“Mighty oaks from little acorns grow” – so goes the proverb. At Live Oak Bank, a small idea has taken root and is rapidly sprouting into a profitable, independent enterprise.

That enterprise is nCino, Live Oak’s software spinoff in Wilmington that is finding a receptive market and enthusiastic response from customers all over the country, according to Neil Underwood, Live Oak’s president and chief operating officer, who helped design the software and start the new company with James (Chip) Mahan, Live Oak Bank chairman.

The software was born of necessity a couple of years ago, as the young Live Oak – founded in 2007 -- sought to streamline its lending performance. The Wilmington-based bank makes SBA loans to veterinarians, dentists, independent pharmacists and funeral directors nationwide, and found the logistics of shuffling paper, or even electronic documents, among involved parties to be unwieldy and time-consuming. After two years of rapid growth, Live Oak executives saw that their operations were drowning in paper that had to be shared with far-flung clients and their agents. Even within their own building, Live Oak employees spent valuable time going desk-to-desk to check on the status of loans.

Live Oak officials looked at existing back-office software and found nothing that effectively addressed their needs, so they set about creating their own system. Using the Force.com platform of Salesforce.com, Live Oak bankers drew upon their knowledge of banking in general, Live Oak’s needs in particular, and their experience in the field of Internet banking, to design a platform that would accomplish their goals.

Key to the success of the endeavor was that Mahan, at the helm, had both extensive banking knowledge and cutting-edge technology expertise. Before moving to Wilmington and helping launch Live Oak Bank, he was a founder of First Network Bank, the first Internet bank, and had started S1 Corp. S1, which builds and deploys online banking, payments and mobile solutions applications.  In its first six years, under Mahan’s leadership, Atlanta-based S1 grew to $234 million in revenues. Its customer base of financial institutions now numbers more than 3,000 worldwide.

“The combination of experience in banking and technology gives you unique insights about what’s new and what’s next,” said Chris Worel, a veteran banker who is now nCino’s managing director and domain expert. “If you looked around, I don’t think you would find any other individual [other than Mahan] who would have this combination.”

Mahan was also key in bringing Underwood from S1 Corp., where he was general manager, to Live Oak in April 2010, shortly after the bank implemented its new software.

nCino tracks a loan through its entire life cycle. For Live Oak Bank, that means that the program starts when a lead comes in the door and ends when the loan is paid off, about nine years later. According to Underwood, the cloud-based system forces users to file documents in the right locations and makes it easy for busy loan professionals to do so.

Because its data is stored remotely, those involved at each stage of the loan have access to the system during their particular stage.

“nCino consolidates various data books. You can look at risk with greater transparency and work with the loan through its end,” Underwood said. “An analogy might be Facebook, where people put digital versions of themselves online. The nCino loan wall is like a Facebook wall: people can interact as appropriate for that life phase. It’s all virtual, easy to transport, and you can see the loan history.”

Since the successful implementation of the software and subsequent shedding of paper-based processes at Live Oak, other lending institutions have taken note. When he and Mahan are on the road, Underwood said, banking conversations inevitably turn to just how the software has improved the efficiency and profits of its creator bank.

Responding to growing interest in the lending industry, the Live Oak team refined the software so that it could serve other lending institutions. Over the last few months, they formed a separate company, raised roughly $3.5 million at the start of 2012, and brought in Pierre Naudé from S1 Corp., where he had many years’ experience in retail banking software. They named the new company Encino – Spanish for live oak – but changed the spelling when they learned that the Encino domain name was taken.

According to Underwood, nCino has six clients now, and the company is hopeful that the client list will grow to 10 by the end of Q2 of 2012.

Naudé is building nCino’s team, which includes Jonathan Rowe, formerly director of UNC Wilmington’s Entrepreneurship Center. Rowe is in charge of marketing for the fast-growing sapling.

“Our target market is the traditional community banking market: banks and credit unions with assets between $1 billion and $10 billion,” Naudé said. “This is a market size of roughly 1,500 banks and credit unions in the United States. We are evaluating a strategy to make this software available to large financial institutions as well.”

To market the software, nCino is using a blend of direct sales and channel partnerships, said Naudé. “The nCino system is built upon the Salesforce.com platform; we have developed a strong partnership with Salesforce.com that has led to further sales and marketing opportunities. This has coincided with the growth of our sales team and our marketing efforts, which will involved targeted banking conferences, establishing our image as the inventor of cloud banking, and creating case studies on how our existing bank clients have benefited and prospered with the nCino system.”

“The adoption process is easy; it makes the user’s day easier,” Worel said. “Many banks still push around enormous files. nCino cuts the loan cycle time by a third, leading to happy clients and lower costs.”

According to Worel, nCino doesn’t just expedite the lending process and make it more transparent: it also has the potential to transform the banking regulatory process.

“When you think of how regulators interact with banks, they come into the bank, look at files and write reports. With this software, this will change, I think,” he said. “The regulators will no longer need to come on site; they can do spot updates. nCino can let the bank preset reports to be sent to the regulators, draw out data to be sent to them on a schedule. It’s a totally different regulatory relationship.”

“In five years, we expect to be credited with having invented cloud-based banking and transformed the way in which banks operate  -- in a more efficient, effective, and financially sound way,” Naudé said. “We expect to have established a powerful presence and market share in the banking industry as a de facto standard for how banks are managed and run.”

“We also expect,” he added, “to become a system that allows banks and regulators to avoid financial meltdowns by enabling financial problems to be identified and addressed before they happen.”