Live Oak Bancshares, Inc.
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 27, 2026
LOB$33.92+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-18.
0001462120-25-000018
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-27.
0001462120-26-000020
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 166 previous paragraphs and 154 current paragraphs.
83 unchanged; 65 reworded; 6 added; 17 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 21 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
•Increased equity method investments income of $28.3 million, largely comprised of a $24.1 million gain arising from the sale of the Company’s interest in Apiture, Inc.
Current report
Key factors partially offsetting the year-over-year increase in net income were comprised of decreases in management fee and other noninterest income of $7.7 million and $20.2 million, respectively, combined with increases in salary and employee benefits, technology expense and income tax expense of $14.7 million, $8.7 million and $25.4 million, respectively.
Current report
The provision for credit losses was $96.3 million in 2025, relatively flat compared to $96.2 million in 2024, with an increase of $91 thousand.
Current report
Technology expense: Technology expense increased $8.7 million, or 25.6%, compared to the same period in 2024. This increase was primarily related to enhanced investments in the Company’s technology resources.
Current report
Other expense: Other expense increased $5.8 million, or 47.0%, compared to 2024. The increase was principally driven by a $1.5 million special charitable donation during the fourth quarter of 2025 made in connection with the earlier discussed Apiture gain combined with a $2.8 million loss arising from the early buyout of the Company's sole bioenergy lease in the second quarter of 2025.
Current report
To illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. In this adverse environment, the U.S. economy faces renewed weakness following late‑2025 softening in labor markets and persistent inflation pressures. Elevated interest rates – declining more slowly than anticipated – continue to suppress credit‑sensitive consumer spending and business investment, while the expanded tariff regime introduced in 2025 further elevates goods prices and weighs on supply chains. Also compiling into an adverse scenario are geopolitical tensions, including continued instability in Eastern Europe and heightened trade frictions with major partners, further disrupt supply chains and contribute to volatility in goods prices. These developments, combined with limited fiscal space and slowing job creation, push the U.S. economy into a mild recession by mid‑2026 under this scenario. Under this scenario, as an example, the Baa Corporate Bond Yield increases from baseline levels and remains elevated for an extended period. The estimated Baa Corporate Bond Yield in this scenario could reach 7.0% at the middle of 2026, approximately 120 basis points higher than the baseline scenario forecast start.
Removed paragraphs (17)
Previous report
•Increased other noninterest income of $14.0 million, largely related to the combination of a $2.4 million gain from the sale of a building in the third quarter of 2024, a $6.7 million gain arising from the sale of one of the Company’s aircraft in the second quarter of 2024 and a $5.7 million gain in the first quarter of 2024 arising from the increased fair value of a certain equity warrant asset.
Previous report
•Decreased impairment charges of $14.1 million, arising from a fourth quarter of 2023 renewable energy tax credit investment.
Previous report
Key factors partially offsetting the year-over-year increase in net income were a combination of increased provision for credit losses of $44.9 million, increased net loss on the loan servicing asset revaluation of $17.0 million and increased salaries and employee benefits of $8.2 million.
Previous report
For 2024, the provision for credit losses was $96.2 million compared to $51.3 million in 2023, an increase of $44.9 million. The 2024 increase in provision was primarily the result of record loan growth combined with the impacts of the current macroeconomic environment, which adversely affected some borrowers’ performance.
Previous report
The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Changes in prepayment speed and discount rate assumptions typically have the most significant impacts on the fair value of servicing rights. Generally, as interest rates rise on variable rate loans, loan prepayments increase due to an increase in refinance activity, which results in a decrease in the fair value of servicing assets, however, weakening economic conditions or significant declines in interest rates can also increase loan prepayment activity. The discount rate used in the estimation process is tied to a benchmark risk-free rate with a risk premium added using a build-up method. Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different time.
Previous report
At December 31, 2024, the key assumptions used to determine the fair value of the Company’s servicing rights included a weighted average prepayment speed equal to 15.6% and a weighted average discount rate equal to 13.5%. 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:
Previous report
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.
Previous report
Renewable energy tax credit investment impairment: Renewable energy tax credit investment impairment decreased $14.1 million which was the result of a renewable energy tax credit investment in the fourth quarter of 2023 which resulted in $14.6 million in impairment charges during that year. Investments of this type generate a return primarily through the realization of income tax credits and other benefits; accordingly, impairment of the investment amount is recognized in conjunction with the realization of related tax benefits
Previous report
Other expense: Other expense decreased $4.7 million, or 27.6%, compared to 2023. This decrease was largely related to reserves for unfunded commitments, historically being presented in other expense. Beginning in the second quarter of 2024, this expense was classified in the provision for credit losses.
Previous report
Borrowings increased to $112.8 million at December 31,2024 from $23.4 million at December 31,2023. This increase was principally due to entering into a new loan agreement in the first quarter of 2024 to strategically enhance Bank capital levels in order to accommodate future growth expectations. See Note 8. Borrowings in the accompanying Notes to Consolidated Financial Statements for a discussion of current sources of available debt capacity.
Previous report
Regulatory Impact of Asset Growth
Previous report
General. In the first quarter of 2023, the Company and the Bank each first exceeded $10 billion in total assets. As of December 31,2024, the Company and the Bank each had total assets of $12.94 billion and$12.86 billion. The Dodd-Frank Act and its implementing regulations impose various additional requirements on bank holding companies and banks with $10 billion or more in total consolidated asset
Previous report
Consumer Financial Laws. Under the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) has near-exclusive supervision authority, including examination authority, to assess compliance with federal consumer financial laws for a bank and its affiliates if the bank has total assets of more than $10 billion. This provision becomes applicable to a bank following the fourth consecutive quarter where the total assets of the bank, as reported in its quarterly Call Report, exceed $10 billion and afterwards remains applicable to the bank unless the bank has reported total assets of $10 billion or less in its quarterly Call Report for four consecutive quarters. This provision became applicable to the Bank in the first quarter of 2024.
Previous report
Deposit Insurance Assessments. Also under the Dodd-Frank Act, the DIF reserve ratio was increased from 1.15 percent to 1.35 percent and the FDIC is required, in setting deposit insurance assessments, to offset the effect of the increase on institutions with assets of less than $10 billion, which results in institutions with assets greater than $10 billion paying higher assessments. In addition, following the fourth consecutive quarter where the total assets of a bank exceeds $10 billion, as reported in its quarterly Call Report, the FDIC utilizes a different method for determining deposit insurance assessments. This large bank method is based on a bank’s ability to withstand asset- and funding-related stress, its regulatory ratings, and potential losses to the FDIC in the event of the bank’s failure, subject to discretionary adjustments by the FDIC. The Bank became subject to the large bank method for determining its deposit insurance assessments in 2024.
Previous report
Volcker Rule. Under provisions of the Dodd-Frank Act referred to as the “Volcker Rule,” certain limitations are placed on the ability of insured depository institutions and their affiliates to engage in sponsoring, investing in and transacting with certain investment funds, known as “covered funds” under the rule. There are a number of exclusions from the definition of “covered funds,” including for investments in Small Business Investment Companies, or SBICs, and certain qualifying venture capital funds. The Volcker Rule also places restrictions on proprietary trading, which could impact certain hedging activities.
Previous report
Limits on Interchange Fees. The Durbin Amendment to the Dodd-Frank Act gave the Federal Reserve Board the authority to establish rules regarding interchange fees charged for electronic debit transactions by a payment card issuer that, together with its affiliates, has assets of $10 billion or more, as of December 31 of the preceding calendar year, and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer. The Federal Reserve Board has adopted rules under this provision that limit the swipe fees that a debit card issuer can charge a merchant for a transaction to the sum of 21 cents and five basis points times the value of the transaction, plus up to one cent for fraud prevention costs. The Bank exceeded $10 billion in assets at December 31, 2023. This triggered a reduction of annual pre-tax income from debit card interchange fees beginning July 1, 2024. Additional information regarding the Durbin Amendment is presented in Item 1A. Risk Factors.
Previous report
To illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario contemplates elevated interest rates weakening credit-sensitive consumer spending, growing concerns about the impact of potential tariffs, and deepening fiscal disputes in Congress causing further sentiment decline. Increased geopolitical tensions between China and Taiwan briefly impact the supply chain for semiconductors and the threat of a wider conflict causes consumer confidence to fall. Additionally, the Russian invasion of Ukraine lasts longer than in the baseline scenario and concerns increase around the current conflict in the Middle East leading to a broader war in the region. The combination of still elevated interest rates, political tensions, and tightening lending standards cause the economy to fall into a recession in the first quarter of 2025. Despite the recession, rising inflation causes the Federal Reserve to reverse course and raise the federal funds rate further before resuming rate cuts in the third quarter as the recession persists, resulting in a fed funds rate below the baseline forecast. Under this scenario, as an example, the unemployment rate increases from baseline levels and remains elevated for an extended period. The estimated unemployment rate in this scenario reaches 8.2% at the end of 2025, approximately 4.1% higher than the baseline scenario projection.
Reworded paragraphs (65)
Previous wording
The following presents management’s discussion and analysis (“MD&A”) of the more significant factors that affected the Company's financial condition and results of operations for the year ended December 31, 2024 as compared to December 31, 2023. For a comparison of 2023 results to 2022 and other 2022 information not included herein, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of the 2023 Form 10-K filed with the SEC on February 22,2024. This discussion should be read in conjunction with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be obtained during any future period.
Current wording
The following presents management’s discussion and analysis (“MD&A”) of the more significant factors that affected the Company's financial condition and results of operations for the year ended December 31, 2025 as compared to December 31, 2024. For a comparison of 2024 results to 2023 and other 2023 information not included herein, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of the 2024 Form 10-K/A filed with the SEC on November 17,2025. This discussion should be read in conjunction with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Results of operations for the periods included in this review are not necessarily indicative of results to be obtained during any future period.
Previous wording
As of December 31, 2024, 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. 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.
Current wording
As of December 31,2025, the Company’s wholly owned material subsidiaries were the Bank, Government Loan Solutions (“GLS”), Live Oak Grove, LLC (“Grove”) and Live Oak Ventures, Inc. (“Live Oak Ventures”). GLS is a management and technology consulting firm that advises and offers solutions and services to participants in the government guaranteed lending sector. GLS primarily provides services in connection with the settlement, accounting, and securitization processes for government guaranteed loans, including loans originated under 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. 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.
Previous wording
As of December 31, 2024, the Bank’s wholly owned subsidiaries were Live Oak Number One, Inc., Live Oak Clean Energy Financing LLC (“LOCEF”), Live Oak Private Wealth, LLC (“Live Oak Private Wealth”) and Tiburon Land Holdings, LLC (“TLH”). Live Oak Number One, Inc. holds properties foreclosed on by the Bank. LOCEF provides financing to entities for renewable energy applications. Live Oak Private Wealth provides high-net-worth individuals and families with strategic wealth and investment management services. During the first quarter of 2022, Jolley Asset Management, LLC (“JAM”) was merged into Live Oak Private Wealth. JAM was previously a wholly owned subsidiary of Live Oak Private Wealth. 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.
Current wording
As of December 31,2025, the Bank’s wholly owned subsidiaries were Live Oak Number One, Inc., Live Oak Clean Energy Financing LLC (“LOCEF”), Live Oak Private Wealth, LLC (“Live Oak Private Wealth”) and Tiburon Land Holdings, LLC (“TLH”). Live Oak Number One, Inc. holds properties foreclosed on by the Bank. LOCEF provides financing to entities for renewable energy applications. Live Oak Private Wealth provides high-net-worth individuals and families with strategic wealth and investment management services. TLH holds land adjacent to the Bank's headquarters consisting of wetlands and other protected property for the use and enjoyment of the Bank's employees and customers.
Previous wording
The Company generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. Income from the retention of loans consists principally of interest income. Income from the sale of loans consists 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.
Current wording
The Company generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. Income from the retention of loans consists principally of interest income. Income from the sale of loans is comprised of loan servicing revenue and revaluation of related servicing assets along with net gains on sales of loans. Offsetting these revenues are the cost of funding sources, provision for credit losses, any costs related to foreclosed assets and other operating costs such as salaries and employee benefits, travel, professional services, advertising and marketing and tax expense. The Company also has less routinely generated gains and losses arising from its financial technology investments.
Previous wording
•Record year of loan production with total loans and leases held for sale and investment increasing by $1.56 billion, or 17.3%. Total loan originations in 2024 were $5.16 billion compared to $3.95 billion in 2023, an increase of 30.6%. Substantial loan production in 2024 was the primary driver of growth in total assets which increased to $12.94 billion at December 31, 2024 as compared to $11.27 billion at December 31,2023, for an increase of $1.67 billion, or 14.8%.
Current wording
•Record year of loan production with total loans and leases held for sale and investment increasing by $1.81 billion, or 17.1%. Total loan originations in 2025 were $6.21 billion compared to $5.16 billion in 2024, an increase of 20.5%. Substantial loan production in 2025 was the primary driver of growth in total assets, which increased to $15.13 billion at December 31, 2025 as compared to $12.94 billion at December 31,2024, for an increase of $2.19 billion, or 16.9%.
Previous wording
•Supporting loan growth, total deposits increased by $1.49 billion, or 14.5%, to $11.76 billion at the end of 2024.
Current wording
•Supporting loan growth, total deposits increased by $1.93 billion, or 16.4%, to $13.69 billion at the end of 2025 and shareholders’ equity increased $250.6 million, or 25.0%, driven by net income as discussed below and further bolstered by the issuance of depositary shares which resulted in net proceeds of$96.3 million.
Previous wording
•Net income attributable to Live Oak Bancshares, Inc. increased $3.6 million, or 4.8%, from $73.9 million, or $1.64 per diluted share, to $77.5 million, or $1.69 per diluted share, largely due to the following items.
Current wording
•Net income attributable to common shareholders increased $25.3 million, or 32.7%, from $77.5 million, or $1.69 per diluted share, to $102.8 million, or $2.23 per diluted share, largely due to the following items:
Previous wording
•Net interest income increased by $30.6 million, or 8.9%, largely the result of robust loan growth, partially offset by higher funding costs which were reflected in a decline in net interest margin to 3.27% for 2024 as compared to 3.35% for 2023.
Current wording
◦Net interest income increased by $72.5 million, or 19.3%, largely the result of robust loan growth, which led to an increase in net interest margin to 3.30% for 2025 as compared to 3.27% for 2024.
Previous wording
•The provision for credit losses increased $44.9 million, or 87.5%, driven by record loan growth combined with the impacts of the current macroeconomic environment. Total nonperforming unguaranteed loans and leases as a percentage of total loans and leases held for investment, excluding loans measured at fair value, increased from 0.48% at the end of 2023 to 0.82% at the end of 2024. Net charge-offs as a percentage of average held for investment loans and leases carried at historical cost, for the years ended December 31, 2024 and 2023, were 0.52% and 0.28%, respectively.
Current wording
◦The provision for credit losses of $96.3 million remained relatively flat year over year. Total nonperforming unguaranteed loans and leases as a percentage of total loans and leases held for investment, excluding loans measured at fair value, increased from 0.82% at the end of 2024 to 0.87% at the end of 2025. Net charge-offs as a percentage of average held for investment loans and leases carried at amortized cost, for the years ended December 31, 2025 and 2024, were 0.63% and 0.52%, respectively.
Previous wording
•Increased total noninterest income of $12.0 million, or 10.8%, and decreased total noninterest expense of $8.6 million, or 2.7%. A detailed overview of key drivers of year-over-year changes in reported net income is outlined more fully in the opening to the section titled “Results of Operations.”
Current wording
◦Increased total noninterest income of $16.8 million, or 14.9%, and increased total noninterest expense of $35.6 million, or 11.7%. A detailed overview of key drivers of year-over-year changes in reported net income is outlined more fully in the opening to the section titled “Results of Operations.”
Previous wording
The Company reported net income attributable to Live Oak Bancshares, Inc. of $77.5 million, or $1.69 per diluted share, for 2024 compared to $73.9 million, or $1.64 per diluted share, for 2023.
Current wording
The Company reported net income attributable to common shareholders of $102.8 million, or $2.23 per diluted share, for 2025 compared to $77.5 million, or $1.69 per diluted share, for 2024.
Previous wording
•Increased net interest income of $30.6 million, or 8.9%;
Current wording
•Increased net interest income of $72.5 million, or 19.3%;
Previous wording
•Increased net gains on sales of loans of $14.4 million, or 30.8%, principally the result of higher loan sale volumes combined with improving premiums in 2024;
Current wording
•Increased net gains on sales of loans of $12.7 million, or 25.4%, principally the result of higher loan sale volumes in 2025;
Previous wording
For 2024, net interest income increased $30.6 million, or 8.9%, to $375.9 million compared to $345.3 million for 2023. This increase was principally due to thegrowth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities offset by an increase in average cost of funds which exceeded the increase in average yield on interest-earning assets. Average interest-earning assets increased by $1.20 billion, or 11.6%, to $11.50 billion for 2024, compared to $10.30 billion for 2023, while the yield on average interest-earning assets increased 39 basis points to 7.07%. The cost of funds on interest-bearing liabilities for 2024 increased 52 basis points to 4.11%, and the average balance of interest-bearing liabilities increased by $1.08 billion, or 11.3%, over 2023. The increase in cost of funds was largely influenced by repricing of short-term certificates of deposit with the average cost of funds increasing from 3.31% in 2023 to 4.17% for in 2024.
Current wording
For 2025, net interest income increased $72.5 million, or 19.3%, to $448.4 million compared to $375.9 million for 2024. This increase was principally due to thegrowth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities. Average interest-earning assets increased by $2.10 billion, or 18.2%, to $13.59 billion for 2025, compared to $11.50 billion for 2024, while the yield on average interest-earning assets decreased by 39 basis points to 6.68%. The cost of funds on interest-bearing liabilities for 2025 decreased by 39 basis points to 3.72%, and the average balance of interest-bearing liabilities increased by $1.73 billion, or 16.3%, over 2024.
Previous wording
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 table below, the overall increase discussed above is reflected in increased interest income of $124.1 million outpacing growth in interest expense of $93.5 million for 2024 compared to 2023. The net interest margin decreased from 3.35% for 2023 to 3.27% for 2024.
Current wording
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 table below, the overall increase discussed above is reflected in increased interest income of $96.1 million outpacing growth in interest expense of $23.6 million for 2025 compared to 2024. The net interest margin slightly increased from 3.27% for 2024 to 3.30% for 2025.
Previous wording
In January 2025, the Federal Reserve decided to maintain the federal funds upper target rate at 4.5%. The Federal Reserve released its most current federal funds target rate midpoint projections at its previous meeting in December 2024 which implied a decrease of approximately 50 basis points 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 7A. Quantitative and Qualitative Disclosures About Market Risk for information about the Company’s sensitivity to interest rates.
Current wording
In January 2026, the Federal Reserve decided to maintain the federal funds upper target rate at 3.75%. The Federal Reserve released its most current federal funds target rate midpoint projections at its previous meeting in December 2025 which implied a decrease of approximately 25 basis points to 3.4% by the end of 2026 and a decrease of approximately 25 basis points to 3.1% by the end of 2027. There can be no assurance that any further decreases or increases in the Federal Funds rate will occur, and if they do, the amount and timing of actual adjustments are subject to change. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for information about the Company’s sensitivity to interest rates.
Previous wording
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 1 under the subheading Allowance for Off-Balance Sheet Credit Exposures for additional information.
Current wording
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, the 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 1 to the consolidated financial statements included in Item 8 of this Report under the subheading Allowance for Off-Balance Sheet Credit Exposures for additional information.
Previous wording
Loans and leases held for investment at historical cost were $9.90 billion as of December 31, 2024, an increase of $1.66 billion, or 20.1%, compared to December 31, 2023.
Current wording
Loans and leases held for investment at historical cost were $11.71 billion as of December 31, 2025, an increase of $1.81 billion, or 18.3%, compared to December 31, 2024.
Previous wording
Net charge-offs for loans and leases carried at historical cost were $46.7 million, or 0.52% of average loans and leases held for investment at amortized cost, excluding loans measured at fair value, for 2024, compared to net charge-offs of $21.4 million, or 0.28%, for 2023, an increase of $25.3 million, or 118.5%. The increase in net charge-offs for 2024 was primarily related to an increase in activity within five verticals, Search Fund Lending, General Lending, Government Contracting, Community Facilities and Wine & Craft Beverage. The increase was largely due to the high interest rate environment and inflationary pressures, which increased financial strain on borrowers. 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.
Current wording
Net charge-offs for loans and leases carried at historical cost were $68.8 million, or 0.63% of average loans and leases held for investment at amortized cost, excluding loans measured at fair value, for 2025, compared to net charge-offs of $46.7 million, or 0.52%, for 2024, an increase of $22.1 million, or 47.3%. The increase in net charge-offs for 2025 was largely concentrated to individually evaluated loans with specific reserves recorded in prior periods. Net charge-offs are a key element of historical experience in the Company's estimation of the allowance for credit losses on loans and leases.
Previous wording
In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $9.1 million and $7.2 million accounted for under the fair value option at December 31, 2024 and 2023, respectively, totaled $81.4 million, which was 0.82% of the held for investment loan and lease portfolio carried at historical cost at December 31, 2024, compared to $39.3 million, or 0.48% of loans and leases held for investment carried at historical cost at December 31, 2023.
Current wording
In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $7.7 million and $9.1 million accounted for under the fair value option at December 31, 2025 and 2024, respectively, totaled $101.4 million, which was 0.87% of the held for investment loan and lease portfolio carried at historical cost at December 31, 2025, compared to $81.4 million, or 0.82% of loans and leases held for investment carried at historical cost at December 31, 2024.
Previous wording
For 2024, noninterest income increased by $12.0 million, or 10.8%, compared to 2023. The increase over the prior year is primarily a result of higher servicing revenue of $4.1 million, increased net gains on sales of loans of $14.4 million, a $5.9 million increase in the net gain on loans accounted for under the fair value option and increased other noninterest income of $14.0 million. The increase in other noninterest income was largely related to the previously mentioned $2.4 million gain from the sale of a building in the third quarter of 2024 combined with a $6.7 million gain arising from the sale of one of the Company’s aircraft in the second quarter of 2024 and a $5.7 million gain in the first quarter of 2024 arising from the increased fair value of a certain equity warrant asset. Partially offsetting the increase in total noninterest income over the prior year-to-date period were higher losses of $17.0 million related to the servicing asset revaluation, $4.9 million in higher flow-through losses of equity method investments and a $5.7 million decrease in management fee income due to the restructuring of the Canapi Funds in the third quarter of 2024.
Current wording
For 2025, noninterest income increased by $16.8 million, or 14.9%, compared to 2024. The increase over the prior year is primarily a result of higher servicing revenue of $3.4 million, increased net gains on sales of loans of $12.7 million, $28.3 million in increased equity method investments income, largely associated with the earlier mentioned gain arising from the sale of the Company’s interest in Apiture, Inc. and a $5.2 million increase in equity security investments gains largely driven by a $9.0 million gain arising from the sale of a portfolio investment. Partially offsetting the increase in total noninterest income over the prior year-to-date period was a $3.9 million increase in loss related to the servicing asset revaluation combined with a $7.7 million decrease in management fee income due to the restructuring of the Canapi Funds in the third quarter of 2024 and a $20.2 million decrease in other noninterest income. The decrease in other noninterest income was largely due to fair value losses in equity warrant assets in 2025 of $5.5 million compared to 2024 higher income related to a $2.4 million gain from the sale of a building, a $6.7 million gain arising from an aircraft sale and a $5.7 million fair value gain in equity warrant assets.
Previous wording
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 2024, there was a net loss on loan servicing asset revaluation of $12.2 million compared to a net gain of $4.9 million for 2023, resulting in a negative change of $17.0 million. The negative change in valuation of the servicing asset compared to 2023 was principally the result of the third quarter of 2023 change in valuation techniques used to estimate the fair value of servicing rights.
Current wording
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 2025, there was a net loss on loan servicing asset revaluation of $16.1 million compared to a net loss of $12.2 million for 2024, resulting in a negative change of $3.9 million. The negative change in valuation of the servicing asset compared to 2024 was principally the result of principal paydowns or runoff as well as less favorable market conditions in 2025.
Previous wording
Net Gains on Sales of Loans: For 2024, net gains on sales of loans increased $14.4 million, or 30.8%, compared to 2023. The volume of guaranteed loans sold increased $103.4 million, or 11.8%, over 2023 while the average net gain on loan sale premium increased from 105% to 107% in 2023 and 2024, respectively. The increase in net gains on sales of loans over 2023 was principally related to a higher loan sale volume combined with improving premium.
Current wording
Net Gains on Sales of Loans: For 2025, net gains on sales of loans increased $12.7 million, or 25.4%, compared to 2024. The volume of guaranteed loans sold increased $201.9 million, or 20.6%, over 2024 while the average net gain on loan sale premium remained stable at 107% in both 2024 and 2025, respectively. The increase in net gains on sales of loans over 2024 was principally related to a higher loan sale volume.
Previous wording
Net Gain (Loss) on Loans Accounted for Under the Fair Value Option: For 2024, the Company had a net gain on loans accounted for under the fair value option of $2.4 million compared to a net loss of $3.5 million for 2023, a positive change of $5.9 million. The carrying amount of loans accounted for under the fair value option at December 31, 2024 and 2023 was $328.7 million (all classified as held for investment) and $388.0 million (all classified as held for investment), respectively, a decrease of $59.3 million, or 15.3%. The increased levels of net gains arising from the valuation of loans accounted for under the fair value option was principally due to the third quarter of 2023 change in valuation techniques used to estimate the fair value of loans.
Current wording
Net Gain (Loss) on Loans Accounted for Under the Fair Value Option: For 2025, the Company had a net gain on loans accounted for under the fair value option of $1.2 million compared to a net gain of $2.4 million for 2024, a negative change of $1.2 million. The carrying amount of loans accounted for under the fair value option at December 31, 2025 and 2024 was $260.6 million (all classified as held for investment) and $328.7 million (all classified as held for investment), respectively, a decrease of $68.1 million, or 20.7%. The reduction in net gain arising from the valuation of loans accounted for under the fair value option was principally the result of credit downgrades in the derivation of fair value for a portion of the underlying loans.
Previous wording
Total noninterest expense for 2024 decreased $8.6 million, or 2.7%, compared to 2023. The decrease in noninterest expense was predominately driven by the following items.
Current wording
Total noninterest expense for 2025 increased $35.6 million, or 11.7%, compared to 2024. The increase in noninterest expense was predominately driven by the following items.
Previous wording
Salaries and employee benefits: Total personnel expense for 2024 increased by $8.2 million, or 4.7%, compared to 2023. The increase in salaries and employee benefits was principally related to continued investment in human resources to support strategic and growth initiatives. Total full-time equivalent employees increased from 952 at December 31,2023 to 1,014 at December 31,2024. Salaries and employee benefits expense included $26.4 million of stock-based compensation for 2024, compared to $17.9 million for 2023. Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation.
Current wording
Salaries and employee benefits: Total perso nnel expense for 2025 increased by $14.7 million, or 8.4%, compared to 2024. The increase in salaries and employee benefits was principally related to continued investment in human resources to support strategic and growth initiatives. Total full-time equivalent employees increased from 1,014 at December 31,2024 to 1,031 at December 31,2025. Salaries and employee benefits expense included $26.3 million of stock-based compensation for 2025, compared to $26.4 million for 2024. Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation.
Previous wording
FDIC insurance: FDIC insurance decreased $5.8 million, or 35.0%, compared to 2023. This decrease is largely the product of favorable changes in the Company’s FDIC assessment rates in 2024.
Current wording
FDIC insurance: FDIC insurance assessment expense increased $3.8 million, or 35.4%, compared to 2024. This increase is largely the product of the Company’s continued growth combined with increased FDIC assessment rates.
Previous wording
Income tax expense and related effective tax rate in 2024 was $11.8 million and 13.2% compared to $8.9 million and 10.8% in 2023. The higher level of income tax expense for 2024 was primarily the result of lower levels of anticipated investment tax credits in 2024 as compared to the prior year.
Current wording
Income tax expense and related effective tax rate in 2025 was $37.2 million and 26.0% compared to $11.8 million and 13.2% in 2024. The higher level of income tax expense in 2025 as compared to 2024 was largely the result of increased pretax income in 2025 and $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.
Previous wording
Total assets at December 31,2024 were $12.94 billion, an increase of $1.67 billion, or 14.8%, compared to total assets of $11.27 billion at December 31,2023. The growth in total assets was principally driven by the growth in total loans and leases held for investment of $1.60 billion, or 18.5%, from $8.63 billion at December 31, 2023, to $10.23 billion at December 31, 2024.
Current wording
Total assets at December 31,2025 were $15.13 billion, an increase of $2.19 billion, or 16.9%, compared to total assets of $12.94 billion at December 31,2024. The growth in total assets was principally driven by growth in total loans and leases held for investment and held for sale of $1.81 billion, or 17.1%, in 2025, from $10.58 billion at December 31,2024 to $12.39 billion at December 31,2025. This growth was a result of strong origination activity during 2025 of $6.21 billion.
Previous wording
Total deposits were $11.76 billion at December 31,2024, an increase of $1.49 billion, or 14.5%, from $10.28 billion at December 31,2023. 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 December 31, 2024, the Bank’s total uninsured deposits were approximately $1.71 billion, or 14.5%, of total deposits.
Current wording
Total deposits were $13.69 billion at December 31,2025, an increase of $1.93 billion, or 16.4%, 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 December 31,2025, the Bank’s total uninsured deposits were approximately $2.16 billion, or 15.8%, of total deposits.
Previous wording
Shareholders’ equity at December 31,2024 was $1.00 billion as compared to $902.7 million at December 31,2023. The book value per share was $22.12 at December 31,2024 compared to $20.23 at December 31,2023. Average equity to average assets was 8.2% for the year ended December 31,2024 compared to 8.0% for the year ended December 31,2023. The increase in shareholders’ equity for 2024 was principally the result of $77.5 million in net income and stock-based compensation expense of $26.4 million.
Current wording
Shareholders’ equity at December 31,2025 was $1.25 billion as compared to $1.00 billion at December 31,2024. The book value per share of our common stock was $25.06 at December 31,2025 compared to $22.12 at December 31,2024. Average equity to average assets was 8.1% for the year ended December 31,2025 compared to 8.2% for the year ended December 31,2024. The increase in shareholders’ equity for 2025 was principally the result of $105.9 million in net income and $96.3 million in net proceeds from the issuance of depository shares.
Previous wording
Any loan or portion of a loan that the Company has the intent and ability to sell is classified as held for sale. The average age of the held for sale portfolio as of December 31, 2024 was 6.9 months from origination date. Approximately 3.3% of the current held for sale portfolio is older than two years. The majority of held for sale loans over one year old are composed of construction loans or other loans that have yet to fully fund. Construction loans typically have extended build out periods that inherently result in longer lead times between origination and the ultimate sale date. Approximately 27.0% of the held for sale portfolio is aged between one and two years.
Current wording
Any loan or portion of a loan that the Company has the intent and ability to sell is classified as held for sale. The average age of the held for sale portfolio as of December 31, 2025 was 7.7 months from origination date. Approximately 2.9% of the current held for sale portfolio is older than two years. The majority of held for sale loans over one year old are composed of construction loans or other loans that have yet to fully fund. Construction loans typically have extended build out periods that inherently result in longer lead times between origination and the ultimate sale date. Approximately 28.8% of the held for sale portfolio is aged between one and two years.
Previous wording
As of December 31, 2024 and 2023, the cumulative total outstanding balance of loans sold since May 2007 totaled $4.72 billion and $4.24 billion, respectively. The Company generally continues to service loans after the date of sale. As of December 31, 2024 and 2023, the total outstanding balance of loans and leases, including those serviced for others, was $15.32 billion and $13.28 billion, respectively.
Current wording
As of December 31, 2025 and 2024, the cumulative total outstanding balance of loans sold since May 2007 totaled $5.60 billion and $4.72 billion, respectively. The Company generally continues to service loans after the date of sale. As of December 31, 2025 and 2024, the total outstanding balance of loans and leases, including those serviced for others, was $18.03 billion and $15.32 billion, respectively.
Previous wording
As of December 31, 2024, $13.10 billion, or 85.5%, of the total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust at specified dates based on the prime lending rate or other variable indices. As of December 31, 2024, $9.05 billion, or 59.1%, of total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust on either a calendar monthly or calendar quarterly basis using the prime lending rate or other variable indices.
Current wording
As of December 31, 2025, $15.86 billion, or 88.0%, of the total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust at specified dates based on the prime lending rate or other variable indices. As of December 31, 2025, $12.23 billion, or 67.8%, of total outstanding balance of loans and leases, including those at fair value and those serviced for others, were variable rate loans that adjust on either a calendar monthly or calendar quarterly basis using the prime lending rate or other variable indices.
Previous wording
At December 31, 2024, 88.1%, or $9.36 billion, of the combined held for sale and held for investment loan and lease portfolio, including those at fair value, were composed of variable rate loans.
Current wording
At December 31, 2025, 90.9%, or $11.30 billion, of the combined held for sale and held for investment loan and lease portfolio, including those at fair value, were composed of variable rate loans.
Previous wording
At December 31, 2024, $3.75 billion, or 36.6%, of loans held for investment, including those at fair value, matures in less than five years. Loans and leases maturing in greater than five years total $6.51 billion of the total $10.26 billion. The variable rate portion of the total held for investment loans and leases is 87.9%, which reflects the Company’s strategy to minimize interest rate risk through the use of variable rate products.
Current wording
At December 31, 2025, $5.00 billion, or 41.6%, of loans held for investment, including those at fair value, mature in less than five years. Loans and leases maturing in greater than five years total $7.01 billion of the total $12.01 billion. The variable rate portion of the total held for investment loans and leases is 90.8%, which reflects the Company’s strategy to minimize interest rate risk through the use of variable rate products.
Previous wording
Total nonperforming assets, including loans measured at fair value, at December 31, 2024 were $371.7 million, which represented a $179.5 million, or 93.4%, increase from December 31, 2023. These nonperforming assets, at December 31, 2024 were comprised of $369.8 million in nonaccrual loans and leases and $1.9 million in foreclosed assets. Of the $371.7 million of nonperforming assets, $280.1 million carried a government guarantee, leaving an unguaranteed exposure of $91.6 million in total nonperforming assets at December 31, 2024. This represents an increase of $40.4 million, or 78.9%, from an unguaranteed exposure of $51.2 million at December 31, 2023.
Current wording
Total nonperforming assets, including loans measured at fair value, at December 31, 2025 were $572.2 million, which represented a $200.5 million, or 53.9%, increase from December 31, 2024. These nonperforming assets, at December 31, 2025 were comprised of $564.0 million in nonaccrual loans and leases and $8.2 million in foreclosed assets. Of the $572.2 million of nonperforming assets, $460.9 million carried a government guarantee, leaving an unguaranteed exposure of $111.2 million in total nonperforming assets at December 31, 2025. This represents an increase of $19.7 million, or 21.5% from an unguaranteed exposure of $91.6 million at December 31, 2024.
Previous wording
Nonperforming assets, excluding loans measured at fair value, at December 31,2024 were $306.2 million, which represented a $164.8 million, or 116.5%, increase from December 31,2023. These nonperforming assets, at December 31,2024 were comprised of $304.3 million in nonaccrual loans and leases and $1.9 million in foreclosed assets. Of the $306.2 million of nonperforming assets, $224.6 million carried a government guarantee, leaving an unguaranteed exposure of $81.6 million in total nonperforming assets at December 31,2024. This represents an increase of $39.5 million, or 93.8%, from an unguaranteed exposure of $42.1 million at December 31,2023.
Current wording
Nonperforming assets, excluding loans measured at fair value, at December 31,2025 were $509.4 million, which represented a $203.1 million, or 66.3%, increase from December 31,2024. These nonperforming assets, at December 31,2025 were comprised of $501.2 million in nonaccrual loans and leases and $8.2 million in foreclosed assets. Of the $509.4 million of nonperforming assets, $406.6 million carried a government guarantee, leaving an unguaranteed exposure of $102.8 million in total nonperforming assets at December 31,2025. This represents an increase of $21.2 million, or 26.0%, from an unguaranteed exposure of $81.6 million at December 31,2024.
Previous wording
As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, repres ented 26.7% at December 31, 2024, compared to 14.6% at December 31, 2023. 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 ratio at December 31, 2024 and 2023 was 7.2%and 4.3%, respectively.
Current wording
As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, repres ented 39.0% at December 31, 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 ratio at December 31, 2025 and 2024 was 7.9%and 7.2%, respectively.
Previous wording
As of December 31,2024, and December 31,2023, potential problem (also referred to as criticized) and classified loans and leases, excluding loans measured at fair value, totaled $1.04 billion and $785.2 million, 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 to the notes to consolidated financial statements. At December 31,2024, the portion of criticized and classified loans and leases guaranteed by the SBA or USDA 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. This compares to the December 31,2023 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled $344.8 million and total portfolio unguaranteed exposure risk was $440.3 million, or 8.3% of total held for investment unguaranteed exposure carried at historical cost.
Current wording
As of December 31,2025, and December 31,2024, potential problem (also referred to as criticized) and classified loans and leases, excluding loans measured at fair value, totaled $1.39 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 to the notes to consolidated financial statements included in Item 8 of this Report. At December 31,2025, the portion of criticized and classified loans and leases guaranteed by the SBA or USDA totaled $669.8 million and total portfolio unguaranteed exposure risk was $719.9 million, or 8.6% of total held for investment unguaranteed exposure carried at historical cost. 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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Previous report — wording carried elsewhere
See Note 5. Servicing Assets in the notes to consolidated financial statements for further details of the factors considered by the Company in estimating the fair value of servicing assets.