Durham's Square 1 Bank targets IPO

dranii@newsobserver.comJanuary 6, 2014 

Square 1 Bank, a Durham-based financial institution that caters to entrepreneurial companies that aspire to one day go public, is itself planning an initial public offering of stock.

The bank’s corporate parent, Square 1 Financial, hopes to raise up to $57.5 million with an IPO, according to documents filed Monday with the Securities and Exchange Commission.

Square 1 is a nationwide bank with 10 offices scattered from New York City to San Diego. But it has a relatively small footprint locally that is confined to its headquarters in downtown Durham’s American Tobacco Campus.

Square 1 had 226 employees as of Sept. 30 and $2.37 billion in total assets as of Nov. 30, up from $1.8 billion a year earlier.

It provides a broad range of financial services to venture capital and private equity firms and the businesses that they invest in. Its primary focus in the entrepreneurial arena is technology and life science companies.

During the first 11 months of 2013, Square 1 posted net income of $19.3 million, up 54 percent. The increase was due to a 13 percent hike in net interest income and a 62 percent jump in noninterest income. Those upside numbers were partially offset by a increase of $3.1 million, or 36 percent, in its loan loss provision.

Last week, Square 1 expanded into accounts receivable financing by paying $12.4 million for most of the assets of Sand Hill Finance, a Silicon Valley company with seven employees. In accounts-receivable financing, a business uses its receivables, or money that’s owed by its customers, as collateral for a loan.

Square 1 is the third Triangle company to unveil plans to go public in the past three weeks. Last week drug-development company Argos Therapeutics filed plans to raise up to $60 million by going public, and the week before NephroGenex, which is developing a treatment for kidney disease, reported it intends to raise up to $46 million from an IPO.

Last year was a landmark year for Triangle companies going public. Seven local companies, the most in recent memory, successfully raised anywhere from tens of millions of dollars to hundreds of millions of dollars via an IPO.

Square 1 hasn’t yet provided details on how many shares it plans to sell or at what price. Nor has it yet specified what size ownership stake would be sold to investors through its IPO.

Bank spokeswoman Dee McDougal declined to comment, citing SEC regulations that limit what companies can say once they file for an IPO.

The bank was founded in 2005 by a group of bankers led by the late Richard Casey, who served as CEO until his death in 2011, and his wife, Susan Casey. Susan Casey is a former executive of the bank and remains on its board of directors.

Today the bank’s CEO is Douglas Bowers, who previously spent more than 25 years at Bank of America. Bowers received $798,047 in total compensation in 2013, including $500,000 in salary.

Square 1 raised $105 million from investors before opening its doors in 2005 and since then has raised an additional $79.1 million.

If Square 1 succeeds in going public — which depends both on convincing Wall Street that it’s a good investment and the overall health of the public markets – it plans to use the funds to enhance its capital position in light of tighter regulatory standards known as Basel III. It also plans to use the money to make larger loans than it has in the past.

The bank cautions in the “risk factors” section of its IPO filing, which is required by the SEC, that its level of nonperforming loans and charge-offs can be volatile because it loans money to companies “with modest or negative cash flows and no established record of profitable operations.”

The company is seeking to have its stock traded on the Nasdaq exchange under the symbol “SQBK.”

Ranii: 919-829-4877

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