Live Oak Bancshares (LOB) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We may experience increased delinquencies and credit losses, which could have a material adverse effect on our capital, financial condition, and results of operations
2. 02SBA lending and other government guaranteed lending is an important part of our business. These lending programs are dependent upon the federal government, and we face specific risks associated with originating SBA and other government guaranteed loans
3. 03Pandemics, natural disasters, global climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations
4. 04We are dependent upon the use of intellectual property owned by third parties, and any change in our ability to use, or the terms upon which we may use, this intellectual property could have a material adverse effect on our business
5. 05We have identified a material weakness in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in a loss of investor confidence and adversely impact the trading price of our securities
6. 06The fair value of our investment securities can fluctuate due to factors outside of our control
7. 07Our ACL may prove to be insufficient to absorb lifetime losses on loans, leases and off-balance sheet credit exposures
8. 08The valuation of our loans measured at fair value is based on estimates and subject to fluctuation based on market conditions and other factors that are beyond our control
9. 09The valuation of our servicing rights is based on estimates and subject to fluctuation based on market conditions and other factors that are beyond our control
10. 10The recognition of gains on the sale of loans reflects certain assumptions
11. 11Our rental equipment is subject to residual value risk upon disposition, and may not sell at the prices or in the quantities we expect
12. 12We are subject to liquidity risk in our operations
13. 13Changes in the interest rate environment could reduce our net interest income, which could reduce our profitability
14. 14The amount of other real estate owned, or OREO, may increase significantly, resulting in additional losses, and costs and expenses that will negatively affect our operations
15. 15We are subject to environmental liability risk associated with our lending activities
16. 16Our use of appraisals in deciding whether to make a loan secured by real property or how to value the loan in the future may not accurately reflect the net value of the collateral that we can realize
17. 17We could be subject to losses, regulatory action or reputational harm due to fraudulent and negligent acts on the part of loan applicants, our borrowers, our employees and vendors
18. 18New lines of business or new products and services may subject us to additional risks
19. 19We are subject to risk in connection with our strategic activities, including acquisitions, joint ventures, partnerships, and investments
20. 20Our investments in financial technology companies and initiatives, including our investment in Apiture, subject us to material financial, reputational and strategic risks
21. 21Our investments in other companies may be illiquid
22. 22Our investments and/or financings in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on our financial results
23. 23Our loan portfolio may be affected by deterioration in real estate markets, including declines in the performance of loans
24. 24Deterioration in the commercial soundness of our counterparties could adversely affect us
25. 25We have different lending risks than larger, more diversified banks
26. 26Insiders have substantial control over us, and this control may limit our shareholders’ ability to influence corporate matters and may delay or prevent a third party from acquiring control over us

Risks Related to Our Regulatory Environment

1. 27We are subject to extensive regulation that could limit or restrict our activities
2. 28Because our total assets exceed $10 billion, we are subject to heightened regulatory requirements, which could have an adverse effect on our financial condition or results of operations
3. 29Our deposit operations are subject to extensive regulation, and we expect additional regulatory requirements to be implemented in the future
4. 30Our FDIC deposit insurance premiums and assessments may increase
5. 31Adverse developments or concerns affecting the financial services industry or specific financial institutions could adversely affect our financial condition and results of operations
6. 32We may incur increased costs to comply with privacy and data security laws and regulations and, to the extent we fail to comply, we could be subject to government enforcement actions, private claims and litigation, adverse publicity, loss of customers, and other negative outcomes

Risks Related to Our Common Stock

1. 33The low trading volume in our common stock may adversely affect your ability to resell shares at prices that you find attractive or at all
2. 34Future sales of shares of our common stock by existing shareholders could depress the market price of our common stock
3. 35There can be no assurance that we will continue to pay cash dividends
4. 36The Company is subject to extensive federal and state banking laws, including the BHCA and federal and state banking regulations, that impact the rights and obligations of owners of our common stock, including, for example, its ability to declare and pay dividends on its common stock
5. 37Anti-takeover provisions could adversely affect Live Oak Bancshares, Inc. shareholders
6. 38Shares of Live Oak Bancshares, Inc.’s common stock are not insured deposits and may lose value
7. 39We face strong competition from a diverse group of competitors
8. 40We rely heavily on our management team and depend on our ability to attract and retain key personnel, and the unexpected loss of any of those personnel could adversely affect our operations
9. 41Our risk management framework may not be effective in mitigating risks and/or losses to us
10. 42Hurricanes or other adverse weather events could disrupt our operations, which could have an adverse effect on our business or results of operations
11. 43Changes in accounting standards and management’s selection of accounting methods, including assumptions and estimates, could materially impact our financial statements
12. 44Our business reputation is important and any damage to it could have a material adverse effect on our business