The FRB issued an Order (the “Order”) approving, under Section 4 of the Bank Holding Company Act, the application of Live Oak Bancshares, Inc., a Wilmington, North Carolina based bank holding company with $342.9 million in total assets (“Live Oak”) to acquire a nonbanking company, Government Loan Solutions, Inc. of Cleveland, Ohio (“GLS”). GLS provides support services in connection with the settlement, accounting and securitization process for government-guaranteed loans, including Small Business Administration (“SBA”) loans and loans guaranteed under U.S. Department of Agriculture (“USDA”) programs.
In approving Live Oak’s application, the FRB analyzed the services provided by GLS and concluded that they all fell within the scope of five permissible nonbanking activities of bank holding companies under Regulation Y of the FRB’s regulations. Specifically, the Order states that the activities of GLS include: (1) making, acquiring, brokering or servicing loans; (2) providing appraisals of real estate and tangible and intangible property, including securities; (3) acting as an investment or financial advisor; (4) providing management consulting advice; and (5) providing data processing, data storing, data transmission, and related services. In approving the Order the FRB found that “the acquisitions of GLS by Live Oak will enhance the ability of GLS to provide its services to lenders who make SBA and USDA loans, thereby potentially expanding the availability of those services.” The FRB also noted in the Order that it had received and considered public comments that questioned whether Live Oak, as a relatively small bank holding company, had the financial and managerial capacity to supervise the activities of GLS. The FRB concluded that Live Oak has the resources, capacity, policies, procedures and controls to supervise GLS.