S-1/A

Title of each class of

securities to be registered

Amount

to be

registered⁽¹⁾

Proposed

maximum

Aggregate

offering price⁽²⁾

Amount of
registration fee

Class A Common Stock, $0.01 par value

$119,048,892

$15,334⁽³⁾

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

This prospectus relates to the initial public offering of Square 1 Financial’s Class A common stock. We are offering 3,125,000 shares of our Class A common stock. The selling shareholders identified in this prospectus are offering 2,306,126 shares of our Class A common stock and 450,000 shares of our Class B common stock, which will convert into 450,000 shares of Class A common stock upon sale in this offering. We will not receive any proceeds from sales by the selling shareholders. References in this prospectus to “common stock” refer to Square 1 Financial’s Class A common stock unless we state otherwise or the context otherwise requires.

Prior to this offering, there has been no established public market for our common stock. We currently estimate the public offering price per share of our common stock will be between $15.00 and $17.00. We have applied to have our common stock listed on the Nasdaq Global Market under the symbol “SQBK.”

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.

See “Risk Factors,” beginning on page 14, for a discussion of certain risks that you should consider before making an investment decision to purchase our common stock.

The underwriters have an option to purchase up to an additional 882,167 shares of our common stock at the initial public offering price less the underwriting discount, within 30 days from the date of this prospectus. Of the 882,167 shares subject to the underwriters’ option, 468,750 shares will be offered by us and 413,417 shares will be offered by the selling shareholders.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The shares of our common stock that you purchase in this offering will not be savings accounts, deposits or other obligations of any of our bank or non-bank subsidiaries and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

The underwriters expect to deliver the shares to purchasers on or about [·], 2014, subject to customary closing conditions.

You should rely only on the information contained in or incorporated by reference in this prospectus or in any free writing prospectus that we may authorize to be delivered and made available to you. We, the selling shareholders and the underwriters have not authorized anyone to provide you with additional or inconsistent information. If anyone provides you with different or inconsistent information, you should not rely on it. We and the selling shareholders are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where those offers and sales are permitted.

This prospectus describes the specific details regarding this offering and the terms and conditions of the common stock being offered hereby and the risks of investing in our common stock. You should read this prospectus, any free writing prospectus and the additional information about us described in the section entitled “Where You Can Find Additional Information” before making your investment decision.

Neither we, nor any of our officers, directors, agents or representatives or any of the selling shareholders or underwriters, make any representation to you about the legality of an investment in our common stock. You should not interpret the contents of this prospectus or any free writing prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.

As a company with less than $1.0 billion in revenues during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company,

We have elected in this prospectus to take advantage of scaled disclosure relating only to executive compensation arrangements. We do not intend to take advantage of any other scaled disclosure or relief during the time that we qualify as an emerging growth company, although the JOBS Act would permit us to do so.

In addition to scaled disclosure and the other relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. However, we have elected not to take advantage of this extended transition period, which means that the financial statements included in this prospectus, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.

PROSPECTUS SUMMARY

This summary highlights selected information contained in this prospectus and may not contain all of the information that you need to consider in making your investment decision. To understand this offering fully, you should carefully read this summary together with the more detailed information contained in this prospectus. You should carefully consider the section titled “Risk Factors” in this prospectus and our consolidated financial statements. Unless we state otherwise or the context otherwise requires, references in this prospectus to “Square 1,” “we,” “our,” and “us” refer to Square 1 Financial, Inc., a Delaware corporation, and its consolidated subsidiaries. References in this prospectus to “the Bank” means Square 1 Bank, the wholly-owned banking subsidiary of Square 1 Financial.

Overview

About us. We are a financial services company headquartered in the greater Research Triangle Park area of North Carolina and became the bank holding company for Square 1 Bank, a de novo North Carolina commercial bank, in August 2005 upon the commencement of Square 1 Bank’s operations. Through Square 1 Bank, which was formed by experienced venture bankers, commercial bankers and entrepreneurs, we focus our banking activities almost exclusively on venture capital firms and private equity firms (which we collectively refer to as “venture firms”) and the portfolio companies funded by such firms. Square 1 Bank provides a broad range of financial services nationwide to these investors and their portfolio companies, including, among others, term commercial loans, revolving lines of credit, asset-based loans, deposit products and fee-based banking services, including credit cards, foreign exchange, cash management and letters of credit. We refer to the market in which we operate as the “venture banking market” and our bankers as “venture bankers.” Among entrepreneurial companies, our primary focus is on venture-backed technology and life sciences companies, nationwide. Our strong relationships and extensive experience in the entrepreneurial community have allowed us to follow these and other companies across their stages of development, resulting in a diversified borrower and depositor customer base. We marked our eight year anniversary in August 2013 and, shortly thereafter, exceeded $1.0 billion in loans outstanding. As of December 31, 2013, we had total assets of $2.3 billion, total loans outstanding of $1.1 billion, total deposits of $2.1 billion, and shareholders’ equity of $189.1 million.

Venture firms are a key referral source for new entrepreneurial company relationships for Square 1 Bank. However, we have no arrangements or understandings with any venture firm relating to lending money to their portfolio companies. We target our business development and marketing strategy primarily on entrepreneurs, venture-backed entrepreneurial companies and venture firms. The terms of the credit facilities we provide to our clients vary by type of loan product, loan size and growth stage of the client and underlying collateral. We provide commercial term loans and lines of credit to venture-backed companies primarily in the technology and life sciences sectors, with loan terms of between 12 and 48 months. These loans are typically made to companies in all stages of a typical start-up company’s lifecycle. Loans originated by our asset-based lending group are typically structured as revolving lines of credit and advances are based on a formula tied to accounts receivable or other assets of the borrowers. Our asset-based loans are typically made to expansion and late stage companies. The primary source of repayment for asset-based loans is typically operating cash flow of the client. We also provide real estate secured, government-guaranteed loans through the Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) programs, with maturities of 20 years or more, and construction loans, which convert into real estate SBA and USDA loans upon completion of construction, the terms of which are generally 12 months or less. In certain cases, we sell the guaranteed portion of SBA loans originated by us on the secondary SBA market, which serves to reduce the amount of our outstanding loan balances and results in a gain on sale as well as fee income for us.

We provide senior debt facilities to our borrowers that are secured by substantially all of the assets of the borrower client. In some instances, we also obtain the guarantee of the venture firm that provided venture capital to our borrower client or, in the case of a borrower that has not received venture capital funding, a guarantee of individuals associated with the borrower. For early stage companies, the primary source of repayment is typically cash collateral held in accounts with us. At December 31, 2013, with the exception of several credit card loans, all of the loans in our portfolio were secured loans.

In connection with the negotiation of credit facilities with our portfolio company borrowers, we often receive warrants to acquire stock of the borrower, primarily those that are privately-held, venture-backed companies in the life sciences and technology industries, but do not otherwise make equity investments in our portfolio company clients.

Our market. According to the PricewaterhouseCoopers/National Venture Capital Association MoneyTree^™ Report (“MoneyTree^™ Report”), in 2013 venture capital investment in the U.S. totaled approximately $29.4 billion invested across 3,995 venture investment rounds. In the past four years, in a given quarter, based on the MoneyTree^™ Report, there are generally as few as approximately 675 and as many as approximately 1,075 venture investment rounds completed, totaling between $5.0 billion to $8.0 billion across the U.S. While approximately one-third of these investments will be first-time financings for companies, overall these investments span the life stages of a company from angel/seed to late stage of the company, at which point the venture capital backer typically exits its investment through an acquisition or the sale of its investment in connection with an initial public offering of the company. This cycle of venture investment and company maturation results in these companies needing tailored venture banking products and services for many years. This market and the short-term nature of our loan facilities provide a steady flow of banking needs, since we work very closely with both the entrepreneurial company and its venture firm investors to provide debt financing and cash management solutions for each stage of the company’s growth.

Balance Sheet Strength

Banking the venture capital community provides a steady stream of funding, including low-cost deposits. In addition, venture-backed companies, as well as venture firms, typically have large fluctuations in cash flow. We have developed a mix of on- and off-balance sheet client funds and cash management products to accommodate their financial needs, while prudently managing our capital. Venture-backed companies tend to receive large cash infusions from each round of equity financing, which they must hold in a liquid vehicle that allows them to access funds for operating purposes as they implement their business models. As a result, many of our customers hold large cash balances in deposit accounts and off-balance sheet cash management products with us. At December 31, 2013, 65.6% of our client funds came from our borrower clients. Client funds consist of on-balance sheet deposits and off-balance sheet client investment funds. Venture firms also often have excess cash after a capital call or sale of a portfolio company, and require access to a short-term, liquid investment vehicle for these funds. These firms need liquidity for these funds as well as desire to earn a yield, so they often utilize a combination of demand deposits, money market accounts and certain other short-term, highly liquid products we offer. Our average cost of deposits for the year ended December 31, 2013 was 0.04% on an average balance of deposits of $1.9 billion. These low-cost deposits are our primary source of funding and provide us with a significant competitive advantage. They also provide us with more than sufficient funds to satisfy the lending needs of our clients. This funding leverage can be seen in our relatively low loan-to-deposit ratio, which was 49.1% for the year ended December 31, 2013 as well as off-balance sheet deposits, which were $557.9 million at December 31, 2013.

In addition to our funding advantages from our low-cost deposits, 92.7% of our loan portfolio is comprised of floating-rate loans, which provides us with automatic re-pricing of those loans as the interest rate environment changes.

A Specialized Market Demands Specialized Capabilities

Lending to a venture-backed company, particularly in the early and expansion stages of its corporate life cycle, presents challenges to a typical commercial bank lender. For example, early stage clients are in the process of developing their products and often lack revenue and operating cash flow. Expansion stage clients have begun to commercialize their products and generate revenue, but may not have achieved profitability. At December 31, 2013, 13.4% of our loans outstanding were represented by loans to early stage companies, 54.3% to expansion stage companies, and 13.2% to late stage companies. The remainder of our loan portfolio at that date was comprised of loans to venture firms, credit cards and SBA/USDA loans. Lending to companies without revenue or established products requires frequent monitoring as well as knowledgeable and experienced venture bankers who can assist our borrowers. Managing these risks, therefore, requires specialized expertise and controls that cannot be acquired with a simple addition to staff. Our controls include, among other things, the review of monthly financial statements and close monitoring of non-traditional measures such as investor reserves, the company’s cash burn rate, and its performance against non-financial business metrics and milestones. We perform frequent company updates with management and engage venture firms quarterly or more frequently on each portfolio company’s performance and its next anticipated equity event. Our team of experienced bankers and risk managers who are knowledgeable about the industry, and our organizational structure, are dedicated to evaluating and monitoring entrepreneurial companies and their venture capital backers. As a result, we believe the controls and procedures we have in place have enabled us to manage this risk effectively.

We believe that entrepreneurial companies and venture firms welcome choice when selecting a banking partner. Despite the attractiveness of this market, the need for experienced bankers who specialize in lending to venture-backed companies has limited the number of financial institutions and specialty lending companies serving this market. From inception, we have believed there is a significant market opportunity for a high-quality and nimble alternative to Silicon Valley Bank, the only other commercial bank that focuses primarily on, and has the largest share of, the venture banking market on which we focus. Given the industry in which we operate, we believe this market is generally underserved and, therefore, it provides us with an opportunity to continue our strong growth and profitability. While there are other banks that will provide deposit and lending services to entrepreneurial companies, most of these banks do not specialize in lending and deposit/cash services tailored to the specific needs of these types of entrepreneurial companies. There are also specialty venture debt funds that provide loans to such companies, but do not accept deposits or provide other traditional fee-based banking services to such companies. We are still a young company, having only been in existence since August 2005, but believe that we have penetrated the venture banking market in all of the key entrepreneurial hubs in the United States. We have continued to add venture bankers and client managers in key markets, particularly during the last three years, adding over 15 bankers and client managers in Silicon Valley, Boston, New York and the West Coast. These key hires have allowed us to further penetrate markets in which we believe there is significant opportunity for us to grow, and they complement our consistently strong presence in other markets such as the mid-Atlantic, Southeast, Texas and Colorado. We, therefore, believe that our position as the only other “pure play” commercial bank serving the venture banking market provides substantial opportunity for us to continue our successful growth.

Our History and Growth

Square 1 Bank was founded in 2005 by a group of venture and commercial bankers, led by Richard Casey and Susan Casey. The founding team collectively had many decades of experience in banking entrepreneurial companies and venture firms. Since inception, Square 1 Bank has experienced significant success across the following areas:

Capital-Raising:

•

August 2005—Chartered with an initial capitalization of $105.0 million raised through a private placement of common stock to the management team and Board of Directors of Square 1 Bank, members of the venture community and institutional investors.

•

September and December 2008—$7.4 million raised through a private placement of trust preferred securities to members of management, the Board of Directors and other existing shareholders and an additional $5.0 million raised through a private placement of preferred stock to a private equity fund.

•

May 2010—$48.5 million raised through a private placement of common stock primarily to institutional investors to support growth and bolster capital.

•

October—December 2012 – $23.2 million raised through a private placement of common stock to continue Square 1 Bank’s focus on organic growth and it strategic initiatives.

Net Income and Net Operating Income⁽¹⁾

•

As shown in the chart below, our net operating income has grown steadily, particularly in the last three years. We incurred a loss in 2010 resulting from the sale and impairment of non-agency mortgage-backed securities held in our investment portfolio.

LOGO

(1)	Net Operating Income is a non-GAAP financial measure. See “Selected Historical Consolidated Financial Information—Non-GAAP Financial Measures.”

Deposit Growth

•

We exceeded approximately $1.0 billion in deposits at Square 1 Bank in July 2008, (amounting to $1.1 billion as of July 31, 2008), solely through organic growth. Low-cost deposits have been, and we expect will continue to be, our primary source of funding.

•

65.5% of our deposits were held in noninterest-bearing demand deposit accounts as of December 31, 2013. Our average cost of deposits for the year ended December 31, 2013 was 0.04%. This deposit mix may shift over time as interest rates move up or down.

LOGO

Loan Growth

The chart below sets forth the average balance of loans outstanding for each period presented.

•

At December 31, 2013 we had $1.1 billion in loans outstanding, with $977.3 million in outstanding unfunded loan commitments.

LOGO

(1)	Net of unearned income.

Our Strengths

We believe that we are well-positioned to create value for our shareholders, particularly as a result of the following strengths:

Experienced and knowledgeable entrepreneurs serving entrepreneurs

Our banking team and culture. Square 1 Bank was founded by a group of venture bankers, with collectively, decades of experience in lending to entrepreneurial companies and venture firms. From the outset, we sought to operate in a manner different from larger banks, and recruited experienced bankers who are driven by an entrepreneur’s motivation to serve our market in a manner that is quick and responsive, flexible, accessible and provides “high touch,” personalized service. These founding goals, coupled with a very strong credit culture, have resulted today in a team of over 60 venture bankers and client managers with extensive relationships throughout the entrepreneurial and venture capital community and dedicated to the industry we serve.

Our executive management team. Douglas H. Bowers, President and Chief Executive Officer, has more than 30 years of commercial banking experience. Judith Erwin, our Executive Vice President, Venture Capital Services and Global Treasury Management, and Christopher Woolley, our Executive Vice President, Banking West, are both founders of Square 1 Bank. Sam Bhaumik is our Executive Vice President, Banking Silicon Valley. Each of these three executive officers has an average of more than 25 years of experience working with entrepreneurs and the venture capital community. Ms. Erwin and Mr. Woolley previously worked together in venture banking at the former Imperial Bank and its successor, Comerica Bank. Mr. Bhaumik brings decades of experience in our market having served in a senior position at a specialty finance company focused on venture-backed technology companies and prior to that in senior positions at Imperial Bank, its successor Comerica Bank, and Silicon Valley Bank. Our Chief Credit Officer, Diane Earle, has more than 27 years of experience in commercial lending and risk management. Ms. Earle spent several years at a venture debt fund, as well as at GE Commercial Finance where she served in senior leadership roles in the credit risk management area, focused on the technology and life sciences industries.

Our Board of Directors. Our Board of Directors includes former venture bankers and commercial bankers, representatives of private equity funds and venture capital firms, and a former banking regulator. Several of our founders who serve on our Board of Directors previously worked together in various high-level executive positions at Imperial Bank, and collectively bring decades of experience in lending to the entrepreneurial and venture capital community and in senior management and/or Boards of Directors roles in this market.

Our relationships. A key component of our strategy is to leverage our strong relationships with venture and private equity firms that invest in, and support, our borrowing clients. From these relationships we gain deep insight into the operations and performance of our clients. These venture firms provide experienced institutional oversight over the portfolio companies to which we lend and are a significant driver in our decision to provide banking services to those companies. The ongoing support provided by these firms to the portfolio companies is also a significant factor in our underwriting decisions with respect to our borrowing clients.

Risk Management

Loan portfolio. We understand the risk profile of entrepreneurial companies and have many years of experience lending to the entrepreneurial and venture capital communities. Credit quality is very important to our business and is a key focus of Square 1 Bank. We have four risk managers and a team of portfolio analysts dedicated to evaluating and continually monitoring our borrowers’ financial and operational progress, which positions us to act quickly and proactively manage our exposure to our borrowers. Our bankers and client managers actively partner with our risk management personnel to manage credit issues which may arise in our loan portfolio. Our lending activities are diversified nationwide over a variety of industry sectors (with a focus on technology and life sciences) and with companies in different stages of development. We have developed an extensive credit risk management system which provides for, among other things, frequent contact with our borrowers and we are in the process of upgrading our credit process capabilities to create additional efficiencies for more scalable risk management practices as we grow.

As a result of this credit focus, we have maintained a track record of sound credit quality from inception. Our highest annual rate of net loan charge-offs to average loans over the past five years, 2009 through 2013, was 1.94%. At December 31, 2013, our ratio of nonperforming loans to total loans was 1.34%. Our 2013 net loan charge-offs were 0.95% of average outstanding loans.

Investment portfolio. As a result of the significant low-cost deposits generated by this business model, we have funds in excess of those we lend to our borrowing clients. As a result, we maintain a significant securities portfolio, which totaled $1.1 billion as of December 31, 2013. This securities portfolio provides us with additional sources of income and liquidity. Our investment portfolio is managed by a team of highly-experienced officers and employees. Prior to 2009, management of our investment portfolio was outsourced to a third-party investment firm. At that time, our investment securities portfolio was highly concentrated in non-agency mortgage-backed securities which at the time of purchase were investment grade securities. Following the financial crisis in 2008, a majority of these securities were downgraded to noninvestment grade securities. We incurred significant losses in 2008, 2010 and 2011 on our investment portfolio due primarily to our investment in these pre-2008 non-agency mortgage-backed securities. We terminated our outsourcing relationship in 2008 and began managing our securities investments internally at that time. The remaining non-agency mortgage-backed securities carry a fair value of $20.9 million, less than 2.0%, of the investment portfolio as of December 31, 2013. These remaining non-agency mortgage-backed securities have been written down $7.0 million to address any future losses. We consider the earnings stream on this remaining balance to be of greater value than the risk of additional losses.

We believe that our active management of this portfolio has helped minimize our losses and positioned us to use our large securities portfolio to meet the sometimes unpredictable liquidity needs of our clients and to optimize yields.

Strong brand and reputation in the entrepreneurial and venture capital community. We believe that we have developed a strong brand and market reputation within the entrepreneurial community and have strong relationships with more than 125 venture firms nationwide who are both clients and a source of referrals for entrepreneurial company clients. By capitalizing on the business and personal relationships of our senior management team in the entrepreneurial and venture communities, we believe that we are positioned to continue to grow our business and our client base.

Our Operating Strategy

Our strategic focus is on continuing to build market share and strong revenues complemented by operational efficiencies. We expect to accomplish this by continuing to attract new venture firm and portfolio company relationships while continuing to strengthen existing relationships with entrepreneurs and venture firms.

We intend to pursue the following core strategies to achieve those goals:

Building our presence within the entrepreneurial and venture community in our existing and target markets by:

•

leveraging the strong relationships and reputations of our experienced venture bankers to grow our market share in key entrepreneurial and venture markets nationwide;

•

growing our loan portfolio, including asset-based loans, and continuing to enhance our product offerings to expansion and late stage companies;

•

expanding our suite of deposit and investment products, which is important to support the growth of our venture firm and portfolio company clients; and

•

deploying the capital from this offering to support our lending and deposit growth.

Maintaining excellent credit quality by:

•

continuing to aggressively monitor the performance of our borrowers, which allows us to proactively manage credit exposure; and

•

upgrading our systems to more effectively and efficiently monitor asset quality as we grow.

Expanding and growing our noninterest income and relationship profitability by:

•

growing the assets under management of Square 1 Asset Management, a registered investment adviser, that was launched in April 2013 to provide a critical cash management tool for our clients and which provides us with income-generating off-balance sheet alternatives to manage the large and sometimes volatile fund flows typical of our clients;

•

growing our foreign exchange and letter of credit fee income;

•

growing our service charges and fees as we grow our lending and deposit relationships; and

•

continuing our practice of taking warrants for equity positions in the companies we serve.

Growing our core deposits, and prudently and expertly managing strong deposit inflows by:

•

continuing to grow deposits organically;

•

managing our investment portfolio in a conservative manner consistent with our liquidity needs and asset/liability management strategies including to optimize yields; and

•

continuing to develop alternative cash management solutions for our clients that allow us to move client funds on and off balance sheet.

There are no assurances that we will be able to successfully implement our business strategy or that we will achieve our strategic goals or our projected growth.

Our Market Opportunity

The venture banking market in the U.S. includes companies in industries with high potential for innovation and growth, such as technology and life sciences. These entrepreneurial companies can be located anywhere, but venture activity tends to be concentrated in key markets which are hubs for academia and innovation. As a result, in addition to our home office in the greater Research Triangle Park area, we maintain offices in Silicon Valley, San Diego, Campbell, Orange County and Los Angeles, CA, Boston, Austin, the Washington, DC metropolitan area, Denver, New York City and Seattle. We also recently

hired key personnel in Chicago and plan to open loan production offices in San Francisco and Chicago in 2014, as these markets continue to evolve as focal points for the development of venture capital-backed early through late stage companies.

Our market opportunity is driven in large part by the number and amount of venture capital investments because, as entrepreneurial companies receive venture capital investments, they require banking services beyond what they may have obtained when they were formed.

The peak year for venture capital investment in the U.S. was in 2000, a period in which approximately 8,041 companies received a total of nearly $105.2 billion in equity investment as reported in the MoneyTree™ Report. However, as reported in the MoneyTree™ Report, in a more typical year, an average of 3,774 companies receive venture capital investments for aggregate average annual equity investments of approximately $20.0 billion to $30.0 billion.

The following data from the MoneyTree^™ Report shows venture capital investment by stage of emerging companies in 2013:


Stage of Development	Number of Deals		Investment (in 000’s)
Seed		218	$	942,953
Early Stage		2,003		9,758,813
Expansion		984		9,838,458
Later Stage		790		8,824,734

Total		3,995	$	29,364,958

We believe that the market data demonstrates the robust opportunities for growth in our core market. Our deposit and loan portfolio includes entrepreneurial companies at all stages of their life cycles as well as the venture firms. These venture-backed companies need specialized banking services and we are well-positioned, as one of only two commercial banks almost exclusively focused on this market, to capitalize on these opportunities consistent with our past successes.

Corporate Information

Our principal executive office is located at 406 Blackwell Street, Suite 240, Durham, North Carolina 27701, and our telephone number is (866) 355-0468. Our website address is www.square1financial.com. The information contained on our website is not a part of, or incorporated by reference into, this prospectus.

THE OFFERING

Class A common stock offered by us

3,125,000 shares

3,593,750 shares if the underwriters’ option is exercised in full.

Class A common stock and Class B common stock offered by the selling shareholders

2,306,126 shares of Class A and 450,000 shares of Class B⁽¹⁾

2,652,043 shares of Class A and 517,500 shares of Class B if the underwriters’ option is exercised in full.

Common shares outstanding after completion of the offering⁽²⁾

27,200,336 shares

27,669,086 shares of common stock if the underwriters’ option is exercised in full.

Common shares outstanding after completion of the offering assuming all outstanding convertible/exercisable securities are converted/exercised into Class A common shares

29,602,096 shares

30,070,846 shares if the underwriters’ option is exercised in full

Use of proceeds

We estimate that the net proceeds to us from the sale of shares of common stock being offered by us in this offering will be $45.5 million (or $52.5 million if the underwriters exercise in full their purchase option), after deducting estimated underwriting discounts and offering expenses, based on an assumed initial offering price of $16.00 per share, which is the mid-point of the estimated public offering price range set forth on the cover page of this prospectus. We will not receive any proceeds from the sale of our common stock by the selling shareholders. We expect to downstream approximately 90% of the net proceeds of the offering to Square 1 Bank.

(1)	Purchasers in this offering will be deemed to have exercised their option to convert Class B shares to Class A shares as a condition to participating in the offering such that all purchasers will receive Class A shares.

(2)	References in this section to the number of shares of our common stock outstanding after this offering are based on 23,696,336 shares of our common stock (including Class A and Class B shares) issued and outstanding as of January 31, 2014. Unless otherwise noted, these references exclude:

•

1,319,550 shares of common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $6.11 per share (of which options to purchase 719,260 shares have vested);

•

522,870 shares of common stock issuable upon the vesting of outstanding restricted stock awards;

•

612,715 shares of common stock reserved for issuance in connection with restricted stock awards and stock options that remain available for issuance under our equity incentive plan;

•

500,000 shares of our common stock reserved for issuance in connection with outstanding Series A preferred stock and 366,500 shares of our common stock reserved for issuance in connection with outstanding trust preferred securities, which are convertible at the option of the holder, and are expected to be converted, in large part, into shares of common stock following completion of the offering;

•

66,000 shares of common stock issuable upon the exercise of warrants issued to the organizers of the Bank at an exercise price of $10.00 per share; and

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750,000 shares of common stock issuable upon the exercise of warrants issued to Patriot Financial Partners, L.P. and Patriot Financial Partners Parallel, L.P. at an exercise price of $5.15 per share in connection with a private placement of our common stock in 2010.

We intend to use the net proceeds generated by this offering to support our long-term growth by enhancing our capital ratios in light of Basel III, and for general working capital and other corporate purposes. We intend, as a secondary purpose of the offering, to use the net proceeds to redeem, at the first quarterly redemption date following the offering, any Series A preferred stock and to retire any indebtedness relating to Square 1 Financial’s trust preferred securities that remain outstanding following the completion of this offering. Our trust preferred securities and Series A preferred stock are currently redeemable by the Company, at its option, on any quarterly dividend payment date. No premium is attached to such redemption. As our preferred stock and our trust preferred securities are currently convertible, at the option of the holder, into common stock at a conversion price of $10.00 per share, we expect that a significant portion of the $7.4 million in principal outstanding trust preferred securities and the $5.0 million in outstanding Series A preferred stock will be converted into common stock prior to the redemption date. There was no accrued interest payable with respect to our trust preferred securities at December 31, 2013. Although we may, from time to time in the ordinary course of business, evaluate potential acquisition and business line expansion opportunities that we believe are complementary to our business and provide attractive risk-adjusted returns, we do not have any immediate plans, arrangements or understandings relating to any material acquisition. For additional information, see “Use of Proceeds.”

Dividend policy

We do not expect to pay cash dividends on our common stock in the foreseeable future. Instead, we anticipate that all of our future earnings will be retained to support our operations and finance the growth and development of our business. Any future determination to pay dividends on our common stock will be made by our Board of Directors and will depend upon our results of operations, financial condition, capital requirements, regulatory and contractual restrictions, our business strategy and other factors that the Board deems relevant. For additional information, see “Dividend Policy.”

Rank

Our common stock is subordinate to our Series A preferred stock and trust preferred securities, with respect to the payment of dividends and the distribution of assets upon liquidation. In addition, our common stock will be subordinate to any debt that we may issue in the future and may be subordinate to any new series of preferred stock that we may issue in the future.

Listing

We have applied to have our common stock listed on the Nasdaq Global Market under the trading symbol “SQBK.”

Determination of offering price

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the representative of the underwriters, the selling shareholders and us. In determining the initial public offering price of our common stock, the representative will consider:

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the history and prospects for the industry in which we compete;

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our financial information;

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our earnings prospects;

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our book value;

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the prevailing securities markets at the time of this offering; and

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the recent market prices of and the demand for publicly traded stock of comparable companies.

Risk factors

Investing in our common stock involves risks. See “Risk Factors,” beginning on page 14, for a discussion of certain factors that you should carefully consider before making an investment decision.

The summary financial information presented below is derived in part from our consolidated financial statements. The following is only a summary and you should read it in conjunction with the consolidated financial statements and the related notes beginning on page F-1. The information at December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 is derived in part from the audited consolidated financial statements that appear in this prospectus.

The information set forth above contains certain financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures are “efficiency ratio,” “tangible common equity to tangible assets” and “net operating income.” Although we believe these non-GAAP financial measures provide a greater understanding of our business, these measures are not necessarily comparable to similar measures that may be presented by other companies.

The information provided below reconciles each non-GAAP measure to its most comparable GAAP measure.

An investment in our common stock involves various risks. Before making an investment decision, you should carefully read and consider the risk factors described below as well as the other information included in this prospectus. Any of these risks, if they are realized, could materially and adversely affect our business, financial condition, and results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect us. In any such case, you could lose all or a portion of your original investment.

We are dependent upon the services of key executives and we could be harmed by the loss of their services.

Our performance depends largely on the experience and client relationships of our management team and bankers. Most of these individuals have been involved in venture banking for much of their professional careers, primarily in providing lending or other financing services to emerging growth technology companies, life sciences companies and venture firms and have strong relationships with individuals and institutions in the markets we serve. The implementation of our business and growth strategies also depends upon our ability to continue to attract and retain additional qualified management and banking personnel. Our bankers may terminate their employment with us at any time, and we could have difficulty replacing such officers with persons who are experienced in the specialized aspects of our business or who have ties to the communities within our market areas. If we are unable to retain any of these key employees, our growth and results of operations could be adversely affected. See “Management.”

Because of the credit profile of our loan portfolio, our levels of nonperforming assets and charge-offs can be volatile. We may need to make material provisions for loan losses in any period, which could reduce net income and/or increase net losses in that period.

Our loan portfolio has a credit profile different from that of most other banking companies. The credit profile of our clients varies across our loan portfolio, based on the nature of the lending we do for different market segments. In our portfolios for early, expansion and late stage companies, many of our loans are made to companies with modest or negative cash flows and no established record of profitable operations. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture firms or others, or in some cases, a successful sale to a third party, public offering or other form of liquidity event. Due to the overall weakening of the economic environment in 2008, venture capital financing activity, as well as mergers and acquisitions and initial public offerings – activities on which venture firms rely to “exit” investments to realize returns – slowed in a meaningful manner. While there has been some improvement in overall economic conditions since then, particularly during the past few years, if economic conditions worsen or do not continue to improve, such activities may slow down further, which may impact the financial health of our client companies. Venture firms may continue to provide financing in a more selective manner, at lower levels, and/or on less favorable terms, any of which may have an adverse effect on our borrowers that are otherwise dependent on such financing to repay their loans to us. Moreover, collateral for many of our loans often includes intellectual property, which is difficult to value and may not be readily salable in the case of default. Because of the intense competition and rapid technological change that characterizes the companies in the technology and life science industry sectors, a borrower’s financial position can deteriorate rapidly.

We continue to increase our efforts to lend to larger clients, as well as to make larger loans. Our ability to make larger loans will increase with the additional capital resulting from this offering. These larger loans include loans equal to or greater than $7.5 million to individual clients, which have over time represented an increasingly larger proportion of our total loan portfolio. Increasing our loan commitments, especially for larger loans, could increase the impact on us of any single borrower default.

We may enter into financing arrangements with our clients, the repayment of which may be dependent on third parties’ financial condition or ability to meet their payment obligations. We make loans secured by letters of credit issued by other third party banks, the repayment of which may be dependent on the reimbursement by third party banks. These third parties may not meet their financial obligations to our clients or to us, which could have an adverse impact on us. We also intend to maintain an emphasis on asset-based lending by providing our clients with lines of credit secured by accounts receivable and inventory. These types of loans generally expose us to additional risks since they are made on the basis of the borrower’s ability to make payments from the cash flows of the borrower’s business and are secured by collateral that may depreciate over time.

In our portfolio of venture capital clients, many of our clients have lines of credit, the repayment of which is dependent on the payment of capital calls or management fees by the underlying limited partner investors in the funds managed by these firms. These limited partner investors may face liquidity issues or have difficulties meeting their financial commitments, especially during unstable economic times, which may lead to our clients’ inability to meet their repayment obligations to us.

Based on the credit profile of our overall loan portfolio, our level of nonperforming loans, loan charge-offs and allowance for loan losses can be volatile and can vary materially from period to period. Although our average nonperforming loans and loan charge-offs have been relatively low historically, due to the credit profile of our loan portfolio and the nature of our borrowers, we may have quarterly or interim periods where nonperforming loans and charge-offs significantly exceed our historical averages. Increases in our level of nonperforming loans or loan charge-offs may require us to increase our provision for loan losses in any period, which could reduce our net income or cause net losses in that period. Additionally, such increases in our level of nonperforming loans or loan charge-offs may also have an adverse effect on our capital ratios and market perceptions of us.

If we conclude that the decline in value of any of our investment securities is other than temporary, we are required to write down the value of that security through a charge to earnings.

We review our investment securities portfolio at each quarter-end reporting period to determine whether securities need to be impaired due to changes in value associated with credit quality. When our other than temporary impairment (“OTTI”) methodology shows that an investment security has declined below its carrying value, we are required to assess whether the decline is other than temporary. If we conclude through our impairment methodology that the decline is other than temporary, we are required to write down the value of that security through a charge to earnings. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example, fixed-rate securities are generally subject to decreases in market value when market interest rates rise. Additional factors include, but are not limited to, rating agency downgrades of the securities, defaults by the issuer or individual borrowers with respect to the underlying securities, and continued instability in the credit markets. The process for determining whether impairment is other than temporary usually requires difficult, subjective judgments about the future financial performance of the issue and any collateral underlying the security in order to assess the probability of receiving all contractual principal on the security. Changes in the expected cash flows of these securities may result in our concluding in future periods that the impairment of these securities is other than temporary, which would require a charge to earnings to write down these securities.

The valuation risk associated with our investment portfolio could have a material adverse impact on our book equity.

As part of managing our overall inherent risk position, our investment portfolio is typically weighted towards fixed-rate securities. If interest rates increase (decrease) the fair value of our investment portfolio will conversely decrease (increase). The decline in value is an unrealized loss that will decrease the fair value of our securities and the Other Comprehensive Income component of our shareholders’ equity. Due to the relatively large size of the investment portfolio, this can have a material adverse impact to our shareholders’ equity. The potential loss in book value could be quite large depending on how quickly and how materially market interest rates change. While the loss is not permanent, it could have a material impact on our book value for any particular reporting period. In addition to regular interest rate risk analysis, we also conduct ongoing analysis to test Square 1 Bank’s exposure to various rising rate scenarios in order to better manage this risk.

Public equity offerings and mergers and acquisitions involving our clients or a slowdown in venture capital investment levels may reduce the market for venture capital investment and the borrowing needs of our current and potential clients, which could adversely affect our ability to grow and our financial performance.

Our core strategy is focused on providing banking products and services to companies, including in particular early- and expansion-stage companies that receive financial support from sophisticated investors, including venture capital or private equity firms, “angels,” and corporate investors. We derive a meaningful share of our deposits from these companies and provide them with loans as well as other banking products and services. In many cases, our credit decisions are based on our analysis of the likelihood that our venture capital-backed client will receive additional rounds of equity capital from investors. If the amount of capital available to such companies decreases, it is likely that the number of new clients and investor financial support to our existing borrowers could decrease, which could have an adverse effect on our business, profitability and growth prospects.

While an active market for public equity offerings and mergers and acquisitions generally has positive implications for our business, one negative consequence is that our clients may pay off or reduce their loans with us if they complete a public equity offering, are acquired by or merge with another entity or otherwise receive a significant equity investment. Moreover, our capital call lines of credit are typically utilized by our venture capital fund clients to make investments prior to receipt of capital called from their respective limited partners. A slowdown in overall venture capital investment levels may reduce the need for our clients to borrow from our capital call lines of credit. Any significant reduction in the outstanding amounts of our loans or under our lines of credit could have a material adverse effect on our business, results of operations and financial condition.

The borrowing needs of our clients may be unpredictable, especially during a challenging economic environment. We may not be able to meet our unfunded credit commitments, or adequately reserve for losses associated with our unfunded credit commitments, which could have a material effect on our business, financial condition, results of operations and reputation.

A commitment to extend credit is a formal agreement to lend funds to a client as long as there is no violation of any condition established under the agreement. The actual borrowing needs of our clients under these credit commitments have historically been lower than the contractual amount of the commitments. A significant portion of these commitments expire without being drawn upon. Because of the credit profile of our clients, we typically have a substantial amount of total unfunded credit commitments, which is reflected off our balance sheet. Actual borrowing needs of our clients may exceed our expected funding requirements, especially during a challenging economic environment when our client companies may be more dependent on our credit commitments due to the lack of available credit elsewhere, the increasing costs of credit, or the limited availability of financings from venture firms. In addition, limited partner investors of our venture capital clients may fail to meet their underlying investment commitments due to liquidity or other financing issues, which may increase our clients’ borrowing needs. Any failure to meet our unfunded credit commitments in accordance with the actual borrowing needs of our clients may have a material adverse effect on our business, financial condition, results of operations and reputation.

Additionally, we establish a reserve for losses associated with our unfunded credit commitments. The level of the reserve for unfunded credit commitments is determined by following a methodology similar to that used to establish our allowance for loan losses in our funded loan portfolio. The reserve is based on credit commitments outstanding, credit quality of the loan commitments, and management’s estimates and judgment, and is susceptible to significant changes. There can be no assurance that our reserve for unfunded credit commitments will be adequate to provide for actual losses associated with our unfunded credit commitments. An increase in the reserve for unfunded credit commitments in any period may result in a charge to our earnings, which could reduce our net income or increase net losses in that period.

Concentration of risk increases the potential for significant losses in our business. While there may exist a great deal of diversity within each industry, our clients are concentrated by these general industry niches: technology, life science and venture capital. Many of our client companies are concentrated by certain stages within their life cycles, such as early-stage or expansion-stage, and many of these companies are venture capital-backed. Our loan concentrations are derived from our borrowers engaging in similar activities or types of loans extended to a diverse group of borrowers that could cause those borrowers to be similarly impacted by economic or other conditions. In addition, we are continuing to increase our efforts to lend to larger clients and/or to make larger loans, which may increase our concentration risk. Any adverse effect on any of our areas of concentration could have a material impact on our business, results of operations and financial condition. Due to our concentrations, we may suffer losses even when economic and market conditions are generally favorable for our competitors.

We face competitive pressures that could adversely affect our business, results of operations, financial condition and future growth.

We compete with other banks and specialty and diversified financial services companies and venture debt funds, many of which are larger than us. While there are a limited number of direct competitors in the venture banking market. Some of our competitors have long-standing relationships with venture firms and the companies that are funded by such firms. As such, the market we target is extremely competitive and several of our competitors have significantly greater resources, established customer bases, more locations and longer operating histories. Our competitors sometimes undercut the pricing

and/or credit terms we are able to offer in order to increase their market share. Our pricing and credit terms could deteriorate if we act to meet these competitive challenges, which could adversely affect our business, results of operations and financial condition and future growth. If we are not able to successfully compete for customers and grow our business, our earnings could be adversely affected.

A return of recessionary conditions could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.

Although the U.S. economy has emerged from the severe recession that occurred in 2008 and 2009, economic growth has been slow and uneven, and unemployment levels remain high. Recovery by many businesses has been impaired by lower consumer spending. A return to prolonged deteriorating economic conditions and/or continued negative developments in the domestic and international credit markets could significantly affect the ability of our client companies to operate, the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. These events may cause us to incur losses and may adversely affect our financial condition and results of operations.

Our allowance for loan losses is determined based upon both objective and subjective factors, and may be inadequate or subject to increase by our regulators, which could hurt our earnings.

When borrowers default and do not repay the loans that we make to them, we may lose money. The allowance for loan losses is the amount estimated by management as necessary to cover probable losses in the loan portfolio at the statement of financial condition date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are loss exposure at default, the amount and timing of future cash flows on impacted loans, value of collateral, and determination of the loss factors to be applied to the various elements of the portfolio. If our estimates and judgments regarding such matters prove to be incorrect, our allowance for loan losses might not be sufficient, and additional loan loss provisions might need to be made. Depending on the amount of such loan loss provisions, the adverse impact on our earnings could be material. In addition, we may increase the allowance because of changing economic conditions or other qualitative factors. There may be a significant increase in the number of borrowers who are unable or unwilling to repay their loans, resulting in our charging off more loans and increasing our allowance.

In addition, bank regulators may require us to make a provision for loan losses or otherwise recognize further loan charge-offs following their periodic review of our loan portfolio, our underwriting procedures, and our loan loss allowance. Any increase in our allowance for loan losses or loan charge-offs as required by such regulatory authorities could have a material adverse effect on our financial condition and results of operations. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Allowance for Loan Losses” for a discussion of the procedures we follow in establishing our loan loss allowance.

Our current level of interest rate spread may decline in the future. Any material reduction in our interest rate spread, or a continuation of the sustained period of low market interest rates, could have a material effect on our business, results of operations or financial condition.

A major portion of our net income comes from our interest rate spread, which is the difference between the interest rates paid by us on amounts used to fund assets and the interest rates and fees we receive on our interest-earning assets. We fund assets using deposits and other borrowings. While we offer interest-bearing deposit products, a majority of our deposit balances consist of noninterest-bearing products. Our interest-earning assets include outstanding loans extended to our clients and securities held in our investment portfolio. Overall, the interest rates we pay on our interest-bearing liabilities and receive on our interest-earning assets, and our level of interest rate spread, could be affected by a variety of factors, including changes in market interest rates, competition, regulatory requirements (such as the repeal of the interest payment restrictions under Federal Reserve Regulation Q), and a change over time in the mix of the types of loans, investment securities, deposits and other liabilities on our balance sheet.

Changes in market interest rates, such as the Federal Funds rate, generally impact our interest rate spread. While changes in interest rates do not produce equivalent changes in the revenues earned from our interest-earning assets and the expenses associated with our interest-bearing liabilities, increases in market interest rates will nevertheless likely cause our interest rate spread to increase. Conversely, if interest rates decline, our interest rate spread will likely decline. Sustained low levels of market interest rates could continue to place downward pressure on our net income levels. Unexpected or further

interest rate changes may adversely affect our business forecasts and expectations. Interest rates are highly sensitive to many factors beyond our control, such as inflation, recession, global economic disruptions, unemployment and the fiscal and monetary policies of the federal government and its agencies. Any material reduction in our interest rate spread or the continuation of sustained low levels of market interest rates could have a material adverse effect on our business, results of operations and financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Interest Rate Risk—Interest Rate Risk Management.”

We anticipate that we will have increased operating expenses in 2014 which could adversely impact our earnings.

As we continue to grow our business and add employees to support our growth, we will incur additional personnel and benefits expenses related to this growth. In addition, our occupancy expenses will increase in 2014 due to our assumption of the leases for the Sand Hill Finance LLC offices, our anticipated addition of new loan production offices in San Francisco and Chicago and an increase in our lease expenses for one of our existing loan production offices. Square 1 Bank is also in the process of updating its online banking system and its platform for lending and credit operations and such updates will result in increased expenses in 2014. We anticipate that the aggregate of these increased expenses will result in approximately a 20% increase in our operating expenses for 2014 compared to 2013. Such increased operating expenses could adversely impact our net income for fiscal year 2014.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business. We require sufficient liquidity to meet our expected, as well as unexpected, financial obligations and requirements. Primary liquidity resources for Square 1 Financial are dividends from the Bank and periodic capital raising transactions. Client deposits are the primary source of liquidity for Square 1 Bank. We tend to have volatility in our deposit portfolio due to, among other things, venture capital funding and disbursement patterns and portfolio company cash burn rates. We have tools in place to manage this volatility, including varying the pricing of various deposit products and using off-balance sheet products for managing deposit growth. When needed, wholesale borrowing capacity supplements our liquidity in the form of short- and long-term borrowings secured by our portfolio of investment securities, loans outstanding and, finally, through unsecured overnight funding channels available to us in the Fed Funds market. An inability to maintain or raise funds through these sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include an increase in costs of capital in financial capital markets, a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us, or a decrease in depositor or investor confidence in us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a severe volatility or disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole. Any failure to manage our liquidity effectively could have a material adverse effect on our financial condition.

Our business reputation is important and any damage to it could have a material adverse effect on our business.

Our reputation, including the intellectual property associated with our reputation, is very important to sustain our business, as we rely on our relationships with our current, former and potential clients and shareholders, the venture capital and private equity communities, and the industries that we serve. On November 22, 2013, we filed a complaint in the U.S. District Court in the Middle District of North Carolina, demanding injunctive relief to block CommunityOne Bancorp from further use of its logo. Our complaint alleges that CommunityOne Bancorp’s newly-adopted logo is nearly identical to our mark and amounts to trademark infringement, as we currently own multiple U.S. registrations for our logo. Any damage to our reputation, whether arising from alleged trademark infringement or other legal, regulatory, supervisory or enforcement actions, matters affecting our financial reporting or compliance with Securities and Exchange Commission (the “SEC”) and exchange listing requirements, negative publicity, the conduct of our business or otherwise could have a material adverse effect on our business. See “Business—Legal Proceedings.”

Regulation of the financial services industry is undergoing major changes, and future legislation could increase our cost of doing business or harm our competitive position.

We are subject to extensive regulation, supervision and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the North Carolina Commissioner of Banks (the “NCCOB”), our primary regulators, and

by the Federal Deposit Insurance Corporation (the “FDIC”), as insurer of our deposits. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the insurance fund and the depositors and borrowers of Square 1 Bank rather than for holders of our common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

In 2010 and 2011, in response to the financial crisis and recession that began in 2008, significant regulatory and legislative changes resulted in broad reform and increased regulation impacting financial institutions. The Dodd-Frank Act has created a significant shift in the way financial institutions operate. The Dodd-Frank Act also created the Consumer Financial Protection Bureau to administer consumer protection and fair lending laws, a function that was formerly performed by the depository institution regulators. The Dodd-Frank Act contains various other provisions designed to enhance the regulation of depository institutions and prevent the recurrence of a financial crisis such as occurred in 2008-2009. The full impact of the Dodd-Frank Act on our business and operations will not be known for years until all of the regulations fully implementing the statute are written and adopted. The Dodd-Frank Act may have a material impact on our operations, particularly through increased regulatory burden and compliance costs. Any future legislative changes could have a material impact on our profitability. Future legislative changes could require changes to business practices or force us to discontinue businesses and potentially expose us to additional costs, liabilities, enforcement action and reputational risk.

Additionally, in early July 2013, the Federal Reserve approved revisions to their capital adequacy guidelines and prompt corrective action rules that implement the revised standards of the Basel Committee on Banking Supervision, commonly called Basel III, and address relevant provisions of the Dodd-Frank Act. Basel III and the regulations of the federal banking agencies require bank holding companies and banks to undertake significant activities to demonstrate compliance with the new and higher capital standards. Compliance with these rules will impose additional costs on us.

We are periodically subject to examination and scrutiny by a number of banking agencies and, depending upon the findings and determinations of these agencies, we may be required to make adjustments to our business that could adversely affect us.

Federal and state banking agencies periodically conduct examinations of our business, including compliance with applicable laws and regulations. If, as a result of an examination, a federal banking agency was to determine that the financial condition, capital resources, asset quality, asset concentration, earnings prospects, management, liquidity, sensitivity to market risk or other aspects of any of our operations has become unsatisfactory, or that we or our management is in violation of any law or regulation, it could take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the asset composition of our portfolio or balance sheet, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance. If we become subject to such regulatory actions, our business, results of operations and reputation may be negatively impacted.

We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.

We face significant capital and other regulatory requirements as a financial institution. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions. In addition, Square 1 Financial, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

We are dependent upon Square 1 Bank for cash flow, and Square 1 Bank’s ability to make cash distributions is restricted.

Our primary tangible asset is Square 1 Bank. As such, we depend upon Square 1 Bank for cash distributions (through dividends on Square 1 Bank’s stock) that we use to pay our operating expenses and satisfy our obligations. Such distributions would be a source of funds to pay dividends, should we elect to pay any in the future, on our common stock. There are numerous laws and banking regulations that limit Square 1 Bank’s ability to pay dividends to Square 1 Financial. If Square 1 Bank is unable to pay dividends to Square 1 Financial, we may not be able to satisfy our obligations or pay dividends on our common stock. Federal and state statutes and regulations restrict Square 1 Bank’s ability to make cash distributions to Square 1 Financial. These statutes and regulations require, among other things, that Square 1 Bank maintain certain levels of capital in order to pay a dividend. Further, state and federal banking authorities have the ability to restrict the payment of dividends by supervisory action.

We rely on other companies to provide key components of our business infrastructure.

Third party vendors provide key components of our business infrastructure such as core loan and deposit data processing systems, internet connections, network access and funds distribution. While we have selected these third party vendors carefully, we cannot control their actions. Any problems caused by these third parties, including those which result from their failure to provide services for any reason or their poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise to conduct its business. Replacing these third party vendors could also entail significant delay and expense.

We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have a material adverse effect on us.

Our business is dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on us.

In addition, we provide our customers with the ability to bank remotely, including over the Internet and the telephone. The secure transmission of confidential information over the Internet and other remote channels is a critical element of remote banking. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. To the extent that our activities or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could materially and adversely affect us.

Additionally, financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available. Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so could have a material adverse impact on our business and therefore on our financial condition and results of operations.

Our risk management framework may not be effective in mitigating risks and/or losses to us.

We have implemented a risk management framework to manage our risk exposure. This framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies which involve management assumptions and judgment. There is no assurance that our risk

management framework will be effective under all circumstances or that it will adequately mitigate any risk or loss to us. If our framework is not effective, we could suffer unexpected losses and our business, financial condition, results of operations or prospects could be materially and adversely affected. We may also be subject to potentially adverse regulatory consequences.

We depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, under our accounts receivable financing arrangements, we rely on information, such as invoices, contracts and other supporting documentation, provided by our clients and their account debtors to determine the amount of credit to extend. Similarly, in deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements conform to GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our clients. Our financial condition, results of operations, financial reporting and reputation could be negatively affected if we rely on materially misleading, false, inaccurate or fraudulent information.

Changes in accounting standards could materially impact our financial statements.

From time to time, the Financial Accounting Standards Board or the SEC may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in Square 1 Financial being subject to new or changing accounting and reporting standards. In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. These changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential shareholders could lose confidence in our financial reporting which would harm our business and the trading price of our securities.

If we identify material weaknesses in our internal control over financial reporting or are otherwise required to restate our financial statements, we could be required to implement expensive and time-consuming remedial measures and could lose investor confidence in the accuracy and completeness of our financial reports. We may also face regulatory enforcement or other actions, including the potential delisting of our securities from Nasdaq Stock Market. This could have an adverse effect on our business, financial condition and results of operations, including our stock price, and could potentially subject us to litigation.

Business disruptions and interruptions due to natural disasters and other external events beyond our control can adversely affect our business, financial condition and results of operations.

Our operations can be subject to natural disasters and other external events beyond our control, such as earthquakes, fires, severe weather, public health issues, power failures, telecommunication loss, major accidents, terrorist attacks, acts of war, and other natural and man-made events. Such events of disaster, whether natural or attributable to human beings, could cause severe destruction, disruption or interruption to our operations or property. Financial institutions, such as us, generally must resume operations promptly following any interruption. If we were to suffer a disruption or interruption and were not able to resume normal operations within a period consistent with industry standards, our business could suffer serious harm. In addition, depending on the nature and duration of the disruption or interruption, we might be vulnerable to fraud, additional expense or other losses, or to a loss of business and/or clients. We have implemented a business continuity and disaster recovery program which is reviewed and updated no less than annually. There is no assurance that our business continuity and disaster recovery program can adequately mitigate the risks of such business disruptions and interruptions.

Additionally, natural disasters and external events could affect the business and operations of our clients, which could impair their ability to pay their loans or fees when due, impair the value of collateral securing their loans, cause our clients to

reduce their deposits with us, or otherwise adversely affect their business dealings with us, any of which could have a material adverse effect on our business, financial condition and results of operations.

Insiders have substantial control over us, and this control may limit our shareholders’ ability to influence corporate matters and may delay or prevent a third party from acquiring control over us.

Our directors and executive officers and their affiliates currently beneficially own, in the aggregate, 49.2% of our outstanding Class A common stock and all of our Class B common stock. Further, we anticipate that our executive officers and members of our Board of Directors will hold an aggregate of approximately 2.4% of our Class A common stock following the offering, and that entities related to members of our Board of Directors will hold an aggregate of approximately 35.7% of our outstanding Class A common stock and all of our Class B common stock following the offering (without giving effect in each case to the exercise of the purchase option granted to the underwriters but giving effect to the sales of secondary shares by the selling shareholders). The significant concentration of stock ownership may adversely affect the trading price of our Class A common stock due to investors’ perception that conflicts of interest may exist or arise. In addition, these shareholders will be able to exercise influence over all matters requiring shareholder approval, including the election of directors and approval of corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change in control would benefit our other shareholders. For information regarding the ownership of our outstanding stock by our executive officers and directors and their affiliates, please see the section titled “Principal and Selling Shareholders.”

An active, liquid market for our common stock may not develop or be sustained following the offering, which may impair your ability to sell your shares and our ability to raise capital and expand our business.

Before this offering, there has been no established public market for our common stock. Although we have applied to have our common stock listed on the Nasdaq Global Market, an active, liquid trading market for our common stock may not develop or be sustained following the offering. A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace and independent decisions of willing buyers and sellers of our common stock, over which we have no control. Without an active, liquid trading market for our common stock, shareholders may not be able to sell their shares at the volume, prices and times desired. Moreover, the lack of an established market could materially and adversely affect the value of our common stock. The initial public offering price for our common stock will be determined by negotiations between us and the representative of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the initial public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration.

Actual or anticipated issuances or sales of substantial amounts of our common stock following this offering could cause the market price of our common stock to decline significantly and make it more difficult for us to sell equity or equity-related securities in the future at a time and on terms that we deem appropriate. The issuance of any shares of our common stock in the future also would, and equity-related securities could, dilute the percentage ownership interest held by shareholders prior to such issuance. All 5,881,126 of the shares of common stock sold in this offering (or 6,763,293 shares if the underwriters exercise in full their purchase option) will be freely tradable, except that any shares purchased by “affiliates” (as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) may be sold publicly only in compliance with the limitations described under “Shares Eligible For Future Sale.” The remaining 21,319,210 outstanding shares of our common stock, or 78.4% of our outstanding shares, will be deemed to be “restricted securities” as that term is defined in Rule 144, and may be sold in the market over time in private transactions or future public offerings. We also intend to file a registration statement on Form S-8 under the Securities Act to register an aggregate of approximately 2.5 million shares of common stock issued or reserved for future issuance under our equity incentive plan. We may issue all of these shares without any action or approval by our shareholders, and these shares, once issued (including upon exercise of outstanding options), will be available for sale into the public market, subject to the restrictions described above, if applicable, for affiliate holders.

Additional expenses following the offering from operating as a public company will adversely affect our profitability.

Following the offering, our noninterest expenses will increase as a result of the additional financial accounting, legal and various other additional expenses usually associated with operating as a public company and complying with public company disclosure obligations, particularly those obligations imposed by the Sarbanes-Oxley Act of 2002 and the Dodd Frank Act.

We are an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our gross revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions, or if we choose to rely on additional exemptions in the future. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Securities analysts may not initiate or continue coverage on our common stock, which could adversely affect the market for our common stock.

The trading market for our common stock will depend in part on the research and reports that securities analysts publish about us and our business. We do not have any control over these securities analysts, and they may not cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our common stock is the subject of an unfavorable report, the price of our common stock may decline. If one or more of these analysts cease to cover us or fail to publish regular reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.

Investors in this offering will experience immediate and substantial dilution.

The initial public offering price is substantially higher than the net tangible book value per share of our common stock immediately following this offering. Therefore, if you purchase shares in the offering, you will experience immediate and substantial dilution in net tangible book value per share in relation to the price that you paid for your shares. The dilution as a result of the offering will be $7.43 per share, based on the assumed initial offering price of $16.00 per share, and our pro forma net tangible book value of $8.57 per share as of December 31, 2013. In addition, we expect the conversion to common stock of a substantial portion of our convertible securities, which include our Series A preferred stock and trust preferred securities, to occur following the offering, which would result in dilution of approximately $7.23 per share assuming every convertible security is converted. Additional dilution may occur upon the exercise of warrants and stock options. Accordingly, if we were liquidated at our pro forma net tangible book value, you would not receive the full amount of your investment.

We have broad discretion in the use of the net proceeds from this offering, and our use of those proceeds may not yield a favorable return on your investment.

We expect to use the net proceeds of this offering to support our long-term growth by enhancing our capital ratios to permit growth initiatives and for general working capital and other corporate purposes, which may include, among other things, funding loans and purchasing investment securities through our bank subsidiary. We intend, as a secondary purpose of the offering, to use the net proceeds to redeem, at the first quarterly redemption date following the offering, any Series A preferred stock and to retire any indebtedness relating to Square 1 Financial’s trust preferred securities that remain outstanding following the completion of this offering. As our preferred stock and our trust preferred securities are currently convertible into common stock at a conversion price of $10.00 per share, we expect that a significant portion of the $7.4 million in outstanding trust preferred securities and the $5.0 million in outstanding Series A preferred stock will be converted into common stock following completion of this offering.

Our management has broad discretion over how these proceeds are used and could spend the proceeds in ways with which you may not agree. In addition, we may not use the proceeds of this offering effectively or in a manner that increases our market value or enhances our profitability. We have not established a timetable for the effective deployment of the proceeds, and we cannot predict how long it will take to deploy the proceeds. Investing the offering proceeds in securities until we are able to deploy the proceeds will provide lower margins that we generally earn on loans, potentially adversely affecting shareholder returns, including earnings per share, return on assets and return on equity.

Our Board of Directors intends to retain all of our earnings to promote growth and build capital. Accordingly, we do not expect to pay dividends in the foreseeable future. In addition, we are subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies. Finally, because Square 1 Bank is our only material asset, our ability to pay dividends to our shareholders depends on our receipt of dividends from the Bank, which is also subject to restrictions on dividends as a result of banking laws, regulations and policies. Accordingly, if the receipt of dividends over the near term is important to you, you should not invest in our common stock. For additional information, see “Dividend Policy.”

Our corporate governance documents, and certain corporate and banking laws applicable to us, could make a takeover more difficult.

Certain provisions of our certificate of incorporation and bylaws, and corporate and federal banking laws, could make it more difficult for a third party to acquire control of our organization or conduct a proxy contest, even if those events were perceived by many of our shareholders as beneficial to their interests. These provisions, and the corporate and banking laws and regulations applicable to us:

These provisions may discourage potential acquisition proposals and could delay or prevent a change in control, including under circumstances in which our shareholders might otherwise receive a premium over the market price of our shares.

An investment in our common stock is not an insured deposit and is subject to risk of loss.

Your investment in our common stock will not be a bank deposit and will not be insured or guaranteed by the FDIC or any other government agency. Your investment will be subject to investment risk, and you must be capable of affording the loss of your entire investment.

This prospectus contains forward-looking statements within the meaning of section 27A of the Securities Act and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but are not limited to, the following:

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this prospectus. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

We estimate that the net proceeds to us from the sale of our common stock offered by us in this offering will be approximately $45.5 million, or approximately $52.5 million if the underwriters elect to exercise in full their purchase option, based on an assumed initial offering price of $16.00 per share, which is the mid-point of the estimated public offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and offering expenses. Each $1.00 increase or decrease in the assumed initial public offering price of $16.00 per share would increase or decrease the net proceeds to us from this offering by approximately $2.9 million, or approximately $3.4 million if the underwriters’ purchase option is exercised in full. We will not receive any proceeds from the sale of our common stock by the selling shareholders. We expect to downstream approximately 90% of the net proceeds of the offering to Square 1 Bank.

We intend to use the net proceeds to us generated by this offering to support our long-term growth by enhancing our capital ratios in light of the heightened capital standards under Basel III, and for general working capital and other corporate purposes. We intend, as a secondary purpose of the offering, to use the net proceeds to redeem, at the first quarterly redemption date following the offering, any Series A preferred stock and to retire any indebtedness relating to Square 1 Financial’s trust preferred securities that remain outstanding following the completion of this offering. Our trust preferred securities and Series A preferred stock are currently redeemable by the Company, at its option, on any quarterly dividend payment date. No premium is attached to such redemption. Such redemption would require approval of the Federal Reserve, which approval has not yet been sought. As our preferred stock and our trust preferred securities are currently convertible, at the option of the holder, into common stock at a conversion price of $10.00 per share, we expect that a significant portion of the $7.4 million in outstanding trust preferred securities and the $5.0 million in outstanding Series A preferred stock will be converted into common stock prior to the redemption date. Although we may, from time to time in the ordinary course of business, evaluate potential acquisition and business line expansion opportunities that we believe are complementary to our business and provide attractive risk-adjusted returns, we do not have any immediate plans, arrangements or understandings relating to any material acquisition. Our management will retain broad discretion to allocate the net proceeds of this offering. The precise amounts and timing of our use of the proceeds will depend upon market conditions, among other factors.

We have not paid any dividends on our common stock since inception, and we do not intend to pay dividends for the foreseeable future. Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business. Any future determination relating to our dividend policy will be made by our Board of Directors and will depend on a number of factors, including our financial condition and results of operations, tax considerations, capital requirements, industry standards, and economic conditions. We will also consider the regulatory restrictions that affect the payment of dividends by Square 1 Bank to us, as discussed below.

As a Delaware corporation, Square 1 Financial is permitted to pay dividends out of its surplus, or if no surplus is available, out of its net profits for the fiscal year in which the dividend is declared and the preceding fiscal year. We are not required to obtain prior Federal Reserve approval to pay a dividend unless the declaration and payment of a dividend could raise supervisory concerns about the safe and sound operation of Square 1 Financial and Square 1 Bank, where the dividend declared for a period is not supported by earnings for that period, or where we plan to declare a material increase in our common stock dividend.

Our ability to pay dividends to our shareholders may depend, in part, upon our receipt of dividends from Square 1 Bank, which is also subject to numerous limitations on the payment of dividends under federal and state banking laws, regulations and policies. The ability of Square 1 Bank to pay dividends is governed by North Carolina law and FDIC regulations. Under North Carolina law, the Board of Directors of Square 1 Bank may declare a dividend provided they maintain regulatory capital ratios sufficient to be considered “adequately capitalized” for regulatory purposes. Also, under FDIC regulations, no bank may pay a dividend if, after the payment of the dividend, it would be “undercapitalized” within the meaning of the prompt corrective action laws. See “Supervision and Regulation—State Bank Regulation—Dividend Restrictions.”

The present and future dividend policy of Square 1 Bank is subject to the discretion of its Board of Directors.

The following table shows our capitalization, including regulatory capital ratios, on a consolidated basis, as of December 31, 2013, on an actual basis and on an as adjusted basis after giving effect to (i) the net proceeds from the sale by us of 3,125,000 shares of common stock in this offering (assuming the underwriters do not exercise their purchase option) at the assumed initial public offering price of $16.00 per share, which is the mid-point of the estimated public offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and offering expenses and (ii) the conversion of $3.75 million of trust preferred securities and the exercise of 4,000 warrants by two selling shareholders in connection with the sales of their shares in this offering. You should read the following table in conjunction with the sections titled “Selected Historical Consolidated Financial Information,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.

If you invest in our common stock, your ownership interest will be diluted to the extent that the initial public offering price per share of our common stock exceeds the book value per share of our common stock immediately following this offering. Tangible book value per common share is equal to our total shareholders’ equity, excluding preferred stock and intangible assets, divided by the number of common shares outstanding. As of December 31, 2013, the tangible book value of our common stock was $183.4 million, or $7.77 per share.

After giving effect to our sale of 3,125,000 shares of common stock in this offering (assuming the underwriters do not exercise their purchase option) at an assumed initial public offering price of $16.00 per share, the conversion of $3.75 million of trust preferred securities and the exercise of 4,000 warrants by two selling shareholders in connection with the sales of their shares in this offering and after deducting estimated underwriting discounts and offering expenses, the pro forma net tangible book value of our common stock at December 31, 2013 would have been approximately $232.3 million, or $8.57 per share. Therefore, this offering will result in an immediate increase of $0.80 in the tangible book value per share of our common stock of existing shareholders and an immediate dilution of $7.43 in the tangible book value per share of our common stock to investors purchasing shares in this offering, or approximately 46.5% of an assumed public offering price of $16.00 per share.

In addition, we expect that our preferred stock and trust preferred securities will be converted, by the holders of such securities, into shares of our common stock prior to the redemption date, which will result in additional dilution to new investors. After giving effect to the offering, in the manner described above, and assuming the subsequent conversion of all shares of preferred stock and all trust preferred securities into an aggregate of 1,241,500 shares of common stock, the pro forma net tangible book value per share of our common stock at December 31, 2013 would have been $8.77 per share. Accordingly, taking into account the conversion of our preferred stock and trust preferred securities, this offering will result in an immediate increase of $1.01 in the book value per share of our common stock of existing shareholders and an immediate dilution of $7.23 in the tangible book value per share of our common stock to investors purchasing shares in this offering, or approximately 45.2% of an assumed public offering price of $16.00 per share.

The following table illustrates the calculation of the amount of dilution per share that a purchaser of our common stock in this offering will incur given the assumptions above:

Each $1.00 increase or decrease in the assumed public offering price of $16.00 per share would increase or decrease, respectively, our as adjusted tangible book value by approximately $2.9 million, or approximately $0.11 per share, and the dilution per share to investors in this offering by approximately $0.11 per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting

discounts and commissions and offering expenses. We may also increase or decrease the number of shares we are offering. An increase of 1.0 million in the number of shares offered by us, together with a $1.00 increase in the assumed offering price of $16.00 per share, would result in an as adjusted tangible book value of approximately $251.1 million, or $8.93 per share, and the dilution per share to investors in this offering would be $7.07 per share. Similarly, a decrease of 1.0 million in the number of shares offered by us, together with a $1.00 decrease in the assumed public offering price of $16.00 per share, would result in as adjusted tangible book value of approximately $215.3 million, or $8.25 per share, and the dilution per share to investors in this offering would be $7.75 per share. The as adjusted information discussed above is illustrative only and will adjust based on the actual public offering price and other terms of this offering determined at pricing.

If the underwriters exercise in full their option to purchase additional shares in this offering, our as adjusted tangible common book value as of December 31, 2013, would be $239.3 million, or $8.67 per share, representing an immediate increase in as adjusted tangible book value to our existing shareholders over our historical December 31, 2013 book value per share of $0.91 per share and immediate dilution to investors participating in this offering of $7.33 per share.

Prior to this offering, our common stock has not been traded on an established public trading market, and quotations for our common stock were not reported on any market. As a result, there has been no regular market for our common stock. Although our shares may have been sporadically traded in private transactions, the prices at which such transactions occurred may not necessarily reflect the price that would be paid for our common stock in an active market. As of January 31, 2014, there were approximately 385 holders of record of our common stock.

We anticipate that this offering and the listing of our common stock on the Nasdaq Global Market will result in a more active trading market for our common stock. However, we cannot assure you that a liquid trading market for our common stock will develop or be sustained after this offering. You may not be able to sell your shares quickly or at the market price if trading in our common stock is not active. See the section of this prospectus titled “Underwriting” for more information regarding our arrangements with the underwriters and the factors considered in setting the initial public offering price.

We are a financial services company, headquartered in the greater Research Triangle Park area in North Carolina. Square 1 Financial was incorporated in the State of Delaware in October 2004 and became the bank holding company for Square 1 Bank, a de novo North Carolina commercial bank, in August 2005 upon the commencement of Square 1 Bank’s operations. Through Square 1 Bank, which was formed by experienced venture bankers, commercial bankers and entrepreneurs, we offer a full range of banking and financial products and services throughout the United States, focused on the entrepreneurial community and venture capital and private equity firms, which we collectively refer to as venture firms. Since inception, we have operated as a highly-focused venture bank and have provided a broad range of financial services to entrepreneurs, growing entrepreneurial companies and the venture capital and private equity communities.

Our primary focus is on venture-backed technology and life sciences companies located throughout the United States. We focus on venture firms, and on growing and continuing to develop our strong relationships with these firms and the entrepreneurs and companies they fund. Because we lend primarily to venture-backed entrepreneurial companies, our relationships with venture firms are an important aspect of our business. Many of our venture bankers have long-standing relationships with venture firms and focus on leveraging their industry knowledge to develop relationships with additional venture firms. Our knowledge of, and relationships with, venture firms is a key component in underwriting loans to venture-backed companies as we take into account, among other factors, our past experience with the related venture firm as well as the venture firm’s view of its portfolio companies’ management and prospects. We also maintain regular contact with the venture firms that have invested in our borrowers as part of our ongoing monitoring of, and ultimate repayment, of the loans we make to such clients. However, a venture firm is not responsible for the repayment of a loan unless we obtain an explicit written guarantee from such firm in connection with a loan to one of our borrower clients.

Beyond our relationships with venture firms, we also focus our efforts on the entrepreneurial companies served by the venture firms. We actively build relationships and maintain contact with successful serial entrepreneurs, some of whom are repeat chief executive officers and chief financial officers and who we may encounter with different customers over time. We are also involved in networking activities in the startup communities in many of our markets. We maintain a presence in these communities through participation in events sponsored by “incubators” or “accelerators,” which are informal associations engaged in a variety of activities designed to promote and encourage the startup and development of new companies.

Many of our clients are early stage and pre-revenue companies with specialized banking needs. We provide expansion and late stage entrepreneurial companies with lines of credit secured by accounts receivable and inventory. Separately, we also provide certain clients with commercial business loans and real estate loans through SBA and USDA loan programs. As of December 31, 2013, on a consolidated basis, we had total assets of $2.3 billion, loans of $1.1 billion, investment securities of $1.1 billion, total deposits of $2.1 billion, and shareholders’ equity of $189.1 million.

We provide commercial banking services to our clients from our main office in the greater Research Triangle Park area, located in the American Tobacco Historic District in Durham, North Carolina, and eleven loan production offices located

in key technology hubs across the United States, including Silicon Valley, San Diego, Campbell, Orange County and Los Angeles, CA, Boston, Austin, the Washington DC metropolitan area, Denver, New York City and Seattle. We also offer investment advisory and asset management services to our clients through Square 1 Asset Management, a subsidiary of Square 1 Bank, and provide certain non-banking services to our clients through Square 1 Bank, including funds management. In the fourth quarter of 2013, we acquired the business operations and hired the seven employees of a small factoring company, Sand Hill Finance LLC, as part of our strategy to continue to grow our asset-based lending portfolio. In connection with the acquisition, we acquired approximately $11.9 million in loans secured by accounts receivables, furniture, fixtures, equipment and certain warrants acquired by Sand Hill Finance LLC from its borrowers, all for an aggregate purchase price of approximately $12.4 million. See “Acquisition of Factoring Company” below.

Our team of experienced venture and commercial bankers has substantial banking or related experience and relationships in the venture banking market and in lending to entrepreneurial companies and venture firms. We believe our management team’s long-standing presence in the entrepreneurial and venture/private equity communities and our focus on personalized, high-touch client service, have enabled us to sustain double-digit asset growth since our formation and gives us the tools we need to continue our growth. We believe that, given the limited number of competitors that focus solely on the entrepreneurial and venture markets, the continued growth of new start-up companies nationwide and the need for experienced bankers who specialize in lending to venture-backed companies, we have long-term opportunities for growth.

Square 1 Bank was chartered in July 2005 to serve the venture capital community and venture-backed companies. Founded by long time venture bankers Richard Casey and Susan Casey and a team of experienced venture bankers and board members, Square 1 Bank commenced banking operations in August 2005. Since its inception, Square 1 Bank has experienced significant organic growth and milestones, including:

Our growth and our profitability over our history are reflected in the charts below:

The chart below sets forth the average balance of loans outstanding for each period presented.

On December 31, 2013, we acquired the business operations and key employees of Sand Hill Finance LLC, a factoring company located in California, as part of our strategy to continue to grow our asset-based lending portfolio. Square 1 Bank acquired $11.9 million of factoring loans from Sand Hill Finance LLC and certain other assets for a total purchase price of $12.4 million, which included the repayment of $7.2 million in outstanding indebtedness of Sand Hill Finance to Square 1 Bank under a customary revolving line of credit. The acquisition increased our asset-based loans by $11.9 million and increased our technology loans by $7.2 million. Additionally, Square 1 Bank assumed obligations under the real estate lease for the company’s primary place of business and hired the company’s seven employees. We intend to integrate the factoring product into our existing suite of asset-based lending products, and will not operate Sand Hill Finance LLC as a separate division of Square 1 Bank.

Our primary market is broadly defined as venture firms and the portfolio companies in which they invest, nationwide. The venture capital market (which we define to include private equity firms) is vibrant, with venture-backed companies continuing to attract high levels of venture capital investments. Due to the special financing needs of venture-backed companies, many of which may not be eligible for more traditional forms of financing from financial institutions, this market is generally underserved and therefore is an attractive market for us.

The venture banking market in the U.S. includes companies operating in industries that have high potential for innovation and growth, such as technology and life sciences. Venture-backed companies are in various stages of growth, from what is known as angel/seed stage to early stage, expansion stage and late stage. The various stages of entrepreneurial companies are described below:

Angel/Seed stage—companies in this stage have generally raised a small amount of capital from angel investors or family and friends, rather than from venture firms. These companies are in a pre-marketing stage and generally are focused on product development and market research as well as building a management team and developing a business plan, if the initial steps are successful. We are often the first banking relationship for these companies, which tend to need basic, deposit-focused services. We value our ability to form incumbent relationships with companies at this nascent stage of their development, with the goal of a long-term banking relationship as they mature.

Early stage—companies in this stage have generally received at least one round of institutional funding from venture firms or other sources of capital. These companies are often still in the development or testing phase with respect to their products or services and in some cases may have just begun to make their products or services commercially available. Typically, an early stage company will have a core management team and may have a proven concept or product, but has little or no revenues. We are often the first deposit relationship for these companies and typically provide lines of credit and other products and services.

Expansion stage—These companies are generally monetizing their products and have growing accounts receivables and/or inventories. They have revenues of less than $10 million annually and are generally not profitable or cash flow positive. These companies still typically count on additional rounds of investment from venture firms to support further expansion, marketing, working capital, or development of an improved product. In addition to deposits, revolving lines of credit, term loans and asset-based loans, we may provide growth capital loans for these clients to take advantage of unique growth opportunities such as the acquisition of other companies or intellectual property.

Late stage—These companies tend to have proven their concept, achieved revenue of over $10 million annually, and are profitable. Typically, a late stage company is on the road to a liquidity event such as a public offering or acquisition. In addition to deposits and revolving lines of credit, we may provide asset-based loans, trade letters of credit, foreign exchange products and other treasury management services to such companies.

These entrepreneurial companies can be located anywhere, but venture activity tends to be concentrated in key markets which are hubs for academia and innovation, such as Silicon Valley, San Diego, Boston, New York, the Washington, DC metropolitan area, Austin, Denver and the greater Research Triangle Park area. The size of the venture banking market is driven in large part by the number and amount of venture capital investments, because as entrepreneurial companies receive venture capital investments they require banking services beyond what they may have obtained at their formation. As reported in the MoneyTree™ Report, in recent years, in a given quarter there can be as few as approximately 675 and as many as approximately 1,075 venture investment rounds made across the U.S., totaling between $6.0 billion to $9.0 billion, and approximately one-third of these will be first-time financings for companies that will often need tailored venture banking services for many years. Venture firms are also a key part of our market. These firms need a full range of banking services as well, and depend on financial institutions to provide services to their portfolio companies.

From 1995 through 2013, venture capital firms in the U.S. invested approximately $565.0 billion in U.S. companies, based on data obtained from the MoneyTree^™ Report. The peak year for venture capital investment in the U.S. during that period was 2000, during which approximately 8,038 companies received a total of nearly $105.1 billion in equity investment. However, in a more typical year since 2000, an average of 3,774 companies receive venture capital investment which, in the aggregate, corresponds to an average, annual equity investment ranging from $20.0 billion to $30.0 billion.

According to the MoneyTree^™ Report , venture capital investment totaled approximately $29.4 billion invested in 3,995 deals in 2013. The following data shows venture capital investment by stage of emerging companies for the year 2013:

We believe this data demonstrates the robust opportunities for growth in this market. These venture-backed companies need specialized banking services and we are well-positioned as one of only two commercial banks almost exclusively focused on this market.

Geography. We divide the broader U.S. market into West and East markets. In the West market, the west coast alone represents nearly half of all U.S. venture investment activity, according to the National Venture Capital Association Yearbook 2013 (“NVCA 2013 Yearbook”). The San Francisco Bay Area and Silicon Valley are the heart of the venture capital industry, and make up the largest market and highest concentration of venture firms, with more than 200 venture firms located in those two areas, and numerous venture-funded companies. By way of example, in 2012, $10.9 billion, or

approximately 41%, of the total of $26.7 billion in venture capital investments made for that year in the U.S. were made in the San Francisco Bay Area and Silicon Valley. The remainder of California and the Pacific Northwest combined had $4.3 billion in venture capital investments in 2012. Denver and Austin also have strong concentrations of venture activity. The Midwest Region, which includes Chicago, had $1.4 billion in venture capital investments in 2012.

The East market is dominated by New York and Massachusetts. These two areas combined accounted for $4.9 billion of total venture capital investments made in 2012. The mid-Atlantic South, a region that includes Washington, DC, the Research Triangle Park region of North Carolina, and Atlanta, are also markets that have strong concentrations of venture activity.

According to the NVCA 2013 Yearbook, in 2012, the five largest states (California, Massachusetts, New York, Washington and Texas) received 78% of all the dollars invested nationally by venture capital firms.

Industry sectors. Venture investments tend to be made to companies with high potential for innovation and growth. Most investments go to companies in the technology, life sciences, and other select traditional industries. The technology sector generally includes software, hardware, media and entertainment, wireless communications, Internet, and networking. The life sciences sector includes biotechnology, medical devices, pharmaceuticals, and healthcare services. Venture capitalists also invest in innovative companies in traditional industries such as consumer products, manufacturing, and business services. According to the MoneyTree^™ Report, the software industry was the leading sector in 2013, receiving 37.3% of the total dollars invested, followed by the biotechnology industry which received approximately 15.4% of total dollars invested in 2013, the media and entertainment industry which received approximately 10.0% of total dollars invested in 2013 with the medical devices industry, the fourth largest sector, receiving approximately 7.2% of total dollars invested in 2013.

Venture banking products and services. Banking the venture capital community is characterized by low-cost deposits. Venture-backed companies tend to receive large cash infusions from each round of equity financing, which they must generally hold in a safe liquid investment vehicle that allows them to access their funds as they develop their products. As a result, venture-backed companies tend to hold large cash balances in short-term deposit accounts. Venture firms also often have excess cash after a capital call or sale of a portfolio company that they wish to invest on a short-term and liquid basis. These firms have a need for safety and liquidity, combined with some yield, for a portion of those funds and often utilize a combination of deposit and money market accounts for investing such funds. These companies and venture firms also produce significant noninterest income for us, as they often use fee-based banking services, including, alternative investment products, foreign exchange, credit cards, bill pay, wires, ACH, letters of credit and lockbox services.

We believe that we are well-positioned to create value for our shareholders, particularly as a result of the following strengths:

We have an experienced core management team with a record of successes in the venture banking community.

Our team. Douglas H. Bowers, our President and Chief Executive Officer, has more than 30 years of commercial banking experience. Judith Erwin, our Executive Vice President, Venture Capital Services and Global Treasury Management, and Christopher Woolley, our Executive Vice President, Banking West, are both founders of Square 1 Bank. Sam Bhaumik is our Executive Vice President, Banking Silicon Valley. Frank Tower, who joined us in January 2014, is our Executive Vice President, Banking East. Each of these four executive officers has an average of more than 25 years of experience working with entrepreneurs and the venture capital community. Ms. Erwin and Mr. Woolley previously worked together in venture banking at the former Imperial Bank and its successor, Comerica Bank. Mr. Bhaumik brings decades of experience in our market having served in a senior position at a specialty finance company focused on venture-backed technology companies and prior to that, in senior positions at Imperial Bank, its successor Comerica Bank, and Silicon Valley Bank. Mr. Tower has over 20 years of experience financing high growth, venture-backed technology and life science companies, both at Gold Hill Capital , a private equity firm, and in senior positions at Silicon Valley Bank. Our Chief Credit Officer, Diane Earle, has more than 27 years of experience in commercial lending and risk management. Ms. Earle spent several years at a venture debt fund, as well as at GE Commercial Finance where she served in senior leadership roles in the credit risk management area, focused on the technology and life sciences industries. Other members of our executive management team include Patrick Oakes, our Chief Financial Officer, Gregory Thompson, our Executive Vice President, Shared Services, and Jason Kranack, our Senior Vice President, Head of Human Resources. Collectively, these three executives bring more than 50 years of experience in the financial services industry and the business world.

Our highly-experienced team also includes more than 60 venture bankers and client managers and 34 credit administration personnel. These individuals bring bench strength, strong industry relationships and decades of experience in lending to entrepreneurial companies and monitoring the performance of a venture banking loan portfolio.

Our ability to grow our business has been directly related to our ability to attract and retain experienced and qualified management, lenders and other employees with deep and broad ties to the entrepreneurial and venture capital communities. We have grown our employee base from 26 at inception in 2005 to 230 full-time equivalent employees at December 31, 2013. We expect that our position as one of only two commercial banks in the United States almost exclusively focused on the entrepreneurial and venture capital community will allow us to continue to attract qualified employees to support and enhance future organic growth.

Our Board of Directors. Our Board of Directors is comprised of former commercial bankers, venture bankers, representatives of private equity funds and venture capital firms, individuals involved in various aspects of business and a former government regulator. Several of our founders who serve on our Board of Directors, including Susan G. Casey, Robert S. Muehlenbeck, Daniel R. Mathis and Norman P. Creighton, previously worked together in various high-level executive positions at Imperial Bank, which was subsequently acquired by Comerica Bank. Collectively, they bring decades of experience in lending to the entrepreneurial and venture capital community. Our other board members bring years of experience in banking, venture capital, private equity and business.

Our culture. We are entrepreneurs serving entrepreneurs. Square 1 Bank was a de novo, start-up bank founded by a group of venture bankers who, as a founding team of 26 individuals, had decades of experience lending to entrepreneurial companies and the venture capital firms that fund such companies. We understand start-ups and entrepreneurial companies because we are such a company. As the venture capital community is constantly funding new companies, new opportunities are continually created for us to develop new client banking relationships by leveraging our knowledge of, and our commitment to, the entrepreneurial community as a bank that “gets it.” We believe we are well-positioned to continue our organic growth as one of the only other “pure play” commercial banks focused on the venture banking market and to continue to be entrepreneurial bankers serving the entrepreneurial community.

We believe that our highly-experienced management and banking team, our Board of Directors and our entrepreneurial culture are key to our success to date as well as to our continued success.

Loan credit quality. We understand and have many years of experience in serving the entrepreneurial and venture capital communities. Credit quality is very important to our business and is a key focus of Square 1 Bank. Our lending activities are diversified over a large number of emerging growth companies in different sectors, particularly in the technology and life sciences areas, and which are in different stages of their development. Our borrowers are located in various technology centers across the country. We have invested significant resources to ensure our risk management is commensurate with our operating platform. We are in the process of upgrading our credit processes platform. We anticipate this upgrade will allow us to further scale our risk management practices and enhance our portfolio management tools as we grow.

We manage our credit risk exposure through credit controls including: (i) evaluation of credit applications, borrowers, collateral packages and liquidity, (ii) a detailed loan approval process and (iii) rigorous monitoring procedures with respect to our existing loan portfolio. Our regional managers and portfolio analysts monitor loan covenants on a daily basis, our borrowers’ performance on a monthly basis and each region’s portfolio quality on at least an annual basis. We maintain a sophisticated database that provides us with detailed loan performance information. We know our borrowers and work with them to monitor their progress and performance closely. We also know and work closely with the venture firms that fund our entrepreneurial clients. We have an internal credit risk rating system that is used to assess and monitor our credit risk, the performance of each loan and performance of our overall loan portfolio. Our risk managers review and confirm the credit risk rating of each borrower on at least a monthly basis. In addition, our Chief Credit Officer reports to our Board of Directors on a monthly basis on the performance of our loan portfolio and on the concentrations within that portfolio. We believe these credit controls and processes provide Square 1 Bank’s executive management with the tools necessary to adequately manage our loan portfolio. Our Directors’ Loan Committee is responsible for oversight of our credit management and lending practices and reports to our Board of Directors on our credit management and lending practices, including the quality of our loan portfolio.

Investment portfolio. As a result of the low-cost deposits generated by our business model, we have funds in excess of those we lend to our borrowing clients, and maintain a significant securities portfolio of $1.1 billion as of December 31, 2013. This securities portfolio provides us with additional sources of income and liquidity. Our investment portfolio is managed by a team of highly-experienced officers and employees. Prior to 2009, management of our investment portfolio was outsourced to a third-party investment firm. At that time, our investment securities portfolio was highly concentrated in non-agency mortgage-backed securities which at the time of purchase were investment grade securities. We incurred significant losses as a result of the deterioration in the underlying loans in 2008, 2010 and 2011 on our investment portfolio due primarily to our investment in these pre-2008 non-agency mortgage-backed securities. We terminated our outsourcing relationship in 2008 and began managing our securities investments internally at that time. We believe that our active management of this portfolio has helped minimize our losses and positioned us to use our large securities portfolio to meet the sometimes unpredictable liquidity needs of our clients and to optimize yields.

We have strong brand and reputation in the entrepreneurial and venture capital/private equity community.

One of only two pure-play venture banks. We focus almost exclusively on the entrepreneurial and venture communities and are one of only two commercial banks that have such a focus. We pride ourselves on providing quality, high-touch service and believe that is one of our core strengths. We believe that clients welcome choice, and that we have developed a strong brand and market reputation within the entrepreneurial community which has enabled us to be a competitive force within this community. From inception, we have believed there is significant market opportunity for a high-quality and nimble alternative to Silicon Valley Bank, the only other commercial bank focused on, and with the largest share of the venture banking market, on which we focus. Given the industry and market in which we operate, and the specialized expertise in lending to venture-backed companies that is required to lend successfully in this market, we believe this market is generally underserved and, as such, provides us with an opportunity to continue our strong growth and profitability. We are still a young company, having only been in existence since August 2005, but believe that we have penetrated the venture banking market in all key entrepreneurial hubs in the United States. We have continued to add venture bankers and client managers in key markets, particularly during the last three years, including a total of over 15 bankers and client managers added in Silicon Valley, Boston, New York and the West Coast otherwise. These key hires have allowed us to further penetrate markets in which we believe there is significant opportunity for us to grow, and they complement our consistently strong presence in other markets such as the mid-Atlantic, Southeast, Texas and Colorado. We believe that our position as the only other “pure play” commercial bank serving the venture banking market provides substantial opportunity for us to continue our successful growth.

We also have strong relationships with more than 125 venture capital firms nationwide and intend to continue to deepen our relationships within this space. By capitalizing on the business and personal relationships that our senior bankers have in the entrepreneurial and venture communities, we believe that we are positioned to continue to grow our business and our client base. We expect to accomplish this by continuing to attract talented bankers and clients, growing and strengthening our relationships with entrepreneurs and venture firms and through growing organically.

Focus on the entrepreneurial community. We focus on entrepreneurial companies, primarily those that have received funding from venture firms, in the technology and life sciences sectors. In the technology sector, our clients tend to be in the software, hardware, Internet, telecommunications semiconductor, media and related industries. Our clients in the life sciences sector tend to be in the medical devices, healthcare services or biotechnology industries. We develop relationships with our clients at the early stages of their businesses and provide them complete solutions by offering them banking and financial services through our various banking groups and programs that will serve their borrowing, cash management and financial services needs as they grow and expand their businesses. We also target, through our Square Roots program, companies that are in the angel/seed stage of their development and that have not yet received venture capital financing. We generally offer deposit products and cash management services to these clients. Our goal is to continue to work with our Square Roots clients as they grow and expand their operations through the various growth stages and obtain venture financing. As our clients grow and have more extensive lending needs, we provide asset-based lending products and treasury management products and services.

Our deposit and loan portfolio includes entrepreneurial companies at all stages of their life cycles, as well as venture firms.

The following table provides a summary of total loans outstanding, total unfunded loan commitments and deposit balance by stage and type at December 31, 2013 and 2012:

Our strategic focus is on continuing to build market share and strong revenues complemented by operational efficiencies and personalized, high-touch service, which we believe will produce attractive risk-adjusted returns for our shareholders. Our business model focuses on a relationship-based, venture banking structure guided by the following principles: disciplined risk management; responsive, personalized, high-touch service; focus on building long-term relationships in the entrepreneurial and venture capital/private equity communities; and innovation, creativity, flexibility and efficiency in delivering our products and services. We value our flexible organizational structure and strong risk management culture and believe that the level of market knowledge acquired by our management team and senior bankers over their many years of experience as venture bankers and our personalized, high-touch customer service differentiates us from our competitors. We believe that focusing on these principles enables us to expand our capabilities for providing banking and financial products and services to both entrepreneurial companies and the venture firms that fund such companies and continue to generate steady, long-term growth.

Our organizational culture is focused on providing products and services that meet our clients’ needs in a way that leads to increased depth of relationships, enhanced long-term profitability, client referral and exceptional customer retention. A

key aspect of this philosophy is a clear understanding of a differentiation of service value for our clients. Our client managers, bankers and client service representatives work closely with our clients from inception and are responsible for maintaining the client relationship. We believe our clients prefer this type of highly personalized, high-touch service. We believe that delivering our products and services in this manner leads to successful outcomes for our clients and contributes to retention of our clients over their various life stages.

Our success in quickly raising new capital has contributed to our ability to grow since our inception. Over the past four years, we have completed several private offerings of our capital stock, raising an aggregate of $72.0 million of common equity from private investors, to provide us the necessary capital to continue to implement our strategic plan, enhance our capital and support our growth. We believe that the proceeds from this offering and the improved access to the capital markets afforded us as a public company will enhance our ability to continue to grow our client base and our business.

With these principles in mind, we intend to pursue the following core strategies for our organization:

Growing our core deposits, which are integrally tied to the growth in our venture firm and portfolio company clients, and prudently managing deposit volatility. We commenced operations as a de novo commercial bank in August 2005. All of our deposit growth since inception has been organic and is primarily focused on the entrepreneurial and venture capital communities. Our growth in core deposits is integrally tied to the growth in our loan portfolio. We almost always require our venture-backed clients with whom we have a lending relationship to maintain their deposits with Square 1 Bank. We do not solicit conventional retail deposits.

As of December 31, 2013, 65.5% of our deposit portfolio consisted of noninterest-bearing demand deposit accounts, and therefore these deposits provide us with a low-cost source of funds. We tend to have volatility in our deposit portfolio due to, among other things, venture capital funding and disbursement patterns and portfolio company burn rates. We have tools in place to manage this volatility, including variable pricing and the use of off-balance sheet solutions for managing deposit growth. As we continue to penetrate deeper into the entrepreneurial and venture capital communities we serve and leverage existing relationships, we believe our loan portfolio, and therefore our deposits, will continue to grow. At December 31, 2013, we had $2.1 billion of deposits, an increase of 107.1% from $1.0 billion in deposits at December 31, 2009 and on those same dates had $557.9 million and $349.0 million, respectively, in client investment funds.

Leveraging the strong relationships and reputations of our venture bankers to continue to grow and build our presence in our existing and target markets. We believe that the long-term relationships that our venture bankers and client managers have with the entrepreneurial and venture capital communities, coupled with our reputation for personalized, high-touch service, have been a critical factor in the growth of our loan and deposit portfolios and will continue to be so in the future.

Continuing to grow our loan portfolio while maintaining excellent credit quality. Our loan portfolio has grown consistently since we commenced operations in 2005. Over the years, we have expanded our lending products to include asset-based loans, which increased our ability to lend to expansion and late stage companies, SBA and USDA loans, and credit cards. At December 31, 2013, we had $1.1 billion in our loan portfolio, an increase of 137.1% from December 31, 2009 when our loan portfolio was $456.6 million. The composition of our loan portfolio, as well as the industry segment concentrations, have changed over time. Our technology segment has decreased from 62.8% of our loan portfolio at December 31, 2009 to 45.4% as of December 31, 2013, while life sciences has increased from 15.9% to 18.3% of our loan portfolio over the same period. Asset-based loans, including accounts receivable-based lines of credit, which are provided across the industry segments we serve, have grown to comprise 17.2% of our loan portfolio as of December 31, 2013. We expect that our portfolio of asset-based loans, particularly accounts receivable-based lines of credit, will increase over time organically as well as through our acquisition of Sand Hill Finance, LLC, a factoring company, which closed on December 31, 2013.

We have maintained a track record of sound credit quality from inception. Our highest annual rate of net loan charge-offs to average loans over the past five years, 2009 through 2013, was 1.94% in 2009. At December 31, 2013, our ratio of nonperforming loans to total loans was 1.34%, and our annualized net charge-off ratio was 0.95%. We intend to continue to focus on maintaining strong credit quality. We believe that our strong credit culture and asset quality levels will allow us to continue to grow and that our operating platform will allow us to manage that growth effectively and efficiently, while maintaining the quality of our loan portfolio.

Continuing to provide personalized, high-touch service to our clients. Square 1 Bank was organized to operate in a manner that was different from that of larger, traditional commercial banks. From the outset, we sought and found

experienced bankers who were driven by an entrepreneur’s motivation to serve the entrepreneurial and venture capital/private equity community in a manner that was smart and responsive, adaptive and flexible, accessible and provided “high-touch,” personalized service. We believe our approach to client service distinguishes us from our competitors and we intend to continue our emphasis on providing personalize, high-touch service.

Expanding and growing our noninterest income and relationship profitability. We generate noninterest income, which provides revenue diversification, from fees charged to our clients for foreign exchange transactions, credit cards, service charges, loan documentation fees and letters of credit. We intend to continue our focus on growing our noninterest income. Our noninterest income represented 24.6% of our revenue in fiscal year 2013.

Prudently and conservatively managing our strong deposit flows. As a result of the significant low-cost deposits generated by the venture banking business model, we have funds in excess of those we lend to our borrowing clients. Certain vehicles, including those offered by Square 1 Asset Management, allow us to shift certain deposits off-balance sheet by offering clients alternative investments for their funds. We invest the funds that remain on our balance sheet in securities in accordance with our investment policies and procedures.

There are no assurances that we will be able to successfully implement our business strategy or that we will achieve our strategic goals on projected growth.

We operate in the United States where financial services are highly competitive. Our competitors include other banks, venture debt funds, specialty and diversified finance companies and investment advisory firms. Our primary competitors are those financial institutions that specialize in venture banking and venture debt. There is only one other pure play commercial bank that serves our market, Silicon Valley Bank, and we compete with them on an ongoing basis in all of the markets we serve. In addition to Silicon Valley Bank, there are several other commercial banks that serve the venture banking market but are not focused primarily on this market. These financial institutions include Comerica, City National Bank, First Republic Bank and Bridge Bank. Other lending competitors also include various debt funds and other specialty and diversified finance companies.

For the venture banking market, lending products are the most significant competitive factor among the financial institutions that serve the venture banking market. Not all commercial banks have credit models that allow for lending to companies that are in a pre-revenue or pre-profit stage. Our main competitors that do have expertise in this market understand how to lend in this market, and compete aggressively for market share. These competitors may choose to relax loan structure covenants, reduce interest rates, lower fees, or offer higher loan amounts than that which we can offer. In particular, financial institutions with greater equity can offer higher loan amounts to later stage companies than we can offer. Venture debt funds are a class of both competitors and partners. These funds may be able to offer fewer covenants, longer terms and higher loan amounts than we generally offer, and price their loans higher than loans we offer. While we do compete with venture debt funds, in certain situations we may partner with these firms to provide a larger partnered loan facility in which we generally take either a senior or pari-passu lien position.

Another competitive differentiator in our market is the level of expertise and service provided by a financial institution, including the expertise to structure loans and provide treasury management services, while also providing personalized service. Based on our experience, many of our competitors are organized to provide efficient, albeit impersonal, approaches to serving the market that are generally not as personalized as the services we provide. Other competitive factors include the knowledge of the venture capital environment, and a network of, or relationships with, venture capital firms, professional services providers, and incubators. For start-up or early stage companies, often times they need advice on ways to facilitate connections to capital and ideas. To capitalize on this need, we have established our Square Roots program to provide consulting, services, and networking for start-up companies that may eventually seek venture capital investments.

With respect to non-lending products such as deposits, treasury management services, and foreign exchange, we also compete with national, regional, and local commercial banks. Such banks are frequently larger financial institutions than we are that have benefits of scale, and can often offer more attractive prices and features than those we can offer. However, we believe our full spectrum of banking services, delivered in a personalized, high-touch manner, allows us to compete favorably in all of our markets. Although the competition in our markets is strong, we believe our breadth of products, our experience and our personalized, high-touch service combined with our focus on the venture community will continue to provide us with growth opportunities in the venture banking market.

Our primary lending focus is to serve the entrepreneurial community and the venture capital firms that fund the entrepreneurial community.

We target our business development and marketing strategy primarily on entrepreneurs, venture-backed entrepreneurial companies and venture firms. Venture firms are a key referral source for new relationships with entrepreneurial companies. Our venture bankers and client managers actively solicit the business of entrepreneurial companies within our industry segments and the business of the venture capital firms that fund such companies. Our venture bankers who lead our regional teams bring years of experience and extensive relationships with the entrepreneurial and venture capital communities. We seek to attract new lending clients through personalized, high-touch service, relationship networks with venture capital firms and their portfolio companies, innovative and flexible structures and competitive pricing.

We offer a full array of commercial lending products to serve the needs of our clients. These products include traditional commercial loans, revolving lines of credit, equipment loans, asset-based loans, credit cards and capital call loans. We focus our lending activities in the technology and life sciences industries, and in the venture capital community. In connection with the negotiation of credit facilities, we often receive warrants which grant us rights to acquire stock of our clients, primarily those that are privately-held, venture-backed companies in the life sciences and technology industries. We do a financial review and analysis of a client’s products, markets and risks, in addition to a financial review, as part of our underwriting process.

The terms of the credit facilities we provide to our clients vary by type of loan product, loan size and growth stage of the client and underlying collateral. We provide commercial term loans and lines of credit to venture-backed companies in the technology and life sciences sectors, with loan terms of between 12 and 48 months. These loans are typically made to companies in various stages of a start-up lifecycle. If the company is in an early stage company, the primary source of repayment is the venture investment round held in deposit accounts with us. If the company is a late stage company, the primary source of repayment may also include operating cash flows. The ratio of total deposits to loan commitments for early, expansion and late stage companies that have lending relationships with us were 320.8%, 83.8% and 72.9%, respectively, at December 31, 2013. Although we do not maintain minimum balance requirements or otherwise restrict the deposits of our borrowers, we do have financial covenants which may require the company to maintain certain levels of cash or liquidity. In cases involving venture-backed companies, we also take into account the strength of the venture firm(s) funding such companies. Commercial loans that we originate are generally secured by all corporate assets of the borrower, which may include accounts receivable, inventory equipment and intellectual property, and may also include personal guarantees. Loans originated by our asset-based lending group are typically structured as revolving lines of credit and advances are based on a formula tied to accounts receivable or other assets. Our asset-based loans are typically made to expansion and late stage companies. The primary source of repayment for asset-based loans is typically operating cash flow of the client. Separately, we provide SBA and USDA loans to certain of our clients.

We provide secured and unsecured capital call lines and management company lines of credit to venture capital and private equity firms, which generally use bank debt for capital efficiency, to cover short-term cash needs between capital calls or to smooth cash flows for one of their investments prior to sale. Loans made to venture capital and private equity firms may also be for the purpose of covering leasehold improvements or fundraising expenses. The primary sources of repayment for these loans are capital contributions from the firm’s limited partners, management fees, and a secondary source of repayment is generally the liquidation of the fund’s assets (i.e., their portfolio companies).

We offer credit cards, generally secured by client deposit accounts at Square 1 Bank, but also, occasionally offered as a sublimit under a line of credit, to our clients in all industry segments. The limits extended to clients are usually taken out of total credit facilities offered to the client, and, as a result, the repayment sources are the same as those credit facilities. We earn interest income on our credit card portfolio based on outstanding balances and interchange fee income based on total transaction amounts. Our credit card clients generally pay off their balances each month.

We also provide real estate secured, government-guaranteed loans through the SBA and USDA programs, with maturities of 20 years or more, and construction loans, which convert into real estate SBA and USDA loans upon completion of the construction, the terms of which are generally 12 months or less. In certain cases, we sell the guaranteed portion of SBA loans originated by us on the secondary SBA market, which serves to reduce the amount of our outstanding loan balances and results in a gain on sale and fee income for us. As of December 31, 2013, we had $51.5 million of SBA/USDA loans outstanding.

General. We maintain and adhere to what we believe are disciplined underwriting standards, taking into account the credit needs of our clients and, at the same time, providing flexible loan solutions in a highly responsive, timely and efficient manner.

We seek to maintain a broadly diversified loan portfolio across the industries and geographies we serve within the entrepreneurial and venture capital communities. We strive to balance credit quality and soundness of capital with profitability and managed growth. These components, together with active credit management, are the foundation of our credit culture, which we believe is critical to enhancing the long-term value of our organization to our clients, employees, shareholders and communities.

We have an entrepreneurial-focused, service-driven, relationship-based credit culture, rather than a price-driven, transaction-based culture. We are primarily focused on the entrepreneurial and venture capital communities and we understand the credit needs of those communities and the risks associated with providing credit facilities to entrepreneurial companies at various stages of growth. We have key credit guidelines that are followed by our management team in originating credit facilities, with deviations to those guidelines monitored and tracked by our credit administration division and our Chief Credit Officer, and reported to our Directors’ Loan Committee on a monthly basis.

Credit concentrations. In connection with the management of our credit portfolio, we actively manage the composition of our loan portfolio, including industry segment concentrations, which are measured as a percentage of our risk-based capital. The credit profile of our clients varies depending on the stage of growth and the industry segment. Our loan approval policies establish concentrations limits with respect to industry segments, growth stage and loan product type to enhance portfolio diversification. These limits are reviewed annually as part of our annual review of our credit policy and program. In general, loan concentration levels are monitored on a monthly basis, and our industry segment, loan product type, growth stage and geographical concentrations are monitored monthly by our credit administration division and our Chief Credit Officer, and reported monthly to the Directors’ Loan Committee.

We also manage concentration of credit to individual borrowers and our overall exposure to large loan commitments and outstandings in excess of certain set percentages of total outstanding loans and commitments. These limits are reviewed and ratified at least annually by our Directors’ Loan Committee and the Board of Directors of Square 1 Bank.

Loan approval process. We seek to achieve an appropriate balance between prudent, disciplined underwriting, on the one hand, and innovation, flexibility in our decision-making and responsiveness to our clients, on the other hand. Our Directors’ Loan Committee has the authority to approve loans up to Square 1 Bank’s legal lending limit, which was $31.9 million as of December 31, 2013 and will increase following the offering due to the additional capital raised in the offering. Consistent with that authority, the Directors’ Loan Committee has delegated approval authority for certain credit actions and types of loans, subject to the level of total potential liability for a borrower, to our Chief Credit Officer. Our Chief Credit Officer, in turn has delegated certain lending authority to risk managers and senior management, based on position, capability and experience. In addition, approval authority has been delegated to certain loan committees for larger loan exposures and adversely rated credits. The Bank Loan Committee is comprised of all the risk managers and the Senior Loan Committee is comprised of all the risk managers and the Chief Credit Officer. All adversely graded credits must be approved by the Risk Control Committee which is comprised of the Chief Credit Officer, the risk managers, the special assets officer and certain other members of management. These delegations and authorities are reviewed and ratified at least annually by our Directors’ Loan Committee and the Board of Directors of Square 1 Bank. The Directors’ Loan Committee and the Board of Directors reviews and approves all delegated credit actions on a monthly basis. We believe that our credit approval process provides for thorough underwriting and efficient decision making.

Credit risk management. Credit risk management involves a partnership between our venture bankers, client managers and our credit approval, credit administration and collections personnel. It is the policy of Square 1 Bank to assign risk ratings to all credit facilities using our internal credit risk rating system. We assign each individual loan a credit risk rating of 1 through 7. Loans rated 1 through 3.5 are performing loans that we rate internally as “Pass.” Loans rated 1 are in the highest category and are adequately secured by deposits in Square 1 Bank or securities. Loans rated 4 are special mention and have potential weaknesses that require increased management attention. Loan rated 5 through 7 are generally loans for which one or more weaknesses exist and with respect to which we believe we may incur a loss. Some loans rated 5 may still be considered “performing (criticized)” due to the unique profile of our borrowers. While we will downgrade a loan displaying

certain weaknesses, many early and expansion stage companies will continue to make scheduled interest and principal payments while we work with them to restructure their equity financing and/or sell the business. All nonperforming 5 rated loans are considered impaired. Our venture bankers are responsible for recommending the appropriate credit risk rating on all credit facilities but the rating is approved as part of the loan approval process and is monitored as part of the overall credit review process. Our venture bankers are also responsible for recommending changes, where appropriate, to a credit risk rating based on any change in the credit relationship with our clients whether financial or not, regardless of whether a credit action is requested. Loans that exhibit signs of credit weakness are handled by our special assets division. Each of our regional managers and venture bankers are held accountable for the loans made by them and our regional managers are held accountable for loans made by the venture bankers under their supervision.

Given the nature of the entrepreneurial companies we serve, which are primarily venture-backed companies, the need to make modifications or amendments to our credit facilities are typical over the course of the term of a loan. It is not unusual for our clients’ business plans to change as they recognize the realities of bringing their products to market, as economic conditions change and as new or different business opportunities arise. Because we have alternative sources of payments other than operations for many of our venture-backed clients, we often make adjustments to our credit underwriting as our clients’ sources of repayment change over time.

We review compliance with financial and other loan covenants on a daily basis. Risk managers conduct monthly portfolio reviews with each region to assess the accuracy of credit risk ratings and identify potential problem loans. We conduct monthly administrative meetings of the Risk Control Committee, at which adversely rated loans and our strategy for managing those credits are reviewed. Annually, or more frequently as required, our Chief Credit Officer conducts portfolio reviews for each of our regions. Our regional managers, client managers and bankers are responsible for the loans they originate and we believe that motivates them to focus on high quality credit consistent with our strategic focus on credit quality.

Our policies and procedures are designed to provide us with rapid notification of potential credit quality problems and to enable us to take prompt action on troubled credit facilities. We have established risk tolerance levels based on asset quality ratios against which we measure the credit quality of our loan portfolio. Our credit administration division reports on a monthly basis to our Directors’ Loan Committee and our Board the performance of our loan portfolio against our established risk tolerance levels.

Our credit administration division provides monthly reporting on all loans that are criticized or classified to the Directors’ Loan Committee and the Board of Directors of Square 1 Bank for their review. This review includes an evaluation of a client’s business prospects, its financial condition, venture financing, the underlying collateral, the level of reserves required and loan accrual status. Additionally, we have an independent, third-party review performed on our credit risk ratings and our credit administration functions at least annually. Management reviews these reports and the Chief Credit Officer presents them to the Directors’ Loan Committee, the Audit Committee and the Board of Directors. These third-party procedures provide management with additional information for assessing our asset quality.

Deposits are our primary source of liquid funds to support our earning assets. Unlike most commercial banks, the venture banking model contemplates that our borrowing customers will provide a significant majority of our deposits as our lending customers are almost always required to maintain significant cash balances in deposit accounts at Square 1 Bank. We do not obtain deposits from conventional retail sources. Our deposits provide us with a source of low-cost funding. Our deposits are also subject to volatility due to the unique nature of venture banking such as the timing of venture capital funding and portfolio company burn rates. We offer traditional depository products, including checking, money market and certificates of deposit with a variety of rates. Deposits at Square 1 Bank are insured by the FDIC up to statutory limits.

We price our interest-bearing deposit products based on a variety of factors, including current market conditions, changes in market interest rates, competition within our sector, regulatory requirements and our asset-liability management needs.

We have a strong liquidity position given our venture banking model. We utilize alternative cash investment vehicles to manage our on-balance sheet deposit growth, which tends to be volatile as is typical in the market in which we operate. At

December 31, 2013, we had $557.9 million in client investment funds, an increase from $349.0 million at December 31, 2009. To accomplish this, we offer our clients alternative cash investment vehicles such as sweep accounts and investment in the Certificates of Deposit Account Registry Service (“CDARS”), the latter of which allows us to place client deposits in one or more insured depository institutions. In April 2013, we formed Square 1 Asset Management, a wholly-owned subsidiary of Square 1 Bank, and a registered investment adviser, to allow us to directly provide cash management solutions for our clients and the market we serve. Square 1 Asset Management offers customized solutions to our clients that are tailored to meet the unique corporate cash management needs of entrepreneurial companies and venture firms. As of December 31, 2013, we had $108.1 million of assets under management. We expect to continue to manage our on-balance sheet deposit growth through these alternative investment vehicles for our clients and to grow the amount of assets under management by Square 1 Asset Management as we offer this service to both our existing clients and new clients. As a result, we expect to generate additional noninterest income from these sources in the future.

Due to the deposits generated by the venture banking model, our investment portfolio at times may be larger than our loan portfolio. We manage our investment portfolio primarily to address asset/liability strategies as well as to optimize portfolio yield over the long term in a manner that is consistent with liquidity needs. It is our policy only to invest in investment securities that are government guaranteed, agency-backed or rated investment grade by a nationally recognized statistical rating organization. The types of securities we purchase are based on our current and projected liquidity position as well as relative value among approved asset classes. Since the fourth quarter of 2011, we have increased our investment in corporate bonds, primarily with floating coupons, for the purpose of minimizing market value risk and diversifying the portfolio.

The majority of our investment portfolio is classified as available-for-sale and can be used for meeting unforeseen liquidity needs. Our investments are comprised of a variety of high-grade securities, including government agency securities, government guaranteed mortgage-backed securities, highly rated corporate bonds, SBA pools, municipal securities and other asset-backed securities. Our portfolio maturity and concentration mix is designed to ensure that our liquidity needs are met, including sufficient liquidity to meet anticipated loan increases, deposit decreases and a reserve to meet unexpected liquidity demands. We regularly evaluate the performance and the composition of our investment portfolio as changes in market conditions may necessitate a repositioning of our investment portfolio. It is predominantly our intention not to sell investment securities unless we determine to change our mix of investments to manage interest rate risk, although we may sell investment securities from time to time, under certain circumstances.

The investment policy is reviewed annually by the Board of Directors of Square 1 Bank. Overall investment goals are established by the Board of Directors, the Board Asset/Liability Committee, the Chief Financial Officer and the Asset/Liability Committee of Square 1 Bank. The Board of Directors has delegated the responsibility of monitoring our investment activities to the Asset/Liability Committee of Square 1 Bank, which is a management committee. Day-to-day activities pertaining to the investment portfolio are conducted within our treasury department under the supervision of our Chief Financial Officer.

We place significant emphasis on risk mitigation as an integral component of our organizational culture. We have an Enterprise Risk Committee comprised of our executive management team and other senior members of our team which meets monthly to discuss our risk management. Risk management with respect to our lending philosophy focuses, among other things, our strong underwriting undertaken by an experienced Chief Credit Officer, our venture bankers and risk managers. Our risk mitigation techniques include loan and credit administration reviews by an independent third party that reports directly to the Audit Committee of our Board of Directors and a credit risk rating system applied to all our credit facilities, including a process for monitoring those relationships that have higher credit risk ratings and implementing corrective measures on a timely basis to avoid or minimize losses.

We also focus on risk management in numerous other areas throughout our organization, including asset/liability management, investments, liquidity, international operations, corporate governance, allowance for loan and lease losses, information technology, operations, human resources, regulatory compliance and legal and have regular reviews by an independent third party of our internal controls in these areas. We have implemented an extensive asset/liability management process, use a simulation model to perform sensitivity analysis on the economic value of equity and the impact of changes in

market interest rates on our net interest income and use and independent, reputable third party to validate the reasonableness of our assumptions and results.

Although, as a non-public company we have not been subject to the Sarbanes-Oxley Act, we have begun to implement management assessment and testing of internal controls consistent with the Sarbanes-Oxley Act and have engaged an experienced independent public accounting firm to assist us with respect to compliance and to review and assess our controls with respect to technology, as well as to perform penetration testing to assist us in managing the risks associated with information security.

As of December 31, 2013, we had 230 full-time equivalent employees. None of our employees are represented by any collective bargaining unit or are parties to a collective bargaining agreement. We believe that our relations with our employees are good.

Our main office is located at 406 Blackwell Street, Suite 240, Durham, North Carolina. We lease our main office and also lease office space for our eleven loan production offices.

On November 22, 2013, we filed a complaint in the U.S. District Court in the Middle District of North Carolina, demanding injunctive relief to block CommunityOne Bancorp from further use of its logo, along with monetary damages. Our complaint alleges that CommunityOne Bancorp’s newly-adopted logo is nearly identical to our mark and amounts to trademark infringement, as we currently own multiple U.S. registrations for our logo. The complaint further alleges that given the two companies’ presence in the same industry, CommunityOne Bancorp’s use of the logo is likely to cause confusion and to deceive the public as to the source, origin, or sponsorship of the products and services offered by CommunityOne Bancorp.

We are party to other legal actions that are routine and incidental to our business. In management’s opinion, the outcome of these matters, individually or in the aggregate, will not have a material effect on our results of operations or financial position.

In addition to Square 1 Bank, the only other subsidiary of Square 1 Financial is Square 1 Ventures, LLC, which was formed in 2007 to manage a fund-of-funds focused on venture capital firms.

The objective of this section is to help potential investors understand our views on our results of operations and financial condition. You should read this discussion in conjunction with the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013, that appear at the end of this prospectus.

We prepared our consolidated financial statements in accordance with GAAP. In doing so, we made certain estimates that were critical in nature to our financial condition and results of operations as they require us to make especially difficult, subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported using different conditions and assumptions. The following discusses the accounting policies and estimates that are subject to the greatest amount of subjectivity and may have a material impact on our financial results. We have discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors.

Allowance for Loan Losses. The allowance for loan losses is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. We consider our accounting policy for the allowance for loan losses to be critical as this allowance is subject to significant near term changes and its estimation requires us to make material estimates. We make forecasts that are highly uncertain and require a high degree of judgment in order to determine the allowance for loan losses. Our loan loss reserve methodology is applied by us to our loan portfolio and we maintain the reserve at an amount that management believes will be adequate to absorb probable losses inherent in the portfolio, based on evaluations of the collectability of loans.

A loan is considered impaired, based on current information and events, if it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. We apply a systematic process for the evaluation of individual loans and pools of loans for inherent risk of loan losses. Uncollateralized loans are measured for impairment based on the present value of expected future cash flows discounted at the historical effective interest rate, while all collateral-dependent loans are measured for impairment based on the fair value of the collateral.

The Bank uses several factors in determining if a loan is impaired. The internal asset classification procedures include a thorough review of significant loans and lending relationships, as well as the accumulation of related data. This data includes loan payment status, borrowers’ financial data and borrowers’ operating factors such as cash flows and operating income or loss. It is possible that these factors and management’s evaluation of the adequacy of the allowance for loan losses will change.

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions and trends that may affect the borrower’s ability to pay.

The allowance for loan losses is based on a formula allocation for similarly risk-rated loans and individually for impaired loans. The formula allocation is determined on a monthly basis by utilizing a historical loan loss migration model, which is a statistical model used to estimate an appropriate allowance for outstanding loan balances by calculating the likelihood of a loan being charged-off based on its credit risk rating using historical loan performance data from our portfolio. The historical loan loss migration statistical model utilizes loss history over the trailing six-month period, over the trailing twelve-month period and since Square 1 Bank’s adoption of its allowance methodology. These three loss rates are annualized and averaged equally to provide a charge-off rate that is reflective of both current market conditions and the cumulative experience of Square 1 Bank. This average rate is then applied using three methodologies that are based on industry, stage of company and structure of debt. An allowance for loan losses is calculated using each of these methodologies. The results of the three calculations are then averaged for each risk-rating category and applied to the respective period-end client loan balances for each corresponding risk-rating category in order to provide an estimation of the

aggregate allowance for loan losses. Equal weighting is given to each historical time frame and to each methodology, and is applied across all loan categories. The application of these methodologies has been applied consistently for all periods presented in this prospectus.

Square 1 Bank applies qualitative allocations to the results we obtained through our historical loan loss migration model to ascertain the total allowance for loan losses. These qualitative allocations are based upon management’s assessment of the risks that may lead to a loan loss experience different from our historical loan loss experience. These risks are aggregated to become our qualitative allocation. Based on management’s prediction or estimate of changing risks in the lending environment, the qualitative allocation may vary significantly from period to period and includes, but is not limited to, consideration of the following factors:

The Bank will generally charge off a loan when it determines that the loan is uncollectible, meaning that all economically sensible means of recovery have been exhausted. Charge offs are approved by the Chief Credit Officer or designee.

For further information, see Notes 2 and 4 to the consolidated financial statements appearing elsewhere in this prospectus.

Fair Value Measurements. We use fair value measurements to record fair value for certain financial instruments and to determine fair value disclosures. Available for sale securities and derivative instruments are financial instruments recorded at fair value on a recurring basis. We make estimates regarding valuation of assets and liabilities measured at fair value in preparing our consolidated financial statements. We disclose our method and approach for fair value measurements of assets and liabilities in Notes 2 and 17 to the consolidated financial statements appearing elsewhere in this prospectus.

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the “exit price”) in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measurement.

ASC 820 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data. The three levels for measuring fair value are defined in Note 2 to the consolidated financial statements appearing elsewhere in this prospectus.

It is our practice to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. For inactive markets, there is little information, if any, to evaluate if individual transactions are orderly. Accordingly, we are required to estimate, based upon all available facts and circumstances, the degree to which orderly transactions are occurring. Price quotes based upon transactions that are not orderly are not considered to be determinative of fair value and are given little, if any, weight in measuring fair value. Price quotes based upon transactions that are orderly are considered in determining fair value, with the weight given based upon the facts and circumstances. If sufficient information is not available to determine if price quotes are based upon orderly transactions, less weight is given to the price quote relative to other transactions that are known to be orderly. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value

hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement is determined is based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair values are based on estimates or calculations at the transaction level using present value techniques in instances where quoted market prices are not available. Because broadly traded markets do not exist for many of our financial instruments, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. Fair valuations are management’s estimates of the values, and they are calculated based on indicator prices corroborated by observable market quotes or pricing models, the economic and competitive environment, the characteristics of the financial instruments, expected losses, and other such factors.

These calculations are subjective in nature, involve uncertainties and matters of significant judgment, and do not include tax ramifications; therefore, the results cannot be determined with precision or substantiated by comparison to independent markets, and they may not be realized in an actual sale or immediate settlement of the instruments. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results. Our valuation processes include a number of key controls that are designed to ensure that fair value is measured appropriately.

For further information, see Note 17 to the consolidated financial statements appearing elsewhere in this prospectus.

Income Taxes. We consider our accounting policy relating to income taxes to be critical as the determination of current and deferred income taxes is based on complex analyses of many factors including interpretation of federal, state and foreign income tax laws, the difference between tax and financial reporting bases of assets and liabilities (temporary differences), estimates of amounts due or owed, the timing of reversals of temporary differences and current financial accounting standards. Actual results could differ significantly from the estimates due to tax law interpretations used in determining the current and deferred income tax liabilities. Additionally, there can be no assurances that estimates and interpretations used in determining income tax liabilities may not be challenged by federal and state taxing authorities.

Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse.

The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carry-back or carry-forward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following:

Management evaluates each position based solely on the technical merits and facts and circumstances of the position, assuming the position will be examined by a taxing authority having full knowledge of all relevant information. We review our uncertain tax positions quarterly. Management reevaluates tax positions when new information about recognition or measurement becomes available. We evaluate our uncertain tax positions in accordance with ASC 740, Income Taxes. The portion of the tax benefit which is uncertain is disclosed in the Notes to the consolidated financial statements.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made. For further information, see Note 10 to the consolidated financial statements.

Investment Securities. Investments in certain securities are classified into three categories—held to maturity, trading and available for sale. We intend to hold our securities classified as available for sale for an indefinite period of time but may

sell them prior to maturity. All other securities, which we have the positive intent and ability to hold to maturity, are classified as held to maturity securities. During the periods included in this prospectus, we did not hold any trading securities.

We analyze marketable securities for other-than-temporary impairment as required under ASC 820-10 which provides guidance on how to determine other than temporary impairment. Market valuations represent the current fair value of a security at a specified point in time and do not represent the risk of repayment of the principal due to our ability to hold the security to maturity. Gains and losses on securities are only realized upon the sale of the security prior to maturity. A credit downgrade represents an increased level of risk of other-than-temporary impairment, and will only be recognized if we assess the downgrade to challenge the issuer’s ability to service the debt and to repay the principal at contractual maturity.

We consider our accounting policy for investment securities to be critical as the analysis of marketable securities for other-than-temporary impairment is subject to significant judgment and, as our investment securities comprise a significant portion of our assets, changes in valuation of our market securities may have a material impact.

Assumptions utilized vary from security to security. There are numerous factors to be considered when estimating whether a credit loss exists and the period over which the debt security is expected to recover. The following list is not meant to be all inclusive. All of the following factors shall be considered:

We use a third party to obtain information about the structure of each security, including subordination and other credit enhancements, in order to determine how the underlying collateral cash flows will be distributed to each security issued in the structure. These cash flows are then discounted at the interest rate equal to the yield anticipated at the time the security was purchased. We review the actual collateral performance of these securities on a quarterly basis and update the inputs as appropriate to determine the projected cash flows.

For further information, see Notes 2 and 3 to the consolidated financial statements appearing elsewhere in this prospectus.

We are a financial services company, headquartered in the greater Research Triangle Park area in North Carolina. Square 1 Financial was incorporated in the State of Delaware in October 2004 and became the bank holding company for Square 1 Bank, a de novo North Carolina commercial bank, in August 2005 upon the commencement of Square 1 Bank’s operations. Through Square 1 Bank, which was formed by experienced venture bankers and entrepreneurs, we offer a full range of banking and financial products and services throughout the United States, focused on the entrepreneurial community and venture capital and private equity firms. Since inception, we have operated as a highly-focused venture bank and have provided a broad range of financial services to entrepreneurs, growing entrepreneurial companies and the venture capital and

private equity communities. Our primary focus is on the technology and life sciences industries located throughout the United States. We also focus on the venture capital and private equity market and on growing and continuing to develop our strong relationships with the venture capital and private equity community and the entrepreneurs and companies that are funded by such firms. Through our asset-based lending group, we provide clients with lines of credit secured by accounts receivable and inventory. We provide our clients with commercial business loans and real estate loans through SBA and USDA loan programs. We also offer investment advisory and asset management services to our clients through Square 1 Asset Management, a subsidiary of Square 1 Bank, and provide certain non-banking services to our clients through Square 1 Bank, including funds management and global market services.

An important part of our strategy is increasing our penetration into the most active entrepreneurial markets and industries. We have continued to add venture bankers and client managers, particularly during the last three years, in key markets, including a total of 15 bankers and client managers in Silicon Valley, Boston, New York and other locations on the West Coast. These key hires have allowed us to further penetrate markets in which we believe there is significant opportunity for us to grow, and they complement our consistently strong presence in other areas such as the mid-Atlantic, Southeast, Texas and Colorado. We believe that our position as the only other “pure play” commercial bank serving the venture banking market provides substantial opportunity for us to continue our successful growth.

As a result, we have continued to experience robust balance sheet and revenue growth, which has resulted in three consecutive years of increasing net operating income. We had net income available to common shareholders of $22.1 million and diluted earnings per share of $0.93 for the year ended December 31, 2013, compared to net income available to common shareholders of $14.1 million and diluted earnings per share of $0.67 for the prior year. We experienced strong growth in net interest income as a result of significant growth in both loans and deposits during 2013, with an average loan balance for 2013 of $918.2 million, compared to $750.9 million for 2012. This loan growth was funded by our continued ability to generate strong growth from new and existing venture firms and entrepreneurial companies. We also continue to experience favorable funding of our interest earning assets with 61.4% of our average deposits for the year ended December 31, 2013, coming from noninterest-bearing deposits compared to 66.0% for the year ended December 31, 2012. Our average client funds, which consist of on-balance sheet deposits and client investment funds, increased $344.5 million, or 17.5%, during the year ended December 31, 2013. The success of our larger and more experienced banking teams drove continued growth in fee income. We also experienced significant gains from our equity warrant assets as our clients experienced liquidity events during 2013. In addition, while higher loan balances and increases in specific reserves on nonperforming loans have increased our provision for loans losses, overall credit quality remains strong. At December 31, 2013, our ratio of nonperforming loans to total loans was 1.34%, improving from 1.68% at December 31, 2012.

As we continue to grow our business and add employees to support our growth, we will incur additional personnel and benefits expenses related to such growth. In addition, our occupancy expenses will increase in 2014 due to our assumption of the leases for the Sand Hill Finance LLC offices, the anticipated addition of new loan production offices in San Francisco and Chicago, and an increase in our lease expenses for one of our existing loan production offices. Square 1 Bank is also in the process of updating its online banking system and its platform for lending and credit operations. Such updates will result in increased expenses in 2014. We anticipate that the aggregate of these increased expenses will result in approximately a 20% increase in our operating expenses for 2014 compared to 2013. Such increased operating expenses could adversely impact our net income for fiscal year 2014.

Performance Summary. 2013 vs. 2012. For the year ended December 31, 2013, we reported net income available to common shareholders of $22.1 million, an increase of $8.0 million, or 56.7%, compared to net income of $14.1 million for the year ended December 31, 2012. The increase resulted from a $9.8 million, or 14.7%, increase in net interest income and a $9.7 million, or 62.6%, increase in noninterest income, partially offset by a $3.9 million, or 41.9%, increase in our loan loss provision and a $4.8 million, or 9.3%, increase in noninterest expense. The net interest income increase was primarily the result of our continued success in growing both our loan portfolio and the level of low cost deposits. The increase in noninterest income reflected additional fee income related to this balance sheet growth and fees contingent upon customer success events, as well as a $3.8 million increase in warrant income as 31 of our portfolio company clients in which we had taken warrant positions had successful liquidity events in 2013.

2012 vs. 2011. For the year ended December 31, 2012, we reported net income available to common shareholders of $14.1 million, an increase of $9.0 million, or 177.1%, compared to net income of $5.1 million for the year ended December 31, 2011. The increase resulted from a $7.2 million, or 12.2%, increase in net interest income and a $8.7 million, or 126.9%, increase in noninterest income, partially offset by a $2.1 million, or 28.4%, increase in our loan loss provision and a $2.0 million, or 4.0%, increase in noninterest expense. While net interest income improved primarily as a result of continued loan growth funded by low cost deposits, noninterest income in 2011 was adversely affected by $9.0 million in net securities losses due to the sale of a significant percentage of our non-agency mortgage-backed securities.

Net Interest Income (Fully Tax Equivalent Basis). Net interest income, the primary contributor to our earnings, represents the difference between the income that we earn on our interest-earning assets and the cost to us of our interest-bearing liabilities. Our net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rates that we earn or pay on them. Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume changes.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as “rate changes.” The yield earned on loans includes loan fees, which are primarily loan origination fees and loan documentation fees related to loan origination. Net interest income and the net interest margin are presented on a fully taxable equivalent basis based on the federal statutory tax rate of 35% to consistently reflect income from taxable loans and securities and tax-exempt securities.

2013 vs. 2012. For the year ended December 31, 2013, net interest income increased $11.5 million, or 16.9%, to $79.4 million compared to 2012. This increase was primarily driven by a $11.6 million, or 16.8%, increase in interest income. Our interest income increase primarily resulted from:

Interest income was partially offset by interest expense of $1.3 million, which represented a $0.2 million, or 16.3%, increase from 2012. This increase was driven by the higher volume of our interest-bearing liabilities. 56.7% of our funding for the year ended December 31, 2013 came from noninterest-bearing deposits compared to 61.6% for the year ended December 31, 2012.

Net Interest Margin (Fully Tax Equivalent Basis). 2013 vs. 2012. Our net interest margin declined to 3.91% from 4.14%. The primary reasons for the decrease were:

Net Interest Income (Fully Tax Equivalent Basis). 2012 vs. 2011. For the year ended December 31, 2012, net interest income increased $8.6 million, or 14.5%, to $67.9 million when compared to 2011. This increase was primarily driven by a $8.3 million, or 13.6%, increase in interest income. Our net interest income increase in 2012 primarily resulted from:

These increases were partially offset by a $3.4 million, or 19.7%, decline in interest income on taxable securities to $14.0 million, which was caused by a $40.4 million, or 5.5%, decline in the weighted average balance and a 35 basis point decline in the yield earned.

Our net interest income was further increased by $0.4 million as a result of a decline in interest expense. Interest expense declined as a result of the 7 basis point decline in rates more than offsetting the $4.1 million, or 0.8%, increase in the average balance of interest-bearing liabilities.

Net Interest Margin (Fully Tax Equivalent Basis). 2012 vs. 2011. Our net interest margin increased to 4.14% in 2012 from 4.02% in 2011. The primary reasons for the increase were:

Average Balances and Yields. The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented. Loan fees are included in interest income on loans. Yields are presented on a tax equivalent basis.

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by current volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

Provision for Loan Losses. We consider a number of factors in determining the required level of our loan reserves and the provision required to achieve what we believe is the appropriate reserve level, including loan growth, credit risk rating trends, nonperforming loan levels, delinquencies, loan portfolio concentrations and economic and market trends. The provision for loan losses represents our determination of the amount necessary to be charged against the current period’s earnings to maintain the allowance for loan losses at a level that we consider adequate in relation to the estimated losses inherent in the loan portfolio.

2013 vs. 2012. For the year ended December 31, 2013, the provision for loan losses was $13.3 million, an increase of $3.9 million, or 41.9%, compared to 2012. The higher provision in 2013 reflected the 25.4% growth in loan balance as well as an increase in the allowance for specific reserves related to nonperforming loans and an increase in net charge-offs. At December 31, 2013, nonperforming loans totaled $14.5 million, which was 1.34% of total loans compared to $14.5 million, or 1.68% of total loans, at December 31, 2012. Specific loan loss allowances relating to nonperforming loans increased to $5.4 million and were 37.6% of nonperforming loans at December 31, 2013, compared to $3.3 million, or 23.0%, of nonperforming loans at December 31, 2012. Net loan charge-offs were $8.8 million for the year ended December 31, 2013, compared to $7.2 million for 2012.

2012 vs. 2011. For the year ended December 31, 2012, the provision for loan losses was $9.4 million, an increase of $2.1 million, or 28.4%, compared to 2011. The higher provision in 2012 resulted from 21.4% higher loan balances combined with an increase in the allowance for specific reserves related to nonperforming loans and an increase in net charge-offs. At December 31, 2012, nonperforming loans totaled $14.5 million, or 1.68% of total loans, compared to $7.1 million, or 0.99% of total loans, at December 31, 2011. Specific loan loss allowances relating to nonperforming loans increased to $3.3 million and were 23.0% of nonperforming loans at December 31, 2012, compared to $2.6 million, or 36.9%, of nonperforming loans at December 31, 2011. Net loan charge-offs were $7.2 million for 2012, compared to $4.9 million for 2011.

2013 vs. 2012. The following table shows the components of noninterest income and the dollar and percentage changes from 2013 to 2012.

Core banking income represents recurring income from traditional banking services provided to our customers. Income from these fees increased $2.2 million, or 19.8%, primarily due to an increased customer base combined with increased service utilization by our customers. Service charges and fees represent fees earned on our deposit accounts and credit card fee income. For the year ended December 31, 2013, service charges and fees on deposit accounts were $4.1 million, with growth of $0.5 million, or 13.0%, and credit card income was $2.5 million, with growth of $0.4 million, or 17.8%. These increases for the year ended December 31, 2013, are consistent with new customer growth and increased penetration with our existing customers.

Foreign exchange fees are primarily transaction based fees earned from our customers for performing foreign currency-based transactions on their behalf. The increase of $1.1 million in foreign exchange fees reflects our expanding geographic footprint and the evolving needs of our client base.

Warrant income includes income realized upon the exercise of a warrant and the sale of the underlying equity security and the quarterly mark-to-market of our warrant portfolio. We experienced several material warrant gains during 2013. This income is volatile as it is largely dependent on liquidity events experienced by our clients. The following table shows the components of warrant income and the period-to-period changes (see further discussion of our equity warrant assets under “Derivatives” in Note 2 to the consolidated financial statements).

For the year ended December 31, 2013, our other income was primarily comprised of income earned from our debt, venture capital and private equity fund investments portfolio, fees earned based upon contingent customer success events such as completion of an initial public offering or business combination. The increase in other income during the year ended December 31, 2013, compared to the prior year was primarily the result of increased customer success fees and gains on our investments in our private equity investments portfolio. For the year ended December 31, 2013, noninterest income from customer success fees increased $1.4 million, or 119.8%, to $2.6 million from $1.2 million in the prior year. These fees are by their nature volatile and there is no assurance that such fees will remain at these levels or increase in the future. Our investments in debt, venture capital and private equity funds totaled $4.1 million at December 31, 2013. These investments are primarily in funds for CRA credit, other non-CRA funds for relationship purposes and an investment in our own fund-of-funds, Square 1 Ventures. For the year ended December 31, 2013, noninterest income from these investments was $1.1 million, an increase of $1.3 million from the $0.2 million loss recognized in 2012. The Volcker Rule is not expected to have a material impact on these investments.

2012 vs. 2011. The following table shows the components of noninterest income and the dollar and percentage changes from 2011 to 2012.

Higher noninterest income in 2012 resulted from a $1.7 million, or 18.4% increase in our core banking income and a significant decrease in securities losses, partially offset by decreases in warrant income and other income. For the year ended December 31, 2012, service charges on deposit accounts were $3.6 million, an increase of $0.5 million, or 17.6%, and credit card income was $2.1 million, an increase of $0.6 million, or 38.6%.

The net loss on securities sold includes the net impact of securities transactions and any valuation impairment recognized on our securities portfolio. The $9.0 million loss in 2011 resulted primarily from actions taken to reduce our exposure to non-agency mortgage-backed securities.

The following table shows the components of warrant income and the year-to-year changes.

Noninterest Expense. 2013 vs. 2012. The following table shows the components of noninterest expense and the related dollar and percentage changes.

For the year ended December 31, 2013 we recognized $55.9 million in total noninterest expense, an increase of $4.8 million, or 9.3%, compared to 2012.

Personnel, at $35.8 million, represented 63.9% of our total noninterest expense and this category increased $5.3 million, or 17.2%. This increase primarily resulted from an increase in our full-time equivalent employees to 230 at December 31, 2013, from 203 at December 31, 2012, to support our balance sheet and income growth.

2012 vs. 2011. The following table shows the components of noninterest expense and the related dollar and percentage changes.

For fiscal year 2012 we recognized $51.1 million in total noninterest expense, an increase of $2.0 million, or 4.0%, when compared to the same period in 2011.

Personnel, at $30.5 million, represented 59.6% of our total noninterest expense and this category increased $3.6 million, or 13.5%. The primary cause of this increase was an increase in our full-time equivalent employees from 189 at December 31, 2011 to 203 at December 31, 2012 to support our balance sheet and income growth. Our FDIC deposit insurance assessment declined $1.0 million, or 43.8%, as the rate we are charged was reduced after the first quarter of 2011.

2013 vs. 2012. Income tax expense increased $2.8 million, or 39.4%, for the year ended December 31, 2013, as compared to the prior year due to a $10.8 million, or 50.3%, increase in pre-tax income. Our effective tax rate declined to 31.0% from 33.4% as a result of an increase in our tax preferred income from our municipal securities portfolio and bank owned life insurance.

2012 vs. 2011. Income tax expense increased $2.8 million, or 64.8%, due to an $11.9 million or 122.0% increase in pre-tax income. Our effective tax rate declined to 33.4% from 45.0% as a result of an increase in our tax preferred income from our municipal securities portfolio and bank owned life insurance. In addition, 2011 income tax expense included recognition of $0.6 million in prior period taxes in 2011 as a result of an IRS audit.

Our total assets increased $523.1 million, or 29.0%, to $2.3 billion at December 31, 2013, from $1.8 billion at December 31, 2012, primarily due to growth in our loan portfolio of $219.5 million and an increase in our investment securities portfolio of $235.3 million.

Our total assets increased $155.0 million, or 9.4%, to $1.8 billion at December 31, 2012, as compared to $1.6 billion at December 31, 2011, primarily due to growth of $152.2 million in our loan portfolio and an increase of $134.8 million in our investment securities portfolio.

Loans. At December 31, 2013, 2012 and 2011, loans totaled $1.1 billion, $867.1 million and $715.0 million, respectively. The following table presents the balance and associated percentage of each category of loans within our loan portfolio at the dates indicated.

The increase in commercial loans from December 31, 2012, to December 31, 2013 occurred in all our client industry segments, with most of the growth occurring in our technology and life sciences client sector and asset-based loans.

Within our commercial loan portfolio, our asset-based loans increased $81.7 million, or 77.8%, to $186.7 million as of December 31, 2013, from $105.0 million as of December 31, 2012, and increased $33.8 million, or 47.5%, from $71.2 million as of December 31, 2011. This increase in asset-based loans since 2011 has primarily been due to our strategic focus on expanding this product line to better serve the needs of our expansion and late stage clients, while $11.9 million of the increase in 2013 was the result of our acquisition of Sand Hill Finance.

Our loans to venture firm clients fluctuate from year to year based on funding needs driven by investment cycles and timing. We have consistently increased the number of venture firm clients since 2010 and the amount of loan commitments to such clients has increased as well, from $362.1 million at December 31, 2010, to $559.3 million at December 31, 2013. The amount of loan commitments that are utilized by these clients vary during the year and often increase at the end of the year when these clients may increase the amount drawn on their lines of credit for various business reasons. The amount of loans outstanding to our venture firm clients at December 31, 2013, was $143.5 million, compared to $132.6 million as of December 31, 2012. During the first quarter of 2013 we experienced a decline from our 2012 year end balances of $41.2 million. We anticipate a similar decline from our year end 2013 balances during the first quarter of 2014. Our venture firm loans increased to $132.6 million as of December 31, 2012, from $89.7 million as of December 31, 2011, an increase of $42.9 million, or 47.9%, as a result of a larger customer base and increased line of credit utilization by such firms.

We began offering SBA and USDA loans in 2011. As of December 31, 2013, SBA and USDA loans represented 4.7% of our loan portfolio compared to 4.1% as of December 31, 2012 and 2.5% as of December 31, 2011. We expect to continue to grow our SBA and USDA loan portfolio as we originate new loans and sell a portion of the guaranteed balances.

Loan concentrations may exist when there are borrowers engaged in similar activities or types of loans extended to a diverse group of borrowers that could cause those borrowers or portfolios to be similarly impacted by economic or other conditions. The breakdown of total loans as a percentage of total loans by industry sector at December 31, 2013 and 2012, is as follows:


*Copies to:*
Christina M. Gattuso, Esq. Joseph J. Bradley, Esq.		Philip R. Bevan, Esq. Hugh T. Wilkinson, Esq.
Kilpatrick Townsend & Stockton LLP		Silver, Freedman, Taff & Tiernan LLP
607 14^th Street, NW, Suite 900		3299 K Street, NW, Suite 100
Washington, DC 20005		Washington, DC 20007
(202) 508-5800		(202) 295-4500


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨


	Per Share	Total
Initial public offering price	$	$
Underwriting discounts⁽¹⁾
Proceeds to us before expenses
Proceeds to selling shareholders, before expenses


	At or For the Years Ended December 31,
	2013		2012		2011		2010			2009
	(Dollars in thousands)
Financial Condition Data:
Total assets	$	2,326,427	$	1,803,281	$	1,648,287	$	1,583,871		$	1,095,836
Cash and cash equivalents		105,730		48,971		194,240		201,279			94,489
Investment securities—available- for-sale		924,229		776,160		679,553		820,048			460,833
Investment securities—held-to- maturity		154,255		67,022		28,817		16,964			19,390
Loans⁽¹⁾		1,082,536		863,081		710,904		490,636			456,551
Off-balance sheet unfunded loan commitments		977,262		741,232		714,185		576,632			433,582
Deposits		2,106,727		1,519,329		1,508,829		1,461,913			1,017,437
Off-balance sheet client investment funds		557,883		377,932		458,464		263,325			348,968
Borrowings		6,207		96,204		6,193		6,183			6,193
Repurchase agreements		12,737		—		—		928			1,256
Total shareholders’ equity		189,149		176,726		124,379		107,004			66,412

Operating Data:
Interest income	$	77,662	$	67,676	$	60,827	$	52,854		$	46,992
Interest expense		1,328		1,142		1,502		1,880			2,982
Net interest income		76,334		66,534		59,325		50,974			44,009
Provision for loan losses		13,300		9,371		7,300		5,050			9,273
Net interest income after provision for loan losses		63,034		57,163		52,025		45,924			34,737
Noninterest income (loss)		25,308		15,560		6,857		(22,724	)		10,320
Noninterest expense		55,921		51,148		49,163		43,091			37,705
Income before income tax expense (benefit)		32,421		21,575		9,719		(19,892	)		7,350
Income tax expense (benefit)		10,038		7,203		4,372		(7,271	)		4,738
Preferred stock dividends and discount accretion		250		250		250		250			256
Net income (loss) available to common shareholders		22,133		14,122		5,097		(12,871	)		2,356


	Page
About This Prospectus		i

Prospectus Summary		1

The Offering		9

Selected Historical Consolidated Financial Information		11

Risk Factors		14

Cautionary Note Regarding Forward-Looking Statements		25

Use of Proceeds		26

Dividend Policy		26

Capitalization		28

Dilution		29

Price Range of Our Common Stock		31

Business		31

Management’s Discussion and Analysis of Financial Condition and Results of Operations		47

Management		77

Executive Compensation		83

Principal and Selling Shareholders		89

Description of Capital Stock		92

Restrictions on Acquisition of Square 1 Financial		94

Shares Eligible for Future Sale		95

Certain Relationships and Related Party Transactions		96

Supervision and Regulation		99

Certain Material U.S. Federal Income Tax Consequences for Non-U.S. Holders of Common Stock		109

Underwriting		111

Legal Matters		114

Experts		114

Where You Can Find More Information		114

Index to Consolidated Financial Statements		115


	For the Years Ended December 31,
	2013			2012			2011			2010			2009
	(Dollars in thousands)
Efficiency Ratio
Noninterest expense	$	55,921		$	51,148		$	49,163		$	43,091		$	37,705

Net interest taxable equivalent income		79,404			67,950			59,325			50,974			44,009
Noninterest taxable equivalent income (loss)		25,886			15,900			6,858			(22,724	)		10,319
Less loss on sale of securities and impairment		(24	)		(358	)		(8,956	)		(30,410	)		(3,433	)

Adjusted operating revenue	$	105,314		$	84,208		$	75,139		$	58,660		$	57,761

Efficiency ratio		53.10	%		60.74	%		65.43	%		73.46	%		65.28	%

Tangible Common Equity/Tangible Assets
Total equity	$	189,149		$	176,726		$	124,379		$	107,004		$	66,412
Less: preferred stock		4,950			4,950			4,950			4,950			4,950
Intangible assets⁽¹⁾		800			—			—			—			—

Tangible common equity	$	183,399		$	171,776		$	119,429		$	102,054		$	61,462

Total assets	$	2,326,427		$	1,803,281		$	1,648,287		$	1,583,871		$	1,095,836
Less: intangible assets⁽¹⁾		800			—			—			—			—

Tangible assets		2,325,627			1,803,281			1,648,287			1,583,871			1,095,836

Tangible common equity/tangible assets		7.89	%		9.53	%		7.25	%		6.44	%		5.61	%


Net Operating Income
GAAP income before taxes	$	32,421		$	21,575		$	9,719		$	(19,892	)	$	7,350
Less loss on sale of securities		(24	)		(358	)		(8,956	)		(30,410	)		(3,433	)
Add: tax equivalent adjustment		3,647			1,755			—			—			—

Non-GAAP net operating income before taxes	$	36,092		$	23,688		$	18,675		$	10,518		$	10,783


	As of December 31, 2013⁽¹⁾
	Actual			As Adjusted for the Offering⁽²⁾
	(Dollars in thousands, except per share data)
Long-term debt:
Junior subordinated debentures⁽³⁾	$	6,207		$	3,068

Total long-term debt	$	6,207		$	3,068

Shareholders’ equity:
Common stock, par value $0.01 per share, 45,000,000 shares authorized, 23,611,746 shares issued and outstanding; and 70,000,000 shares authorized, 27,115,746 shares issued and outstanding, as adjusted⁽⁴⁾	$	236		$	271
Convertible preferred stock, par value $0.01 per share, 10,000,000 shares authorized, 5,000 shares issued and outstanding; actual and as adjusted		—			—
Additional paid-in capital		183,716			232,907
Accumulated other comprehensive income, net		(4,096	)		(4,096	)
Retained earnings		9,293			8,943

Total shareholders’ equity	$	189,149		$	238,025
Book value per common share	$	7.80		$	8.60
Tangible book value per common share	$	7.77		$	8.57
Capital ratios (consolidated):
Total shareholders’ equity to assets		8.13	%		10.03	%
Tangible equity to tangible assets⁽⁵⁾		7.89	%		9.80	%
Tier 1 leverage		8.34	%		9.94	%
Tier 1 risk-based		12.08	%		14.55	%
Total risk-based		13.24	%		15.69	%
Basel III capital ratios⁽⁶⁾:
Tier 1 common equity		10.26	%		13.08	%
Tier 1 leverage		8.34	%		9.93	%
Tier 1 risk-based		10.87	%		13.08	%
Total risk-based		11.91	%		14.11	%


Net tangible book value per common share at December 31, 2013	$	7.77
Increase in net book value per common share attributable to new investors		0.80
Pro forma tangible book value per common share after the offering		8.57
Assumed initial public offering price		16.00

Dilution per common share to new investors from offering		(7.43	)
Additional accretion per common share as a result of conversion of preferred stock and trust preferred securities		0.21

Dilution per common share to new investors from offering and conversion	$	(7.23	)


Stage of Development	Number of Deals		Investment (in 000’s)
Seed		218	$	942,953
Early Stage		2,003		9,758,813
Expansion		984		9,838,458
Later Stage		790		8,824,734

Total		3,995	$	29,364,958


(Dollars in thousands)
	At December 31, 2013
	Loans Outstanding						Unfunded Loan Commitments					Deposit Balances
	Amount			Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Stage:
Early	$	146,096			13.44	%	$	81,611		8.35	%	$	730,511		34.68	%
Expansion		590,511			54.32			299,898		30.69			746,032		35.41
Late		143,925			13.24			163,231		16.70			223,989		10.63

Total portfolio company loans		880,532			81.00			544,740		55.74			1,700,532		80.72
Venture capital/private equity		143,468			13.20			415,830		42.55			405,870		19.26
SBA and USDA		51,510			4.74			2,388		0.25			325		0.02
Credit cards		11,575			1.06			14,304		1.46			—		—

Total		1,087,085			100.00	%	$	977,262		100.00	%	$	2,106,727		100.00	%

Less unearned income		(4,549	)

Total loans, net of unearned income	$	1,082,536


	At December 31, 2012
	Loans Outstanding						Unfunded Loan Commitments					Deposit Balances
	Amount			Percent			Amount		Percent			Amount		Percent
	(Dollars in thousands)
Stage:
Early	$	90,833			10.48	%	$	30,478		4.11	%	$	410,891		27.04	%
Expansion		492,912			56.84			254,184		34.29			619,046		40.75
Late		107,787			12.43			112,500		15.18			118,226		7.78

Total portfolio company loans	$	691,532			79.75	%		397,162		53.58			1,148,163		75.57
Venture capital/private equity		132,621			15.29			329,973		44.52			370,926		24.41
SBA and USDA		35,276			4.07			4,858		0.66			240		0.02
Credit cards		7,693			0.89			9,239		1.24			—		—

Total	$	867,122			100.00	%	$	741,232		100.00	%	$	1,519,329		100.00	%

Less unearned income		(4,041	)

Total loans, net of unearned income	$	863,081


	Lease Expiration
Headquarters/Branch:
Durham, NC		1/31/2018
Loan Production Offices:
Aliso Viejo, CA (Orange County market)
Austin, TX		6/30/2017
Campbell, CA		10/31/2015
Waltham, MA (Boston market)		12/31/2015
Denver, CO		10/31/2017
Santa Monica, CA (Los Angeles market)		11/30/2016
New York, NY		8/30/2014
San Diego, CA		12/31/2015
Seattle, WA		12/31/2015
Menlo Park, CA (Silicon Valley)		1/31/2016
Chevy Chase, MD (Washington, DC market)		12/31/2014


	Years Ended December 31,
	2013								2012								2011
	Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost			Average Balance			Interest and Dividends		Yield/ Cost
	(Dollars in thousands)
Interest-earning assets:
Federal Reserve deposits, federal funds sold and other short-term investments	$	135,372		$	361		0.27	%	$	101,209		$	284		0.28	%	$	111,784		$	341		0.31	%
Loans, net of unearned income		918,149			58,230		6.34			750,857			50,815		6.77			619,537			42,981		6.94
Nontaxable securities		193,363			8,772		4.54			90,162			4,041		4.48			4,063			125		3.07
Taxable securities		779,179			13,369		1.72			695,421			13,951		2.01			735,840			17,380		2.36

Total interest-earning assets		2,026,063			80,732		3.98			1,637,649			69,091		4.22			1,471,224			60,827		4.13

Less: Allowance for loan losses		(17,057	)							(14,217	)							(11,464	)
Noninterest-earning assets		81,836								84,094								81,354

Total assets	$	2,090,842								1,707,526								1,541,114

Interest-bearing liabilities:
Demand deposits	$	67,059			96		0.14		$	20			—		—		$	52			—		—
Money market		624,281			499		0.08			488,924			423		0.09			497,135			802		0.16
Time deposits		31,552			61		0.19			32,082			50		0.16			26,915			56		0.21

Total interest-bearing deposits		722,892			656		0.09			521,026			473		0.09			524,102			858		0.16
FHLB advances		8,015			31		0.39			7,814			24		0.31			137			—		0.35
Other borrowings		10,672			11		—			222			2		0.78			692			1		0.25
Junior subordinated debt		6,206			630		10.15			6,200			643		10.37			6,191			643		10.37

Total interest-bearing liabilities		747,785			1,328		0.18			535,262			1,142		0.21			531,122			1,502		0.28

Noninterest-bearing liabilities		1,160,175								1,027,695								894,074

Total liabilities		1,907,960								1,562,957								1,425,196
Total shareholders’ equity		182,882								144,569								115,918

Total liabilities and shareholders’ equity	$	2,090,842							$	1,707,526							$	1,541,114

Net interest income				$	79,404							$	67,949							$	59,325

Interest rate spread							3.80	%							4.01	%							3.85	%

Net interest margin							3.91	%							4.14	%							4.02	%

Ratio of average interest-earning assets to average interest-bearing liabilities							270.94	%							305.95	%							277.00	%


	Year Ended December 31, 2013 Compared to December 31, 2012
	Increase (Decrease) Due to
	Rate			Volume			Net
	(Dollars in thousands)
Interest income:
Federal Reserve deposits, federal funds sold and other short-term investments	$	(8	)	$	85		$	77
Loans, net of unearned income		(3,468	)		10,883			7,415
Nontaxable securities⁽¹⁾		754			3,977			4,731
Taxable securities		(3,043	)		2,461			(582	)

Total interest-earning assets		(5,765	)		17,406			11,641
Interest expense:
Demand deposits		—			96			96
Money market		(40	)		116			76
Time deposits		12			(1	)		11
Borrowings		(38	)		41			3

Total interest-bearing liabilities		(66	)		252			186

Change in net interest income	$	(5,699	)	$	17,154		$	11,455


	Year Ended December 31, 2012 Compared to December 31, 2011
	Increase (Decrease) Due to
	Rate			Volume			Net
	(Dollars in thousands)
Interest income:
Federal Reserve deposits, federal funds sold and other short-term investments	$	(24	)	$	(33	)	$	(57	)
Loans, net of unearned income		(764	)		8,598			7,834
Nontaxable securities⁽¹⁾		1,207			2,709			3,916
Taxable securities		(2,625	)		(804	)		(3,429	)

Total interest-earning assets		(2,206	)		10,470			8,264
Interest expense:
Demand deposits		—			—			—
Money market		(367	)		(12	)		(379	)
Time deposits		(17	)		11			(6	)
Borrowings		(669	)		694			25

Total interest-bearing liabilities		(1,053	)		693			(360	)

Change in net interest income	$	(1,153	)	$	9,777		$	8,624


	Years Ended December 31,						Change
	2013			2012			Dollars			Percent
	(Dollars in thousands)
Core banking income:
Service charges and fees	$	6,535		$	5,695		$	840			14.7	%
Foreign exchange fees		4,864			3,768			1,096			29.1
Letter of credit fees		1,247			1,048			199			19.0
Loan documentation fees		429			401			28			7.0
Client investment fees		218			188			30			16.0

Total core banking income		13,293			11,100			2,193			19.8
Net loss on sale of securities		(24	)		(358	)		334			93.3
Warrant income		3,750			(73	)		3,823			5237.0
Gain on sale of loans		2,033			2,575			(542	)		(21.0	)
Bank owned life insurance		1,073			633			440			69.5
Other		5,183			1,683			3,500			208.0

Total noninterest income	$	25,308		$	15,560		$	9,748			62.6	%


	Years Ended December 31,						Change
	2013			2012			Dollars		Percent
	(Dollars in thousands)
Equity warrant assets:
Net realized gains on equity warrants	$	4,535		$	1,502		$	3,033		201.9	%
Change in fair value		(785	)		(1,575	)		790		50.2

Warrant income (loss)	$	3,750		$	(73	)	$	3,823		5237.0	%


	At December 31,
	2013						2012						2011
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Commercial loans:
Technology	$	493,337			45.39	%	$	416,657			48.06	%	$	417,280			58.36	%
Life sciences		199,069			18.31			168,481			19.43			113,433			15.87
Venture capital/private equity		143,468			13.20			132,621			15.29			89,670			12.54
Asset-based loans		186,702			17.17			104,988			12.11			71,176			9.95
SBA and USDA		23,719			2.18			8,887			1.02			11,412			1.60
Other		1,424			0.13			1,406			0.16			948			0.13

Total commercial loans		1,047,719			96.38			833,040			96.07			703,919			98.45
Real estate loans:
SBA and USDA		27,504			2.53			26,389			3.04			6,131			0.86

Total real estate loans		27,504			2.53			26,389			3.04			6,131			0.86
Construction:
SBA and USDA		287			0.03			—			—			—			—

Total construction loans		287			0.03			—			—			—			—
Credit cards		11,575			1.06			7,693			0.89			4,936			0.69

Total loans		1,087,085			100.00	%		867,122			100.00	%		714,986			100.00	%
Less unearned income(1)		(4,549	)					(4,041	)					(4,082	)

Total loans, net of unearned income	$	1,082,536			100.00	%	$	863,081			100.00	%	$	710,904			100.00	%