Live Oak Bancshares Stock

Live Oak Bancshares, Inc. (Bancshares) operates as the bank holding company for Live Oak Banking Company (the bank) that provides various banking products and services.

The bank operates an established national online platform for small business lending and deposit gathering.

The company predominantly originates loans partially guaranteed by the U.S. Small Business Administration (the 'SBA') and to a lesser extent by the United States Department of Agriculture ('USDA') Rural Energy for America Program ('REAP'), Water and Environmental Program ('WEP'), Business & Industry ('B&I') and Community Facilities loan programs. These loans are to small businesses and professionals. Industries, or 'verticals,' on which the company focuses its lending efforts are carefully selected. The company also lends more broadly to select borrowers outside of those verticals.

The company has developed, and continues to refine, a technology-based platform to facilitate providing financial services to the small business community on a national scale and has leveraged this technology to optimize the company's loan origination process, customer experience, reporting metrics, and servicing activity. The company services customers efficiently throughout the loan process and monitors their performance by means of the technology-based platform without maintaining traditional branch locations.

Subsidiaries

In addition to the bank, Bancshares directly or indirectly held the following wholly owned material subsidiaries as of December 31, 2023:

Canapi Advisors, LLC ('Canapi Advisors'), formed in September 2018 for the purpose of providing investment advisory services to a series of funds focused on investing venture capital in new and emerging financial technology companies;

Live Oak Ventures, Inc., formed in August 2016 for the purpose of investing in businesses that align with the company's strategic initiative to be a leader in financial technology;

Live Oak Grove, LLC, formed in February 2015 for the purpose of providing Company employees and business visitors with on-site dining at the company's Wilmington, North Carolina headquarters; and

Government Loan Solutions, Inc. ('GLS'), a management and technology consulting firm that specializes in the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under the SBA 7(a) loan program and USDA-guaranteed loans.

In 2010, the bank formed Live Oak Number One, Inc., a wholly owned subsidiary, to hold properties foreclosed on by the bank.

In 2018, the bank formed Live Oak Private Wealth, LLC ('LOPW'), a registered investment advisor that provides high-net-worth individuals and families with strategic wealth and investment management services.

In 2019, Live Oak Clean Energy Financing LLC ('LOCEF') became a subsidiary of the bank. LOCEF was formed in November 2016 as a subsidiary of Bancshares for the purpose of providing financing to entities for renewable energy applications.

Tiburon Land Holdings, LLC was formed in the third quarter of 2022 as a subsidiary of the bank to hold 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.

Operating Segments

The company's operations are managed along two reportable operating segments consisting of Banking and Fintech.

Banking - This segment specializes in providing financing services to small businesses nationwide in targeted industries and deposit-related services to small businesses, consumers and other customers nationwide. The primary source of revenue for this segment is net interest income and secondarily the origination and sale of government guaranteed loans.

Fintech - This segment is involved in making strategic investments into emerging financial technology companies. The primary sources of revenue for this segment are principally gains and losses on equity method and equity security investments and management fees. The Fintech segment is consisted of the company's direct wholly owned subsidiaries Live Oak Ventures, Inc. (Live Oak Ventures) and Canapi Advisors, LLC (Canapi Advisors), and the investments held by those entities, as well as the bank's investment in Apiture, Inc. (Apiture).

Loans

As of December 31, 2023, the company's loans were commercial & industrial loans, such as small business banking, specialty lending, energy & infrastructure, and paycheck protection program; construction & development, such as small business banking and specialty lending; commercial real estate, such as small business banking, specialty lending, and energy & infrastructure; and commercial land loans, such as small business banking.

Deposits

As of December 31, 2023, the company's deposit products included noninterest-bearing demand deposits; and interest-bearing deposits, such as interest-bearing checking, money market, savings, and time deposits.

Investment Portfolio

As of December 31, 2023, the company's investment portfolio included U.S. government securities; mortgage-backed securities; and municipal bonds.

Supervision and Regulation

In addition to the regulation and supervision summarized below, Bancshares is a reporting company under the Securities Exchange Act of 1934 (the 'Exchange Act') and is required to file reports with the SEC and otherwise comply with federal securities laws.

As a registered bank holding company, Bancshares is subject to regulation under the Bank Holding Company Act of 1956, as amended ('BHCA'), and to the supervision, examination and reporting requirements of the Board of Governors of the Federal Reserve System (the 'Federal Reserve').

The bank is a North Carolina-chartered commercial bank and is subject to regulation, supervision and examination by the Federal Deposit Insurance Corporation ('FDIC') and the North Carolina Commissioner of Banks ('NCCOB').

Bancshares' voting common stock is registered under Section 12 of the Securities Exchange Act of 1934.

The bank is also subject to numerous state and federal statutes and regulations that affect its business, activities and operations and it is supervised and examined by state and federal bank regulatory agencies. The FDIC and the NCCOB regularly examine the operations of the bank and are given the authority to approve or disapprove mergers, consolidations, the establishment of branches and similar corporate actions. These agencies also have the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law.

The bank is subject to extensive supervision and regulation by the NCCOB. The primary state banking laws to which Bancshares and the bank are subject are set forth in Chapters 53 and 53C of the North Carolina General Statutes. The North Carolina Business Corporation Act is also applicable to Bancshares as a North Carolina business corporation and to the bank as a North Carolina banking corporation.

The Bank's deposits are insured by the FDIC.

The company is subject to complex and evolving laws and regulations governing the privacy and security of personal information associated with consumers, prospective, current and former customers, employees and contractors, and other individuals. For example, financial institutions are required by the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the 'GLBA') to disclose their policies for collecting and protecting consumer information. The bank has established a privacy policy that promotes compliance with these federal requirements.

As a member of the FHLB of Atlanta, the bank is required to acquire and hold shares of capital stock in the FHLB of Atlanta. The bank received an 'Outstanding' rating in its last Community Reinvestment Act examination, which was conducted as of June 1, 2022.

The Sarbanes-Oxley Act of 2002 ('Sarbanes-Oxley') mandated for public companies, such as Bancshares, a variety of reforms intended to address corporate and accounting fraud and provided for the establishment of the Public Company Accounting Oversight Board ('PCAOB'), which enforces auditing, quality control and independence standards for firms that audit SEC-reporting companies.

LOPW is a registered investment adviser under the Investment Advisers Act of 1940 and the SEC's regulations promulgated thereunder.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the 'CARES Act') was signed into law in March 2020, to provide national emergency economic relief measures. Many of the CARES Act's programs were dependent upon the direct involvement of U.S. financial institutions, such as the company and the bank, and were implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve and other federal banking agencies, including those with direct supervisory jurisdiction over the company and the bank.

The CARES Act amended the SBA's loan program, in which the bank participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program ('PPP'), to fund operational costs of eligible businesses, organizations and self-employed persons during the COVID-19 pandemic. As a participating lender in the PPP, the bank continues to monitor legislative, regulatory, and supervisory developments related thereto.

History

Live Oak Bancshares, Inc. was founded in 2008. The company was incorporated under the laws of the state of North Carolina in 2008.