Mighty oak: Wilmington-based Live Oak Bank's success relies on software that has aided its climb in a struggling industry.

• Author: Maurer, Kevin
• Position: NC BANKING

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Glance at Neil Underwood's resume, and he seems like an iconoclastic choice to run a thriving North Carolina-based bank. His background as an engineer and experience in sales wouldn't seem to lend themselves to leading the nation's second-largest originator of U.S. Small Business Administration loans.

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But Live Oak isn't a traditional bank. It has no branches, no tellers or ATMs, instead focusing almost entirely on SBA lending. Agency data identifies which of the SBA's 1,100 eligible industries are the most attractive and likely to need loans, prompting the Wilmington-based bank to pursue 11 distinct sectors, one pharmacist, chicken farmer or funeral-home director at a time.

"We're a software company that lends money," Neil Underwood says. "We are indeed a regulated bank. But we don't always have to think that way."

Or look the part, either. Set in the pines east of downtown, the headquarters looks more like a cabin in the woods, overlooking wetlands where Venus' flytraps grow. Bank employees can bring their dogs to work and wear flip-flops to the office. Wilmington's only publicly traded company, Live Oak saw its loan originations soar from $256 million in 2010 to more than $1.1 billion last year, without any dilutive acquisitions. While shares have declined slightly since Live Oak's initial public offering last July, the company's market value in mid-May topped $530 million, or about 35% greater than some North Carolina-based community banks that are triple its size.

It isn't surprising that Live Oak is an innovator, given co-founder Chip Mahan's history. In 1995, he started Security First Network Bank, the first U.S. bank to operate solely through the Internet. It took deposits online, eschewing traditional bank branches. At the same time, he created an affiliated software company, later called SI Corp.

Security First was an idea ahead of its time, but it never really caught on. Royal Bank of Canada bought the Atlanta-based company for $20 million in 1998 as the Canadian bank was expanding in the United States. SI proved to be much more successful, spinning off as an independent company at the time of the Security First sale. It operated independently, including several years as a public company, until it was acquired for more than $500 million in 2012 by New York-based payments processor ACI Worldwide Inc.

Mahan and co-founder Lee Williams were living in Wilmington when they started Live Oak...