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July 31, 2015 at 06:56 AM
“The capital we raised will allow us to do more of what we already do, continuing to grow within the verticals in which we lend,” said Brett Caines, CFO of Live Oak Bancshares Inc., referring to the bank’s initial public offering of 4.8 million shares of common stock on Nasdaq, which closed July 28 under the symbol LOB. The IPO had an original offering price for its stock of $17, and Caines said “we opened at $18.50 and were at $21 yesterday.”
So where was the stock on Thursday, when the interview took place? Caines said he didn’t know, not having checked. “We’re going to keep running the business the way we’ve been running it,” he said, without being distracted by the daily fluctuations of the company’s stock. (Today, Live Oak announced that its IPO underwriters exercised in full their option to purchase an additional 700,000 shares of common stock.)
One of Live Oak’s key verticals is investment advisors, and Jason Carroll, managing director and senior loan officer for IA lending at Live Oak, reported in the same interview that the bank had just passed the $200 million mark in loans made to advisors. About 60% to 65% of that $200 million, said Carroll, formerly of Schwab, is for advisor acquisition or succession deals.
Caines said that in the beginning of 2014 “we toyed with the idea then of going public,” but decided then to go in another direction, raising some private capital. By the end of the year, he said the “capital markets were really good for banks, so it seemed like a good time to raise capital.” The goal, he said, was “expanding into new directions—monetizing some opportunities that we saw.” Caines said “we like to say we enable small businesses to get the benefits they need to achieve their deals.”
Live Oak is based in Wilmington, North Carolina, and led by executives experienced in both commercial banking but also, critically, in small-business lending with the backing of the federal Small Business Administration. “We research and find industries” with operators who have “good credit characteristics,” Caines said, but in whom other banks are not interested.
“What sets us apart from traditional banks,” Caines said, is that “they try to be everything to everyone, but when a small-business owner talks to a bank [the owner] spends so much time educating the bank about their business. When you talk to us, you talk to somebody who knows your business already” while also having expertise in the SBA loan process.
The first of those businesses was veterinarians, followed by pharmacists, funeral home operators and then investment advisors and other small-business owners. Since launching its advisor vertical, the firm has also begun lending to craft brewers. What all those verticals have in common is that they have strong cash flows but not the traditional collateral that traditional lenders require.
