Bank gets big by going small.

• Position: Eastern

Chip Mahan has made his career targeting niches in the banking industry. Live Oak Banking Co., which he started in 2007, makes most of its profit selling Small Business Administration loans on the secondary market. Since the federal government guarantees 75% of the loan's value, there's less risk for the buyer. "What we realized early on with this SBA program was that if we could make really, really good loans to people who paid you back and sell off the government-guaranteed portion of that loan and keep a portion of that loan, we could leverage our balance sheet and make a lot of money." The good loans come from catering to specific occupations. Live Oak started with veterinarians but has expanded to pharmacists, dentists, funeral-home operators, financial advisers and medical-practice owners.

The bank's assets have grown 161% since 2009 to $350 million, and it registered a 4% return on assets in 2012. (U.S. banks averaged 1%.) It has one retail location, which doesn't offer checking but focuses on money-market accounts and certificates of deposit. Paperwork with SBA loans presents a challenge. "Our average loan has 148 documents by the time you get to closing," Mahan, 61, says. A technology enthusiast, he started the world's first intemet-only bank, Atlanta-based Security First Network Bank, in 1995 and moved to Wilmington 12 years ago. To reduce paperwork, Live Oak joined with San Francisco-based Salesforce.com Inc. to develop cloud-based software that tracks loans from application until they're paid off. The technology helped shave closing times 34% and evolved into a separate entity, Wilmington-based nCino LLC, which licenses the software to other banks...