Paragon’s IPO may mark 6-bagger for original investors
When starting Raleigh’s Paragon State Bank in 1999, former Centura executive Robert Hatley envisioned a bank that offered more personalized service for lawyers, doctors and business owners. He also targeted an exclusive investor base, with each original share priced at $52,500.
It’s proven to be a terrific investment as Paragon has expanded to Charlotte and Cary and survived the banking industry debacle of 2007-09 that sank many peers.
Now, Paragon Commercial Corp., the bank’s parent company, is making its shares more widely available through an IPO to raise more than $20 million.
Initial pricing is expected to be in the $33 to $35 range, according to Renaissance Capital, which tracks IPOs. After taking into account a stock split, the original investors’ shares have increased more than sixfold, Hatley says. Shares were trading June 13 for about $33, compared with the original basis of $5.25, he says.
Companies can’t say much in the days before an IPO, but the Paragon prospectus notes the bank wants to pay off debt, add more capital to enable growth and make it easier for shareholders to be able to trade their shares. At $34 a share, Paragon’s market value would be about $182 million, Renaissance said.
Paragon’s focus on small-business owners and professionals in two of the nation’s most robust metro areas has worked, with assets growing to $1.3 billion as of Dec. 31. Paragon only has three offices, enabling the bank to operate with fewer employees than peers with broad branch networks. About 70% of loans are tied to real estate, construction or land development. Profit was a record $11.2 million last year. Nonperforming loans totaled $487,000 as of March 31.
Hatley had been an executive of Wachovia and Centura Banks before leaving in 1998 to start Paragon. It expanded to Richmond, Va., in 2005 but sold its office there six years later. It added Charlotte in 2006 and Cary in 2014.
Three original directors remain on Paragon’s board: commercial real-estate broker Curtis Brewer, former Ace Hardware Inc. Chairman Howard Jung and Hatley, each of whom live in Raleigh. The board member with the most sway may be Roy Harmon, CEO and chairman of Bank of Tennessee, a subsidiary of BancTenn Corp. The closely held Kingsport, Tenn.-based banking company or its owners control about 17% of Paragon’s shares; no one else holds more than 5%. BancTenn was started by William Greene Jr., who bought two small banks in 1964 and has become one of the Volunteer State’s most successful bankers.
Raymond James and Sandler O’Neill and Partners are the main investment bankers on Paragon’s IPO.