Live Oak in North Carolina makes a big SBA recruiting push

There is no shortage of banks and other lenders looking to expand their Small Business Administration 7(a) lending operations.

For example, Gulf Coast Small Business Lending in Dallas plans to add five lenders this year, increasing its sales team by 50%, said President and CEO Nimi Natan. The company is the SBA unit of the $2.8 billion-asset Gulf Coast Bank & Trust in New Orleans.

Fountainhead Commercial Capital in Lake Mary, Fla., is also in expansion mode, with plans to double originations and hire more than a dozen lenders by the end of 2023, according to Chris Hurn, its founder and CEO.

“We want top lenders to know we’re coming to a city near you,” says Chip Mahan, president and CEO of Live Oak Bancshares, which recently sent letters to 700 SBA lenders at 85 banks urging them to reach the North. Carolina Society.

Meanwhile, in College Station, Texas, the $2.8 billion American Momentum Bank is pushing ahead with plans to expand its SBA division nationwide, announcing moves to St. Louis and Raleigh, North Carolina.

Live Oak Bancshares in Wilmington, North Carolina, the nation’s top SBA 7(a) lender by dollar volume, is also drawing up expansion plans — but it’s aiming higher than most of the rest of the industry .

Much higher.

Live Oak, a $9.1 billion asset, just finished emailing 700 SBA lenders at 85 banks. He plans to contact dozens more at 25 additional banks over the next two weeks, Chief Executive Officer Chip Mahan said on a conference call with analysts on Thursday.

So far, the recruiting effort has produced a pipeline of 168 lenders “in various phases” of interest, according to Mahan. While it’s hard now to say how many new hires this will produce, the move sends an unmistakable signal that Live Oak, which provided $1.3 billion in 913 7(a) loans in the first 10 months in fiscal 2022, is committed to significant growth.

By comparison, Live Oak has hired 11 SBA lenders in 2022 and a total of 85 since 2018.

“We want top lenders to know we’re coming to a city near you,” Mahan said. “If you’re an SBA lender, there’s a 100% chance you’ve heard of us. Chances are you’ve heard good things.

The 7(a) program is SBA’s largest and most flexible loan program. It offers loans of up to $5 million for working capital, debt refinancing, equipment purchases and a wide range of other activities. Under 7(a), the SBA guarantees loans made by banks and other lenders. Between Oct. 1 and July 22, the agency said it guaranteed 37,000 7(a) loans for $19.7 billion.

“We have built a scalable culture and technology platform in an industry that considers SBA loans somewhere in between. the port-o-let from banking to just a sidecar to their other small business initiatives,” Mahan said. “This is what we do.”

Mahan’s comments come as Live Oak reported second-quarter results on Thursday, including net income totaling $97 million, up more than 180% from the same period in 2021. The second-quarter results this year were bolstered by a $120.5 million gain on the sale of Live Oak’s investment in banking technology provider Finxact, which Fiserv acquired in April.

Live Oak chairman Huntley Garriott compared Finxact’s money to “a non-dilutive capital raise”.

“It allows us to manage our balance sheet, to invest in our team, our community, in our technology,” Garriott added Thursday during the conference call.

Live Oak also said it has $3.1 billion in outstanding loan deals, the largest pipeline in its history.

This step aligns with a widely held view that the current uncertain economy is an opportune time for SBA lenders to aggressively pursue expansion.

Mahan “can read tea leaves,” Fountainhead told Hurn. “If we’re heading into an economic downturn, traditional banking goes down. They are tightening the credit union tremendously.

Therefore, many lenders responded to tough economic times by shifting more of their production to SBA programs. “Every time we have a cycle like this, the SBA blows up,” Hurn said.

Live Oak issued approximately $1 billion in loans in the quarter ending June 30. Given the size of its pipeline and prevailing economic trends, Mahan and Garriott said they expect the company to meet its previously announced goal of $4 billion in lending for all. 2022.

“I think the second half of the year looks pretty solid,” Garriott said. “If we continue at this rate, we should be wrapped around that number more or less a bit.”

Whether Live Oak hits its recruiting goals may be a different story, Hurn said.

“It’s always been a bit difficult to hire people in the SBA space,” Hurn said. “Because it’s so specialized and because there’s only a few thousand people who even regularly do SBA loans…hiring has always been a challenge.”

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