James S. Mahan III
About James S. Mahan III
Founder, Chairman and Chief Executive Officer of Live Oak Bancshares and Live Oak Banking Company; age 73; director since 2008; economics B.A. from Washington & Lee University . He has been Chairman and CEO “since inception,” and is widely recognized for building technology-enabled financial services businesses (e.g., Security First Network Bank; S1 Corporation grew to $234M revenue in six years, peak market cap >$6B) . Company performance under his leadership in 2024: net income rose to $77.5M (+4.8% YoY), book value per share reached $22.12, and total assets grew to $12.94B; five-year Pay vs Performance shows Company TSR value of a $100 initial investment at $212 for 2024 (peer group $112) .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Security First Network Bank | Co-founder; world’s first internet bank | Not disclosed | Pioneered online banking platform . |
| S1 Corporation | CEO & Chairman | Not disclosed | Grew to $234M revenue in six years; peak market cap >$6B . |
| Cardinal Bancshares | Founder, Chairman & CEO; took public | IPO in 1992 | Built to ~$675M assets; executed IPO . |
| Citizens Union National Bank & Trust Co. | President, COO, Vice Chairman; later Chairman & CEO | Became Chairman & CEO in 1984 | Led bank; organized investor purchase in 1986; later sold to BankOne . |
| Wachovia Bank & Trust Co. | Began banking career | 1973 | Foundational banking experience . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Canapi Ventures | Managing partner & co-founder | Not disclosed | Fintech venture platform; Company has commitments to Canapi funds . |
| Apiture, Inc. | Board member | Not disclosed | Digital banking JV; Company’s investment carrying value $53.1M at 12/31/24 . |
| DefenseStorm, Inc. | Board member | Not disclosed | Cybersecurity for financial institutions . |
| Savana Inc. | Board member | Not disclosed | Digital delivery/operations for banks . |
| nCino, Finxact, Payrailz | Co-founder | Not disclosed | Cloud-native banking platforms/payment tech . |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary | $510,601 | $510,601 | $514,529 |
| Bonus | $0 | $0 | $0 |
| Stock Awards (RSUs/Options grant-date fair value) | $0 | $0 | $0 |
| All Other Compensation (incl. perqs) | $270,594 | $394,892 | $330,445 |
| Total | $781,195 | $905,493 | $844,974 |
| Personal Aircraft Hours Approved | — | — | 140 hours in 2024 |
| Aircraft AIC Value in “All Other” | — | — | $285,977 (portion of 2024 All Other) |
Notes:
- No equity awards have been granted to Mahan since the 2015 IPO; Committee views his substantial stock ownership as aligning interests .
- Non-employee directors are compensated separately; employee directors (incl. CEO) are not paid director fees .
Performance Compensation
- Program design: For NEOs other than CEO, the Committee used discretionary cash bonuses (6–8% of base) based on subjective review of 2024 Company and individual performance; RSUs granted in Feb-2025 vest pro rata over five years. No specific financial targets or weightings were set; CEO received neither bonus nor equity .
- Clawback: SEC/NYSE-compliant clawback policy adopted; incentive compensation awarded on/after Oct 2, 2023 is subject to recovery in case of restatement .
Given absence of formal metrics/awards for CEO, there is no payout table applicable to Mahan for 2024 .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership | 6,771,682 shares; 14.9% of shares outstanding (as of 1/31/2025) . |
| Ownership Structure | Includes 3,147,844 shares in the James S. Mahan III Revocable Trust; shared voting rights on 3,032,547 shares in Marguerite D. Mahan Revocable Trust; additional holdings in family and charitable trusts and entities . |
| Pledging | 6,180,391 shares serve as collateral for a personal line of credit; outstanding balance $25,894,657 equals max available credit limit (as of 1/31/2025). Lenders require minimum collateral ≥2x credit extended; pledging permitted with quarterly Audit Committee reporting and prior GC consultation . |
| Hedging | Prohibited for directors and employees (options receipt/exercise excluded) . |
| Ownership Guidelines | No formal stock ownership guidelines for executives/directors; Board believes ownership is aligned . |
| Outstanding Awards | No outstanding RSUs or options for CEO; no equity acceleration applicable to him . |
Red flag: Significant pledging and large line of credit increase potential forced-sale risk under adverse market conditions, which can pressure stock and misalign incentives if collateral calls occur .
Employment Terms
| Provision | CEO Terms |
|---|---|
| Employment Agreement | None; serves at Board’s discretion . |
| Severance | No pre-set severance; any benefits negotiated if applicable . |
| Change-in-Control | RSU acceleration for NEOs if terminated within 12 months post Corporate Transaction (other than for Cause); CEO has no outstanding RSUs, so no acceleration . |
| Non-Compete/Non-Solicit | Not disclosed. |
| Pension/SERP/Deferred Comp | No pension; no nonqualified deferred compensation plans . |
| Perquisites | Personal aircraft usage (140 hours approved in 2024) . |
| Clawback | SEC/NYSE-compliant clawback policy applies to incentive compensation . |
Board Governance
- Role: Chairman & CEO; Board has no formal policy separating roles and has not appointed a Lead Independent Director; Board believes CEO is best-situated as Chair .
- Independence: With the exception of Messrs. Mahan, Underwood, and Williams, directors are independent under NYSE rules; committee memberships are composed of independent directors .
- Committees: Audit (Valine chair), Risk (Glossman chair), Compensation (Cameron chair), Nominating & Corporate Governance (Lucht chair) .
- Meetings/Attendance: Board met six times in 2024; all incumbent directors attended ≥75% of aggregate meetings; independent director executive sessions are held .
- Succession: Formal Management Succession Policy reviewed annually by the Board .
Dual-role implications:
- CEO/Chair concentration and absence of a Lead Independent Director can weaken independent oversight; mitigants include independent committee structure and regular executive sessions .
Director Compensation (for context)
- Non-employee directors received $60,000 annual retainer plus committee chair fees and a 2,327 RSU grant in May 2024; employee directors (including CEO) are not separately compensated for Board service .
Say-on-Pay & Shareholder Feedback
- 2024 Say-on-Pay approval: 76.45% of votes cast supported NEO compensation .
- Frequency: Board recommends annual Say-on-Pay; proposal set to “1 YEAR” .
Performance & Track Record
| Year | Company TSR (Value of $100) | Peer Group TSR (KBW Nasdaq Regional Banking Index) | Net Income ($000) | Book Value/Share |
|---|---|---|---|---|
| 2020 | 251 | 88 | 59,543 | 13.38 |
| 2021 | 463 | 117 | 166,995 | 16.39 |
| 2022 | 161 | 106 | 176,208 | 18.41 |
| 2023 | 243 | 102 | 73,898 | 20.23 |
| 2024 | 212 | 112 | 77,474 | 22.12 |
2024 Operating highlights: total loans/leases +17.3% to $10.58B; deposits +14.5% to $11.76B; net interest income +8.9% despite NIM compression to 3.27%; provision for credit losses increased $44.9M due to record growth and macro environment .
Compensation Structure Analysis
- Cash vs equity mix: CEO is paid predominantly fixed cash with perquisites; no equity grants since IPO; other NEOs receive mix of base, small discretionary cash bonuses, and multi-year time-vested RSUs .
- Shift in incentive design: Company does not use option awards; RSUs are time-based over five years; no formulaic annual performance goals disclosed, indicating higher Committee discretion and retention focus .
- Governance controls: Clawback policy adopted; hedging prohibited; pledging permitted subject to controls—Audit Committee chose not to further restrict pledging, a notable departure from common best practice .
- Benchmarking/Consultants: Committee did not use an external compensation consultant or benchmarking for 2024 .
Related Party & Interlocks
- Canapi Funds I commitments: Company $17.0M; Mahan and Underwood each $1.0M (as of Dec 31, 2024 total commitments $654.1M) .
- Canapi Funds II commitments: Company $15.5M; Mahan $1.0M; Underwood $3.0M (as of Dec 31, 2024 total commitments $753.4M) .
- Company dissolved Canapi Advisors, LLC in 4Q24; no management fees or carry payable by Company on its Canapi investments .
Risk Indicators & Red Flags
- Pledging/Hypothecation: Mahan’s pledged shares and maxed line of credit materially elevate margin-call risk; Audit Committee allows pledging with oversight rather than prohibiting it .
- Perquisites optics: Significant personal aircraft use and cost allocations may attract governance scrutiny, though policy and AIC method disclosed .
- Internal control: Company disclosed a material weakness in internal control over financial reporting at year-end 2024; remediation underway .
- Say-on-Pay: 76.45% support is moderate; continued investor engagement advisable .
Compensation Committee & Governance
- Composition: Bradford, Cameron (Chair), Lucht, Petty; largely independent composition; no executive officers on the committee .
- Risk review: Committee reviews incentive arrangements for excessive risk; oversees clawback compliance; administers equity plans .
- Equity plans: 2015 Omnibus Stock Incentive Plan in effect; RSUs are principal vehicle; 2,026,522 RSUs outstanding and 41,361 options under prior plans at 12/31/24 .
Investment Implications
- Alignment and retention: CEO’s long-standing equity stake supports alignment, but extensive pledging introduces counter-alignment risk and potential selling pressure under stress; absence of a Lead Independent Director amplifies governance concern despite independent committees .
- Incentive quality: Lack of disclosed, formulaic performance metrics and reliance on time-based RSUs for others suggests retention and stability focus over pay-for-performance; clawback adoption is positive, but pledging leniency offsets governance strength .
- Execution track record: Technology-forward growth in small business lending remains intact; 2024 delivered asset, loan and deposit growth with net income improvement; TSR remained above peer group over multi-year horizon, though compressed in 2024 vs 2021 peak .
- Monitoring: Watch for any Form 4 sales or pledge-related activity, remediation progress on material weakness, and any future shifts toward metric-based incentives or adoption of stock ownership guidelines to strengthen alignment .