Coastal residents know about live oaks: they are slow growing but, over time, produce a magnificent canopy.
Wilmington’s own Live Oak has grown much faster than its namesake. It sprouted in 2008 as a bank focused on making SBA loans within select industries and has spread its lending programs as well as its deposit products. Ten years in, its parent, Live Oak Bancshares, is involved in joint ventures and recently launched Canapi, an entity that invests in and partners with early-stage financial technology companies.
From the start, Live Oak aimed to be different from other banks, according to its chairman and CEO, James “Chip” Mahan. It was to be a financial institution with its roots planted firmly in Wilmington, its sole physical location, but with a technology platform and software program that would enable it to streamline small business lending nationwide.
Mahan is the keynote speaker for the 10th anniversary Coastal Entrepreneur Awards, to be held May 23 at the University of North Carolina Wilmington's Burney Center.
Today, Live Oak Bank makes SBA and USDA loans to businesses in 20 industries, and monitors those borrowers to ensure that they are getting the most from that capital. The company owns three private jets that fly bank personnel to customers and partners wherever they are located.
Today’s Live Oak campus consists of two fully occupied buildings, with a third building and a parking deck under construction. As many as 60 Live Oak employees work at the company’s old quarters in the Irongate complex on Shipyard Boulevard.
“Plans are drawn up for up to eight buildings on the Live Oak site,” said Neil Underwood, president of Live Oak Bancshares. He envisions the campus becoming a fertile destination for a variety of financial technology companies, especially those in which Canapi invests. In fact, Canapi will strongly encourage ventures in which it has an interest to move their headquarters to – or at least establish a presence in – Wilmington, according to Underwood.
Mahan sees Apiture, Live Oak Bancshares’ joint venture company with First Data, eventually moving from its downtown Wilmington offices to the campus as well. He predicts that Apiture, which got up and running early in 2018 and now employs about 50, will almost triple in workforce size.
Live Oak Bank, itself, is on an upward trajectory. Its recent first-quarter earnings report showed steady year-over-year growth.
What accounts for the growth?
First, says Mahan, there is plenty of opportunity, although more and more banks are getting into the small business lending business. He points to Live Oak’s streamlined operations system and its way of approaching each new industry. Before lending in a new field, Live Oak identifies a domain expert, who works with the bank’s team assigned to that industry.
Live Oak’s initial lending foray was veterinarians – an industry with which founding officials had some familiarity. Vets as a group also had a very good track record for repaying loans. Degree of risk was a factor as the bank began adding new verticals. Live Oak continues to consider risk carefully but its domain expert model helps the bank minimize risk within each new industry.
“We take a little more risk,” Mahan said. “There are 1,100 industries you can lend to, with SBA loans and non-SBA loans.
“As long as we stay away from bureaucracy and playing politics . . . I think our business can scale to $100 billion easily,” he said. “I think we can be a $100 billion bank over a meaningful period of time and not dilute value (for shareholders) and maintain our accountability.”
Another way that Live Oak manages its risk is by staying very close to its borrowers. Although the bulk of the SBA or USDA loan is sold to another entity, Live Oak continues to service the loans it makes, and it monitors those loans closely, offering advice to borrowers along the way.
This degree of scrutiny is made possible by use of the technology it developed and spun off into nCino, which continues to hone this Bank Operating System and is expanding it to increasingly large and complex financial institutions in the U.S. and abroad.
Underwood believes that LOB’s platform is much better than that being offered by traditional so-called core processors, which provide the behind-the-scenes technology that processes all deposits, payments, loans, most bank transactions and customer data.
“The core operating systems on which [most financial institutions] sit are 30-plus years old,” he said, explaining that banks continue to add technology-based products and services onto platforms that are not adequate to support them.
“Think of the innovation that’s happened in the last five years. Our vision is to provide a new foundation,” Underwood said. “We have better software, newer technology and lower costs.”
A further key to Live Oak’s growth is its culture, according to Mahan. He and other members of Live Oak Bank’s start-up team came to Wilmington because they wanted to live here. They believe they are successfully selling the Wilmington lifestyle, along with an entrepreneurial workplace, to the company’s recruits, and thus far, retention is good.
“It takes more energy to recruit [employees] from elsewhere, but once they are here, they are hooked,” Underwood said.
Mahan thinks back to the 10-plus years he worked in banking technology in Atlanta prior to moving here.
“I had a ringside seat,” he said.
“The tech culture, whether in Boston, New York or Silicon Valley is: ‘I’m smarter than you.’ ‘What’s in it for me?’ People stay in one place for about two years, get their stock options reloaded and then go off and do more cool stuff.
“Live Oak Bank and nCino are five to 10 times better than any companies you’re thinking about. Think about our companies. We emphasize love and trust. Live Oak is a fun place to work; there are great opportunities, and we give back to the community. If you love and trust, you are going to give it everything you’ve got and the customer is going to love you.
“When you put your head on the pillow at night, think: did you do everything you could to treat your customer right, or did you get lazy? Here it’s hard to hide, because the team is counting on you. What we do is not hard; it just takes effort. And we try to drive ownership [by employees] through a variety of initiatives.”
Mahan loves what he does, and he talks about what trust means in the Live Oak workplace.
“One of the greatest things I say is ‘I stand corrected.’ We look for diverse sets of skills, and then set [employees] free to succeed. Hopefully, that is the kind of organization we will continue to run.”