Wilmington’s only locally-based bank isn’t your typical community financial institution. Live Oak Bank has no tellers, no drive-through, no customer service representatives.

Instead, Live Oak makes SBA loans to professionals all over the United States. Its clients say the bank knows them and their businesses as thoroughly as if Live Oak were in their community.

In a recent study, business lending consultant MultiFunding ranked 127 FDIC-insured banks that made at least 50 SBA 7A loans in 2010. Live Oak Bank was the top bank in terms of the percentage of resources used to make SBA loans.

From the first, the bank has adhered to its unusual business model. Its original plan was to lend to veterinarians who wished to purchase, expand, remodel or refinance an existing practice, and to attract brokered deposits and offer money market accounts and certificates of deposit via Internet.

“The model has worked well beyond what we could have imagined,” said James S. (Chip) Mahan III, Live Oak’s CEO and chairman, and one of its founders. “Since we opened, we’ve made about 800 loans, for a total of about $1 billion.”

Mahan and co-founder Lee Williams had experience in small business lending and Internet banking prior to launching their venture.

The two met during the 1970s when working for Wachovia. Williams stayed with Wachovia for 20 years, while Mahan moved to Atlanta, where he was involved in small business lending, and founded Security First Network Bank and S1 Corporation.

Ultimately, Williams joined Mahan in Atlanta and in 2006 they decided to launch a new bank venture. They brought in David Lucht, who had served in senior credit positions for two Ohio banks. Lucht is now Chief Risk Officer, while Williams is involved in loan servicing.

Five years ago, the three met with N.C. Banking Commissioner Joe Smith, unveiling their vision and asking if he would support a new FDIC-insured bank with none of the usual retail attributes, whose primary mission would be to make SBA loans to veterinarians – who as a profession have an excellent record of repayment.

“Little did we know that the FDIC would not welcome us with open arms,” Mahan recalled. “The FDIC is used to a model that involves local money, local deposits, and local loans.”

The three advocated their case to the FDIC’s top leadership and were successful. Live Oak opened its doors in May 2007.

“They were very confident in their model, which proved to be a good one,” said Don Spry, regional representative for the SBA in southeast North Carolina. “What they realized is that vets pay their bills on time and have a loyal following.”

Spry added that 2009 was a critical period for the fledgling bank. But, while other banks were mired in troubled loans, Live Oak thrived, thanks to its founders’ understanding of Americans’ devotion to their pets and willingness to pay for their health care.

Wilmington veterinarian Chris Coble purchased Port City Animal Hospital from its retiring owner, thanks to an SBA loan from Live Oak Bank.

“They put together a multi-faceted loan that included the existing property, the practice, and a new building,” he said. “Live Oak had a good sense of my experience as well as the property. They take everything into account, not just the bottom line. They do a lot of research.”

Research is at the heart of Live Oak’s success. Each fiscal year, the SBA publishes a list of business categories that have the best repayment histories. Live Oak’s executives have expanded their lending based on that list, expanding first to dentists and then to independent pharmacists. The bank is poised to add funeral homes to its target markets.

“Funeral home directors are at top of the SBA list,” Williams said.

When considering a market extension, Live Oak researches the target profession and invites one or more members of that profession to join its board. Then it tackles that market nationally, supported by a staff of about 60.

“We will find other verticals over time and continue to grow our business,” Mahan said. “Because of our profitability, we are able to pay higher than usual interest rates on deposits.”

To accommodate its growth, Live Oak is breaking ground on a 32,0000-square-foot headquarters building just off Independence Boulevard near Alderman Elementary School.

“Live Oak Bank is an absolute success story,” Spry said. “It finished 2011 second in nation in terms of SBA loan volume. I’m impressed with their team. Whenever I meet with them, I always learn something.”