Live Oak Bancshares, Inc.LOB
Live Oak Bancshares, Inc. Income Taxes Disclosure
Income Taxes
Effective January 1, 2025, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The new disclosure requirements were applied prospectively. Prior periods have not been restated.
The components of income tax expense for the years ended December 31 are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income tax expense: | |||||||||||||||||
| Federal | $ | 41,497 | $ | 16,700 | $ | 24,051 | |||||||||||
| State | 8,043 | 6,538 | 7,042 | ||||||||||||||
| Total current tax expense | 49,540 | 23,238 | 31,093 | ||||||||||||||
| Deferred income tax benefit: | |||||||||||||||||
| Federal | (10,397) | (9,439) | (20,914) | ||||||||||||||
| State | (1,971) | (1,981) | (1,247) | ||||||||||||||
| Total deferred tax benefit | (12,368) | (11,420) | (22,161) | ||||||||||||||
| Totals: | |||||||||||||||||
| Federal | 31,100 | 7,261 | 3,137 | ||||||||||||||
| State | 6,072 | 4,557 | 5,795 | ||||||||||||||
| Income tax expense, as reported | $ | 37,172 | $ | 11,818 | $ | 8,932 | |||||||||||
| 2025 | Percent | ||||||||||
| Income tax expense computed at the statutory rate | $ | 29,991 | 21.0 | % | |||||||
| State income tax expense, net of federal | 4,797 | 3.4 | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock-based compensation expense | 690 | 0.5 | |||||||||
| Tax credits | |||||||||||
| Low income housing tax credits, net of amortization | (45) | — | |||||||||
| Research and development tax credits | (610) | (0.4) | |||||||||
| Other | 2,349 | 1.6 | |||||||||
| Total income tax expense | $ | 37,172 | 26.0 | % | |||||||
For the year ended December 31, 2025, state and local income taxes in California, New York, and Illinois comprise the majority of the state income tax expense, net of federal category.
Reported income tax expense differed from the amounts computed by applying the U.S. federal statutory income tax rate of 21% in 2024 and 2023 to income before income taxes as follows:
| 2024 | 2023 | ||||||||||
| Income tax expense computed at the statutory rate | $ | 18,739 | $ | 17,394 | |||||||
| State income tax expense, net of federal | 3,184 | 4,316 | |||||||||
| Stock-based compensation expense | (194) | 2,084 | |||||||||
| Decrease in taxes due to investment tax credit | (10,440) | (16,390) | |||||||||
| Other | 529 | 1,528 | |||||||||
| Total income tax expense | $ | 11,818 | $ | 8,932 | |||||||
Components of deferred tax assets and liabilities are as follows:
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net unrealized losses on securities available for sale | $ | 14,352 | $ | 26,003 | |||||||
| Allowance for loan and lease losses | 46,935 | 40,564 | |||||||||
| Stock-based compensation expense | 2,886 | 2,701 | |||||||||
| Capitalized research and experimentation costs | — | 6,205 | |||||||||
| Accrued expenses | 6,162 | 4,029 | |||||||||
Allowance for off-balance sheet credit exposures | 3,999 | 3,293 | |||||||||
| Operating lease liabilities | 528 | 638 | |||||||||
| Other | 1,634 | 702 | |||||||||
| Total deferred tax assets | 76,496 | 84,135 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Premises and equipment | 30,595 | 35,831 | |||||||||
| Net unrealized gains on non-marketable and other equity securities | 9,011 | 17,245 | |||||||||
| Mark to market on loans held for sale | 14,396 | 11,968 | |||||||||
| Unguaranteed loan discount | 194 | 34 | |||||||||
| Deferred loan fees and costs, net | 3,281 | 1,415 | |||||||||
| Operating lease right-of-use assets | 424 | 541 | |||||||||
| Goodwill and intangibles | 77 | 34 | |||||||||
| Capitalized research and experimentation costs | 599 | — | |||||||||
| Other | 378 | 11 | |||||||||
| Total deferred tax liabilities | 58,955 | 67,079 | |||||||||
| Net deferred tax asset | $ | 17,541 | $ | 17,056 | |||||||
Income taxes paid, net of refunds, were as follows:
| 2025 | |||||
| Federal | $ | 18,678 | |||
| State | |||||
| California | 2,970 | ||||
| Other | 4,946 | ||||
| Total income taxes paid | $ | 26,594 | |||
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, 2025, 2024 and 2023. As of December 31, 2025, 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.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 18, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Mar 8, 2018 | |
| 2016 | Mar 9, 2017 | |
| 2015 | Mar 14, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.