 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $1752761 | $— | $1427337 | $325424 |

---

(1) During the three months ended March 31, 2026 and 2025 there were no level 3 fair value adjustment gains or losses.

(2) Loans accounted for under the fair value option.

(3) See Note 6 for a rollforward of recurring Level 3 fair values for servicing assets.

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

For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see Note 10. Fair Value of Financial Instruments in the Company's 2025 Form 10-K.

***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 March 31, 2026 or December 31, 2025. The unpaid principal balance of unguaranteed exposure for nonaccruals was $8.0 million and $8.5 million at March 31, 2026 and December 31, 2025, respectively.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of loans accounted for under the fair value option at March 31, 2026 and December 31, 2025.

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** | **March 31, 2026** |
| | **Total Loans** | **Total Loans** | **Total Loans** | **Nonaccruals** | **Nonaccruals** | **Nonaccruals** | **90 Days or More Past Due** | **90 Days or More Past Due** | **90 Days or More Past Due** |
| | **Fair Value<br>Carrying <br>Amount** | **Unpaid <br>Principal<br>Balance** | **Difference** | **Fair Value<br>Carrying <br>Amount** | **Unpaid <br>Principal<br>Balance** | **Difference** | **Fair Value<br>Carrying <br>Amount** | **Unpaid <br>Principal<br>Balance** | **Difference** |
| **Fair Value Option Elections** | | | | | | | | | |
| &nbsp;&nbsp;Loans held for investment | $244940 | $253668 | $(8728) | $61563 | $62839 | $(1276) | $48109 | $49087 | $(978) |
|  | $244940 | $253668 | $(8728) | $61563 | $62839 | $(1276) | $48109 | $49087 | $(978) |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Total Loans** | **Total Loans** | **Total Loans** | **Nonaccruals** | **Nonaccruals** | **Nonaccruals** | **90 Days or More Past Due** | **90 Days or More Past Due** | **90 Days or More Past Due** |
| | **Fair Value<br>Carrying <br>Amount** | **Unpaid <br>Principal<br>Balance** | **Difference** | **Fair Value<br>Carrying <br>Amount** | **Unpaid <br>Principal<br>Balance** | **Difference** | **Fair Value<br>Carrying <br>Amount** | **Unpaid <br>Principal<br>Balance** | **Difference** |
| **Fair Value Option Elections** | | | | | | | | | |
| &nbsp;&nbsp;Loans held for investment | $260625 | $269851 | $(9226) | $61602 | $62824 | $(1222) | $45784 | $46824 | $(1040) |
|  | $260625 | $269851 | $(9226) | $61602 | $62824 | $(1222) | $45784 | $46824 | $(1040) |

---

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

---

| | | |
|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| **Losses on Loans Accounted for under the Fair Value Option** | **2026** | **2025** |
| Loans held for investment | $(1165) | $(1034) |
|  | $(1165) | $(1034) |

---

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

---

| | | |
|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| **Loans held for investment** | **2026** | **2025** |
| Balance at beginning of period | $260625 | $328746 |
| Repurchases | 2945 | 6252 |
| Fair value changes | (1165) | (1034) |
| Settlements | (17465) | (17157) |
| Balance at end of period | $244940 | $316807 |

---

***Non-Recurring Fair Value***

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.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Collateral-dependent loans | $36054 | $— | $— | $36054 |
| Foreclosed assets | 9550 |  |  | 9550 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $45604 | $— | $— | $45604 |

---

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Collateral-dependent loans | $20619 | $— | $— | $20619 |
| Foreclosed assets | 6877 |  |  | 6877 |
| Equity security investment with a non-readily determinable fair value | 2101 |  |  | 2101 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $29597 | $— | $— | $29597 |

---

For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets that are measured at fair value on a non-recurring basis, see Note 10. Fair Value of Financial Instruments in the Company's 2025 Form 10-K.

***Level 3 Analysis***

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of March 31, 2026 and December 31, 2025, the significant unobservable inputs used in the fair value measurements were as follows:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>**<br>**Level 3 Assets with Significant Unobservable Inputs** | |<br>**Fair Value** |<br>**Valuation Technique** | |<br>**Significant Unobservable Inputs** |<br>**Range** |<br>**Weighted Average** <sup>(1)</sup> |
| ***Recurring fair value*** | | | | | | | |
| Municipal bond |  | $83 | Discounted expected cash flows |  | Discount rate | 7.0% | N/A |
| Municipal bond |  | $83 | Discounted expected cash flows |  | Prepayment speed | 5.0% | N/A |
| Loans held for investment |  | $244940 | Discounted expected cash flows |  | Loss rate | 0.0 % - 5.5% | 1.1% |
| Loans held for investment |  | $244940 | Discounted expected cash flows |  | Discount rate | 6.6 % - 18.0% | 8.8% |
| Loans held for investment |  | $244940 | Discounted expected cash flows |  | Prepayment speed | 16.2 % - 24.1% | 18.2% |
| Loans held for investment | Servicing assets | $244940 | $64520 |  | Discounted expected cash flows | Discount rate | 12.8% |
|  | Servicing assets |  | $64520 | Prepayment speed | Discounted expected cash flows | 12.2 % - 19.1% | 16.6% |
| Equity warrant assets |  | $1916 | Black-Scholes option pricing model |  | Volatility | 13.1 % - 104.4% | 58.4% |
| Equity warrant assets |  | $1916 | Black-Scholes option pricing model |  | Risk-free interest rate | 3.9 % - 4.3% | 4.3% |
| Equity warrant assets |  | $1916 | Black-Scholes option pricing model |  | Marketability discount | 20.0 % - 100.0 %  | 20.4% |
| Equity warrant assets |  | $1916 | Black-Scholes option pricing model |  | Remaining life | 2.3 - 11.8 years | 8.0 years |
| ***Non-recurring fair value*** |  |  |  |  |  |  |  |
| Collateral-dependent loans |  | $36054 | Discounted appraisals |  | Appraisal adjustments <sup>(2)</sup> | 6.1 % - 90.3% | 33.2% |
| Foreclosed assets |  | $9550 | Discounted appraisals |  | Appraisal adjustments <sup>(2)</sup> | 7.1% - 10.0% | 10.0% |

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**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>**<br>**Level 3 Assets with Significant Unobservable Inputs** |<br>**Fair Value** |<br>**Valuation Technique** |<br>**Significant Unobservable Inputs** |<br>**Range** |<br>**Weighted Average** <sup>(1)</sup> |
| ***Recurring fair value*** | | | | | |
| Municipal bond | $83 | Discounted expected cash flows | Discount rate | 7.0% | N/A |
| Municipal bond | $83 | Discounted expected cash flows | Prepayment speed | 5.0% | N/A |
| Loans held for investment | $260625 | Discounted expected cash flows | Loss rate | 0.0% - 4.6% | 1.1% |
| Loans held for investment | $260625 | Discounted expected cash flows | Discount rate | 6.7% - 10.0% | 8.6% |
| Loans held for investment | $260625 | Discounted expected cash flows | Prepayment speed | 15.1% - 21.2% | 17.2% |
| Servicing assets | $62941 | Discounted expected cash flows | Discount rate | 12.8% | 12.8% |
| Servicing assets | $62941 | Discounted expected cash flows | Prepayment speed | 12.0% - 18.8% | 16.2% |
| Equity warrant assets | $1775 | Black-Scholes option pricing model | Volatility | 13.1% - 104.4% | 58.3% |
| Equity warrant assets | $1775 | Black-Scholes option pricing model | Risk-free interest rate | 3.7% - 4.2% | 4.2% |
| Equity warrant assets | $1775 | Black-Scholes option pricing model | Marketability discount | 20.0% - 100.0%  | 20.4% |
| Equity warrant assets | $1775 | Black-Scholes option pricing model | Remaining life | 2.5 - 11.5 years | 8.2 years |
| ***Non-recurring fair value*** |  |  |  |  |  |
| Collateral-dependent loans | $20619 | Discounted appraisals | Appraisal adjustments <sup>(2)</sup> | 10.0% - 82.7% | 39.7% |
| Foreclosed assets | $6877 | Discounted appraisals | Appraisal adjustments <sup>(2)</sup> | 10.0% | 10.0% |
| Equity security investment with a non-readily determinable fair value | $2101 | Market Approach | Revenue Multiple | 3.75 | N/A |

---

(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 the fair value of financial instruments carried at book value on the Unaudited Condensed Consolidated Balance Sheets.

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**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

The carrying amounts and estimated fair values of the Company's financial instruments not measured at fair value on a recurring or non-recurring basis are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **<u>March 31, 2026</u>** | **Carrying** <br>**Amount** | **Quoted Price<br>In Active<br>Markets for<br>Identical Assets/Liabilities<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** | **Total<br>Fair<br>Value** |
| ***Financial assets*** | | | | | |
| &nbsp;&nbsp;&nbsp;Cash and due from banks | $816135 | $816135 | $— | $— | $816135 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit with other banks | 250 | 250 |  |  | 250 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 435313 |  |  | 460878 | 460878 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment, net of allowance for credit losses on loans and leases | 11719997 |  |  | 11548151 | 11548151 |
| ***Financial liabilities*** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 13835058 |  | 13181865 |  | 13181865 |
| &nbsp;&nbsp;&nbsp;Borrowings | 99746 |  |  | 107267 | 107267 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **<u>December 31, 2025</u>** | **Carrying** <br>**Amount** | **Quoted Price<br>In Active<br>Markets for<br>Identical Assets/Liabilities<br>(Level 1)** | **Significant<br>Other<br>Observable<br>Inputs<br>(Level 2)** | **Significant<br>Unobservable<br>Inputs<br>(Level 3)** | **Total<br>Fair<br>Value** |
| ***Financial assets*** | | | | | |
| &nbsp;&nbsp;&nbsp;Cash and due from banks | $864904 | $864904 | $— | $— | $864904 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit with other banks | 250 | 250 |  |  | 250 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 420055 |  |  | 440928 | 440928 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment, net of allowance for credit losses on loans and leases | 11520733 |  |  | 11329479 | 11329479 |
| ***Financial liabilities*** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 13688659 |  | 13096941 |  | 13096941 |
| &nbsp;&nbsp;&nbsp;Borrowings | 102404 |  |  | 110782 | 110782 |

---

**Note 8. Commitments and Contingencies**

***Litigation***

In the normal course of business, the Company is involved in various legal proceedings. Management believes that the outcome of such proceedings will not materially affect the financial position, results of operations or cash flows of the Company.

***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.

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**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

---

| | | |
|:---|:---|:---|
| | **March 31, 2026** | **December 31, 2025** |
| Commitments to extend credit <sup>(1) (2)</sup> | $4419656 | $4099313 |
| Standby letters of credit | 15944 | 51842 |
| Airplane purchase agreement commitments | 48636 | 48636 |
| &nbsp;&nbsp;&nbsp;Total unfunded off-balance-sheet credit risk | $4484236 | $4199791 |

---

(1) Includes unfunded overdraft protection.

(2) Includes $1.65 billion and $1.27 billion at March 31, 2026 and December 31, 2025, 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.

The allowance for off-balance-sheet credit exposures was $16.9 million and $16.4 million at March 31, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026 and 2025, the Company recorded $500 thousand in expense and $478 thousand in recoveries related to the allowance for off-balance-sheet credit exposures, respectively.

***Other Commitments***

See Note 4. Investments for unfunded commitments to provide capital contributions for equity fund investments as of March 31, 2026 and December 31, 2025.

***Concentrations of Credit Risk***

The distribution of commitments to extend credit approximates the distribution of loans outstanding. The Company generally does not have a significant number of credits to any single borrower or group of related borrowers whereby their retained unguaranteed exposure exceeds $20.0 million, except for 77 relationships that have a retained unguaranteed exposure of $3.01 billion of which $2.37 billion of the unguaranteed exposure has been disbursed.

The Company from time-to-time may have cash and cash equivalents on deposit with other financial institutions that exceed federally-insured limits.

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**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

*Geographic Concentration*s

The following table presents the geographic concentration of the Company's loan and lease portfolio at March 31, 2026:

---

| | |
|:---|:---|
| | **% of Total** |
| **Geographic Regions** <sup>(1)</sup> | |
| &nbsp;&nbsp;Midwest | 12.9% |
| &nbsp;&nbsp;Northeast | 18.7 |
| &nbsp;&nbsp;Southeast | 31.0 |
| &nbsp;&nbsp;Southwest | 13.9 |
| &nbsp;&nbsp;West | 23.0 |
| &nbsp;&nbsp;Non-U.S. | 0.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;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 9. Stock 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, the 2015 Omnibus Stock Incentive Plan was amended to authorize awards covering a maximum of 13,750,000 common voting shares. Options or restricted shares granted under the 2015 Omnibus Stock Incentive Plan expire no more than 10 years from date of grant. Exercise prices under the 2015 Omnibus Stock Incentive Plan are set by the Board of Directors at the date of grant but shall not be less than 100% of fair market value of the related stock at the date of the grant. Forfeitures are recognized as they occur.

***Restricted Stock***

Restricted stock awards are authorized in the form of restricted stock awards or units ("RSU"s). RSUs have a restriction based on the passage of time and may also have a restriction based on a non-market-related performance criteria. The fair value of the RSUs is based on the closing price on the date of the grant.

For the three months ended March 31, 2026, 786,525 RSUs were granted with a weighted average grant date fair value of $41.12.

At March 31, 2026, unrecognized compensation costs relating to RSUs amounted to $77.7 million which will be recognized over a weighted average period of 3.68 years.

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**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations**

The following presents management's discussion and analysis of the financial condition and results of operations of Live Oak Bancshares, Inc. (individually, "Bancshares" and collectively with its subsidiaries including Live Oak Banking Company, the "Company"). This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Form 10-K"). Results of operations for the periods included in this quarterly report on Form 10-Q are not necessarily indicative of results to be obtained during any future period.

**Important Note Regarding Forward-Looking Statements**

This quarterly report on Form 10-Q contains statements that management believes are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements generally relate to the financial condition, results of operations, plans, objectives, future performance or business of Live Oak Bancshares, Inc. (the "Company"). They usually can be identified by the use of forward-looking terminology, such as "believes," "expects," or "are expected to," "plans," "projects," "goals," "estimates," "will," "may," "should," "could," "would," "continues," "intends to," "outlook" or "anticipates," or variations of these and similar words, or by discussions of strategies that involve risks and uncertainties. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including but not limited to, those described in this Report. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements management may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information actually known to the Company at the time. Management undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements contained in this Report are based on current expectations, estimates and projections about the Company's business, management's beliefs and assumptions made by management. These statements are not guarantees of the Company's future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. These risks, uncertainties and assumptions include, without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• deterioration in the financial condition of borrowers resulting in significant increases in the Company's provision for credit losses and other adverse impacts to results of operations and financial condition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in Small Business Administration ("SBA") rules, regulations and loan products, including specifically the Section 7(a) program, changes in SBA standard operating procedures or changes to the status of Live Oak Banking Company (the "Bank") as an SBA Preferred Lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture ("USDA");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in interest rates that affect the level and composition of deposits, loan demand and the values of loan collateral, securities, and interest-sensitive assets and liabilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the failure of assumptions underlying the establishment of reserves for possible credit losses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the impacts of any pandemic or public health situation on trade (including supply chains and export levels), travel, employee productivity and other economic activities that may have a destabilizing and negative effect on financial markets, economic activity and customer behavior;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• risks relating to the deployment and use of artificial intelligence by the Company, its customers, and counterparties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a reduction in or the termination of the Company's ability to use the technology-based platform that is critical to the success of the Company's business model, including a failure in or a breach of the Company's operational or security systems or those of its third-party service providers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• risks relating to the material weaknesses we identified in our internal control over financial reporting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• technological risks and developments, including cyber threats, attacks, or events;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in financial market conditions, either internationally, nationally or locally in areas in which the Company conducts operations, including reductions in rates of business formation and growth, demand for the Company's products and services, commercial and residential real estate development and prices, premiums paid in the secondary market for the sale of loans, and valuation of servicing rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in accounting principles, policies, and guidelines applicable to bank holding companies and banking;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• fluctuations in markets for equity, fixed-income, commercial paper and other securities, which could affect availability, market liquidity levels, and pricing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effects of competition from other commercial banks, non-bank lenders, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and mutual funds, and other financial institutions operating in the Company's market area and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone and the Internet;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Company's ability to attract and retain key personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in governmental monetary and fiscal policies as well as other legislative and regulatory changes, including with respect to SBA or USDA lending programs and investment tax credits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in tariffs and trade barriers, including potential changes in U.S. and international trade policies and the resulting impact on the Company and its customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding the debt ceiling and the federal budget;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in political and economic conditions, including any prolonged U.S. government shutdown;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the impact of heightened regulatory scrutiny of financial products and services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Company's ability to comply with any requirements imposed on it by regulators, and the potential negative consequences that may result;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• operational, compliance and other factors, including conditions in local areas in which the Company conducts business such as inclement weather or a reduction in the availability of services or products for which loan proceeds will be used, that could prevent or delay closing and funding loans before they can be sold in the secondary market;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of any mergers, acquisitions or other transactions, to which the Company or the Bank may from time to time be a party, including management's ability to successfully integrate any businesses acquired;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adverse results, including related fees and expenses, from pending or future lawsuits, government investigations or private actions;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other risk factors listed from time to time in reports that the Company files with the U.S. Securities and Exchange Commission, or the SEC, including those described under "Risk Factors" in this Report; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Company's success at managing the risks involved in the foregoing.

Except as otherwise disclosed, forward-looking statements do not reflect: (i) the effect of any acquisitions, divestitures or similar transactions that have not been previously disclosed; (ii) any changes in laws, regulations or regulatory interpretations; or (iii) any change in current dividend or repurchase strategies, in each case after the date as of which such statements are made. All forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update any statement, to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

Amounts in all tables in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") have been presented in thousands, except percentage, time period, stock option, share and per share data or where otherwise indicated.

***Nature of Operations***

Bancshares is a financial holding company and 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 incorporated in February 2008 as a North Carolina-chartered commercial bank. 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 U.S. Small Business Administration ("SBA") under the 7(a) Loan program and the U.S. Department of Agriculture ("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 March 31, 2026, 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 the SBA 7(a) loan programs and USDA guaranteed loans. The Grove provides Company employees and business visitors with on-site dining at the Company's Wilmington, North Carolina headquarters. Live Oak Ventures' purpose is investing in businesses that align with the Company's strategic initiative to be a leader in financial technology. During the fourth quarter of 2024, Live Oak Ventures consolidated its investment in Synply, Inc. ("Synply") as a result of its controlling interest in that entity. Synply is a cloud-based technology platform designed to simplify the loan syndication process for financial institutions. The non-controlling interest in Synply is disclosed according to the Company's consolidation policy.

As of March 31, 2026, the Bank's wholly owned subsidiaries were 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.

The Company generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. Income from the retention of loans consists principally of interest income. Income from the sale of loans is comprised of loan servicing revenue and revaluation of related servicing assets along with net gains on sales of loans. Offsetting these revenues are the cost of funding sources, provision for credit losses, any costs related to foreclosed assets and other operating costs such as salaries and employee benefits, travel, professional services, advertising and marketing and tax expense. The Company also has less routinely generated gains and losses arising from its financial technology investments.

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**Results of Operations**

***Performance Summary***

*Three months ended March 31, 2026 compared with three months ended March 31, 2025*

For the three months ended March 31, 2026, the Company reported net income attributable to common shareholders of $27.9 million, or $0.60 per diluted share, compared to net income attributable to common shareholders of $9.7 million, or $0.21 per diluted share, for the three months ended March 31, 2025.

The increase in net income was principally due to the following items:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Increased net interest income of $18.9 million, or 18.8%;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Provision for credit losses decreased by $8.9 million, or 30.6%, to $20.1 million, compared to $29.0 million for the first quarter of 2025;

Key factors largely offsetting the increase in net income are increased levels of salaries and employee benefits of $3.8 million and income tax expense of $6.7 million.

***Net Interest Income and Margin***

Net interest income represents the difference between the income that the Company earns on interest-earning assets and the cost of interest-bearing liabilities. The Company's net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rates that the Company earns or pays on them, respectively. Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as "volume changes." It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as "rate changes." As a bank without a branch network, the Bank gathers deposits over the Internet and in the community in which it is headquartered. Due to the nature of a branchless bank and the relatively low overhead required for deposit gathering, the rates that the Bank offers are generally above the industry average.

*Three months ended March 31, 2026 compared with three months ended March 31, 2025*

For the three months ended March 31, 2026, net interest income increased $18.9 million, or 18.8%, to $119.4 million compared to $100.5 million for the three months ended March 31, 2025. This increase was principally due to the growth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities, offset by the decrease in average yield on interest-earning assets outpacing the decrease in average cost of funds. Average interest-earning assets increased by $2.06 billion, or 16.1%, to $14.82 billion for the first quarter of 2026, compared to $12.76 billion for the first quarter of 2025, while the yield on average interest-earning assets decreased 37 basis points to 6.40%. The cost of funds on interest-bearing liabilities for the first quarter of 2026 decreased 42 basis points to 3.48% and the average balance of interest-bearing liabilities increased by $1.63 billion, or 13.9%, over the first quarter of 2025.

The increase in average interest-bearing liabilities was largely driven by funding for significant loan originations and growth as well as maintenance of the Company's target liquidity profile. As indicated in the rate/volume analysis below, the overall increase discussed above is reflected in increased interest income of $20.8 million outpacing growth in interest expense of $1.9 million for the first quarter of 2026 compared to the first quarter of 2025. The net interest margin increased from 3.20% for the first quarter of 2025 to 3.27% for the first quarter of 2026.

In March 2026, the Federal Reserve decided to maintain the federal funds upper target rate at 3.75%. The Federal Reserve released its most current federal funds target rate midpoint projections at its previous meeting in March 2026 which implied a decrease of approximately 25 basis points to 3.4% by the end of 2026 and a decrease of approximately 25 basis points to 3.1% by the end of 2027. There can be no assurance that any further decreases or increases in the Federal Funds rate will occur, and if they do, the amount and timing of actual adjustments are subject to change. See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for information about the Company's sensitivity to interest rates.

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*Average Balances and Yields.* The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amount of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented and annualizing that result. Loan fees are included in interest income on loans.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| | **2026** | **2026** | **2026** | **2025** | **2025** | **2025** |
| | **Average<br>Balance** | **Interest** | **Average<br>Yield/Rate** | **Average**<br>**Balance** | **Interest** | **Average<br>Yield/Rate** |
| **Interest-earning assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest-earning balances in other banks | $729938 | $6726 | 3.74% | $581267 | $6400 | 4.47% |
| &nbsp;&nbsp;&nbsp;Investment securities | 1492023 | 13009 | 3.54 | 1379797 | 11089 | 3.26 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 514501 | 9792 | 7.72 | 407953 | 8612 | 8.56 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment <sup>(1)</sup> | 12081396 | 204337 | 6.86 | 10388872 | 187004 | 7.30 |
| Total interest-earning assets | 14817858 | 233864 | 6.40 | 12757889 | 213105 | 6.77 |
| Less: Allowance for credit losses on loans and leases | (190522) |  |  | (165320) |  |  |
| Noninterest-earning assets | 547970 |  |  | 534133 |  |  |
| Total assets | $15175306 |  |  | $13126702 |  |  |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Savings | $6910397 | $55420 | 3.25% | $5540147 | $51604 | 3.78% |
| &nbsp;&nbsp;&nbsp;Certificates of deposit | 5730803 | 53337 | 3.77 | 5563004 | 55235 | 4.03 |
| &nbsp;&nbsp;&nbsp;Other interest-bearing deposits | 579330 | 4090 | 2.86 | 478399 | 4049 | 3.43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 13220530 | 112847 | 3.46 | 11581550 | 110888 | 3.88 |
| &nbsp;&nbsp;&nbsp;Borrowings | 103329 | 1617 | 6.35 | 111919 | 1685 | 6.11 |
| Total interest-bearing liabilities | 13323859 | 114464 | 3.48 | 11693469 | 112573 | 3.90 |
| Noninterest-bearing deposits | 491301 |  |  | 342482 |  |  |
| Noninterest-bearing liabilities | 69596 |  |  | 58739 |  |  |
| Shareholders' equity | 1286313 |  |  | 1027547 |  |  |
| Non-controlling interest | 4237 |  |  | 4465 |  |  |
| &nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $15175306 |  |  | $13126702 |  |  |
| Net interest income and interest rate spread |  | $119400 | 2.92% |  | $100532 | 2.87% |
| Net interest margin |  |  | 3.27% |  |  | 3.20% |
| Ratio of average interest-earning assets to average interest-bearing liabilities |  |  | 111.21% |  |  | 109.10% |

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(1) Average loan and lease balances include non-accruing loans and leases.

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*Rate/Volume Analysis.* The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, increases or decreases attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

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| | | | |
|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **Three Months Ended March 31,** |
| | **2026 vs. 2025** | **2026 vs. 2025** | **2026 vs. 2025** |
| | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** |
| | **Rate** | **Volume** | **Total** |
| **Interest income:** | | | |
| &nbsp;&nbsp;&nbsp;Interest-earning balances in other banks | $(1177) | $1503 | $326 |
| &nbsp;&nbsp;&nbsp;Investment securities | 980 | 940 | 1920 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | (959) | 2139 | 1180 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment | (12213) | 29546 | 17333 |
| &nbsp;&nbsp;&nbsp;Total interest income | (13369) | 34128 | 20759 |
| **Interest expense:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Savings | $(8061) | $11877 | $3816 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit | (3512) | 1614 | (1898) |
| &nbsp;&nbsp;&nbsp;Other interest-bearing deposits | (742) | 783 | 41 |
| &nbsp;&nbsp;&nbsp;Borrowings | 64 | (132) | (68) |
| &nbsp;&nbsp;&nbsp;Total interest expense | (12251) | 14142 | 1891 |
| Net interest income | $(1118) | $19986 | $18868 |

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***Provision for Credit Losses***

The provision for credit losses represents the amount necessary to be charged against the current period's earnings to maintain the allowance for credit losses ("ACL") on loans and leases at a level that the Company believes is appropriate in relation to the estimated losses inherent in the loan and lease portfolio. Expense related to off-balance sheet credit exposures is also included in the provision for credit losses. See Note 8. Commitments and Contingencies under the subheading *Financial Instruments with Off-Balance-Sheet Risk* for additional information*.* 

Losses inherent in loan relationships are mitigated if a portion of the loan is guaranteed by the SBA or USDA. Typical SBA 7(a) and USDA guarantees range from 50% to 90% depending on loan size and type, which serve to reduce the risk profile of these loans. The Company believes that its focus on compliance with regulations and guidance from the SBA and USDA are key factors to managing this risk.

For the first quarter of 2026, there was a provision for credit losses of $20.1 million compared to $29.0 million for the same period in 2025, a decrease of $8.9 million. The decrease over the first quarter of 2025 was primarily driven by lower levels of specific reserves required on individually evaluated loans in the first quarter of 2026.

Loans and leases held for investment at historical cost were $11.91 billion as of March 31, 2026, increasing by $1.54 billion, or 14.8%, compared to March 31, 2025.

Net charge-offs for loans and leases carried at historical cost were$18.6 million, or 0.63% of average quarterly loans and leases held for investment, carried at historical cost, on an annualized basis, for the three months ended March 31, 2026, compared to net charge-offs of $6.8 million, or 0.27%, for the three months ended March 31, 2025, an increase of $11.8 million, or 174.4%. The increase in net charge-offs in the first quarter of 2026 was largely concentrated to individually evaluated loans with specific reserves recorded in prior periods. Net charge-offs are a key element of historical experience in the Company's estimation of the allowance for credit losses on loans and leases.

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In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $6.9 million and $9.9 million accounted for under the fair value option at March 31, 2026 and 2025, respectively, totaled $116.8 million, which was 0.98% of the held for investment loan and lease portfolio carried at historical cost at March 31, 2026, compared to $99.9 million, or 0.96% of loans and leases held for investment carried at historical cost at March 31, 2025.

***Noninterest Income***

Noninterest income is principally comprised of net gains from the sale of SBA and USDA-guaranteed loans along with loan servicing revenue and related revaluation of the servicing asset. Revenue from the sale of loans depends upon the volume, maturity structure and rates of underlying loans as well as the pricing and availability of funds in the secondary markets prevailing in the period between completed loan funding and closing of sale. In addition, the loan servicing revaluation is significantly impacted by changes in market rates and other underlying assumptions such as prepayment speeds and default rates. Net loss on loans accounted for under the fair value option is also significantly impacted by changes in market rates, prepayment speeds and inherent credit risk. Other less consistent elements of noninterest income include gains and losses on investments.

The following table shows the components of noninterest income and the dollar and percentage changes for the periods presented.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **2026/2025 Increase (Decrease)** | **2026/2025 Increase (Decrease)** |
| | **2026** | **2025** | **Amount** | **Percent** |
| ***Noninterest income*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | $9094 | $8298 | $796 | 9.6% |
| &nbsp;&nbsp;&nbsp;Loan servicing asset revaluation | (3487) | (4728) | 1241 | 26.2 |
| &nbsp;&nbsp;&nbsp;Net gains on sales of loans | 15425 | 15438 | (13) | (0.1) |
| &nbsp;&nbsp;&nbsp;Net loss on loans accounted for under the fair value option | (1165) | (1034) | (131) | (12.7) |
| &nbsp;&nbsp;&nbsp;Equity method investments (loss) income | (817) | (2239) | 1422 | 63.5 |
| &nbsp;&nbsp;&nbsp;Equity security investments gains, net |  | 20 | (20) | (100.0) |
| &nbsp;&nbsp;&nbsp;Lease income | 2135 | 2573 | (438) | (17.0) |
| &nbsp;&nbsp;&nbsp;Other noninterest income | 4889 | 4043 | 846 | 20.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $26074 | $22371 | $3703 | 16.6% |

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For the three months ended March 31, 2026, noninterest income increased by $3.7 million, or 16.6%, compared to the three months ended March 31, 2025. Principal changes when compared with the first quarter of 2025 are a $1.2 million decrease in loss related to the servicing asset revaluation combined with a $1.4 million decrease in equity method investment losses, principally associated with cessation of flow-through losses from Apiture, Inc. which was sold in the fourth quarter of 2025.

The following tables reflects loan and lease production, sales of guaranteed loans and the aggregate balance in guaranteed loans sold. These components are key drivers of the Company's noninterest income.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **For years ended December 31,** | **For years ended December 31,** | **For years ended December 31,** | **For years ended December 31,** |
| | **2026** | **2025** | **2025** | **2024** | **2023** | **2022** |
| Amount of loans and leases originated | $1368311 | $1396223 | $6209639 | $5155244 | $3946873 | $4007621 |
| Guaranteed portions of loans sold | 275488 | 266275 | 1182871 | 980973 | 877551 | 580889 |
| Outstanding balance of guaranteed loans sold <sup>(1)</sup> | 4018059 | 3486533 | 3897790 | 3379477 | 2986959 | 2668110 |

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(1) This represents the outstanding principal balance of guaranteed loans serviced, as of the last day of the applicable period, which have been sold into the secondary market.

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*Change in Loan Servicing Asset Revaluation:* The Company revalues its serviced loan portfolio at least quarterly. 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 prepayment speed and discount rate being the most sensitive assumptions. For the three months ended March 31, 2026, there was a net loss on loan servicing asset revaluation of $3.5 million, compared to a net loss of $4.7 million for the three months ended March 31, 2025. The positive change in valuation of the servicing asset compared to the first quarter of 2025 was principally the result of improved market conditions in 2026.

***Noninterest Expense***

Noninterest expense comprises all operating costs of the Company, such as employee related costs, travel, professional services, advertising and marketing expenses, exclusive of interest and income tax expense.

The following table shows the components of noninterest expense and the related dollar and percentage changes for the periods presented.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended March 31,** | **Three Months Ended March 31,** | **2026/2025 Increase (Decrease)** | **2026/2025 Increase (Decrease)** |
| | **2026** | **2025** | **Amount** | **Percent** |
| **Noninterest expense** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | $49354 | $45529 | $3825 | 8.4% |
| &nbsp;&nbsp;&nbsp;Non-employee expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Travel expense | 1463 | 2064 | (601) | (29.1) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional services expense | 2516 | 3024 | (508) | (16.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising and marketing expense | 3051 | 3665 | (614) | (16.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Occupancy expense | 2410 | 2737 | (327) | (11.9) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technology expense | 9749 | 9251 | 498 | 5.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equipment expense | 3693 | 3745 | (52) | (1.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other loan origination and maintenance expense | 5919 | 4585 | 1334 | 29.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FDIC insurance | 4401 | 3551 | 850 | 23.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense | 2737 | 2656 | 81 | 3.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-employee expenses | 35939 | 35278 | 661 | 1.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | $85293 | $80807 | $4486 | 5.6% |

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Total noninterest expense for the three months ended March 31, 2026, increased $4.5 million, or 5.6%, compared to the same period in 2025. The changes within noninterest expense for the comparable three month periods was largely driven by components, discussed below.

*Salaries and employee benefits:* Total personnel expense for the three months ended March 31, 2026 increased by $3.8 million, or 8.4%, compared to the same period in 2025. The increase over the first three months of 2025 is principally related to investment in human resources to support strategic and growth initiatives. Salaries and employee benefits expense included $6.9 million of stock-based compensation for the three months ended March 31, 2026, compared to $6.8 million for the three months ended March 30, 2025, respectively. Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation.

*Other loan origination and maintenance expense*: For the three months ended March 31, 2026, other loan origination and maintenance expense increased $1.3 million, or 29.1%, compared to the same period in 2025. This increase was primarily related to maintenance of the Company's ongoing growth in the guaranteed loan portfolio.

***Income Tax Expense***

For the three months ended March 31, 2026, income tax expense was $10.1 million compared to income tax expense of $3.5 million in the first quarter of 2025, and the Company's effective tax rates were 25.3% and 26.4%, respectively. The higher level of income tax expense for the first quarter of 2026 as compared to the first quarter of 2025 was largely the result of heightened pretax income during the current period.

**Discussion and Analysis of Financial Condition**

*March 31, 2026 vs. December 31, 2025* 

Total assets at March 31, 2026 were $15.30 billion, an increase of $165.3 million, or 1.1%, compared to total assets of $15.13 billion at December 31, 2025. The growth in total assets was principally driven by total loans and leases held for investment and held for sale increasing by $199.9 million, or 1.6%, in 2026, from $12.39 billion at December 31, 2025 to $12.59 billion at March 31, 2026. This growth was a result of strong origination activity during the first quarter of 2026 of $1.37 billion.

Total deposits were $13.84 billion at March 31, 2026, an increase of $146.4 million, or 1.1%, from $13.69 billion at December 31, 2025. The increase in total deposits from the prior period was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels. At March 31, 2026, the Bank's total uninsured deposits were approximately $2.38 billion, or 17.0%, of total deposits.

Total shareholders' equity was $1.28 billion at March 31, 2026, an increase of $27.7 million, or 2.2%, from $1.25 billion at December 31, 2025. The increase in total shareholders' equity from the prior period was largely due to net income of $29.9 million combined with net share-based compensation activity of $3.9 million, offset by other comprehensive loss of $2.7 million and cash dividends of $2.1 million and $1.4 million related to preferred and common stock shares, respectively.

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**Commercial Real Estate**

Commercial real estate loans as indicated by the FDIC include loans secured by the following: construction, land development, multifamily property and nonfarm, nonresidential real property. The following table provides information with respect to commercial real estate loans as of March 31, 2026.

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| | | | |
|:---|:---|:---|:---|
| | **Guaranteed** | **Unguaranteed** | **Total** <sup>(1)</sup> |
| **Held for Investment Loans:** | | | |
| **Owner Occupied** | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $1439769 | $1367304 | $2807073 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 17992 | 58493 | 76485 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **1457761** | **1425797** | **2883558** |
| **Non-Owner Occupied** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 475678 | 898979 | 1374657 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 17358 | 1300668 | 1318026 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **493036** | **2199647** | **2692683** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Held for Investment Commercial Real Estate** | $**1950797** | $**3625444** | $**5576241** |
| **Held for Sale Loans:** |  |  |  |
| **Owner Occupied** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $90714 | $— | $90714 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **90714** | **—** | **90714** |
| **Non-Owner Occupied** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 171445 |  | 171445 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **171445** | **—** | **171445** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Held for Sale Commercial Real Estate** | $**262159** | $**—** | $**262159** |
| **Total Commercial Real Estate Loans** | $**2212956** | $**3625444** | $**5838400** |
| **% of Total Commercial Real Estate Loans** | **37.9%** | **62.1%** | **100.0%** |

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(1)Excludes retained loan discount and net deferred costs.

**Asset Quality**

Management considers asset quality to be of primary importance. A formal loan review function, independent of loan origination, is used to identify and monitor problem loans. This function reports directly to the Risk Committee of the Board of Directors.

*Nonperforming Assets*

The Bank places loans and leases on nonaccrual status when they become 90 days past due as to principal or interest payments, or prior to that if management has determined based upon current information available to them that the timely collection of principal or interest is not probable. When a loan or lease is placed on nonaccrual status, any interest previously accrued as income but not actually collected is reversed and recorded as a reduction of loan or lease interest and fee income. Typically, collections of interest and principal received on a nonaccrual loan or lease are applied to the outstanding principal as determined at the time of collection of the loan or lease.

Total nonperforming assets, including loans measured at fair value, at March 31, 2026 were $519.0 million, which represented a $53.1 million, or 9.3%, decrease from December 31, 2025. These nonperforming assets at March 31, 2026 were comprised of $507.0 million in nonaccrual loans and leases and $12.0 million in foreclosed assets. Of the $519.0 million of nonperforming assets, $391.0 million carried a government guarantee, leaving an unguaranteed exposure of $128.0 million in total nonperforming assets at March 31, 2026. This represents an increase of $16.8 million, or 15.1%, from an unguaranteed exposure of $111.2 million at December 31, 2025.

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The following table provides information with respect to nonperforming assets, excluding loans measured at fair value, at the dates indicated.

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| | | |
|:---|:---|:---|
| | **March 31, 2026** <sup>(1)</sup> | **December 31, 2025** <sup>(1)</sup> |
| Nonaccrual loans and leases: |  |  |
| Total nonperforming loans and leases (all on nonaccrual) | $444200 | $501157 |
| Foreclosed assets | 12005 | 8208 |
| **Total nonperforming assets** | $**456205** | $**509365** |
| **Allowance for credit losses on loans and leases** | $**193279** | $**192264** |
| Total nonperforming loans and leases to total loans and leases held for investment | 3.73% | 4.28% |
| Total nonperforming loans and leases to total assets | 2.95% | 3.37% |
| Allowance for credit losses on loans and leases to loans and leases held for investment | 1.62% | 1.64% |
| Allowance for credit losses on loans and leases to total nonperforming loans and leases | 43.51% | 38.36% |
| **Nonaccrual loans and leases guaranteed by U.S. government:** |  |  |
| Total nonperforming loans and leases guaranteed by the U.S government (all on nonaccrual) | $327409 | $399786 |
| Foreclosed assets guaranteed by the U.S. government | 8684 | 6798 |
| **Total nonperforming assets guaranteed by the U.S. government** | $**336093** | $**406584** |
| **Allowance for credit losses on loans and leases** | $**193279** | $**192264** |
| Total nonperforming loans and leases not guaranteed by the U.S. government to total held for investment loans and leases | 0.98% | 0.87% |
| Total nonperforming loans and leases not guaranteed by the U.S. government to total assets | 0.78% | 0.68% |
| Allowance for credit losses on loans and leases to total nonperforming loans and leases not guaranteed by the U.S. government | 165.49% | 189.66% |

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(1) Excludes loans measured at fair value.

Nonperforming assets, excluding loans measured at fair value, at March 31, 2026 were $456.2 million, which represented a $53.2 million, or 10.4%, decrease from December 31, 2025. These nonperforming assets at March 31, 2026 were comprised of $444.2 million in nonaccrual loans and leases and $12.0 million in foreclosed assets. Of the $456.2 million of nonperforming assets, $336.1 million carried a government guarantee, leaving an unguaranteed exposure of $120.1 million in total nonperforming assets at March 31, 2026. This represents an increase of $17.3 million, or 16.9%, from an unguaranteed exposure of $102.8 million at December 31, 2025.

See the below discussion related to the change in potential problem and individually evaluated loans and leases for management's overall observations regarding growth in total nonperforming loans and leases.

As a percentage of the Bank's total capital, nonperforming loans and leases, excluding loans measured at fair value, represented 33.6% at March 31, 2026, compared to 39.0% at December 31, 2025. Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management's belief that the greater magnitude of risk resides in this portion, the ratios at March 31, 2026 and December 31, 2025 were 8.8% and 7.9%, respectively.

As of March 31, 2026, and December 31, 2025, potential problem (also referred to as criticized or Risk Grade 50) and classified loans and leases, excluding loans measured at fair value, totaled $1.33 billion and $1.39 billion, respectively. The following is a discussion of these loans and leases. Risk Grades 50 through 80 represent the spectrum of criticized and classified loans and leases. For a complete description of the risk grading system, see "Credit Quality Indicators" in Note 3 in the notes to consolidated financial statements in the Company's 2025 Form 10-K. At March 31, 2026, the portion of criticized and classified loans and leases guaranteed by the SBA or USDA totaled $653.4 million and total portfolio unguaranteed exposure risk was $680.8 million, or 7.9% of total held for investment unguaranteed exposure carried at historical cost. This compares to the December 31, 2025 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled $669.8 million and total portfolio unguaranteed exposure risk was $719.9 million, or 8.6% of total held for investment unguaranteed exposure carried at historical cost.

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As of March 31, 2026 and December 31, 2025, loans and leases carried at historical cost within the following verticals comprise the largest portion of the total potential problem and classified loans and leases:

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| | | | |
|:---|:---|:---|:---|
| **As of March 31, 2026** | **As of March 31, 2026** | **As of December 31, 2025** | **As of December 31, 2025** |
| **Vertical** | **% of Criticized and Classified Loans and Leases** | **Vertical** | **% of Criticized and Classified Loans and Leases** |
| &nbsp;&nbsp;General Lending | 12.3% | &nbsp;&nbsp;General Lending | 11.8% |
| &nbsp;&nbsp;Solar Energy | 8.0 | &nbsp;&nbsp;Solar Energy | 7.5 |
| &nbsp;&nbsp;Sponsor Finance | 7.6 | &nbsp;&nbsp;Senior Housing | 6.1 |
| &nbsp;&nbsp;Auto Care & Auto Dealerships | 6.4 | &nbsp;&nbsp;Bioenergy | 6.1 |
| &nbsp;&nbsp;Self Storage | 6.3 | &nbsp;&nbsp;Sponsor Finance | 6.1 |
| &nbsp;&nbsp;Healthcare | 5.6 | &nbsp;&nbsp;Auto Care + Auto Dealerships | 5.9 |
| &nbsp;&nbsp;Senior Housing | 4.9 | &nbsp;&nbsp;Healthcare | 5.4 |
| &nbsp;&nbsp;Wine & Craft Beverages | 4.9 | &nbsp;&nbsp;Self Storage | 5.4 |
| &nbsp;&nbsp;RV Parks | 4.2 | &nbsp;&nbsp;RV Parks | 4.0 |
| &nbsp;&nbsp;% of Total Criticized and Classified Loans | 60.2% | &nbsp;&nbsp;% of Total Criticized and Classified Loans | 58.3% |

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Of the above listed verticals, Senior Housing, Sponsor Finance, Bioenergy, and Solar Energy are within the Company's Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division. The total $55.4 million decrease in potential problem and classified loans and leases in the first three months of 2026 was comprised of $15.5 million in increased levels of Risk Grade 50 loans and leases, as discussed below and $70.9 million in decreased levels of classified loans. The overall decrease in classified loans in the first quarter of 2026 was primarily driven by one $84.9 million Renewable Energy relationship that was moved out of loans resulting in no losses in the quarter due to the combination of a sale and related government guarantee. The remainder of the change (increase) is due to isolated borrower-specific credit migrations, including movement of several larger individual exposures and isolated industries into classified status based on performance trends identified through ongoing credit reviews. These changes largely reflect the effects of normal growth and isolated borrower performance migrations rather than any systemic credit deterioration. The Company believes that its underwriting and credit quality standards have remained high and continues to consider changing economic conditions as well as the current interest rate environment.

Loans and leases that experience insignificant payment delays and payment shortfalls are generally not individually evaluated for the purpose of estimating the allowance for credit losses. The Bank generally considers an "insignificant period of time" from payment delays to be a period of 90 days or less. The Bank would consider a modification for a customer experiencing what is expected to be a short-term event that has temporarily impacted cash flow. This could be due, among other reasons, to illness, weather, impact from a one-time expense, slower than expected start-up, construction issues or other short-term issues. Credit personnel will review the request to determine if the customer is experiencing financial stress and how the event has impacted the ability of the customer to repay the loan or lease long term. At March 31, 2026, the Company had a total of $43.2 million in loans modified in 2026 to borrowers experiencing financial difficulty, excluding loans measured at fair value, $42.8 million of which remained current and $30.1 million of which are for an other-than-insignificant payment delay or term extension.

Management endeavors to be proactive in its approach to identify and resolve problem loans and leases and is focused on working with the borrowers and guarantors of these loans and leases to provide loan and lease modifications when warranted. Management implements a proactive approach to identifying and classifying loans and leases as special mention (also referred to as criticized), Risk Grade 50. At March 31, 2026, and December 31, 2025, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $742.7 million and $727.2 million, respectively, for an increase of $15.5 million. Relative to total held for investment unguaranteed exposure carried at historical cost at December 31, 2025 and March 31, 2026, unguaranteed Risk Grade 50 loans and leases decreased from $465.7 million, or 5.5%, to $462.3 million, or 5.3%, respectively.

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The largest year-to-date changes in Risk Grade 50 loans and leases carried at historical cost were within the following verticals:

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| | |
|:---|:---|
| **March 31, 2026 vs. December 31, 2025 Increase (Decrease)** | **March 31, 2026 vs. December 31, 2025 Increase (Decrease)** |
| **Vertical** | $**%** |
| &nbsp;&nbsp;Sponsor Finance | 86.7% |
| &nbsp;&nbsp;Auto Care & Auto Dealerships | 82.1 |
| &nbsp;&nbsp;Hotels | 77.2 |
| &nbsp;&nbsp;Wine and Craft Beverages | 68.8 |
| &nbsp;&nbsp;Service Contractors | 52.7 |
| &nbsp;&nbsp;Agriculture | 39.9 |
| &nbsp;&nbsp;Educational Services | 34.5 |
| &nbsp;&nbsp;Veterinary | 33.8 |
| &nbsp;&nbsp;Care Services | 31.7 |
| &nbsp;&nbsp;RV Parks | (54.6) |
| &nbsp;&nbsp;Sponsor Search | (84.6) |
| &nbsp;&nbsp;Senior Housing | (124.9) |
| &nbsp;&nbsp;Government Contractors | (178.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total of largest changes in Risk Grade 50 loans and leases | 64.9% |

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The change in Risk Grade 50 loans and leases, exclusive of loans measured at fair value, during the first three months of 2026 was principally confined to 13 verticals, as reflected above. Of the above listed verticals Sponsor Finance, Government Contractors, Senior Housing and Hotels are within the Company's Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division.

At March 31, 2026, approximately 99.6% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days. While the level of nonperforming assets fluctuates in response to changing economic and market conditions, in light of the relative size and composition of the loan and lease portfolio and management's degree of success in resolving problem assets, management believes that a proactive approach to early identification and intervention is critical to successfully managing a small business loan portfolio.

*Allowance for Credit Losses on Loans and Leases*

The ACL of $192.3 million at December 31, 2025, increased by $1.0 million, or 0.5%, to $193.3 million at March 31, 2026. The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.6% at both December 31, 2025 and March 31, 2026. The increase in the ACL during the first three months of 2026 was primarily the result of loan growth and charge off impacts amid a challenging macroeconomic environment, where elevated interest rates and inflationary pressures have placed financial strain on some small business and commercial borrowers. See also the above section captioned "Provision for Credit Losses" in "Results of Operations" for related information.

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Actual past due held for investment loans and leases, inclusive of loans measured at fair value, have decreased by $40.2 million since December 31, 2025. Total loans and leases 90 or more days past due decreased $63.4 million, or 15.8%, compared to December 31, 2025. This decrease was comprised of a $4.2 million increase in unguaranteed exposure combined with a $67.7 million decrease in the guaranteed portion of past due loans compared to December 31, 2025. At March 31, 2026 and December 31, 2025, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 1.1% and 0.9%, respectively. Total unguaranteed loans and leases past due were comprised of $89.0 million carried at historical cost, an increase of $19.8 million, and $7.6 million measured at fair value, a decrease of $266 thousand, as of March 31, 2026 compared to December 31, 2025. Management continues to actively monitor and work to improve asset quality. Management believes the ACL of $193.3 million at March 31, 2026 is appropriate in light of the risk inherent in the loan and lease portfolio. Management's judgments are based on numerous assumptions about current and expected events that it believes to be reasonable, but which may or may not be valid. Accordingly, no assurance can be given that management's ongoing evaluation of the loan and lease portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the ACL, thus adversely affecting the Company's operating results. Additional information on the ACL is presented in Note 5. Loans and Leases Held for Investment and Credit Quality of the Unaudited Condensed Consolidated Financial Statements in this report.

**Liquidity Management**

Liquidity management refers to the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of the Company's customers. Liquidity is immediately available from four major sources: (a) cash on hand and on deposit at other banks; (b) the outstanding balance of federal funds sold; (c) the fair value of unpledged investment securities; and (d) availability under lines of credit, FHLB advances and the Federal Reserve Discount Window. A primary tool in the Company's liquidity management process is the utilization of an Outflow Coverage Ratio ("OCR") model to stress outflows in various scenarios with targeted days of liquidity coverage. The OCR model output is then used by management to ensure adequate liquidity sources are available during those future periods. At March 31, 2026, the total amount of these four liquidity source items was $4.96 billion, or 32.4% of total assets, an increase of 0.1% of total assets from $4.89 billion, or 32.3% of total assets, at December 31, 2025.

As of March 31, 2026 and December 31, 2025, the Company's unused borrowing capacity was $4.09 billion and $3.97 billion, respectively, based upon securities and loans identified as available for collateral. Unused borrowing capacity consists of access through the Federal Reserve Bank's discount window, available lines of credit with the Federal Home Loan Bank and other correspondent banks, and access to a repurchase agreement. If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $7.77 billion and $7.54 billion as of March 31, 2026 and December 31, 2025, respectively.

Loans and other assets are funded primarily by customer deposits, brokered deposits and loan sales. The Company maintains an investment securities portfolio that is available for both immediate and secondary contingent liquidity purposes, whether via pledging to the Federal Home Loan Bank, Federal Reserve Bank, or through liquidation. Additionally, the Company maintains a guaranteed and unguaranteed loan portfolio that is also a contingent liquidity source, whether via pledging to the Federal Reserve Discount Window or through liquidation.

At March 31, 2026, $540.0 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $894.5 million available to be pledged as collateral.

*Contractual Obligations*

The Company has entered into significant fixed and determinable contractual obligations for future payments. Other than normal changes in the ordinary course of the Company's operations, there have been no significant changes in the types of contractual obligations or amounts due since December 31, 2025. See the section titled "Liquidity Management" in Part II, Item 7 of the Company's 2025 Form 10-K for additional discussion of contractual obligations.

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*Off-Balance Sheet Arrangements*

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers' requests for funding and take the form of commitments to extend credit and standby letters of credit. In 2025, the Company entered into airplane purchase agreement commitments. For more information, see Note 2. Investments and Note 8. Commitments and Contingencies in the accompanying notes to Unaudited Condensed Consolidated Financial Statements.

**Asset/Liability Management and Interest Rate Sensitivity**

One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with changes in interest rates. One method used to manage interest rate sensitivity is to measure the repricing differences, or interest rate gaps, between interest-earning assets and interest-bearing liabilities, across various time periods. As of March 31, 2026, the balance sheet's total cumulative gap position was 6.7%, meaning that over the entire life of the Company's assets and liabilities, more assets will reprice than liabilities. For further information, see Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The interest rate gap method, however, addresses only the magnitude of asset and liability repricing timing differences as of the report date and does not address earnings, market value, changes in account behaviors based on the interest rate environment, or growth. Therefore, management also uses an earnings simulation model to prepare, on a regular basis, earnings projections based on a range of instantaneous parallel interest rate shocks applied to a static balance sheet and non-parallel interest rate shocks applied to a dynamic balance sheet to measure interest rate risk. As of March 31, 2026, the Company's interest rate risk profile under the instantaneous parallel interest rate shock scenarios applied to a static balance sheet is moderately asset-sensitive. For more information, see Item 3. Quantitative and Qualitative Disclosures About Market Risk.

An asset-sensitive position means that net interest income will generally move in the same direction as interest rates. For instance, if interest rates increase, net interest income can be expected to increase, and if interest rates decrease, net interest income can be expected to decrease. The Company attempts to mitigate interest rate risk by match funding assets and liabilities with similar rate instruments. Asset/liability sensitivity is primarily derived from the prime-based loans that adjust as the prime interest rate changes, rates on cash accounts that adjust as the federal funds rate changes and the longer duration of indeterminate term deposits. Note that the Company regularly models various forecasted rate projections with non-parallel shifts that are reflective of potential current rate environment outcomes. Under these scenarios, the Company's interest rate risk profile may increase in asset sensitivity, decrease in asset sensitivity, or depending on the scenario and timing of anticipated rate changes, may transition to a liability-sensitive interest rate risk profile. The Company believes that regular modeling of various interest rate outcomes allows it to assess and manage potential risks from various rate shifts.

**Capital**

The maintenance of appropriate levels of capital is a management priority and is monitored on a regular basis. The Company's principal goals related to the maintenance of capital are the following: to provide adequate capital to support the Company's risk profile consistent with the risk appetite approved by the Board of Directors; to provide financial flexibility to support future growth and client needs; to comply with relevant laws, regulations, and supervisory guidance; to achieve optimal ratings for the Company and its subsidiaries; and to provide a competitive return to shareholders. Management regularly monitors the capital position of the Company on both a consolidated and bank level basis. In this regard, management's goal is to maintain capital at levels that are in excess of the regulatory "well capitalized" levels. Risk-based capital ratios, which include Tier 1 Capital, Total Capital and Common Equity Tier 1 Capital, are calculated based on regulatory guidance related to the measurement of capital and risk-weighted assets.

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Capital amounts and ratios as of March 31, 2026, and December 31, 2025, are presented in the table below.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Actual** | **Actual** | **Minimum Capital<br>Requirement** | **Minimum Capital<br>Requirement** | **Minimum To Be**<br>**Well Capitalized**<br>**Under Prompt**<br>**Corrective Action**<br>**Provisions** <sup>(1)</sup> | **Minimum To Be**<br>**Well Capitalized**<br>**Under Prompt**<br>**Corrective Action**<br>**Provisions** <sup>(1)</sup> |
| | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** |
| ***Consolidated - March 31, 2026*** | | | | | | |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1192564 | 10.63% | $504903 | 4.50% | N/A | N/A |
| Total Capital (to Risk-Weighted Assets) | 1429944 | 12.74 | 897605 | 8.00 | N/A | N/A |
| Tier 1 Capital (to Risk-Weighted Assets) | 1288830 | 11.49 | 673204 | 6.00 | N/A | N/A |
| Tier 1 Capital (to Average Assets) | 1288830 | 8.47 | 608704 | 4.00 | N/A | N/A |
| ***Bank - March 31, 2026*** |  |  |  |  |  |  |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1183260 | 10.61% | $501786 | 4.50% | $724801 | 6.50% |
| Total Capital (to Risk-Weighted Assets) | 1323519 | 11.87 | 892063 | 8.00 | 1115079 | 10.00 |
| Tier 1 Capital (to Risk-Weighted Assets) | 1183260 | 10.61 | 669047 | 6.00 | 892063 | 8.00 |
| Tier 1 Capital (to Average Assets) | 1183260 | 7.81 | 605670 | 4.00 | 757087 | 5.00 |
| ***Consolidated - December 31, 2025*** |  |  |  |  |  |  |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1162337 | 10.53% | $496712 | 4.50% | N/A | N/A |
| Total Capital (to Risk-Weighted Assets) | 1397451 | 12.66 | 883043 | 8.00 | N/A | N/A |
| Tier 1 Capital (to Risk-Weighted Assets) | 1258603 | 11.40 | 662282 | 6.00 | N/A | N/A |
| Tier 1 Capital (to Average Assets) | 1258603 | 8.48 | 593767 | 4.00 | N/A | N/A |
| ***Bank - December 31, 2025*** |  |  |  |  |  |  |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1147133 | 10.46% | $493607 | 4.50% | $712987 | 6.50% |
| Total Capital (to Risk-Weighted Assets) | 1285129 | 11.72 | 877523 | 8.00 | 1096904 | 10.00 |
| Tier 1 Capital (to Risk-Weighted Assets) | 1147133 | 10.46 | 658142 | 6.00 | 877523 | 8.00 |
| Tier 1 Capital (to Average Assets) | 1147133 | 7.77 | 590666 | 4.00 | 738333 | 5.00 |

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(1) Prompt corrective action provisions are not applicable at the bank holding company level.

**Critical Accounting Policies and Estimates**

The preparation of consolidated financial statements in accordance with GAAP requires the Company to make estimates and judgments that affect reported amounts of assets, liabilities, income and expenses and related disclosure of contingent assets and liabilities. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources. Estimates are evaluated on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Accounting policies, including those for the Company's critical accounting policies, as described in detail in the Notes to the Company's Unaudited Condensed Consolidated Financial Statements in this report and in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, are an integral part of the Company's consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company's reported results of operations and financial position. The Company's most critical accounting policy and estimate is the ACL. This estimate requires the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. Except as described in Note 1. Basis of Presentation, there were no changes related to critical accounting policies and estimates during the first quarter of 2026.

Changes in this estimate, that are likely to occur from period to period, or the use of different estimates that the Company could have reasonably used in the current period, could have a material impact on the Company's financial position or results of operations.

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**Item 3. Quantitative and Qualitative Disclosures About Market Risk**

Interest rate risk is a significant market risk and can result from timing and volume differences in the repricing of rate-sensitive assets and liabilities, widening or tightening of credit spreads, changes in the general level of market interest rates and changes in the shape and level of market yield curves. The Company manages the interest rate sensitivity of interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Management of interest rate risk is carried out primarily through strategies involving available-for-sale securities, loan and lease portfolio, and available funding sources.

The Company has an Asset/Liability Committee to communicate, coordinate and control all aspects involving interest rate risk management. The Asset/Liability Committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals. Adherence to relevant policies is monitored on an ongoing basis by the Asset/Liability Committee.

The Company has a total cumulative gap in interest-earning assets and interest-bearing liabilities of 6.7% as of March 31, 2026, indicating that, overall, assets will reprice before liabilities during the expected life of the instruments. Cumulative gap is a useful measure to monitor balance sheet match-funding, yet economic value of equity and net interest income simulations, discussed below, are more useful in understanding potential impacts to earnings from a change in interest rates.

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest rate sensitive." An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The Company analyzes interest rate sensitivity position to manage the risk associated with interest rate movements through the use of two simulation models: economic value of equity ("EVE") and net interest income ("NII") simulations. The EVE simulation provides a long-term view of interest rate risk because it analyzes all of the Company's future cash flows. EVE is defined as the present value of the Company's assets, less the present value of its liabilities, adjusted for any off-balance sheet items. The results show a theoretical change in the economic value of shareholders' equity as interest rates change. The NII simulation provides a short-term view of interest rate risk as it analyzes impact on net interest income over a 12-month and 24-month time horizon. NII simulations are prepared by calculating net interest income in a scenario where interest rates do not change (base case) and then recalculated in scenarios with higher and lower interest rates. The results of each variation are compared against the base case scenario to determine the potential change in earnings.

EVE and NII simulations are completed regularly and presented to the Asset/Liability Committee. The simulations provide an estimate of the impact of changes in interest rates on equity and net interest income under a range of assumptions, and under instantaneous parallel interest rate shocks assuming a static balance sheet. The numerous assumptions used in the simulation process are provided to the Asset/Liability Committee on at least an annual basis. Changes to these assumptions can significantly affect the results of the simulation. The simulation incorporates assumptions regarding the potential timing in the repricing of certain assets and liabilities when market rates change and the changes in spreads between different market rates. The simulation analysis incorporates management's current assessment of the risk that pricing margins will change adversely over time due to competition or other factors.

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The table below sets forth an approximation of the Company's NII sensitivity exposure for the 12-month periods ending March 31, 2027 and 2028, and the Company's EVE sensitivity at March 31, 2026 under instantaneous parallel interest rate shocks assuming a static balance sheet. The simulation uses projected repricing of assets and liabilities at March 31, 2026, on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Critical model assumptions such as loan and investment prepayment rates, deposit decay rates, deposit betas and lags and assumed replacement pricing can have a significant impact on interest income simulation. A static balance sheet is maintained to remove volume considerations and to place the focal point on the rate sensitivity of the Company's balance sheet. While management believes such assumptions to be reasonable, approximate actual future activity may differ from the results shown below as it will include growth considerations and management actions to mitigate the impacts of changing interest rates on the balance sheet's earnings profile.

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| | | | |
|:---|:---|:---|:---|
| | **Estimated Increase/Decrease<br>in Net Interest Income** | **Estimated Increase/Decrease<br>in Net Interest Income** | **Estimated<br>Percentage Change in EVE** |
| **Basis Point Change in<br>Interest Rates** | **12 Months Ending March 31, 2027** | **12 Months Ending March 31, 2028** | **As of March 31, 2026** |
| +300 | 17.9% | 13.1% | (7.2 %) |
| +200 | 12.2 | 9.0 | (4.4) |
| +100 | 6.1 | 4.5 | (1.9) |
| -100 | (4.9) | (3.7) | 1.2 |
| -200 | (7.8) | (6.1) | 1.6 |
| -300 | (9.0) | (7.6) | 2.3 |

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Rates are increased instantaneously at the beginning of the projection. Under this instantaneous parallel interest rate shock, with a static balance sheet NII simulation, the Company is moderately asset sensitive in the initial year, as the Company's large variable rate loan portfolio reprices the full amount of the assumed change in interest rates, while the large retail savings and short-term retail certificates of deposits portfolio will reprice with an assumed beta. The Company is slightly asset sensitive in the second year of the projection due to interest rates increasing or decreasing for the full year, the Company's loan portfolio continuing to reprice, and also due to the other assumptions used in the analysis as noted previously. Interest rates do not normally move all at once or evenly over time, but management believes that the analysis is useful to understanding the potential direction and magnitude of net interest income changes due to changing interest rates.

The EVE analysis shows that the Company would theoretically lose market value in a rising rate environment. This is largely driven by the Company's longer asset duration, primarily consisting of investments and loans, versus the shorter duration of its funding portfolio, primarily consisting of retail savings and short-term retail certificates of deposits.

The NII and EVE simulation analysis shown above is only an estimate of interest rate risk exposure at a particular point in time without growth considerations. The Company regularly models various forecasted rate projections with non-parallel shifts that are reflective of potential current rate environment outcomes using the Company's assumed growth projections. Under these scenarios, the Company's interest rate risk profile may increase in asset sensitivity, decrease in asset sensitivity, or depending on the scenario and timing of anticipated rate changes, may transition to a liability sensitive interest rate risk profile. Regular, robust modeling of various interest rate outcomes allows the Company to properly assess and manage potential risks from various rate shifts.

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**Item 4. Controls and Procedures**

*Evaluation of Disclosure Controls and Procedures*

An evaluation of the Company's disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), was carried out under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer as of March 31, 2026, the last day of the period covered by this Quarterly Report. The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were not effective as of March 31, 2026, in ensuring that the information required to be disclosed in the reports the Company files or submits under the Exchange Act is (i) accumulated and communicated to management (including the Company's Chief Executive Officer and Chief Financial Officer) as appropriate to allow timely decisions regarding required disclosures, and (ii) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

The conclusion that disclosure controls and procedures were not effective was due to the presence of a material weakness in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as previously disclosed in Part II, Item 9A of the Company's annual report on Form 10-K for the year ended December 31, 2025.

*Remediation Plan for Material Weakness in Internal Control Over Financial Reporting*

As previously reported in the 2025 Form 10-K, management concluded that a material weakness in the Company's internal control over financial reporting exists with respect to effective control activities related to accounting for and classification of loan participation activity within the Consolidated Statements of Income ("SOI") and the Consolidated Statements of Cash Flows ("SCF").

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

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

The Company is currently working to remediate the material weakness described above, including assessing the need for additional remediation steps and implementing additional measures to remediate the underlying causes that gave rise to the material weakness. The Company is committed to maintaining a strong internal control environment and to ensuring that proper oversight and a consistent tone is communicated throughout the organization. The Company expects that existing deficiencies will be remediated through implementation of processes and controls designed to ensure compliance with GAAP.

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

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

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

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

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

*Changes in Internal Control Over Financial Reporting*

Other than the implementation of the measures outlined in the remediation plan for the material weakness described above, there were no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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**PART II. OTHER INFORMATION**

**Item 1. Legal Proceedings**

In the ordinary course of operations, the Company is at times involved in legal proceedings. In the opinion of management, as of March 31, 2026, 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.

**Item 1A. Risk Factors**

There have been no material changes in the Company's risk factors from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds**

None.

**Item 3. Defaults Upon Senior Securities**

None.

**Item 4. Mine Safety Disclosures**

Not applicable.

**Item 5. Other Information**

*(c)&nbsp;&nbsp;&nbsp;&nbsp;Rule 10b5-1 Trading Arrangements.* Gregory W. Seward, who serves as General Counsel of the Company, entered into a prearranged stock trading plan on February 27, 2026. Mr. Seward's plan provides for the sale of up to 12,000 shares of his holdings of the Company's voting common stock, no par value per share, in amounts and prices set forth in the plan and terminates on the earlier of the date all shares under the plan are sold or December 18, 2026. The trading plan was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and the Company's policies regarding transactions in its securities.

William L. Williams, III, who serves as the Vice Chairman of our Board of Directors, entered into a prearranged stock trading plan on March 12, 2026. Mr. Williams's plan provides for the sale of up to 50,000 shares of his holdings of the Company's voting common stock, no par value per share, in amounts and prices set forth in the plan and terminates on the earlier of the date all shares under the plan are sold or December 31, 2026. The trading plan was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and the Company's policies regarding transactions in its securities.

*Non-Rule 10b5-1 Trading Arrangements.* During the quarter ended March 31, 2026, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified, or terminated a non-Rule 10b5-1 trading arrangement as such terms are defined in Item 408 of Regulation S-K.

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<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**Item 6. Exhibits.**

Exhibits to this report are listed in the Index to Exhibits section of this report.

**INDEX TO EXHIBITS**

---

| | |
|:---|:---|
| **Exhibit<br>No.** | **Description of Exhibit** |
| 3.1 | <u>[Amended and Restated Articles of Incorporation of Live Oak Bancshares, Inc. (incorporated by reference to Exhibit 3.1 of the registration statement on Form S-1, filed on June 19, 2015)](https://www.sec.gov/Archives/edgar/data/1462120/000119312515229020/d893770dex31.htm)</u> |
| 3.2 | <u>[Articles of Amendment designating the 8.375% Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.2 of the Form 8-A, filed on August 4, 2025)](https://www.sec.gov/Archives/edgar/data/1462120/000119312525172234/d57685dex32.htm)</u> |
| 3.3 | <u>[Amended By laws of Live Oak Bancshares, Inc. (incorporated by reference to Exhibit 3.2 of the amended registration statement on Form S-1, filed on July 13, 2015)](https://www.sec.gov/Archives/edgar/data/1462120/000119312515250698/d893770dex32.htm)</u> |
| 4.1 | <u>[Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the registration statement on Form S-1, filed on June 19, 2015)](https://www.sec.gov/Archives/edgar/data/1462120/000119312515229020/d893770dex41.htm)</u> |
| 4.2 | <u>[Deposit Agreement, by and among Live Oak Bancshares, Inc., and Broadridge Corporate Issuer Solutions, LLC, and the Holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K, filed on August 4, 2025)](https://www.sec.gov/Archives/edgar/data/1462120/000146212025000063/lob-ex41toclosing8xkxexecu.htm)</u> |
| 4.3 | <u>[Form of Depositary Receipt representing the Depositary Shares (included as Exhibit A to Exhibit 4.2 hereto) (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K, filed on August 4, 2025)](https://www.sec.gov/Archives/edgar/data/1462120/000146212025000063/lob-ex41toclosing8xkxexecu.htm#i5c5cceb956064fa18effa5369a337aeb_13)</u> |
| 31.1 | <u>[Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\*](lob-20260331xex311.htm)</u> |
| 31.2 | <u>[Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\*](lob-20260331xex312.htm)</u> |
| 32 | <u>[Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\*\*](lob-20260331xex32.htm)</u> |
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025; (ii) Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2026 and 2025; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2026 and 2025; (iv) Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2026 and 2025; (v) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements\* |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |

---

\*Indicates a document being filed with this Form 10-Q.

\*\*Furnished herewith. This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

------

<u>[**Table of Contents**](#ic5c14571a54d4781ae660cff4d3f0c4c_10)</u>

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
| | **Live Oak Bancshares, Inc.** | **Live Oak Bancshares, Inc.** |
|  | *(Registrant)* | *(Registrant)* |
| Date: May 5, 2026 | By: | /*s*/ Walter J. Phifer |
|  |  | Walter J. Phifer |
|  |  | Chief Financial Officer |

---

## Exhibit 31.1

**Exhibit 31.1**

**Certification of Principal Executive Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, James S. Mahan III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Live Oak Bancshares, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: May 5, 2026 | /s/ James S. Mahan III |
| | James S. Mahan III |
| | Chief Executive Officer |
| | (principal executive officer) |

---

## Exhibit 31.2

**Exhibit 31.2**

**Certification of Principal Financial Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Walter J. Phifer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Live Oak Bancshares, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: May 5, 2026 | /s/ Walter J. Phifer |
| | Walter J. Phifer |
| | Chief Financial Officer |
| | (principal financial officer) |

---

## Ex-32

**Exhibit 32**

**Certification**

**Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

**(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)**

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Live Oak Bancshares, Inc., a North Carolina corporation (the "Company"), does hereby certify that:

The Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 (the "Form 10-Q") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Date: May 5, 2026 | /s/ James S. Mahan III |
| | James S. Mahan III |
| | Chief Executive Officer |
| | (principal executive officer) |
| Date: May 5, 2026 | /s/ Walter J. Phifer |
| | Walter J. Phifer |
| | Chief Financial Officer |
| | (principal financial officer) |

---

This certification is being furnished solely to accompany the Form 10-Q pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed "filed" by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of the Form 10-Q, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

<br>