# EDGAR Filing Document

**Accession Number:** 0001462120
**File Stem:** 0001462120-25-000067
**Filing Date:** 2025-8
**Character Count:** 260318
**Document Hash:** 028aac43477322ed928935391ab1dc4e
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001462120-25-000067.hdr.sgml**: 20250805

**ACCESSION NUMBER**: 0001462120-25-000067

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 95

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250805

**DATE AS OF CHANGE**: 20250805

**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:** 251185102

**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-20250630

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 June 30, 2025**

**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-20250630_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 PR A** | **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 August 4, 2025, there were 45,731,300 shares of the registrant's voting common stock outstanding.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Form 10-Q**

**For the Quarterly Period Ended June 30, 2025**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| | | **Page** |
| | **[PART I. FINANCIAL INFORMATION](#i078c9a03c5fd4d61934ccadf9ec90db0_10)** | |
| [Item 1.](#i078c9a03c5fd4d61934ccadf9ec90db0_13) | <u>[Financial Statements (Unaudited)](#i078c9a03c5fd4d61934ccadf9ec90db0_13)</u> | [1](#i078c9a03c5fd4d61934ccadf9ec90db0_13) |
|  | <u>[Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024](#i078c9a03c5fd4d61934ccadf9ec90db0_16)</u> | [1](#i078c9a03c5fd4d61934ccadf9ec90db0_16) |
|  | <u>[Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2025 and 2024](#i078c9a03c5fd4d61934ccadf9ec90db0_19)</u> | [2](#i078c9a03c5fd4d61934ccadf9ec90db0_19) |
|  | <u>[Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024](#i078c9a03c5fd4d61934ccadf9ec90db0_22)</u> | [3](#i078c9a03c5fd4d61934ccadf9ec90db0_22) |
|  | <u>[Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three and](#i078c9a03c5fd4d61934ccadf9ec90db0_25)[Six](#i078c9a03c5fd4d61934ccadf9ec90db0_25)[Months Ended](#i078c9a03c5fd4d61934ccadf9ec90db0_25)[June](#i078c9a03c5fd4d61934ccadf9ec90db0_25)[30, 202](#i078c9a03c5fd4d61934ccadf9ec90db0_25)[5](#i078c9a03c5fd4d61934ccadf9ec90db0_25)[and 20](#i078c9a03c5fd4d61934ccadf9ec90db0_25)[24](#i078c9a03c5fd4d61934ccadf9ec90db0_25)</u> | [4](#i078c9a03c5fd4d61934ccadf9ec90db0_25) |
|  | <u>[Condensed Consolidated Statements of Cash Flows for the](#i078c9a03c5fd4d61934ccadf9ec90db0_31)[Six](#i078c9a03c5fd4d61934ccadf9ec90db0_31)[Months Ended](#i078c9a03c5fd4d61934ccadf9ec90db0_31)[June](#i078c9a03c5fd4d61934ccadf9ec90db0_31)[30, 202](#i078c9a03c5fd4d61934ccadf9ec90db0_31)[5](#i078c9a03c5fd4d61934ccadf9ec90db0_31)[and 202](#i078c9a03c5fd4d61934ccadf9ec90db0_31)[4](#i078c9a03c5fd4d61934ccadf9ec90db0_31)</u> | [6](#i078c9a03c5fd4d61934ccadf9ec90db0_31) |
|  | <u>[Notes to Unaudited Condensed Consolidated Financial Statements](#i078c9a03c5fd4d61934ccadf9ec90db0_34)</u> | [8](#i078c9a03c5fd4d61934ccadf9ec90db0_34) |
| [Item 2.](#i078c9a03c5fd4d61934ccadf9ec90db0_79) | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#i078c9a03c5fd4d61934ccadf9ec90db0_79)</u> | [38](#i078c9a03c5fd4d61934ccadf9ec90db0_79) |
| [Item 3.](#i078c9a03c5fd4d61934ccadf9ec90db0_115) | <u>[Quantitative and Qualitative Disclosures about Market Risk](#i078c9a03c5fd4d61934ccadf9ec90db0_115)</u> | [58](#i078c9a03c5fd4d61934ccadf9ec90db0_115) |
| [Item 4.](#i078c9a03c5fd4d61934ccadf9ec90db0_118) | <u>[Controls and Procedures](#i078c9a03c5fd4d61934ccadf9ec90db0_118)</u> | [60](#i078c9a03c5fd4d61934ccadf9ec90db0_118) |
|  | **[PART II. OTHER INFORMATION](#i078c9a03c5fd4d61934ccadf9ec90db0_121)** |  |
| [Item 1.](#i078c9a03c5fd4d61934ccadf9ec90db0_124) | <u>[Legal Proceedings](#i078c9a03c5fd4d61934ccadf9ec90db0_124)</u> | [61](#i078c9a03c5fd4d61934ccadf9ec90db0_124) |
| [Item 1A.](#i078c9a03c5fd4d61934ccadf9ec90db0_127) | <u>[Risk Factors](#i078c9a03c5fd4d61934ccadf9ec90db0_127)</u> | [61](#i078c9a03c5fd4d61934ccadf9ec90db0_127) |
| [Item 2.](#i078c9a03c5fd4d61934ccadf9ec90db0_130) | <u>[Unregistered Sales of Equity Securities and Use of Proceeds](#i078c9a03c5fd4d61934ccadf9ec90db0_130)</u> | [61](#i078c9a03c5fd4d61934ccadf9ec90db0_130) |
| [Item 3.](#i078c9a03c5fd4d61934ccadf9ec90db0_133) | <u>[Defaults Upon Senior Securities](#i078c9a03c5fd4d61934ccadf9ec90db0_133)</u> | [61](#i078c9a03c5fd4d61934ccadf9ec90db0_133) |
| [Item 4.](#i078c9a03c5fd4d61934ccadf9ec90db0_136) | <u>[Mine Safety Disclosures](#i078c9a03c5fd4d61934ccadf9ec90db0_136)</u> | [61](#i078c9a03c5fd4d61934ccadf9ec90db0_136) |
| [Item 5.](#i078c9a03c5fd4d61934ccadf9ec90db0_139) | <u>[Other Information](#i078c9a03c5fd4d61934ccadf9ec90db0_139)</u> | [61](#i078c9a03c5fd4d61934ccadf9ec90db0_139) |
| [Item 6.](#i078c9a03c5fd4d61934ccadf9ec90db0_142) | <u>[Exhibits](#i078c9a03c5fd4d61934ccadf9ec90db0_142)</u> | [62](#i078c9a03c5fd4d61934ccadf9ec90db0_142) |
|  | <u>[Index to Exhibits](#i078c9a03c5fd4d61934ccadf9ec90db0_145)</u> | [62](#i078c9a03c5fd4d61934ccadf9ec90db0_145) |
|  | <u>[Signatures](#i078c9a03c5fd4d61934ccadf9ec90db0_148)</u> | [63](#i078c9a03c5fd4d61934ccadf9ec90db0_148) |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Balance Sheets**

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

(Dollars in thousands)

---

| | | |
|:---|:---|:---|
| | **June 30,<br>2025** | **December 31,<br>2024** |
| **Assets** | | |
| Cash and due from banks | $662755 | $608800 |
| Certificates of deposit with other banks | 250 | 250 |
| Investment securities available-for-sale | 1325206 | 1248203 |
| Loans held for sale | 350791 | 346002 |
| Loans and leases held for investment (includes $303,818 and $328,746 measured at fair value, respectively) | 11014055 | 10233374 |
| Allowance for credit losses on loans and leases | (182231) | (167516) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loans and leases | 10831824 | 10065858 |
| Premises and equipment, net | 246493 | 264059 |
| Foreclosed assets | 6318 | 1944 |
| Servicing assets (includes $60,085 and $55,788 measured at fair value, respectively) | 60359 | 56144 |
| Other assets | 347212 | 352120 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $13831208 | $12943380 |
| **Liabilities and shareholders' equity** |  |  |
| ***Liabilities*** |  |  |
| Deposits: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noninterest-bearing | $393393 | $318890 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest-bearing | 12201397 | 11441604 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 12594790 | 11760494 |
| Borrowings | 107659 | 112820 |
| Other liabilities | 61494 | 66570 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 12763943 | 11939884 |
| ***Shareholders' equity*** |  |  |
| Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding at June 30, 2025 and December 31, 2024 |  |  |
| Class A common stock, no par value, 100,000,000 shares authorized, 45,686,081 and 45,359,425 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively | 377953 | 365607 |
| Class B common stock, no par value, 10,000,000 shares authorized, none issued or outstanding at June 30, 2025 and December 31, 2024 |  |  |
| Retained earnings | 746450 | 715767 |
| Accumulated other comprehensive loss | (61514) | (82344) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity attributed to Live Oak Bancshares, Inc. | 1062889 | 999030 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest | 4376 | 4466 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 1067265 | 1003496 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $13831208 | $12943380 |

---

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

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Income**

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

(Dollars in thousands, except per share data)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| ***Interest income*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Loans and fees on loans | $204513 | $181840 | $400129 | $357850 |
| &nbsp;&nbsp;&nbsp;Investment securities, taxable | 11648 | 9219 | 22737 | 18173 |
| &nbsp;&nbsp;&nbsp;Other interest earning assets | 8123 | 7389 | 14523 | 14845 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest income | 224284 | 198448 | 437389 | 390868 |
| ***Interest expense*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 113380 | 105358 | 224268 | 207356 |
| &nbsp;&nbsp;&nbsp;Borrowings | 1683 | 1770 | 3368 | 2081 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | 115063 | 107128 | 227636 | 209437 |
| &nbsp;&nbsp;&nbsp;Net interest income | 109221 | 91320 | 209753 | 181431 |
| ***Provision for credit losses*** | 23252 | 11765 | 52216 | 28129 |
| &nbsp;&nbsp;&nbsp;Net interest income after provision for credit losses | 85969 | 79555 | 157537 | 153302 |
| ***Noninterest income*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 8565 | 7347 | 16863 | 14971 |
| &nbsp;&nbsp;&nbsp;Loan servicing asset revaluation | (3057) | (2878) | (7785) | (5622) |
| &nbsp;&nbsp;&nbsp;Net gains on sales of loans | 21641 | 14395 | 40289 | 25897 |
| &nbsp;&nbsp;&nbsp;Net gain (loss) on loans accounted for under the fair value option | 1082 | 172 | 48 | (47) |
| &nbsp;&nbsp;&nbsp;Equity method investments (loss) income | (2716) | (1767) | (4955) | (6789) |
| &nbsp;&nbsp;&nbsp;Equity security investments gains, net | 1004 | 161 | 1024 | (368) |
| &nbsp;&nbsp;&nbsp;Lease income | 3103 | 2423 | 5676 | 4876 |
| &nbsp;&nbsp;&nbsp;Management fee income |  | 3271 |  | 6542 |
| &nbsp;&nbsp;&nbsp;Other noninterest income | 4904 | 11035 | 8947 | 20796 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | 34526 | 34159 | 60107 | 60256 |
| ***Noninterest expense*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | 49137 | 46255 | 97145 | 93530 |
| &nbsp;&nbsp;&nbsp;Travel expense | 2576 | 2328 | 5371 | 4766 |
| &nbsp;&nbsp;&nbsp;Professional services expense | 2874 | 3061 | 5898 | 4939 |
| &nbsp;&nbsp;&nbsp;Advertising and marketing expense | 4420 | 3004 | 8085 | 6696 |
| &nbsp;&nbsp;&nbsp;Occupancy expense | 2369 | 2388 | 5106 | 4635 |
| &nbsp;&nbsp;&nbsp;Technology expense | 10066 | 7996 | 19317 | 15719 |
| &nbsp;&nbsp;&nbsp;Equipment expense | 3685 | 3511 | 7430 | 6585 |
| &nbsp;&nbsp;&nbsp;Other loan origination and maintenance expense | 4190 | 3659 | 8775 | 7570 |
| &nbsp;&nbsp;&nbsp;Renewable energy tax credit investment (recovery) impairment | 270 | 170 | 270 | (757) |
| &nbsp;&nbsp;&nbsp;FDIC insurance | 3545 | 2649 | 7096 | 5849 |
| &nbsp;&nbsp;&nbsp;Other expense | 6161 | 2635 | 8817 | 5861 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | 89293 | 77656 | 173310 | 155393 |
| ***Income before taxes*** | 31202 | 36058 | 44334 | 58165 |
| &nbsp;&nbsp;&nbsp;Income tax expense | 7815 | 9095 | 11279 | 3616 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income | 23387 | 26963 | 33055 | 54549 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss attributable to non-controlling interest | 41 |  | 90 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to Live Oak Bancshares, Inc. | $23428 | $26963 | $33145 | $54549 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share | $0.51 | $0.60 | $0.72 | $1.22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted earnings per share | $0.51 | $0.59 | $0.72 | $1.20 |

---

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

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Comprehensive Income**

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

(Dollars in thousands)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| Net income | $23387 | $26963 | $33055 | $54549 |
| Other comprehensive income (loss) before tax: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net unrealized gain (loss) on investment securities available-for-sale during the period | 8137 | 964 | 27408 | (7612) |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclassification adjustment for gain on sale of securities available-for-sale included in net income |  |  |  |  |
| Other comprehensive income (loss) before tax | 8137 | 964 | 27408 | (7612) |
| &nbsp;&nbsp;&nbsp;Income tax (expense) benefit | (1953) | (231) | (6578) | 1827 |
| Other comprehensive income (loss), net of tax | 6184 | 733 | 20830 | (5785) |
| Total comprehensive income | 29571 | 27696 | 53885 | 48764 |
| Comprehensive loss attributable to non-controlling interest | 41 |  | 90 |  |
| Total comprehensive income attributable to Live Oak Bancshares, Inc. | $29612 | $27696 | $53975 | $48764 |

---

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

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

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

***For the three and six months ended June 30, 2025 and 2024 (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** |
| | **Common stock** | **Common stock** | **Common stock** | **Retained <br>earnings** | **Accumulated<br>other<br>comprehensive<br>(loss) income** | **Non-controlling interest** | **Total <br>equity** |
| | **Shares** | **Shares** | **Amount** | **Retained <br>earnings** | **Accumulated<br>other<br>comprehensive<br>(loss) income** | **Non-controlling interest** | **Total <br>equity** |
| | **Class A** | **Class B** | **Amount** | **Retained <br>earnings** | **Accumulated<br>other<br>comprehensive<br>(loss) income** | **Non-controlling interest** | **Total <br>equity** |
| **Balance at March 31, 2025** | 45589633 |  | $370513 | $724215 | $(67698) | $4417 | $1031447 |
| &nbsp;&nbsp;&nbsp;Net income |  |  |  | 23428 |  | (41) | 23387 |
| &nbsp;&nbsp;&nbsp;Other comprehensive income |  |  |  |  | 6184 |  | 6184 |
| &nbsp;&nbsp;&nbsp;Issuance of restricted stock | 36720 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other |  |  | (293) |  |  |  | (293) |
| &nbsp;&nbsp;&nbsp;Stock option exercises | 59728 |  | 788 |  |  |  | 788 |
| &nbsp;&nbsp;&nbsp;Restricted stock compensation expense |  |  | 6945 |  |  |  | 6945 |
| &nbsp;&nbsp;&nbsp;Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense |  |  |  | 176 |  |  | 176 |
| &nbsp;&nbsp;&nbsp;Cash dividends ($0.03 per share) |  |  |  | (1369) |  |  | (1369) |
| **Balance at June 30, 2025** | 45686081 |  | $377953 | $746450 | $(61514) | 4376 | $1067265 |
| **Balance at March 31, 2024** | 44938673 |  | $349648 | $669307 | $(91237) | $— | $927718 |
| &nbsp;&nbsp;&nbsp;Net income |  |  |  | 26963 |  |  | 26963 |
| &nbsp;&nbsp;&nbsp;Other comprehensive income |  |  |  |  | 733 |  | 733 |
| &nbsp;&nbsp;&nbsp;Issuance of restricted stock | 45613 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other |  |  | (337) |  |  |  | (337) |
| &nbsp;&nbsp;&nbsp;Stock option exercises | 19570 |  | 277 |  |  |  | 277 |
| &nbsp;&nbsp;&nbsp;Restricted stock compensation expense |  |  | 6793 |  |  |  | 6793 |
| &nbsp;&nbsp;&nbsp;Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense |  |  |  | 252 |  |  | 252 |
| &nbsp;&nbsp;&nbsp;Cash dividends ($0.03 per share) |  |  |  | (1350) |  |  | (1350) |
| **Balance at June 30, 2024** | 45003856 |  | $356381 | $695172 | $(90504) | $— | $961049 |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Changes in Shareholders' Equity (Continued)**

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

(Dollars in thousands)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** | **Six Months Ended** |
| | **Common stock** | **Common stock** | **Common stock** | **Retained <br>earnings** | **Accumulated**<br>**other**<br>**comprehensive**<br>**income (loss)**  | **Non-controlling interest** | **Total <br>equity** |
| | **Shares** | **Shares** | **Amount** | **Retained <br>earnings** | **Accumulated**<br>**other**<br>**comprehensive**<br>**income (loss)**  | **Non-controlling interest** | **Total <br>equity** |
| | **Class A** | **Class B** | **Amount** | **Retained <br>earnings** | **Accumulated**<br>**other**<br>**comprehensive**<br>**income (loss)**  | **Non-controlling interest** | **Total <br>equity** |
| **Balance at December 31, 2024** | 45359425 |  | $365607 | $715767 | $(82344) | $4466 | $1003496 |
| &nbsp;&nbsp;&nbsp;Net income |  |  |  | 33145 |  | (90) | 33055 |
| &nbsp;&nbsp;&nbsp;Other comprehensive income |  |  |  |  | 20830 |  | 20830 |
| &nbsp;&nbsp;&nbsp;Issuance of restricted stock | 180504 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other |  |  | (3471) |  |  |  | (3471) |
| &nbsp;&nbsp;&nbsp;Employee stock purchase program | 23015 |  | 659 |  |  |  | 659 |
| &nbsp;&nbsp;&nbsp;Stock option exercises | 123137 |  | 1546 |  |  |  | 1546 |
| &nbsp;&nbsp;&nbsp;Restricted stock compensation expense |  |  | 13612 |  |  |  | 13612 |
| &nbsp;&nbsp;&nbsp;Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense |  |  |  | 274 |  |  | 274 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash dividends ($0.06 per share) |  |  |  | (2736) |  |  | (2736) |
| **Balance at June 30, 2025** | 45686081 |  | $377953 | $746450 | $(61514) | $4376 | $1067265 |
| **Balance at December 31, 2023** | 44617673 |  | $344568 | $642817 | $(84719) | $— | $902666 |
| &nbsp;&nbsp;&nbsp;Net income |  |  |  | 54549 |  |  | 54549 |
| &nbsp;&nbsp;&nbsp;Other comprehensive loss |  |  |  |  | (5785) |  | (5785) |
| &nbsp;&nbsp;&nbsp;Issuance of restricted stock | 169283 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other |  |  | (3394) |  |  |  | (3394) |
| &nbsp;&nbsp;&nbsp;Employee stock purchase program | 18485 |  | 702 |  |  |  | 702 |
| &nbsp;&nbsp;&nbsp;Stock option exercises | 198415 |  | 1406 |  |  |  | 1406 |
| &nbsp;&nbsp;&nbsp;Restricted stock compensation expense |  |  | 13099 |  |  |  | 13099 |
| &nbsp;&nbsp;&nbsp;Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense |  |  |  | 501 |  |  | 501 |
| &nbsp;&nbsp;&nbsp;Cash dividends ($0.06 per share) |  |  |  | (2695) |  |  | (2695) |
| **Balance at June 30, 2024** | 45003856 |  | $356381 | $695172 | $(90504) | $— | $961049 |

---

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

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Condensed Consolidated Statements of Cash Flows**

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

(Dollars in thousands)

---

| | | |
|:---|:---|:---|
| | **Six Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** |
| | **2025** | **2024** |
| ***Cash flows from operating activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $33055 | $54549 |
| &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 | 13758 | 10324 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 52216 | 28129 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of discount on securities, net | (230) | (497) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax benefit | (843) | (278) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Originations of loans held for sale | (697086) | (467005) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales of loans held for sale | 924481 | 577817 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net gains on sale of loans held for sale | (40289) | (25897) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss on impairment or sale of foreclosed assets | 12 | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (gains) loss on loans accounted for under fair value option | (48) | 47 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net change in servicing assets | (4215) | (2937) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net gain on disposal of long-lived assets |  | (6663) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss on disposal of property and equipment | 3122 | 177 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity method investments loss (income) | 4955 | 6789 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity security investments (gains) losses, net | (1024) | 368 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on equity warrant assets | 419 | (6246) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renewable energy tax credit investment impairment (recovery) | 270 | (757) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted stock compensation expense | 13612 | 13099 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock based compensation excess tax (deficiency) benefit | (224) | 988 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease right-of-use assets and liabilities, net | 7 | 195 |
| &nbsp;&nbsp;&nbsp;Changes in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | 15288 | (13536) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other liabilities | (4090) | 6094 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 313146 | 174769 |
| ***Cash flows from investing activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Purchases of investment securities available-for-sale | (126937) | (109829) |
| &nbsp;&nbsp;&nbsp;Proceeds from maturities, calls, and principal paydowns of investment securities available-for-sale | 77572 | 77679 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of foreclosed assets | 827 | 583 |
| &nbsp;&nbsp;&nbsp;Purchases of loans previously sold | (45257) | (35928) |
| &nbsp;&nbsp;&nbsp;Loan and lease originations and principal collections, net | (984384) | (577457) |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of long-lived asset |  | 22641 |
| &nbsp;&nbsp;&nbsp;Purchases of equity security investments | (4471) | (3676) |
| &nbsp;&nbsp;&nbsp;Purchases of equity method investments | (3060) | (1872) |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of equity security investments | 359 | 957 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of equity method investments | 385 | 524 |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of premises and equipment | 4361 | 978 |
| &nbsp;&nbsp;&nbsp;Purchases of premises and equipment, net | (3719) | (38882) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by investing activities | (1084324) | (664282) |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

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

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

(Dollars in thousands)

---

| | | |
|:---|:---|:---|
| | **Six Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** |
| | **2025** | **2024** |
| ***Cash flows from financing activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Net increase in deposits | $834296 | $432012 |
| &nbsp;&nbsp;&nbsp;Proceeds from borrowings | 84 | 99462 |
| &nbsp;&nbsp;&nbsp;Repayment of borrowings | (5245) | (5071) |
| &nbsp;&nbsp;&nbsp;Stock option exercises | 1546 | 1406 |
| &nbsp;&nbsp;&nbsp;Employee stock purchase program | 659 | 702 |
| &nbsp;&nbsp;&nbsp;Tax withholding related to vesting of restricted stock and other | (3471) | (3394) |
| &nbsp;&nbsp;&nbsp;Shareholder dividend distributions | (2736) | (2695) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 825133 | 522422 |
| Net increase in cash and cash equivalents | 53955 | 32909 |
| ***Cash and cash equivalents, beginning*** | 608800 | 582540 |
| ***Cash and cash equivalents, ending*** | $662755 | $615449 |
| ***Supplemental disclosures of cash flow information*** |  |  |
| &nbsp;&nbsp;&nbsp;Interest paid | $227748 | $209811 |
| &nbsp;&nbsp;&nbsp;Income tax paid, net | 7221 | 22888 |
| ***Supplemental disclosures of noncash investing and financing activities*** |  |  |
| &nbsp;&nbsp;&nbsp;Unrealized holding gains (losses) on investment securities available-for-sale, net of taxes | $20830 | $(5785) |
| &nbsp;&nbsp;&nbsp;Transfers from loans and leases to foreclosed real estate and other repossessions or SBA receivable | 18894 | 2125 |
| &nbsp;&nbsp;&nbsp;Net transfers between foreclosed assets and SBA receivable | 33 |  |
| &nbsp;&nbsp;&nbsp;Transfer from premises and equipment, net to other assets |  | 18540 |
| &nbsp;&nbsp;&nbsp;Transfer of loans held for sale to loans and leases held for investment | 408925 | 108048 |
| &nbsp;&nbsp;&nbsp;Transfer of loans and leases held for investment to loans held for sale | 610907 | 178482 |
| &nbsp;&nbsp;&nbsp;Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense | 274 | 501 |
| &nbsp;&nbsp;&nbsp;Accrued premises and equipment additions |  | 1193 |
| &nbsp;&nbsp;&nbsp;Equity method investment commitments |  | 1508 |
| &nbsp;&nbsp;&nbsp;Equity security investment commitments |  | 1000 |

---

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

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 June 30, 2025, 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. Canapi Advisors, LLC ("Canapi Advisors") was a wholly owned subsidiary providing investment advisory services to a series of funds (the "Canapi Funds") focused on providing venture capital to new and emerging financial technology companies. During the third quarter of 2024, the Canapi Funds were restructured and Canapi Advisors voluntarily withdrew as an investment advisor to the funds. Canapi Advisors was subsequently dissolved in the fourth quarter of 2024. 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**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 and six months ended June 30, 2025 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2025. The Condensed Consolidated Balance Sheet as of December 31, 2024 has been derived from the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities Exchange Commission ("SEC") on March 18, 2025 (SEC File No. 001-37497) (the "2024 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 2024 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 2024 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 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 small businesses nationwide. The banking platform generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. The chief operating decision maker assesses performance and decides how to allocate resources based on net income which is reported on the consolidated statements of income. The chief operating decision maker uses net income to evaluate income generated from total assets (return on assets) and profitability of the segment in relation to total shareholders' equity (return on equity). The measures of segment assets and equity are reported on the consolidated balance sheets as total assets and total shareholders' equity. Net income is also used to monitor budget versus actual results. All of these elements are used in assessing performance of the segment.

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

***Use of Estimates***

In preparing unaudited condensed consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The allowance for credit losses is a material estimate that is particularly susceptible to significant change in the near term.

***Changes in Accounting Estimates***

During the second quarter of 2024, the Company made enhancements to the qualitative framework of the allowance for credit losses. The enhanced framework leverages quantifiable credit risk metrics as well as current and forecasted economic conditions to determine possible portfolio outcomes that are not captured in quantitatively modeled results. The framework continues to consider risk factors which include, but are not limited to, changes in lending policies, economic and business conditions, nature and volume of portfolio, volume and severity of past due loans, value of underlying collateral, concentrations, and prepayment speeds. The result of these changes was not material.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

***Long-Lived Asset Reclassified to Held for Sale***

During the second quarter of 2024, the Company sold an aircraft that was previously reclassified as held for sale. The $6.7 million gain on the sale of the aircraft is reflected in other income on the Condensed Consolidated Statements of Income.

During the first quarter of 2024, the Company determined that retention of an idle building and accompanying land adjacent to its main campus was not best suited to serve future expansion plans. As a result of this determination, the Company entered into a purchase and sale agreement with a third party with expected total proceeds, net of estimated expenses, of $20.9 million. Accordingly, the $18.5 million carrying amount of the building and land, was considered held for sale, and reclassified from premises and equipment, net to other assets in the Unaudited Condensed Consolidated Balance Sheet. During the third quarter of 2024, the building and land were sold for a gain of $2.4 million.

***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**

In October 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-06 "Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative" ("ASU 2023-06"). ASU 2023-06 amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company does not believe this standard will have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). ASU 2023-09 requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide more transparency by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation table and (ii) income taxes paid, net of refunds, to be disaggregated by jurisdiction based on an established threshold. ASU 2023-09 is effective January 1, 2025 and impacts the Company's annual income tax disclosure. Aside from complying with the new disclosure requirements, the Company does not believe this standard will have a material impact on its consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01 "Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards" ("ASU 2024-01"). ASU 2024-01 adds an illustrative example to clarify how an entity should determine whether a profits interest or similar award is within the scope of ASC 718. The Company adopted the standard on January 1, 2025, with no material effect on its consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02 "Codification Improvements - Amendments to Remove References to the Concepts Statements" ("ASU 2024-02"). ASU 2024-02 removes references to various Concepts Statements in the Codification. The Company adopted the standard on January 1, 2025, with no material effect on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). ASU 2024-03 requires disaggregation of certain expense captions into specified categories within the footnotes. The amendments in this standard will be effective for the Company on January 1, 2027. The Company is currently evaluating the impact the amendments will have on the consolidated financial statements and related disclosures.

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

*Legislative Developments*

On July 4, 2025, H.R. 1, the U.S. fiscal-year 2025 budget reconciliation legislation, commonly known as the One Big Beautiful Bill Act ("OBBB"), was signed into law, implementing changes in tax and other provisions. The Company does not currently believe the impacts of the OBBB will be material to the consolidated financial statements and related disclosures.

**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>June 30,** | **Three Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| **Basic earnings per share:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to Live Oak Bancshares, Inc. | $23428 | $26963 | $33145 | $54549 |
| Weighted-average basic shares outstanding | 45634741 | 44974942 | 45556842 | 44868625 |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share | $0.51 | $0.60 | $0.72 | $1.22 |
| **Diluted earnings per share:** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to Live Oak Bancshares, Inc., for diluted earnings per share | $23428 | $26963 | $33145 | $54549 |
| Total weighted-average basic shares outstanding | 45634741 | 44974942 | 45556842 | 44868625 |
| &nbsp;&nbsp;&nbsp;&nbsp;Add effect of dilutive stock options and restricted stock grants | 160867 | 550140 | 268701 | 714521 |
| Total weighted-average diluted shares outstanding | 45795608 | 45525082 | 45825543 | 45583146 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted earnings per share | $0.51 | $0.59 | $0.72 | $1.20 |
| Anti-dilutive stock options and restricted stock grants | 2177255 | 945063 | 1838191 | 702331 |

---

**Note 4. Investments**

***Available-for-Sale***

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>June 30, 2025</u>** | **Amortized**<br>**Cost** | **Unrealized**<br>**Gains** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** |
| U.S. government agencies | $13919 | $77 | $38 | $13958 |
| Mortgage-backed securities | 1389062 | 3498 | 84387 | 1308173 |
| Municipal bonds | 3164 |  | 89 | 3075 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1406145 | $3575 | $84514 | $1325206 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</u>** | **Amortized<br>Cost** | **Unrealized<br>Gains** | **Unrealized<br>Losses** | **Fair<br>Value** |
| U.S. government agencies | $18196 | $— | $299 | $17897 |
| Mortgage-backed securities | 1335177 | 1083 | 108927 | 1227333 |
| Municipal bonds | 3176 |  | 203 | 2973 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $1356549 | $1083 | $109429 | $1248203 |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

During the three months ended June 30, 2025, four securities totaling $11.3 million were settled and one security totaling $4.0 million matured. During the six months ended June 30, 2025, seven securities totaling $16.9 million were settled and one security totaling $4.0 million matured. During the three months ended June 30, 2024, one security totaling $155 thousand was settled and one security totaling $3.0 million matured. During the six months ended June 30, 2024, two securities totaling $14.8 million were settled, one security totaling $2.5 million was called and one security totaling $3.0 million matured.

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

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

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
| **<u>June 30, 2025</u>** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** |
| U.S. government agencies | $— | $— | $5939 | $38 | $5939 | $38 |
| Mortgage-backed securities | 200410 | 1883 | 817241 | 82504 | 1017651 | 84387 |
| Municipal bonds | 2992 | 76 | 83 | 13 | 3075 | 89 |
| &nbsp;&nbsp;&nbsp;Total | $203402 | $1959 | $823263 | $82555 | $1026665 | $84514 |

---

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Less Than 12 Months** | **Less Than 12 Months** | **12 Months or More** | **12 Months or More** | **Total** | **Total** |
| **<u>December 31, 2024</u>** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** | **Fair**<br>**Value** | **Unrealized**<br>**Losses** |
| U.S. government agencies | $8036 | $189 | $9861 | $110 | $17897 | $299 |
| Mortgage-backed securities | 265934 | 4173 | 859819 | 104754 | 1125753 | 108927 |
| Municipal bonds |  |  | 2973 | 203 | 2973 | 203 |
| &nbsp;&nbsp;&nbsp;Total | $273970 | $4362 | $872653 | $105067 | $1146623 | $109429 |

---

At June 30, 2025, there were 395 mortgage-backed securities, two U.S. government agencies and one municipal bond in unrealized loss positions for greater than 12 months. There were 35 mortgage-backed securities and two municipal bonds in unrealized loss positions for less than 12 months. Unrealized losses at December 31, 2024 were comprised of 404 mortgage-backed securities, three U.S. government agencies and two municipal bonds in unrealized loss positions for greater than 12 months. There were 59 mortgage-backed securities and two U.S. government agencies in unrealized loss positions for less than 12 months.

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 June 30, 2025 and December 31, 2024 were backed by U.S. government sponsored enterprises ("GSEs").

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

The following is a summary of investment securities by maturity:

---

| | | |
|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** |
| | **Available-for-Sale** | **Available-for-Sale** |
| | **Amortized Cost** | **Fair Value** |
| U.S. government agencies |  |  |
| &nbsp;&nbsp;&nbsp;Within one year | $3000 | $2996 |
| &nbsp;&nbsp;&nbsp;One to five years | 4002 | 3972 |
| &nbsp;&nbsp;&nbsp;Five to ten years | 6917 | 6990 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 13919 | 13958 |
| Mortgage-backed securities |  |  |
| &nbsp;&nbsp;&nbsp;Within one year | 30056 | 29788 |
| &nbsp;&nbsp;&nbsp;One to five years | 216354 | 210828 |
| &nbsp;&nbsp;&nbsp;Five to ten years | 202521 | 186080 |
| &nbsp;&nbsp;&nbsp;After 10 years | 940131 | 881477 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1389062 | 1308173 |
| Municipal bonds |  |  |
| &nbsp;&nbsp;&nbsp;Five to ten years | 3068 | 2992 |
| &nbsp;&nbsp;&nbsp;After 10 years | 96 | 83 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 3164 | 3075 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $1406145 | $1325206 |

---

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

At June 30, 2025, investment securities with a fair value of $597.0 million and amortized cost of $654.2 million were pledged to support unused borrowing capacity. At December 31, 2024, investment securities with a fair value of $621.4 million and amortized cost of $695.1 million were pledged to support unused borrowing capacity.

***Equity Investments***

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.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 June 30, 2025 and December 31, 2024 is reflected in the following table:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **December 31, 2024** | **December 31, 2024** |
| | **Amount** | **Ownership %** | **Amount** | **Ownership %** |
| Apiture, Inc. | $49673 | 40.4% | $53108 | 40.4% |
| Canapi Ventures SBIC Fund, LP <sup>(1) (5)</sup> | 11421 | 2.9 | 11504 | 2.9 |
| Canapi Ventures Fund, LP <sup>(2) (5)</sup> | 1391 | 1.5 | 1438 | 1.5 |
| Canapi Ventures Fund II, LP <sup>(3) (5)</sup> | 2858 | 1.6 | 2193 | 1.6 |
| Canapi Ventures SBIC Fund II, LP <sup>(4) (5)</sup> | 1596 | 2.9 | 1238 | 2.9 |
| Affordable housing <sup>(6)</sup> | 14032 | Various | 14724 | Various |
| Solar tax credit investments <sup>(7)</sup> | 4340 | 99.0 | 5309 | 99.0 |
| Other <sup>(8)</sup> | 943 | Various | 1489 | Various |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $86254 |  | $91003 |  |

---

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

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

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

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

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

(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. As of December 31, 2024, the Company had an unfunded commitment of $1.7 million in Estrella Landing. There was no unfunded commitment as of June 30, 2025.

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

(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**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 and amounts recognized in earnings on a cumulative basis as of June 30, 2025 and as of and for the six months ended June 30, 2025 and 2024 is reflected in the following table:

---

| | | | |
|:---|:---|:---|:---|
| | | **As of and for the six month period ended** | **As of and for the six month period ended** |
| |<br>**Cumulative Adjustments** | **June 30, 2025** | **June 30, 2024** |
| Carrying value <sup>(1)</sup> |  | $84864 | $80467 |
| Carrying value adjustments: |  |  |  |
| Impairment | $— |  |  |
| Upward changes for observable prices <sup>(2)</sup> | 52029 | 1128 | 56 |
| Downward changes for observable prices | (2342) | (173) | (369) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net upward (downward) change | $49687 | $955 | $(313) |

---

(1) Investment unfunded commitments of $5.3 million and $2.7 million as of June 30, 2025, and June 30, 2024, respectively.

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

For the three and six months ended June 30, 2025, the Company recognized unrealized gains on all equity securities held at the reporting date of $959 thousand and $966 thousand, respectively. For the three and six months ended June 30, 2024, the Company recognized unrealized gains (losses) on all equity securities held at the reporting date of $31 thousand and $(269) thousand, respectively.

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

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.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

*Canapi Funds*

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

*Non-marketable and Other Equity Investments*

The Company also has limited interests in several non-marketable funds, including Small Business Investment Company ("SBIC") and venture capital funds, which are accounted for as equity security investments. After the initial commitment and over the course of the investment period, the Company will make capital contributions and receive profit and return of capital distributions as a result of fund performance until the funds wind down. While the partnership agreements allow the Company to remove the general partner, this right is not deemed to be substantive as the general partner can only be removed for cause. All investments are generally non-redeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement.

The above investments meet the criteria of a VIE, however, the Company is not the primary beneficiary of the entities, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities. 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**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 June 30, 2025 and December 31, 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>June 30, 2025</u>** | **Investment Carrying Amount** | **Maximum Exposure to Loss** | **Liability Recognized** | **Classification** |
| Solar tax credit investments | $4340 | $27781 | $— | Other assets <sup>(1)</sup> |
| Affordable housing | 14032 | 14973 |  | Other assets <sup>(2)</sup> |
| Canapi Funds | 17699 | 33504 |  | Other assets <sup>(3)</sup> |
| Non-marketable and other equity investments | 5175 | 10505 |  | Other assets <sup>(4)</sup> |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</u>** | **Investment Carrying Amount** | **Maximum Exposure to Loss** | **Liability Recognized** | **Classification** |
| Solar tax credit investments | $5309 | $38107 | $— | Other assets <sup>(5)</sup> |
| Affordable housing | 12940 | 15463 |  | Other assets <sup>(6)</sup> |
| Canapi Funds | 17104 | 34269 |  | Other assets <sup>(7)</sup> |
| Non-marketable and other equity investments | 5290 | 9591 |  | Other assets <sup>(8)</sup> |

---

(1) Maximum exposure to loss includes $4.3 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $23.4 million.

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

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

(4) Maximum exposure to loss includes $5.2 million of current investments and $5.3 million in unfunded commitments.

(5) Maximum exposure to loss includes $5.3 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $32.8 million.

(6) Maximum exposure to loss includes $12.9 million of current investments, $1.7 million in unfunded commitments, and a scenario in which related tax credits are recaptured, collectively totaling $824 thousand.

(7) Maximum exposure to loss includes $17.1 million of current investments and $17.2 million in unfunded commitments.

(8) Maximum exposure to loss includes $5.3 million of current investments and $4.3 million in unfunded commitments.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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>June 30, 2025</u>** | | | | | | | | | | | |
| **Commercial & Industrial** | | | | | | | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 2309146 | $| 19426 | $| 126150 | $| 145576 | 2454722 | $| 106175 | 2560897 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 2509638 | 6083 | 6083 | 29862 | 29862 | 35945 | 35945 | 2545583 | 48183 | 48183 | 2593766 |
| &nbsp;&nbsp;&nbsp;&nbsp;Paycheck Protection Program | 1361 |  |  |  |  |  |  | 1361 |  |  | 1361 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 4820145 | 25509 | 25509 | 156012 | 156012 | 181521 | 181521 | 5001666 | 154358 | 154358 | 5156024 |
| **Construction & Development** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 634863 |  |  | 1816 | 1816 | 1816 | 1816 | 636679 |  |  | 636679 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 91326 |  |  |  |  |  |  | 91326 |  |  | 91326 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 726189 |  |  | 1816 | 1816 | 1816 | 1816 | 728005 |  |  | 728005 |
| **Commercial Real Estate** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 2971064 | 16746 | 16746 | 68216 | 68216 | 84962 | 84962 | 3056026 | 105564 | 105564 | 3161590 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 1273548 | 12794 | 12794 | 10123 | 10123 | 22917 | 22917 | 1296465 | 18885 | 18885 | 1315350 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 4244612 | 29540 | 29540 | 78339 | 78339 | 107879 | 107879 | 4352491 | 124449 | 124449 | 4476940 |
| **Commercial Land** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 657361 |  |  | 4383 | 4383 | 4383 | 4383 | 661744 | 25011 | 25011 | 686755 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 657361 |  |  | 4383 | 4383 | 4383 | 4383 | 661744 | 25011 | 25011 | 686755 |
| Total | 10448307 | $| 55049 | $| 240550 | $| 295599 | 10743906 | $| 303818 | 11047724 |
| Retained Loan Discount and Net Deferred Costs |  |  |  |  |  |  |  |  |  |  | (33669) |
| Loans and Leases, Net |  |  |  |  |  |  |  |  |  |  | 11014055 |
| Guaranteed Balance | 3031369 | $| 38629 | $| 208426 | $| 247055 | 3278424 | $| 77852 | 3356276 |
| % Guaranteed | 29.0% | 70.2% | 70.2% | 86.6% | 86.6% | 83.6% | 83.6% | 30.5% | 25.6% | 25.6% | 30.4% |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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, 2024</u>** | | | | | | | | | | | |
| **Commercial & Industrial** | | | | | | | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 2182596 | $| 37966 | $| 104362 | $| 142328 | 2324924 | $| 119378 | 2444302 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 2418078 | 15282 | 15282 | 23999 | 23999 | 39281 | 39281 | 2457359 | 49767 | 49767 | 2507126 |
| &nbsp;&nbsp;&nbsp;&nbsp;Paycheck Protection Program | 2361 |  |  |  |  |  |  | 2361 |  |  | 2361 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 4603035 | 53248 | 53248 | 128361 | 128361 | 181609 | 181609 | 4784644 | 169145 | 169145 | 4953789 |
| **Construction & Development** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 514997 | 1488 | 1488 | 2468 | 2468 | 3956 | 3956 | 518953 |  |  | 518953 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 85456 |  |  |  |  |  |  | 85456 |  |  | 85456 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 600453 | 1488 | 1488 | 2468 | 2468 | 3956 | 3956 | 604409 |  |  | 604409 |
| **Commercial Real Estate** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 2773306 | 42058 | 42058 | 57896 | 57896 | 99954 | 99954 | 2873260 | 107751 | 107751 | 2981011 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 1040065 | 5000 | 5000 | 10778 | 10778 | 15778 | 15778 | 1055843 | 19025 | 19025 | 1074868 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 3813371 | 47058 | 47058 | 68674 | 68674 | 115732 | 115732 | 3929103 | 126776 | 126776 | 4055879 |
| **Commercial Land** |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 610920 | 2209 | 2209 | 3324 | 3324 | 5533 | 5533 | 616453 | 32825 | 32825 | 649278 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 610920 | 2209 | 2209 | 3324 | 3324 | 5533 | 5533 | 616453 | 32825 | 32825 | 649278 |
| Total | 9627779 | $| 104003 | $| 202827 | $| 306830 | 9934609 | $| 328746 | 10263355 |
| Retained Loan Discount and Net Deferred Costs |  |  |  |  |  |  |  |  |  |  | (29981) |
| Loans and Leases, Net |  |  |  |  |  |  |  |  |  |  | 10233374 |
| Guaranteed Balance | 2933636 | $| 58235 | $| 171123 | $| 229358 | 3162994 | $| 77514 | 3240508 |
| % Guaranteed | 30.5% | 56.0% | 56.0% | 84.4% | 84.4% | 74.8% | 74.8% | 31.8% | 23.6% | 23.6% | 31.6% |

---

(1) Retained portions of government guaranteed loans sold prior to January 1, 2021 are carried at fair value under FASB ASC Subtopic 825-10, *Financial Instruments: Overall*. See Note 9. Fair Value of Financial Instruments for additional information.

***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 2024 Form 10-K for additional discussion around the asset quality indicators that the Company uses to manage and monitor credit risk.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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>June 30, 2025</u>** |  |  |  |  |  |  |  |  |  |
| **Small Business Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $679930 | $1264667 | $1040770 | $1142671 | $922291 | $856350 | $151028 | $37500 | $6095207 |
| &nbsp;&nbsp;&nbsp;Special Mention | 2890 | 21807 | 72357 | 91921 | 48915 | 93835 | 21947 | 1266 | 354938 |
| &nbsp;&nbsp;&nbsp;Substandard | 12427 | 21075 | 42094 | 102667 | 73602 | 96674 | 8285 | 2202 | 359026 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 695247 | 1307549 | 1155221 | 1337259 | 1044808 | 1046859 | 181260 | 40968 | 6809171 |
| **Commercial Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | 611019 | 965368 | 630645 | 327064 | 178249 | 136858 | 501564 | 156729 | 3507496 |
| &nbsp;&nbsp;&nbsp;Special Mention | 2000 | 28632 | 24971 | 73827 | 49262 | 40499 | 10575 | 5074 | 234840 |
| &nbsp;&nbsp;&nbsp;Substandard | 9000 |  |  | 31954 | 109276 | 27884 | 402 | 12522 | 191038 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 622019 | 994000 | 655616 | 432845 | 336787 | 205241 | 512541 | 174325 | 3933374 |
| **Paycheck Protection Program** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass |  |  |  |  | 1042 | 319 |  |  | 1361 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  |  | 1042 | 319 |  |  | 1361 |
| Total | $1317266 | $2301549 | $1810837 | $1770104 | $1382637 | $1252419 | $693801 | $215293 | $10743906 |
| **Year-To-Date Gross Charge-offs** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Small Business Banking | $— | $3442 | $6465 | $6597 | $2616 | $3839 | $3174 | $50 | $26183 |
| &nbsp;&nbsp;&nbsp;Commercial Banking |  |  |  | 2249 | 9759 |  |  | 1679 | 13687 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $— | $3442 | $6465 | $8846 | $12375 | $3839 | $3174 | $1729 | $39870 |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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** | | | |
| | **2024** | **2023** | **2022** | **2021** | **2020** | **Prior** |<br>**Revolving Loans<br>Amortized Cost Basis** |<br>**Revolving Loans<br>Converted to Term** |<br>**Total** <sup>(1)</sup> |
| **<u>December 31, 2024</u>** |  |  |  |  |  |  |  |  |  |
| **Small Business Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $1112351 | $1084996 | $1323982 | $1001021 | $528008 | $482192 | $124370 | $33359 | $5690279 |
| &nbsp;&nbsp;&nbsp;Special Mention | 7041 | 46047 | 77638 | 61906 | 31575 | 83693 | 22729 | 2790 | 333419 |
| &nbsp;&nbsp;&nbsp;Substandard | 13805 | 28573 | 84067 | 74990 | 40266 | 59874 | 7922 | 395 | 309892 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1133197 | 1159616 | 1485687 | 1137917 | 599849 | 625759 | 155021 | 36544 | 6333590 |
| **Commercial Banking** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | 1169167 | 752078 | 398333 | 207755 | 51552 | 81166 | 423334 | 116594 | 3199979 |
| &nbsp;&nbsp;&nbsp;Special Mention |  | 16483 | 88464 | 36165 | 24018 | 17569 | 9555 | 4245 | 196499 |
| &nbsp;&nbsp;&nbsp;Substandard |  |  | 31461 | 136818 | 27905 |  | 2902 | 3094 | 202180 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1169167 | 768561 | 518258 | 380738 | 103475 | 98735 | 435791 | 123933 | 3598658 |
| **Paycheck Protection Program** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pass |  |  |  | 1461 | 900 |  |  |  | 2361 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  | 1461 | 900 |  |  |  | 2361 |
| Total | $2302364 | $1928177 | $2003945 | $1520116 | $704224 | $724494 | $590812 | $160477 | $9934609 |
| **Year-To-Date Gross Charge-offs** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Small Business Banking | $652 | $4198 | $18630 | $4954 | $3462 | $3481 | $3555 | $170 | $39102 |
| &nbsp;&nbsp;&nbsp;Commercial Banking |  | 17 | 5176 | 1493 | 756 |  | 1535 |  | 8977 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $652 | $4215 | $23806 | $6447 | $4218 | $3481 | $5090 | $170 | $48079 |

---

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

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>June 30, 2025</u>** | **Loan and Lease**<br>**Balance** <sup>(1)</sup> | **Guaranteed Balance** | **Unguaranteed Balance** | **% Guaranteed** |
| Pass | $9604064 | $2699594 | $6904470 | 28.1% |
| Special Mention | 589778 | 176523 | 413255 | 29.9 |
| Substandard | 550064 | 402307 | 147757 | 73.1 |
| Total | $10743906 | $3278424 | $7465482 | 30.5% |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</u>** | **Loan and Lease**<br>**Balance** <sup>(1)</sup> | **Guaranteed Balance** | **Unguaranteed Balance** | **% Guaranteed** |
| Pass | $8892619 | $2644310 | $6248309 | 29.7% |
| Special Mention | 529918 | 172015 | 357903 | 32.5 |
| Substandard | 512072 | 346669 | 165403 | 67.7 |
| Total | $9934609 | $3162994 | $6771615 | 31.8% |

---

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

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***Nonaccrual Loans and Leases***

As of June 30, 2025 and December 31, 2024 there were no loans greater than 90 days past due and still accruing. There was no interest income recognized on nonaccrual loans and leases during the three and six months ended June 30, 2025 and 2024. Accrued interest receivable on loans totaled $79.8 million and $80.7 million at June 30, 2025 and December 31, 2024, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Nonaccrual loans and leases held for investment as of June 30, 2025 and December 31, 2024 are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>June 30, 2025</u>** | **Loan and Lease**<br>**Balance** <sup>(1)</sup> | **Guaranteed<br>Balance** | **Unguaranteed Balance** | **Unguaranteed<br>Exposure with No Allowance for Credit Losses ("ACL")** |
| **Commercial & Industrial** | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $154211 | $140178 | $14033 | $5987 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 126378 | 112832 | 13546 | 13546 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 280589 | 253010 | 27579 | 19533 |
| **Construction & Development** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 1816 | 1745 | 71 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1816 | 1745 | 71 |  |
| **Commercial Real Estate** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 82133 | 61308 | 20825 | 11940 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 23437 | 13242 | 10195 | 9232 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 105570 | 74550 | 31020 | 21172 |
| **Commercial Land** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 8357 | 7472 | 885 | 162 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 8357 | 7472 | 885 | 162 |
| Total | $396332 | $336777 | $59555 | $40867 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</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 | $141674 | $116596 | $25078 | $5219 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 39282 | 26300 | 12982 | 3816 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 180956 | 142896 | 38060 | 9035 |
| **Construction & Development** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 3955 | 3379 | 576 | 372 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 3955 | 3379 | 576 | 372 |
| **Commercial Real Estate** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 81847 | 55290 | 26557 | 17736 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 26888 | 13981 | 12907 | 11907 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 108735 | 69271 | 39464 | 29643 |
| **Commercial Land** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 10651 | 7339 | 3312 | 173 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 10651 | 7339 | 3312 | 173 |
| Total | $304297 | $222885 | $81412 | $39223 |

---

(1) Excludes loans accounted for under the fair value option. See Note 9. Fair Value of Financial Instruments for additional information.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** <sup>(1)</sup> | **2024** <sup>(1)</sup> | **2025** <sup>(1)</sup> | **2024** <sup>(1)</sup> |
| Commercial & Industrial | $597 | $364 | $1041 | $974 |
| Commercial Real Estate | 284 | 219 | 774 | 338 |
| Commercial Land | 52 | 52 | 52 | 52 |
| Construction & Development |  |  |  | 30 |
| &nbsp;&nbsp;Total | $933 | $635 | $1867 | $1394 |

---

(1) Excludes loans accounted for under the fair value option. See Note 9. Fair Value of Financial Instruments for additional information.

The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses, as of June 30, 2025 and December 31, 2024:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Total Collateral-Dependent Loans** | **Total Collateral-Dependent Loans** | **Unguaranteed Portion** | **Unguaranteed Portion** | **Unguaranteed Portion** |
| **<u>June 30, 2025</u>** | **Real Estate** | **Business Assets** | **Real Estate** | **Business Assets** | **Allowance for Credit Losses** |
| **Commercial & Industrial** | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $15540 | $3658 | $5040 | $145 | $32 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 2869 | 91635 | 74 | 10854 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 18409 | 95293 | 5114 | 10999 | 32 |
| **Commercial Real Estate** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 48859 |  | 12604 |  | 186 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 48859 |  | 12604 |  | 186 |
| **Commercial Land** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 1608 |  | 168 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 1608 |  | 168 |  |  |
| Total | $68876 | $95293 | $17886 | $10999 | $218 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Total Collateral-Dependent Loans** | **Total Collateral-Dependent Loans** | **Unguaranteed Portion** | **Unguaranteed Portion** | **Unguaranteed Portion** |
| **<u>December 31, 2024</u>** | **Real Estate** | **Business Assets** | **Real Estate** | **Business Assets** | **Allowance for Credit Losses** |
| **Commercial & Industrial** | | | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $6693 | $36500 | $2738 | $12061 | $8299 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 101001 | 26788 | 13704 | 11350 | 4374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 107694 | 63288 | 16442 | 23411 | 12673 |
| **Commercial Real Estate** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 53306 | 6327 | 22239 | 1061 | 890 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 53306 | 6327 | 22239 | 1061 | 890 |
| **Commercial Land** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 6295 |  | 2713 |  | 974 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 6295 |  | 2713 |  | 974 |
| Total | $167295 | $69615 | $41394 | $24472 | $14537 |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

See Note 1. Organization and Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in the Company's 2024 Form 10-K for a description of the methodologies used to estimate the ACL.

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>June 30, 2025</u>** | | | | | |
| Beginning Balance | $149916 | $5712 | $30295 | $4261 | $190184 |
| Charge offs | (30853) |  | (1916) | (178) | (32947) |
| Recoveries | 731 |  | 771 |  | 1502 |
| Provision (Recovery) | 19166 | 324 | 5098 | (1096) | 23492 |
| Ending Balance | $138960 | $6036 | $34248 | $2987 | $182231 |
| **<u>June 30, 2024</u>** |  |  |  |  |  |
| Beginning Balance | $98552 | $4292 | $31369 | $4828 | $139041 |
| Charge offs | (8415) | (35) | (105) | (8) | (8563) |
| Recoveries | 57 |  | 253 |  | 310 |
| Provision (Recovery) | 17972 | (563) | (7977) | (2353) | 7079 |
| Ending Balance | $108166 | $3694 | $23540 | $2467 | $137867 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Six Months Ended** | **Commercial<br>& Industrial** | **Construction &<br>Development** | **Commercial<br>Real Estate** | **Commercial<br>Land** | **Total** |
| **<u>June 30, 2025</u>** | | | | | |
| Beginning Balance | $129007 | $4943 | $29501 | $4065 | $167516 |
| Charge offs | (36840) |  | (2852) | (178) | (39870) |
| Recoveries | 771 |  | 862 | 18 | 1651 |
| Provision (Recovery) | 46022 | 1093 | 6737 | (918) | 52934 |
| Ending Balance | $138960 | $6036 | $34248 | $2987 | $182231 |
| **<u>June 30, 2024</u>** |  |  |  |  |  |
| Beginning Balance | $87581 | $4717 | $28864 | $4678 | $125840 |
| Charge offs | (11744) | (338) | (105) | (8) | (12195) |
| Recoveries | 512 |  | 267 |  | 779 |
| Provision (Recovery) | 31817 | (685) | (5486) | (2203) | 23443 |
| Ending Balance | $108166 | $3694 | $23540 | $2467 | $137867 |

---

During the three months ended June 30, 2025, the ACL decreased primarily as a result of moderating credit trends and net charge-offs of individually evaluated loans with specific reserves recorded in prior periods. During the six months ended June 30, 2025, the ACL increased as a result of growth in the loan and lease portfolio, the impact of the macroeconomic environment on our small business and commercial borrowers, and changes in the macroeconomic outlook. Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

During the three months ended June 30, 2024, the ACL decreased primarily as a result of a decrease in specific reserves on loans individually evaluated for impairment. During the six months ended June 30, 2024, the ACL increased as a result of loan growth and changes in the macroeconomic outlook. Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 and six months ended June 30, 2025 and June 30, 2024, respectively:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Three Months Ended June 30, 2025** | **Other-Than-Insignificant <br>Payment Delay** | **Term Extension** | **Combination - Term Extension & Interest Rate Reduction** | **% of Total Class of <br>Financing Receivable** |
| &nbsp;&nbsp;Small Business Banking | $— | $10893 | $9820 | 0.16% |
| &nbsp;&nbsp;Commercial Banking | 5527 |  |  | 0.21 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $5527 | $10893 | $9820 | 0.37% |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Six Months Ended June 30, 2025** | **Other-Than-Insignificant <br>Payment Delay** | **Term Extension** | **Interest Rate Reduction** | **Combination - Term Extension, Other-Than-Insignificant Payment Delay & Interest Rate Reduction** | **Combination - Term Extension & Other-Than-Insignificant Payment Delay** | **Combination - Term Extension & Interest Rate Reduction** | **% of Total Class of <br>Financing Receivable** |
| &nbsp;&nbsp;Small Business Banking | $— | $14448 | $9862 | $3020 | $3009 | $10010 | 0.45% |
| &nbsp;&nbsp;Commercial Banking | 5527 |  |  |  |  |  | 0.21 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $5527 | $14448 | $9862 | $3020 | $3009 | $10010 | 0.66% |

---

---

| | | |
|:---|:---|:---|
| **Three Months Ended June 30, 2024** | **Other-Than-Insignificant <br>Payment Delay** | **% of Total Class of <br>Financing Receivable** |
| &nbsp;&nbsp;Small Business Banking | $6459 | 0.11% |
| &nbsp;&nbsp;Commercial Banking | 2333 | 0.12 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $8792 | 0.23% |

---

---

| | | |
|:---|:---|:---|
| **Six Months Ended June 30, 2024** | **Other-Than-Insignificant <br>Payment Delay** | **% of Total Class of <br>Financing Receivable** |
| &nbsp;&nbsp;Small Business Banking | $6459 | 0.11% |
| &nbsp;&nbsp;Commercial Banking | 2333 | 0.12 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $8792 | 0.23% |

---

As of June 30, 2025, the Company had commitments to lend additional funds to these borrowers totaling $28 thousand. As of December 31, 2024, the Company had commitments to lend additional funds to these borrowers totaling $6.3 million.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>June 30, 2025</u>** | **Current** | **30-89 Days<br>Past Due** | **90 Days or More Past Due** | **Total Past Due** |
| Small Business Banking | $40120 | $— | $2243 | $2243 |
| Commercial Banking | 22824 |  |  |  |
| &nbsp;&nbsp;Total | $62944 | $— | $2243 | $2243 |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>June 30, 2024</u>** | **Current** | **30-89 Days<br>Past Due** | **90 Days or More Past Due** | **Total Past Due** |
| Small Business Banking | $21518 | $— | $— | $— |
| Commercial Banking | 2333 |  |  |  |
| &nbsp;&nbsp;Total | $23851 | $— | $— | $— |

---

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

---

| | | |
|:---|:---|:---|
| | **Three Months Ended June 30, 2025** | **Three Months Ended June 30, 2025** |
| | **Weighted Average<br>Interest Rate Reduction** | **Weighted Average<br>Term Extension (in Months)** |
| Small Business Banking | 2.48% | 54 |

---

---

| | | |
|:---|:---|:---|
| | **Six Months Ended June 30, 2025** | **Six Months Ended June 30, 2025** |
| | **Weighted Average<br>Interest Rate Reduction** | **Weighted Average<br>Term Extension (in Months)** |
| Small Business Banking | 4.32% | 51 |

---

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

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

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

**Lessor Equipment Leasing**

The Company may purchase new equipment for the purpose of leasing such equipment to customers within its verticals. Equipment purchased to fulfill commitments to commercial renewable energy projects is rented out under operating leases while leases of equipment outside of the renewable energy vertical are generally direct financing leases. Accordingly, leased assets under operating leases are included in premises and equipment, net while leased assets under direct financing leases are included in loans and leases held for investment in the accompanying Unaudited Condensed Consolidated Balance Sheets.

*Direct Financing Leases*

Interest income on direct financing leases is recognized when earned. Unearned interest is recognized over the lease term on a basis which results in a constant rate of return on the unrecovered lease investment. The term of each lease is generally 3 to 7 years which is consistent with the useful life of the equipment with no residual value. The net investment in direct finance leases included in loans and leases held for investment are as follows:

---

| | | |
|:---|:---|:---|
| | **June 30, 2025** | **December 31, 2024** |
| Gross direct finance lease payments receivable | $474 | $961 |
| Less – unearned interest | (10) | (39) |
| Net investment in direct financing leases | $464 | $922 |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

---

| | |
|:---|:---|
| **<u>As of June 30, 2025</u>** | **Amount** |
| 2025 | $378 |
| 2026 | 96 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $474 |

---

Interest income of $12 thousand and $48 thousand was recognized in the three months ended June 30, 2025 and 2024, respectively. Interest income of $29 thousand and $66 thousand was recognized in the six months ended June 30, 2025 and 2024, respectively.

*Operating Leases*

The term of each operating lease is generally 10 to 15 years. The Company retains ownership of the equipment and associated tax benefits such as investment tax credits and accelerated depreciation. At the end of the lease term, the lessee has the option to renew the lease for two additional terms or purchase the equipment at the then-current fair value.

Rental revenue from operating leases is recognized on a straight-line basis over the term of the lease. Rental equipment is recorded at cost and depreciated to an estimated residual value on a straight-line basis over the estimated useful life. The useful lives generally range from 20 to 25 years and residual values generally range from 20% to 50%, however, they are subject to periodic evaluation. Changes in useful lives or residual values will impact depreciation expense and any gain or loss from the sale of used equipment. The estimated useful lives and residual values of the Company's leasing equipment are based on industry disposal experience and the Company's expectations for future sale prices.

If the Company decides to sell or otherwise dispose of rental equipment, it is carried at the lower of cost or fair value less costs to sell or dispose. Repair and maintenance costs that do not extend the lives of the rental equipment are charged to equipment expense at the time the costs are incurred.

As of June 30, 2025 and December 31, 2024, the Company had a net investment of $81.2 million and $93.4 million, respectively, in assets included in premises and equipment, net that are subject to operating leases. Of the net investment, the gross balance of the assets was $142.4 million and $159.7 million as of June 30, 2025 and December 31, 2024, respectively. Accumulated depreciation was $61.2 million and $66.2 million as of June 30, 2025 and December 31, 2024, respectively. Depreciation expense recognized on these assets was $2.5 million and $2.4 million for the three months ended June 30, 2025 and 2024. Depreciation expense recognized on these assets was $5.1 million and $4.7 million for the six months ended June 30, 2025 and 2024, respectively.

Lease income of $3.0 million and $2.3 million was recognized in the three months ended June 30, 2025 and 2024, respectively. Lease income of $5.5 million and $4.7 million was recognized in the six months ended June 30, 2025 and 2024, respectively.

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

---

| | |
|:---|:---|
| **<u>As of June 30, 2025</u>** | **Amount** |
| 2025 | $3653 |
| 2026 | 8721 |
| 2027 | 8483 |
| 2028 | 3836 |
| 2029 | 2399 |
| Thereafter | 7309 |
| &nbsp;&nbsp;&nbsp;Total | $34401 |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

**Note 7. Servicing Assets**

Loans serviced for others are not included in the accompanying Unaudited Condensed Consolidated Balance Sheets. The unpaid principal balance of loans serviced for others requiring recognition of a servicing asset was $3.76 billion and $3.46 billion at June 30, 2025 and December 31, 2024, respectively. The unpaid principal balance for all loans serviced for others was $5.32 billion and $4.72 billion at June 30, 2025 and December 31, 2024, respectively.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** | **Six Months Ended<br>June 30,** |
| | **2025** | **2024** | **2025** | **2024** |
| Balance at beginning of period | $56684 | $48962 | $55788 | $48186 |
| Additions, net | 6458 | 5218 | 12082 | 8739 |
| Fair value changes: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Due to changes in valuation inputs or assumptions | (125) | 701 | (1220) | 922 |
| &nbsp;&nbsp;&nbsp;&nbsp;Decay due to increases in principal paydowns or runoff | (2932) | (3578) | (6565) | (6544) |
| Balance at end of period | $60085 | $51303 | $60085 | $51303 |

---

See Note 9. Fair Value of Financial Instruments for further details about servicing assets measured at fair value.

The fair value of servicing rights was determined using a weighted average discount rate of 13.5% on June 30, 2025 and 14.5% on June 30, 2024. The fair value of servicing rights was determined using a weighted average prepayment speed of 16.0% on June 30, 2025 and 15.7% on June 30, 2024, with the actual rate depending on the stratification of the specific right. Changes to fair value are reported in loan servicing asset revaluation within the Unaudited Condensed Consolidated Statements of Income.

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 June. 30, 2025** | **As of December. 31, 2024** |
| Fair value of servicing rights | $60085 | $55788 |
|  | **Incremental Increase (Decrease) in Value** | **Incremental Increase (Decrease) in Value** |
| **<u>Prepayment Speed</u>** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;20% increase | ($3472) | ($3459) |
| &nbsp;&nbsp;&nbsp;&nbsp;10% increase | (1688) | (1785) |
| **<u>Discount Rate</u>** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;200 basis point increase | (2513) | (2603) |
| &nbsp;&nbsp;&nbsp;&nbsp;100 basis point increase | (1179) | (1331) |

---

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

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

**Note 8. Borrowings**

Total outstanding borrowings consisted of the following:

---

| | | |
|:---|:---|:---|
| | **June 30,<br>2025** | **December 31,<br>2024** |
| **<u>Borrowings</u>** | | |
| In March 2021, the Company entered into a 60-month term loan agreement of $50.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 2.95% with a monthly payment sufficient to fully amortize the loan, with all remaining unpaid principal and interest due at maturity on March 30, 2026. The Company paid the Lender a non-refundable $325 thousand loan origination fee upon signing of the Note that is presented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan. | $7973 | $13184 |
| In March 2024, the Company entered into a 60-month term loan agreement of $100.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 5.95% with monthly interest payments until maturity on March 28, 2029, and $33.0 million of principal to be paid in year 4, and $67.0 million of principal to be paid in year 5. The Company paid the Lender a non-refundable $600 thousand loan origination fee upon signing of the Note that is represented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan. | 99575 | 99505 |
| Other long term debt<sup>(1)</sup> | 111 | 131 |
| Total borrowings | $107659 | $112820 |

---

(1) Includes finance leases.

As of June 30, 2025 and December 31, 2024, the Company's unused borrowing capacity was $3.78 billion and $3.55 billion, respectively, based upon securities and loans identified as available for collateral. Unused borrowing capacity consists of access through the Federal Reserve Bank's discount window, available lines of credit with the Federal Home Loan Bank and other correspondent banks, and access to a repurchase agreement. If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $6.48 billion and $6.10 billion as of June 30, 2025 and December 31, 2024, respectively.

**Note 9. 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.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***Recurring Fair Value***

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| **<u>Equity Warrant Assets</u>** | **2025** | **2024** | **2025** | **2024** |
| Balance at beginning of period | $7035 | $8700 | $7162 | $2874 |
| New equity warrant assets | 50 | 123 | 267 | 493 |
| Changes in fair value, net | (115) | 585 | (419) | 6246 |
| Settlements | (225) | (2001) | (265) | (2206) |
| Balance at end of period | $6745 | $7407 | $6745 | $7407 |

---

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>June 30, 2025</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Investment securities available-for-sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. government agencies | $13958 | $— | $13958 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 1308173 |  | 1308173 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal bonds <sup>(1)</sup> | 3075 |  | 2992 | 83 |
| Loans held for investment | 303818 |  |  | 303818 |
| Servicing assets <sup>(2)</sup> | 60085 |  |  | 60085 |
| Mutual fund <sup>(3)</sup> | 345 |  | 345 |  |
| Equity warrant assets | 6745 |  |  | 6745 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $1696199 | $— | $1325468 | $370731 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Investment securities available-for-sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. government agencies | $17897 | $— | $17897 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Mortgage-backed securities | 1227333 |  | 1227333 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal bonds <sup>(1)</sup> | 2973 |  | 2890 | 83 |
| Loans held for investment | 328746 |  |  | 328746 |
| Servicing assets <sup>(2)</sup> | 55788 |  |  | 55788 |
| Mutual fund <sup>(3)</sup> | 458 |  | 458 |  |
| Equity warrant assets | 7162 |  |  | 7162 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $1640357 | $— | $1248578 | $391779 |

---

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

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

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

For additional information on the valuation techniques and significant inputs for Level 2 and Level 3 assets and liabilities that are measured at fair value on a recurring basis, see Note 10. Fair Value of Financial Instruments in the Company's 2024 Form 10-K.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of loans accounted for under the fair value option at June 30, 2025 and December 31, 2024.

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 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 | $303818 | $315724 | $(11907) | $69326 | $70799 | $(1473) | $59768 | $61140 | $(1372) |
|  | $303818 | $315724 | $(11907) | $69326 | $70799 | $(1473) | $59768 | $61140 | $(1372) |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **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 | $328746 | $342150 | $(13404) | $63386 | $64784 | $(1398) | $51272 | $52528 | $(1256) |
|  | $328746 | $342150 | $(13404) | $63386 | $64784 | $(1398) | $51272 | $52528 | $(1256) |

---

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| **Gains (Losses) on Loans Accounted for under the Fair Value Option** | **2025** | **2024** | **2025** | **2024** |
| Loans held for investment | $1082 | $172 | $48 | $(47) |
|  | $1082 | $172 | $48 | $(47) |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| **Loans held for investment** | **2025** | **2024** | **2025** | **2024** |
| Balance at beginning of period | $316807 | $379222 | $328746 | $388036 |
| Repurchases | 3057 | 4247 | 9309 | 12812 |
| Fair value changes | 1082 | 172 | 48 | (47) |
| Settlements | (17128) | (20624) | (34285) | (37784) |
| Balance at end of period | $303818 | $363017 | $303818 | $363017 |

---

***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>June 30, 2025</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Collateral-dependent loans | $14750 | $— | $— | $14750 |
| Foreclosed assets | 4210 |  |  | 4210 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $18960 | $— | $— | $18960 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</u>** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Collateral-dependent loans | $17085 | $— | $— | $17085 |
| Foreclosed assets | 1944 |  |  | 1944 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total assets at fair value | $19029 | $— | $— | $19029 |

---

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 2024 Form 10-K.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

***Level 3 Analysis***

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

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **<u>June 30, 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 | 7.2% | N/A |
| Municipal bond |  | $83 | Discounted expected cash flows |  | Prepayment speed | 5.0% | N/A |
| Loans held for investment |  | $303818 | Discounted expected cash flows |  | Loss rate | 0.0 % - 4.7% | 1.0% |
| Loans held for investment |  | $303818 | Discounted expected cash flows |  | Discount rate | 7.0 % - 18.0% | 9.0% |
| Loans held for investment |  | $303818 | Discounted expected cash flows |  | Prepayment speed | 15.1 % - 30.2% | 16.9% |
| Loans held for investment | Servicing assets | $303818 | $60085 |  | Discounted expected cash flows | Discount rate | 13.5% |
|  | Servicing assets |  | $60085 | Prepayment speed | Discounted expected cash flows | 11.9 % - 18.7% | 16.0% |
| Equity warrant assets |  | $6745 | Black-Scholes option pricing model |  | Volatility | 13.1 % - 90.0% | 33.3% |
| Equity warrant assets |  | $6745 | Black-Scholes option pricing model |  | Risk-free interest rate | 3.8 % - 4.3% | 4.2% |
| Equity warrant assets |  | $6745 | Black-Scholes option pricing model |  | Marketability discount | 20.0 % - 52.0 %  | 21.0% |
| Equity warrant assets |  | $6745 | Black-Scholes option pricing model |  | Remaining life | 2.4 - 11.2 years | 7.7 years |
| ***Non-recurring fair value*** |  |  |  |  |  |  |  |
| Collateral-dependent loans |  | $14750 | Discounted appraisals |  | Appraisal adjustments <sup>(2)</sup> | 11.3 % - 76.7% | 36.1% |
| Foreclosed assets |  | $4210 | Discounted appraisals |  | Appraisal adjustments <sup>(2)</sup> | 10.0% | 10.0% |

---

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Live Oak Bancshares, Inc.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</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 | 7.2% | N/A |
| Municipal bond | $83 | Discounted expected cash flows | Prepayment speed | 5.0% | N/A |
| Loans held for investment | $328746 | Discounted expected cash flows | Loss rate | 0.0 % - 6.3% | 1.1% |
| Loans held for investment | $328746 | Discounted expected cash flows | Discount rate | 7.0 % - 18.0% | 9.2% |
| Loans held for investment | $328746 | Discounted expected cash flows | Prepayment speed | 14.3% - 30.1% | 16.3% |
| Servicing assets | $55788 | Discounted expected cash flows | Discount rate | 13.5% | 13.5% |
| Servicing assets | $55788 | Discounted expected cash flows | Prepayment speed | 11.9% - 18.3% | 15.6% |
| Equity warrant assets | $7162 | Black-Scholes option pricing model | Volatility | 13.1 % - 90.0% | 32.1% |
| Equity warrant assets | $7162 | Black-Scholes option pricing model | Risk-free interest rate | 4.5 % - 4.6% | 4.5% |
| Equity warrant assets | $7162 | Black-Scholes option pricing model | Marketability discount | 10.0% - 25.0%  | 13.8% |
| Equity warrant assets | $7162 | Black-Scholes option pricing model | Remaining life | 2.9 - 12 years | 4.5 years |
| ***Non-recurring fair value*** |  |  |  |  |  |
| Collateral-dependent loans | $17085 | Discounted appraisals | Appraisal adjustments <sup>(2)</sup> | 0.0 % - 95.8% | 45.4% |
| Foreclosed assets | $1944 | Discounted appraisals | Appraisal adjustments <sup>(2)</sup> | 10.0% | 10.0% |

---

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

(2) Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and other qualitative adjustments.

***Estimated Fair Value of Other Financial Instruments***

GAAP also requires disclosure of the fair value of financial instruments carried at book value on the Unaudited Condensed Consolidated Balance Sheets.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**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>June 30, 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 | $662755 | $662755 | $— | $— | $662755 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit with other banks | 250 | 250 |  |  | 250 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 350791 |  |  | 365540 | 365540 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment, net of allowance for credit losses on loans and leases | 10528006 |  |  | 10473868 | 10473868 |
| ***Financial liabilities*** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 12594790 |  | 12064625 |  | 12064625 |
| &nbsp;&nbsp;&nbsp;Borrowings | 107659 |  |  | 116417 | 116417 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **<u>December 31, 2024</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 | $608800 | $608800 | $— | $— | $608800 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit with other banks | 250 | 250 |  |  | 250 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 346002 |  |  | 367993 | 367993 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment, net of allowance for credit losses on loans and leases | 9737112 |  |  | 9556981 | 9556981 |
| ***Financial liabilities*** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 11760494 |  | 11317639 |  | 11317639 |
| &nbsp;&nbsp;&nbsp;Borrowings | 112820 |  |  | 121026 | 121026 |

---

**Note 10. 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.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**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:

---

| | | |
|:---|:---|:---|
| | **June 30, 2025** | **December 31, 2024** |
| Commitments to extend credit <sup>(1) (2)</sup> | $4276758 | $3597937 |
| Standby letters of credit | 8141 | 7365 |
| &nbsp;&nbsp;&nbsp;Total unfunded off-balance-sheet credit risk | $4284899 | $3605302 |

---

(1) Includes unfunded overdraft protection.

(2) Includes $1.77 billion and $1.20 billion at June 30, 2025 and December 31, 2024, respectively, for which loan commitment letters have been issued. Such letters do not represent a present obligation to extend credit due to the variety of conditions contained in the letters.

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 $12.9 million and $13.6 million at June 30, 2025 and December 31, 2024, respectively. During the three and six months ended June 30, 2025, the Company recorded $240 thousand and $718 thousand in recoveries related to the allowance for off-balance-sheet credit exposures, respectively. During the three and six months ended June 30, 2024, the Company recorded $4.7 million and $5.6 million in expense related to the allowance for off-balance-sheet credit exposures, respectively. Beginning in the second quarter of 2024, this expense was presented in the provision for credit losses. This expense has historically been presented in other expense and that classification remains unchanged for prior periods.

***Other Commitments***

See Note 4. Investments for unfunded commitments to provide capital contributions for equity fund investments as of June 30, 2025 and December 31, 2024.

***Concentrations of Credit Risk***

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 60 relationships that have a retained unguaranteed exposure of $2.55 billion of which $1.71 billion of the unguaranteed exposure has been disbursed.

Additionally, the Company has future minimum lease payments receivable under non-cancelable operating leases totaling $34.4 million, of which no relationships exceed $20.0 million.

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 June 30, 2025:

---

| | |
|:---|:---|
| | **% of Total** |
| **Geographic Regions** <sup>(1)</sup> | |
| &nbsp;&nbsp;Midwest | 12.8% |
| &nbsp;&nbsp;Northeast | 17.1 |
| &nbsp;&nbsp;Southeast | 32.2 |
| &nbsp;&nbsp;Southwest | 13.2 |
| &nbsp;&nbsp;West | 24.3 |
| &nbsp;&nbsp;Non-U.S. | 0.4 |
| &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 11. Subsequent Event** 

On August 4, 2025, the Company issued and sold 4,000,000 depositary shares (the "Depositary Shares"), each representing a 1/40th interest in a share of the Company's 8.375% Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock, no par value per share (the "Series A Preferred Stock"), with a liquidation preference of $1,000 per share of Series A Preferred Stock (equivalent to $25 per depositary Share), which represents $100,000,000 in aggregate liquidation preference. Net proceeds, after underwriting discounts and estimated expenses, total approximately $96.2 million. Holders of the Series A Preferred Stock will not have voting rights, except with respect to certain changes in the terms of the preferred stock, certain dividend non-payments and as otherwise required by applicable law. The Company may redeem the Series A Preferred Stock at its option, (i) in whole or in part, from time to time, on any dividend payment date on or after September 15, 2030 or (ii) in whole but not in part, at any time within 90 days following a regulatory capital treatment event, in either case at a redemption price equal to $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends.

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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, 2024 (the "2024 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;• 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 or to develop a next-generation banking platform, 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 weakness 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, primarily led by the Consumer Financial Protection Bureau and various state agencies;

&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 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 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 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 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 June 30, 2025, the Company's wholly owned material subsidiaries were the Bank, Government Loan Solutions ("GLS"), Live Oak Grove, LLC ("Grove") and Live Oak Ventures, Inc. ("Live Oak Ventures"). GLS is a management and technology consulting firm that advises and offers solutions and services to participants in the government guaranteed lending sector. GLS primarily provides services in connection with the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under 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. Canapi Advisors, LLC ("Canapi Advisors") was a wholly owned subsidiary providing investment advisory services to a series of funds (the "Canapi Funds") focused on providing venture capital to new and emerging financial technology companies. During the third quarter of 2024, the Canapi Funds were restructured and Canapi Advisors voluntarily withdrew as an investment advisor to the funds. Canapi Advisors was subsequently dissolved in the fourth quarter of 2024. As of December 31, 2024, Live Oak Ventures consolidated its investment in Synply, Inc. ("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 and discloses the non-controlling interest 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.

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The Company generates revenue primarily from net interest income and secondarily through 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 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.

**Results of Operations**

***Performance Summary***

*Three months ended June 30, 2025 compared with three months ended June 30, 2024*

For the three months ended June 30, 2025, the Company reported net income attributable to Live Oak Bancshares, Inc. of $23.4 million, or $0.51 per diluted share, compared to net income attributable to Live Oak Bancshares, Inc. of $27.0 million, or $0.59 per diluted share, for the second quarter of 2024.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Provision for credit losses increased by $11.5 million, or 97.6%, to $23.3 million, compared to $11.8 million for the second quarter of 2024;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Management fee income decreased by $3.3 million, or 100.0%, due to the restructuring of the Canapi Funds in the third quarter of 2024;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Other noninterest income decreased by $6.1 million, or 55.6%, largely related to a $6.7 million gain arising from the sale of one of the Company's aircraft in the second quarter of 2024; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Other noninterest expense increased by $3.5 million, or 133.8%, principally driven by a $2.8 million loss arising from the early buyout of the Company's sole bioenergy lease.

Key factors largely offsetting the decrease in net income are increased levels of net interest income of $17.9 million, combined with increased net gains on sales of loans of $7.2 million.

*Six months ended June 30, 2025 compared with six months ended June 30, 2024*

For the six months ended June 30, 2025, the Company reported net income attributable to Live Oak Bancshares, Inc. of $33.1 million, or $0.72 per diluted share, compared to net income attributable to Live Oak Bancshares, Inc. of $54.5 million, or $1.20 per diluted share, for the six months ended June 30, 2024.

The decrease in net income was largely due to the following items:

&nbsp;&nbsp;&nbsp;&nbsp;• Provision for credit losses increased by $24.1 million, or 85.6%, to $52.2 million, compared to $28.1 million for the first half of 2024;

&nbsp;&nbsp;&nbsp;&nbsp;• Management fee income decreased by $6.5 million, or 100.0%, due to reasons discussed above;

&nbsp;&nbsp;&nbsp;&nbsp;• Other noninterest income decreased by $11.8 million, or 57.0%, largely related to activity in the first half of 2024 arising from the above noted $6.7 million gain arising from the sale of one of the Company's aircraft combined with a first quarter of 2024 gain arising from increased fair value of equity warrant assets;

&nbsp;&nbsp;&nbsp;&nbsp;• Noninterest expense increased by $17.9 million, or 11.5%. This increase was principally comprised by increased levels of salary and employee benefits of $3.6 million, technology expense of $3.6 million and other expense of $3.0 million. The increase in other expense was principally comprised of a $2.8 million loss arising from the early buyout of the Company's sole bioenergy lease;

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&nbsp;&nbsp;&nbsp;&nbsp;• Net income tax expense increased by $7.7 million, from $3.6 million in the first half of 2024, to $11.3 million for the first half of 2025. This increase was largely the result of an additional $10.6 million in investment tax credits related to the Company's fourth quarter of 2023 renewable energy investment that became eligible for an extra 10% in tax credits in the first quarter of 2024.

Key factors largely offsetting the decrease in net income are increased levels of net interest income of $28.3 million, combined with increased net gains on sales of loans of $14.4 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 June 30, 2025 compared with three months ended June 30, 2024*

For the three months ended June 30, 2025, net interest income increased $17.9 million, or 19.6%, to $109.2 million compared to $91.3 million for the three months ended June 30, 2024. 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 $2.16 billion, or 19.3%, to $13.36 billion for the second quarter of 2025, compared to $11.20 billion for the second quarter of 2024, while the yield on average interest-earning assets decreased 39 basis points to 6.73%. The cost of funds on interest-bearing liabilities for the second quarter of 2025 decreased 37 basis points to 3.78% and the average balance of interest-bearing liabilities increased by $1.83 billion, or 17.6%, over the second quarter of 2024.

As indicated in the rate/volume analysis below, the overall increase discussed above is reflected in increased interest income of $25.8 million outpacing growth in interest expense of $7.9 million for the second quarter of 2025 compared to the second quarter of 2024. The net interest margin remained stable at 3.28% for both the second quarters of 2024 and 2025.

*Six months ended June 30, 2025 compared with six months ended June 30, 2024*

For the six months ended June 30, 2025, net interest income increased $28.3 million, or 15.6%, to $209.8 million compared to $181.4 million for the six months ended June 30, 2024. 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 $2.01 billion, or 18.2%, to $13.06 billion for the six months ended June 30, 2025, compared to $11.05 billion for the six months ended June 30, 2024, while the yield on average interest-earning assets decreased 36 basis points to 6.75%. The cost of funds on interest-bearing liabilities for the six months ended June 30, 2025 decreased 27 basis points to 3.84%, and the average balance of interest-bearing liabilities increased by $1.72 billion, or 16.7%, over the six months ended June 30, 2024.

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 $46.5 million outpacing growth in interest expense of $18.2 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The net interest margin decreased from 3.30% for the six months ended June 30, 2024 to 3.24% for the six months ended June 30, 2025.

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In June and July 2025, the Federal Reserve decided to maintain the federal funds upper target rate at 4.5%. In June 2025, the Federal Reserve released its most current federal funds target rate midpoint projections which implied a decrease of the median Federal Funds rate to 3.9% by the end of 2025. 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 3. Quantitative and Qualitative Disclosures About Market Risk for information about the Company's sensitivity to interest rates.

*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 June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** |
| | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** |
| | **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 | $727715 | $8123 | 4.48% | $555570 | $7389 | 5.35% |
| &nbsp;&nbsp;&nbsp;Investment securities | 1408942 | 11648 | 3.32 | 1263675 | 9219 | 2.93 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 381531 | 8008 | 8.42 | 387824 | 9329 | 9.67 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment <sup>(1)</sup> | 10843303 | 196505 | 7.27 | 8997164 | 172511 | 7.71 |
| Total interest-earning assets | 13361491 | 224284 | 6.73 | 11204233 | 198448 | 7.12 |
| Less: Allowance for credit losses on loans and leases | (186022) |  |  | (136668) |  |  |
| Noninterest-earning assets | 539485 |  |  | 562488 |  |  |
| Total assets | $13714954 |  |  | $11630053 |  |  |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest-bearing checking | $350978 | $3969 | 4.54% | $304505 | $4267 | 5.64% |
| &nbsp;&nbsp;&nbsp;Savings | 6241053 | 56529 | 3.63 | 4804037 | 48617 | 4.07 |
| &nbsp;&nbsp;&nbsp;Money market accounts | 128757 | 93 | 0.29 | 128625 | 186 | 0.58 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit | 5392494 | 52789 | 3.93 | 5032856 | 52288 | 4.18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 12113282 | 113380 | 3.75 | 10270023 | 105358 | 4.13 |
| &nbsp;&nbsp;&nbsp;Borrowings | 109463 | 1683 | 6.17 | 119321 | 1770 | 5.97 |
| Total interest-bearing liabilities | 12222745 | 115063 | 3.78 | 10389344 | 107128 | 4.15 |
| Noninterest-bearing deposits | 375503 |  |  | 223026 |  |  |
| Noninterest-bearing liabilities | 53717 |  |  | 70667 |  |  |
| Shareholders' equity | 1058572 |  |  | 947016 |  |  |
| Non-controlling interest | 4417 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $13714954 |  |  | $11630053 |  |  |
| Net interest income and interest rate spread |  | $109221 | 2.95% |  | $91320 | 2.97% |
| Net interest margin |  |  | 3.28% |  |  | 3.28% |
| Ratio of average interest-earning assets to average interest-bearing liabilities |  |  | 109.32% |  |  | 107.84% |

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

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** |
| | **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 | $654896 | $14523 | 4.47% | $550608 | $14845 | 5.42% |
| &nbsp;&nbsp;&nbsp;Investment securities | 1394450 | 22737 | 3.29 | 1252268 | 18173 | 2.92 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 394846 | 16620 | 8.49 | 370662 | 17683 | 9.59 |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment <sup>(1)</sup> | 10617166 | 383509 | 7.28 | 8875186 | 340167 | 7.71 |
| Total interest-earning assets | 13061358 | 437389 | 6.75 | 11048724 | 390868 | 7.11 |
| Less: Allowance for credit losses on loans and leases | (175728) |  |  | (131057) |  |  |
| Noninterest-earning assets | 536823 |  |  | 554961 |  |  |
| Total assets | $13422453 |  |  | $11472628 |  |  |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest-bearing checking | $350736 | $7898 | 4.54% | $302285 | $8450 | 5.62% |
| &nbsp;&nbsp;&nbsp;Savings | 5892536 | 108133 | 3.70 | 4678214 | 94788 | 4.07 |
| &nbsp;&nbsp;&nbsp;Money market accounts | 128335 | 213 | 0.33 | 126971 | 373 | 0.59 |
| &nbsp;&nbsp;&nbsp;Certificates of deposit | 5477278 | 108024 | 3.98 | 5063704 | 103745 | 4.12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 11848885 | 224268 | 3.82 | 10171174 | 207356 | 4.10 |
| &nbsp;&nbsp;&nbsp;Borrowings | 110684 | 3368 | 6.14 | 73047 | 2081 | 5.73 |
| Total interest-bearing liabilities | 11959569 | 227636 | 3.84 | 10244221 | 209437 | 4.11 |
| Noninterest-bearing deposits | 359084 |  |  | 218298 |  |  |
| Noninterest-bearing liabilities | 56214 |  |  | 74305 |  |  |
| Shareholders' equity | 1043145 |  |  | 935804 |  |  |
| Non-controlling interest | 4441 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $13422453 |  |  | $11472628 |  |  |
| Net interest income and interest rate spread |  | $209753 | 2.91% |  | $181431 | 3.00% |
| Net interest margin |  |  | 3.24% |  |  | 3.30% |
| Ratio of average interest-earning assets to average interest-bearing liabilities |  |  | 109.21% |  |  | 107.85% |

---

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

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

*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.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **Six Months Ended June 30,** |
| | **2025 vs. 2024** | **2025 vs. 2024** | **2025 vs. 2024** | **2025 vs. 2024** | **2025 vs. 2024** | **2025 vs. 2024** |
| | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** |
| | **Rate** | **Volume** | **Total** | **Rate** | **Volume** | **Total** |
| **Interest income:** | | | | | | |
| &nbsp;&nbsp;&nbsp;Interest-earning balances in other banks | $(1372) | $2106 | $734 | $(2884) | $2562 | $(322) |
| &nbsp;&nbsp;&nbsp;Investment securities | 1299 | 1130 | 2429 | 2373 | 2191 | 4564 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | (1179) | (142) | (1321) | (2149) | 1086 | (1063) |
| &nbsp;&nbsp;&nbsp;Loans and leases held for investment | (10433) | 34427 | 23994 | (21502) | 64844 | 43342 |
| &nbsp;&nbsp;&nbsp;Total interest income | (11685) | 37521 | 25836 | (24162) | 70683 | 46521 |
| **Interest expense:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest-bearing checking | (886) | 588 | (298) | (1775) | 1223 | (552) |
| &nbsp;&nbsp;&nbsp;Savings | (5867) | 13779 | 7912 | (10099) | 23444 | 13345 |
| &nbsp;&nbsp;&nbsp;Money market accounts | (93) |  | (93) | (163) | 3 | (160) |
| &nbsp;&nbsp;&nbsp;Certificates of deposit | (3127) | 3628 | 501 | (4036) | 8315 | 4279 |
| &nbsp;&nbsp;&nbsp;Borrowings | 62 | (149) | (87) | 178 | 1109 | 1287 |
| &nbsp;&nbsp;&nbsp;Total interest expense | (9911) | 17846 | 7935 | (15895) | 34094 | 18199 |
| Net interest income | $(1774) | $19675 | $17901 | $(8267) | $36589 | $28322 |

---

***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. Beginning in the second quarter of 2024, expense related to off-balance sheet credit exposures was also included in the provision for credit losses in response to growth in the amount of loans with applicable off-balance sheet credit risk. See Note 10. 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 second quarter of 2025, there was a provision for credit losses of $23.3 million compared to $11.8 million for the same period in 2024, an increase of $11.5 million. For the six months ended June 30, 2025, there was a provision for credit losses of $52.2 million compared to $28.1 million for the same period in 2024, an increase of $24.1 million. The increase in provision was principally driven by loan growth and elevated specific reserves on individually evaluated loans amid a challenging macroeconomic environment, where elevated interest rates and inflationary pressures placed financial strain on some small business and commercial borrowers.

Loans and leases held for investment at historical cost were $10.71 billion as of June 30, 2025, increasing by $1.90 billion, or 21.6%, compared to June 30, 2024.

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

Net charge-offs for loans and leases carried at historical cost were $31.4 million, or 1.19% of average quarterly loans and leases held for investment, carried at historical cost, on an annualized basis, for the three months ended June 30, 2025, compared to net charge-offs of $8.3 million, or 0.38%, for the three months ended June 30, 2024, an increase of $23.2 million, or 281.0%. The increase in net charge-offs compared to the second quarter of 2024 was largely concentrated to individually evaluated loans with specific reserves recorded in prior periods. For the six months ended June 30, 2025, net charge-offs totaled $38.2 million compared to $11.4 million for the six months ended June 30, 2024, an increase of $26.8 million, or 234.8%. 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.

In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $8.9 million and $9.6 million accounted for under the fair value option at June 30, 2025 and 2024, respectively, totaled $59.6 million, which was 0.56% of the held for investment loan and lease portfolio carried at historical cost at June 30, 2025, compared to $37.3 million, or 0.42% of loans and leases held for investment carried at historical cost at June 30, 2024.

***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 gain (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 June 30,** | **Three Months Ended June 30,** | **2025/2024 Increase (Decrease)** | **2025/2024 Increase (Decrease)** |
| | **2025** | **2024** | **Amount** | **Percent** |
| ***Noninterest income*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | $8565 | $7347 | $1218 | 16.6% |
| &nbsp;&nbsp;&nbsp;Loan servicing asset revaluation | (3057) | (2878) | (179) | (6.2) |
| &nbsp;&nbsp;&nbsp;Net gains on sales of loans | 21641 | 14395 | 7246 | 50.3 |
| &nbsp;&nbsp;&nbsp;Net gain on loans accounted for under the fair value option | 1082 | 172 | 910 | 529.1 |
| &nbsp;&nbsp;&nbsp;Equity method investments (loss) income | (2716) | (1767) | (949) | (53.7) |
| &nbsp;&nbsp;&nbsp;Equity security investments gains, net | 1004 | 161 | 843 | 523.6 |
| &nbsp;&nbsp;&nbsp;Lease income | 3103 | 2423 | 680 | 28.1 |
| &nbsp;&nbsp;&nbsp;Management fee income |  | 3271 | (3271) | (100.0) |
| &nbsp;&nbsp;&nbsp;Other noninterest income | 4904 | 11035 | (6131) | (55.6) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $34526 | $34159 | $367 | 1.1% |

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **2025/2024 Increase (Decrease)** | **2025/2024 Increase (Decrease)** |
| | **2025** | **2024** | **Amount** | **Percent** |
| ***Noninterest income*** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | $16863 | $14971 | $1892 | 12.6% |
| &nbsp;&nbsp;&nbsp;Loan servicing asset revaluation | (7785) | (5622) | (2163) | (38.5) |
| &nbsp;&nbsp;&nbsp;Net gains on sales of loans | 40289 | 25897 | 14392 | 55.6 |
| &nbsp;&nbsp;&nbsp;Net gain (loss) on loans accounted for under the fair value option | 48 | (47) | 95 | 202.1 |
| &nbsp;&nbsp;&nbsp;Equity method investments (loss) income | (4955) | (6789) | 1834 | 27.0 |
| &nbsp;&nbsp;&nbsp;Equity security investments gains, net | 1024 | (368) | 1392 | 378.3 |
| &nbsp;&nbsp;&nbsp;Lease income | 5676 | 4876 | 800 | 16.4 |
| &nbsp;&nbsp;&nbsp;Management fee income |  | 6542 | (6542) | (100.0) |
| &nbsp;&nbsp;&nbsp;Other noninterest income | 8947 | 20796 | (11849) | (57.0) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest income | $60107 | $60256 | $(149) | (0.2)% |

---

For the three months ended June 30, 2025, noninterest income increased by $367 thousand, or 1.1%, compared to the three months ended June 30, 2024. Principal changes when compared with the second quarter of 2024 are higher net gains on sales of loans of $7.2 million combined with a $3.3 million decrease in management fee income due to the restructuring of the Canapi Funds in the third quarter of 2024 and a $6.1 million decrease in other noninterest income largely related to a $6.7 million gain arising from the sale of one of the Company's aircraft in the second quarter of 2024.

For the six months ended June 30, 2025, noninterest income decreased by $149 thousand, or 0.2%, compared to the six months ended June 30, 2024. Principal changes when compared with the first half of 2024 are primarily a result of a $2.2 million increase in loss related to the servicing asset revaluation combined with a $6.5 million decrease in management fee income discussed above and a $11.8 million decrease in other noninterest income largely related to activity in the first half of 2024 arising from a $6.7 million gain arising from the sale of one of the Company's aircraft combined with a gain arising from increased fair value of equity warrant assets. Partially offsetting these negative changes was higher net gains on sales of loans of $14.4 million.

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.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended June 30,** | **Three months ended June 30,** | **Three months ended March 31,** | **Three months ended March 31,** |
| | **2025** | **2024** | **2025** | **2024** |
| Amount of loans and leases originated | $1526592 | $1171141 | $1396223 | $805129 |
| Guaranteed portions of loans sold | 322317 | 250466 | 266275 | 186654 |
| Outstanding balance of guaranteed loans sold <sup>(1)</sup> | 3685981 | 3177629 | 3486533 | 3057641 |

---

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **For years ended December 31,** | **For years ended December 31,** | **For years ended December 31,** | **For years ended December 31,** |
| | **2025** | **2024** | **2024** | **2023** | **2022** | **2021** |
| Amount of loans and leases originated | $2922815 | $1976270 | $5155244 | $3946873 | $4007621 | $4480725 |
| Guaranteed portions of loans sold | 588592 | 437120 | 980973 | 877551 | 580889 | 668462 |
| Outstanding balance of guaranteed loans sold <sup>(1)</sup> | 3685981 | 3177629 | 3379477 | 2986959 | 2668110 | 2756915 |

---

(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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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

Changes in various components of noninterest income are discussed in more detail below.

*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 June 30, 2025, there was a net loss on loan servicing asset revaluation of $3.1 million, compared to a net loss of $2.9 million for the three months ended June 30, 2024. For the six months ended June 30, 2025, there was a net loss on loan servicing asset revaluation of $7.8 million compared to a net loss of $5.6 million for the six months ended June 30, 2024, resulting in a negative comparative year-to-date change of $2.2 million. The decrease in the valuation of the servicing asset compared to the first half of 2024 was principally the result of principal paydowns or runoff as well as less favorable market conditions in 2025.

*Net Gains on Sales of Loans:* For the three months ended June 30, 2025, net gains on sales of loans increased $7.2 million, or 50.3%, compared to the three months ended June 30, 2024. The volume of guaranteed loans sold increased $71.9 million, or 28.7%, for the three months ended June 30, 2025 to $322.3 million from $250.5 million for the three months ended June 30, 2024. For the six months ended June 30, 2025, net gains on sales of loans increased $14.4 million, or 55.6%, compared to the six months ended June 30, 2024. For the six months ended June 30, 2025, the volume of guaranteed loans sold increased $151.5 million, or 34.7%, to $588.6 million from $437.1 million for the six months ended June 30, 2024. The average net gain on loan sale premium increased from 106% to 107% in the second quarters of 2024 and 2025, respectively, and for the six months ended June 30, 2024 and 2025. The increase in net gains on sales of loans over the second quarter of 2024 and six months ended June 30, 2024 was principally related to a higher loan sale volume combined with improving premiums.

***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.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three Months Ended June 30,** | **Three Months Ended June 30,** | **2025/2024 Increase (Decrease)** | **2025/2024 Increase (Decrease)** |
| | **2025** | **2024** | **Amount** | **Percent** |
| **Noninterest expense** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | $49137 | $46255 | $2882 | 6.2% |
| &nbsp;&nbsp;&nbsp;Non-employee expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Travel expense | 2576 | 2328 | 248 | 10.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional services expense | 2874 | 3061 | (187) | (6.1) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising and marketing expense | 4420 | 3004 | 1416 | 47.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Occupancy expense | 2369 | 2388 | (19) | (0.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technology expense | 10066 | 7996 | 2070 | 25.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equipment expense | 3685 | 3511 | 174 | 5.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other loan origination and maintenance expense | 4190 | 3659 | 531 | 14.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renewable energy tax credit investment impairment | 270 | 170 | 100 | 58.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FDIC insurance | 3545 | 2649 | 896 | 33.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense | 6161 | 2635 | 3526 | 133.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-employee expenses | 40156 | 31401 | 8755 | 27.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | $89293 | $77656 | $11637 | 15.0% |

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Six Months Ended June 30,** | **Six Months Ended June 30,** | **2025/2024 Increase (Decrease)** | **2025/2024 Increase (Decrease)** |
| | **2025** | **2024** | **Amount** | **Percent** |
| **Noninterest expense** |  |  |  |  |
| Salaries and employee benefits | $97145 | $93530 | $3615 | 3.9% |
| &nbsp;&nbsp;&nbsp;Non-employee expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Travel expense | 5371 | 4766 | 605 | 12.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional services expense | 5898 | 4939 | 959 | 19.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising and marketing expense | 8085 | 6696 | 1389 | 20.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Occupancy expense | 5106 | 4635 | 471 | 10.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Technology expense | 19317 | 15719 | 3598 | 22.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equipment expense | 7430 | 6585 | 845 | 12.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other loan origination and maintenance expense | 8775 | 7570 | 1205 | 15.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renewable energy tax credit investment (recovery) impairment | 270 | (757) | 1027 | 135.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FDIC insurance | 7096 | 5849 | 1247 | 21.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense | 8817 | 5861 | 2956 | 50.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-employee expenses | 76165 | 61863 | 14302 | 23.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noninterest expense | $173310 | $155393 | $17917 | 11.5% |

---

Total noninterest expense for the three and six months ended June 30, 2025, increased $11.6 million, or 15.0%, and increased $17.9 million, or 11.5%, respectively, compared to the same periods in 2024. The changes within noninterest expense for the comparable three and six month periods was largely driven by various components, as discussed below.

*Salaries and employee benefits:* Total personnel expense for the three and six months ended June 30, 2025 increased by $2.9 million, or 6.2%, and increased by $3.6 million, or 3.9%, respectively, compared to the same periods in 2024. The increase over both comparative periods of 2024 is principally related to investment in human resources to support strategic and growth initiatives. Total full-time equivalent employees increased from 987 at June 30, 2024, to 1,056 at June 30, 2025. Salaries and employee benefits expense included $6.9 million and $13.7 million of stock-based compensation for the three and six months ended June 30, 2025, respectively, compared to $6.8 million and $13.2 million for the three and six months ended June 30, 2024, respectively. Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation.

*Technology expense*: For the three and six months ended June 30, 2025, technology expense increased $2.1 million, or 25.9%, and $3.6 million, or 22.9%, respectively, compared to the same periods in 2024. This increase for both compared periods was primarily related to enhanced investments in the Company's technology resources.

*Other expense*: For the three and six months ended June 30, 2025, other expense increased $3.5 million, or 133.8%, and $3.0 million, or 50.4%, respectively, compared to the same periods in 2024. The increase over both comparative periods was principally driven by a $2.8 million loss arising from the early buyout of the Company's sole bioenergy lease in the second quarter of 2025.

***Income Tax Expense***

For the three months ended June 30, 2025, income tax expense was $7.8 million compared to income tax expense of $9.1 million in the second quarter of 2024, and the Company's effective tax rates were 25.0% and 25.2%, respectively. For the six months ended June 30, 2025, income tax expense was $11.3 million compared to $3.6 million for the six months ended June 30, 2024, and the Company's effective tax rates were 25.4% and 6.2%, respectively. The lower level of income tax expense for the second quarter of 2025 as compared to the second quarter of 2024 was largely the result of decreased pretax income during the current period. The higher level of income tax expense for the first half of 2025 as compared to the first half of 2024 was largely the result of an additional $10.6 million in tax credits related to the Company's fourth quarter of 2023 renewable energy investment that became eligible for an extra 10% in tax credits in the first quarter of 2024. Partially offsetting the comparative increase in income tax expense in the first half of 2025 was decreased pretax income during the current period.

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**Discussion and Analysis of Financial Condition**

*June 30, 2025 vs. December 31, 2024* 

Total assets at June 30, 2025 were $13.83 billion, an increase of $887.8 million, or 6.9%, compared to total assets of $12.94 billion at December 31, 2024. The growth in total assets was principally driven by the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cash and cash equivalents, comprised of cash and due from banks, combined with investment securities available-for-sale was $1.99 billion at June 30, 2025, an increase of $131.0 million, or 7.1%, compared to $1.86 billion at December 31, 2024. This increase reflects growing deposit levels combined with maintenance of the Company's targeted liquidity profile.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Growth in total loans and leases held for investment and held for sale of $785.5 million, or 7.4%, during the first half of 2025, from $10.58 billion at December 31, 2024, to $11.36 billion at June 30, 2025. This growth was a result of strong origination activity during the first half of 2025 of $2.92 billion.

Total deposits were $12.59 billion at June 30, 2025, an increase of $834.3 million, or 7.1%, from $11.76 billion at December 31, 2024. 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 June 30, 2025, the Bank's total uninsured deposits were approximately $1.95 billion, or 15.4%, of total deposits.

**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 June 30, 2025.

---

| | | | |
|:---|:---|:---|:---|
| | **Guaranteed** | **Unguaranteed** | **Total** <sup>(1)</sup> |
| **Held for Investment Loans:** | | | |
| **Owner Occupied** | | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $1317130 | $1174127 | $2491257 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 19960 | 45906 | 65866 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **1337090** | **1220033** | **2557123** |
| **Non-Owner Occupied** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 440686 | 688252 | 1128938 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial Banking | 32829 | 1308770 | 1341599 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **473515** | **1997022** | **2470537** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Held for Investment Commercial Real Estate** | $**1810605** | $**3217055** | $**5027660** |
| **Held for Sale Loans:** |  |  |  |
| **Owner Occupied** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | $58869 | $— | $58869 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **58869** | **—** | **58869** |
| **Non-Owner Occupied** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Small Business Banking | 175110 |  | 175110 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | **175110** | **—** | **175110** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Held for Sale Commercial Real Estate** | $**233979** | $**—** | $**233979** |
| **Total Commercial Real Estate Loans** | $**2044584** | $**3217055** | $**5261639** |
| **% of Total Commercial Real Estate Loans** | **38.9%** | **61.1%** | **100.0%** |

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

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**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.

Nonperforming assets, including loans measured at fair value, at June 30, 2025 were $473.5 million, which represented a $101.7 million, or 27.4%, increase from December 31, 2024. These nonperforming assets at June 30, 2025 were comprised of $467.1 million in nonaccrual loans and leases and $6.3 million in foreclosed assets. Of the $473.5 million of nonperforming assets, $402.8 million carried a government guarantee, leaving an unguaranteed exposure of $70.6 million in total nonperforming assets at June 30, 2025. This represents a decrease of $20.9 million, or 22.9%, from an unguaranteed exposure of $91.6 million at December 31, 2024.

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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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| | | |
|:---|:---|:---|
| | **June 30, 2025** <sup>(1)</sup> | **December 31, 2024** <sup>(1)</sup> |
| Nonaccrual loans and leases: |  |  |
| Total nonperforming loans and leases (all on nonaccrual) | $396332 | $304297 |
| Foreclosed assets | 6318 | 1944 |
| **Total nonperforming assets** | $**402650** | $**306241** |
| **Allowance for credit losses on loans and leases** | $**182231** | $**167516** |
| Total nonperforming loans and leases to total loans and leases held for investment | 3.70% | 3.07% |
| Total nonperforming loans and leases to total assets | 2.93% | 2.41% |
| Allowance for credit losses on loans and leases to loans and leases held for investment | 1.70% | 1.69% |
| Allowance for credit losses on loans and leases to total nonperforming loans and leases | 45.98% | 55.05% |
| **Nonaccrual loans and leases guaranteed by U.S. government:** |  |  |
| Total nonperforming loans and leases guaranteed by the U.S government (all on nonaccrual) | $336777 | $222885 |
| Foreclosed assets guaranteed by the U.S. government | 5147 | 1753 |
| **Total nonperforming assets guaranteed by the U.S. government** | $**341924** | $**224638** |
| **Allowance for credit losses on loans and leases** | $**182231** | $**167516** |
| Total nonperforming loans and leases not guaranteed by the U.S. government to total held for investment loans and leases | 0.56% | 0.82% |
| Total nonperforming loans and leases not guaranteed by the U.S. government to total assets | 0.44% | 0.65% |
| Allowance for credit losses on loans and leases to total nonperforming loans and leases not guaranteed by the U.S. government | 305.99% | 205.76% |

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(1) Excludes loans measured at fair value.

Nonperforming assets, excluding loans measured at fair value, at June 30, 2025 were $402.7 million, which represented a $96.4 million, or 31.5%, increase from December 31, 2024. These nonperforming assets at June 30, 2025 were comprised of $396.3 million in nonaccrual loans and leases and $6.3 million in foreclosed assets. Of the $402.7 million of nonperforming assets, $341.9 million carried a government guarantee, leaving an unguaranteed exposure of $60.7 million in total nonperforming assets at June 30, 2025. This represents a decrease of $20.9 million, or 25.6%, from an unguaranteed exposure of $81.6 million at December 31, 2024.

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 33.2% at June 30, 2025, compared to 26.7% at December 31, 2024. 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 both June 30, 2025 and December 31, 2024 were 5.0% and 7.2%, respectively.

As of June 30, 2025, and December 31, 2024, potential problem (also referred to as criticized) and classified loans and leases, excluding loans measured at fair value, totaled $1.14 billion and $1.04 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 2024 Form 10-K. At June 30, 2025, the portion of criticized and classified loans and leases guaranteed by the SBA or USDA totaled $578.8 million and total portfolio unguaranteed exposure risk was $561.0 million, or 7.5% of total held for investment unguaranteed exposure carried at historical cost. This compares to the December 31, 2024 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled $518.7 million and total portfolio unguaranteed exposure risk was $523.3 million, or 7.8% of total held for investment unguaranteed exposure carried at historical cost.

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As of June 30, 2025 and December 31, 2024, 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 June 30, 2025** | **As of June 30, 2025** | **As of December 31, 2024** | **As of December 31, 2024** |
| **Vertical** | **% of Criticized and Classified Loans and Leases** | **Vertical** | **% of Criticized and Classified Loans and Leases** |
| &nbsp;&nbsp;General Lending | 12.9% | &nbsp;&nbsp;General Lending | 15.1% |
| &nbsp;&nbsp;Senior Housing | 9.2 | &nbsp;&nbsp;Bioenergy | 11.1 |
| &nbsp;&nbsp;Bioenergy | 8.7 | &nbsp;&nbsp;Senior Housing | 9.9 |
| &nbsp;&nbsp;Healthcare | 8.3 | &nbsp;&nbsp;Healthcare | 6.9 |
| &nbsp;&nbsp;Sponsor Finance | 5.8 | &nbsp;&nbsp;Sponsor Finance | 5.5 |
| &nbsp;&nbsp;Auto Care | 5.2 | &nbsp;&nbsp;Wine & Craft Beverage | 5.3 |
| &nbsp;&nbsp;Self Storage | 5.2 | &nbsp;&nbsp;Search Fund Lending | 5.0 |
| &nbsp;&nbsp;Community Facilities | 4.3 | &nbsp;&nbsp;Community Facilities | 4.8 |
| &nbsp;&nbsp;Wine & Craft Beverage | 4.3 | &nbsp;&nbsp;Self Storage | 4.6 |
| &nbsp;&nbsp;% of Total Criticized and Classified Loans | 63.9% | &nbsp;&nbsp;% of Total Criticized and Classified Loans | 68.2% |

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Of the above listed verticals, Senior Housing, Sponsor Finance, Bioenergy and Community Facilities are within the Company's Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division. The total $97.8 million increase in potential problem and classified loans and leases in the first six months of 2025 was comprised of $59.9 million in increased levels of Risk Grade 50 loans and leases, as discussed below and $38.0 million in classified loans. The overall increase in criticized and classified loans in the first half of 2025 was primarily driven by higher levels of commercial borrowers impacted by the challenging macroeconomic environment. 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 June 30, 2025, the Company had a total of $45.9 million in loans modified in 2025 to borrowers experiencing financial difficulty, excluding loans measured at fair value, $43.7 million of which remained current and $36.0 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 June 30, 2025, and December 31, 2024, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $589.8 million and $529.9 million, respectively, for an increase of $59.9 million. Relative to total held for investment unguaranteed exposure carried at historical cost at December 31, 2024 and June 30, 2025, unguaranteed Risk Grade 50 loans and leases increased from $357.9 million, or 5.3%, to $413.3 million, or 5.5%, 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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| | |
|:---|:---|
| **June 30, 2025 vs. December 31, 2024 Increase (Decrease)** | **June 30, 2025 vs. December 31, 2024 Increase (Decrease)** |
| **Vertical** | $**%** |
| &nbsp;&nbsp;Healthcare | 37.1% |
| &nbsp;&nbsp;Government Contractors | 36.1 |
| &nbsp;&nbsp;Sponsor Finance | 21.3 |
| &nbsp;&nbsp;Agriculture | 17.4 |
| &nbsp;&nbsp;Auto Care | 12.9 |
| &nbsp;&nbsp;Hospitality | 12.3 |
| &nbsp;&nbsp;RV Parks | 7.4 |
| &nbsp;&nbsp;Self Storage | (7.6) |
| &nbsp;&nbsp;Veterinary | (9.6) |
| &nbsp;&nbsp;Senior Housing | (10.4) |
| &nbsp;&nbsp;Commercial Real Estate Financing | (10.5) |
| &nbsp;&nbsp;General Lending | (16.3) |
| &nbsp;&nbsp;Search Fund Lending | (17.3) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total of largest changes in Risk Grade 50 loans and leases | 72.8% |

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The increase in Risk Grade 50 loans and leases, exclusive of loans measured at fair value, during the first six months of 2025 was principally confined to 13 verticals, as reflected above. Of the above listed verticals, Government Contractors, Sponsor Finance, Hospitality, Senior Housing, and Commercial Real Estate Financing are within the Company's Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division.

At June 30, 2025, approximately 97.8% 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 $167.5 million at December 31, 2024, increased by $14.7 million, or 8.8%, to $182.2 million at June 30, 2025. The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.7% at both December 31, 2024 and June 30, 2025, respectively. The increase in the ACL during the first six months of 2025 was primarily the result of specific reserve changes on individually evaluated loans and continued growth of the loan and lease portfolio. See also the above section captioned "Provision for Credit Losses" in "Results of Operations" for related information.

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

Actual past due held for investment loans and leases, inclusive of loans measured at fair value, have decreased by $12.0 million since December 31, 2024. Total loans and leases 90 or more days past due increased $46.3 million, or 18.1%, compared to December 31, 2024. This increase was comprised of a $1.8 million increase in unguaranteed exposure combined with a $44.5 million increase in the guaranteed portion of past due loans compared to December 31, 2024. At June 30, 2025 and December 31, 2024, 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 0.7% and 1.3%, respectively. Total unguaranteed loans and leases past due were comprised of $48.5 million carried at historical cost, a decrease of $28.9 million, and $8.5 million measured at fair value, a decrease of $1.8 million, as of June 30, 2025 compared to December 31, 2024. Management continues to actively monitor and work to improve asset quality. Management believes the ACL of $182.2 million at June 30, 2025 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 June 30, 2025, the total amount of these four liquidity source items was $4.49 billion, or 32.5% of total assets, an increase of 0.1% of total assets from $4.20 billion, or 32.4% of total assets, at December 31, 2024.

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 June 30, 2025, $597.0 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $728.2 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, 2024. See the section titled "Liquidity Management" in Part II, Item 7 of the Company's 2024 Form 10-K for additional discussion of contractual obligations.

*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. For more information, see Note 10. Commitments and Contingencies in the accompanying notes to Unaudited Condensed Consolidated Financial Statements.

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**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 June 30, 2025, the balance sheet's total cumulative gap position was 5.3%, 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 June 30, 2025, 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 June 30, 2025, and December 31, 2024, 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 - June 30, 2025*** | | | | | | |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1088967 | 10.67% | $459367 | 4.50% | N/A | N/A |
| Total Capital (to Risk-Weighted Assets) | 1217403 | 11.93 | 816653 | 8.00 | N/A | N/A |
| Tier 1 Capital (to Risk-Weighted Assets) | 1088967 | 10.67 | 612490 | 6.00 | N/A | N/A |
| Tier 1 Capital (to Average Assets) | 1088967 | 7.90 | 551427 | 4.00 | N/A | N/A |
| ***Bank - June 30, 2025*** |  |  |  |  |  |  |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1066764 | 10.65% | $450806 | 4.50% | $651164 | 6.50% |
| Total Capital (to Risk-Weighted Assets) | 1192851 | 11.91 | 801433 | 8.00 | 1001791 | 10.00 |
| Tier 1 Capital (to Risk-Weighted Assets) | 1066764 | 10.65 | 601074 | 6.00 | 801433 | 8.00 |
| Tier 1 Capital (to Average Assets) | 1066764 | 7.79 | 547878 | 4.00 | 684847 | 5.00 |
| ***Consolidated - December 31, 2024*** |  |  |  |  |  |  |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1049420 | 11.04% | $427941 | 4.50% | N/A | N/A |
| Total Capital (to Risk-Weighted Assets) | 1169061 | 12.29 | 760784 | 8.00 | N/A | N/A |
| Tier 1 Capital (to Risk-Weighted Assets) | 1049420 | 11.04 | 570588 | 6.00 | N/A | N/A |
| Tier 1 Capital (to Average Assets) | 1049420 | 8.21 | 511293 | 4.00 | N/A | N/A |
| ***Bank - December 31, 2024*** |  |  |  |  |  |  |
| Common Equity Tier 1 (to Risk-Weighted Assets) | $1020820 | 10.96% | $418992 | 4.50% | $605210 | 6.50% |
| Total Capital (to Risk-Weighted Assets) | 1138006 | 12.22 | 744874 | 8.00 | 931093 | 10.00 |
| Tier 1 Capital (to Risk-Weighted Assets) | 1020820 | 10.96 | 558656 | 6.00 | 744874 | 8.00 |
| Tier 1 Capital (to Average Assets) | 1020820 | 8.04 | 507725 | 4.00 | 634657 | 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, 2024, 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 listed below. This estimate requires the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Allowance for credit losses

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, results of operations or liquidity.

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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 5.3% as of June 30, 2025, 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.

Simulation analysis is only an estimate of interest rate risk exposure at a particular point in time. 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.

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The table below sets forth an approximation of the Company's NII sensitivity exposure for the 12-month periods ending June 30, 2026 and 2027, and the Company's EVE sensitivity at June 30, 2025 under instantaneous parallel interest rate shocks assuming a static balance sheet. The simulation uses projected repricing of assets and liabilities at June 30, 2025, 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 June 30, 2026** | **12 Months Ending June 30, 2027** | **As of June 30, 2025** |
| +300 | 12.4% | 8.6% | (9.9 %) |
| +200 | 8.6 | 6.0 | (6.3) |
| +100 | 4.3 | 3.0 | (2.9) |
| -100 | (4.0) | (2.9) | 1.5 |
| -200 | (6.8) | (5.0) | 1.7 |
| -300 | (8.2) | (6.4) | 1.8 |

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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.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**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 June 30, 2025, 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 June 30, 2025, 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, 2024 (the "2024 10-K"). The Company did not have a restatement of current or prior periods as a result of this material weakness in internal control over financial reporting.

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

In responses to the material weakness identified above, the Company has implemented changes to its internal control over financial reporting to enhance the control environment and strengthen communication protocols in connection with the loan review process. The Company's remediation efforts have focused on enhanced internal control trainings for individuals responsible for the risk assessment, design, monitoring and documentation of the Company's loan review process and increased reporting to the Company's Risk Committee of the Board of Directors through the Company's independent loan review function.

As of the date of this filing, the Company's remediation efforts are ongoing and the material weakness has not yet been fully remediated. The material weakness will not be considered remediated 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 June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

------

<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</u>

**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 June 30, 2025, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

**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, 2024, with the exception of the additional risk factor disclosed in the Company's Quarterly Report on Form 10-Q for the period ended March 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**

*Insider Trading Arrangements -* During the quarter ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" as such terms are defined in Item 408 of Regulation S-K.

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<u>[**Table of Contents**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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 Bylaws 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> |
| 10.1 | <u>[Form of 2025 RSU Award Agreement for non-employee directors\* #](lob-20250630xex101.htm)</u> |
| 31.1 | <u>[Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\*](lob-20250630xex311.htm)</u> |
| 31.2 | <u>[Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\*](lob-20250630xex312.htm)</u> |
| 32 | <u>[Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\*\*](lob-20250630xex32.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 June 30, 2025 and December 31, 2024; (ii) Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2025 and 2024; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024; (iv) Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 2025 and 2024; (v) Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024; 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**](#i078c9a03c5fd4d61934ccadf9ec90db0_7)</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: August 5, 2025 | By: | /*s*/ Walter J. Phifer |
|  |  | Walter J. Phifer |
|  |  | Chief Financial Officer |

---

## Exhibit 10.1

**Exhibit 10.1**

**LIVE OAK BANCSHARES, INC.**

**2015 OMNIBUS STOCK INCENTIVE PLAN**

**RESTRICTED STOCK UNIT AWARD AGREEMENT**

&nbsp;&nbsp;&nbsp;&nbsp;THIS RESTRICTED STOCK UNIT AWARD AGREEMENT is made and entered into effective as of [DATE] (the "**Date of Grant**"), by and between LIVE OAK BANCSHARES, INC., a North Carolina corporation (the "**Company**"), and [NAME] (the "**Grantee**"). This Agreement sets forth the terms and conditions associated with the Company's award to Grantee of restricted stock units payable as described below in shares of Common Stock pursuant to the Company's 2015 Omnibus Stock Incentive Plan (as amended from time to time, the "**Plan**"). Capitalized terms not explicitly defined in this Agreement but defined in the Plan will have the meanings ascribed to them under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the foregoing and Grantee's continued provision of valuable services as a director of the Company, the parties hereto, intending to be legally bound, agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.<u>Grant of Units</u>. Effective as of the Date of Grant, the Company grants the Grantee [####] Restricted Stock Units (the "**Units**") subject to the provisions of this Agreement and the Plan. Each Unit is subject to settlement into one share of Common Stock (a "**Share**") that will be delivered to Grantee pursuant to this Agreement when and if such Unit becomes vested in accordance with this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.<u>Condition to Grant of Units</u>. This award of Units is conditioned upon Grantee's electronic acceptance of this Agreement through the online portal established by the Company's equity plan administrator (i.e., Fidelity) within thirty (30) days of the Date of Grant (the "**Acceptance Period**"). In the event Grantee fails to accept this Agreement through such online portal within the Acceptance Period, then this Agreement is void and the Units will not be issued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.<u>Vesting</u>. The Units are unvested when granted and will vest May 1, 2026, subject to Grantee's provision of Continuous Service to the Company through such date. In addition, to the extent not previously forfeited, all unvested Units will vest immediately upon: (a) the consummation of a Corporate Transaction provided that Grantee provides Continuous Service to the Company through the date of such Corporate Transaction; (b) the termination of Grantee's Continuous Service as a result of Grantee's death; or (c) the termination of Grantee's Continuous Service as a result of Grantee's Disability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.<u>Effect of Termination of Continuous Service</u>. Except as provided in Section 3 in connection with the termination of Grantee's Continuous Service as a result of Grantee's death

------

or Disability, in the event of the termination of Grantee's Continuous Service, all Units that are not vested will be immediately, automatically, and without consideration forfeited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.<u>Delivery of Shares to Settle Units</u>. When Units become vested as provided in Section 3, the vested Units will be settled by delivering to Grantee the number of Shares equal to the number of vested Units, subject to the following provisions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Delivery of the Shares will be made as soon as practicable after the date on which the Units vest, provided that the Company may provide for a reasonable delay in the delivery of the Shares to address tax and other administrative matters, and provided further that delivery of the Shares will occur no later than two and one-half months following the conclusion of the year in which the vesting occurs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Subject to the conditions described herein, as soon as practicable after the date on which the Units vest, the Company will, at its election, either: (i) issue a certificate representing the Shares deliverable pursuant to this Agreement; or (ii) not issue any certificate representing the Shares deliverable pursuant to this Agreement and instead document the Grantee's interest in the Shares by registering such Shares with the Company's transfer agent (or another custodian selected by the Company) in bookentry form in the Grantee's name.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)No Shares will be issued pursuant to this Agreement unless and until all then-applicable requirements imposed by U.S., foreign, and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met, and the Company may condition the issuance of Shares pursuant to this Agreement on the Grantee's taking any reasonable action to meet those requirements. The Company may impose such conditions on any Shares issuable pursuant to this Agreement as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any exchange upon which shares of the same class are then listed, and under any blue sky or other securities laws applicable to those shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.<u>Rights as a Shareholder</u>. The Units represent a right to payment from the Company if the conditions of the Agreement are met and do not give the Grantee ownership of any Common Stock prior to delivery as provided in Section 5. Grantee will not have any rights and/or privileges of a stockholder of the Company with respect to the Units prior to such delivery, but Grantee will have all rights associated with the ownership of the Shares upon such delivery.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.<u>Non-Transferability of the Units</u>. The Units and the right to payment under this Agreement are not transferable, and may not be sold, exchanged, transferred, pledged, hypothecated, encumbered or otherwise disposed of except by the laws of descent or distribution, or as otherwise provided by the Plan. Any purported transfer of the Units or the right to payment under this Agreement not in compliance with the preceding sentence is null and void and will not be given effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.<u>Tax Consequences</u>. Grantee acknowledges that Grantee understands the federal, state, local, and foreign tax consequences of the award of the Units and the provisions of this Agreement. Grantee is relying solely on the advice of Grantee's own tax advisors and not on any statements or representations of the Company or any of its agents in connection with such tax consequences. Grantee understands that Grantee (and not the Company nor any Related Entity)

------

will be responsible for Grantee's own tax liability that may arise as a result of the granting, vesting, and/or settlement of the Units (or otherwise in connection with this Agreement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.<u>Withholding Obligations</u>. As a condition to delivery of the Shares, the Grantee hereby authorizes the Company to withhold from the Shares deliverable under this Agreement a number of Shares with a Fair Market Value (measured as of the date tax withholding obligations are to be determined) equal to the federal, state, local and foreign tax withholding obligations of the Company or a Related Entity, if any. In the event that the Administrator determines in its discretion that such withholding of Shares is not permitted pursuant to the Applicable Laws, the rules and regulations of any regulatory agencies having jurisdiction over the Company, or the rules of any exchanges upon which the Shares may be listed, then the Administrator may, in its discretion, make alternative arrangements for satisfying the Company's (or a Related Entity's) withholding obligations, utilizing any method permitted by the Plan, including but not limited to requiring Grantee to tender a cash payment or withholding from salary or other compensation payable to Grantee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.<u>Application of Section 409A of the Code</u>. The parties intend that the delivery of Shares in respect of the Units provided under this Agreement satisfies, to the greatest extent possible, the exemption from the application of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively, "**Section 409A**") provided under Treasury Regulations Section 1.409A-1(b)(4) (or any other applicable exemption), and this Agreement will be construed to the greatest extent possible as consistent with those provisions. To the extent not so exempt, the delivery of Shares in respect of the Units provided under this Agreement will be conducted, and this Agreement will be construed, in a manner that complies with Section 409A and is consistent with the requirements for avoiding taxes or penalties under Section 409A. The parties further intend that each installment of any payments provided for in this Agreement is a separate "payment" for purposes of Section 409A. To the extent that (a) one or more of the payments received or to be received by Grantee pursuant to this Agreement would constitute deferred compensation subject to the requirements of Section 409A, and (b) Grantee is a "specified employee" within the meaning of Section 409A, then solely to the extent necessary to avoid the imposition of any additional taxes or penalties under Section 409A, the commencement of any payments under this Agreement will be deferred until the date that is six months following the Grantee's termination of Continuous Service (or, if earlier, the date of death of the Grantee) and will instead be paid on the date that immediately follows the end of such six-month period (or death) or as soon as administratively practicable within thirty (30) days thereafter. The Company makes no representations to Grantee regarding the compliance of this Agreement or the Units with Section 409A, and Grantee is solely responsible for the payment of any taxes or penalties arising under Section 409A(a)(1), or any state law of similar effect, with respect to the grant or vesting of the Units or the delivery of the Shares hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.<u>Adjustments</u>. All references to the number of Units will be appropriately adjusted to reflect any stock split, stock dividend, or other change in capitalization that may be made by the Company after the date of this Agreement, as provided in Section 13 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.<u>Electronic Delivery</u>. Grantee hereby consents to receive documents related to the Units and any other Awards granted under the Plan by electronic delivery and agrees to participate in the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company, and such consent shall remain in effect throughout until withdrawn in writing by Grantee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.<u>Data Privacy</u>. Grantee acknowledges that the Company holds certain personal information about him/her, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality,

------

job title, details of the Units and any other entitlement to Shares awarded, cancelled, exercised, vested or unvested. Grantee consents to the collection, use and transfer (including but not limited to transfers to parties assisting in the implementation, administration and management of the Plan), in electronic or other form, of such personal data for the purpose of implementing, administering, and managing Grantee's participation in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.<u>Binding Effect</u>. This Agreement is binding upon and inures to the benefit of Grantee and Grantee's heirs, executors, and personal representatives, and the Company and its successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.<u>Counterparts; Electronic Signatures</u>. This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same agreement. Each party agrees that this Agreement may be executed by means of electronic signatures, and that electronic signatures (whether digital or encrypted) of the parties included in this Agreement are intended to authenticate this writing and to have the same force and effect as manual signatures. For this purpose, electronic signature means any electronic sound, symbol, or process attached to or logically associated with a record and executed and adopted by a party with the intent to sign such record, including facsimile, signatures on scanned documents or email electronic signatures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.<u>Notices</u>. Any notice, demand or request required or permitted to be given pursuant to the terms of this Agreement must be in writing and will be deemed given when delivered personally, one day after deposit with a recognized international delivery service (such as FedEx), or three days after deposit in the U.S. mail, first class, certified or registered, return receipt requested, with postage prepaid, in each case addressed to the parties at the addresses of the parties set forth at the end of this Agreement or such other address as a party may designate by notifying the other in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.<u>Choice of Law; Venue</u>. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of North Carolina, without giving effect to the choice of law rules of any jurisdiction. The parties agree that any litigation arising out of or related to the Units or this Agreement will be brought exclusively in any state or federal court in New Hanover County, North Carolina. Each party (i) consents to the personal jurisdiction of said courts, (ii) waives any venue or inconvenient forum defense to any proceeding maintained in such courts, and (iii) agrees not to bring any proceeding arising out of or relating to this Agreement in any other court.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.<u>Modification of Agreement; Waiver</u>. This Agreement may be modified, amended, suspended, or terminated, and any terms, representations or conditions may be waived, but only by a written instrument signed by each of the parties hereto, except as otherwise provided in the Plan. No waiver hereunder will constitute a waiver with respect to any subsequent occurrence or other transaction hereunder or of any other provision hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.<u>Severability</u>. The provisions of this Agreement are severable, and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions will nevertheless be binding and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.<u>Entire Agreement</u>. This Agreement, along with the Plan, constitutes and embodies the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and there are no other agreements or understandings, written or oral, in effect between the parties hereto relating to the matters addressed herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.<u>Grantee's Acknowledgements</u>. Grantee hereby acknowledges receipt of a copy of the Plan and the Company's prospectus covering the Shares issued pursuant to the Plan (the

------

"**Prospectus**"). Grantee has read and understands the terms of this Agreement, the Plan, and the Prospectus. The Units are subject to all the provisions of the Plan, the provisions of which are hereby made a part of this Agreement, and are further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall control.

[SIGNATURE PAGE FOLLOWS]

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**&nbsp;&nbsp;&nbsp;&nbsp;**IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has hereunto set the Grantee's hand and seal, all as of the day and year first above written.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>COMPANY</u>:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Live Oak Bancshares, Inc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:&nbsp;&nbsp;&nbsp;&nbsp;Courtney C. Spencer

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title: Chief Experience Officer

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address:&nbsp;&nbsp;&nbsp;&nbsp;1741 Tiburon Drive

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Wilmington, NC 28403

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>GRANTEE</u>:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[ELECTRONIC ACCEPTANCE]

## 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: August 5, 2025 | /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: August 5, 2025 | /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 June 30, 2025 (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: August 5, 2025 | /s/ James S. Mahan III |
| | James S. Mahan III |
| | Chief Executive Officer |
| | (principal executive officer) |
| Date: August 5, 2025 | /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>