Cover - USD ($)	12 Months Ended
Cover - USD ($)	Dec. 31, 2024	Mar. 17, 2025	Jun. 30, 2024
Cover [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2024
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity File Number	001-37497
Entity Registrant Name	LIVE OAK BANCSHARES, INC.
Entity Incorporation, State or Country Code	NC
Entity Tax Identification Number	26-4596286
Entity Address, Address Line One	1741 Tiburon Drive
Entity Address, City or Town	Wilmington
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	28403
City Area Code	910
Local Phone Number	790-5867
Title of 12(b) Security	Voting Common Stock, no par value per share
Trading Symbol	LOB
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Files	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Document Financial Statement Error Correction	false
Entity Shell Company	false
Entity Public Float			$ 1,203,104,831
Entity Common Stock, Shares Outstanding (in shares)		45,565,314
Documents Incorporated by Reference	Portions of the registrant's definitive proxy statement for the 2025 Annual Meeting of Shareholders, which the registrant plans to file subsequent to the date hereof, are incorporated by reference into Part III. Portions of the registrant's annual report to shareholders for the year ended December 31, 2024, which will be posted on the registrant's website and furnished to the SEC subsequent to the date hereof, are incorporated by reference into Part II.
Entity Central Index Key	0001462120
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	FY
Amendment Flag	false

Audit Information	12 Months Ended
Audit Information	Dec. 31, 2024
Auditor Information [Abstract]
Auditor Name	KPMG LLP
Auditor Location	Charlotte, North Carolina
Auditor Firm ID	185

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2024	Dec. 31, 2023
Assets
Cash and due from banks	$ 608,800	$ 582,540
Certificate of deposit with other banks	250	250
Investment securities available-for-sale	1,248,203	1,126,160
Loans held for sale	346,002	387,037
Loans and leases held for investment (includes $328,746 and $388,036 measured at fair value, respectively)	10,233,374	8,633,847
Allowance for credit losses on loans and leases	(167,516)	(125,840)
Net loans and leases	10,065,858	8,508,007
Premises and equipment, net	264,059	257,881
Foreclosed assets	1,944	6,481
Servicing assets (includes $55,788 and $48,186 measured at fair value, respectively)	56,144	48,591
Other assets	352,120	354,476
Total assets	12,943,380	11,271,423
Deposits:
Noninterest-bearing	318,890	259,270
Interest-bearing	11,441,604	10,015,749
Total deposits	11,760,494	10,275,019
Borrowings	112,820	23,354
Other liabilities	66,570	70,384
Total liabilities	11,939,884	10,368,757
Shareholders’ equity
Preferred stock, no par value, 1,000,000 authorized, none issued or outstanding at December 31, 2024 and December 31, 2023	0	0
Retained earnings	715,767	642,817
Accumulated other comprehensive loss	(82,344)	(84,719)
Total shareholders' equity attributed to Live Oak Bancshares, Inc.	999,030	902,666
Non-controlling interest	4,466	0
Total shareholders’ equity	1,003,496	902,666
Total liabilities and shareholders’ equity	12,943,380	11,271,423
Class A Common Stock
Shareholders’ equity
Common stock	365,607	344,568
Class B Common Stock
Shareholders’ equity
Common stock	$ 0	$ 0

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2024	Dec. 31, 2023
Total Loans and Leases	$ 10,263,355	$ 8,655,865
Servicing asset, Fair Value	55,788	48,186
Adoption of accounting standards update, adjustment to retained earnings	999,030	902,666
Receivables Under The Fair Value Option
Total Loans and Leases	$ 328,746	$ 388,036
Preferred Stock
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, authorized (in shares)	1,000,000	1,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Class A Common Stock
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	100,000,000	100,000,000
Common stock, issued (in shares)	45,359,425	44,617,673
Common stock, outstanding (in shares)	45,359,425	44,617,673
Class B Common Stock
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	10,000,000	10,000,000
Common stock, issued (in shares)	0	0
Common stock, outstanding (in shares)	0	0

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
Consolidated Statements of Income - USD ($) $ in Thousands	Dec. 31, 2024	Dec. 31, 2023	Dec. 31, 2022
Interest income
Loans and fees on loans	$ 744,841	$ 623,667	$ 418,545
Investment securities, taxable	38,413	33,497	19,667
Other interest earning assets	29,118	31,111	6,261
Total interest income	812,372	688,275	444,473
Interest expense
Deposits	430,887	340,207	115,035
Borrowings	5,580	2,763	1,937
Total interest expense	436,467	342,970	116,972
Net interest income	375,905	345,305	327,501
Provision for credit losses	96,212	51,323	40,943
Net interest income after provision for credit losses	279,693	293,982	286,558
Noninterest income
Loan servicing revenue	31,535	27,399	25,359
Loan servicing asset revaluation	(12,155)	4,886	(16,577)
Net gains on sales of loans	60,899	46,545	43,244
Net gain (loss) on loans accounted for under the fair value option	2,403	(3,539)	1,046
Equity method investments (loss) income	(10,921)	(5,994)	144,250
Equity security investments gains (losses), net	553	(969)	3,355
Lease income	9,756	10,007	10,084
Management fee income	7,658	13,324	10,090
Other noninterest income	34,053	20,074	17,141
Total noninterest income	123,781	111,733	237,992
Noninterest expense
Salaries and employee benefits	183,268	175,052	170,822
Travel expense	9,738	8,922	8,499
Professional services expense	11,023	7,737	11,737
Advertising and marketing expense	11,148	12,559	10,543
Occupancy expense	10,000	8,490	11,088
Technology expense	34,206	31,858	28,434
Equipment expense	13,826	14,997	15,120
Other loan origination and maintenance expense	17,254	14,804	13,168
Renewable energy tax credit investment impairment	530	14,644	16,217
FDIC insurance	10,835	16,670	9,756
Contributions and donations	0	0	6,462
Other expense	12,411	17,152	12,380
Total noninterest expense	314,239	322,885	314,226
Income before taxes	89,235	82,830	210,324
Income tax expense	11,818	8,932	34,116
Net income	77,417	73,898	176,208
Net loss attributable to non-controlling interest	57	0	0
Net income attributable to Live Oak Bancshares, Inc.	$ 77,474	$ 73,898	$ 176,208
Basic earnings per share (in dollars per share)	$ 1.72	$ 1.67	$ 4.02
Diluted earnings per share (in dollars per share)	$ 1.69	$ 1.64	$ 3.92

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2024	Dec. 31, 2023	Dec. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 77,417	$ 73,898	$ 176,208
Other comprehensive income (loss) before tax:
Net unrealized gain (loss) on investment securities available-for-sale during the period	3,125	9,999	(124,032)
Reclassification adjustment for gain on sale of securities available- for-sale included in net income	0	0	0
Other comprehensive income (loss) before tax	3,125	9,999	(124,032)
Income tax (expense) benefit	(750)	(2,400)	29,768
Other comprehensive income (loss), net of tax	2,375	7,599	(94,264)
Total comprehensive income	79,792	81,497	81,944
Comprehensive loss attributable to non-controlling interest	57	0	0
Total comprehensive income attributable to Live Oak Bancshares, Inc.	$ 79,849	$ 81,497	$ 81,944

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Class A Common Stock	Class B Common Stock	Common stock	Common stock Class A Common Stock	Common stock Class B Common Stock	Retained earnings	Retained earnings Cumulative Effect, Period of Adoption, Adjustment	Accumulated other comprehensive income (loss)	Non-Controlling Interest
Beginning balance (in shares) at Dec. 31, 2021						43,494,046	125,024
Beginning balance at Dec. 31, 2021	$ 715,133				$ 312,294			$ 400,893		$ 1,946	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	176,208							176,208
Other comprehensive income (loss)	(94,264)									(94,264)
Issuance of restricted stock (in shares)						211,235
Tax withholding related to vesting of restricted stock and other	(4,972)				(4,972)
Employee stock purchase program (in shares)						29,383
Employee stock purchase program	1,067				1,067
Non-voting common stock converted to voting common stock in private sale (in shares)						125,024	(125,024)
Stock option exercises (in shares)						201,556
Stock option exercises	2,118				2,118
Stock option compensation expense	942				942
Restricted stock compensation expense	$ 19,405				19,405
Accounting Standards Update [Extensible Enumeration]	Accounting Standards Update 2022-02 [Member]
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	$ 662							662
Cash dividends	(5,266)							(5,266)
Ending balance (in shares) at Dec. 31, 2022						44,061,244	0
Ending balance at Dec. 31, 2022	811,033	$ 676			330,854			572,497	$ 676	(92,318)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	73,898							73,898
Other comprehensive income (loss)	7,599									7,599
Issuance of restricted stock (in shares)						373,616
Tax withholding related to vesting of restricted stock and other	(6,725)				(6,725)
Employee stock purchase program (in shares)						59,074
Employee stock purchase program	1,396				1,396
Stock option exercises (in shares)						123,739
Stock option exercises	1,168				1,168
Stock option compensation expense	272				272
Restricted stock compensation expense	17,603				17,603
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	1,072							1,072
Cash dividends	(5,326)							(5,326)
Ending balance (in shares) at Dec. 31, 2023			44,617,673	0		44,617,673	0
Ending balance at Dec. 31, 2023	902,666				344,568			642,817		(84,719)	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	77,417							77,474			(57)
Other comprehensive income (loss)	2,375									2,375
Issuance of restricted stock (in shares)						399,806
Tax withholding related to vesting of restricted stock and other	(8,926)				(8,926)
Employee stock purchase program (in shares)						34,930
Employee stock purchase program	$ 1,449				1,449
Stock option exercises (in shares)	336,197					307,016
Stock option exercises	$ 2,311				2,311
Restricted stock compensation expense	26,205				26,205
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	881							881
Contributions of non-controlling interest	4,523										4,523
Cash dividends	(5,405)							(5,405)
Ending balance (in shares) at Dec. 31, 2024			45,359,425	0		45,359,425	0
Ending balance at Dec. 31, 2024	$ 1,003,496				$ 365,607			$ 715,767		$ (82,344)	$ 4,466

Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2024	Dec. 31, 2023	Dec. 31, 2022
Statement of Stockholders' Equity [Abstract]
Cash dividends (in dollars per share)	$ 0.12	$ 0.12	$ 0.12

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2024	Dec. 31, 2023	Dec. 31, 2022
Cash flows from operating activities
Net income	$ 77,417	$ 73,898	$ 176,208
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,282	21,271	20,779
Provision for credit losses	96,212	51,323	40,943
(Accretion) amortization of (discount) premium on securities, net of accretion	(721)	8	3,420
Deferred tax (benefit) expense	(11,420)	(22,161)	27,129
Originations of loans held for sale	(1,037,474)	(877,083)	(1,042,061)
Proceeds from sales of loans held for sale	1,431,261	1,362,803	1,067,758
Net gains on sale of loans held for sale	(60,899)	(46,545)	(43,244)
Net (gain) loss on impairment and sale of foreclosed assets	(249)	751	(24)
Net (gain) loss on loans accounted for under fair value option	(2,403)	3,539	(1,046)
Net change in servicing assets	(7,553)	(22,268)	7,251
Net gain on sale or disposal of long lived asset	(9,079)	(4,411)	0
Net loss on disposal of premises and equipment	113	377	31
Impairment on premises and equipment, net	0	499	0
Equity method investments loss (income)	10,921	5,994	(144,250)
Equity security investments (gains) losses, net	(553)	969	(3,355)
Gain on equity warrant assets	(5,962)	0	0
Renewable energy tax credit investment impairment	530	14,644	16,217
Stock option compensation expense	0	272	942
Restricted stock compensation expense	26,205	17,603	19,405
Stock based compensation excess tax benefit (deficiency)	1,085	(1,004)	531
Business combination contingent consideration fair value adjustment	(125)	125	(86)
Lease right-of-use assets and liabilities, net	150	(59)	232
Changes in assets and liabilities:
Other assets	(12,284)	35,556	(15,889)
Other liabilities	18,014	3,970	(6,406)
Net cash provided by operating activities	536,468	620,071	124,485
Cash flows from investing activities
Purchases of investment securities available-for-sale	(269,631)	(215,595)	(397,346)
Proceeds from sales, maturities, calls, and principal paydowns of investment securities available-for-sale	151,435	114,145	161,227
Proceeds from SBA reimbursement/sale of foreclosed assets, net	8,322	0	1,837
Maturities of certificates of deposit with other banks	0	3,750	750
Purchases of loans previously sold	(116,903)	(51,172)	(16,765)
Loan and lease originations and principal collections, net	(1,835,442)	(1,574,912)	(1,252,106)
Proceeds from sale of long lived asset	43,598	18,588	0
Purchases of equity security investments	(7,020)	(3,390)	(9,283)
Purchases of equity method investments	(8,458)	(27,209)	(35,955)
Proceeds from sale of equity security investments	1,901	0	625
Proceeds from sale of equity method investments	1,361	7,612	148,423
Proceeds from sale of premises and equipment	1,043	100	0
Purchases of premises and equipment, net	(49,307)	(46,839)	(43,751)
Net cash used by investing activities	(2,079,101)	(1,774,922)	(1,442,344)
Cash flows from financing activities
Net increase in deposits	1,485,475	1,390,091	1,772,884
Proceeds from borrowings	99,703	2,906,071	62,096
Repayment of borrowings	(10,237)	(2,965,920)	(297,182)
Stock option exercises	2,311	1,168	2,118
Employee stock purchase program	1,449	1,396	1,067
Withholding cash issued in lieu of restricted stock and other	(8,926)	(6,725)	(4,972)
Contributions of non-controlling interest	4,523	0	0
Shareholder dividend distributions	(5,405)	(5,326)	(5,266)
Net cash provided by financing activities	1,568,893	1,320,755	1,530,745
Net increase in cash and cash equivalents	26,260	165,904	212,886
Cash and cash equivalents, beginning	582,540	416,636	203,750
Cash and cash equivalents, ending	608,800	582,540	416,636
Supplemental disclosure of cash flow information
Interest paid	436,847	342,766	117,516
Income tax paid, net	38,907	5,303	24,708
Supplemental disclosures of noncash operating, investing, and financing activities
Unrealized holding gains (losses) on investment securities available-for-sale, net of taxes	2,375	7,599	(94,264)
Transfers from loans and leases to foreclosed real estate and other repossessions or SBA receivable	16,676	39,901	18,496
Net transfers between foreclosed real estate and SBA receivable	497	0	(15)
Transfer asset from premises and equipment, net to held for sale assets	18,540	30,154	0
Transfer of loans held for sale to loans and leases held for investment	168,303	275,408	930,612
Transfer of loans and leases held for investment to loans held for sale	475,567	617,189	468,042
Transfer from retained earnings to other assets for pro rata portion of equity method investee stock compensation expense	881	1,072	662
Equity method investment commitments	(18,358)	7,715	17,022
Equity security investment commitments	(583)	0	394
Change related to accounting change for ASU 2022-02	$ 0	$ 676	$ 0

Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies

Organization

Live Oak Bancshares, Inc. (collectively with its subsidiaries including Live Oak Banking Company, the “Company”) is a bank holding company headquartered in Wilmington, North Carolina incorporated under the laws of North Carolina in December 2008. The Company conducts business operations primarily through its commercial bank subsidiary, Live Oak Banking Company (the “Bank”). The Bank was organized and incorporated under the laws of the State of North Carolina on February 25, 2008 and commenced operations on May 12, 2008. The Bank has satellite sales offices across the United States. The Bank specializes in providing lending and deposit related services to small businesses nationwide. A significant portion of the loans originated by the Bank are partially guaranteed by the Small Business Administration (“SBA”) under the 7(a) Loan Program and the U.S. Department of Agriculture’s (“USDA”) Rural Energy for America Program (“REAP”), Water and Environmental Program (“WEP”), Business & Industry (“B&I”) and Community Facilities loan programs. These loans are to small businesses and professionals with what the Bank believes are lower risk characteristics. Industries, or “verticals,” on which the Bank focuses its lending efforts are carefully selected. The Bank also lends more broadly to select borrowers outside of those verticals.

As of December 31, 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. 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. 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.

Basis of Presentation

Dollar amounts in all tables in the notes to consolidated financial statements have been presented in thousands, except percentage, time period, stock option, share and per share data. The accounting and reporting policies of the Company and the Bank follow United States generally accepted accounting principles (“GAAP”) and general practices within the financial services industry. The following is a description of the significant accounting and reporting policies the Company follows in preparing and presenting its consolidated financial statements.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

Consolidation Policy

The consolidated financial statements include the financial statements of the Company and its directly and indirectly wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity in a subsidiary not attributable, directly or indirectly, to the Company. Non-controlling interests are presented as a separate component of equity in the consolidated balance sheets and the presentation of net income (loss) is modified to present the net income (loss) attributed to controlling and non-controlling interests.

The Company evaluates its relationships with other entities to identify whether they are a voting interest entity or variable interest entity (“VIE”). Voting interest entities are entities that generally (1) have sufficient equity to finance their activities and (2) provide the equity investors with power to make significant decisions relating to the entity’s operations. A voting interest entity is consolidated if the Company holds majority voting rights.

The Company is considered to hold a controlling financial interest in a VIE when it is the primary beneficiary. A primary beneficiary has both (1) the power to direct the activities that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or right to receive benefits of a VIE that could potentially be significant to a VIE. The parties that make investment and investment decisions, or parties that can unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE. The Company considers all of its economic interests in the VIE when determining whether it has the obligation to absorb losses or the right to receive benefits from the VIE. For details on the Company’s VIE investments refer to Note 2. Securities, “Variable Interest Entities.”

Business Segment

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the President of Live Oak Bancshares, Inc. and the Bank. In determining the appropriateness of segment definition, the Company considers the components of the business about which financial information is available and components the chief operating decision maker regularly evaluates relative to resource allocation and performance assessment.

As of December 31, 2023, the Company disclosed two reportable operating segments: Banking and Fintech. Due to Canapi Advisors voluntarily withdrawing as an investment advisor to the Canapi Funds in the third quarter of 2024, the chief operating decision maker began evaluating the business on a consolidated basis. Therefore, the Company has one significant operating segment, which is providing a banking platform for small businesses nationwide. The banking platform generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. The chief operating decision maker assesses performance and decides how to allocate resources based on net income which is reported on the consolidated statements of income. The chief operating decision maker uses net income to evaluate income generated from total assets (return on assets) and profitability of the segment in relation to total shareholders’ equity (return on equity). The measures of segment assets and equity are reported on the consolidated balance sheets as total assets and total shareholders’ equity. Net income is also used to monitor budget versus actual results. All of these elements are used in assessing performance of the segment.

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

Use of Estimates

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

During the first quarter of 2023, the Company refined its allowance for credit losses (“ACL”) methodology for estimating probability of default (“PD”) and loss given default (“LGD”). Additionally, the Company began using internally calculated prepayment rates based on its historical information. These changes, based on the continued maturity of internal data, resulted in a $1.5 million increase in the ACL in the first quarter of 2023.

The Company also refined its methodology for estimating its reserve on unfunded loan commitments by incorporating historical utilization rates on unused lines of credit and updating probability assumptions related to construction loan commitments. These changes resulted in a $2.4 million increase in the reserve on unfunded commitments in the first quarter of 2023.

During the third quarter of 2023, the Company changed the valuation techniques used to estimate the fair value of servicing rights and loans measured at fair value as a result of rising interest rates and their impacts on market conditions. The changes include aligning our net servicing income and loan fair value estimates with changes in forward interest rate curves. Loan fair value estimates were also revised to utilize market participant credit loss information. These revisions provide estimates that the Company believes are more representative of fair value while transitioning from unobservable inputs to those that are more observable. These estimate changes were implemented as of July 1, 2023 and resulted in an adjustment to increase the estimated value of the servicing asset by $13.7 million and loans measured at fair value by $1.3 million. This adjustment also increased noninterest income by a corresponding $15.0 million.

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.

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

Cash and Cash Equivalents

For the purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “cash and due from banks” and “federal funds sold.” Cash and cash equivalents have an initial maturity of three months or less.

Certificate of Deposit with other Banks

The certificate of deposit with other banks has a maturity of December 2025 and bears interest at a rate of 3.80%. All investments in certificates of deposit are with FDIC insured financial institutions and none exceed the maximum insurable amount of $250 thousand.

Investments

Debt Securities

Debt securities that management has the positive intent and ability to hold to maturity are classified as held-to-maturity and recorded at amortized cost. Securities that may be sold prior to maturity are classified as available-for-sale and recorded at fair value. Unrealized gains and losses for available-for-sale investment securities, other than credit-related impairment losses, are excluded from earnings and reported in other comprehensive income. The Company’s entire portfolio of debt securities is classified as available-for-sale for the periods presented.

Purchase premiums and discounts on debt securities are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sales of these securities are recorded on the trade date and are determined using the specific identification method.

When debt securities are in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. Debt securities that do not meet the aforementioned criteria are evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected from the security is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. Changes in the ACL are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale debt securities from the estimate of credit losses. Securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met.

Equity Investments

Equity investments are generally non-marketable investments and are included in the other assets line in the consolidated balance sheets. The Company generally accounts for equity investments either under the equity method or equity security accounting. Earnings impacts are reflected in the equity method investments (loss) income and equity security investments (losses) gains, net line items on the consolidated statements of income.

Investments in in-substance common stock through which there is significant influence but not control over the investee are accounted for under the equity method. The determination of whether the Company has significant influence over an investee requires judgement based on the facts and circumstances of each investment including, share type, level of ownership, power to control and legal structure. Significant influence is generally presumed to exist in privately held companies where the Company owns at least 20% of voting stock, or 5% interest in limited partnerships or limited liability companies. Qualitatively, significant influence can exist through the ability to influence the investee’s operating and financial policies through board involvement or other influence. Under the equity method, the Company recognizes its proportionate share of the results of operations of the investee based on most current information available. In instances where cash distributions vary at different points and/or are not directly linked to the Company’s ownership percentage, the investee’s net income or loss is allocated using the hypothetical liquidation at book value (“HLBV”) method.

Investments that do not qualify as in-substance common stock, or through which the Company is not able to exercise significant influence over the investee, are accounted for as equity securities, whereby investments are measured at fair value with changes in fair value recognized in net income, unless those investments have no readily determinable fair value. Investments without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus changes in value resulting from observable price changes arising from orderly transactions. Management considers a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, market conditions, values for comparable securities, current and projected operating performance, exit strategies, financing transactions subsequent to the acquisition of the investment and a discount for certain investments that have lock-up restrictions or other features that indicate a discount to fair value is warranted.

For equity securities not accounted for at fair value, any impairment is recognized with the full charge recorded in earnings. To determine whether an equity security may be impaired, the Company considers various indicators of impairment, including, but not limited to (1) the financial condition and near-term prospects of the issuer, (2) adverse market conditions and (3) bona-fide offers to purchase an equity interest in the investee below the carrying amount.

Federal Home Loan Bank Stock

Membership in the Federal Home Loan Bank of Atlanta (“FHLB”) requires ownership of FHLB stock. FHLB stock is restricted because it may only be sold to the FHLB and all sales must be at par. FHLB stock is carried at cost minus impairment, if any, and is recorded within other assets in the consolidated balance sheet. FHLB stock was $7.8 million and $6.8 million at December 31, 2024 and 2023, respectively.

Loans and Leases

Fair Value Option

Prior to 2021, management elected to account for the retained participating interests in government guaranteed loans under the fair value option. Those loans for which the fair value option were elected are measured at fair value and classified as either held for sale or held for investment, as outlined below. Not electing fair value generally results in a larger discount being recorded on the date of the sale. This discount is subsequently accreted into interest income over the underlying loan’s remaining term using the effective interest method. Management made this change of election in alignment with its ongoing effort to reduce volatility and drive more predictable revenue. In accordance with accounting standards, any loans for which fair value was previously elected continue to be measured accordingly. Interest income is recognized in the same manner on loans reported at fair value as on non-fair value loans, except in regard to origination fees and costs which are recognized immediately upon fair value election. The changes in fair value of loans are reported in noninterest income. Fair value of loans includes adjustments for credit losses, market liquidity, and economic conditions.

Management estimates the fair value of loans accounted for under the fair value option using a discounted cash flow (“DCF”) methodology. The estimate incorporates assumptions that market participants would use to estimate fair value of similar assets such as prepayment speeds, default and severity rates, and a discount rate. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

Held for Sale

Management designates loans as held for sale based on its intent to sell loans, or portions of loans, in established secondary markets or to participant banks and credit unions. Salability requirements of government guaranteed portions include, but are not limited to, full disbursement of the loan commitment amount. Loans held for sale are carried at the lower of cost or fair value. Net unrealized losses, if any, on loans without a fair value election, are recognized through a valuation allowance and recorded as a charge to noninterest income. The cost basis of loans held for sale includes unamortized loan origination fees and costs. The pro-rata portion, based on the percent of the total loan sold, of the remaining deferred fees and costs are recognized as an adjustment to the gain on sale.

Transfers of loans, or portions of loans that meet the definition of a participating interest are accounted for as sales on the transaction settlement date when control has been surrendered. Control is deemed surrendered when the loans have been (1) legally isolated from the Company, (2) the transferee obtains the right to pledge or transfer the loans free of conditions that constrain it from using that right, and (3) the Company does not maintain effective control over the loans through a repurchase agreement or other means. If the transfer is accounted for as a sale, the loans are derecognized from the Company’s consolidated balance sheet and a gain or loss is recognized in net gains on sales of loans line item on the consolidated statements of income. The gain on sale recognized in income is the sum of the premium on the guaranteed loan and the fair value of the servicing assets recognized, less the discount recorded on the unguaranteed portion of the loan retained. If the transfer does not satisfy the aforementioned control criteria, the transaction is recorded as a secured borrowing with the transferred loans remaining on the Company’s consolidated balance sheet and proceeds recognized as a liability.

In accordance with SBA and USDA regulation, the Bank is required to retain 10% and 7.5% of the principal balance of any SBA 7(a) or USDA loan, respectively, comprised of unguaranteed dollars. With written consent from the SBA, the Bank may sell down to a 5% exposure comprised of unguaranteed dollars.

The Company occasionally transfers loans between the held for sale and held for investment classifications based on its intent and ability to hold or sell loans. Management’s intent to sell may be impacted by secondary market conditions, loan credit quality, or other factors.

The following summarizes the activity pertaining to loans held for sale for the years ended December 31, 2024 and 2023:


	2024		2023
Balance at beginning of year	$	387,037	$	554,610
Originations	1,037,474		877,083
Proceeds from sale	(1,431,261)		(1,362,803)
Gain on sale of loans	60,899		46,545
Principal collections, net of deferred fees and costs	(15,411)		(70,179)
Non-cash transfers, net	307,264		341,781
Balance at end of period	$	346,002	$	387,037

Held for Investment

Loans and leases receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are classified as held for investment and generally reported at their outstanding principal amount, net of unearned income unless the fair value option has been elected. For such loans not carried at fair value, loan origination fees and direct origination costs are deferred and recognized as an adjustment of the loan yield using the interest method. Discounts and premiums on any purchased loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Interest income on loans and leases is recognized as earned on a daily accrual basis at the applicable interest rate.

Loans and leases designated as held for investment include those identified as more beneficial to hold for the long term as well as the required retention amount defined by the SBA and USDA. Loans and leases held for investment also consist of certain guaranteed and unguaranteed credits including nonaccrual, non-marketable, and risk grade 50 or worse as defined by internal risk rating metrics.

Nonaccrual and Past Due Loans

Past due status of loans and leases is determined based on contractual terms. Loans and leases are placed in nonaccrual status and the accrual of interest is discontinued if they become 90 days delinquent or there is evidence that the borrower’s ability to make the required payments is not probable. When interest accrual is discontinued, all unpaid accrued interest is reversed against current interest income. Loans and leases, or portions thereof, are charged off when deemed uncollectible.

Allowance for Credit Losses

The ACL is a valuation account that is deducted from the amortized cost basis of loans and leases to present a net amount expected to be collected. The ACL is not applicable to loans held for sale and loans accounted for under the fair value option. Loans and leases are charged-off against the ACL when management believes the uncollectibility of a loan or lease balance is confirmed. Expected recoveries, included in the ACL, do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The Company’s ACL on loans and leases is estimated using models that incorporate relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. The Company’s historical credit loss experience provides the basis for the estimation of expected credit losses.

The ACL is measured on a pooled basis using a quantitative modeling process when similar risk characteristics are present in the portfolio. The Company has identified pools based on industry or market segment, and whether the receivable is secured by real estate or another form of collateral. Additional information related to the portfolio segments can be found in Note 3. Loans and Leases Held for Investment and Credit Quality. Expected credit losses for pooled loans and leases are estimated using a DCF methodology for each loan and lease which incorporates measurements of PD, LGD, prepayments, the estimated outstanding exposure at default (“EAD”), and the effective interest rate (“EIR”). PD rates are calculated using the number of defaults divided by the number of loans available to default for 1-year observation periods over the lifetime of data available for a certain pool. LGD rates are calculated by dividing the lifetime net charge-offs for each pool by the pool’s EAD. PD and LGD rates are adjusted for forecasted national unemployment rates during a reasonable and supportable forecast period, using a single macroeconomic scenario. Management has determined that four quarters represents a reasonable and supportable forecast period and adjusted loss rates revert back to a historical loss rate over four quarters on a straight-line basis.

Expected credit losses are estimated over the contractual term of the loan or lease, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions and renewals unless the extension or renewal options are included in the contract at the reporting date and are not unconditionally cancellable by the Company.

The Company considers a variety of qualitative factors to reflect its current judgment of various events and risks that are not measured within the quantitative modeling, including lending policies and procedures, economic and business conditions, nature and volume of the loan and lease portfolio, experience of lending staff, volume and severity of credit risk metrics, quality of loan review, value of underlying collateral, loan and lease portfolio concentrations, and other external factors. The qualitative component of the ACL is further informed by multiple alternative economic scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires management judgment based on underlying factors that are susceptible to changes.

In 2023, management adjusted historical loss information for differences in current risk characteristics that are not considered within the quantitative modeling processes but were relevant in assessing the expected credit losses within the loan and lease pools. These qualitative factor adjustments generally increased management’s estimate of expected credit losses based upon the estimated level of risk. The various risk factors considered in qualitative adjustments included risk grading, delinquency levels, pool age, portfolio mix and growth rates, and the status of servicing efforts which may be impacted by natural disasters or health pandemics. This evaluation was inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

Loans or leases that do not share risk characteristics are evaluated on an individual basis and are excluded from the pooled evaluation. This generally occurs when, based on current information and events, it is probable that the Company will be unable to collect all interest and principal payments due according to the originally contracted, or reasonably modified, terms of the loan or lease agreement. The Company has determined that loans and leases meeting the criteria defined below must be reviewed quarterly to determine if they should be evaluated for expected credit losses on an individual basis.

•All commercial loans and leases classified substandard or worse.

•Any loan or lease that is on nonaccrual.

•Prior to January 1, 2023, any loan or lease that was restructured with an interest rate concession and met the definition of a troubled debt restructuring (“TDR”).

The Company estimates reserves on individually evaluated loans and leases using either a DCF methodology in conjunction with the evaluation of collateral values or strictly through the evaluation of collateral values.

Loan relationships which meet the criteria to be individually evaluated with unguaranteed exposure of less than $250 thousand are collectively evaluated using an average of loss rates applied to individually evaluated relationships with unguaranteed exposure between $250 thousand and $1.0 million.

When management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Allowance for Off-Balance Sheet Credit Exposures

Expected credit losses on off-balance sheet credit exposures is estimated over the contractual period in which the Company is exposed to such losses. The estimate of off-balance sheet credit exposures includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated losses. The estimate is influenced by historical loss experience, adjusted for current risk characteristics, and economic forecasts. The balance of the allowance for off-balance sheet credit exposures was $13.6 million and $4.8 million at December 31, 2024 and 2023, respectively, and is recorded in other liabilities in the consolidated balance sheet. During the years ended December 31, 2024, 2023 and 2022, the Company recorded $8.8 million, $3.3 million and $794 thousand in expense related to the allowance for off-balance sheet credit exposures. Beginning in the second quarter of 2024, this expense was presented in the provision for credit losses. This expense was historically presented in other expense and that classification remains unchanged for prior periods.

Equipment Leasing

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

Direct Financing Leases

Interest income on direct financing leases is recognized when earned. Unearned interest is recognized over the lease term on a basis which results in a constant rate of return on the unrecovered lease investment. The term of each lease is generally 3-7 years which is consistent with the useful life of the equipment with no residual value. The Company records expected credit losses on direct finance leases within the ACL.

Operating Leases

The term of each operating lease is generally 10 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 market value.

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

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

The Company evaluates the carrying value of rental equipment for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable. If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value. The Company determines fair value based upon the condition of the rental equipment and the projected net cash flows from its rental and sale considering current market conditions. During the year ended December 31, 2023, the Company recognized impairment expense of $499 thousand related to rental equipment. No impairment expense was recorded during the years ended December 31, 2024 and 2022.

Premises and Equipment

All premises and equipment, excluding land, are carried at cost, less accumulated depreciation. Land is carried at cost. Additions and major replacements or improvements which extend useful lives of property or equipment are capitalized. Maintenance, repairs, and minor improvements are expensed as incurred. Upon retirement or other disposition of the assets, the cost and related depreciation are derecognized and any resulting gain or loss is reflected in income. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Depreciation is computed by the straight-line method over the following generally estimated useful lives:


			Years
Buildings			39
Transportation			5-10
Land improvements			10-15
Furniture and equipment			5-10
Hardware and software			3-5
Solar panels			20-25

Foreclosed Assets

Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value less anticipated cost to sell at the date of foreclosure, establishing a new cost basis. Any write down at the time of transfer to foreclosed assets is charged to the allowance for credit losses on loans and leases. After foreclosure, valuations are periodically performed by management, and the real estate is carried at the lower of the carrying amount or fair value, less cost to sell. Subsequent write downs are charged to other expense. Costs relating to improvement of the property are capitalized while holding costs of the property are charged to other loan origination and maintenance expense in the period incurred.

Servicing Assets

All sales of loans are executed on a servicing retained basis. The standard SBA loan sale agreement is structured to provide the Company with a “servicing spread” paid from a portion of the interest cash flow of the loan. SBA regulations require the Bank to retain a portion of the cash flow from the interest payments received for a sold loan. The SBA retention requirement is at least 100 basis points in servicing spread while the Company's standard USDA loan sale agreement specifies a servicing spread of 40 basis points. The portion of the servicing spread that exceeds adequate compensation for the servicing function is recognized as a servicing asset, while any that is less is considered a servicing liability. Industry practice recognizes adequate compensation for servicing SBA and USDA loans as 25 basis points.

Servicing assets related to SBA and USDA loan sales are recognized as separate assets measured at fair value when a loan is sold. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as adequate compensation for servicing, the discount rate, the custodial earnings rate, ancillary income, prepayment speeds and default rates and losses, with the prepayment speed and discount rate being the most sensitive assumptions. Servicing rights recognized through the sale of government guaranteed loans are carried at fair value as of the reporting date. Changes to fair value are reported in loan servicing asset revaluation in the consolidated statements of income. Servicing rights recognized through the sale of conventional loans are amortized over the period of estimated future net servicing life of the underlying assets and are evaluated quarterly for impairment by comparing the amortized cost to the estimated fair value. Servicing assets related to conventional commercial loans are carried at amortized cost.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned.

Derivative Financial Instruments

Equity Warrant Assets

In connection with negotiated credit facilities and certain other services, the Company may obtain equity warrant assets giving the Company the right to acquire stock in private companies in certain verticals. These assets are held for prospective investment gains and are not used to hedge any economic risks. Further, the Company does not use other derivative instruments to hedge economic risks stemming from equity warrant assets.

Equity warrant assets in certain private client companies are recorded as derivatives when they contain net settlement terms and other qualifying criteria. Equity warrant assets entitle the Company to purchase a specific number of shares of stock at a specific price within a specific time period, generally 10 years. Certain equity warrant assets contain contingent provisions, which adjust the underlying number of shares or purchase price upon the occurrence of certain future events to prevent dilution of the Company’s implied ownership represented by the warrants. Certain warrant agreements contain net share settlement provisions, which permit the receipt of, upon exercise, a share count equal to the intrinsic value of the warrant divided by the share price (otherwise known as a “cashless” exercise). These equity warrant assets are recorded at fair value and are classified as derivative assets, a component of other assets, on the consolidated balance sheet at the time they are obtained.

The grant date fair values of equity warrant assets classified as derivatives received in connection with the issuance of a credit facility are deemed to be loan fees and recognized as an adjustment of loan yield through loan interest income. Similar to other loan fees, the yield adjustment related to grant date fair value of warrants is recognized over the life of that credit facility.

Any changes in fair value from the grant date fair value of equity warrant assets classified as derivatives are recognized as increases or decreases to other assets on the consolidated balance sheet and as net gains or losses on derivative instruments, in other noninterest income, a component of consolidated net income. When a portfolio company is acquired, the Company may exercise these equity warrant assets for shares or cash.

The fair value of equity warrant assets classified as derivatives is reviewed and updated quarterly using a Black-Scholes option pricing model.

For those equity warrant assets that do not contain net share settlement provisions, the Company considers these to be equity investments without readily determinable market values and records the asset at cost, subject to periodic impairment testing.

Goodwill and Intangible Assets

Goodwill is the purchase premium after adjusting for the fair value of net assets acquired. Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or when events or circumstances indicate a potential impairment, at the related reporting unit level. The goodwill impairment test involves comparing the fair value of the reporting unit with its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not impaired; however, if the carrying value of the reporting unit exceeds its fair value, an impairment charge must be recorded. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit. An impairment loss establishes a new basis in the goodwill and subsequent reversals of goodwill impairment losses are not permitted under applicable accounting guidance.

For intangible assets subject to amortization, the recoverability test is performed when a triggering event occurs and an impairment loss is recognized if the carrying value of the intangible asset is not recoverable and exceeds fair value. The carrying value of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. Intangible assets deemed to have indefinite useful lives are not subject to amortization. An impairment loss is recognized if the carrying value of the intangible asset with an indefinite life exceeds its fair value.

As of December 31, 2024 and 2023, the Company had $1.8 million of goodwill. The carrying amounts and accumulated amortization of all intangible assets as of December 31, 2024 was $1.6 million and $726 thousand, respectively, while at December 31, 2023 the balances were $1.7 million and $573 thousand, respectively. Intangible assets are almost entirely comprised of customer relationships that are being amortized using the straight-line method over 15 years.

The Company had no impairment charges related to business combinations in 2024, 2023 or 2022.

Long-Lived Assets Impairment Evaluation

The Company evaluates the carrying value of long-lived assets for impairment whenever events or circumstances have occurred that would indicate the carrying amount may not be fully recoverable. A key element in determining the recoverability of long-lived assets is the Company’s outlook as to the future market conditions. If the carrying amount is not fully recoverable, an impairment loss is recognized to reduce the carrying amount to fair value.

Long-Lived Assets Reclassified to Held for Sale

During 2024, the Company determined retention of an idle building and accompanying land adjacent to its main campus was not best suited to serve future expansion plans. As a result of this determination, the $18.5 million carrying amount of the building and land was considered held for sale, and reclassified from premises and equipment, net to other assets in the consolidated balance sheet. During the year, the building and land were sold for a gain of $2.4 million which is reflected in the 2024 consolidated statement of income in other noninterest income.

During 2023, the Company determined retention of two of its aircraft, was ineffective in serving the needs of an expanding nationwide customer base. As a result of this determination, the Company marketed the aircraft for sale and accordingly reclassified them from premises and equipment, net to other assets. The total amount reclassified out of premises and equipment, net was $30.2 million. Prior to December 31, 2023, one aircraft was sold for a $4.4 million gain and is reflected in the 2023 consolidated statement of income in other noninterest income with one aircraft remaining in other assets with a carrying amount of $16.0 million at December 31, 2023. During 2024, the Company sold the other aircraft for a gain of $6.7 million which is reflected in the 2024 consolidated statement of income in other noninterest income.

Common Stock

On June 11, 2014, the Company amended its Articles of Incorporation to create two classes of common stock. These two classes are identified as Class A and Class B or Voting Common Stock and Non-Voting Common Stock, respectively, in the accompanying consolidated balance sheet and statements of changes in shareholders’ equity. Voting and Non-Voting Common Stock holders have identical rights and privileges, with the exception that Non-Voting Common shares have no voting power except in limited circumstances. Stock splits or dividends of Voting and Non-Voting Common Shares shall be in like stock (voting for voting and non-voting for non-voting). Any number of Non-Voting Common Stock may be converted to an equal number of Voting Common Stock at the option of the holder; provided that holder is not the initial transferee or an affiliate of initial transferee and other conditions are met.

During 2022, 125,024 shares of Class B common stock (non-voting) were converted to Class A common stock (voting) in connection with private sales. This conversion decreased the value of Class B common stock (non-voting) and increased the value of Class A common stock (voting) by $1.3 million.

Advertising Expense

Marketing costs are recognized in the month the event or advertisement takes place. These costs are included in advertising and marketing expense as presented in the consolidated statements of income.

Income Taxes

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to business combinations or components of other comprehensive income). Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. The effect of a change in tax rates on deferred assets and liabilities is recognized in income taxes during the period that includes the enactment date. A valuation allowance, if needed, reduces deferred tax assets to the expected amount more likely than not to be realized. Realization of deferred tax assets is dependent upon the level of historical income, prudent and feasible tax planning strategies, reversals of deferred tax liabilities and estimates of future taxable income.

The Company uses the flow-through method of accounting for its solar investment tax credit investments, none of which qualify for proportional amortization. Under the flow-through method, investment tax credits are recognized as a reduction to income tax expense immediately in the period that the credit is generated, to the extent permitted by tax law. In accounting for any temporary difference that arise, the Company has elected the income statement method whereby deferred taxes are adjusted through income tax expense.

The Company evaluates uncertain tax positions at the end of each reporting period. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit recognized in the financial statements from any such position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Interest and/or penalties related to income taxes are reported as a component of income tax expense.

Comprehensive Income

Annual comprehensive income reflects the change in the Company’s equity during the year arising from transactions and events other than investment by and distributions to shareholders. The only components of other comprehensive income consist of realized and unrealized gains and losses related to investment securities available-for-sale.

Stock Compensation Plans

The Company recognizes compensation cost based on the fair value of the equity instruments issued. The expense measures the cost of employee services received in exchange for stock options and restricted stock based on the grant-date fair value of the award and recognizes the cost over the vesting period for all awards within an individual grant, including ones with graded vesting features. The fair value of restricted stock awards or units with a market price condition and implied service period are calculated using the Monte Carlo Simulation method. The impact of forfeitures on stock-based compensation expense is recognized as forfeitures occur. See Note 12. Benefit Plans for further discussion and detail.

Fair Value of Financial Instruments

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines the fair values of its financial instruments based on the fair value hierarchy established per GAAP which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 10. Fair Value of Financial Instruments for further discussion and detail.

Earnings Per Share

Basic and diluted earnings per share are computed based on the weighted average number of shares outstanding during each period. Diluted earnings per share reflects the potential dilution that could occur, upon the exercise of stock options or upon the vesting of restricted stock grants, any of which would result in the issuance of common stock that would then share in the net income of the Company.


	December 31,
	2024		2023		2022
Basic earnings per share:
Net income attributable to Live Oak Bancshares, Inc.	$	77,474	$	73,898	$	176,208
Weighted-average basic shares outstanding	45,009,567		44,353,708		43,862,291
Basic earnings per share	$	1.72	$	1.67	$	4.02
Diluted earnings per share:
Net income attributable to Live Oak Bancshares, Inc., for diluted earnings per share	$	77,474	$	73,898	$	176,208
Total weighted-average basic shares outstanding	45,009,567		44,353,708		43,862,291
Add effect of dilutive stock options and restricted stock grants	810,754		741,171		1,044,019
Total weighted-average diluted shares outstanding	45,820,321		45,094,879		44,906,310
Diluted earnings per share	$	1.69	$	1.64	$	3.92
Anti-dilutive stock options and restricted stock grants	494,481		1,233,230		1,413,738

Revenue Recognition

The Company offers various services to customers that generate revenue. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. Incremental costs of obtaining a contract are expensed when incurred when the amortization period is one year or less. As of December 31, 2024, 2023 and 2022, remaining performance obligations consisted primarily of service based revenues for contracts with an original expected length of two years or less.

Service based revenues are included in other noninterest income in the consolidated statements of income and consist of other recurring revenue streams from GLS to its clients for settlement, accounting and valuation for government guaranteed loan sales and holdings, fund investment advisory services performed by Canapi Advisors, and investment management and financial planning services provided by Live Oak Private Wealth. Fund investment advisory services performed by Canapi Advisors ended in the third quarter of 2024 when Canapi Advisors voluntarily withdrew as an investment advisor.

Service Based Revenues

GLS provides services when requested by clients. Each requested service represents a specific performance obligation with a transaction price outlined by a fee schedule. Revenue is recognized as the requested services are completed and payment is generally received the following month.

Canapi Advisors provided investment advisory services to four financial technology venture funds where its performance obligations were satisfied over time. Fund management fees were based upon the contractual terms of the limited partnership agreements and were recognized as earned over the specified contract period, which was generally equal to the life of the individual fund. Fund management fees were calculated as a percentage of committed capital, net of any permitted offsets, and were collected in advance and recognized quarterly.

Live Oak Private Wealth’s investment management and financial planning performance obligations are generally satisfied over time. Fees are recognized quarterly based on the quarter-end market value of the managed assets as valued by the custodian of the customer’s assets and the applicable fee rate. Payment is generally received within a quarter of service delivery. The Company does not earn performance-based incentives from investment management and financial planning services. Contracts with customers may be terminated at any time by either party.

Reclassifications

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

Loan and Lease Classes

During the fourth quarter of 2024, management made changes to loan and lease classes to align the presentation in the credit quality disclosures in Note 3. Loans and Leases Held for Investment and Credit Quality with the Company’s method for monitoring and assessing credit risk. As a result, loans and leases previously classified as Specialty Lending class and Energy & Infrastructure class in the 2023 financial statements were reclassified into the Commercial Banking class to reflect the current year classifications.

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements that could impact the accounting, reporting, and/or disclosure of financial information by the Company.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”). ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In December 2022, ASU 2022-06 “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848” was issued deferring the sunset date of Topic 848. As subsequently amended, the ASU can be adopted by the Company through December 31, 2024. To address the discontinuance of LIBOR, the Company stopped originating variable LIBOR-based loans effective December 31, 2021 and started to negotiate loans using the preferred replacement index, the Secured Overnight Financing Rate (“SOFR”) or a relevant duration U.S. Treasury rate. As of December 31, 2024, the Company has transitioned all its LIBOR-based loan exposure to an alternative index. The application of the standard did not have a material effect on the consolidated financial statements.

In June 2022, the FASB issued ASU No. 2022-03 “Fair Value Measurement (Topic 820) Fair Value Measurement of Equity Securities Subject to Contractual Restrictions” (“ASU 2022-03”). ASU 2022-03 indicates a contractual sale restriction on equity securities should not be considered in measuring fair value, however, disclosure should be made about such restrictions. The Company adopted the standard on January 1, 2024, with no material effect on its consolidated financial statements.

In March 2023, the FASB issued ASU No. 2023-02 “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”). ASU 2023-02 permits companies to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The Company adopted the standard on January 1, 2024 with no material effect on its consolidated financial statements.

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

In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company adopted this standard on December 31, 2024 with no material effect on its consolidated financial statements. The amendments were applied retrospectively to all prior periods in the consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide more transparency by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation table and (ii) income taxes paid, net of refunds, to be disaggregated by jurisdiction based on an established threshold. The amendments in this standard will be effective for the Company on January 1, 2025. The Company is currently evaluating the impact the amendments will have on the consolidated financial statements and related disclosures.

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 amendments in this standard will be effective for the Company on January 1, 2025. The Company does not believe this standard will have a material impact on its consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02 “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 amendments in this standard will be effective for the Company on January 1, 2025. The Company does not believe this standard will have a material impact 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.

Securities

12 Months Ended

Dec. 31, 2024

Investments, Debt and Equity Securities [Abstract]

Securities

Available-for-Sale

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


December 31, 2024	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. government agencies	$	18,196	$	—	$	299	$	17,897
Mortgage-backed securities	1,335,177		1,083		108,927		1,227,333
Municipal bonds	3,176		—		203		2,973

Total	$	1,356,549	$	1,083	$	109,429	$	1,248,203

December 31, 2023
U.S. government agencies	$	17,809	$	2	$	282	$	17,529
Mortgage-backed securities	1,216,624		466		111,498		1,105,592
Municipal bonds	3,200		—		161		3,039

Total	$	1,237,633	$	468	$	111,941	$	1,126,160

During the year ended December 31, 2024, one security totaling $3.0 million matured, one security totaling $2.5 million was called and ten securities totaling $27.0 million were settled. During the year ended December 31, 2023, three securities totaling $13.0 million were called and four securities totaling $7.0 million were settled. During the year ended December 31, 2022, two securities totaling $7.5 million matured and twenty securities totaling $36.5 million were settled.

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


	Less Than 12 Months				12 Months or More				Total
December 31, 2024	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	8,036	$	189	$	9,861	$	110	$	17,897	$	299
Mortgage-backed securities	265,934		4,173		859,819		104,754		1,125,753		108,927
Municipal bonds	—		—		2,973		203		2,973		203
Total	$	273,970	$	4,362	$	872,653	$	105,067	$	1,146,623	$	109,429


	Less Than 12 Months				12 Months or More				Total
December 31, 2023	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. government agencies	$	—	$	—	$	15,057	$	282	$	15,057	$	282
Mortgage-backed securities	138,823		3,431		886,699		108,067		1,025,522		111,498
Municipal bonds	—		—		3,039		161		3,039		161
Total	$	138,823	$	3,431	$	904,795	$	108,510	$	1,043,618	$	111,941

At December 31, 2024, there were 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. Unrealized losses at December 31, 2023 consisted of 409 mortgage-backed securities, five U.S. government agencies and two municipal bond for greater than 12 months. There were 27 mortgage-backed securities 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 issuer’s ability to honor redemption obligations, and the Company does not intend to sell the related securities and does not believe it is more likely than not that it will be required to sell the securities before recovery of amortized cost, none of the losses have been recognized in the Company’s consolidated statement of income.

All mortgage-backed securities in the Company’s portfolio at December 31, 2024 and 2023 were backed by U.S. government sponsored enterprises (“GSEs”).

The following is a summary of investment securities by maturity:


	December 31, 2024
	Available-for-sale
	Amortized Cost		Fair Value
U.S. government agencies
Within one year	$	7,000	$	6,963
One to five years	4,272		4,180
Five to ten years	6,924		6,754
Total	18,196		17,897
Mortgage-backed securities
Within one year	18,479		18,381
One to five years	198,710		190,071
Five to ten years	223,875		200,334
After 10 years	894,113		818,547
Total	1,335,177		1,227,333
Municipal bonds
Five to ten years	3,080		2,890
After 10 years	96		83
Total	3,176		2,973



Total	$	1,356,549	$	1,248,203

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

At December 31, 2024, investment securities with a market value of $621.4 million and a carrying value of $695.1 million were pledged to support unused borrowing capacity. There were no investment securities pledged at December 31, 2023.

Equity Investments

Equity investments, largely comprised of non-marketable equity investments, are generally accounted for under either the equity method or equity security accounting. The below tables provide additional information related to investments accounted for under these two methods.

Equity Method Accounting

The carrying amount and ownership percentage of each equity method investment at December 31, 2024 and 2023 is reflected in the following table:


	2024				2023
	Amount		Ownership %		Amount		Ownership %
Apiture, Inc.	$	53,108	40.4	%	$	60,682	40.4	%
Canapi Ventures SBIC Fund, LP (1) (5)	11,504		2.9		18,190		2.9
Canapi Ventures Fund, LP (2) (5)	1,438		1.5		2,267		1.5
Canapi Ventures Fund II, LP (3) (5)	2,193		1.6		7,232		1.6
Canapi Ventures SBIC Fund II, LP (4) (5)	1,238		2.9		7,611		2.9
Affordable housing (6)	14,724		Various		15,611		Various
Solar tax credit investments (7)	5,309		99.0		6,714		99.0
Other (8)	1,489		Various		607		Various
Total	$	91,003			$	118,914


(1)			Investment unfunded commitments of $5.0 million as of December 31, 2024 and December 31, 2023.
(2)			Investment unfunded commitments of $492 thousand and $559 thousand as of December 31, 2024 and December 31, 2023, respectively.
(3)			Investment unfunded commitments of $5.2 million and $6.3 million as of December 31, 2024 and December 31, 2023, respectively.
(4)			Investment unfunded commitments of $6.5 million and $7.1 million as of December 31, 2024 and December 31, 2023, 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 and December 31, 2023, there was an unfunded commitment of $1.7 million and $7.7 million, respectively for Estrella Landing.
(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. As of December 31, 2024, this investment category also includes the carried interest security related to Canapi Ventures Fund I, L.P.

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 December 31, 2024 and for the years ended December 31, 2024, 2023 and 2022 is reflected in the following table:


	Cumulative Adjustments		2024		2023		2022
Carrying value (1)			$	79,662	$	77,825	$	76,438
Carrying value adjustments:
Impairment	$	—	—		—		—
Upward changes for observable prices (2)	50,901		409		—		2,022
Downward changes for observable prices	(2,910)		(369)		(1,524)		—
Net upward (downward) change	$	47,991	$	40	$	(1,524)	$	2,022


(1)			Investment unfunded commitments of $4.3 million, $2.3 million, and $3.0 million as of December 31, 2024, 2023, and 2022, respectively.
(2)			Cumulative adjustments excludes $13.9 million in realized gains for sale of an investment in the second quarter of 2021.

For the twelve months ended December 31, 2024, 2023 and 2022, the Company recognized unrealized gains (losses) on all equity securities still held at the reporting date of $119 thousand, $(1.5) million, and $1.9 million, respectively.

Variable Interest Entities

Variable interests are defined as contractual ownership or other interests in an entity that change with fluctuations in the fair value of an entity's net asset value. The primary beneficiary consolidates the VIE. The primary beneficiary is defined as the enterprise that has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

Solar Renewable Energy Tax Credit Investments

The Company has equity interests in several limited liability companies that own and operate solar renewable energy projects which are accounted for as equity method investments. Over the course of the investments, the Company will receive federal and state tax credits, tax-related benefits, and excess cash available for distribution, if any. The Company may be called to sell its interest in the limited partnerships through a call option once all investment tax credits have been recognized.

Affordable Housing

The Company has an equity investment in a limited liability company LIHTC that qualifies as an affordable housing project, managed by an unrelated general partner. The Company accounts for the investment under the proportional amortization method. Under this method an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance as a component of income tax expense. The Company also has equity interests in two limited liability companies that invest in the acquisition, rehabilitation, or new construction of local qualified housing projects which are accounted for as equity method investments.

Canapi Funds

The Company’s limited partnership investments in the Canapi Funds focus on providing venture capital to new and emerging financial technology companies. After initial commitment and over the course of the investment period, the Company will make capital contributions and receive profit and return of capital distributions as a result of fund performance until the funds wind down.

Non-marketable and Other Equity Investments

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

The above investments meet the criteria of a VIE, however, the Company is not the primary beneficiary of the entities, as it does not have the power to direct the activities that most significantly impact the economic performance of the entities. The Company’s investment in the unconsolidated VIEs are carried in other assets.

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

The following table provides a summary of the VIEs that the Company has not consolidated as of December 31, 2024 and 2023:


December 31, 2024	Carrying Amount		Maximum Exposure to Loss		Liability Recognized		Classification
Solar tax credit investments	$	5,309	$	38,107	$	—	Other assets (1)
Affordable housing	12,940		15,463		—		Other assets (2)
Canapi Funds	17,104		34,269		—		Other assets (3)
Non-marketable and other equity investments	5,290		9,591		—		Other assets (4)

December 31, 2023	Carrying Amount		Maximum Exposure to Loss		Liability Recognized		Classification
Solar tax credit investments	$	6,714	$	38,228	$	—	Other assets (5)
Affordable housing	15,611		15,611		7,715		Other assets & other liabilities (6)
Canapi Funds	35,300		35,300		18,930		Other assets & other liabilities
Non-marketable and other equity investments	8,840		8,840		2,321		Other assets & other liabilities


(1)			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.
(2)			Maximum exposure to loss includes $12.9 million of investments, $1.7 million in unfunded commitments and a scenario in which related tax credits are recaptured, collectively totaling $0.8 million.
(3)			Maximum exposure to loss includes $17.1 million of current investments and $17.2 million in unfunded commitments.
(4)			Maximum exposure to loss includes $5.3 million of current investments and $4.3 million in unfunded commitments.
(5)			Maximum exposure to loss represents $6.7 million of current investments and a scenario in which related tax credits are recaptured, collectively totaling $31.5 million.
(6)			Maximum exposure to loss represents $15.6 million of investments. As there are no tax credits allocated in 2023, there is no increase to the maximum exposure to loss related to recaptured tax credits on the $8.8 million LIHTC investment as of December 31, 2023.

The following table provides a summary of the tax benefits the Company has received from VIEs as of December 31, 2024, 2023, and 2022:


	The Year Ended December 31,
	2024		2023		2022
Provision for income taxes:
Amortization of tax credit investments under proportional amortization	$	1,106	$	—	$	—
Tax credits from tax credit investments	(11,546)		(16,390)		(16,361)
Other tax benefits related to tax credit investments	—		—		—
Total	$	(10,440)	$	(16,390)	$	(16,361)

Loans and Leases Held for Investment and Credit Quality

12 Months Ended

Dec. 31, 2024

Receivables [Abstract]

Loans and Leases Held for Investment and Credit Quality

Loan and Lease Portfolio Segments & Classes

The following describes the risk characteristics relevant to each of the portfolio segments.

Commercial and Industrial

Commercial and industrial loans (“C&I”) receive similar underwriting treatment as commercial real estate loans in that the repayment source is analyzed to determine its ability to meet cash flow coverage requirements as set forth by Bank policies. Repayment of the Bank’s C&I loans generally comes from the generation of cash flow as the result of the borrower’s business operations. This business cycle itself brings a certain level of risk to the portfolio. In some instances, these loans may carry a higher degree of risk due to a variety of reasons – illiquid collateral, specialized equipment, highly depreciable assets, uncollectable accounts receivable, revolving balances, or simply being unsecured. As a result of these characteristics, the government guarantee on these loans, when applicable, is an important factor in mitigating risk. The Bank’s lease portfolio is included in the C&I segment.

Construction and Development

Construction and development loans are for the purpose of acquisition and development of land to be improved through the construction of commercial buildings. Such loans are usually paid off through the conversion to permanent financing for the long-term benefit of the borrower’s ongoing operations. At the completion of the project, if the loan is converted to permanent financing or if scheduled loan amortization begins, it is then reclassified to the Commercial Real Estate segment. Underwriting of construction and development loans typically includes analysis of not only the borrower’s financial condition and ability to meet the required debt obligations, but also the general market conditions associated with the area and type of project being funded.

Commercial Real Estate

Commercial real estate loans are extensions of credit secured by owner occupied and non-owner occupied collateral. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Such repayment of owner occupied loans is commonly derived from the successful ongoing operations of the business occupying the property. These typically include small businesses and professional practices. Commercial real estate loans may also include government guaranteed loans secured by collateral in the form of residential real estate. Repayment of such loans generally comes from the generation of cash flow as the result of the borrower’s business operations.

Commercial Land

Commercial land loans are extensions of credit secured by farmland. Such loans are often for land improvements related to agricultural endeavors that may include construction of new specialized facilities. These loans are usually repaid through the conversion to permanent financing, or if scheduled loan amortization begins, for the long-term benefit of the borrower’s ongoing operations. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies.

The loan and lease portfolio is further grouped into one of the following classes (also referred to as divisions): Small Business Banking, Commercial Banking, or Paycheck Protection Program. Small Business Banking includes loans to customers in verticals that generally have traditional loan structures. Commercial Banking includes loans to customers in verticals that generally have atypical ownership structures as well as complex collateral arrangements, underwriting requirements, and servicing needs. Commercial Banking also includes loans to customers that operate renewable energy projects, lodging facilities, and municipalities, and often utilize USDA or tax-exempt loan structures. Paycheck Protection Program (“PPP”) includes all loans originated under the PPP pursuant to the Coronavirus Aid, Relief, and Economic Security Act’s (“CARES Act”) economic relief program and carry a 100% government guarantee. These loans and lease classes were determined based on industry risk characteristics and management’s method for monitoring credit risk and managing those lending divisions.

Past Due Loans and Leases

Loans and leases are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans and leases less than 30 days past due and accruing are included within current loans and leases shown below. The following tables show an age analysis of past due loans and leases as of the dates presented.


December 31, 2024	Current or Less than 30 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Carried at Amortized Cost		Loans Accounted for Under the Fair Value Option (1)		Total Loans and Leases
Commercial & Industrial
Small Business Banking	$	2,182,596	$	37,966	$	104,362	$	142,328	$	2,324,924	$	119,378	$	2,444,302
Commercial Banking	2,418,078		15,282		23,999		39,281		2,457,359		49,767		2,507,126
Paycheck Protection Program	2,361		—		—		—		2,361		—		2,361
Total	4,603,035		53,248		128,361		181,609		4,784,644		169,145		4,953,789
Construction & Development
Small Business Banking	514,997		1,488		2,468		3,956		518,953		—		518,953
Commercial Banking	85,456		—		—		—		85,456		—		85,456
Total	600,453		1,488		2,468		3,956		604,409		—		604,409
Commercial Real Estate
Small Business Banking	2,773,306		42,058		57,896		99,954		2,873,260		107,751		2,981,011
Commercial Banking	1,040,065		5,000		10,778		15,778		1,055,843		19,025		1,074,868
Total	3,813,371		47,058		68,674		115,732		3,929,103		126,776		4,055,879
Commercial Land
Small Business Banking	610,920		2,209		3,324		5,533		616,453		32,825		649,278
Total	610,920		2,209		3,324		5,533		616,453		32,825		649,278
Total	$	9,627,779	$	104,003	$	202,827	$	306,830	$	9,934,609	$	328,746	$	10,263,355
Retained Loan Discount and Net Deferred Costs													$	(29,981)
Loan and Leases, Net													$	10,233,374

Guaranteed Balance	$	2,933,636	$	58,235	$	171,123	$	229,358	$	3,162,994	$	77,514	$	3,240,508
% Guaranteed	30.5%		56.0%		84.4%		74.8%		31.8%		23.6%		31.6%


December 31, 2023	Current or Less than 30 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Carried at Amortized Cost		Loans Accounted for Under the Fair Value Option (1)		Total Loans and Leases
Commercial & Industrial
Small Business Banking	$	2,075,227	$	16,570	$	33,366	$	49,936	$	2,125,163	$	151,887	$	2,277,050
Commercial Banking	1,974,400		2,806		4,044		6,850		1,981,250		54,014		2,035,264
Paycheck Protection Program	5,595		—		—		—		5,595		—		5,595
Total	4,055,222		19,376		37,410		56,786		4,112,008		205,901		4,317,909
Construction & Development
Small Business Banking	413,349		1,745		—		1,745		415,094		—		415,094
Commercial Banking	54,960		—		—		—		54,960		—		54,960
Total	468,309		1,745		—		1,745		470,054		—		470,054
Commercial Real Estate
Small Business Banking	2,414,677		18,589		32,310		50,899		2,465,576		127,358		2,592,934
Commercial Banking	670,325		—		15,104		15,104		685,429		17,751		703,180
Total	3,085,002		18,589		47,414		66,003		3,151,005		145,109		3,296,114
Commercial Land
Small Business Banking	531,331		1,521		1,910		3,431		534,762		37,026		571,788
Total	531,331		1,521		1,910		3,431		534,762		37,026		571,788
Total	$	8,139,864	$	41,231	$	86,734	$	127,965	$	8,267,829	$	388,036	$	8,655,865
Retained Loan Discount and Net Deferred Costs													$	(22,018)
Loan and Leases, Net													$	8,633,847

Guaranteed Balance	$	2,877,105	$	29,183	$	61,107	$	90,290	$	2,967,395	$	66,299	$	3,033,694
% Guaranteed	35.3%		70.8%		70.5%		70.6%		35.9%		17.1%		35.0%


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

Credit Quality Indicators

The Bank uses internal loan and lease reviews to assess the performance of individual loans and leases. Each loan and lease is assigned a risk grade during the origination and closing process. Subsequent to origination, loans and lease risk grades are continually evaluated as information becomes available. The Bank performs an annual review of each borrower’s financial performance to validate the accuracy of the assigned risk grade. Additionally, the loan and lease portfolio is subject to annual independent review by an external firm.

Pass (Risk Grades 10-47): These loans and leases are not impaired and have no known issues that could significantly impact their quality. There are seven categories within the Pass classification depending on the strength of the borrower, including credits that warrant additional management attention but are not currently Special Mention.

Special Mention (Risk Grade 50): These loans and leases show signs of weaknesses in either adequate sources of repayment or collateral. These loans and leases may contain underwriting guidelines tolerances and/or exceptions with no mitigating factors; and/or instances where adverse economic conditions develop subsequent to origination that do not jeopardize liquidation of the debt but substantially increase the level of risk.

Substandard (Risk Grades 60-80): Loans and leases graded Substandard are inadequately protected by current sound net worth, paying capacity of the obligor, or pledged collateral. Loans and leases classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These loans and leases are consistently not meeting the repayment schedule.

The following tables present credit quality indicators by portfolio class:


	Term Loans and Leases Amortized Cost Basis by Origination Year
December 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total (1)
Small Business Banking
Pass	$	1,112,351	$	1,084,996	$	1,323,982	$	1,001,021	$	528,008	$	482,192	$	124,370	$	33,359	$	5,690,279
Special Mention	7,041		46,047		77,638		61,906		31,575		83,693		22,729		2,790		333,419
Substandard	13,805		28,573		84,067		74,990		40,266		59,874		7,922		395		309,892
Total	1,133,197		1,159,616		1,485,687		1,137,917		599,849		625,759		155,021		36,544		6,333,590
Commercial Banking
Pass	1,169,167		752,078		398,333		207,755		51,552		81,166		423,334		116,594		3,199,979
Special Mention	—		16,483		88,464		36,165		24,018		17,569		9,555		4,245		196,499
Substandard	—		—		31,461		136,818		27,905		—		2,902		3,094		202,180
Total	1,169,167		768,561		518,258		380,738		103,475		98,735		435,791		123,933		3,598,658
Paycheck Protection Program
Pass	—		—		—		1,461		900		—		—		—		2,361
Total	—		—		—		1,461		900		—		—		—		2,361
Total	$	2,302,364	$	1,928,177	$	2,003,945	$	1,520,116	$	704,224	$	724,494	$	590,812	$	160,477	$	9,934,609

Year-To-Date Gross Charge-offs
Small Business Banking	$	652	$	4,198	$	18,630	$	4,954	$	3,462	$	3,481	$	3,555	$	170	$	39,102
Commercial Banking	—		17		5,176		1,493		756		—		1,535		—		8,977
Total	$	652	$	4,215	$	23,806	$	6,447	$	4,218	$	3,481	$	5,090	$	170	$	48,079


	Term Loans and Leases Amortized Cost Basis by Origination Year
December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total (1)
Small Business Banking
Pass	$	990,349	$	1,470,824	$	1,255,664	$	660,926	$	363,377	$	296,132	$	63,963	$	11,047	$	5,112,282
Special Mention	7,744		72,913		60,115		37,390		42,095		50,705		7,174		1,407		279,543
Substandard	2,286		31,487		29,636		35,611		18,429		28,700		2,621		—		148,770
Total	1,000,379		1,575,224		1,345,415		733,927		423,901		375,537		73,758		12,454		5,540,595
Commercial Banking
Pass	1,027,017		561,189		347,087		63,205		59,138		23,420		225,278		58,441		2,364,775
Special Mention	8,858		52,767		139,824		56,565		17,050		18,627		20,547		5,417		319,655
Substandard	—		4,024		18,335		3,619		—		—		7,203		4,028		37,209
Total	1,035,875		617,980		505,246		123,389		76,188		42,047		253,028		67,886		2,721,639
Paycheck Protection Program
Pass	—		—		2,831		2,764		—		—		—		—		5,595


Total	—		—		2,831		2,764		—		—		—		—		5,595
Total	$	2,036,254	$	2,193,204	$	1,853,492	$	860,080	$	500,089	$	417,584	$	326,786	$	80,340	$	8,267,829

Year-To-Date Gross Charge-offs
Small Business Banking	$	—	$	5,621	$	6,435	$	1,058	$	1,225	$	525	$	1,097	$	—	$	15,961
Commercial Banking	—		—		—		—		—		—		7,966		—		7,966
Total	$	—	$	5,621	$	6,435	$	1,058	$	1,225	$	525	$	9,063	$	—	$	23,927


(1)			Excludes $328.7 million and $388.0 million of loans accounted for under the fair value option as of December 31, 2024 and December 31, 2023, respectively.

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


December 31, 2024	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		% Guaranteed
Pass	$	8,892,619	$	2,644,310	$	6,248,309	29.7	%
Special Mention	529,918		172,015		357,903		32.5
Substandard	512,072		346,669		165,403		67.7
Total	$	9,934,609	$	3,162,994	$	6,771,615	31.8	%


December 31, 2023	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		% Guaranteed
Pass	$	7,482,652	$	2,622,558	$	4,860,094	35.0	%
Special Mention	599,198		234,845		364,353		39.2
Substandard	185,979		109,992		75,987		59.1
Total	$	8,267,829	$	2,967,395	$	5,300,434	35.9	%


(1)			Excludes $328.7 million and $388.0 million of loans accounted for under the fair value option as of December 31, 2024 and 2023, respectively.

Nonaccrual Loans and Leases

As of December 31, 2024 and December 31, 2023 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 twelve months ended December 31, 2024 and 2023. Nonaccrual loans and leases are generally included in the held for investment portfolio. Accrued interest receivable on loans totaled $80.7 million and $63.5 million at December 31, 2024 and December 31, 2023, respectively, and is included in other assets in the accompanying consolidated balance sheet.

Nonaccrual loans and leases as of December 31, 2024 and December 31, 2023 are as follows:


December 31, 2024	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		Unguaranteed Exposure with No ACL
Commercial & Industrial
Small Business Banking	$	141,674	$	116,596	$	25,078	$	5,219
Commercial Banking	39,282		26,300		12,982		3,816
Total	180,956		142,896		38,060		9,035
Construction & Development
Small Business Banking	3,955		3,379		576		372
Total	3,955		3,379		576		372
Commercial Real Estate
Small Business Banking	81,847		55,290		26,557		17,736
Commercial Banking	26,888		13,981		12,907		11,907
Total	108,735		69,271		39,464		29,643
Commercial Land
Small Business Banking	10,651		7,339		3,312		173
Total	10,651		7,339		3,312		173
Total	$	304,297	$	222,885	$	81,412	$	39,223


December 31, 2023	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		Unguaranteed Exposure with No ACL
Commercial & Industrial
Small Business Banking	$	47,558	$	39,018	$	8,540	$	407
Commercial Banking	6,850		2,794		4,056		2,546
Total	54,408		41,812		12,596		2,953
Construction & Development
Small Business Banking	1,745		1,309		436		—
Total	1,745		1,309		436		—
Commercial Real Estate
Small Business Banking	57,140		44,426		12,714		8,199
Commercial Banking	15,104		2,799		12,305		12,032
Total	72,244		47,225		25,019		20,231
Commercial Land
Small Business Banking	6,566		5,332		1,234		194
Total	6,566		5,332		1,234		194
Total	$	134,963	$	95,678	$	39,285	$	23,378


(1)			Excludes loans accounted for under the fair value option. See Note 10. Fair Value of Financial Instruments for additional information.

When a loan or lease is placed on nonaccrual status, any accrued interest is reversed from loan interest income. The following table summarizes the amount of accrued interest reversed during the periods presented:


	Twelve Months Ended December 31,
	2024 (1)		2023 (1)
Commercial & Industrial	$	4,213	$	2,212
Construction & Development	74		56
Commercial Real Estate	1,699		1,041
Commercial Land	218		—
Total	$	6,204	$	3,309


(1)			Excludes loans accounted for under the fair value option. See Note 10. Fair Value of Financial Instruments for additional information.

The following tables present the amortized cost basis of collateral-dependent loans and leases which are individually evaluated to determine expected credit losses, as of December 31, 2024 and 2023:


	Total Collateral-Dependent Loans						Unguaranteed Portion
December 31, 2024	Real Estate		Business Assets		Other		Real Estate		Business Assets		Other		Allowance for Credit Losses
Commercial & Industrial
Small Business Banking	$	6,693	$	36,500	$	—	$	2,738	$	12,061	$	—	$	8,299
Commercial Banking	101,001		26,788		—		13,704		11,350		—		4,374
Total	107,694		63,288		—		16,442		23,411		—		12,673
Commercial Real Estate
Small Business Banking	53,306		6,327		—		22,239		1,061		—		890
Total	53,306		6,327		—		22,239		1,061		—		890
Commercial Land
Small Business Banking	6,295		—		—		2,713		—		—		974
Total	6,295		—		—		2,713		—		—		974
Total	$	167,295	$	69,615	$	—	$	41,394	$	24,472	$	—	$	14,537


	Total Collateral-Dependent Loans						Unguaranteed Portion
December 31, 2023	Real Estate		Business Assets		Other		Real Estate		Business Assets		Other		Allowance for Credit Losses
Commercial & Industrial
Small Business Banking	$	2,737	$	2,426	$	—	$	421	$	547	$	—	$	277
Commercial Banking	—		7,733		—		—		4,938		—		—
Total	2,737		10,159		—		421		5,485		—		277
Commercial Real Estate
Small Business Banking	21,211		—		—		6,298		—		—		—
Total	21,211		—		—		6,298		—		—		—
Commercial Land
Small Business Banking	1,735		—		—		200		—		—		—
Total	1,735		—		—		200		—		—		—
Total	$	25,683	$	10,159	$	—	$	6,919	$	5,485	$	—	$	277

Allowance for Credit Losses – Loans and Leases

The Company maintains the ACL at levels management believes represents the future expected credit losses in the loan and lease portfolios as of the balance sheet date. See Note 1. Organization and Summary of Significant Accounting Policies for a description of the methodologies used to estimate credit losses.

The following tables detail activity in the allowance for credit losses for the periods presented:


	Commercial & Industrial		Construction & Development		Commercial Real Estate		Commercial Land		Total
December 31, 2024
Beginning Balance	$	87,581	$	4,717	$	28,864	$	4,678	$	125,840
Charge offs	(43,785)		(338)		(3,932)		(24)		(48,079)
Recoveries	741		—		638		8		1,387
Provision	84,470		564		3,931		(597)		88,368
Ending Balance	$	129,007	$	4,943	$	29,501	$	4,065	$	167,516
December 31, 2023
Beginning Balance	$	64,995	$	5,101	$	22,901	$	3,569	$	96,566
Adoption of ASU 2022-02	(25)		(166)		(83)		(402)		(676)
Charge offs	(22,510)		—		(1,417)		—		(23,927)
Recoveries	839		—		1,715		—		2,554
Provision	44,282		(218)		5,748		1,511		51,323
Ending Balance	$	87,581	$	4,717	$	28,864	$	4,678	$	125,840
December 31, 2022
Beginning Balance	$	37,770	$	3,435	$	19,068	$	3,311	$	63,584
Charge offs	(8,262)		—		(1,463)		(652)		(10,377)
Recoveries	1,039		3		1,363		11		2,416
Provision	34,448		1,663		3,933		899		40,943
Ending Balance	$	64,995	$	5,101	$	22,901	$	3,569	$	96,566

During the year ended December 31, 2024, the ACL increased primarily as a result of record loan growth combined with the impacts of the current and forecasted macroeconomic environment. Loss rates are adjusted for four quarters of forecasted unemployment followed by a four-quarter straight-line reversion period.

During the year ended December 31, 2023, the ACL increased primarily as a result of loan growth and charge-off related impacts. Additionally, during the first quarter of 2023, certain assumptions were refined, drawing more heavily on internal data, in the calculations of PD, LGD and prepayment rates. Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

During the year ended December 31, 2022, the ACL increased primarily as a result of loan growth, charge-off experience impacts and changes in the macroeconomic outlook. Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

Loan Modifications for Borrowers Experiencing Financial Difficulty

The Company may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness.

The following tables summarize the amortized cost basis of loans that were modified during the periods presented.


Twelve Months Ended December 31, 2024	Other-Than-Insignificant Payment Delay		Term Extension		Interest Rate Reduction		Combination - Term Extension & Interest Rate Reduction		% of Total Class of Financing Receivable
Small Business Banking	$	8,083	$	—	$	—	$	—	0.1	%
Commercial Banking	12,779		—		3,094		2,500		0.7
Total	$	20,862	$	—	$	3,094	$	2,500	0.8	%


Twelve Months Ended December 31, 2023	Other-Than-Insignificant Payment Delay		Term Extension		Interest Rate Reduction		Combination - Term Extension & Payment Delay		% of Total Class of Financing Receivable
Small Business Banking	$	10,090	$	5,127	$	3,330	$	361	0.3	%
Commercial Banking	—		14,193		—		4,133		1.7
Total	$	10,090	$	19,320	$	3,330	$	4,494	2.0	%

As of December 31, 2024 and December 31, 2023, the Company had commitments to lend additional funds to these borrowers totaling $6.3 million and $1.2 million, respectively.

The following table presents an aging analysis of loans that were modified within the twelve months ended December 31, 2024 and December 31, 2023, respectively:


Twelve Months Ended December 31, 2024	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due
Small Business Banking	$	8,083	$	—	$	—	$	—


Commercial Banking	18,373		—		—		—
Total	$	26,456	$	—	$	—	$	—


Twelve Months Ended December 31, 2023	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due
Small Business Banking	$	18,908	$	—	$	—	$	—


Commercial Banking	18,326		—		—		—
Total	$	37,234	$	—	$	—	$	—

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


	Twelve Months Ended December 31, 2024
	Weighted Average Interest Rate Reduction		Weighted Average Term Extension (in Months)
Small Business Banking	—	%	0
Commercial Banking	5.00		7



	Twelve Months Ended December 31, 2023
	Weighted Average Interest Rate Reduction		Weighted Average Term Extension (in Months)
Small Business Banking	1.41	%	67


Commercial Banking	—		29

There were no loans that were modified within the twelve months ended December 31, 2024 and December 31, 2023, respectively, that subsequently defaulted during the periods presented.

The Company’s ACL is estimated using lifetime historical loan performance adjusted to reflect current conditions and reasonable and supportable forecasts. Upon determination that a modified loan, or portion of a modified loan, has subsequently been deemed uncollectible, the uncollectible portion is written off. The amortized cost basis is reduced by the uncollectible amount and the ACL is adjusted by the same amount. As a result, the impact of loss mitigation strategies is captured in the estimates of PD and LGD.

Prior to January 1, 2023, a loan or lease was accounted for as a TDR if the Company, for reasons related to the borrower’s financial difficulties, restructured a loan or lease, and granted a concession to the borrower that it would not otherwise grant. A TDR typically involved a more than short-term modification of terms such as a reduction of the interest rate below the current market rate for a loan or lease with similar risk characteristics or the waiving of certain financial covenants without corresponding offsetting compensation or additional support.

The following table represents the types of TDRs that were made during the periods presented:


	Twelve months ended December 31, 2022
	Interest Only			Payment Deferral			Extend Amortization			Other (1)			Total TDRs (2)
	Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end
Commercial & Industrial
Small Business Banking	—	$	—	7	$	8,795	3	$	1,442	1	$	490	11	$	10,727
Commercial Banking	—	—		1	4,183		1	13,517		—	—		2	17,700
Total	—	—		8	12,978		4	14,959		1	490		13	28,427
Commercial Real Estate
Small Business Banking	1	3,677		1	797		1	4,364		—	—		3	8,838
Total	1	3,677		1	797		1	4,364		—	—		3	8,838
Construction & Development
Small Business Banking	—	—		—	—		—	—		2	3,081		2	3,081
Total	—	—		—	—		—	—		2	3,081		2	3,081
Total	1	$	3,677	9	$	13,775	5	$	19,323	3	$	3,571	18	$	40,346


(1)			Includes one small business banking loan with extend amortization and a rate concession ($490 thousand) and two small business banking loans with extended amortization and interest only ($3.1 million).
(2)			Excludes loans accounted for under the fair value option. See Note 10. Fair Value of Financial Instruments for additional information.

Restructurings made to improve a loan’s performance have varying degrees of success. The following table presents TDRs that were modified within the twelve months ended December 31, 2022 that subsequently defaulted during the period:


	Twelve months ended December 31, 2022
	Interest Only			Payment Deferral			Extend Amortization			Other			Total TDRs (1)
	Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end		Number of Loans	Recorded investment at period end
Commercial & Industrial
Small Business Banking	—	$	—	2	$	940	2	$	318	—	$	—	4	$	1,258
Total	—	$	—	2	$	940	2	$	318	—	$	—	4	$	1,258


(1)			Excludes loans accounted for under the fair value option. See Note 10. Fair Value of Financial Instruments for additional information.

Leases

12 Months Ended

Dec. 31, 2024

Leases [Abstract]

Leases

Lessor Equipment Leasing

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

Direct Financing Leases

The gross lease payments receivable and the net investment included in loans and leases held for investment are as follows:


	As of December 31,
	2024		2023

Gross direct finance lease payments receivable	$	961	$	2,335
Less - unearned interest	(39)		(218)
Net investment in direct financing leases	$	922	$	2,117

Future minimum lease payments receivable under direct finance leases are as follows:


As of December 31, 2024	Amount
2025	$	854
2026	107



Total	$	961

Interest income of $122 thousand, $253 thousand and $393 thousand was recognized in the twelve months ended December 31, 2024, 2023 and 2022, respectively.

Operating Leases

As of December 31, 2024 and 2023, the Company had a net investment of $93.4 million and $104.0 million, respectively, in assets included in premises and equipment, net in the consolidated balance sheet that are subject to operating leases. Of the net investment, the gross balance of the assets was $159.7 million and $162.3 million as of December 31, 2024 and 2023, respectively, and accumulated depreciation was $66.2 million and $58.3 million as of December 31, 2024 and 2023, respectively. Depreciation expense recognized on these assets for the twelve months ended December 31, 2024, 2023 and 2022 was $9.6 million, $9.6 million and $9.7 million, respectively.

Lease income of $9.4 million, $9.5 million and $9.5 million was recognized in the twelve months ended December 31, 2024, 2023 and 2022, respectively.

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


As of December 31, 2024	Amount
2025	$	9,657
2026	8,721
2027	8,483
2028	3,837
2029	2,399
Thereafter	7,309
Total	$	40,406

Lessee Lease Arrangements

The Company determines if an arrangement is or contains a lease at inception. If it is determined to be or contain a lease, then the lease is classified as an operating or finance lease.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term. Lease liabilities represent the Company's obligation to make lease payments arising from the lease. When recognizing right-of-use assets and liabilities, the Company accounts for lease and non-lease components separately because such amounts are readily determinable under the lease contracts. Right-of-use assets and liabilities are measured on commencement date based on the present value of the lease payments over the lease term, discounted using the discount rate for the lease at commencement. The discount rate is the rate implicit in the lease, however, if that is not readily determinable, the Company will use its incremental borrowing rate. The right-of-use asset also includes any lease payments made before the commencement date and initial direct costs and excludes any lease incentives received. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not apply the recognition and measurement requirements to any short-term leases (terms of twelve months or less).

Operating leases are included in other assets and other liabilities in the consolidated balance sheet. Finance leases are included in other assets and borrowings in the consolidated balance sheet. Lease expense for operating leases and finance leases is included in occupancy expense in the consolidated statements of income and interest expense for finance leases is included in borrowings interest expense in the consolidated statements of income.

The Company has operating leases for real property and land. These leases have remaining lease terms of 1 year to 22 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases. The Company has concluded that it is reasonably certain it will exercise the options to extend for only one lease, which was therefore recognized as part of the right-of-use asset and lease liability.

The Company has a finance lease for business equipment, and it has a remaining lease term of approximately 2.58 years. There are no options to extend or terminate this lease.

The components of lease expense are as follows:


	December 31, 2024		December 31, 2023
Operating lease cost	$	891	$	820
Short-term lease cost	379		123
Finance lease cost:
Amortization of right-of-use assets	22		—
Interest expense on lease liabilities	3		—
Sublease income	(40)		—
Total net lease cost	$	1,255	$	943

Supplemental disclosure for the consolidated balance sheets related to leases is as follows:


	December 31, 2024		December 31, 2023
Operating lease right-of-use asset	$	2,106	$	2,799
Operating lease liability	2,636		3,180
Finance lease right-of-use asset	130		—
Finance lease liability	132		—

The weighted average remaining lease term and weighted average discount rate for leases are as follows:


	December 31, 2024		December 31, 2023
Weighted average remaining lease term (years)
Operating leases	10.73		10.58
Finance lease	2.58		—
Weighted average discount rate
Operating leases	3.76	%	3.64	%
Finance lease	4.40	%	—	%

A maturity analysis of operating and finance lease liabilities is as follows:


As of December 31, 2024	Operating Leases		Finance Leases
2025	$	603	$	58
2026	539		54
2027	508		28
2028	333		—
2029	210		—
Thereafter	1,022		—
Total lease payments	3,215		140
Less: imputed interest	(579)		(8)
Total lease liabilities	$	2,636	$	132

Leases

Lessor Equipment Leasing

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

Direct Financing Leases

The gross lease payments receivable and the net investment included in loans and leases held for investment are as follows:


	As of December 31,
	2024		2023

Gross direct finance lease payments receivable	$	961	$	2,335
Less - unearned interest	(39)		(218)
Net investment in direct financing leases	$	922	$	2,117

Future minimum lease payments receivable under direct finance leases are as follows:


As of December 31, 2024	Amount
2025	$	854
2026	107



Total	$	961

Interest income of $122 thousand, $253 thousand and $393 thousand was recognized in the twelve months ended December 31, 2024, 2023 and 2022, respectively.

Operating Leases

As of December 31, 2024 and 2023, the Company had a net investment of $93.4 million and $104.0 million, respectively, in assets included in premises and equipment, net in the consolidated balance sheet that are subject to operating leases. Of the net investment, the gross balance of the assets was $159.7 million and $162.3 million as of December 31, 2024 and 2023, respectively, and accumulated depreciation was $66.2 million and $58.3 million as of December 31, 2024 and 2023, respectively. Depreciation expense recognized on these assets for the twelve months ended December 31, 2024, 2023 and 2022 was $9.6 million, $9.6 million and $9.7 million, respectively.

Lease income of $9.4 million, $9.5 million and $9.5 million was recognized in the twelve months ended December 31, 2024, 2023 and 2022, respectively.

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


As of December 31, 2024	Amount
2025	$	9,657
2026	8,721
2027	8,483
2028	3,837
2029	2,399
Thereafter	7,309
Total	$	40,406

Lessee Lease Arrangements

The Company determines if an arrangement is or contains a lease at inception. If it is determined to be or contain a lease, then the lease is classified as an operating or finance lease.

Right-of-use assets represent the Company's right to use an underlying asset for the lease term. Lease liabilities represent the Company's obligation to make lease payments arising from the lease. When recognizing right-of-use assets and liabilities, the Company accounts for lease and non-lease components separately because such amounts are readily determinable under the lease contracts. Right-of-use assets and liabilities are measured on commencement date based on the present value of the lease payments over the lease term, discounted using the discount rate for the lease at commencement. The discount rate is the rate implicit in the lease, however, if that is not readily determinable, the Company will use its incremental borrowing rate. The right-of-use asset also includes any lease payments made before the commencement date and initial direct costs and excludes any lease incentives received. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not apply the recognition and measurement requirements to any short-term leases (terms of twelve months or less).

Operating leases are included in other assets and other liabilities in the consolidated balance sheet. Finance leases are included in other assets and borrowings in the consolidated balance sheet. Lease expense for operating leases and finance leases is included in occupancy expense in the consolidated statements of income and interest expense for finance leases is included in borrowings interest expense in the consolidated statements of income.

The Company has operating leases for real property and land. These leases have remaining lease terms of 1 year to 22 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases. The Company has concluded that it is reasonably certain it will exercise the options to extend for only one lease, which was therefore recognized as part of the right-of-use asset and lease liability.

The Company has a finance lease for business equipment, and it has a remaining lease term of approximately 2.58 years. There are no options to extend or terminate this lease.

The components of lease expense are as follows:


	December 31, 2024		December 31, 2023
Operating lease cost	$	891	$	820
Short-term lease cost	379		123
Finance lease cost:
Amortization of right-of-use assets	22		—
Interest expense on lease liabilities	3		—
Sublease income	(40)		—
Total net lease cost	$	1,255	$	943

Supplemental disclosure for the consolidated balance sheets related to leases is as follows:


	December 31, 2024		December 31, 2023
Operating lease right-of-use asset	$	2,106	$	2,799
Operating lease liability	2,636		3,180
Finance lease right-of-use asset	130		—
Finance lease liability	132		—

The weighted average remaining lease term and weighted average discount rate for leases are as follows:


	December 31, 2024		December 31, 2023
Weighted average remaining lease term (years)
Operating leases	10.73		10.58
Finance lease	2.58		—
Weighted average discount rate
Operating leases	3.76	%	3.64	%
Finance lease	4.40	%	—	%

A maturity analysis of operating and finance lease liabilities is as follows:


As of December 31, 2024	Operating Leases		Finance Leases
2025	$	603	$	58
2026	539		54
2027	508		28
2028	333		—
2029	210		—
Thereafter	1,022		—
Total lease payments	3,215		140
Less: imputed interest	(579)		(8)
Total lease liabilities	$	2,636	$	132

Servicing Assets

12 Months Ended

Dec. 31, 2024

Transfers and Servicing [Abstract]

Servicing Assets

Loans serviced for others are not included in the consolidated balance sheets. The unpaid principal balances of loans serviced for others requiring recognition of a servicing asset were $3.46 billion, $3.09 billion and $2.67 billion at December 31, 2024, 2023 and 2022, respectively. The unpaid principal balance for all loans serviced for others was $4.72 billion, $4.24 billion and $3.48 billion at December 31, 2024, 2023 and 2022, respectively.

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


	2024		2023
Balance at beginning of period	$	48,186	$	26,323
Additions, net	19,757		16,977
Fair value changes:
Due to changes in valuation inputs or assumptions (1)	3		14,297
Decay due to increases in principal paydowns or runoff	(12,158)		(9,411)
Balance at end of period	$	55,788	$	48,186


(1)			The twelve month period ended December 31, 2023, includes a $13.7 million increase related to change in estimate implemented on July 1, 2023.

See Note 10. Fair Value of Financial Instruments for further details about servicing assets measured at fair value.

As of December 31, 2024 and 2023, the Company had servicing assets related to conventional commercial loans carried at amortized cost of $356 thousand and $405 thousand, respectively.

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 210
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.6-04(11))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479170/946-210-S99-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 1A
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481420/860-30-50-1A

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 50
-Name Accounting Standards Codification
-Section 50
-Paragraph 4
-Subparagraph (a)(7)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481229/860-50-50-4

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (b)(2)(i)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481326/860-20-50-3

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
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-Paragraph 3
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-URI https://asc.fasb.org/1943274/2147481326/860-20-50-3

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 20
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-Paragraph 4
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-URI https://asc.fasb.org/1943274/2147481326/860-20-50-4

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
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-Paragraph 3
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481229/860-50-50-3

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 50
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (a)(4)(ii)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481229/860-50-50-3

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 50
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (a)(5)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481229/860-50-50-3

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 50
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481229/860-50-50-2

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-Name Accounting Standards Codification
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-URI https://asc.fasb.org/860/tableOfContent

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
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-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481326/860-20-50-3

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
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-Name Accounting Standards Codification
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-Paragraph 3
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481326/860-20-50-3

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
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-Section 50
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-URI https://asc.fasb.org/1943274/2147481326/860-20-50-4

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147481326/860-20-50-4

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
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-Name Accounting Standards Codification
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-Paragraph 4D
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481326/860-20-50-4D

Reference 17: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Paragraph 1A
-Subparagraph (c)(3)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481420/860-30-50-1A

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
-SubTopic 30
-Name Accounting Standards Codification
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481420/860-30-50-7

Reference 19: http://www.xbrl.org/2009/role/commonPracticeRef
-Topic 860
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-URI https://asc.fasb.org/1943274/2147481229/860-50-50-2

Reference 20: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147481229/860-50-50-2

Reference 21: http://www.xbrl.org/2003/role/disclosureRef
-Topic 860
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-Name Accounting Standards Codification
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-Paragraph 4
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481229/860-50-50-4

+ Details

Premises and Equipment

12 Months Ended

Dec. 31, 2024

Property, Plant and Equipment [Abstract]

Premises and Equipment

Components of Premises and Equipment

Components of premises and equipment and total accumulated depreciation at December 31, 2024 and 2023 are as follows:


	2024		2023
Buildings	$	90,990	$	54,746
Land improvements	6,829		5,213
Furniture and equipment	27,830		19,537
Hardware and software	26,847		16,698
Leasehold improvements	7,421		7,678
Land	16,870		17,998
Transportation	44,144		22,279
Solar panels	159,672		162,348
Deposits on fixed assets	1,390		48,518
Premises and equipment, total	381,993		355,015
Less accumulated depreciation	(117,934)		(97,134)
Premises and equipment, net of depreciation	$	264,059	$	257,881

Deposits on fixed assets at December 31, 2024 consist primarily of software development costs and campus improvement costs. Depreciation expense for the years ended December 31, 2024, 2023 and 2022 amounted to $23.4 million, $21.1 million and $20.6 million, respectively. Total capitalized interest of $769 thousand related to the Company’s newly constructed building at its headquarters campus was recorded for the year ended December 31, 2024.

Deposits

12 Months Ended

Dec. 31, 2024

Deposits Liabilities, Balance Sheet, Reported Amounts [Abstract]

Deposits

The types of deposits at December 31, 2024 and 2023 are:


	2024		2023
Noninterest-bearing deposits	$	318,890	$	259,270
Interest-bearing deposits:
Interest-bearing checking	351,284		301,006
Money market	147,533		135,551
Savings	5,282,812		4,497,376
Time deposits	5,659,975		5,081,816
Total	11,441,604		10,015,749
Total deposits	$	11,760,494	$	10,275,019

The aggregate amount of time deposits in denominations of $250 thousand or more at December 31, 2024 and 2023 was approximately $695.9 million and $695.6 million, respectively. At December 31, 2024 the scheduled maturities of total time deposits are as follows:


Year	Amount
2025	$	4,289,716
2026	680,765
2027	255,613
2028	155,951
2029	94,966
Thereafter	182,964
Total	$	5,659,975

Borrowings

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Borrowings

Total outstanding borrowings consisted of the following:


	December 31, 2024		December 31, 2023
Borrowings
In March 2021, the Company entered into a 60-month term loan agreement of $50.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 2.95% with a monthly payment sufficient to fully amortize the loan, with all remaining unpaid principal and interest due at maturity on March 30, 2026. The Company paid the Lender a non-refundable $325 thousand loan origination fee upon signing of the Note that is presented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan.	$	13,184	$	23,354
In March 2024, the Company entered into a 60-month term loan agreement of $100.0 million with a third party correspondent bank. The loan accrues interest at a fixed rate of 5.95% with monthly interest payments until maturity on March 28, 2029, and $33.0 million of principal to be paid in year 4, and $67.0 million of principal to be paid in year 5. The Company paid the Lender a non-refundable $600 thousand loan origination fee upon signing of the Note that is represented as a direct deduction from the carrying amount of the loan and will be amortized into interest expense over the life of the loan.	99,505		—
Other long term debt (1)	131		—

Total borrowings	$	112,820	$	23,354

(1) Includes finance leases.

As of December 31, 2024 and 2023, the Company’s total unused borrowing capacity was $3.55 billion and $3.68 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, access to a repurchase agreement, and the Federal Reserve Bank’s Bank Term Funding Program which ended March 11, 2024. If additional collateral is available, the Company’s aggregate approved borrowing capacity with all of the above sources is $6.10 billion and $6.28 billion as of December 31, 2024 and 2023, respectively. See further details below on each type of unused borrowing available to the Company.

The Company may borrow funds through the Federal Reserve Bank’s discount window. These borrowings are secured by qualifying loans and investment securities with a balance of $3.25 billion and $2.74 billion as of December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, the Company had approximately $2.73 billion and $2.21 billion, respectively, in borrowing capacity available under these arrangements with no outstanding balance as of December 31, 2024 or 2023.

On June 18, 2018, the Company entered into a borrowing agreement with the Federal Home Loan Bank of Atlanta. These borrowings must be secured with eligible collateral approved by the Federal Home Loan Bank of Atlanta. As of December 31, 2024 and 2023, there was $3.13 billion and $2.72 billion, respectively, of stated potential borrowing capacity available under this agreement, of which approximately $587.8 million and $111.7 million of securities are available for collateral, respectively. There is no collateral pledged and no advances outstanding as of December 31, 2024 or 2023.

The Company may purchase federal funds through unsecured federal funds lines of credit with various correspondent banks, which totaled $130.0 million as of December 31, 2024 and 2023. These lines are intended for short-term borrowings and are subject to restrictions limiting the frequency and terms of advances. These lines of credit are payable on demand and bear interest based upon the daily federal funds rate. The Company had no outstanding balance on the lines of credit as of December 31, 2024 and 2023.

In September 2024, the Company modified a $100.0 million revolving line of credit with a third party correspondent bank. The line of credit is unsecured and accrues interest at 30-day SOFR plus 1.25% with an interest rate floor of 2.75% and an interest rate cap of 6.75%. The line of credit was extended 12 months to a maturity date of October 10, 2027. Payments are interest only with all principal and accrued interest due at maturity. The terms of this loan require the Company to maintain minimum capital and debt service coverage ratios. The Company paid the Lender a non-refundable $250 thousand renewal fee upon modifying the Note that will be amortized into interest expense over the life of the loan. As of December 31, 2024 and 2023, there was $100.0 million of available credit.

The Company could borrow funds from the Bank Term Funding Program (“BTFP”). Under the BTFP, advances must be secured by pledging eligible securities owned by the Company on March 12, 2023. BTFP advances could be requested for a term of up to one year at a fixed market rate until the program ended March 11, 2024. As of December 31, 2024, there was no potential borrowing capacity available and no outstanding balance.

The Company has entered into a repurchase agreement with a third party for up to $5.0 million as of December 31, 2024 and 2023. At the time the Company enters into a transaction with the third party, the Company must transfer securities or other assets against the funds received. The terms of the agreement are set at market conditions at the time the Company enters into such transaction. The Company had no outstanding balance on the repurchase agreement as of December 31, 2024 and 2023.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481544/470-10-50-6

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481544/470-10-50-6

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
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-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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-Subparagraph (a)(3)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Section 50
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 470
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/470/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 2
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-Topic 470
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-Paragraph 1I
-Subparagraph (a)
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+ Details

Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

The components of income tax expense for the years ended December 31 are as follows:


	2024		2023		2022
Current income tax expense:
Federal	$	16,700	$	24,051	$	3,686
State	6,538		7,042		3,301
Total current tax expense	23,238		31,093		6,987
Deferred income tax (benefit) expense:
Federal	(9,439)		(20,914)		23,838
State	(1,981)		(1,247)		3,291
Total deferred tax (benefit) expense	(11,420)		(22,161)		27,129
Income tax expense, as reported	$	11,818	$	8,932	$	34,116

Reported income tax expense differed from the amounts computed by applying the U.S. federal statutory income tax rate of 21% in 2024, 2023 and 2022 to income before income taxes as follows:


	2024		2023		2022
Income tax expense computed at the statutory rate	$	18,739	$	17,394	$	44,168

State income tax expense, net of federal	3,184		4,316		5,899
Stock-based compensation expense	(194)		2,084		73
Decrease in taxes due to investment tax credit	(10,440)		(16,390)		(16,361)
Amended return net benefits	—		—		(3,261)

Other	529		1,528		3,598
Total income tax expense	$	11,818	$	8,932	$	34,116

Components of deferred tax assets and liabilities are as follows:


	2024		2023
Deferred tax assets:
Net unrealized losses on securities available for sale	$	26,003	$	26,753
Allowance for loan and lease losses	40,564		30,576
Stock-based compensation expense	2,701		2,599
Capitalized research and experimentation costs	6,205		4,726
Accrued expenses	4,029		1,283
Allowance for off-balance sheet credit exposures	3,293		1,178
Operating lease liabilities	638		773


Unguaranteed loan discount	—		319
Deferred loan fees and costs, net	—		101
Other	702		628
Total deferred tax assets	84,135		68,936

Deferred tax liabilities:
Premises and equipment	35,831		37,381
Net unrealized gains on non-marketable and other equity securities	17,245		18,165
Mark to market on loans held for sale	11,968		6,294
Unguaranteed loan discount	34		—
Deferred loan fees and costs, net	1,415		—
Operating lease right-of-use assets	541		680

Goodwill and intangibles	34		19
Other	11		11
Total deferred tax liabilities	67,079		62,550
Net deferred tax asset	$	17,056	$	6,386

The Company assesses the realizability of deferred tax assets at each reporting period and considers whether it is more likely than not that a deferred tax asset will not be realized. The realization of a deferred tax asset is dependent upon the generation of future taxable income during periods in which the related temporary difference becomes deductible or realizable prior to its expiration. The Company considers projected future taxable income, scheduled reversal of deferred tax liabilities, cessation of investing in renewable energy assets that generate investment tax credits and tax planning strategies in making this assessment. Based on these considerations, management believes it is more likely than not that the deferred tax assets will be realized.

ASC 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. The Company does not have material uncertain tax positions, interest or penalties recorded in the consolidated balance sheets or statements of income as of or for the years ended December 31, 2024, 2023 and 2022. As of December 31, 2024, the Company was under audit by the Internal Revenue Service principally as it relates to prior energy credits. Due to the complexities of uncertainties, the ultimate resolution may result in a liability that is materially different from the current estimate.

The Company files a consolidated income tax return in the U.S. federal tax jurisdiction. Generally, the Company’s federal and state tax returns are no longer subject to examination by the taxing authorities for years prior to 2015.

- Definition

The entire disclosure for income tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Topic 740
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-Name Accounting Standards Codification
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-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482663/740-10-55-231

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12C
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12C

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147482685/740-10-50-12B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477891/740-270-50-1

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org/740/tableOfContent

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-14

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-21

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482685/740-10-50-17

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479360/740-10-S99-2

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482603/740-30-50-2

+ Details

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value Hierarchy

There are three levels of inputs in the fair value hierarchy that may be used to measure fair value. Financial instruments are considered Level 1 when valuation can be based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instruments are valued using quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.

Recurring Fair Value

The following sections provide a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the fair value hierarchy:

Investment securities available-for-sale: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, discounted cash flow or at net asset value per share. Level 2 securities would include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Loans held for investment: The fair values of loans accounted for under the fair value option are determined using a DCF methodology. The estimate incorporates assumptions that market participants would use to estimate fair value of similar assets such as prepayment speeds, default and severity rates, and a discount rate. Due to the nature of the valuation inputs, loans held for investment are classified within Level 3 of the valuation hierarchy.

Servicing assets: Servicing rights do not trade in an active, open market with readily observable prices. While sales of servicing rights do occur, the precise terms and conditions typically are not readily available. Accordingly, the Company estimates the fair value of servicing rights using discounted cash flow models incorporating numerous assumptions from the perspective of a market participant including servicing income, ancillary income, servicing costs, discount rates and prepayment speeds. Due to the nature of the valuation inputs, servicing rights are classified within Level 3 of the valuation hierarchy.

Mutual fund: The mutual fund is registered with the Securities and Exchange Commission as a closed-end, non-diversified management investment company and operates as an interval fund. The fund primarily invests in the unguaranteed portion of SBA504 first lien loans secured by owner-occupied commercial real estate. This investment is valued using quoted prices in markets that are not active and is classified as Level 2 within the valuation hierarchy.

Equity warrant assets: Fair value measurements of equity warrant assets of private companies are priced based on a Black-Scholes option pricing model to estimate the asset value by using stated strike prices, option expiration dates, risk-free interest rates and option volatility assumptions. Option volatility assumptions used in the Black-Scholes model are based on public companies that operate in similar industries as the companies in the Company’s private company portfolio. Values are further adjusted for a general lack of liquidity due to the private nature of the associated underlying company. The Company classifies equity warrant assets within Level 3 of the valuation hierarchy.

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


	Twelve months ended December 31,
Equity Warrant Assets	2024		2023
Balance at beginning of period	$	2,874	$	2,210
Issuances	798		1,005
Net gains on derivative instruments	5,962		19
Settlements	(2,472)		(360)
Balance at end of period	$	7,162	$	2,874

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


December 31, 2024	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. government agencies	$	17,897	$	—	$	17,897	$	—
Mortgage-backed securities	1,227,333		—		1,227,333		—
Municipal bonds (1)	2,973		—		2,890		83


Loans held for investment	328,746						328,746
Servicing assets (2)	55,788		—		—		55,788
Mutual fund	458		—		458		—
Equity warrant assets	7,162		—		—		7,162
Total assets at fair value	$	1,640,357	$	—	$	1,248,578	$	391,779


December 31, 2023	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. government agencies	$	17,529	$	—	$	17,529	$	—
Mortgage-backed securities	1,105,592		—		1,105,592		—
Municipal bonds (1)	3,039		—		2,954		85

Loans held for investment	388,036		—		—		388,036
Servicing assets (2)	48,186		—		—		48,186
Mutual fund	1,645		—		1,645		—
Equity warrant assets	2,874		—		—		2,874
Total assets at fair value	$	1,566,901	$	—	$	1,127,720	$	439,181


(1)			During the year ended December 31, 2024, the Company recorded a principal paydown of $1 thousand and a fair value adjustment loss of $1 thousand. During the year ended December 31, 2023, the Company recorded a principal paydown of $1 thousand and a fair value adjustment loss of $7 thousand.
(2)			See Note 5 for a rollforward of recurring Level 3 fair values for servicing assets.

Fair Value Option

Until the first quarter of 2021, the Company had historically elected to account for retained participating interests of all government guaranteed loans under the fair value option in order to align the accounting presentation with the Company’s viewpoint of the economics of the loans. Interest income is recognized in the same manner on loans reported at fair value as on non-fair value loans, except in regard to origination fees and costs which are recognized immediately upon fair value election. Not electing fair value generally results in a larger discount being recorded on the date of the sale. This discount is subsequently accreted into interest income over the underlying loan’s remaining term using the effective interest method. Management made this change of election in alignment with its ongoing effort to reduce volatility and drive more predictable revenue. In accordance with GAAP, any loans for which fair value was previously elected continue to be measured as such.

There were no loans accounted for under the fair value option that were 90 days or more past due and still accruing interest at December 31, 2024 or 2023. The unpaid principal balance of unguaranteed exposure for nonaccruals was $10.0 million and $9.1 million at December 31, 2024 and 2023, respectively.

The following tables provide more information about the fair value carrying amount and the unpaid principal outstanding of loans accounted for under the fair value option at December 31, 2024 and December 31, 2023.


	December 31, 2024
	Total Loans						Nonaccruals						90 Days or More Past Due
	Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference
Fair Value Option Elections

Loans held for investment	$	328,746	$	342,150	$	(13,404)	$	63,386	$	64,784	$	(1,398)	$	51,272	$	52,528	$	(1,256)
	$	328,746	$	342,150	$	(13,404)	$	63,386	$	64,784	$	(1,398)	$	51,272	$	52,528	$	(1,256)


	December 31, 2023
	Total Loans						Nonaccruals						90 Days or More Past Due
	Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference		Fair Value Carrying Amount		Unpaid Principal Balance		Difference
Fair Value Option Elections

Loans held for investment	$	388,036	$	407,544	$	(19,508)	$	48,474	$	50,749	$	(2,275)	$	36,490	$	37,939	$	(1,449)
	$	388,036	$	407,544	$	(19,508)	$	48,474	$	50,749	$	(2,275)	$	36,490	$	37,939	$	(1,449)

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


	Twelve Months Ended December 31,
Gains (Losses) on Loans Accounted for under the Fair Value Option	2024		2023

Loans held for investment	$	2,403	$	(3,539)
	$	2,403	$	(3,539)

Losses related to borrower-specific credit risk were $0 and $3.5 million for the twelve months ended December 31, 2024 and 2023, respectively.

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


	Twelve Months Ended December 31,
Loans held for investment	2024		2023
Balance at beginning of period	$	388,036	$	494,458
Repurchases and issuances	25,192		22,955
Fair value changes	2,403		(3,539)
Transfers	—		—
Settlements	(86,885)		(125,838)
Balance at end of period	$	328,746	$	388,036

Non-recurring Fair Value

The following sections provide a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the fair value hierarchy:

Collateral-dependent loans: Loans are considered collateral-dependent when the Company has determined that foreclosure of the collateral is probable or when a borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of collateral. A collateral-dependent loan’s ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan’s collateral is determined by appraisals, independent valuation, or management’s estimation of fair value which is then adjusted for the cost related to liquidation of the collateral. Collateral-dependent loans are generally classified as Level 3 based on management’s judgment and estimation. Loans with agreed upon sales prices are classified as Level 1.

Foreclosed assets: Foreclosed real estate is adjusted to fair value less selling costs upon transfer of the loans to foreclosed real estate. Subsequently, foreclosed real estate is carried at the lower of carrying value or fair value less selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Given the lack of observable market prices for identical properties and market discounts applied to appraised values, the Company generally classifies foreclosed assets as non-recurring Level 3.

The tables below present the recorded amount of assets measured at fair value on a non-recurring basis. The Company has no liabilities recorded at fair value on a non-recurring basis.


December 31, 2024	Total		Level 1		Level 2		Level 3
Collateral-dependent loans	$	17,085	$	—	$	—	$	17,085
Foreclosed assets	1,944		—		—		1,944
Total assets at fair value	$	19,029	$	—	$	—	$	19,029


December 31, 2023	Total		Level 1		Level 2		Level 3
Collateral-dependent loans	$	4,503	$	—	$	—	$	4,503
Foreclosed assets	6,481		—		—		6,481


Total assets at fair value	$	10,984	$	—	$	—	$	10,984

Level 3 Analysis

For Level 3 assets measured at fair value on a recurring or non-recurring basis as of December 31, 2024 and December 31, 2023, the significant unobservable inputs used in the fair value measurements were as follows:


December 31, 2024

Level 3 Assets with Significant Unobservable Inputs	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range	Weighted Average (1)
Recurring fair value
Municipal bond	$	83	Discounted expected cash flows	Discount rate	7.2%	N/A
				Prepayment speed	5.0%	N/A


Loans held for investment	$	328,746	Discounted expected cash flows	Loss rate	0.0% - 6.3%	1.1	%
				Discount rate	7.0% - 18.0%	9.2	%
				Prepayment speed	14.3% - 30.1%	16.3	%
Servicing assets	$	55,788	Discounted expected cash flows	Discount rate	13.5%	13.5	%
				Prepayment speed	11.9% - 18.3%	15.6	%
Equity warrant assets	$	7,162	Black-Scholes option pricing model	Volatility	13.1% - 90.0%	32.1	%
				Risk-free interest rate	4.5% - 4.6%	4.5	%
				Marketability discount	10.0% - 25.0%	13.8	%
				Remaining life	2.91 - 12 years	4.5 years
Non-recurring fair value
Collateral-dependent loans	$	17,085	Discounted appraisals	Appraisal adjustments (2)	0.0% - 95.8%	45.4	%
Foreclosed assets	$	1,944	Discounted appraisals	Appraisal adjustments (2)	10.0%	10.0	%


December 31, 2023

Level 3 Assets with Significant Unobservable Inputs	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range		Weighted Average (1)
Recurring fair value
Municipal Bond	$	85	Discounted expected cash flows	Discount rate	7.0%		N/A
				Prepayment speed	5.0%		N/A


Loans held for investment	$	388,036	Discounted expected cash flows	Loss rate	0.0% - 7.4%		1.2	%
				Discount rate	6.7% - 18.0%		9.6	%
				Prepayment speed	14.0% - 30.3%		16.0	%
Servicing assets	$	48,186	Discounted expected cash flows	Discount rate	14.5	%	14.5	%
				Prepayment speed	11.8% - 17.8%		15.3	%
Equity warrant assets	$	2,874	Black-Scholes option pricing model	Volatility	26.9% - 90.0%		35.8	%
				Risk-free interest rate	3.8% - 3.9%		3.9	%
				Marketability discount	20.0% - 25.0%		22.7	%
				Remaining life	3.9 - 10 years		7.6 years
Non-recurring fair value
Collateral-dependent loans	$	4,503	Discounted appraisals	Appraisal adjustments (2)	10.0% - 70.0%		38.7	%
Foreclosed assets	$	6,481	Discounted appraisals	Appraisal adjustments (2)	10.0% - 17.4%		10.4	%


(1)			Weighted averages are determined by the relative fair value of the instruments or the relative contribution to the instruments fair value.
(2)			Appraisals may be adjusted by management for customized discounting criteria, estimated sales costs, and other qualitative adjustments.

Estimated Fair Value of Other Financial Instruments

GAAP also requires disclosure of fair value information about financial instruments carried at book value on the consolidated balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value to the Company.

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


December 31, 2024	Carrying Amount		Quoted Price In Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Financial assets
Cash and due from banks	$	608,800	$	608,800	$	—	$	—	$	608,800

Certificates of deposit with other banks	250		250		—		—		250
Loans held for sale	346,002		—		—		367,993		367,993
Loans and leases held for investment, net of allowance for credit losses on loans and leases	9,737,112		—		—		9,556,981		9,556,981
Financial liabilities
Deposits	11,760,494		—		11,317,639		—		11,317,639
Borrowings	112,820		—		—		121,026		121,026


December 31, 2023	Carrying Amount		Quoted Price In Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Financial assets
Cash and due from banks	$	582,540	$	582,540	$	—	$	—	$	582,540

Certificates of deposit with other banks	250		250		—		—		250
Loans held for sale	387,037		—		—		402,096		402,096
Loans and leases held for investment, net of allowance for credit losses on loans and leases	8,119,971		—		—		8,600,046		8,600,046
Financial liabilities
Deposits	10,275,019		—		10,080,182		—		10,080,182
Borrowings	23,354		—		—		22,844		22,844

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
-Topic 820
-SubTopic 10
-Name Accounting Standards Codification
-Section 55
-Paragraph 107
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482078/820-10-55-107

Reference 2: http://www.xbrl.org/2003/role/exampleRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
-Paragraph 2
-Subparagraph (c)(3)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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-Subparagraph (g)
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-Topic 940
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-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147478119/940-820-50-1

+ Details

Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Litigation

In the ordinary course of operations, the Company is at times involved in legal proceedings. In the opinion of management, as of December 31, 2024, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

Financial Instruments with Off-balance-sheet Risk

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, credit risk in excess of the amount recognized in the balance sheet.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as for on-balance-sheet instruments. A summary of the Company’s commitments is as follows:


	December 31, 2024		December 31, 2023
Commitments to extend credit (1) (2)	$	3,597,937	$	2,921,978
Standby letters of credit	7,365		20,487
Airplane purchase agreement commitments	—		9,000
Total unfunded off-balance sheet credit risk	$	3,605,302	$	2,951,465


(1)			Includes unfunded overdraft protection.
(2)			Includes $1.20 billion and $1.17 billion at December 31, 2024 and 2023, respectively, for which loan commitment letters have been issued. Such letters do not represent a present obligation to extend credit due to the variety of conditions contained in the letters.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required in instances which the Company deems necessary.

Other Commitments

See Note 2. Securities for unfunded commitments to provide capital contributions for equity fund investments as of December 31, 2024 and 2023.

As of December 31, 2023, the Company was in the final phase of constructing a new facility to accommodate expansion of its main campus. The total estimated cost to complete the construction program was approximately $37.0 million. At December 31, 2023, the Company paid and was committed to approximately $21.5 million of the total estimated amount. As of December 31, 2024, construction was complete and there was no additional committed balance.

Concentrations of Credit Risk

The distribution of commitments to extend credit approximates the distribution of loans outstanding. The Company does not have a significant number of credits to any single borrower or group of related borrowers whereby their retained exposure exceeds $20.0 million, except for fifty-one relationships that have a retained unguaranteed exposure of $2.15 billion of which $1.31 billion of the unguaranteed exposure has been disbursed.

Additionally, the Company has future minimum lease payments receivable under non-cancelable operating leases totaling $40.4 million, of which no relationships exceed $20.0 million.

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

Geographic Concentrations

The following table presents the geographic concentration of the Company’s loan and lease portfolio at December 31, 2024:


	% of Total
Geographic Regions (1)
Midwest	12.5	%
Northeast	17.1
Southeast	31.3
Southwest	13.1
West	25.5
Non-U.S.	0.5
Total	100.0	%


(1)			Concentrations are stated as a percentage of total unguaranteed loans held for investment. Midwest consists of ND, SD, NE, KS, MN, IA,WI, MO, IL, IN, MI and OH. Northeast consists of MD, DE, PA, NJ, NY, CT, RI, MA, VT, ME and NH. Southeast consists of AR, LA, MS, TN, AL, GA, FL, SC, KY, NC, VA, WV, DC, PR and VI. Southwest consists of AZ, NM, TX and OK. West consists of WA, OR, CA, NV, ID, MT, WY, CO, UT, AK and HI. Non-U.S. includes addressees with foreign domicile. Domicile is determined by the principal resident or business address of the entity.

Benefit Plans

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Benefit Plans

Defined Contribution Plan

The Company maintains an employee benefit plan pursuant to Section 401(k) of the Internal Revenue Code. The plan covers substantially all employees. Participants may contribute a percentage of compensation, subject to a maximum allowed under the Code. In addition, the Company makes certain matching contributions and may make additional contributions at the discretion of the board of directors. Company expense relating to the plan for the years ended December 31, 2024, 2023 and 2022 amounted to $6.7 million, $6.5 million and $6.3 million, respectively.

Flexible Benefits Plan

The Company maintains a Flexible Benefits Plan which covers substantially all employees. Participants may set aside pre-tax dollars to provide for future expenses such as dependent care.

Employee Stock Purchase Plan

The Company adopted an Employee Stock Purchase Plan, or ESPP, on October 8, 2014, which was most recently amended and approved by the Company’s shareholders on May 21, 2024, within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended. Under this plan, eligible employees are able to purchase available shares with post-tax dollars as of the grant date. In order for employees to be eligible to participate in this plan they must be employed or on an authorized leave of absence from the Company or any subsidiary immediately prior to the grant date. ESPP stock purchases cannot exceed $25 thousand in fair market value per employee per calendar year. Options to purchase shares under the ESPP are granted at a 15% discount to fair market value. Expense recognized in relation to the ESPP was $217 thousand, $246 thousand and $188 thousand for fiscal years 2024, 2023 and 2022, respectively.

Stock Option Plans

On March 20, 2015, the Company adopted the 2015 Omnibus Stock Incentive Plan (as amended and currently in effect, the “2015 Omnibus Stock Incentive Plan”) which replaced the previously existing Amended Incentive Stock Option Plan and Nonstatutory Stock Option Plan. Subsequently on May 24, 2016, the 2015 Omnibus Stock Incentive Plan was amended and restated, and on May 15, 2018, the 2015 Omnibus Stock Incentive Plan was amended, to authorize awards covering a maximum of 7,000,000 and 8,750,000 common voting shares, respectively. On May 11, 2021, the Amended and Restated 2015 Omnibus Stock Incentive Plan was amended to authorize awards covering a maximum of 10,750,000 common voting shares. Subsequently on May 16, 2023, 2015 Omnibus Stock Incentive Plan was amended to authorize awards covering a maximum of 13,750,000 common voting shares. Options or restricted shares granted under 2015 Omnibus Stock Incentive Plan expire no more than 10 years from date of grant. Exercise prices under the 2015 Omnibus Stock Incentive Plan are set by the Board of Directors at the date of grant but shall not be less than 100% of fair market value of the related stock at the date of the grant. Forfeitures are recognized as they occur.

Compensation cost relating to share-based payment transactions are recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued. There was no compensation expense for stock options recognized for the year ended December 31, 2024. For the years ended December 31, 2023 and 2022, the Company recognized $25 thousand and $753 thousand in compensation expense for stock options, respectively.

Stock option activity under the 2015 Omnibus Stock Incentive Plan during the year ended December 31, 2024 is summarized below.


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2023	676,563	$	12.74
Exercised	(336,197)	10.35
Forfeited	(7,980)	4.40
Outstanding at December 31, 2024	332,386	$	15.35	0.70 years	$	8,043,504
Exercisable at December 31, 2024	332,386	$	15.35	0.70 years	$	8,043,504

The following is a summary of non-vested stock option activity for the Company for the years ended December 31, 2024, 2023 and 2022.


	Shares	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2021	382,850	$	6.75
Vested	(336,464)	6.85
Forfeited	(8,626)	6.95
Non-vested at December 31, 2022	37,760	6.60
Vested	(37,760)	6.60

Non-vested at December 31, 2023	—	—
Vested	—	—

Non-vested at December 31, 2024	—	$	—

The total intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022 was $10.1 million, $2.8 million and $7.0 million, respectively.

At December 31, 2024, there was no unrecognized compensation costs relating to stock options.

There were no options granted in 2024, 2023 or 2022.

Restricted Stock Plan

In 2010, the Company adopted a Restricted Stock Plan. Under this plan, a total of 1,350,000 shares of Common Stock were available for issuance to eligible employees. Restricted stock grants vested in equal installments ranging from immediate vesting to over a seven year period from the date of the grant. Under the 2015 Omnibus Stock Incentive Plan, which replaced the previously existing Restricted Stock Plan, 885,939 restricted stock units were granted during 2022 to eligible employees and outside directors at a weighted average grant date fair value of $37.75. During 2023, 927,838 restricted stock units were granted to eligible employees and outside directors at a weighted average grant date fair value of $34.83. The vesting of these grants was time based and had no market price conditions. During 2024, 524,064 restricted stock units were granted to eligible employees and outside directors at a weighted average grant date fair value of $39.30, of which the vesting of all grants was time based.

The fair value of each restricted stock unit is based on the market value of the Company’s stock on the date of the grant. Restricted stock awards are authorized in the form of restricted stock awards or units (“RSUs”).

RSUs have a restriction based on the passage of time and may also have a restriction based on a non-market-related performance criteria. The fair value of the RSUs is based on the closing price on the date of the grant.

The following is a summary of non-vested RSU stock activity for the Company for the year ended December 31, 2024.


	Shares	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2023	2,228,236	$	39.50
Granted	524,064	39.30
Vested	(613,979)	39.56
Forfeited	(111,799)	35.27
Non-vested at December 31, 2024	2,026,522	$	39.66

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $26.2 million, $17.6 million and $19.4 million in compensation expense for RSUs, respectively.

At December 31, 2024, unrecognized compensation costs relating to RSUs amounted to $67.5 million which will be recognized over a weighted average period of 3.24 years.

Subsequently in February 2025, the Company granted 551,911 RSUs with a weighted average grant date fair value of $34.54 with unrecognized compensation expense of $19.1 million which will be recognized over a weighted average period of 5.01 years.

Employee Incentive Compensation

The Company has an incentive compensation framework whereby full-time employees are eligible to receive an annual cash bonus payment plus the opportunity for an annual long-term incentive (“LTI”) equity grant in the form of RSUs. Both cash bonus and LTI equity grants are based on each individual’s base pay and overall Company performance. LTI grants are generally influenced by each individual’s tiered target as a percent of base pay. Total expenses related to the cash bonus for employees were $12.9 million, $1.0 million and $9.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. There were no discretionary special bonuses for December 31, 2024. In addition, for the years ended December 31, 2023 and 2022 the Company had discretionary special bonuses of $4.5 million and $10.5 million, respectively, to most full-time employees.

Regulatory Matters

12 Months Ended

Dec. 31, 2024

Regulated Operations [Abstract]

Regulatory Matters

Dividends

The Bank, as a North Carolina banking corporation, may pay dividends to shareholders provided the bank does not make distributions that reduce its capital below its applicable required capital, pursuant to North Carolina General Statutes Section 53C-4-7. However, regulatory authorities may limit payment of dividends by any bank when it is determined that such a limitation is in the public interest and is necessary to ensure financial soundness of the bank.

Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. The Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, includes quantitative measures designed to ensure capital adequacy. The Basel III Rules require the Company and the Bank to maintain (i) a minimum common equity Tier 1 ratio of 4.50 percent plus a 2.50 percent “capital conservation buffer” (effectively resulting in minimum common equity Tier 1 ratio of 7.00 percent), (ii) Tier 1 risk-based capital minimum of 6.00 percent plus the capital conservation buffer (effectively resulting in a minimum Tier 1 risk-based capital ratio of 8.50 percent), (iii) total risk-based capital ratio minimum of 8.00 percent plus the capital conservation buffer (effectively resulting in a minimum total risk-based capital ratio of 10.5 percent) and (iv) Tier 1 leverage capital ratio minimum of 4.00 percent. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios. Failure to meet minimum capital requirements may result in certain actions by regulators that could have a direct material effect on the consolidated financial statements.

Based on the most recent notification from the Federal Deposit Insurance Corporation, the Bank is well capitalized under the regulatory framework for prompt corrective action. As of December 31, 2024, the Company and the Bank met all capital adequacy requirements to which they are subject and were not aware of any conditions or events that would change each entity’s well capitalized status.

Capital amounts and ratios as of December 31, 2024 and 2023, are presented in the following table.


	Actual				Minimum Capital Requirement				Minimum To Be Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Consolidated - December 31, 2024
Common Equity Tier 1
(to Risk-Weighted Assets)	$	1,049,420	11.04	%	$	427,941	4.50	%	N/A		N/A
Total Capital
(to Risk-Weighted Assets)	$	1,169,061	12.29	%	$	760,784	8.00	%	N/A		N/A
Tier 1 Capital
(to Risk-Weighted Assets)	$	1,049,420	11.04	%	$	570,588	6.00	%	N/A		N/A
Tier 1 Capital
(to Average Assets)	$	1,049,420	8.21	%	$	511,293	4.00	%	N/A		N/A
Bank - December 31, 2024
Common Equity Tier 1
(to Risk-Weighted Assets)	$	1,020,820	10.96	%	$	418,992	4.50	%	$	605,210	6.50	%
Total Capital
(to Risk-Weighted Assets)	$	1,138,006	12.22	%	$	744,874	8.00	%	$	931,093	10.00	%
Tier 1 Capital
(to Risk-Weighted Assets)	$	1,020,820	10.96	%	$	558,656	6.00	%	$	744,874	8.00	%
Tier 1 Capital
(to Average Assets)	$	1,020,820	8.04	%	$	507,725	4.00	%	$	634,657	5.00	%
Consolidated - December 31, 2023
Common Equity Tier 1
(to Risk-Weighted Assets)	$	960,433	11.73	%	$	368,549	4.50	%	N/A		N/A
Total Capital
(to Risk-Weighted Assets)	$	1,063,157	12.98	%	$	655,198	8.00%		N/A		N/A
Tier 1 Capital
(to Risk-Weighted Assets)	$	960,433	11.73	%	$	491,399	6.00%		N/A		N/A
Tier 1 Capital
(to Average Assets)	$	960,433	8.58	%	$	447,561	4.00%		N/A		N/A
Bank - December 31, 2023
Common Equity Tier 1
(to Risk-Weighted Assets)	$	823,478	10.40	%	$	356,426	4.50	%	$	514,837	6.50	%
Total Capital
(to Risk-Weighted Assets)	$	922,876	11.65	%	$	633,646	8.00%		$	792,057	10.00%
Tier 1 Capital
(to Risk-Weighted Assets)	$	823,478	10.40	%	$	475,234	6.00%		$	633,646	8.00%
Tier 1 Capital
(to Average Assets)	$	823,478	7.41	%	$	444,480	4.00%		$	555,600	5.00%

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details

Transactions with Related Parties

12 Months Ended

Dec. 31, 2024

Transactions with Related Parties

The Company has entered into transactions with its directors, officers, significant shareholders, their affiliates, and equity method investments (“related parties”).

Related parties include the following equity method investments: Apiture, Inc. (“Apiture”), Canapi Funds, Cape Fear Collective 1 & 2, OTR, Estrella Landing, Green Sun, Sun Vest, HEP and Heelstone.

Apiture is a digital banking solution for financial institutions. The Canapi Funds are investment funds which focus on providing venture capital to new and emerging financial technology companies. Each of Cape Fear Collective 1 & 2 is a “qualified housing project” within the meaning of 12 CFR 362.3 and serves as a special purpose vehicle to purchase residential homes available for sale in the community. OTR is a Community Development Financial Institution (“CDFI”) certified by the U.S. Department of the Treasury. CDFIs provide credit and financial services to underserved markets and populations to help low-income and other disadvantaged people join the economic mainstream. Estrella Landing is a LIHTC investment that qualifies as an affordable housing project located in Wilmington, NC. Green Sun, Sun Vest, HEP, and Heelstone are solar income tax credit projects. See Note 2. Securities, section captioned “Equity Method Accounting,” for further detail on equity method investments.

The following table provides related party loan activity during 2024:


	Amount
Balance as of December 31, 2023	$	22,924
Loan originations	—
Loan repayments	(1,716)
Balance as of December 31, 2024	$	21,208

Deposits from related parties held by the Company as of December 31, 2024 and 2023 amounted to $41.1 million and $48.6 million, respectively.

Medical Park Hotels, LLC (“Medical Park Hotels”) owns a hotel in the Wilmington, North Carolina area. One executive officer and one board member hold a combined total of 24% interest in Medical Park Hotels. During the year ended December 31, 2024, the Company paid Medical Park Hotels $183 thousand for room rentals to house employees, recruits and other business associates when visiting the Wilmington, North Carolina area.

During the years ended December 31, 2024, 2023 and 2022, the Company paid Apiture $3.8 million, $2.5 million and $2.0 million, respectively, for professional services. During 2024, 2023 and 2022, the Company recognized income from Apiture of $217 thousand, $385 thousand and $438 thousand, respectively, for shared services and rent.

As of December 31, 2024, Live Oak Bancshares, Inc. and two Company Directors held carried interest in Canapi Ventures Fund, L.P. The Company recognized $731 thousand of carried interest during the year ended December 31, 2024. No carried interest was recognized during 2023 and 2022.

During the year ended December 31, 2022, the Company made charitable contributions in the amount of $310 thousand, to Collective Impact in New Hanover County, a 501(c)(3) charitable organization (“Collective Impact”). There were no charitable contributions made during the years ended December 31, 2024 and 2023. Cape Fear Collective Ventures, LLC, a wholly owned subsidiary of Collective Impact, manages each of Cape Fear Collective 1 & 2.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480990/946-20-50-2

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+ Details

Parent Company Only Financial Statements

12 Months Ended

Dec. 31, 2024

Condensed Financial Information Disclosure [Abstract]

Parent Company Only Financial Statements

The following balance sheets, statements of income and statements of cash flows are for Live Oak Bancshares, Inc.

Balance Sheets


	As of December 31,
	2024		2023
Assets
Cash and cash equivalents	$	56,144	$	81,897
Investment in subsidiaries	1,048,715		843,978
Other assets	17,916		14,518
Total assets	$	1,122,775	$	940,393

Liabilities and Shareholders' Equity
Borrowings	$	112,689	$	23,354
Other liabilities	6,590		14,373
Total liabilities	119,279		37,727

Shareholders' equity:
Common stock	365,607		344,568
Retained earnings	715,767		642,817
Accumulated other comprehensive loss	(82,344)		(84,719)
Total shareholders' equity attributed to Live Oak Bancshares, Inc.	999,030		902,666
Non-controlling interest	4,466		—
Total shareholders' equity	1,003,496		902,666
Total liabilities and shareholders' equity	$	1,122,775	$	940,393

Statements of Income


	Years ended December 31,
	2024		2023		2022
Interest income	$	281	$	581	$	73
Interest expense	5,577		1,182		1,648
Net interest loss	(5,296)		(601)		(1,575)
Noninterest income:
Other noninterest income	757		(290)		(107)
Total noninterest income	757		(290)		(107)
Noninterest expense:
Salaries and employee benefits	1,213		1,549		1,444
Professional services expense	1,657		1,540		1,163

Other expense	3,020		2,384		1,907
Total noninterest expense	5,890		5,473		4,514
Net loss before equity in undistributed income of subsidiaries	(10,429)		(6,364)		(6,196)
Income tax benefit	(3,907)		(1,010)		(1,358)
Net loss	(6,522)		(5,354)		(4,838)
Equity in undistributed income of subsidiaries in excess of dividends from subsidiaries	83,939		79,252		181,046
Net income	77,417		73,898		176,208
Net loss attributable to non-controlling interest	57		—		—
Net income attributable to Live Oak Bancshares, Inc.	$	77,474	$	73,898	$	176,208

Statements of Cash Flows


	Years ended December 31,
	2024		2023		2022
Cash flows from operating activities
Net income	$	77,417	$	73,898	$	176,208
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Equity in undistributed net income of subsidiaries in excess of dividends of subsidiaries	(83,939)		(79,252)		(181,046)
Subsidiary vesting of restricted stock and other	(16,978)		(10,474)		(14,862)
Deferred tax (benefit) expense	(680)		(15)		434

Stock option compensation expense	—		272		942
Restricted stock compensation expense	26,205		17,603		19,405
Business combination contingent consideration fair value adjustments	(125)		125		(86)
Net change in other assets	(9,631)		36,283		(2,846)
Net change in other liabilities	526		299		(1,626)
Net cash (used in) provided by operating activities	(7,205)		38,739		(3,477)
Cash flows from investing activities
Capital (investment in) return on subsidiaries	(96,041)		(40,000)		121,750
Purchases of equity security investments	(90)		(132)		(182)
Purchases of equity method investments	(1,181)		(612)		(904)

Net cash (used in) provided by investing activities	(97,312)		(40,744)		120,664
Cash flows from financing activities
Proceeds from borrowings	99,552		71		12,096
Repayment of borrowings	(10,217)		(9,920)		(29,627)
Stock option exercises	2,311		1,168		2,118
Employee stock purchase program	1,449		1,396		1,067
Withholding cash issued in lieu of restricted stock and other	(8,926)		(6,725)		(4,972)
Repurchase and retirement of shares	—		—		—
Shareholder dividend distributions	(5,405)		(5,326)		(5,266)
Net cash provided by (used in) financing activities	78,764		(19,336)		(24,584)
Net change in cash and cash equivalents	(25,753)		(21,341)		92,603
Cash and cash equivalents at beginning of year	81,897		103,238		10,635
Cash and cash equivalents at end of year	$	56,144	$	81,897	$	103,238

Pay vs Performance Disclosure - USD ($) $ in Thousands	12 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Dec. 31, 2024	Dec. 31, 2023	Dec. 31, 2022
Pay vs Performance Disclosure
Net Income (Loss)	$ 77,474	$ 73,898	$ 176,208

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Dec. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Insider Trading Policies and Procedures	12 Months Ended
Insider Trading Policies and Procedures	Dec. 31, 2024
Insider Trading Policies and Procedures [Line Items]
Insider Trading Policies and Procedures Adopted	true

Cybersecurity Risk Management and Strategy Disclosure	12 Months Ended
Cybersecurity Risk Management and Strategy Disclosure	Dec. 31, 2024
Cybersecurity Risk Management, Strategy, and Governance [Line Items]
Cybersecurity Risk Management Processes for Assessing, Identifying, and Managing Threats [Text Block]	The Company maintains a cybersecurity risk management program that is designed to enable us to assess, identify, and manage risk associated with cybersecurity threats (the “Cybersecurity Program”). Our Cybersecurity Program is based on the Cybersecurity Framework promulgated by the National Institute of Standards and Technology and other applicable industry standards. It includes the following elements: •Identification and assessment of cybersecurity threats based on periodic internal and external assessments and monitoring, information from internal stakeholders, and external publications and resources. •Technical and organizational safeguards designed to protect against identified threats, including documented policies and procedures, employee training and awareness, and technical controls. •Processes to detect the occurrence of cybersecurity events and incidents, maintenance, and periodic testing of incident response and recovery and business continuity plans and processes. •A third-party risk management program to manage cybersecurity risks associated with our service providers, suppliers, and vendors using a risk-based approach that focuses on cybersecurity risks associated with critical service providers, suppliers, and vendors. Further, the Company’s internal controls, various threat landscapes, internal events and incidents, and emerging risks are periodically reviewed to make adjustments to the Cybersecurity Program as needed. Additionally, annual risk assessments and penetration tests are performed. Management of Material Risks & Integrated Overall Risk Management Assessing, identifying, and managing cybersecurity risks is integrated into our overall risk management framework. The Cybersecurity Program is integrated into the Company’s Enterprise Risk Management (“ERM”) program and framework. Together, these programs are designed to foster a company-wide culture of cybersecurity risk management. Our Information Security team works closely with stakeholders across technology, legal, risk, and business units to implement and monitor controls. See “Governance” below for additional information on processes used by management to monitor cybersecurity incidents. Engagement of Third Parties in Connection With Risk Management The Company leverages various third parties to conduct evaluations of our Cybersecurity Program, including security controls. The Company engages a third party to audit its information technology function, which includes an assessment of the Company’s cybersecurity efforts. The Company also maintains cybersecurity insurance; however, the costs related to cybersecurity threats or disruptions may not be fully insured. Additionally, the Company engages third parties to perform penetration tests on an annual basis. The Company also periodically engages third parties for assessments of specific products, services, or applications. The Company leverages various software and service providers as part of its Cybersecurity Program, including a managed security service provider and a service provider that helps monitor third-party suppliers. The Company also receives periodic threat intelligence reports from vendors, peers, and industry information sharing and analysis centers. The Company maintains a relationship with a leading incident response firm to assist the Company in responding to cybersecurity incidents, if appropriate. Oversight of Third-party Risks Our third-party service providers, suppliers, vendors, and partners face cybersecurity risks that could impact us. Therefore, the Company has developed and implemented processes to oversee and manage these risks. These processes include performing third-party onboarding due diligence such as risk assessments and information security reviews for critical service providers, suppliers, and vendors, seeking to have third-parties agree to contractual requirements designed to ensure cybersecurity and related matters are addressed, and conducting ongoing monitoring and due diligence in accordance with our vendor management and information security policies and standards. As noted above, we use a third-party to aid us in monitoring third-parties’ cybersecurity risk. Risks from Cybersecurity Threats As of the date of this report, we have not encountered any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition.
Cybersecurity Risk Management Processes Integrated [Flag]	true
Cybersecurity Risk Management Processes Integrated [Text Block]	Assessing, identifying, and managing cybersecurity risks is integrated into our overall risk management framework. The Cybersecurity Program is integrated into the Company’s Enterprise Risk Management (“ERM”) program and framework. Together, these programs are designed to foster a company-wide culture of cybersecurity risk management. Our Information Security team works closely with stakeholders across technology, legal, risk, and business units to implement and monitor controls. See “Governance” below for additional information on processes used by management to monitor cybersecurity incidents.
Cybersecurity Risk Management Third Party Engaged [Flag]	true
Cybersecurity Risk Third Party Oversight and Identification Processes [Flag]	true
Cybersecurity Risk Materially Affected or Reasonably Likely to Materially Affect Registrant [Flag]	false
Cybersecurity Risk Board of Directors Oversight [Text Block]	The Risk Committee of the Board of Directors is responsible for the oversight of risks from cybersecurity threats. As described below, where appropriate, strategic risk management decisions are escalated to the Risk Committee, and the Risk Committee receives periodic reports on cybersecurity matters from management.
Cybersecurity Risk Board Committee or Subcommittee Responsible for Oversight [Text Block]	The Chief Information Security Officer (“CISO”) of the Bank and a standing management Information Security Committee monitor, measure, and report key indicators, risk assessments, and security measures to the management Corporate Risk Committee. The CISO, in conjunction with the Corporate Risk Committee, makes quarterly reports to, the Risk Committee of the Board of Directors. Such quarterly reporting may include, but is not limited to, key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues. In addition to quarterly reporting to the Board’s Risk Committee, the Company’s incident response processes include escalation to management when an incident is suspected.
Cybersecurity Risk Process for Informing Board Committee or Subcommittee Responsible for Oversight [Text Block]	The CISO, in conjunction with the Corporate Risk Committee, makes quarterly reports to, the Risk Committee of the Board of Directors. Such quarterly reporting may include, but is not limited to, key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues.
Cybersecurity Risk Role of Management [Text Block]	The Chief Information Security Officer (“CISO”) of the Bank and a standing management Information Security Committee monitor, measure, and report key indicators, risk assessments, and security measures to the management Corporate Risk Committee. The CISO, in conjunction with the Corporate Risk Committee, makes quarterly reports to, the Risk Committee of the Board of Directors. Such quarterly reporting may include, but is not limited to, key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues. In addition to quarterly reporting to the Board’s Risk Committee, the Company’s incident response processes include escalation to management when an incident is suspected. Risk Management Personnel Primary responsibility for assessing, monitoring, and managing our Cybersecurity Program rests with the CISO, Mr. Richard Friedberg. With over 25 years of experience in the field of cybersecurity, his background includes extensive experience across the financial sector, technology sector, and U.S. government. Mr. Friedberg is also an adjunct faculty member at Carnegie Mellon University, teaching risk and cyber practices. Mr. Friedberg holds a Bachelor of Science from Carnegie Mellon University, a Master of Business Administration from George Washington University, and maintains certification as a Certified Information Systems Security Professional and Certified Information Security Manager. Monitoring Cybersecurity Incidents The CISO is continually informed of and monitors cybersecurity risks and incidents through real-time updates, including a partnership with a managed security service provider. Periodic Information Security Committee meetings cover key metrics and risk indicators, penetration test results, risk assessment results, status of ongoing initiatives, incident and notable event reports, compliance with regulatory standards, and operational issues. In the event of a cybersecurity incident, we have an established incident response plan that requires prompt notification of the CISO or the CISO’s designee, who in turn engages with the corporate Incident Response Team (IRT) to respond to the incident. The CISO is also responsible for informing the Information Security Committee of cybersecurity incidents, which in turn reviews the impact of incidents and monitors the Company’s mitigation and remediation efforts. Depending on the nature of the incident, this process also provides for escalating notice to the Risk Committee of the Board of Directors. These processes assist management and the Risk Committee in staying informed of and monitoring the prevention, detection, mitigation, and remediation of cybersecurity incidents.
Cybersecurity Risk Management Positions or Committees Responsible [Flag]	true
Cybersecurity Risk Management Positions or Committees Responsible [Text Block]	Primary responsibility for assessing, monitoring, and managing our Cybersecurity Program rests with the CISO, Mr. Richard Friedberg. With over 25 years of experience in the field of cybersecurity, his background includes extensive experience across the financial sector, technology sector, and U.S. government. Mr. Friedberg is also an adjunct faculty member at Carnegie Mellon University, teaching risk and cyber practices. Mr. Friedberg holds a Bachelor of Science from Carnegie Mellon University, a Master of Business Administration from George Washington University, and maintains certification as a Certified Information Systems Security Professional and Certified Information Security Manager.
Cybersecurity Risk Management Expertise of Management Responsible [Text Block]	Primary responsibility for assessing, monitoring, and managing our Cybersecurity Program rests with the CISO, Mr. Richard Friedberg. With over 25 years of experience in the field of cybersecurity, his background includes extensive experience across the financial sector, technology sector, and U.S. government. Mr. Friedberg is also an adjunct faculty member at Carnegie Mellon University, teaching risk and cyber practices. Mr. Friedberg holds a Bachelor of Science from Carnegie Mellon University, a Master of Business Administration from George Washington University, and maintains certification as a Certified Information Systems Security Professional and Certified Information Security Manager.
Cybersecurity Risk Process for Informing Management or Committees Responsible [Text Block]	The CISO, in his capacity, periodically informs the Information Security Committee, Corporate Risk Committee and Board’s Risk Committee of cybersecurity risks and incidents. This enables the highest levels of management to be kept abreast of the Company’s cybersecurity posture and potential risks facing the Company. Furthermore, significant cybersecurity matters and strategic risk management decisions are escalated to the Risk Committee of the Board of Directors, where appropriate.
Cybersecurity Risk Management Positions or Committees Responsible Report to Board [Flag]	true

Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Dollar amounts in all tables in the notes to consolidated financial statements have been presented in thousands, except percentage, time period, stock option, share and per share data. The accounting and reporting policies of the Company and the Bank follow United States generally accepted accounting principles (“GAAP”) and general practices within the financial services industry. The following is a description of the significant accounting and reporting policies the Company follows in preparing and presenting its consolidated financial statements.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

Consolidation Policy

The consolidated financial statements include the financial statements of the Company and its directly and indirectly wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity in a subsidiary not attributable, directly or indirectly, to the Company. Non-controlling interests are presented as a separate component of equity in the consolidated balance sheets and the presentation of net income (loss) is modified to present the net income (loss) attributed to controlling and non-controlling interests.

The Company evaluates its relationships with other entities to identify whether they are a voting interest entity or variable interest entity (“VIE”). Voting interest entities are entities that generally (1) have sufficient equity to finance their activities and (2) provide the equity investors with power to make significant decisions relating to the entity’s operations. A voting interest entity is consolidated if the Company holds majority voting rights.

The Company is considered to hold a controlling financial interest in a VIE when it is the primary beneficiary. A primary beneficiary has both (1) the power to direct the activities that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or right to receive benefits of a VIE that could potentially be significant to a VIE. The parties that make investment and investment decisions, or parties that can unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE. The Company considers all of its economic interests in the VIE when determining whether it has the obligation to absorb losses or the right to receive benefits from the VIE. For details on the Company’s VIE investments refer to Note 2. Securities, “Variable Interest Entities.”

Business Segment

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the President of Live Oak Bancshares, Inc. and the Bank. In determining the appropriateness of segment definition, the Company considers the components of the business about which financial information is available and components the chief operating decision maker regularly evaluates relative to resource allocation and performance assessment.

As of December 31, 2023, the Company disclosed two reportable operating segments: Banking and Fintech. Due to Canapi Advisors voluntarily withdrawing as an investment advisor to the Canapi Funds in the third quarter of 2024, the chief operating decision maker began evaluating the business on a consolidated basis. Therefore, the Company has one significant operating segment, which is providing a banking platform for small businesses nationwide. The banking platform generates revenue primarily from net interest income and secondarily through the origination and sale of government guaranteed loans. The chief operating decision maker assesses performance and decides how to allocate resources based on net income which is reported on the consolidated statements of income. The chief operating decision maker uses net income to evaluate income generated from total assets (return on assets) and profitability of the segment in relation to total shareholders’ equity (return on equity). The measures of segment assets and equity are reported on the consolidated balance sheets as total assets and total shareholders’ equity. Net income is also used to monitor budget versus actual results. All of these elements are used in assessing performance of the segment.

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

Use of Estimates

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

During the first quarter of 2023, the Company refined its allowance for credit losses (“ACL”) methodology for estimating probability of default (“PD”) and loss given default (“LGD”). Additionally, the Company began using internally calculated prepayment rates based on its historical information. These changes, based on the continued maturity of internal data, resulted in a $1.5 million increase in the ACL in the first quarter of 2023.

The Company also refined its methodology for estimating its reserve on unfunded loan commitments by incorporating historical utilization rates on unused lines of credit and updating probability assumptions related to construction loan commitments. These changes resulted in a $2.4 million increase in the reserve on unfunded commitments in the first quarter of 2023.

During the third quarter of 2023, the Company changed the valuation techniques used to estimate the fair value of servicing rights and loans measured at fair value as a result of rising interest rates and their impacts on market conditions. The changes include aligning our net servicing income and loan fair value estimates with changes in forward interest rate curves. Loan fair value estimates were also revised to utilize market participant credit loss information. These revisions provide estimates that the Company believes are more representative of fair value while transitioning from unobservable inputs to those that are more observable. These estimate changes were implemented as of July 1, 2023 and resulted in an adjustment to increase the estimated value of the servicing asset by $13.7 million and loans measured at fair value by $1.3 million. This adjustment also increased noninterest income by a corresponding $15.0 million.

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.

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

Cash and Cash Equivalents

For the purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “cash and due from banks” and “federal funds sold.” Cash and cash equivalents have an initial maturity of three months or less.

Certificate of Deposit with other Banks

The certificate of deposit with other banks has a maturity of December 2025 and bears interest at a rate of 3.80%. All investments in certificates of deposit are with FDIC insured financial institutions and none exceed the maximum insurable amount of $250 thousand.

Investments

Debt Securities

Debt securities that management has the positive intent and ability to hold to maturity are classified as held-to-maturity and recorded at amortized cost. Securities that may be sold prior to maturity are classified as available-for-sale and recorded at fair value. Unrealized gains and losses for available-for-sale investment securities, other than credit-related impairment losses, are excluded from earnings and reported in other comprehensive income. The Company’s entire portfolio of debt securities is classified as available-for-sale for the periods presented.

Purchase premiums and discounts on debt securities are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sales of these securities are recorded on the trade date and are determined using the specific identification method.

When debt securities are in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. Debt securities that do not meet the aforementioned criteria are evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected from the security is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. Changes in the ACL are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale debt securities from the estimate of credit losses. Securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met.

Equity Investments

Equity investments are generally non-marketable investments and are included in the other assets line in the consolidated balance sheets. The Company generally accounts for equity investments either under the equity method or equity security accounting. Earnings impacts are reflected in the equity method investments (loss) income and equity security investments (losses) gains, net line items on the consolidated statements of income.

Investments in in-substance common stock through which there is significant influence but not control over the investee are accounted for under the equity method. The determination of whether the Company has significant influence over an investee requires judgement based on the facts and circumstances of each investment including, share type, level of ownership, power to control and legal structure. Significant influence is generally presumed to exist in privately held companies where the Company owns at least 20% of voting stock, or 5% interest in limited partnerships or limited liability companies. Qualitatively, significant influence can exist through the ability to influence the investee’s operating and financial policies through board involvement or other influence. Under the equity method, the Company recognizes its proportionate share of the results of operations of the investee based on most current information available. In instances where cash distributions vary at different points and/or are not directly linked to the Company’s ownership percentage, the investee’s net income or loss is allocated using the hypothetical liquidation at book value (“HLBV”) method.

Investments that do not qualify as in-substance common stock, or through which the Company is not able to exercise significant influence over the investee, are accounted for as equity securities, whereby investments are measured at fair value with changes in fair value recognized in net income, unless those investments have no readily determinable fair value. Investments without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus changes in value resulting from observable price changes arising from orderly transactions. Management considers a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, market conditions, values for comparable securities, current and projected operating performance, exit strategies, financing transactions subsequent to the acquisition of the investment and a discount for certain investments that have lock-up restrictions or other features that indicate a discount to fair value is warranted.

For equity securities not accounted for at fair value, any impairment is recognized with the full charge recorded in earnings. To determine whether an equity security may be impaired, the Company considers various indicators of impairment, including, but not limited to (1) the financial condition and near-term prospects of the issuer, (2) adverse market conditions and (3) bona-fide offers to purchase an equity interest in the investee below the carrying amount.

Federal Home Loan Bank Stock

Membership in the Federal Home Loan Bank of Atlanta (“FHLB”) requires ownership of FHLB stock. FHLB stock is restricted because it may only be sold to the FHLB and all sales must be at par. FHLB stock is carried at cost minus impairment, if any, and is recorded within other assets in the consolidated balance sheet.

Loans Held for Sale

Held for Sale

Management designates loans as held for sale based on its intent to sell loans, or portions of loans, in established secondary markets or to participant banks and credit unions. Salability requirements of government guaranteed portions include, but are not limited to, full disbursement of the loan commitment amount. Loans held for sale are carried at the lower of cost or fair value. Net unrealized losses, if any, on loans without a fair value election, are recognized through a valuation allowance and recorded as a charge to noninterest income. The cost basis of loans held for sale includes unamortized loan origination fees and costs. The pro-rata portion, based on the percent of the total loan sold, of the remaining deferred fees and costs are recognized as an adjustment to the gain on sale.

Transfer of Loans