Bank Board Letter — November 2014
Neil Underwood

With no physical branch structure sans its Wilmington, N.C., headquarters, Live Oak Bank is not your typical community bank Ð at least not by today’s expectations. The $475 million bank has taken the concept of banker mobility to new levels of reality. Business loans are its sole focus, and Live Oak has embraced automation and the adoption of a cloud infrastructure for all of its lending (and therefore banking) activity.

The FDIC was slowing its handout of new bank charters in 2008, and Live Oak was the last granted before the agency ceased issuance that year. This thrust the then de novo into the perfect storm, a bank needing to do business efficiently or else it would never raise the capital to survive. It turned to Small Business Administration loan programs, but with a twist. Executives forged ground on a fundamentally alternative way to fulfill capital needs of the nation’s small businesses through a model that mitigates credit risk while capitalizing on technology unique to the financial services industry. The now national lender focuses on small business owners in niche industries with superior credit quality characteristics. Its vertical immersion strategy spans everything from veterinary medicine and dental practices to entertainment and agriculture.

Like many community institutions relative to its size, Live Oak once lacked a single system that connected all employees and Ð more importantly Ð brought together the different components of each customer’s relationship in a unified, comprehensive and accessible manner. In putting its business loan strategy into practice, the bank sought out a sound loan origination system that would enable effective communication and awareness into specific loans and the portfolio as a whole. The challenge was that a platform of this kind did not exist. So, Live Oak set out to build it.

When Live Oak failed to find a system to do what was needed, the nCino Bank Operating System was born of necessity and fine-tuned in a real bank environment. Cloud-based, it fuses loan origination, customer relationship management, business process management, intelligence and reporting to centralize awareness of lending performance. Though now in place at more than 50 financial institutions, Live Oak tested the Bank Operating System across all areas to really see how automating these functions Ð and connecting them to one another Ð would impact its bottom line.

Since deployment of the nCino Bank Operating System, Live Oak has risen to the rank of third-largest originator of SBA loans in the United States. Average loan processing time has been reduced from three months to six weeks. The bank’s ROE is a strong 54.22 percent and its ROA an impressive 4.02 percent.

The bank also boasts an efficiency ratio of 57.21 percent. Prior to nCino, closers used to close 40 loans each year. Now, they are able to close 60 loans on average per year.

These results are due to a lending strategy the bank does not compromise, and a belief in technology to carry out its execution. Live Oak looks differently at how information moves across the organization. In such a distributed environment, paper does not work, driving Live Oak’s movement to paperless. Today, 100 percent of its regulatory and compliance policies, accounting books, loan documents and more are electronic, online files.

Working in tandem with the financial institution’s core, nCino’s cloud-based Bank Operating System is built around the Salesforce platform to provide bankers with a centralized means to manage loan production and performance. With nCino, Live Oak employees no longer need to rekey information multiple times; it needs to be entered just once to make it securely available to multiple stakeholders and from any device with secure Internet access. Live Oak has the flexibility to configure custom document templates and workflow patterns, keeping all forms righted in the proper routing and approval procedure throughout origination. Everyone involved can see loans and communicate with each other on those loans, creating an intense degree of consistency to Live Oak’s loan approval process.

Live Oak believes in a decentralized management structure where people interoperate and make decisions in the field. Not every bank employee is concentrated in the greater Wilmington area, or even in the state of North Carolina. However, that does not stop them from collaborating on the same deals every day. They can equally understand the business so it can move a lot faster. They are spotting more qualified deals more quickly and are equipped to process borrowers, who basically span every state, better too. The bank has improved loan turn times and experienced a more than 50 percent reduction in document exceptions.

While a boost to loan activity, such visibility has boosted job performance Ð also measured on a real-time basis. Employees thrive in an environment where they are held accountable while also being able to make decisions. The culture for Live Oak Bank employees is to expose information for making decisions. Every division at Live Oak runs on a dashboard that is shared with the entire company each Monday. Marketing leads, conversions, loan operation performance Ð all shown with the names and pictures of top performers, plus those on the low end, revealed. The goal is to look for anomalies and find opportunities, always strive to see more in the data they have.

The view that Live Oak has into borrower data helps the bank forecast more accurately and cross-sell to grow wallet share. Banks can sometimes fall behind on keeping up with when loans are up for renewal, but the nCino Bank Operating System ensures 90, 60, 30 days out that its loan officers are reminded. Employees are on top of the portfolio. There are no disparate spreadsheets, but instead rigorous accountability as to the status of each loan relationship. The portfolio can be segmented by characteristics such as collateral type, debt service arrangement or borrower geography. Each loan’s financial results are available real time.

Live Oak overall has created an environment of awareness, which has directly played into its risk management and compliance objectives. Over the course of time, the bank has significantly reduced exam downgrades, most times receiving none, and has a better watch list process in play, too.

Live Oak has found a solution that takes into account the needs of each end user, helping make that employee more effective, so that essentially the top level is being rewarded at the same time as the bank’s bottom line.

Neil Underwood is president and chief operating officer of Live Oak Bank in Wilmington, N.C. Go to for more information.