Inside America’s Top Small Business Bank

Key Concepts:

• Small Business Administration (SBA) 7A Loans
• Fintech
• Industry Vertical Specialization
• Online Banking
• Loan Officer Compensation (Non-Commissioned)
• Technology-Driven Lending

Live Oak Bank: America's Top Small Business Bank

• Main Point: Live Oak Bank, a small, branchless bank in Wilmington, NC, is the leading issuer of SBA 7A loans in the US, surpassing major Wall Street banks.
• Background: Founded in 2008, Live Oak Bank has $14 billion in assets, a $1.5 billion market capitalization, and 1,053 employees.
• SBA 7A Loans: Since 2017, Live Oak has issued $15.4 billion in government-backed 7A loans. The 7A program is the SBA's flagship offering for small businesses that may not qualify for conventional credit.
• Loan Volume: Live Oak's average loan is $1 million, and it does around $2 billion a year in SBA loans, plus another $3 billion in conventional small business loans.

Live Oak's Unique Approach

• Culture and Environment: The bank's 85-acre campus resembles a Silicon Valley startup with cypress siding, exposed wooden beams, a full gym, and a health clinic.
• Branchless Model: Live Oak has no branches; all deposits are online.
• Technology Focus: Live Oak leverages technology through its fintech venture arm, Live Oak Ventures.
• Enino Spinoff: Live Oak spun out Enino, a cloud-based banking software firm with a $3.4 billion market capitalization.
• Faster Loan Approvals: Technology helps Live Oak approve loans faster.
• Non-Commissioned Loan Officers: Loan officers don't earn commissions to avoid conflicts between sales and credit.

Industry Vertical Specialization

• Focus: Live Oak specializes in 35 industry verticals, including home healthcare, funeral homes, and auto repair.
• Origins: The bank started by lending to veterinarians because CEO Chip Mahan's stepfather is an equine vet.
• Domain Expertise: Ryan Cave, a business broker at Sunbelt Business Brokers of South Florida, notes that Live Oak stands out for pairing domain expertise with practical dealmaking.
• Problem Solvers: Cave states, "They're not box checkers, they're problem solvers."

Chip Mahan's History and Vision

• Security First Network Bank: Mahan co-founded the world's first online bank, Atlanta-based Security First Network Bank, in 1995.
• Online Banking Services: The bank offered online bill pay, basic banking, and stock trading through a dial-up connection.
• Acquisition and Spinoff: Security First Network Bank was sold to Royal Bank of Canada in 1998 for $20 million. Its software unit, S1 Corporation, was acquired by ACI Worldwide in 2011 for $520 million in cash and stock.
• Playbook: Mahan's playbook is to use technology to rethink old banking models.

Synthesis/Conclusion:

Live Oak Bank's success as the top SBA 7A lender stems from its unique combination of technology-driven lending, industry vertical specialization, a branchless model, and a culture that prioritizes problem-solving over traditional banking practices. Chip Mahan's vision of leveraging technology to disrupt traditional banking models has been instrumental in the bank's growth and success.