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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on July 29, 2014

Registration No. 333-196982

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



Amendment No. 1
to

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Green Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)



Texas
(State or Other Jurisdiction of
Incorporation or Organization)
  6021
(Primary Standard Industrial
Classification No.)
  42-1631980
(I.R.S. Employer
Identification No.)

4000 Greenbriar
Houston, Texas 77098
(713) 275-8220
(Address, Including Zip Code, of Registrant's Principal Executive Offices)

John P. Durie
Executive Vice President and Chief Financial Officer
Green Bancorp, Inc.
4000 Greenbriar
Houston, Texas 77098
(713) 275-8220
(Name, Address and Telephone Number, Including Area Code, of Agent For Service)



Copies to:

Michael J. Zeidel, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
(212) 735-2000 (facsimile)

 

Sanford M. Brown
William S. Anderson
Jason M. Jean
Bracewell & Giuliani LLP
1445 Ross Avenue, Suite 3800
Dallas, Texas 75202
(214) 468-3800
(214) 758-8300 (facsimile)



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 of 1933, check the following box.     o

           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.     o

           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.     o

           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.     o

           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 under the Exchange Act. (check one)

Large accelerated filer  o

  Accelerated filer  o   Non-accelerated filer  ý   Smaller reporting company  o

CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered (1)

  Proposed Maximum
Offering Price Per
Share (2)

  Proposed Maximum
Aggregate Offering
Price (2)(3)

  Amount of
Registration Fee

 

Common Stock, $0.01 par value per share

  5,390,625   $17.00   $91,640,625   $11,803.31 (4)

 

(1)
Includes 703,125 shares subject to the underwriters' option to purchase additional shares.

(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(3)
Includes the offering price of any additional shares of common stock that the underwriters have the option to purchase.

(4)
$12,880 was previously paid in connection with the initial filing of this Registration Statement.

            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 AN 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 THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.


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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 state where the offer or sale is not permitted.

Subject to Completion, Dated July 29, 2014

PROSPECTUS

4,687,500 Shares

GRAPHIC

Green Bancorp, Inc.

Common Stock



        This is the initial public offering of shares of the common stock of Green Bancorp, Inc., the holding company for Green Bank, N.A., a national banking association headquartered in Houston, Texas.

        We are offering 4,687,500 shares of our common stock. No public market currently exists for our common stock. We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "GNBC."

        We anticipate that the initial public offering price per share of our common stock will be between $15.00 and $17.00.

        We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 and are subject to reduced public company disclosure standards.

         Investing in our common stock involves risks. See "Risk Factors" beginning on page 15 of this prospectus to read about factors you should consider before investing in our common stock.

       
 
 
  Per share
  Total
 

Initial public offering price of our common stock

  $                   $                
 

Underwriting discounts and commissions

       
 

Proceeds, before expenses, to us

       

 

        We have granted the underwriters the option to purchase up to an additional 703,125 shares of our common stock from us within 30 days of the date of this prospectus on the same terms and conditions set forth above.

         Neither the Securities and Exchange Commission, any state securities commission, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency nor any other regulatory authority has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

         These securities are not deposits, savings accounts or other obligations of any bank or savings association and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency and are subject to investment risks, including the possible loss of the entire amount you invest.

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

SANDLER O'NEILL + PARTNERS, L.P.   Jefferies

 

J.P. Morgan   RBC Capital Markets   Keefe, Bruyette & Woods
                                       
A Stifel Company



The date of this prospectus is            , 2014


GRAPHIC


Table of Contents


TABLE OF CONTENTS

 
  Page  

Forward-Looking Statements

    iii  

Summary

    1  

Risk Factors

    15  

Use of Proceeds

    36  

Capitalization

    37  

Dilution

    39  

Dividend Policy

    41  

Selected Consolidated Financial Data

    42  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    45  

Business

    81  

Regulation and Supervision

    99  

Management

    112  

Executive Compensation and Other Matters

    118  

Security Ownership of Certain Beneficial Owners and Management

    128  

Certain Relationships and Related Party Transactions

    131  

Description of Capital Stock

    134  

Shares Eligible for Future Sale

    139  

U.S. Federal Income Tax Consequences For Non-U.S. Holders

    141  

Underwriting

    144  

Legal Matters

    149  

Experts

    149  

Where You Can Find More Information

    149  

Index to Financial Statements

    F-1  



        You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf that we have referred you to. We and the underwriters have not authorized anyone to provide you with additional or different information. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. We are not making an offer of these securities in any state, country or other jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any free writing prospectus is accurate as of any date other than the date of the applicable document regardless of its time of delivery or the time of any sales of our common stock. Our business, financial condition, results of operations and cash flows may have changed since the date of the applicable document.



        This prospectus includes demographic, economic, employment, industry and trade association data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys, government agencies and other information available to us, which information may be specific to particular markets or geographic locations. Some data is also based on our good faith estimates, which are derived from management's knowledge of the industry and independent sources. Industry publications and surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe these sources are reliable, we have not independently verified the information. Statements as to our market position are based on market data currently available to us. While we are not aware of any misstatements regarding the demographic, economic, employment, industry and trade association data presented herein, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the


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heading "Risk Factors" in this prospectus. Similarly, we believe our internal research is reliable, even though such research has not been verified by any independent sources.



        As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). We will continue to be an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year following the fifth anniversary of this offering; (ii) the last day of the fiscal year in which we have more than $1.0 billion in annual revenues; (iii) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or (iv) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities. Until we cease to be an emerging growth company, we may take advantage of specified reduced reporting and other regulatory requirements generally unavailable to other public companies. Those provisions allow us to present only two years of audited financial statements, discuss only our results of operations for two years in related Management's Discussions and Analyses and provide less than five years of selected financial data in an initial public offering registration statement; to not provide an auditor attestation of our internal control over financial reporting; to choose not to comply with any new requirements adopted by the Public Company Accounting Oversight Board ("PCAOB") requiring mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and our audited financial statements; to provide reduced disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosure regarding our executive compensation; and to not seek a non-binding advisory vote on executive compensation or golden parachute arrangements. We may choose to take advantage of some or all of these reduced reporting and other regulatory requirements. We have elected in this prospectus to take advantage of the reduced disclosure requirements relating to executive compensation arrangements.

        The JOBS Act also permits an "emerging growth company" to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. However, we have "opted out" of this provision. As a result, we will comply with new or revised accounting standards to the same extent that compliance is required for non-emerging growth companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

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FORWARD-LOOKING STATEMENTS

        Forward-looking statements included in this prospectus are based on various facts and derived utilizing numerous important assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. You should understand that the following important factors could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements:

iii


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        Other factors not identified above, including those described under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," may also cause actual results to differ materially from those described in our forward-looking statements. Most of these factors are difficult to anticipate and are generally beyond our control. You should consider these factors in connection with considering any forward-looking statements that may be made by us. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

iv


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SUMMARY

         This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider in making your investment decision. You should read the following summary together with the entire prospectus, including the more detailed information regarding us, the common stock being sold in this offering and our consolidated financial statements and the related notes included elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus before deciding to invest in our common stock. Some of the statements in this prospectus constitute forward-looking statements. See "Forward-Looking Statements."

         Except where the context otherwise requires or where otherwise indicated, in this prospectus the terms "Company," "we," "us," "our," "our company" and "our business" refer to Green Bancorp, Inc. and our banking subsidiary, Green Bank, N.A., a national banking association, and the term "Bank" refers to Green Bank, N.A. In this prospectus, we refer to the Houston—Sugar Land—Baytown, Dallas—Fort Worth—Arlington and Austin—Round Rock metropolitan statistical areas as the Houston, Dallas and Austin MSAs.

Our Company

        We are a Texas focused bank holding company headquartered in Houston, Texas. Our wholly owned subsidiary, Green Bank, N.A., a nationally chartered commercial bank, provides commercial and private banking services primarily to Texas based customers through twelve full service branches in the Houston, Dallas and Austin MSAs. The Houston, Dallas and Austin MSAs are our target markets, and we believe their growing economies and attractive demographics, together with our scalable platform, provide us with opportunities for long-term and sustainable growth. Our emphasis is on continuing to expand our existing business by executing on our proven portfolio banker driven business model as well as pursuing select strategic acquisitions and attracting additional talented bankers. As of March 31, 2014, we had consolidated total assets of $1.8 billion, total loans of $1.4 billion (of which $1.39 billion were originated by us and $18.8 million were acquired), total deposits of $1.5 billion and total shareholders' equity of $203.6 million.

Our History and Growth

        We began operations as a bank holding company on December 31, 2006 when we acquired Redstone Bank, N.A. ("Redstone Bank"), a Houston community bank with two branches and $219.3 million in total assets. We were formed by our Chairman and Chief Executive Officer, Manny Mehos, who previously founded, led and sold Coastal Bancorp, Inc. after overseeing its growth from one branch and less than $11 million in assets in 1986 to 43 branches and $2.7 billion in assets in 2004, with the objective of building a commercially focused bank in attractive Texas metropolitan markets.

        We have experienced significant growth since commencing operations, while maintaining what we believe to be a healthy balance sheet. During the period from December 31, 2009 through March 31, 2014, we experienced a 37% compounded annual growth rate in total loans and a 31% compounded annual growth rate in total deposits, while extending our branch footprint from five to twelve locations and expanding our team of portfolio bankers from 21 to 50. A key aspect of our growth has been increasing our commercial and industrial loan balances, and as of December 31, 2013, we had the eleventh largest commercial and industrial loan portfolio among banks headquartered in Texas. Our scale has allowed us to leverage our infrastructure to operate our business more efficiently as evidenced by the decrease in our efficiency ratio from 103.4% for the year ended December 31, 2009 to 64.6% for the year ended December 31, 2013, while our total assets grew from $545.4 million to $1.7 billion as of December 31, 2009 and 2013, respectively. We have also increased our net income from a loss of $3.3 million in 2009 to net income of $12.6 million in 2013, while preserving a strong credit culture and

 

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conservative risk profile, as evidenced by the fact that our historical non-performing assets to total assets ratio has consistently remained below the average among all publicly traded banks in the United States, according to information obtained from SNL Financial.

Loans
(Dollars in millions)
  Deposits
(Dollars in millions)


GRAPHIC

 


GRAPHIC

Net income
(Dollars in thousands)

 

Return on Average Assets


GRAPHIC

 


GRAPHIC

        Following our acquisition of Redstone Bank, we have supplemented our organic growth and increased our total deposits by successfully completing and integrating the following acquisitions:

    OneWest Bank Asset Purchase: one branch of OneWest Bank located in the Dallas MSA with $188.4 million in total deposits, acquired in October 2010;

    Main Street Bank Asset Purchase: three branches of Main Street Bank located in the Houston MSA with $167.7 million in total deposits and $12.7 million in loans, acquired in October 2011; and

    Opportunity Bancshares, Inc. ("Opportunity Bancshares") Stock Purchase: Opportunity Bancshares with one branch located in the Dallas MSA, $44.1 million in total deposits and $25.6 million in total loans, acquired in May 2012.

        These acquisitions have provided significant strategic benefits and opportunities, including additional quality deposits which have provided funding for our lending business, new business lines which have contributed to the expansion of our product offerings and additional branches which have extended our geographic footprint and provided opportunities for consolidation of our support areas.

        In addition, we recently entered into a definitive agreement for the acquisition of SP Bancorp, Inc., which owns SharePlus Bank (together, "SharePlus"), a Texas chartered state bank headquartered in the Dallas MSA. As of March 31, 2014, SharePlus had four branches (three in the Dallas MSA and one in

 

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Kentucky), $33.1 million in stockholders' equity, $315.8 million in total assets, $273.5 million in deposits and $228.7 million in loans. See "—Recent Developments" below for more information.

Our Strategy

        Our goal is to be a leading provider of personalized commercial and private banking services to Texas businesses, entrepreneurs and individuals while capitalizing on the vibrant and growing economies of our target markets. We have made the strategic decision to focus on the Houston, Dallas and Austin MSAs because we believe these markets offer a compelling combination of economic growth, favorable demographics and desirable prospective customers.

        We employ a model that relies upon experienced bankers to originate quality loans, attract and retain low cost deposits, and generate fee income. Within this model, which we refer to as our portfolio banking model, our customers are generally assigned a dedicated portfolio banker who acts as the primary point of contact and relationship manager. We believe that this model allows us to build and maintain long-term relationships, leading to increased business opportunities and referrals, while improving our risk profile through ongoing and proactive credit monitoring and loan servicing. Our portfolio banking model has been the primary driver of our loan growth and has also helped us achieve what we believe to be a comparatively high level of average deposits per branch.

        Our target commercial customers include Texas based small and medium-sized businesses in the manufacturing, distribution, supply and energy sectors, as well as real estate investors, mortgage originators and professional firms. We offer a wide variety of banking products and services, including credit and deposit products and treasury management services. We also seek to attract traditional retail customers and to generate retail business from mass affluent individuals with the capacity to maintain significant deposit balances through a combination of diverse product offerings with attractive rates, convenient branch locations and personalized service.

        As a significant portion of our historical growth has occurred in a low interest rate environment, a key aspect of our strategy has been the maintenance of an asset-sensitive balance sheet that we believe will produce increased net interest income if market interest rates rise. As of March 31, 2014, 76.9% of our total loans were comprised of floating-rate loans, which may be subject to changes in yield as the interest rate environment changes. Our loan portfolio has grown to $1.4 billion as of March 31, 2014 from $373.0 million as of December 31, 2009, largely as a result of new loans originated by us during that period. Accordingly, our loan portfolio includes loans that we originated within the past two years, which we consider to be relatively unseasoned because of their limited payment history.

        We intend to continue our legacy of growth by executing our portfolio banker driven organic growth strategy complemented by disciplined strategic acquisitions.

        Portfolio Banker Growth Strategy.     Our portfolio banker driven growth strategy will continue to emphasize organic growth through:

    increasing the productivity of our existing portfolio bankers, as measured by loans, deposits and fee income per banker, while improving profitability by leveraging our existing scalable operating platform and lowering our cost of funding;

    hiring additional seasoned and proven bankers who will thrive within our portfolio banking model as well as opening additional branches in attractive locations within our target markets that offer strong commercial and private banking opportunities;

    providing a wide range of credit product offerings, including commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner occupied commercial properties), reserve-based energy loans, equipment financing, mortgage-warehouse

 

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      lines, residential mortgage products, loans guaranteed by the U.S. Small Business Administration ("SBA loans"), and purchased receivables financing; and

    adhering to our disciplined and sophisticated underwriting process and a portfolio banker based loan servicing model to maintain strong credit metrics and a conservative risk profile.

        Strategic Acquisitions.     We intend to supplement our organic growth by executing a disciplined acquisition strategy:

    focusing on targets with a quality loan and deposit customer base and attractive branch locations in the Houston, Dallas and Austin MSAs that possess favorable market share, low cost deposit funding, compelling noninterest income generating businesses and other unique and attractive characteristics;

    leveraging our reputation as an experienced acquirer of banks, recognizing many banks in our target markets face scale and operational challenges, regulatory burdens, management succession issues or shareholder liquidity expectations; and

    pursuing transactions that we expect will produce attractive risk-adjusted returns for our shareholders.

Our Competitive Strengths

        We believe the following competitive strengths will allow us to capitalize on our substantial market opportunity and achieve our business goals:

        Well-positioned within attractive major metropolitan markets in Texas.     We are one of the few Texas based banking franchises focused primarily on the major metropolitan markets in the state with a presence in each of the Houston, Dallas and Austin MSAs. Substantially all of our branches are strategically located within these markets in areas that we consider to be among the most attractive in terms of serving existing and attracting new customers. We believe our model will allow us to continue to capitalize on the favorable demographic and commercial characteristics of our economically robust target markets. Within these markets, we target commercial customers with annual revenues between $5 and $150 million, and we believe that we offer customers of this size a greater level of attention than our larger competitors while providing access to a broad range of sophisticated banking products that cannot be matched by most community banks. There are numerous businesses located in the markets we serve meeting this profile and we believe that we are well-positioned to attract these target customers relative to our competitors as a result of our extensive local knowledge, broad service offerings and portfolio banking model.

        Scalable portfolio banking and operational platforms with the capacity to generate and accommodate significant organic growth.     Our management team has built a capable and knowledgeable staff and made significant investments in the technology and systems necessary to build a scalable corporate infrastructure with the capacity to support continued growth, while also improving operational efficiencies. As a result of the personalized nature of our portfolio banking model, we generally expect that it will take up to five years for our portfolio bankers to reach full capacity in terms of customer relationships and profitability. As of March 31, 2014, the average tenure across our team of portfolio bankers was approximately three years, and we believe that our current team has the capacity to grow loans, deposits and fee income without significant additional overhead expense. Furthermore, we believe that our scalable credit, operational, technology and governance infrastructure will continue to allow us to efficiently and effectively manage the growth driven by our strategies. For example, our efficiency ratio has decreased from 103.4% for the year ended December 31, 2009 to 64.6% for the

 

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year ended December 31, 2013, while our total assets grew from $545.4 million to $1.7 billion as of December 31, 2009 and 2013, respectively.

        Disciplined and sophisticated credit governance process.     Our approach to credit risk management balances well-defined credit policies, disciplined underwriting criteria and ongoing risk monitoring and review processes with our portfolio banking model which demands that we respond promptly to our customers' needs. Our processes emphasize early-stage review of loans and regular credit evaluations, which supplement the ongoing and proactive credit monitoring and loan servicing provided by our portfolio bankers. This balanced team approach has allowed us to maintain strong credit metrics while executing our growth strategy, as evidenced by the fact that our historical non-performing assets to total assets ratio has consistently remained below the average among all publicly-traded banks in the United States, according to information obtained from SNL Financial. In addition, we believe our nimble and responsive credit culture and underwriting process will help us to attract and retain experienced bankers who are eager to be more responsive to customers' credit requests.

        Experienced acquirer and integrator of financial institutions.     We have developed a proven platform to identify acquisition candidates, conduct comprehensive due diligence, model financial expectations, and effectively consummate the transaction and integrate the acquired institution into our scalable infrastructure and achieve synergies. Since completing a successful capital raise in 2010, we have completed three acquisitions and have recently entered into a definitive agreement to acquire SharePlus. In addition, members of our senior management team have successfully led over 30 bank merger and acquisition transactions since the mid-1980s, including public company transactions. There are approximately 500 banks headquartered in Texas, approximately 150 of which are headquartered in our target markets. Of these 150 banks, 85 reported total assets between $100 million and $1.5 billion as of December 31, 2013. These banks provide us with opportunities to selectively pursue strategic transactions that meet our stringent financial, cultural and risk criteria to support our continued growth. We believe that becoming a publicly traded company will further enhance our ability to execute on our acquisition strategy since we will be able to offer publicly traded stock as consideration.

        Strong and experienced management team.     We are managed by a team of banking executives with complementary experience and personal attributes who have a history of managing large teams, leading acquisition and divestiture projects and managing significant growth in diverse markets and economic climates. Our four executive management team members are career bankers and each has over 25 years of banking experience, including significant experience within large, nationally recognized financial institutions. As a result, our executive management team has substantial expertise with numerous sophisticated banking products, extensive knowledge of the bank regulatory landscape, significant experience throughout numerous interest rate and credit cycles and a range of experience with banks of all sizes. We believe that this varied experience has resulted in a diverse and adaptive culture that enhances our ability to attract driven, entrepreneurial bankers as well as seasoned and capable credit professionals.

Our Market Areas

        We believe that a key factor contributing to our ability to achieve our business objectives and to create shareholder value is the attractiveness of the Texas market, including the favorable demographic and economic characteristics of our target markets within Texas.

        Texas is the second most populous state in the country with an estimated population in 2013 of 26.4 million. Population within the state grew 5.2% from April 1, 2010 to July 1, 2013, compared to growth of 2.4% for the nation as a whole during the same period according to the U.S. Census Bureau. According to SNL Financial, the five-year population growth rate for the period from 2013 to 2018 is projected to be 7.6%, compared to a 3.6% projected growth rate for the nation as a whole during the

 

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same period, and the five-year household income growth rate for the period from 2013 to 2018 is projected to be 21.7% compared to 16.1% for the nation as a whole during the same period. According to the Federal Reserve Bank of Dallas (the "Dallas Fed"), Texas led the nation in job growth for the period from 2000 to 2013, with employment increasing 24.9% compared to an increase of 4.7% for the rest of the nation. According to the Dallas Fed, a significant number of Texas jobs created during this period were in the top half of the pay scale, with 55% of new jobs falling within the two highest wage quartiles, substantially outpacing growth among these quartiles for the rest of the nation. In addition, as illustrated below, job losses resulting from the recent economic recession were substantially less severe in Texas than for the nation as a whole and Texas was among the first states to emerge from the recession, surpassing its pre-recession employment peak in 2011. By contrast, the nation as a whole has yet to restore all of the jobs lost in the recession, remaining over a million jobs short of its pre-recession high as of December 2013, according to the Dallas Fed.


Total Nonagricultural Employment in Selected
States Since the Recession Began


GRAPHIC

                       Source: The Dallas Fed

        Our primary markets are the Houston, Dallas and Austin MSAs, which we consider to be among the most attractive markets in the United States. The 2013 median household income and the projected five-year population and median household income growth rates for these MSAs are substantially greater than the nation as a whole. The following map illustrates the projected 2018 population and

 

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projected annual percentage growth in population for the period from 2013 to 2018 among Texas MSAs according to SNL Financial:

GRAPHIC

        The table below summarizes certain key demographic information relating to our target markets and our presence within these markets:

 
  Number
of
Branches (1)
  Number
of
Portfolio
Bankers (1)
  Total
Loans (1)
  Total
Deposits (1)
  2013 Total
Population (2)
  2013 - 2018
Projected
Population
Growth (3)
  2013 - 2018
Projected
Household
Income
Growth (3)
 
 
  (Dollars in millions)
 

Houston MSA

    7     25   $ 937.3   $ 983.8     6,313,158     9.1 %   28.6 %

Dallas MSA

   
4
   
20
   
344.5
   
444.6
   
6,810,913
   
8.2

%
 
26.7

%

Austin MSA

   
1
   
5
   
122.5
   
58.0
   
1,883,051
   
12.9

%
 
28.3

%

Texas

                           
26,448,193
   
7.6

%
 
21.7

%

United States

                           
316,128,839
   
3.6

%
 
16.1

%

(1)
As of March 31, 2014; excludes branches to be acquired in the SharePlus acquisition.

(2)
As of July 1, 2013, according to U.S. Census Bureau estimates.

(3)
According to SNL Financial.

 

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        Houston.     Houston ranks second in the nation as a home to Fortune 500 company headquarters, including Phillips 66, ConocoPhillips, Marathon Oil and Sysco, along with the Texas Medical Center, which is the largest health complex in the world, and benefits from a vibrant and diverse economy underpinned by a strong energy sector. The Houston MSA is the fifth largest in the country and the city of Houston is the fourth most populous city in the United States, according to 2012 U.S. Census Bureau estimates. The Houston MSA had the second highest percentage employment growth of the 12 most populous MSAs during the 12 months ended October 2013, according to the U.S. Bureau of Labor Statistics.

        Dallas.     Dallas ranks third in the nation as a home to Fortune 500 company headquarters, including ExxonMobil, AT&T, Texas Instruments and Southwest Airlines. The Dallas MSA is the fourth largest in the country and the city of Dallas is the ninth most populous city in the United States, according to 2012 U.S. Census Bureau estimates. The Dallas MSA had the highest percentage employment growth of the 12 most populous MSAs during the 12 months ended October 2013, according to the U.S. Bureau of Labor Statistics.

        Austin.     Austin is the capital of Texas, home to the University of Texas, and a major national cultural, arts, film and media center and a home to numerous company headquarters including Dell and Whole Foods Markets. The Austin MSA ranked ninth among the nation's 10 fastest growing MSAs with a 37.3% population increase between 2000 and 2010, according to 2010 U.S. Census data. The city of Austin experienced 11.8% private sector job growth over the five-year period ending October 2013, and was the only city in the nation to post double-digit percentage growth during that period. Austin was recently ranked first among the best cities for future job growth by Forbes.com.

Recent Developments

        For the three months ended June 30, 2014, we expect to report net income in the range of $4.4 million to $4.7 million as compared to $3.3 million for the three months ended June 30, 2013. We also expect to report net income in the range of $7.9 million to $8.2 million for the six months ended June 30, 2014 as compared to $6.0 million for the six months ended June 30, 2013. The increase in net income for these periods is primarily attributable to an increase in net interest income. The increase was also attributable to other factors including an increase in noninterest income and a decrease in provision for loan losses, offset by increases in noninterest expense and provision for income taxes. For the three months ended June 30, 2014, we expect to report return on average assets in the range of 1.00% to 1.05%. We also expect to report return on average assets in the range of 0.91% to 0.94% for the six months ended June 30, 2014.

        As of June 30, 2014, we expect to report consolidated total loans of approximately $1.4 billion representing a $172.7 million increase from June 30, 2013 and a $29.4 million increase from March 31, 2014. We also expect to report total deposits of approximately $1.5 billion as of June 30, 2014 representing a $50.3 million increase from June 30, 2013 and a $48.1 million increase from March 31, 2014. Changes were primarily driven by the execution of our growth strategy and the continued strength of our target markets.

        We have provided a range, rather than a specific amount, for certain of the preliminary results described above primarily because our financial closing procedures for the three and six months ended June 30, 2014 are not yet complete and, as a result, we expect that our final results upon completion of our closing procedures may vary from the preliminary estimates within the ranges as described above. We expect to complete our closing procedures with respect to the three and six months ended June 30, 2014 after the completion of this offering. Our auditors have not yet completed their review of our results for the three and six months ended June 30, 2014. The estimates were prepared by our management, based upon a number of assumptions, in connection with preparation of our financial statements and completion of the interim period review. Additional items that would require material

 

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adjustments to the preliminary financial information may be identified. Estimates of results are inherently uncertain and subject to change, and we undertake no obligation to update this information. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies," "Risk Factors—Risks Related to Our Business" and "Forward-Looking Statements."

        On May 5, 2014, we entered into a definitive agreement to acquire SP Bancorp, Inc., which owns SharePlus Bank, a Texas chartered state bank headquartered in the Dallas MSA for aggregate cash consideration of $46.2 million, subject to adjustment. SharePlus operates as a full-service commercial bank, providing services that include the acceptance of checking and savings deposits and the origination of one- to four-family residential mortgage, mortgage warehouse, commercial real estate, commercial business, home equity, automobile and personal loans. SharePlus' business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in loans and securities. As of March 31, 2014, SharePlus had four branches (three in the Dallas MSA and one in Kentucky), $33.1 million in stockholders' equity, $315.8 million in total assets, $273.5 million in deposits and $228.7 million in loans, and $177.5 million, or 77.6%, of its total loan portfolio was comprised of residential and commercial real estate loans. Subject to satisfaction of certain conditions, including receipt of SharePlus shareholder approval and customary regulatory approvals, the acquisition is expected to close before the end of 2014. Upon completion of the SharePlus acquisition, five portfolio bankers will be added to the Dallas MSA. This offering and our proposed acquisition of SharePlus are not conditioned on one another.

        Other than SharePlus, we have no current plans, arrangements or understandings to make any acquisitions. However, at any given time we may be evaluating other acquisition candidates, conducting due diligence and may have entered into one or more letters of intent. We cannot assure you that we will enter into any definitive agreements in respect of any such transaction.

Our Corporate Information

        Our principal executive offices are located at 4000 Greenbriar, Houston, Texas 77098, and our telephone number is (713) 275-8220. Our website is www.greenbank.com. The information contained on or accessible from our website does not constitute a part of this prospectus and is not incorporated by reference herein.

 

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The Offering

Common stock we are offering

  4,687,500 shares (5,390,625 shares if the underwriters exercise their option to purchase additional shares in full).

Common stock to be outstanding after this offering

 

25,467,754 shares (26,170,879 shares if the underwriters exercise their option to purchase additional shares in full).

Use of proceeds

 

We estimate that our net proceeds from the sale of the shares of common stock by us will be approximately $67.6 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, based on an assumed initial public offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus. If the underwriters exercise their option to purchase additional shares in full, the net proceeds to us will be approximately $78.1 million. We intend to use $8.0 million of the net proceeds from this offering received by us to pay a portion of the purchase price of SharePlus (see "—Recent Developments" for a description of the terms of the transaction), and to contribute all but $5.0 million of the remaining net proceeds to the Bank to be used for general corporate purposes. Other than SharePlus, we have no current plans, arrangements or understandings to make any acquisitions. However, at any given time we may be evaluating other acquisition candidates, conducting due diligence and may have entered into one or more letters of intent. We cannot assure you that we will enter into any definitive agreements in respect of any such transaction.

Dividend policy

 

We have not declared or paid any dividends on our common stock. We currently intend to retain all of our future earnings, if any, for use in our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. See "Dividend Policy."

Risk factors

 

See "Risk Factors" for a discussion of factors you should carefully consider before deciding to invest in our common stock.

 

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Registration Rights

 

Although certain of our existing shareholders currently have the ability to cause us to register the resale of their shares pursuant to a registration rights agreement, such shareholders have agreed with the underwriters not to exercise such rights for a period of at least 180 days from the date of this prospectus, subject to certain exceptions. See "Certain Relationships and Related Party Transactions—Registration Rights Agreement" and "Underwriting—Lock-Up Agreements."

Stock exchange symbol

 

We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "GNBC."



        Except as otherwise indicated, all of the information in this prospectus:

    assumes no exercise of the underwriters' option to purchase up to 703,125 additional shares of common stock from us;

    excludes 2,772,785 shares of common stock issuable upon exercise of outstanding stock options at a weighted average exercise price of $8.78 per share as of July 24, 2014;

    excludes 1,273,838 shares of our common stock issuable under our stock option plans as of July 24, 2014; and

    assumes an initial offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus.

 

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Summary Consolidated Financial Data

        The summary consolidated financial data as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 presented below have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The summary consolidated financial data set forth below as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 have been derived from our audited financial statements included elsewhere in this prospectus. The summary consolidated balance sheet data as of December 31, 2011 has been derived from our audited financial statements not included in this prospectus.

        You should read the summary consolidated financial data set forth below in conjunction with the sections entitled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

 
  As of March 31,   As of December 31,  
 
  2014   2013   2012   2011  
 
  (Dollars in thousands, except per share amounts)
 

Summary Period End Balance Sheet Data:

                         

Cash and cash equivalents

  $ 42,561   $ 34,757   $ 178,492   $ 151,190  

Investment securities

    250,878     255,515     242,261     250,526  

Goodwill

    15,672     15,672     15,672     15,672  

Core deposit intangibles, net of accumulated amortization

    923     984     1,230     1,245  

Loans held for investment

    1,404,275     1,359,415     1,204,689     891,489  

Allowance for loan losses

    15,119     16,361     14,151     10,574  

Total assets

    1,751,563     1,703,127     1,674,800     1,335,376  

Deposits

    1,486,440     1,447,372     1,461,451     1,157,634  

Other borrowed funds

    46,846     46,858     15,037     15,544  

Total shareholders' equity

    203,600     199,218     188,211     153,423  

 
  As of and for the
Three Months
Ended March 31,
  As of and for the
Years Ended December 31,
 
 
  2014   2013   2013   2012   2011  
 
  (Dollars in thousands, except per share amounts)
 

Summary Income Statement Data:

                               

Net interest income

  $ 15,676   $ 13,291   $ 57,042   $ 51,608   $ 34,662  

Provision for loan losses

    1,223     781     2,373     8,060     8,391  

Net interest income after provision for loan losses

    14,453     12,510     54,669     43,548     26,271  

Noninterest income

    1,607     1,068     4,812     5,109     2,087  

Noninterest expense

    10,597     9,415     39,965     35,742     26,459  

Net income

    3,488     2,649     12,610     8,535     1,017  

Per Share Data:

   
 
   
 
   
 
   
 
   
 
 

Earnings per common share, basic

  $ 0.17   $ 0.13   $ 0.61   $ 0.44   $ 0.06  

Earnings per common share, diluted

    0.17     0.13     0.60     0.44     0.06  

Book value per common share

    9.80     9.20     9.59     9.07     8.54  

Tangible book value per common share (1)

    9.00     8.39     8.79     8.26     7.60  

 

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  As of and for the
Three Months
Ended March 31,
  As of and for the
Years Ended December 31,
 
 
  2014   2013   2013   2012   2011  
 
  (Dollars in thousands, except per share amounts)
 

Weighted average common shares outstanding, basic

    20,775,162     20,748,173     20,748,299     19,382,053     17,970,395  

Weighted average common shares outstanding, diluted

    20,907,108     20,772,253     20,880,187     19,405,404     17,989,424  

Summary Performance Metrics:

   
 
   
 
   
 
   
 
   
 
 

Return on average assets (2)

    0.82 %   0.65 %   0.75 %   0.59 %   0.10 %

Return on average equity (2)

    7.04     5.68     6.53     5.01     0.67  

Net interest margin (3)

    3.79     3.35     3.49     3.68     3.47  

Efficiency ratio (4)

    61.31     65.57     64.61     63.67     72.00  

Loans to deposits ratio

    94.47     83.32     93.92     82.43     77.17  

Noninterest expense to average assets (2)

    2.49     2.30     2.37     2.46     2.57  

Summary Credit Quality Ratios:

   
 
   
 
   
 
   
 
   
 
 

Nonperforming assets to total assets

    1.10 %   1.77 %   1.38 %   1.70 %   0.81 %

Nonperforming loans to total loans

    0.90     1.99     1.23     1.87     0.81  

Total classified assets to total regulatory capital

    9.61     16.38     11.87     20.10     26.56  

Allowance for loan losses to total loans

    1.08     1.26     1.20     1.17     1.19  

Net charge-offs to average loans outstanding

    0.18     (0.04 )   0.01     0.43     0.72  

Capital Ratios:

   
 
   
 
   
 
   
 
   
 
 

Tier 1 capital to average assets (2)

    10.5 %   10.1 %   10.3 %   10.3 %   10.5 %

Tier 1 capital to risk-weighted assets

    11.6     12.5     11.4     12.3     12.9  

Total capital to risk-weighted assets

    12.6     13.7     12.5     13.3     14.0  

Tangible common equity to tangible assets (5)

    10.8     10.5     10.8     10.3     10.4  

Average shareholders' equity to average total assets (2)

    11.6     11.4     11.4     11.7     14.7  

(1)
We calculate tangible book value per common share as total shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization at the end of the relevant period, divided by the outstanding number of shares of our common stock at the end of the relevant period. Tangible book value per common share is a financial measure not reported in accordance with the accounting principles generally accepted in the United States ("GAAP") (a "non-GAAP financial measure"), and, as we calculate tangible book value per common share, the most directly comparable GAAP financial measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

(2)
We calculate our average assets and average equity for a period by dividing the sum of our total assets or total shareholders' equity, as the case may be, as of the close of business on each day in the relevant period, by the number of days in the period. We have calculated our return on

 

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    average assets and return on average equity for a period by dividing net income for that period (annualized) by our average assets and average equity, as the case may be, for that period.

(3)
Net interest margin represents net interest income divided by average interest-earning assets.

(4)
Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income, excluding bargain purchase gain from acquisitions. Efficiency ratio, as we calculate it, is a non-GAAP financial measure. The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

(5)
We calculate tangible common equity as total shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization. Tangible common equity to tangible assets is a non-GAAP financial measure, and, as we calculate tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total shareholders' equity to total assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

 

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RISK FACTORS

         Investing in our common stock involves a high degree of risk. Before you decide to invest in our common stock, you should carefully consider the risks described below, together with all other information included in this prospectus, including our consolidated financial statements and the related notes included elsewhere in this prospectus. We believe the risks described below are the risks that are material to us as of the date of this prospectus. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects could be materially and adversely affected. In that case, you could experience a partial or complete loss of your investment.

Risks Related to Our Business

We conduct our operations almost exclusively in Texas which imposes risks and may magnify the consequences of any regional or local economic downturn affecting Texas, including any downturn in the energy, technology or real estate sectors.

        We conduct our operations almost exclusively in Texas and, as of March 31, 2014, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/or conduct business in Texas. Likewise, as of such date, the substantial majority of our secured loans were secured by collateral located in Texas. Accordingly, we are exposed to risks associated with a lack of geographic diversification. The economic conditions in Texas significantly affect our business, financial condition, results of operations and future prospects, and any adverse economic developments, among other things, could negatively affect the volume of loan originations, increase the level of non-performing assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio. Any regional or local economic downturn that affects Texas, our existing or prospective borrowers or property values in our market areas may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically focused.

        In addition, the economies in our target markets are highly dependent on the energy sector as well as the technology and real estate sectors. In particular, a decline in the prices of crude oil or natural gas could adversely affect many of our customers. Any downturn or adverse development in the energy, technology or real estate sectors could have a material adverse impact on our business, financial condition and results of operations.

We may not be able to implement aspects of our growth strategy, which may affect our ability to maintain our historical earnings trends.

        Our strategy focuses on organic growth, supplemented by acquisitions. We may not be able to execute on aspects of our growth strategy to sustain our historical rate of growth or may not be able to grow at all. More specifically, we may not be able to generate sufficient new loans and deposits within acceptable risk and expense tolerances, obtain the personnel or funding necessary for additional growth or find suitable acquisition candidates. Various factors, such as economic conditions and competition, may impede or prohibit the growth of our operations, the opening of new branches and the consummation of acquisitions. Further, we may be unable to attract and retain experienced portfolio bankers, which could adversely affect our growth. The success of our strategy also depends on our ability to effectively manage growth, which is dependent upon a number of factors, including our ability to adapt our credit, operational, technology and governance infrastructure to accommodate expanded operations. If we fail to implement one or more aspects of our strategy, we may be unable to maintain our historical earnings trends, which could have an adverse effect on our business.

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Difficult market conditions and economic trends have adversely affected the banking industry and could adversely affect our business, financial condition and results of operations.

        We are operating in a challenging and uncertain economic environment, including generally uncertain conditions nationally and locally in our industry and markets. Although economic conditions have improved in recent years, financial institutions continue to be affected by volatility in the real estate market in some parts of the country and uncertain regulatory and interest rate conditions. We retain direct exposure to the residential and commercial real estate markets in Texas and are affected by these events.

        Our ability to assess the creditworthiness of customers and to estimate the losses inherent in our loan portfolio is made more complex by uncertain market and economic conditions. Another national economic recession or deterioration of conditions in our markets could drive losses beyond that which is provided for in our allowance for loan losses and result in the following consequences:

        While economic conditions in Texas and the U.S. continue to show signs of recovery, there can be no assurance that these conditions will continue to improve. Although real estate markets have stabilized in portions of the U.S., a resumption of declines in real estate values, home sales volumes and financial stress on borrowers as a result of the uncertain economic environment, including job losses, could have an adverse effect on our borrowers or their customers, which could adversely affect our business, financial condition and results of operations.

Our strategy of pursuing acquisitions exposes us to financial, execution and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

        We intend to continue pursuing a strategy that includes acquisitions. An acquisition strategy involves significant risks, including the following:

        The market for acquisition targets is highly competitive, which may adversely affect our ability to find acquisition candidates that fit our strategy and standards. To the extent that we are unable to find suitable acquisition targets, an important component of our growth strategy may not be realized. Acquisitions will be subject to regulatory approvals, and we may be unable to obtain such approvals. Acquisitions of financial institutions also involve operational risks and uncertainties, and acquired

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companies may have unknown or contingent liabilities with no available manner of recourse, exposure to unexpected problems such as asset quality, the retention of key employees and customers and other issues that could negatively affect our business. We may not be able to complete future acquisitions or, if completed, we may not be able to successfully integrate the operations, technology platforms, management, products and services of the entities that we acquire and to realize our attempts to eliminate redundancies. The integration process may also require significant time and attention from our management that they would otherwise be directed toward servicing existing business and developing new business. Acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future acquisition of a financial service company, and the carrying amount of any goodwill that we acquire may be subject to impairment in future periods. Failure to successfully integrate the entities we acquire into our existing operations may increase our operating costs significantly and adversely affect our business, financial condition and results of operations.

Our ability to retain our portfolio bankers and recruit additional successful portfolio bankers is critical to the success of our business strategy, and any failure to do so may adversely affect our business, financial condition and results of operations.

        Our ability to retain and grow our loans, deposits and fee income depends upon the business generation capabilities, reputation and relationship management skills of our portfolio bankers. If we were to lose the services of any of our portfolio bankers, including any successful bankers employed by acquired businesses, to a new or existing competitor or otherwise, we may not be able to retain valuable relationships and some of our customers could choose to use the services of a competitor instead of our services. Our growth strategy also relies on our ability to attract and retain profitable portfolio bankers and on the ability of our existing portfolio bankers to achieve what we believe to be their full capacity in terms of customer relationships and profitability. We may face difficulties in recruiting and retaining portfolio bankers of our desired caliber, including as a result of competition from other financial institutions. In particular, many of our competitors are significantly larger with greater financial resources, and may be able to offer more attractive compensation packages and broader career opportunities. Additionally, we may incur significant expenses and expend significant time and resources on training, integration and business development before we are able to determine whether a new portfolio banker will be profitable or effective. If we are unable to attract and retain successful portfolio bankers, or if our portfolio bankers fail to meet our expectations in terms of customer relationships and profitability, we may be unable to execute our business strategy and our business, financial condition and results of operations may be negatively affected.

The small to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower's ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

        We focus our business development and marketing strategy primarily on small to medium-sized businesses. Small to medium-sized businesses frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower's ability to repay a loan. In addition, the success of a small and medium-sized business often depends on the management talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact the Texas markets in which we operate and small to medium-sized businesses are adversely affected or our borrowers are otherwise affected by adverse business developments, our business, financial condition and results of operations may be negatively affected.

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A large portion of our loan portfolio is comprised of commercial and industrial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could increase the potential for future losses.

        As of March 31, 2014, $675.8 million, or 48.1% of our total loans, was comprised of commercial and industrial loans to businesses collateralized by general business assets including, among other things, accounts receivable, inventory and equipment and generally backed by a personal guaranty of the borrower or principal. These commercial and industrial loans are typically larger in amount than loans to individuals and, therefore, have the potential for larger losses on a single loan basis. Additionally, the repayment of commercial and industrial loans is subject to the ongoing business operations of the borrower. The collateral securing such loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipate, exposing us to increased credit risk. Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the values associated with general business assets, resulting in inadequate collateral coverage that may expose us to credit losses and could adversely affect our business, financial condition and results of operations.

Our commercial real estate and real estate construction loan portfolios expose us to credit risks that may be greater than the risks related to other types of loans.

        As of March 31, 2014, $462.9 million, or 33.0% of our total loans, was comprised of commercial real estate loans (including owner occupied commercial real estate loans) and $152.3 million, or 10.8% of our total loans, was comprised of real estate construction loans. These loans typically involve repayment dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service. The availability of such income for repayment may be adversely affected by changes in the economy or local market conditions. These loans expose a lender to greater credit risk than loans secured by other types of collateral because the collateral securing these loans is typically more difficult to liquidate. Additionally, non-owner occupied commercial real estate loans generally involve relatively large balances to single borrowers or related groups of borrowers. Unexpected deterioration in the credit quality of our non-owner occupied commercial real estate loan portfolio could require us to increase our allowance for loan losses, which would reduce our profitability and may have a material adverse effect on our business, financial condition and results of operations.

        Construction loans involve risks attributable to the fact that loan funds are secured by a project under construction, and the project is of uncertain value prior to its completion. It can be difficult to accurately evaluate the total funds required to complete a project, and construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If we are forced to foreclose on a project prior to completion, we may be unable to recover the entire unpaid portion of the loan. In addition, we may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time, any of which could adversely affect our business, financial condition and results of operations.

Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.

        As of March 31, 2014, $722.6 million, or 51.5% of our total loans, was comprised of loans with real estate as a primary or secondary component of collateral. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio. Real estate values in many Texas markets have experienced periods of fluctuation

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over the last five years. The market value of real estate can fluctuate significantly in a short period of time. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, and could result in losses that would adversely affect credit quality, financial condition and results of operation. Negative changes in the economy affecting real estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Such declines and losses could have a material adverse impact on our business, results of operations and growth prospects. If real estate values decline, it is also more likely that we would be required to increase our allowance for loan losses, which could adversely affect our business, financial condition and results of operations.

Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.

        We establish our allowance for loan losses and maintain it at a level considered adequate by management to absorb probable loan losses based on our analysis of our portfolio and market environment. The allowance for loan losses represents our estimate of probable losses in the portfolio at each balance sheet date and is based upon relevant information available to us. Our allowance for loan losses consists of a general component based upon probable but unidentified losses inherent in the portfolio and a specific component based on individual loans that are considered impaired. The general component is based on various factors including our historical loss experience, historical loss experience for peer banks, growth trends, loan concentrations, migration trends between internal loan risk ratings, current economic conditions and other qualitative factors. The specific component of the allowance for loan losses is calculated based on a review of individual loans considered impaired. The analysis of impaired losses may be based on the present value of expected future cash flows discounted at the effective loan rate, an observable market price or the fair value of the underlying collateral on collateral dependent loans. In determining the collectability of certain loans, management also considers the fair value of any underlying collateral. The amount ultimately realized may differ from the carrying value of these assets because of economic, operating or other conditions beyond our control, and any such differences may be material. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Allowance for loan losses."

        As of March 31, 2014, our allowance for loan losses was 1.08% of our total loans. Loans acquired are initially recorded at fair value, which includes an estimate of credit losses expected to be realized over the remaining lives of the loans, and therefore no corresponding allowance for loan losses is recorded for these loans at acquisition. Additional loan losses will likely occur in the future and may occur at a rate greater than we have previously experienced. We may be required to take additional provisions for loan losses in the future to further supplement the allowance for loan losses, either due to management's decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our allowance for loan losses and the value attributed to non-accrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require us to recognize future charge-offs. These adjustments may adversely affect our business, financial condition and results of operations.

The relatively unseasoned nature of a significant portion of our loan portfolio may expose us to increased credit risks.

        Our loan portfolio has grown to $1.4 billion as of March 31, 2014, from $373.0 million as of December 31, 2009. A significant portion of this increase is the result of new loans originated by us during that period. It is difficult to assess the future performance of these recently originated loans

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because our relatively limited experience with such loans does not provide us with a significant payment history from which to judge future collectability. These loans may experience higher delinquency or charge-off levels than our historical loan portfolio experience, which could adversely affect our business, financial condition and results of operations.

We have a significant amount of loans outstanding to a limited number of borrowers, which may increase our risk of loss.

        We have extended significant amounts of credit to a limited number of borrowers, and at March 31, 2014, the aggregate amount of loans to our 10 and 25 largest borrowers (including related entities) amounted to approximately $147.7 million, or 10.5% of total loans and $287.8 million, or 20.5% of total loans, respectively. At such date, none of these loans were nonperforming loans. A high amount of credit extended to a limited number of borrowers increases the risk in our loan portfolio. In the event that one or more of these borrowers is not able to make payments of interest and principal in respect of such loans, the potential loss to us is more likely to have a material adverse impact on our business, financial condition and results of operations.

A lack of liquidity could adversely affect our operations and jeopardize our business, financial condition and results of operations.

        Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, the sale of our investment securities, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our most important source of funds is deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff. If customers move money out of bank deposits and into other investments such as money market funds, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.

        Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities, and proceeds from the issuance and sale of our equity and debt securities to investors. Additional liquidity is provided by the ability to borrow from the Dallas Fed and the Federal Home Loan Bank of Dallas (the "FHLB"). We also may borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn in our target markets or by one or more adverse regulatory actions against us.

        Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.

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, could 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

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acquisitions. In addition, the Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. Importantly, regulatory capital requirements could increase from current levels, which could require us to raise additional capital or contract our operations. 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 liquidity, business, financial condition and results of operations could be materially and adversely affected.

Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.

        The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, our earnings and cash flows depend to a great extent upon the level of our net interest income, or the difference between the interest income we earn on loans, investments and other interest-earning assets, and the interest we pay on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. Additionally, an increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans and decrease loan repayment rates. A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio and increased competition for deposits. Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan origination volume, loan portfolio and our overall results. Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.

If we fail to maintain an effective system of disclosure controls and procedures and internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

        Ensuring that we have adequate disclosure controls and procedures, including internal controls over financial reporting, in place so that we can produce accurate financial statements on a timely basis is costly and time-consuming and needs to be re-evaluated frequently. Although we are currently required to provide an auditor attestation as to our internal control over financial reporting in accordance with applicable bank regulatory standards, we are in the process of documenting, reviewing and, if appropriate, improving our internal controls and procedures in anticipation of being a public company and being subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), which will require annual management assessments of the effectiveness of our internal controls over financial reporting and, when we cease to be an emerging growth company under the JOBS Act, a report by our independent auditors addressing these assessments. Our management may conclude that our internal controls over financial reporting are not effective due to our failure to cure any identified material weakness or otherwise. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may not conclude that our internal controls over financial reporting are effective.

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Although no material weaknesses were identified in connection with our internal controls over financial reporting in accordance with applicable bank regulatory standards for the year ended December 31, 2013, a significant deficiency was identified in relation to certain aspects of our internal controls in 2013. We are in the process of remediating this deficiency. Going forward, our independent registered public accounting firm may not be satisfied with our internal controls over financial reporting or the level at which our controls are documented, designed, operated or reviewed, or it may interpret the relevant requirements differently from us. In addition, during the course of the evaluation, documentation and testing of our internal controls over financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Securities and Exchange Commission (the "SEC") for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. Any such deficiencies may also subject us to adverse regulatory consequences in connection with our required submission of audited financial statements and an auditor attestation as to our internal control over financial reporting to certain of our regulators. If we fail to achieve and maintain the adequacy of our internal controls over financial reporting, as these standards are modified, supplemented or amended from time to time, we may be unable to report our financial information on a timely basis, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act, and we may suffer adverse regulatory consequences or violations of listing standards. There could also be a negative reaction in the financial markets due to a loss of investor confidence in the reliability of our financial statements.

We face strong competition from financial services companies and other companies that offer banking services, which could impact our business.

        We conduct our operations almost exclusively in Texas. Many of our competitors offer the same, or a wider variety of, banking services within our market areas. These competitors include banks with nationwide operations, regional banks and other community banks. We also face competition from many other types of financial institutions, including savings banks, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, asset-based non-bank lenders and certain other non-financial entities, such as retail stores which may maintain their own credit programs and certain governmental organizations which may offer more favorable financing or deposit terms than we can. In addition, a number of out-of-state financial intermediaries have opened production offices, or otherwise solicit deposits, in our market areas. Increased competition in our markets may result in reduced loans and deposits, as well as reduced net interest margin, fee income and profitability. Ultimately, we may not be able to compete successfully against current and future competitors. If we are unable to attract and retain banking customers, we may be unable to continue to grow our loan and deposit portfolios, and our business, financial condition and results of operations may be adversely affected.

        Our ability to compete successfully depends on a number of factors, including, among other things:

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        We also face competition for acquisition opportunities in connection with the implementation of our acquisition strategy. Because there are a limited number of acquisition opportunities in our target markets, we face competition from other banks and financial institutions, many of which possess greater financial, human, technical and other resources than we do. Our ability to compete in acquiring target institutions will depend on our available financial resources to fund the acquisitions, including the amount of cash and cash equivalents we have and the liquidity and market price of our common stock. In addition, increased competition may also drive up the acquisition consideration that we will be required to pay in order to successfully capitalize on attractive acquisition opportunities.

        Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

        While we attempt to invest a significant percentage of our assets in loans (our loan to deposit ratio was 94.5% as of March 31, 2014), we invest a percentage of our total assets (14.3% as of March 31, 2014) in investment securities with the primary objectives of providing a source of liquidity, providing an appropriate return on funds invested, managing interest rate risk, meeting pledging requirements and meeting regulatory capital requirements. As of March 31, 2014, the book value of our securities portfolio was $250.9 million. 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 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. Any of the foregoing factors could cause an other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our business, financial condition and results of operations.

Loss of our executive officers or other key employees could impair our relationship with our customers and adversely affect our business.

        Our success is dependent upon the continued service and skills of our executive management team. Our goals, strategies and marketing efforts are closely tied to the banking philosophy and strengths of our executive management, including our Chairman and Chief Executive Officer. The loss of services of any of these key personnel could have a negative impact on our business because of their skills, years of industry experience and the difficulty of promptly finding qualified replacement personnel. While we have employment agreements with our executive officers, we cannot guarantee that these executive officers or key employees will continue to be employed with us in the future.

If the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it could require charges to earnings, which would have a negative impact on our financial condition and results of operations.

        Goodwill represents the amount by which the cost of an acquisition exceeds the fair value of net assets we acquire in connection with the purchase of another financial institution. We review goodwill for impairment at least annually, or more frequently if a triggering event occurs which indicates that the carrying value of the asset might be impaired.

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        Our goodwill impairment test involves a two-step process. Under the first step, the estimation of fair value of the reporting unit is compared with its carrying value including goodwill. If step one indicates a potential impairment, the second step is performed to measure the amount of impairment, if any. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Any such adjustments are reflected in our results of operations in the periods in which they become known. As of March 31, 2014, our goodwill totaled $15.7 million. While we have not recorded any impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of our existing goodwill, or goodwill we may acquire in the future, will not result in findings of impairment and related write-downs, which may have a material adverse effect on our business, financial condition and results of operations.

System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.

        The computer systems and network infrastructure we use, including the systems and infrastructure of our third-party service providers, could be vulnerable to unforeseen problems. Our operations are dependent upon our ability to protect our computer equipment, and the information stored therein, against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes breakdowns or disruptions in our general ledger, deposit, loan and other systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, including enforcement action that could restrict our operations, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us. Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us. In addition, advances in computer capabilities could result in a compromise or breach of the systems we and our third-party service providers use to encrypt and protect customer transaction data. A failure of such security measures could have a material adverse effect on our business, financial condition and results of operations.

We have a continuing need for technological change, and we may not have the resources to effectively implement new technology, or we may experience operational challenges when implementing new technology.

        The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, at least in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our products and service offerings. We may experience operational challenges as we implement these new technology enhancements or products, which could result in us not fully realizing the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner.

        Many of our larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offer additional or superior products to those that we will be able to provide, which would put us at a competitive disadvantage. Accordingly, we may lose customers seeking new technology-driven products and services to the extent we are unable to provide such products and services.

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Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.

        We depend on a number of relationships with third-party service providers. Specifically, we receive certain third-party services including, but not limited to, core systems processing, essential web hosting and other Internet systems, our online banking services, deposit processing and other processing services. If these third-party service providers experience difficulties, or terminate their services, and we are unable to replace them with other service providers on a timely basis, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we are able to replace third-party service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.

We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.

        Employee errors and employee or customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.

        We maintain a system of internal controls to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud, as well as insurance coverage designed to protect us from material losses associated with these risks, including losses resulting from any associated business interruption. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

        In addition, we rely heavily upon information supplied by third parties, including the information contained in credit applications, property appraisals, title information, equipment pricing and valuation and employment and income documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon which we rely is misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected, or we may fund a loan that we would not have funded or on terms we would not have extended. Whether a misrepresentation is made by the applicant or another third-party, we generally bear the risk of loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsellable or subject to repurchase if it is sold prior to detection of the misrepresentation. The sources of the misrepresentations are often difficult to locate, and it is often difficult to recover any of the resulting monetary losses we may suffer.

We may be subject to environmental liabilities in connection with the foreclosure on real estate assets securing our loan portfolio.

        Hazardous or toxic substances or other environmental hazards may be located on the properties that secure our loans. If we acquire such properties as a result of foreclosure or otherwise, we could become subject to various environmental liabilities. For example, we could be held liable for the cost of cleaning up or otherwise addressing contamination at or from these properties. We could also be held liable to a governmental entity or third-party for property damage, personal injury or other claims relating to any environmental contamination at or from these properties. In addition, we own and operate certain properties that may be subject to similar environmental liability risks. Although we have policies and procedures that are designed to mitigate against certain environmental risks, we may not detect all environmental hazards associated with these properties. If we ever became subject to

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significant environmental liabilities, our business, financial condition and results of operations could be adversely affected.

Risks Related to Our Industry and Regulation

The ongoing implementation of the Dodd-Frank Act may have a material effect on our operations.

        On July 21, 2010, the Dodd-Frank Act was signed into law, and the process of implementation is ongoing. The Dodd-Frank Act imposes significant regulatory and compliance changes on many industries, including ours. There remains significant uncertainty surrounding the manner in which the provisions of the Dodd-Frank Act will ultimately be implemented by the various regulatory agencies, and the full extent of the impact of the requirements on our operations is unclear. The legal and regulatory changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, require the development of new compliance infrastructure, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. Failure to comply with the new requirements or with any future changes in laws or regulations may negatively impact our business, financial condition and results of operations. For a more detailed description of the Dodd-Frank Act, see "Regulation and Supervision—The Dodd-Frank Act."

We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, may adversely affect us.

        We are subject to extensive regulation, supervision and legal requirements that govern almost all aspects of our operations. Intended to protect customers, depositors, the Deposit Insurance Fund (the "DIF"), and the overall financial stability of the United States, these laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on the business activities in which we can engage, limit the dividend or distributions that the Bank can pay to us, restrict the ability of institutions to guarantee our debt, and impose certain specific accounting requirements on us that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than generally accepted accounting principles would require. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional compliance costs. Our failure to comply with these laws and regulations, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other penalties, any of which could adversely affect our results of operations, capital base and the price of our securities. Further, any new laws, rules and regulations could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition and results of operations.

Federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations may adversely affect us.

        Federal banking agencies, including the Office of the Comptroller of the Currency (the "OCC") and Federal Reserve, periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, a federal banking agency were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that the Company, the Bank or their respective management were in violation of any law or regulation, it may 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 the

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Company's and/or the Bank's capital, to restrict our growth, to assess civil monetary penalties against the Company, the Bank or their respective 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 the Bank's deposit insurance. If we become subject to such regulatory actions, our business, financial condition, results of operations, cash flows and reputation may be negatively impacted.

Many of our new activities and expansion plans require regulatory approvals, and failure to obtain them may restrict our growth.

        We intend to complement and expand our business by pursuing strategic acquisitions of financial institutions and other complementary businesses. Generally, we must receive federal regulatory approval before we can acquire an FDIC-insured depository institution or related business. In determining whether to approve a proposed acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, our financial condition, our future prospects and the impact of the proposal on U.S. financial stability. The regulators also review current and projected capital ratios and levels, the competence, experience and integrity of management, and its record of compliance with laws and regulations, the convenience and needs of the communities to be served (including the acquiring institution's record of compliance under the Community Reinvestment Act (the "CRA")) and the effectiveness of the acquiring institution in combating money laundering activities. Such regulatory approvals may not be granted on terms that are acceptable to us, or at all. We may also be required to sell branches as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.

        In addition to the acquisition of existing financial institutions, as opportunities arise, we plan to continue de novo branching as a part of our organic growth strategy. De novo branching and any acquisitions carry with them numerous risks, including the inability to obtain all required regulatory approvals. The failure to obtain these regulatory approvals for potential future strategic acquisitions and de novo branches may impact our business plans and restrict our growth.

Financial institutions, such as the Bank, face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

        The federal Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Department of the Treasury ("U.S. Treasury Department") to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements, and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice ("U.S. Justice Department"), Drug Enforcement Administration and Internal Revenue Service. There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC").

        In order to comply with regulations, guidelines and examination procedures in this area, we have dedicated significant resources to our anti-money laundering program. If our policies, procedures and systems are deemed deficient, we could be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plans, including acquisitions and de novo branching.

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We are subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties.

        The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The Consumer Financial Protection Bureau ("CFPB"), the U.S. Justice Department and other federal agencies are responsible for enforcing these laws and regulations. A successful challenge to an institution's performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity and restrictions on expansion activity. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation.

The FDIC's restoration plan and the related increased assessment rate could adversely affect our earnings.

        As a result of economic conditions and the enactment of the Dodd-Frank Act, the FDIC has increased the deposit insurance assessment rates and thus raised deposit premiums for insured depository institutions. If these increases are insufficient for the DIF to meet its funding requirements, further special assessments or increases in deposit insurance premiums may be required. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional financial institution failures that affect the DIF, we may be required to pay FDIC premiums higher than current levels. Our FDIC insurance related costs were $0.3 million for the three months ended March 31, 2014 and March 31, 2013. Our FDIC insurance related costs were $1.2 million for the year ended December 31, 2013, compared with $1.0 million for the year ended December 31, 2012, and $0.9 million for the year ended December 31, 2011. Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially adversely affect our business, financial condition and results of operations.

We may become subject to more stringent capital requirements.

        The Dodd-Frank Act requires the federal banking agencies to establish stricter risk-based capital requirements and leverage limits to apply to banks and bank and savings and loan holding companies. In July 2013, the federal banking agencies published the final Basel III Capital Rules (as defined below) that revised their risk-based and leverage capital requirements and their method for calculating risk-weighted assets. The Basel III Capital Rules will apply to banking organizations, including the Company and the Bank.

        As a result of the enactment of the Basel III Capital Rules, the Company and the Bank will become subject to increased required capital levels. The Basel III Capital Rules become effective as applied to the Company and the Bank on January 1, 2015, with a phase-in period that generally extends from January 1, 2015 through January 1, 2019. See "Regulation and Supervision—Regulatory Capital Requirements and Capital Adequacy—US Implementation of Basel III."

The Federal Reserve may require us to commit capital resources to support the Bank.

        The Federal Reserve, which examines the Company, requires a bank holding company to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks. Under the "source of strength" doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. Under these requirements, in the future, we could be required to provide financial assistance to the Bank if it experiences financial distress.

        Such a capital injection may be required at a time when our resources are limited and we may be required to borrow the funds to make the required capital injection. In the event of a bank holding company's bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to

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a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company's general unsecured creditors, including the holders of any note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company's business, financial condition and results of operations.

We may be adversely affected by the soundness of other financial institutions.

        Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, broker-dealers, investment banks and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated if our collateral cannot be foreclosed upon or is liquidated at prices not sufficient to recover the full amount of the credit or cover the derivative exposure due. Any such losses could have a material adverse effect on our business, financial condition and results of operations.

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

        In addition to being affected by general economic conditions, our earnings and growth are affected by the regulations and policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the U.S. money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of both the discount rate and the federal funds rate and changes in reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

        The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Although we cannot determine the effects of such policies on us at this time, such policies could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to this Offering and an Investment in our Common Stock

An active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the initial public offering price.

        Prior to this offering there has been no public market for our common stock. An active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The initial public offering price for our common stock will be determined by negotiations between us and the representatives 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 in an acquisition.

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The market price of our common stock may fluctuate significantly.

        The market price of our common stock could fluctuate significantly due to a number of factors, including, but not limited to:

        In particular, the realization of any of the risks described in this "Risk Factors" section could have a material adverse effect on the market price of our common stock and cause the value of your investment to decline. In addition, the stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock over the short, medium or long term, regardless of our actual performance. If the market price of our common stock reaches an elevated level following this offering, it may materially and rapidly decline. In the past, following periods of volatility in the market price of a company's securities, shareholders have often instituted securities class action litigation. If we were to be involved in a class action lawsuit, it could divert the attention of senior management and have a material adverse effect on our business, financial condition and results of operations.

The obligations associated with being a public company will require significant resources and management attention.

        As a public company, we will face increased legal, accounting, administrative and other costs and expenses that we have not incurred as a private company, particularly after we are no longer an emerging growth company. We expect to incur incremental costs related to operating as a public company of approximately $940,000 annually, although there can be no assurance that these costs will not be higher, particularly when we no longer qualify as an emerging growth company. After the completion of this offering, we will be subject to the reporting requirements of the Exchange Act, which requires that we file annual, quarterly and current reports with respect to our business and financial condition and proxy and other information statements, and the rules and regulations

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implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Act, the PCAOB and the NASDAQ Global Select Market, each of which imposes additional reporting and other obligations on public companies. As a public company, we will be required to:

        We expect these rules and regulations and changes in laws, regulations and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, to increase legal and financial compliance costs and make some activities more time consuming and costly. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition and results of operations. These increased costs may require us to divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives.

You will incur immediate dilution as a result of this offering.

        If you purchase our common stock in this offering, you will pay more for your shares than the net tangible book value per share immediately prior to consummation of this offering. As a result, you will incur immediate dilution of $6.00 per share representing the difference between the offering price of $16.00 and our net tangible book value per share as of March 31, 2014 after giving effect of this offering of $10.00. Accordingly, if we are liquidated at our book value, you would not receive the full amount of your investment. See "Dilution."

If securities or industry analysts change their recommendations regarding our stock or if our operating results do not meet their expectations, our stock price could decline.

        The trading market for our common stock could be influenced by the research and reports that industry or securities analysts may publish about us or our business. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock or if our operating results do not meet their expectations, either absolutely or relative to our competitors, our stock price could decline significantly.

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Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of shares of our common stock.

        Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities.

        Our Restated Certificate of Formation (with Amendments) ("certificate of formation") authorizes us to issue 90,000,000 shares of common stock, 25,467,754 of which will be outstanding upon consummation of this offering. This number includes 4,687,500 shares that we are selling in this offering, which will be freely transferable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"). Substantially all of the remaining 20,789,250 shares of our common stock outstanding, including the shares of common stock owned by the Sponsor Funds (as defined herein) and members of our management, will be restricted from immediate resale under the federal securities laws and the lock-up agreements between our executive officers, directors, the Sponsor Funds and certain other current shareholders and the underwriters which generally provide for a lock-up period of 180 days following this offering (unless the representatives of the underwriters waive such lock-up period), but may be sold in the near future. See "Underwriting." Following the expiration of the applicable lock-up period, all these shares of our common stock will be eligible for resale under Rule 144 of the Securities Act, subject to volume limitations and applicable holding period requirements. In addition, certain shareholders will have the ability to cause us to register the resale of their shares pursuant to a registration rights agreement. See "Shares Eligible for Future Sale" for a discussion of the shares of our common stock that may be sold into the public market in the future and "Certain Relationships and Related Party Transactions—Registration Rights Agreement" for a description of the registration rights agreement.

        We may issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments and pursuant to compensation and incentive plans. If any such acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our common stock or other securities in connection with any such acquisitions and investments.

        We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including shares of our common stock issued in connection with an acquisition or under a compensation or incentive plan), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock and could impair our ability to raise capital through future sales of our securities.

We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.

        Our certificate of formation authorizes us to issue up to 10,000,000 shares of one or more series of preferred stock. Our board of directors will have the authority to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our shareholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and materially adversely affect the market price and the voting and other rights of the holders of our common stock.

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We are an emerging growth company, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These exemptions allow us to, among other things, present only two years of audited financial statements and discuss only our results of operations for two years in related Management's Discussions and Analyses; to not provide an auditor attestation of our internal control over financial reporting; to choose not to comply with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and our audited financial statements; to provide reduced disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means we do not have to include a compensation discussion and analysis and certain other disclosure regarding our executive compensation; and to not seek a non-binding advisory vote on executive compensation or golden parachute arrangements. In addition, even if we comply with the greater obligations of public companies that are not emerging growth companies immediately after this offering, we may avail ourselves of these reduced requirements applicable to emerging growth companies from time to time in the future, so long as we are an emerging growth company. We will remain an emerging growth company for up to five years, though we may cease to be an emerging growth company earlier under certain circumstances, including if, before the end of such five years, we are deemed to be a large accelerated filer under the rules of the SEC (which depends on, among other things, having a market value of common stock held by non-affiliates in excess of $700 million). Investors and securities analysts may find it more difficult to evaluate our common stock because we may rely on one or more of these exemptions, and, as a result, investor confidence and the market price of our common stock may be materially and adversely affected.

An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.

        An investment in our common stock is not a bank deposit and, therefore, is not insured against loss or guaranteed by the FDIC, any other deposit insurance fund or by any other public or private entity. An investment in our common stock is inherently risky for the reasons described herein. As a result, if you acquire our common stock, you could lose some or all of your investment.

We currently have no plans to pay dividends on our common stock, so you may not receive funds without selling your common stock.

        We do not anticipate paying any dividends on our common stock in the foreseeable future. Our ability to pay dividends on our common stock is dependent on the Bank's ability to pay dividends to the Company, which is limited by applicable laws and banking regulations, and may in the future be restricted by the terms of any debt or preferred securities we may incur or issue. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs, plans for expansion and any legal or contractual limitations on our ability to pay dividends. See "Dividend Policy."

        Our primary tangible asset is the Bank. As such, we depend upon the Bank for cash distributions (through dividends on the Bank's stock) that we use to pay our operating expenses and satisfy our obligations (including debt obligations). There are numerous laws and banking regulations that limit the Bank's ability to pay dividends to the Company. If the Bank is unable to pay dividends to the Company, we will not be able to satisfy our obligations. Federal statutes and regulations restrict the Bank's ability to make cash distributions to the Company. These statutes and regulations require, among other things, that the Bank maintain certain levels of capital in order to pay a dividend. Further,

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federal banking authorities have the ability to restrict the Bank's payment of dividends through supervisory action. See "Regulation and Supervision—Regulatory Limits on Dividends and Distributions."

Our corporate organizational documents and the provisions of Texas law to which we are subject contain certain provisions that could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition of the Company that you may favor.

        Certain provisions of our certificate of formation and bylaws have an anti-takeover effect and may delay, discourage or prevent an attempted acquisition or change of control of the Company. These provisions may include:

        Our certificate of formation provides for non-cumulative voting for directors and authorizes the board of directors to issue shares of its preferred stock without shareholder approval and upon such terms as the board of directors may determine. The issuance of our preferred stock, while providing desirable flexibility in connection with possible acquisitions, financings and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from acquiring, a controlling interest in us. In addition, certain provisions of Texas law, including a provision which restricts certain business combinations between a Texas corporation and certain affiliated shareholders, may delay, discourage or prevent an attempted acquisition or change in control of the Company. Our certificate of formation prohibits shareholder action by less than unanimous written consent. See "Description of Capital Stock."

        Furthermore, banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution. These laws include the Bank Holding Company Act of 1956 (the "BHC Act"), the Change in Bank Control Act and the Savings and Loan Holding Company Act. These laws could delay or prevent an acquisition. See "Regulation and Supervision—Notice and Approval Requirements Related to Control."

Shareholders may be deemed to be acting in concert or otherwise in control of us, which could impose notice, approval and ongoing regulatory requirements and result in adverse regulatory consequences for such holders.

        We are a bank holding company regulated by the Federal Reserve. Banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution or a company that controls an FDIC-insured depository institution, such as a bank holding company. These laws include the BHC Act, the Change in Bank Control Act and the Savings and Loan Holding Company Act. The determination whether an investor "controls" a depository institution or holding company is based on all of the facts and circumstances surrounding the investment.

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        As a general matter, a party is deemed to control a depository institution or other company if the party (i) owns or controls 25% or more of any class of voting stock of the bank or other company, (ii) controls the election of a majority of the directors of the bank or other company or (iii) has the power to exercise a controlling influence over the management or policies of the bank or other company. In addition, subject to rebuttal, a party may be presumed to control a depository institution or other company if the investor owns or controls 10% or more of any class of voting stock. Ownership by affiliated parties, or parties acting in concert, is typically aggregated for these purposes. "Acting in concert" generally means knowing participation in a joint activity or parallel action towards the common goal of acquiring control of a bank or a parent company, whether or not pursuant to an express agreement. The manner in which this definition is applied in individual circumstances can vary and cannot always be predicted with certainty.

        Any shareholder that is deemed to "control" us for regulatory purposes would become subject to notice, approval and ongoing regulatory requirements and may be subject to adverse regulatory consequences. Potential investors are advised to consult with their legal counsel regarding the applicable regulations and requirements.

We have several large non-controlling shareholders, and such shareholders may independently vote their shares in a manner that you may not consider to be consistent with your best interest or the best interest of our shareholders as a whole.

        Investment funds affiliated with Friedman Fleischer & Lowe, LLC, Harvest Partners, LP and Pine Brook Road Partners, LLC each currently beneficially own approximately 24.1% of our outstanding common stock, and are each expected to beneficially own, following the completion of this offering, approximately 19.7% of our outstanding common stock, or 19.1% if the underwriters exercise their option to purchase additional shares in full. Each of these shareholders is currently subject to passivity commitments made to the Federal Reserve in connection with their investment in us in which they agreed not to, without the prior approval of the Federal Reserve, among other things, exercise or attempt to exercise a controlling influence over our management or policies, have or seek to have more than one representative serve on our board of directors or permit any representative to serve as the chairman of our board of directors or any committee thereof. However, subject to those commitments, each of these shareholders will continue to have the ability following the completion of this offering to independently vote a meaningful percentage of our outstanding common stock on all matters put to a vote of our shareholders, including the election of our board of directors and certain other significant corporate transactions, such as a merger or acquisition transaction. On any such matter, the interests of any one of these shareholders may not coincide with the interests of the other holders of our common stock and any such difference in interests may result in that shareholder voting its shares in a manner inconsistent with the interest of other shareholders.

        In addition, in connection with this offering, we will enter into a director nomination agreement with each of these shareholders that will provide for the rights of such shareholders to nominate individuals for election to our board of directors. See "Certain Relationships and Related Party Transactions—Director Nomination Agreement." Furthermore, following the termination of the lock-up period discussed under "Underwriting—Lock-Up Agreements," it is possible that one or more of these shareholders may choose to sell or otherwise dispose of all or a significant portion of the remaining shares they hold following this offering, which could adversely affect the market price of our common stock and the value of your investment in us may decrease.

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USE OF PROCEEDS

        We estimate that the net proceeds from the sale of the shares of common stock by us will be approximately $67.6 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, based on an assumed initial public offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus. If the underwriters exercise their option to purchase additional shares in full, the net proceeds to us will be approximately $78.1 million. We intend to use $8.0 million of the net proceeds from this offering received by us to pay a portion of the purchase price of SharePlus (see "Summary—Recent Developments" for a description of the terms of the transaction), and to contribute all but $5.0 million of the remaining net proceeds to the Bank to be used for general corporate purposes. Other than SharePlus, we have no current plans, arrangements or understandings to make any acquisitions. However, at any given time we may be evaluating other acquisition candidates, conducting due diligence and may have entered into one or more letters of intent. We cannot assure you that we will enter into any definitive agreements in respect of any such transaction.

        A $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds from the sale of the shares of common stock by us by approximately $4.4 million, 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 estimated offering expenses payable by us.

        A 1,000,000 share increase (decrease) in the number of shares of common stock offered by us would increase (decrease) the net proceeds from the sale of the shares of common stock by us by approximately $14.9 million, assuming an initial public offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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CAPITALIZATION

        The following table sets forth our capitalization as of March 31, 2014:

        This table should be read in conjunction with "Use of Proceeds," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

 
  As of March 31, 2014  
 
  Actual   As Adjusted  
 
  (in millions)
 

Shareholders' equity :

             

Preferred stock, par value $0.01 per share; authorized—10,000,000 shares
actual; issued and outstanding—no shares actual, no shares as adjusted

  $   $  

Common stock, par value $0.01 per share; authorized—90,000,000 shares actual;
issued and outstanding—20,780,254 shares actual, 25,467,754 shares as adjusted

    208     255  

Capital surplus

    179,344     246,909  

Retained earnings

    23,406     23,406  

Accumulated other comprehensive income (loss), net

    642     642  
           

Total shareholders' equity

  $ 203,600   $ 271,212  
           

Total capitalization

  $ 203,600   $ 271,212  
           
           

Capital Ratios

             

Tier 1 capital to average assets

    10.5 %   14.4 %

Tier 1 capital to risk-weighted assets

    11.6     16.0  

Total capital to risk-weighted assets

    12.6     17.0  

Tangible common equity to tangible assets (1)

    10.8     14.1  

Per Share Data

             

Book value per common share

  $ 9.80   $ 10.65  

Tangible book value per common share (2)

    9.00     10.00  

(1)
We calculate tangible common equity as total shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization. Tangible common equity to tangible assets is a non-GAAP financial measure, and, as we calculate tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total shareholders' equity to total assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

(2)
We calculate tangible book value per common share as total shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization at the end of the relevant period, divided by the outstanding number of shares of our common stock at the end of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate

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    tangible book value per common share, the most directly comparable GAAP financial measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

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DILUTION

Assumed initial public offering price per share of common stock

        $ 16.00  

Historical net tangible book value per share as of March 31, 2014

  $ 9.00        

Increase per share attributable to this offering

    1.00        
             

As adjusted net tangible book value per share after this offering

          10.00  
             

Dilution in net tangible book value per share to new investors (1)

        $ 6.00  
             
             

(1)
Dilution is determined by subtracting net tangible book value per share after giving effect to this offering from the initial public offering price paid by a new investor.

        A $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, would increase (decrease) the as adjusted net tangible book value per share after this offering by approximately $0.17, and dilution in net tangible book value per share to new investors by approximately $0.83, 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 estimated offering expenses payable by us. If the underwriters exercise in full their option to purchase additional shares of our common stock in this offering, the as adjusted net tangible book value after this offering would be $10.13 per share, the increase in net tangible book value to existing shareholders would be $1.13 per share and the dilution to new investors would be $5.87 per share, in each case assuming an initial public offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus.

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        The following table summarizes, as of March 31, 2014, the differences between our existing shareholders and new investors with respect to the number of shares of our common stock purchased from us, the total consideration paid and the average price per share paid. The calculations with respect to shares purchased by new investors in this offering reflect the initial public offering price of $16.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 
  Shares Purchased   Total Consideration    
 
 
  Average
Price Per
Share
 
 
  Number   Percentage   Amount   Percentage  

Previously raised capital

    20,780,254     82 % $ 183,790,218     71 % $ 8.84  

New investors

    4,687,500     18     75,000,000     29     16.00  
                       

Total

    25,467,754     100 % $ 258,790,218     100 % $ 10.16  
                       
                       

        Except as otherwise indicated, the discussion and tables above assume no exercise of the underwriters' option to purchase additional shares and no exercise of any outstanding options. If the underwriters' option to purchase additional shares is exercised in full, the number of shares of common stock held by existing shareholders will be further reduced to 71% of the total number of shares of common stock to be outstanding upon the closing of this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to 5,390,625 shares or 21% of the total number of shares of common stock to be outstanding upon the closing of this offering.

        The discussion and tables above exclude 2,772,785 shares of our common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $8.78 per share and 1,273,838 shares of common stock reserved for issuance under our stock option plans in each case as of July 24, 2014. To the extent any of these options are exercised, there will be further dilution to investors participating in this offering.

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DIVIDEND POLICY

        We have not declared or paid any dividends on our common stock. We currently intend to retain all of our future earnings, if any, for use in our business and do not anticipate paying cash dividends on our common stock in the foreseeable future. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs, plans for expansion and any legal or contractual limitations on our ability to pay dividends.

        As a bank holding company, our ability to pay dividends is affected by the policies and enforcement powers of the Federal Reserve. In addition, because we are a holding company, we are dependent upon the payment of dividends by the Bank to us as our principal source of funds to pay dividends in the future, if any, and to make other payments. The Bank is also subject to various legal, regulatory and other restrictions on its ability to pay dividends and make other distributions and payments to us. See "Regulation and Supervision—Regulatory Limits on Dividends and Distributions." In addition, in the future we may enter into borrowing or other contractual arrangements that restrict our ability to pay dividends.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The selected consolidated financial data for the three months ended March 31, 2014 and 2013 and as of March 31, 2014 presented below have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The selected consolidated financial data for the years ended December 31, 2013, 2012 and 2011 and the selected consolidated financial data as of December 31, 2013 and 2012 presented below have been derived from our audited financial statements included elsewhere in this prospectus. The selected consolidated financial data as of and for the years ended December 31, 2010 and 2009 and the selected balance sheet data as of December 31, 2011 presented below have been derived from our audited financial statements not included in this prospectus.

        You should read the selected consolidated financial data set forth below in conjunction with the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

 
  As of
March 31,
  As of December 31,  
 
  2014   2013   2012   2011   2010   2009  
 
  (Dollars in thousands, except per share amounts)
 

Selected Period End Balance
Sheet Data:

                                     

Cash and cash equivalents

  $ 42,561   $ 34,757   $ 178,492   $ 151,190   $ 163,983   $ 97,193  

Investment securities

    250,878     255,515     242,261     250,526     125,312     52,304  

Goodwill

    15,672     15,672     15,672     15,672     8,522     6,933  

Core deposit intangibles, net of
accumulated amortization

    923     984     1,230     1,245     313      

Loans held for investment

    1,404,275     1,359,415     1,204,689     891,489     555,872     372,976  

Allowance for loan losses

    15,119     16,361     14,151     10,574     7,132     4,833  

Total assets

    1,751,563     1,703,127     1,674,800     1,335,376     874,115     545,441  

Deposits

    1,486,440     1,447,372     1,461,451     1,157,634     702,318     466,710  

Other borrowed funds

    46,846     46,858     15,037     15,544     16,032     16,501  

Total shareholders' equity

    203,600     199,218     188,211     153,423     150,525     53,598  

 
  As of and for the Three Months Ended March 31,   As of and for the Years Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (Dollars in thousands, except per share amounts)
 

Selected Income
Statement Data:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Net interest income

  $ 15,676   $ 13,291   $ 57,042   $ 51,608   $ 34,662   $ 21,559   $ 13,893  

Provision for loan
losses

    1,223     781     2,373     8,060     8,391     2,940     4,467  

Net interest income
after provision for
loan losses

    14,453     12,510     54,669     43,548     26,271     18,619     9,426  

Noninterest income

    1,607     1,068     4,812     5,109     2,087     1,835     571  

Noninterest expense

    10,597     9,415     39,965     35,742     26,459     17,797     14,960  

Net income (loss)

    3,488     2,649     12,610     8,535     1,017     1,659     (3,294 )

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  As of and for the Three Months Ended March 31,   As of and for the Years Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (Dollars in thousands, except per share amounts)
 

Per Share Data
(Common Stock):

                                           

Earnings (loss) per
common share,
basic

  $ 0.17   $ 0.13   $ 0.61   $ 0.44   $ 0.06   $ 0.14   $ (0.57 )

Earnings (loss) per
common share,
diluted

    0.17     0.13     0.60     0.44     0.06     0.14     (0.57 )

Book value per
common share

    9.80     9.20     9.59     9.07     8.54     8.38     9.35  

Tangible book value per
common share (1)

    9.00     8.39     8.79     8.26     7.60     7.85     8.14  

Weighted average
common shares
outstanding, basic

    20,775,162     20,748,172     20,748,299     19,382,053     17,970,395     11,933,893     5,729,881  

Weighted average
common shares
outstanding, diluted

    20,907,108     20,772,253     20,880,187     19,405,404     17,989,424     11,936,153     5,757,473  

Selected Performance
Metrics:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Return (loss) on
average assets (2)

    0.82 %   0.65 %   0.75 %   0.59 %   0.10 %   0.26 %   (0.73 )%

Return (loss) on
average equity (2)

    7.04     5.68     6.53     5.01     0.67     1.52     (6.04 )

Net interest margin (3)

    3.79     3.35     3.49     3.68     3.47     3.50     3.24  

Efficiency ratio (4)

    61.31     65.57     64.61     63.67     72.00     76.08     103.43  

Loans to deposits ratio

    94.47     83.32     93.92     82.43     77.17     79.14     79.91  

Noninterest expense to
average assets (2)

    2.49     2.30     2.37     2.46     2.57     2.74     3.29  

Selected Credit Quality
Ratios:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Nonperforming assets
to total assets

    1.10 %   1.77 %   1.38 %   1.70 %   0.81 %   1.81 %   0.45 %

Nonperforming loans to
total loans

    0.90     1.99     1.23     1.87     0.81     2.85     0.66  

Total classified assets to
total regulatory capital

    9.61     16.38     11.87     20.10     26.56     26.21     25.76  

Allowance for loan
losses to total loans

    1.08     1.26     1.20     1.17     1.19     1.28     1.30  

Net charge-offs to
average loans
outstanding

    0.18     (0.04 )   0.01     0.43     0.72     0.15     0.86  

Capital Ratios:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Tier 1 capital to
average assets (2)

    10.5 %   10.1 %   10.3 %   10.3 %   10.5 %   17.3 %   8.2 %

Tier 1 capital to
risk-weighted assets

    11.6     12.5     11.4     12.3     12.9     22.4     10.9  

Total capital to
risk-weighted assets

    12.6     13.7     12.5     13.3     14.0     23.6     12.2  

Tangible common
equity to tangible
assets (5)

    10.8     10.5     10.8     10.3     10.4     16.4     8.7  

Average shareholders'
equity to average
total assets (2)

    11.6     11.4     11.4     11.7     14.7     16.8     12.0  

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(1)
We calculate tangible book value per common share as total shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization at the end of the relevant period, divided by the outstanding number of shares of our common stock at the end of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the most directly comparable GAAP financial measure is book value per common share. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

(2)
We calculate our average assets and average equity for a period by dividing the sum of our total assets or total shareholders' equity, as the case may be, as of the close of business on each day in the relevant period, by the number of days in the period. We have calculated our return on average assets and return on average equity for a period by dividing net income for that period (annualized) by our average assets and average equity, as the case may be, for that period.

(3)
Net interest margin represents net interest income divided by average interest-earning assets.

(4)
Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income, excluding bargain purchase gain from acquisitions. Efficiency ratio, as we calculate it, is a non-GAAP financial measure. The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

(5)
We calculate tangible common equity as total shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization. Tangible common equity to tangible assets is a non-GAAP financial measure, and, as we calculate tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total shareholders' equity to total assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures."

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Consolidated Financial Data" and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under "Forward-Looking Statements," "Risk Factors" and elsewhere in this prospectus, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.

Overview

        We are a Texas focused bank holding company headquartered in Houston, Texas. Our wholly owned subsidiary, Green Bank, N.A., a nationally chartered commercial bank, provides commercial and private banking services primarily to Texas based customers through twelve full service branches in the Houston, Dallas and Austin MSAs. The Houston, Dallas and Austin MSAs are our target markets, and we believe their growing economies and attractive demographics, together with our scalable platform, provide us with opportunities for long-term and sustainable growth. As of March 31, 2014, we had consolidated total assets of $1.8 billion, total loans of $1.4 billion (of which $1.39 billion were originated by us and $18.8 million were acquired), total deposits of $1.5 billion and total shareholders' equity of $203.6 million.

        Our emphasis is on continuing to expand our existing business by executing on our proven portfolio banker driven business model as well as pursuing select strategic acquisitions and attracting additional talented portfolio bankers. During 2012 and 2011, we completed the following acquisitions:

        In addition, we recently entered into a definitive agreement for the acquisition of SharePlus. As of March 31, 2014, SharePlus had four branches (three in the Dallas MSA and one in Kentucky), $33.1 million in stockholders' equity, $315.8 million in total assets, $273.5 million in deposits and $228.7 million in loans. See "—Recent Developments" below for more information.

        We generate most of our revenues from interest income on loans, customer service and loan fees and interest income from securities. We incur interest expense on deposits and other borrowed funds and noninterest expense such as salaries and employee benefits and occupancy expenses. Net interest income is the difference between interest income on earning assets such as loans and securities and interest expense on liabilities such as deposits and borrowings which are used to fund those assets. Net interest income is our largest source of revenue. To evaluate net interest income, we measure and monitor (1) yields on our loans and other interest-earning assets, (2) the costs of our deposits and other funding sources, (3) our net interest spread and (4) our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders' equity also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources.

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        Changes in the market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders' equity, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international conditions and conditions in domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in Texas and in the Houston, Dallas and Austin MSAs, as well as developments affecting the energy, technology and real estate sectors within these markets.

        Factors affecting the volume and cost of our deposits include changes in market interest rates and economic conditions in our target markets, as well as the ongoing execution of our balance sheet management strategy. For example, we experienced significant year over year deposit growth of 26.2% in 2012 and 64.8% in 2011, and average rates on deposits were 0.74% in 2012 and 0.86% in 2011, in part reflecting increased marketing initiatives during these periods as part of our strategic focus on deposit growth to fund future loans as opposed to cost reduction. Conversely, our deposits as of December 31, 2013 decreased by 1.0% compared to our deposits as of December 31, 2012, reflecting a shift in our focus as we sought to deploy our existing deposit-driven liquidity into loans.

        Net income was $12.6 million, $8.5 million and $1.0 million for the years ended December 31, 2013, 2012 and 2011, respectively. The change in net income during 2013 was principally due to increased interest income resulting from growth in loans and reduced provision for loan losses resulting from minimal net loan charge-offs during the period.

        Our efficiency ratio, which represents noninterest expense divided by the sum of net interest income and noninterest income, excluding bargain purchase gain from acquisitions, was 64.6% in 2013, 63.7% in 2012 and 72.0% in 2011. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease would indicate a more efficient allocation of resources. We also monitor the efficiency ratio in comparison with changes in our total assets and loans, and we believe that maintaining or reducing the efficiency ratio during periods of growth demonstrates the scalability of our operating platform. We expect to continue to benefit from our scalable platform in future periods as we believe we have already incurred a significant portion of the additional overhead expense necessary to support growth as we continue to execute our business strategy.

        Total assets were $1.8 billion as of March 31, 2014 and $1.7 billion as of December 31, 2013. Total deposits were $1.5 billion at March 31, 2014 and $1.4 billion at December 31, 2013. Total loans were $1.4 billion at March 31, 2014, an increase of $44.9 million or 3.3% compared with December 31, 2013. At March 31, 2014 and December 31, 2013, we had $8.7 million and $11.4 million, respectively, of non-accrual loans, and our allowance for loan losses was $15.1 million and $16.4 million, respectively. Shareholders' equity was $203.6 million and $199.2 million at March 31, 2014 and December 31, 2013, respectively.

Recent Developments

        For the three months ended June 30, 2014, we expect to report net income in the range of $4.4 million to $4.7 million as compared to $3.3 million for the three months ended June 30, 2013. We also expect to report net income in the range of $7.9 million to $8.2 million for the six months ended June 30, 2014 as compared to $6.0 million for the six months ended June 30, 2013. The increase in net income for these periods is primarily attributable to an increase in net interest income.The increase was also attributable to other factors including an increase in noninterest income and a decrease in provision for loan losses, offset by increases in noninterest expense and provision for income taxes. For the three months ended June 30, 2014, we expect to report return on average assets in the range of

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1.00% to 1.05%. We also expect to report return on average assets in the range of 0.91% to 0.94% for the six months ended June 30, 2014.

        As of June 30, 2014, we expect to report consolidated total loans of approximately $1.4 billion representing a $172.7 million increase from June 30, 2013 and a $29.4 million increase from March 31, 2014. We also expect to report total deposits of approximately $1.5 billion as of June 30, 2014 representing a $50.3 million increase from June 30, 2013 and a $48.1 million increase from March 31, 2014. Changes were primarily driven by the execution of our growth strategy and the continued strength of our target markets.

        We have provided a range, rather than a specific amount, for certain of the preliminary results described above primarily because our financial closing procedures for the three and six months ended June 30, 2014 are not yet complete and, as a result, we expect that our final results upon completion of our closing procedures may vary from the preliminary estimates within the ranges as described above. We expect to complete our closing procedures with respect to the three and six months ended June 30, 2014 after the completion of this offering. Our auditors have not yet completed their review of our results for the three and six months ended June 30, 2014. The estimates were prepared by our management, based upon a number of assumptions, in connection with preparation of our financial statements and completion of the interim period review. Additional items that would require material adjustments to the preliminary financial information may be identified. Estimates of results are inherently uncertain and subject to change, and we undertake no obligation to update this information. See "—Critical Accounting Policies," "Risk Factors—Risks Related to Our Business" and "Forward-Looking Statements."

        On May 5, 2014, we entered into a definitive agreement to acquire SP Bancorp, Inc., which owns SharePlus Bank, a Texas chartered state bank headquartered in the Dallas MSA for aggregate cash consideration of $46.2 million, subject to adjustment. SharePlus operates as a full-service commercial bank, providing services that include the acceptance of checking and savings deposits and the origination of one- to four-family residential mortgage, mortgage warehouse, commercial real estate, commercial business, home equity, automobile and personal loans. SharePlus' business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in loans and securities. As of March 31, 2014, SharePlus had four branches (three in the Dallas MSA and one in Kentucky), $33.1 million in stockholders' equity, $315.8 million in total assets, $273.5 million in deposits and $228.7 million in loans, and $177.5 million, or 77.6%, of its total loan portfolio was comprised of residential and commercial real estate loans. Subject to satisfaction of certain conditions, including receipt of SharePlus shareholder approval and customary regulatory approvals, the acquisition is expected to close before the end of 2014. Upon completion of the SharePlus acquisition, five portfolio bankers will be added to the Dallas MSA. This offering and our proposed acquisition of SharePlus are not conditioned on one another.

        Other than SharePlus, we have no current plans, arrangements or understandings to make any acquisitions. However, at any given time we may be evaluating other acquisition candidates, conducting due diligence and may have entered into one or more letters of intent. We cannot assure you that we will enter into any definitive agreements in respect of any such transaction.

Critical Accounting Policies

        Our significant accounting policies are integral to understanding the results reported. Our accounting policies are described in detail in Note 1 to the consolidated financial statements included elsewhere is this prospectus. We believe that of our significant accounting policies, the following may involve a higher degree of judgment and complexity:

        Loans Held for Investment —Loans held for investment are stated at the principal amount outstanding, net of the unearned discount and deferred loan fees or costs. Interest income for loans is recognized principally by the simple interest method.

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        Acquired loans are recorded at fair value as of the date of acquisition. Determining the fair value of the acquired loans involves estimating the amount and timing of future expected cash flows and discounting those cash flows at a market rate of interest. The excess of cash flows expected at acquisition over the estimated fair value is considered the accretable discount and is recognized in interest income over the remaining life of the loan on a level yield basis.

        Acquired loans with evidence of credit deterioration and the probability that all contractually required payments will not be collected as of the date of acquisition are accounted for in accordance with ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected is considered the non-accretable discount. The non-accretable discount represents the future credit losses expected to be incurred over the life of the loan. Subsequent increases in the expected cash flows will result in a recovery of any previously recorded allowance for loan losses and a reclassification from non-accretable discount to accretable discount.

        Allowance for loan losses —The allowance for loan losses is maintained at a level that management estimates to be appropriate to absorb probable credit losses in the portfolio as of the balance sheet date. This estimate involves numerous assumptions and judgments. Management utilizes a calculation methodology that includes both quantitative and qualitative factors and applies judgment when establishing the factors utilized in the methodology and in assessing the overall adequacy of the calculated results.

        The allowance for loan losses is a valuation allowance for losses incurred on loans. All losses are charged to the allowance when the loss actually occurs or when a determination is made that a loss is probable. Recoveries are credited to the allowance at the time of recovery. Our allowance for loan losses consists of two components, including a general component based upon probable but unidentified losses inherent in the portfolio and a specific component on individual loans that are considered impaired.

        The general component of the allowance for loan losses related to probable but unidentified losses inherent in the portfolio is based on various factors, including our historical loss experience, historical loss experience for peer banks, growth trends, loan concentrations, migration trends between internal loan risk ratings, current economic conditions and other qualitative factors. The other qualitative factors considered may include changes in lending policies and procedures, changes in the experience and ability of lending and credit staff and management, changes in the quality of the loan review system and other factors.

        To arrive at the general component of the allowance, loans are first separated into originated and acquired groups and then further separated by loan type for each group. The factors described above are calculated for the applicable loan groups and for each loan type within the applicable group and then applied to the loan balance by type to calculate the general reserve. The actual loss factor is based on our actual three year loss history as a percentage of loans by type. A peer loss factor is calculated by weighting our actual loss history and that of our peer banks as a percentage of loans by type for the same historical three year period. A peer loss factor is added to increase the allowance if our actual loss history is less than the calculated peer loss factor. Additional factors are evaluated based on our loan growth when compared to prior year growth, loan concentrations in groups of similar loan types, migration in our loans by internal risk grade and the level of monitored and classified loans to capital. Management also evaluates various economic indicators, such as state and national unemployment, initial jobless claims, consumer confidence, natural gas price, GDP and a composite city home price index, to establish an economic factor.

        The specific component of the allowance for loan losses is calculated based on a review of individual loans considered impaired. The analysis of impaired loans may be based on the present value of expected future cash flows discounted at the effective loan rate, an observable market price or the fair value of the underlying collateral on collateral dependent loans. In determining the collectability of certain loans, management also considers the fair value of any underlying collateral. The amount

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ultimately realized may differ from the carrying value of these assets because of economic, operating or other conditions beyond our control.

        Throughout the year, management estimates the probable level of losses to determine whether the allowance for loan losses is adequate to absorb inherent losses in the existing portfolio. Based on these estimates, an amount is charged to the provision for loan losses and credited to the allowance for loan losses in order to adjust the allowance to a level determined to be adequate to absorb inherent losses. If economic conditions or borrower behavior deviate substantially from the assumptions utilized in the allowance calculation, increases in the allowance may be required.

        Estimates of loan losses involve an exercise of judgment. While it is reasonably possible that in the near term we may sustain losses which are substantial relative to the allowance for loan losses, it is the judgment of management that the allowance for loan losses reflected in the most recent consolidated balance sheet is adequate to absorb probable losses that exist in the current loan portfolio.

        Goodwill and Other Intangibles —Goodwill has an indefinite useful life and is subject to an annual impairment test and more frequently if a triggering event occurs indicating that it is more likely than not that the fair value of the Company, which is our only reporting unit, is below the carrying value of its equity. We completed our annual impairment analysis of goodwill as of December 31, 2013, and based on this analysis, we do not believe any of our goodwill is impaired as of such date because the fair value of our equity substantially exceeded its carrying value. The goodwill impairment test involves a two-step process. Under the first step, the estimation of fair value of the reporting unit is compared with its carrying value, including goodwill. If step one indicates a potential impairment, the second step is performed to measure the amount of impairment, if any. Goodwill impairment exists when the implied fair value of goodwill is less than its carrying value. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. As part of our impairment analysis, we use a variety of methodologies in determining the fair value of the reporting unit, including cash flow analyses that are consistent with the assumptions management believes hypothetical marketplace participants would use.

        Core deposit intangibles are amortized on an accelerated basis over the years expected to be benefited, which we estimate to be approximately six to eight years.

        Emerging Growth Company —Pursuant to the JOBS Act, an emerging growth company can elect to opt in to any new or revised accounting standards that may be issued by the Financial Accounting Standards Board ("FASB") or the SEC otherwise applicable to non-emerging growth companies. We have elected to opt in to such standards, which election is irrevocable.

        Although we are still evaluating the JOBS Act, we may take advantage of some of the reduced regulatory and reporting requirements that are available to us so long as we qualify as an emerging growth company, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.

Recently Issued Accounting Pronouncements

        FASB Accounting Standards Update ("ASU") 2011-02, "A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring." ASU 2011-02 was issued on April 5, 2011 and provides additional guidance or clarification to help determine whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. Disclosures that relate to activity during a reporting period were required for our financial statements that include periods beginning on or after January 1, 2012. The required disclosures are presented in Note 5 to our audited financial statements included elsewhere in this prospectus.

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        FASB ASU No. 2011-05, "Comprehensive Income (Topic 220)—Presentation of Comprehensive Income." Under ASU 2011-05, an entity has the option to present the total of comprehensive income the components of net income and the components of other operating income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total of other comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as a part of the statement of changes in shareholders' equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 was effective for us on January 1, 2012. We elected to prepare separate consolidated statements of comprehensive income.

        FASB ASU No. 2011-08, "Testing Goodwill for Impairment," amends the guidance in FASB ASC 350-20. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step one of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is, more likely than not, to be less than the carrying amount, the two-step impairment test would be required. The adoption of ASU 2011-08 became effective for us on January 1, 2012, and our adoption did not have a significant impact on our financial statements.

        FASB ASU No. 2013-02, " Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ," amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. The adoption of ASU 2013-02 becomes effective prospectively for us for reporting periods beginning after December 15, 2013.

        FASB ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists," updates prior guidance. The update requires that an unrecognized tax benefit be presented in the statements of financial condition as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the statements of financial condition as a liability and should not be combined with deferred tax assets. The adoption of this ASU becomes effective for us for reporting periods beginning after December 15, 2013.

        FASB ASU No. 2014-04, "Receivables—Troubled Debt Restructuring by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure," clarifies when an in substance foreclosure occurs, that is, when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. This is the point when the consumer mortgage loan should be derecognized and the real property recognized. The adoption of the ASU becomes effective for us for reporting periods beginning after December 31, 2014 and early adoption is permitted.

Results of Operations

Net Interest Income

        Our operating results depend primarily on our net interest income, which is the difference between interest income on interest-earning assets, including loans and securities, and interest expense incurred on interest-bearing liabilities, including deposits and other borrowed funds. Interest rate fluctuations, as well as changes in the amount and type of interest-earning assets and interest-bearing liabilities,

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combine to affect net interest income. Our net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as a "volume change." 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 a "rate change."

        Three months ended March 31, 2014 compared with three months ended March 31, 2013.     Net interest income before the provision for loan losses for the three months ended March 31, 2014 was $15.7 million compared with $13.3 million for the three months ended March 31, 2013, an increase of $2.4 million or 18.0%. The increase in net interest income was primarily due to an increase in average loans outstanding of $193.7 million, or 16.4%, the 3.81% decrease in the average rate on other borrowed funds, the 22 basis point decrease in the rate on interest-bearing demand and savings deposits, and the decrease in average interest-bearing demand and savings deposits of $67.8 million, or 10.1%, partially offset by the 24 basis point decrease in the average yield on the loan portfolio. The increase in average loans outstanding was due to the execution of our growth strategy and the continued strength of our target markets. The decrease in the rate on and volume of interest-bearing demand and savings deposits were due to efforts to reduce cost of funding. The decrease in the average yield on the loan portfolio was due to lower rates on new and renewed loans as a result of market conditions.

        Interest income was $18.1 million in the three months ended March 31, 2014, an increase of $1.9 million over the three months ended March 31, 2013. Interest income on loans was $17.0 million for the first quarter of 2014, an increase of $1.7 million or 11.0% compared with the first quarter of 2013 due to the increase in average loans outstanding, slightly offset by the decrease in the average yield on the loan portfolio. Interest income on securities was $1.0 million during the first quarter of 2014, an increase of $0.3 million over the first quarter of 2013 due to an increase of $19.1 million in the average securities portfolio and a 34 basis point increase in the average yield on the securities portfolio.

        Interest expense was $2.4 million for the first quarter of 2014, a decrease of $0.5 million over the first quarter of 2013. Average interest-bearing demand deposits increased $7.7 million for the first quarter of 2014 compared to the first quarter of 2013 and the average rate on interest-bearing demand deposits decreased from 0.26% to 0.22% for the same period, resulting in a less than $0.1 million increase in related interest expense. Average money market and savings deposits decreased $75.4 million for the first quarter of 2014 compared to the first quarter of 2013 and the average rate on money market and savings deposits decreased from 0.65% to 0.41%, resulting in a decrease of interest expenses of $0.4 million. Average certificates and other time deposits increased $34.6 million for the first quarter of 2014 compared to the first quarter of 2013 and the average rate decreased from 1.35% to 1.28% for the same period, resulting in an increase in related interest expense of less than $0.1 million. During the first quarter of 2014, average noninterest-bearing deposits increased $36.1 million from $239.5 million during the first quarter of 2013 to $275.6 million. Total cost of funds decreased 17 basis points to 0.65% for the first quarter of 2014 from 0.82% for the first quarter of 2013.

        Net interest margin, defined as net interest income divided by average interest-earning assets, for the first quarter of 2014 was 3.79%, an increase of 44 basis points compared with 3.35% for the first quarter of 2013.

        Year ended December 31, 2013 compared with year ended December 31, 2012.     Net interest income before the provision for loan losses for 2013 was $57.0 million compared with $51.6 million for 2012, an increase of $5.4 million or 10.5%. The increase in net interest income was primarily due to the increase in average loans outstanding of $181.7 million, or 17.1%, partially offset by a 28 basis point decrease in the average yield on the loan portfolio and the increase in average interest-bearing deposits outstanding of $180.2 million. The increase in average loans outstanding was due to the execution of our growth

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strategy and the continued strength of our target markets. The decrease in the average yield on the loan portfolio was primarily due to lower interest rates on new and renewed loans due to market factors. The increase in average interest-bearing deposits included $89.2 million in money market deposits, $58.6 million in time deposits and approximately $33.1 million resulting from acquired deposits.

        Interest income was $68.5 million in 2013, an increase of $6.9 million over 2012. Interest income on loans was $64.4 million for 2013, an increase of $6.4 million or 11.0% compared with 2012 due to the increase in average loans outstanding, partially offset by the decrease in the average yield on the loan portfolio. Interest income on securities was $3.4 million during 2013, an increase of $0.4 million over 2012 due to an 8 basis point increase in the average yield on the securities portfolio and an increase in the average securities portfolio of $14.2 million.

        Interest expense was $11.4 million for 2013, an increase of $1.4 million over 2012. Average interest-bearing demand deposits increased $103.8 million for 2013 compared to 2012 (approximately $15.3 million of the increase resulted from acquired interest-bearing demand deposits) and the average rate on interest-bearing demand deposits decreased from 0.55% to 0.50% for the same time period, resulting in a $0.2 million increase in related interest expense. Average certificates and other time deposits increased $76.4 million for 2013 compared to 2012 (approximately $17.8 million of the increase resulted from acquired certificates and other time deposits) and the average rate increased from 1.28% to 1.36% for the same time period resulting in an increase in related interest expense of $1.4 million. During 2013, average noninterest-bearing deposits increased $36.0 million from $224.4 million during 2012 to $260.4 million during 2013 (approximately $3.1 million of the increase resulted from acquired non-interest-bearing deposits). Total cost of funds decreased one basis point to 0.77% for the year ended December 31, 2013 from 0.78% for the year ended December 31, 2012.

        Net interest margin, defined as net interest income divided by average interest-earning assets, for 2013 was 3.49%, a decrease of 19 basis points compared with 3.68% for 2012.

        Year ended December 31, 2012 compared with year ended December 31, 2011.     Net interest income before the provision for loan losses for 2012 was $51.6 million compared with $34.7 million for 2011, an increase of $16.9 million or 48.9%. The increase in net interest income was primarily due to an increase in average loans outstanding of $370.6 million, or 53.6%, and the decrease in the average rate on interest-bearing liabilities from 1.11% to 0.95%, partially offset by a 26 basis point decrease in the average yield on the loan portfolio and a $332.1 million increase in average interest-bearing deposits. The increase in average loans outstanding was due to the execution of our growth strategy and the continued strength of our target markets. The decrease in the average rate on interest-bearing liabilities was primarily due to declines in rates paid on deposit accounts. The decrease in the average yield on the loan portfolio was primarily due to lower interest rates on new and renewed loans due to market factors. The increase in average interest-bearing deposits included $126.3 million resulting from acquired deposits, $124.5 million in money market deposits and $87.1 million in time deposits.

        Interest income was $61.6 million in 2012, an increase of $18.9 million over 2011. Interest income on loans was $58.0 million for 2012, an increase of $18.5 million or 46.7% compared with 2011 due to the increase in average loans outstanding, slightly offset by the decrease in the average yield on the loan portfolio. Interest income on securities was $3.0 million during 2012, an increase of $0.6 million over 2011 due to an increase of $82.7 million in the average securities portfolio, partially offset by a 32 basis point decrease in the average yield on the securities portfolio.

        Interest expense was $10.0 million in 2012, an increase of $1.9 million over 2011. Average interest-bearing demand deposits increased $173.7 million for 2012 compared to 2011 (approximately $55.0 million of the increase resulted from acquired interest-bearing demand deposits) notwithstanding a decrease in the average rate on interest-bearing demand deposits from 0.67% to 0.55% for the same time period resulting in a $0.5 million increase in related interest expense. Average certificates and

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other time deposits increased $158.4 million for 2012 compared to 2011 (approximately $71.3 million of the increase resulted from acquired certificates and other time deposits) and the average rate decreased from 1.46% to 1.28% for the same time period resulting in an increase in related interest expense of $1.4 million. During 2012, average noninterest-bearing deposits increased $70.6 million (approximately $16.9 million of the increase resulted from acquired noninterest-bearing deposits) from $153.8 million during 2011 to $224.4 million during 2012. This increase in noninterest-bearing funds contributed to a decrease in total cost of funds to 0.78% during 2012 from 0.92% during 2011.

        Net interest margin, defined as net interest income divided by average interest-earning assets, for 2012 was 3.68%, an increase of 21 basis points compared with 3.47% for 2011.

        The following table presents, for the periods indicated, the total dollar amount of average balances, interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. All average balances are daily average balances. Any nonaccruing loans have been included in the table as loans carrying a zero yield.

 
  For the Three Months Ended March 31,  
 
  2014   2013  
 
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
 
 
  (Dollars in thousands)
 

Assets

                                     

Interest-earning assets:

                                     

Loans, including fees

  $ 1,374,230   $ 16,976     5.01 % $ 1,180,529   $ 15,288     5.25 %

Securities

    255,039     1,029     1.64     235,944     758     1.30  

Other investments

    9,021     78     3.51     6,343     78     4.99  

Federal funds sold

    596         0.00     781         0.00  

Interest-earning deposits in financial institutions        

    36,621     24     0.27     184,470     121     0.27  
                           

Total interest-earning assets

    1,675,507     18,107     4.38 %   1,608,067     16,245     4.10 %
                           

Allowance for loan losses

    (16,792 )               (14,566 )            

Noninterest-earning assets

    69,815                 66,034              
                                   

Total assets

  $ 1,728,530               $ 1,659,535              
                                   
                                   

Liabilities and Shareholders' Equity

                                     

Interest-bearing liabilities:

                                     

Interest-bearing demand and savings deposits

  $ 603,653   $ 577     0.39 % $ 671,410   $ 1,017     0.61 %

Certificates and other time deposits

    572,389     1,810     1.28     537,831     1,786     1.35  

Securities sold under agreements to repurchase

    6,234     2     0.13     2,171     1     0.19  

Other borrowed funds

    64,338     42     0.26     14,951     150     4.07  
                           

Total interest-bearing liabilities

    1,246,614     2,431     0.79 %   1,226,363     2,954     0.98 %
                           

Noninterest-bearing liabilities:

                                     

Noninterest-bearing demand deposits

    275,584                 239,464              

Other liabilities

    5,314                 4,601              
                                   

Total liabilities

    1,527,512                 1,470,428              
                                   

Shareholders' equity

    201,018                 189,107              
                                   

Total liabilities and shareholders' equity

  $ 1,728,530               $ 1,659,535              
                                   
                                   

Net interest rate spread

                3.59 %               3.12 %

Net interest income and margin (1)

        $ 15,676     3.79 %       $ 13,291     3.35 %
                                   
                                   

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  For the Years Ended December 31,  
 
  2013   2012   2011  
 
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
 
 
  (Dollars in thousands)
 

Assets

                                                       

Interest-earning assets:

                                                       

Loans, including fees

  $ 1,244,106   $ 64,404     5.18 % $ 1,062,431   $ 58,037     5.46 % $ 691,847   $ 39,561     5.72 %

Securities

    247,114     3,371     1.36     232,924     2,977     1.28     150,236     2,408     1.60  

Other investments

    6,315     313     4.96     6,057     285     4.71     5,147     246     4.78  

Federal funds sold

    1,127     1     0.09     1,479     2     0.14     1,326     2     0.15  

Interest-earning deposits in financial institutions        

    137,106     370     0.27     100,997     280     0.28     150,281     482     0.32  
                                       

Total interest-earning assets

    1,635,768     68,459     4.19 %   1,403,888     61,581     4.39 %   998,837     42,699     4.27 %
                                       

Allowance for loan losses

    (14,974 )               (12,907 )               (9,301 )            

Noninterest-earning assets

    67,047                 61,634                 41,764              
                                                   

Total assets

  $ 1,687,841               $ 1,452,615               $ 1,031,300              
                                                   
                                                   

Liabilities and Shareholders' Equity

                                                       

Interest-bearing liabilities:

                                                       

Interest-bearing demand and savings deposits

  $ 640,448   $ 3,210     0.50 % $ 536,669   $ 2,973     0.55 % $ 362,920   $ 2,447     0.67 %

Certificates and other time deposits

    574,294     7,789     1.36     497,923     6,381     1.28     339,536     4,949     1.46  

Securities sold under agreements to repurchase

    3,203     5     0.16     3,109     5     0.16     4,514     6     0.13  

Other borrowed funds

    10,593     413     3.90     15,330     614     4.01     15,770     635     4.03  
                                       

Total interest-bearing liabilities

    1,228,538     11,417     0.93 %   1,053,031     9,973     0.95 %   722,740     8,037     1.11 %
                                       

Noninterest-bearing liabilities:

                                                       

Noninterest-bearing demand deposits

    260,446                 224,441                 153,827              

Other liabilities

    5,723                 4,624                 2,940              
                                                   

Total liabilities

    1,494,707                 1,282,096                 879,507              
                                                   

Shareholders' equity

    193,134                 170,519                 151,793              
                                                   

Total liabilities and shareholders' equity

  $ 1,687,841               $ 1,452,615               $ 1,031,300              
                                                   
                                                   

Net interest rate spread

                3.26 %               3.44 %               3.16 %

Net interest income and margin (1)

        $ 57,042     3.49 %       $ 51,608     3.68 %       $ 34,662     3.47 %
                                                   
                                                   

(1)
The net interest margin is equal to net interest income divided by average interest-earning assets.

        The following table presents information regarding the dollar amount of changes in interest income and interest expense for the periods indicated for each major component of interest-earning assets and interest-bearing liabilities and distinguishes between the changes attributable to changes in volume and changes attributable to changes in interest rates. For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated to rate.

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  For the Three Months Ended March 31,   For the Years Ended December 31,  
 
  2014 vs. 2013   2013 vs. 2012   2012 vs. 2011  
 
  Increase
(Decrease)
Due to Change in
   
  Increase
(Decrease)
Due to Change in
   
  Increase
(Decrease)
Due to Change in
   
 
 
  Volume   Rate   Total   Volume   Rate   Total   Volume   Rate   Total  
 
  (Dollars in thousands)
 

Interest-earning assets:

                                                       

Loans, including fees

  $ 2,508   $ (820 ) $ 1,688   $ 9,924   $ (3,557 ) $ 6,367   $ 21,191   $ (2,715 ) $ 18,476  

Securities

    61     210     271     181     213     394     1,325     (756 )   569  

Other investments

    33     (33 )       12     16     28     43     (4 )   39  

Federal funds sold

                    (1 )   (1 )            

Interest-earning deposits in financial institutions

    (97 )       (97 )   100     (10 )   90     (158 )   (44 )   (202 )
                                       

Total increase (decrease) in interest income

    2,505     (643 )   1,862     10,217     (3,339 )   6,878     22,401     (3,519 )   18,882  
                                       
                                       

Interest-bearing liabilities:

                                                       

Interest-bearing demand and savings deposits

    (103 )   (337 )   (440 )   575     (338 )   237     1,172     (646 )   526  

Certificates and other time deposits

    115     (91 )   24     979     429     1,408     2,309     (877 )   1,432  

Securities sold under agreements to repurchase

    2     (1 )   1                 (2 )   1     (1 )

Other borrowings

    495     (603 )   (108 )   (190 )   (11 )   (201 )   (18 )   (3 )   (21 )
                                       

Total increase (decrease) in interest expense

    509     (1,032 )   (523 )   1,364     80     1,444     3,461     (1,525 )   1,936  
                                       

Increase (decrease) in net interest income

  $ 1,996   $ 389   $ 2,385   $ 8,853   $ (3,419 ) $ 5,434   $ 18,940   $ (1,994 ) $ 16,946  
                                       
                                       

Provision for loan losses

        Our provision for loan losses is established through charges to income in the form of the provision in order to bring our allowance for loan losses to a level deemed appropriate by management based on the factors discussed under "—Financial Condition—Allowance for loan losses." The allowance for loan losses at March 31, 2014 was $15.1 million, representing 1.08% of total loans as of such date. Loans acquired were recorded at fair value based on a discounted cash flow valuation methodology.

        The provision for loan losses for the three months ended March 31, 2014 was $1.2 million compared with $0.8 million for the three months ended March 31, 2013. This increase was due to loan growth and the change in net charge-offs described below. Net charge-offs for the three months ended March 31, 2014 were $2.5 million compared to net recoveries of $0.5 million for the three months ended March 31, 2013. This increase reflected an increase in gross charge-offs from $0.2 million for the three months ended March 31, 2013 to $2.5 million for the three months ended March 31, 2014 and a decrease in recoveries from $0.7 million for the three months ended March 31, 2013 to less than $0.1 million for the three months ended March 31, 2014. The gross charge-offs recorded during 2014 are principally related to one relationship which was fully reserved at December 31, 2013 comprised of a $1.2 million commercial and industrial loan and two consumer loans totaling $1.3 million.

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        The provision for loan losses for the year ended December 31, 2013 was $2.4 million compared with $8.1 million for the year ended December 31, 2012. This decrease was due to minimal loan losses during the period. Net charge-offs for the years ended December 31, 2013 and 2012 were $0.2 million and $4.5 million, respectively. This decrease of 96.4% reflected a decrease in gross charge-offs from $4.6 million for the year ended December 31, 2012 to $1.5 million for the year ended December 31, 2013 and an increase in recoveries from $0.1 million for the year ended December 31, 2012 to $1.3 million for the year ended December 31, 2013. Of the gross charge-offs recorded during 2012, $2.3 million is comprised of partial charge-offs at the time of foreclosure of two commercial real estate loans. The increase in recoveries in 2013 is due to management's ongoing recovery efforts post charge-off, which resulted in recoveries in three commercial and industrial loans totaling $0.9 million. The provision for loan losses and net charge-offs for the year ended December 31, 2011 were $8.4 million and $4.9 million, respectively.

Noninterest Income

        Our primary sources of recurring noninterest income are customer service fees, loan fees, gains on the sale of loans and available-for-sale securities and other service fees. Noninterest income does not include loan origination fees which are recognized over the life of the related loan as an adjustment to yield using the interest method.

        For the three months ended March 31, 2014, noninterest income totaled $1.6 million, an increase of $0.5 million or 50.5% compared with the three months ended March 31, 2013. This increase was primarily due to increases in loan fees, gains on sale of guaranteed portion of SBA loans and customer service fees.

        For the year ended December 31, 2013, noninterest income totaled $4.8 million, a decrease of $0.3 million or 5.8% compared with 2012. This decrease was primarily due to non-recurring gains on the sale of available-for-sale securities and a bargain purchase gain realized in 2012, partially offset by gain on the sale of the guaranteed portion of SBA loans and increases in loan and customer service fees. For the year ended December 31, 2012, noninterest income totaled $5.1 million, an increase of $3.0 million or 144.8% compared with $2.1 million in 2011. The increase was primarily due to increased gain on the sale of available-for-sale securities, an increase in customer service fees principally resulting from an increase in the volume of bankruptcy trustee accounts and debit card transactions, bargain purchase gain recognized in connection with the Opportunity Bancshares acquisition and an increase in other noninterest income including increases in swap fees and referral fees.

        The following table presents, for the periods indicated, the major categories of noninterest income:

 
  For the Three Months Ended March, 31   For the Years Ended
December 31,
 
 
  2014   2013   2013   2012   2011  
 
  (Dollars in thousands)
 

Customer service fees

  $ 531   $ 430   $ 1,826   $ 1,699   $ 1,048  

Loan fees

    550     309     1,270     930     543  

Gain (loss) on sale of available-for-sale securities, net

            (7 )   950     95  

Gain on sale of guaranteed portion of loans

    430     257     1,229         95  

Bargain purchase gain

                578      

Other

    96     72     494     952     306  
                       

Total noninterest income

  $ 1,607   $ 1,068   $ 4,812   $ 5,109   $ 2,087  
                       
                       

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Noninterest Expense

        For the three months ended March 31, 2014, noninterest expense totaled $10.6 million, an increase of $1.2 million or 12.6% compared with the three months ended March 31, 2013. This increase was primarily due to an increase of $0.7 million in salaries and employee benefits, and an increase of $0.2 million in expense related to real estate acquired by foreclosure.

        For the year ended December 31, 2013, noninterest expense totaled $40.0 million, an increase of $4.2 million or 11.8% compared with 2012. This increase was primarily due to an increase of $3.6 million in salaries and employee benefits, and an increase of $0.5 million in occupancy expense. For the year ended December 31, 2012, noninterest expense totaled $35.7 million, an increase of $9.3 million or 35.1% compared with $26.5 million for the same period in 2011. This increase was primarily related to an increase of $5.8 million in salaries and employee benefits, an increase of $1.1 million in occupancy expense, and an increase of $1.0 million in professional and regulatory fees. These items and other changes in the various components of noninterest expense are discussed in more detail below.

        The following table presents, for the periods indicated, the major categories of noninterest expense:

 
  For the Three
Months Ended
March 31,
  For the Years Ended
December 31,
 
 
  2014   2013   2013   2012   2011  
 
  (Dollars in thousands)
 

Salaries and employee benefits (1)

  $ 6,931   $ 6,230   $ 25,618   $ 22,021   $ 16,271  

Non-staff expenses:

                               

Occupancy

    1,133     1,132     4,725     4,194     3,130  

Professional and regulatory fees

    780     763     3,224     3,506     2,493  

Data processing

    388     360     1,429     1,826     1,142  

Software license and maintenance

    315     197     965     750     413  

Marketing

    172     131     605     626     512  

Loan related

    117     95     813     584     888  

Real estate acquired by foreclosure

    169     (63 )   (595 )   107     69  

Other

    592     570     3,181     2,128     1,541  
                       

Total noninterest expense

  $ 10,597   $ 9,415   $ 39,965   $ 35,742   $ 26,459  
                       
                       

(1)
Total salaries and employee benefits include less than $0.1 million and $0.1 million for the three months ended March 31, 2014 and 2013, respectively, in stock based compensation expense. Total salaries and employee benefits includes $0.4 million, $0.3 million and $0.4 million in 2013, 2012 and 2011, respectively, in stock based compensation expense.

        Salaries and Employee Benefits.     Salaries and benefits were $6.9 million for the three months ended March 31, 2014, an increase of $0.7 million compared with the three months ended March 31, 2013. This increase was primarily due to an increase of 15 employees at March 31, 2014 compared to March 31, 2013. Total salaries and benefits for the three months ended March 31, 2014 included less than $0.1 million in stock based compensation expenses compared with $0.1 million recorded for the three months ended March 31, 2013.

        Salaries and benefits were $25.6 million for the year ended December 31, 2013, an increase of $3.6 million compared to 2012. This increase was primarily due to an increase of 21 employees during 2013, the full year impact of the prior year staffing additions and an increase in compensation resulting

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from our portfolio banker compensation program and general merit compensation increases. Salaries and employee benefits increased $5.8 million to $22.0 million for 2012, compared with $16.3 million for 2011, primarily due to an increase of 39 employees during 2012. Total salaries and benefits for the year ended December 31, 2013 included $0.4 million in stock based compensation expense compared with $0.3 million and $0.4 million recorded for each of the years ended December 31, 2012 and 2011, respectively.

        Occupancy.     Occupancy expenses were $1.1 million for the three months ended March 31, 2014 and 2013. Occupancy expenses were $4.7 million, $4.2 million and $3.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. The increase of $0.5 million or 12.7% for 2013 compared with 2012 was due primarily to the full year impact of the relocation of our operations center to the larger Brookhollow location during 2012, the full year impact of the Richardson branch acquired in the Opportunity Bancshares acquisition and the opening of a de novo branch in Addison, Texas in July 2013. The increase of $1.1 million or 34.0% for 2012 compared with 2011 was due primarily to the full year impact of 2011 facilities additions including the Cleveland, Eagle Springs and Kingwood branches acquired from Main Street Bank and the opening of our Dallas Uptown de novo branch, the acquisition of the Richardson branch of Opportunity Bancshares in May 2012 and the relocation and expansion of our operations center.

        Professional and regulatory fees.     Professional and regulatory fees expenses were $0.8 million for the three months ended March 31, 2014 and 2013. Professional and regulatory fees expenses were $3.2 million, $3.5 million and $2.5 million for the years ended December 31, 2013, 2012 and 2011, respectively. The decrease of $0.3 million or 8.0% for 2013 compared with 2012 was due primarily to the prior year one-time costs of $0.3 million related to the Opportunity Bancshares acquisition. The increase of $1.0 million or 40.6% for 2012 compared with 2011 was due primarily to one-time costs of $0.3 million related to the Opportunity Bancshares acquisition, an increase of $0.3 million in audit, tax and accounting fees, an increase of $0.2 million in regulatory assessments and an increase of $0.1 million in recruiting services.

        Data processing.     Data processing expenses were $0.4 million for the three months ended March 31, 2014 and 2013. Data processing expenses were $1.4 million, $1.8 million and $1.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. The decrease of $0.4 million or 21.7% for 2013 compared with 2012 was due primarily to the prior year one-time cost of $0.5 million related to the Opportunity Bancshares acquisition. The increase of $0.7 million or 59.9% for 2012 compared with 2011 was due primarily to the one-time cost related to the Opportunity Bancshares acquisition.

        Real estate acquired by foreclosure.     Real estate acquired by foreclosure expenses were $0.2 million for the three months ended March 31, 2014 compared to a gain of $0.1 million for the three months ended March 31, 2013. The increase in real estate acquired by foreclosure expenses was primarily due to an increase in net operating expenses.

        Real estate acquired by foreclosure expenses decreased by $0.7 million, or 656.1%, from an expense of $0.1 million for the year ended December 31, 2012 to a gain of $0.6 million for the year ended December 31, 2013, due primarily to an increase in gains on sale of real estate acquired by foreclosure of $0.4 million (primarily due to a $0.5 million gain on the sale of one commercial real estate property), a decrease in expenses of $0.2 million and an increase in rental income of $0.1 million.

        Other.     Other noninterest expenses, which consist of subscription, membership and dues; employee expenses including travel, meals, entertainment and education; postage and delivery; amortization of intangibles; supplies, printing and reproduction; insurance; account related losses; correspondent bank fees; customer program expenses; and other operating expenses such as settlement of claims, were $0.6 million for the three months ended March 31, 2014 and 2013.

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        Other noninterest expenses were $3.2 million, $2.1 million and $1.5 million for the years ended December 31, 2013, 2012 and 2011, respectively. The increase of $1.1 million or 49.5% for 2013 compared with 2012 was due primarily to $0.4 million to settle claims primarily related to an acquired loan and $0.2 million provision for credit losses on off-balance sheet exposure. The increase of $0.6 million or 38.1% for 2012 compared with 2011 was due primarily to an increase of $0.2 million in amortization of intangibles resulting from the Opportunity Bancshares acquisition and the full year of the Main Street Bank acquisition, and an increase of $0.2 million in postage and delivery resulting principally from the increased branch count and the increase in account volume.

        Efficiency Ratio.     The efficiency ratio is a supplemental financial measure utilized in our internal evaluation of our performance and is not defined under GAAP. Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income, excluding bargain purchase gain from acquisitions. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease would indicate a more efficient allocation of resources. Our efficiency ratio was 61.3% for the three months ended March 31, 2014, compared with 65.6% for the three months ended March 31, 2013. The decrease was primarily due to increased net interest income and noninterest income.

        Our efficiency ratio was 64.6% for the year ended December 31, 2013, compared with 63.7% for the year ended December 31, 2012. This increase was primarily due to the full year impact of expense increases originating in 2012. Our efficiency ratio was 72.0% for the year ended December 31, 2011.

Income Taxes

        The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the amount of other non-deductible expenses. For the three months ended March 31, 2014, income tax expense was $2.0 million compared with $1.5 million for the three months ended March 31, 2013. The increase was primarily attributable to higher pre-tax net earnings. The effective income tax rate for the three months ended March 31, 2014 and 2013 was 36%, as compared to U.S. statutory rate of 35%. The effective income tax rate differed from the U.S. statutory rate primarily due to non-deductible expenses.

        For the year ended December 31, 2013, income tax expense was $6.9 million compared with $4.4 million for the year ended December 31, 2012 and $0.9 million for the year ended December 31, 2011. The increases were primarily attributable to higher pre-tax net earnings. The effective income tax rates for the years ended December 31, 2013, 2012 and 2011 was 35%, 34% and 46%, respectively, as compared to U.S. statutory rates of 35%, 34% and 34%, respectively. The effective income tax rate for the year ended December 31, 2011 differed from the U.S. statutory rate of 34% primarily due to the effect of state tax expense and non-deductible expenses on a relatively low level of pre-tax income.

Impact of Inflation

        Our consolidated financial statements and related notes included elsewhere in this prospectus have been prepared in accordance with GAAP. These require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.

        Unlike many industrial companies, substantially all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses do reflect general levels of inflation.

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Financial Condition

Loan Portfolio

        At March 31, 2014, total loans were $1.4 billion, an increase of $44.9 million or 3.3% compared with December 31, 2013. This increase was primarily due to the execution of our growth strategy and the continued strength of our target markets. None of our loans were classified as held for sale at March 31, 2014.

        At December 31, 2013, total loans were $1.4 billion, an increase of $154.7 million or 12.8% compared with $1.2 billion at December 31, 2012. This increase was primarily due to the execution of our growth strategy and the continued strength of our target markets. None of our loans were classified as held for sale at December 31, 2013.

        At December 31, 2012, total loans were $1.2 billion, an increase of $311.4 million or 34.9% compared with $893.3 million at December 31, 2011. Loans at December 31, 2011 included $1.8 million of loans held for sale. Loan growth in 2012 was primarily due to the execution of our growth strategy and the continued strength of our target markets, and was impacted by the completion of the Opportunity Bancshares acquisition during the year.

        At March 31, 2014, total loans were 94.5% of deposits and 80.2% of total assets. At December 31, 2013, total loans were 93.9% of deposits and 79.8% of total assets. At December 31, 2012, total loans were 82.4% of deposits and 71.9% of total assets.

        Lending activities originate from the efforts of our portfolio bankers, with an emphasis on lending to individuals, professionals, small to medium-sized businesses and commercial companies located in the Houston, Dallas and Austin MSAs.

        We provide commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner occupied commercial properties), reserve-based energy loans, mortgage-warehouse lines, term loans, equipment financing, acquisition, expansion and development loans, borrowing base loans, real estate construction loans, homebuilder loans, SBA loans, purchased receivables financing, letters of credit and other loan products to national and regional companies, oil and gas producers, real estate developers, mortgage lenders, manufacturing and industrial companies and other businesses.

        The types of loans we make to consumers include residential real estate loans, home equity loans, home equity lines of credit ("HELOCs"), installment loans, unsecured and secured personal lines of credit, overdraft protection and letters of credit.

        See "Business—Our Banking Services—Lending Activities—Loan Types" for further information about the types of loans we offer.

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        The following table summarizes our loan portfolio by type of loan as of the dates indicated:

 
  March 31,   December 31,  
 
  2014   2013   2012  
 
  Amount   Percent   Amount   Percent   Amount   Percent  
 
  (Dollars in thousands)
 

Commercial:

                                     

Commercial and industrial

  $ 675,812     48.1 % $ 681,290     50.1 % $ 637,769     52.9 %

Owner occupied commercial real estate

    152,515     10.9     156,961     11.6     114,287     9.5  

Commercial real estate

    310,379     22.1     267,011     19.6     213,250     17.7  

Construction, land & land development

    152,327     10.8     140,067     10.3     135,858     11.3  
                           

Total commercial

    1,291,033     91.9     1,245,329     91.6     1,101,164     91.4  
                           

Consumer:

                                     

Residential mortgage

    107,408     7.7     106,362     7.8     94,996     7.9  

Other consumer

    5,834     0.4     7,724     0.6     8,529     0.7  
                           

Total consumer

    113,242     8.1     114,086     8.4     103,525     8.6  
                           

Total loans held for investment

  $ 1,404,275     100.0 % $ 1,359,415     100.0 % $ 1,204,689     100.0 %
                           
                           

Total loans held for sale

                         

 

 
  December 31,  
 
  2011   2010   2009  
 
  Amount   Percent   Amount   Percent   Amount   Percent  
 
  (Dollars in thousands)
 

Commercial:

                                     

Commercial and industrial

  $ 405,298     45.5 % $ 250,800     45.1 % $ 136,570     36.6 %

Owner occupied commercial real estate

    119,354     13.4     90,610     16.3     46,492     12.5  

Commercial real estate

    170,492     19.1     100,426     18.1     76,205     20.4  

Construction, land & land development

    99,398     11.1     51,871     9.3     48,360     13.0  
                           

Total commercial

    794,542     89.1     493,707     88.8     307,627     82.5  
                           

Consumer:

                                     

Residential mortgage

    84,252     9.5     55,274     10.0     55,890     15.0  

Other consumer

    12,695     1.4     6,891     1.2     9,459     2.5  
                           

Total consumer

    96,947     10.9     62,165     11.2     65,349     17.5  
                           

Total loans held for investment

  $ 891,489     100.0 % $ 555,872     100.0 % $ 372,976     100.0 %
                           
                           

Total loans held for sale

  $ 1,811     100.0 %                

        Our owner occupied commercial real estate loans were $152.5 million at March 31, 2014, a decrease of $4.4 million or 2.8% compared to December 31, 2013. This decrease was primarily related to repayments. Our owner occupied commercial real estate loans increased $42.7 million or 37.3% to $157.0 million at December 31, 2013 from $114.3 million at December 31, 2012. This increase was primarily related to the execution of our growth strategy and the continued strength of our target markets. Our owner occupied commercial real estate loans decreased $5.1 million or 4.2% to $114.3 million at December 31, 2012 from $119.4 million at December 31, 2011. This decrease was primarily related to repayments.

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        Our commercial real estate loans were $310.4 million at March 31, 2014, an increase of $43.4 million or 16.2% compared to December 31, 2013. This increase was primarily related to the execution of our growth strategy and the continued strength of our target markets. Our commercial real estate loans increased $53.8 million or 25.2% to $267.0 million at December 31, 2013 from $213.3 million at December 31, 2012. This increase was primarily related to the execution of our growth strategy and the continued strength of our target markets. Our commercial real estate loans increased $42.8 million or 25.1% to $213.3 million at December 31, 2012 from $170.5 million at December 31, 2011. This increase was primarily related to the execution of our growth strategy and the continued strength of our target markets.

        The contractual maturity ranges of loans in our loan portfolio and the amount of such loans with predetermined interest rates and floating rates in each maturity range as of March 31, 2014 are summarized in the following table:

 
  Due in
One Year
or Less
  Due After
One Year
Through
Five Years
  Due After
Five Years
  Total  
 
  (Dollars in thousands)
 

Commercial:

                         

Commercial and industrial

  $ 206,300   $ 426,146   $ 43,366   $ 675,812  

Owner occupied commercial real estate

    7,015     97,658     47,842     152,515  

Commercial real estate

    14,406     228,182     67,791     310,379  

Construction, land & land development

    24,691     83,768     43,868     152,327  

Consumer:

                         

Residential mortgage

    5,573     64,213     37,622     107,408  

Other consumer

    4,911     885     38     5,834  
                   

Total

  $ 262,896   $ 900,852   $ 240,527   $ 1,404,275  
                   
                   

Loans with a predetermined interest rate

  $ 23,563   $ 243,852   $ 57,126   $ 324,541  

Loans with a floating interest rate

    239,333     657,000     183,401     1,079,734  
                   

Total

  $ 262,896   $ 900,852   $ 240,527   $ 1,404,275  
                   
                   

        The contractual maturity ranges of loans in our loan portfolio and the amount of such loans with predetermined interest rates and floating rates in each maturity range as of December 31, 2013 are summarized in the following table:

 
  One Year
or Less
  One
Through
Five Years
  After
Five Years
  Total  
 
  (Dollars in thousands)
 

Commercial:

                         

Commercial and industrial

  $ 214,049   $ 418,472   $ 48,769   $ 681,290  

Owner occupied commercial real estate

    6,065     103,574     47,322     156,961  

Commercial real estate

    12,972     213,712     40,327     267,011  

Construction, land & land development

    8,502     94,014     37,551     140,067  

Consumer:

                         

Residential mortgage

    5,738     66,455     34,169     106,362  

Other consumer

    6,347     1,337     40     7,724  
                   

Total

  $ 253,673   $ 897,564   $ 208,178   $ 1,359,415  
                   
                   

Loans with a predetermined interest rate

  $ 19,912   $ 242,472   $ 47,274   $ 309,658  

Loans with a floating interest rate

    233,761     655,092     160,904     1,049,757  
                   

Total

  $ 253,673   $ 897,564   $ 208,178   $ 1,359,415  
                   
                   

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        Our loan portfolio consists of various types of loans, most of which are made to borrowers located in the Houston, Dallas and Austin MSAs. Although the portfolio is diversified and generally secured by various types of collateral, the majority of our loan portfolio consists of commercial and industrial and commercial real estate loans and a substantial portion of our borrowers' ability to honor their obligations is dependent on local economic conditions in Texas, including conditions affecting the energy industry. As of March 31, 2014, there was no concentration of loans to any one type of industry exceeding 10% of total loans nor were there any loans classified as highly leveraged transactions.

Nonperforming Loans

        Nonperforming loans include loans on nonaccrual status, accruing loans 90 or more days past due restructured loans. Impaired loans do not include purchased loans that were identified upon acquisition as having experienced credit deterioration since origination ("purchased credit impaired loans" or "PCI loans").

        We have several procedures in place to assist us in maintaining the overall quality of our loan portfolio. We have established underwriting guidelines to be followed by our portfolio bankers, and we also monitor our delinquency levels for any negative or adverse trends. There can be no assurance, however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.

        As part of the on-going monitoring of our loan portfolio, management grades each loan from 1 to 10 based on the level of risk associated with each loan. Our criticized and classified loan grades are in accordance with applicable regulatory definitions.

        We generally place a loan on nonaccrual status and cease accruing interest when a loan displays problems that may jeopardize full and timely collection of principal and/or interest, evidenced by one or more of the following: (i) full payment of principal and interest becomes questionable; (ii) the loan becomes 90 days past due as to principal or interest; (iii) the loan is graded as doubtful; (iv) the borrower files bankruptcy and does not reaffirm its indebtedness to us; or (v) foreclosure proceedings are initiated against collateral property. An exception to this is if the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan.

        In accordance with applicable regulation, we require appraisals or evaluations to independently value real estate and, as an important element, to consider when underwriting loans secured in part or in whole by real estate. The value of real estate taken as collateral provides additional support for the borrower's credit capacity.

        With respect to potential problem loans, all monitored and under-performing loans are reviewed and an evaluation of the borrower's overall financial condition is made to determine the need, if any, for possible write downs or appropriate additions to the allowance for loan losses based upon the likelihood of full repayment of principal and interest in accordance with the contractual terms or the net realizable value of the pledged collateral.

        We believe our conservative lending approach has resulted in sound asset quality. We had $12.7 million in nonperforming loans at March 31, 2014, compared with $16.7 million, $22.5 million and $7.2 million at December 31, 2013, 2012 and 2011, respectively. The nonperforming loans at March 31, 2014 consisted of 24 separate credits. If interest on nonaccrual loans had been accrued under the original loan terms, approximately $0.4 million and $0.6 million would have been recorded as income for the three months ended March 31, 2014 and 2013, respectively, and $0.7 million, $0.8 million and $0.9 million would have been recorded as income for the years ended December 31, 2013, 2012 and 2011, respectively.

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        The following table presents information regarding nonperforming loans at the dates indicated:

 
  March 31,   December 31,  
 
  2014   2013   2012   2011   2010   2009  
 
  (Dollars in thousands)
 

Nonaccrual loans

  $ 1,972   $ 1,496   $ 5,196   $ 3,863   $ 14,463   $ 247  

Accruing loans 90 or more days past due

    33     1,316     579     18          

Restructured loans—nonaccrual

    6,746     9,864     10,106     2,265          

Restructured loans—accruing

    3,907     4,072     6,621     1,096     1,384     2,211  
                           

Total nonperforming loans

  $ 12,658   $ 16,748   $ 22,502   $ 7,242   $ 15,847   $ 2,458  
                           
                           

Allowance for loan losses

        The following table presents, as of and for the periods indicated, an analysis of the allowance for loan losses and other related data:

 
  As of and for the Three Months Ended March 31,   As of and for the Years Ended December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (Dollars in thousands)
 

Average loans outstanding (1)

  $ 1,374,230     1,180,529   $ 1,244,106   $ 1,040,681   $ 691,842   $ 437,607   $ 339,195  
                               
                               

Gross loans outstanding at end of period (1)

    1,404,275     1,217,659     1,359,415     1,204,689     891,489     555,872     372,976  
                               
                               

Allowance for loan losses at beginning of period

    16,361     14,151     14,151     10,574     7,132     4,833     3,268  

Provision for loan losses

    1,223     781     2,373     8,060     8,391     2,940     4,467  

Charge-offs:

                                           

Commercial and industrial

    (1,239 )       (916 )   (1,832 )   (4,744 )   (19 )   (2,045 )

Owner occupied commercial real estate

                (361 )            

Commercial real estate

            (333 )   (2,270 )           (660 )

Construction, land & land development

                             

Residential mortgage

        (186 )   (186 )   (94 )   (262 )   (770 )   (24 )

Other consumer

    (1,281 )   (48 )   (54 )   (57 )   (29 )   (73 )   (213 )
                               

Total charge-offs

    (2,520 )   (234 )   (1,489 )   (4,614 )   (5,035 )   (862 )   (2,942 )
                               

Recoveries:

                                           

Commercial and industrial

    50     632     1,044     87     46     189     36  

Owner occupied commercial real estate

        23     222                  

Commercial real estate

    1     21     21                  

Construction, land & land development

                             

Residential mortgage

    3     8     27     33     35     25     3  

Other consumer

    1     1     12     11     5     7     1  
                               

Total recoveries

    55     685     1,326     131     86     221     40  
                               

Net recoveries (charge-offs)

    (2,465 )   451     (163 )   (4,483 )   (4,949 )   (641 )   (2,902 )
                               

Allowance for loan losses at end of period

  $ 15,119   $ 15,383   $ 16,361   $ 14,151   $ 10,574   $ 7,132   $ 4,833  
                               
                               

Ratio of allowance to end of period loans

    1.08 %   1.26 %   1.20 %   1.17 %   1.19 %   1.28 %   1.30 %

Ratio of net charge-offs to average loans

    0.18     (0.04 )   0.01     0.43     0.72     0.15     0.86  

(1)
Excluding loans held for sale

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        Please see "—Critical Accounting Policies—Allowance for loan losses" for additional discussion of our allowance policy.

        In connection with our review of the loan portfolio, we consider risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements include:

    for commercial and industrial loans, the operating results of the commercial, industrial or professional enterprise, the borrower's business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral;

    for commercial mortgage loans and multifamily residential loans, the debt service coverage ratio (income from the property in excess of operating expenses compared to loan payment requirements), operating results of the owner in the case of owner occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type;

    for one-to-four family residential mortgage loans, the borrower's ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan-to-value ratio, and the age, condition and marketability of collateral; and

    for construction, land development and other land loans, the perceived feasibility of the project including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan-to-value ratio.

        Acquired loans are recorded at fair value as of the date of acquisition. Determining the fair value of the acquired loans involves estimating the amount and timing of future expected cash flows and discounting those cash flows at a market rate of interest. Acquired loans with evidence of credit deterioration and the probability that all contractually required payments will not be collected as of the date of acquisition are accounted for in accordance with Accounting Standards Codification ("ASC") 310-30, and the difference between contractually required payments at acquisition and the cash flows expected to be collected is considered the non-accretable discount. The non-accretable discount represents the future credit losses expected to be incurred over the life of the loan. No corresponding allowance for loan losses is recorded for these loans at acquisition.

        At March 31, 2014, the allowance for loan losses totaled $15.1 million, or 1.08% of total loans. At December 31, 2013, 2012 and 2011, the allowance for loan losses aggregated $16.4 million, $14.2 million and $10.6 million, or 1.20%, 1.17% and 1.19% of total loans, respectively. At March 31, 2014, less than $0.1 million of allowance was required for acquired loans not deemed credit-impaired and $0.1 million of purchase discounts remained. At December 31, 2013 and 2012, $0.1 million of allowance was required for acquired loans not deemed credit-impaired and $0.3 million and $0.2 million of purchase discounts remained, respectively. PCI loans are not considered nonperforming loans. PCI loans had $0.9 million, $1.0 million and $1.1 million of purchase discounts outstanding at March 31, 2014, December 31, 2013 and 2012, respectively, of which $0.6 million, $0.6 million and $0.5 million, respectively, are considered accretable. Impairment charges and related allowances of $0.2 million and $0.2 million were required for the three months ended March 31, 2014 and 2013, respectively, for PCI loans. Impairment charges and related allowances of $0.1 million and less than $0.1 million were required in 2013 and 2012, respectively, for PCI loans.

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        The allowance for loan losses on loans collectively evaluated for impairment totaled $11.9 million or 0.89% of the $1.3 billion in loans collectively evaluated for impairment at December 31, 2013, compared to an allowance for loan losses of $12.7 million or 1.08% of the $1.2 billion in loans collectively evaluated for impairment at December 31, 2012. This decrease is due primarily to a reduction of 0.20% in the actual loss factor component. Actual losses as a percentage of loans decreased to 0.01% for the year ended December 31, 2013 as compared to 0.43% and 0.72% for the years ended December 31, 2012 and 2011, respectively.

        We updated our allowance methodology during the third quarter of 2013 to expand the look-back period for the loss factors from two years to three years. We consider the three year actual loss history to be more indicative of a sustained loss history based on the maturation of the portfolio.

        During the year ended December 31, 2013, loans in internally assigned risk grades 1 - 4, which are considered pass rated credits, increased to 95.5% from 90.7% of total loans, excluding PCI loans.

        The following table shows the allocation of the allowance for loan losses among our loan categories and certain other information as of the dates indicated. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any loan category.

 
  March 31,   December 31,  
 
  2014   2013   2012  
 
  Amount   Percent
of Loans
to Total
Loans
  Amount   Percent
of Loans
to Total
Loans
  Amount   Percent
of Loans
to Total
Loans
 
 
  (Dollars in thousands)
 

Balance of allowance for loan losses applicable to:

                                     

Commercial and industrial

  $ 9,478     48.1 % $ 10,196     50.1 % $ 9,109     52.9 %

Owner occupied commercial real estate

    792     10.9     874     11.6     763     9.5  

Commercial real estate

    2,716     22.1     2,216     19.6     2,380     17.7  

Construction, land & land development

    1,079     10.8     1,103     10.3     1,352     11.3  

Residential mortgage

    723     7.7     654     7.8     492     7.9  

Other consumer

    331     0.4     1,318     0.6     55     0.7  
                           

Total allowance for loan losses

  $ 15,119     100.0 % $ 16,361     100.0 % $ 14,151     100.0 %
                           
                           

 
  December 31,  
 
  2011   2010   2009  
 
  Amount   Percent
of Loans
to Total
Loans
  Amount   Percent
of Loans
to Total
Loans
  Amount   Percent
of Loans
to Total
Loans
 
 
  (Dollars in thousands)
 

Balance of allowance for loan losses applicable to:

                                     

Commercial and industrial

  $ 6,701     45.5 % $ 4,307     45.1 % $ 1,829     36.6 %

Owner occupied commercial real estate

    711     13.4     542     16.3     602     12.5  

Commercial real estate

    919     19.1     510     18.1     1,082     20.4  

Construction, land & land development

    1,271     11.1     1,340     9.3     625     13.0  

Residential mortgage

    871     9.5     323     10.0     624     15.0  

Other consumer

    101     1.4     110     1.2     71     2.5  
                           

Total allowance for loan losses

  $ 10,574     100.0 % $ 7,132     100.0 % $ 4,833     100.0 %
                           
                           

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        We believe that the allowance for loan losses at March 31, 2014 was adequate to cover probable losses in the loan portfolio as of such date. There can be no assurance, however, that we will not sustain losses in future periods, which could be substantial in relation to the size of the allowance at March 31, 2014.

Securities

        We use our securities portfolio to provide a source of liquidity, to provide an appropriate return on funds invested, to manage interest rate risk, to meet pledging requirements and to meet regulatory capital requirements. At March 31, 2014, the carrying amount of investment securities totaled $250.9 million, a decrease of $4.6 million or 1.8% compared with December 31, 2013. At December 31, 2013, the carrying amount of investment securities was $255.5 million, an increase of $13.3 million or 5.5% compared with $242.3 million at December 31, 2012. At March 31, 2014, securities represented 14.3% of total assets compared with 15.0% and 14.5% at December 31, 2013 and 2012, respectively.

        At the date of purchase, we are required to classify debt and equity securities into one of two categories: held-to-maturity or available-for-sale. We do not purchase securities for trading purposes. At each reporting date, the appropriateness of the classification is reassessed. Investments in debt securities are classified as held-to-maturity and carried at cost, adjusted for the amortization of premiums and the accretion of discounts in the financial statements only if management has the positive intent and we have the ability to hold those securities to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale and measured at fair value in the financial statements with unrealized gains and losses reported, net of tax, as accumulated comprehensive income or loss until realized. Interest earned on debt securities is included in interest income. Other securities are stated at cost and include stock of the Dallas Fed and the FHLB. Dividends received on these investments are included in interest income.

        The following table summarizes the amortized cost and fair value by classification of securities as of the dates shown:

 
  March 31,   December 31,  
 
  2014   2013   2012   2011  
 
  Amortized
Cost
  Fair Value   Amortized
Cost
  Fair Value   Amortized
Cost
  Fair Value   Amortized
Cost
  Fair Value  
 
  (Dollars in thousands)
   
   
 

Available-for-Sale

                                                 

Obligations of the U.S. Treasury or other U.S. government agencies or sponsored entities

  $ 45,148   $ 45,117   $ 45,168   $ 45,111   $ 45,624   $ 45,674   $ 40,831   $ 41,012  

Mortgaged-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored entities

    147,716     148,734     153,265     153,126     133,953     136,935     159,376     160,417  
                                   

Total

  $ 192,864   $ 193,851   $ 198,433   $ 198,237   $ 179,577   $ 182,609   $ 200,207   $ 201,429  
                                   
                                   

Held-to-Maturity

                                                 

Mortgaged-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored entities

  $ 57,027   $ 56,799   $ 57,278   $ 56,588   $ 59,652   $ 60,473   $ 49,097   $ 49,647  
                                   

Total

  $ 57,027   $ 56,799   $ 57,278   $ 56,588   $ 59,652   $ 60,473   $ 49,097   $ 49,647  
                                   
                                   

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        Certain investment securities are valued at less than their historical cost. Management evaluates securities for other-than-temporary impairment ("OTTI") at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

        In determining OTTI, management considers many factors, including the severity and the duration of time that the fair value has been less than cost, the credit quality of the issuer and whether it is more likely than not that we will be required to sell the security before a recovery in value. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. Securities within the available-for-sale portfolio may be used as part of our asset and liability management strategy and may be sold in response to changes in interest rate risk, prepayment risk or other factors.

        Management does not intend to sell any debt securities classified as held-to-maturity and it is more likely than not that we will not be required to sell any such debt securities before their anticipated recovery of cost, if a loss currently exists, at which time we expect to receive full value for the securities. Furthermore, as of March 31, 2014, management does not have the intent to sell any of the securities classified as available-for-sale and believes that it is more likely than not that we will be required to sell any such securities before a recovery of cost, if a loss currently exists. As of March 31, 2014, management believes any impairment in our securities is temporary and no impairment loss has been realized in our consolidated statement of income. We recorded no other-than-temporary impairment charges in the first quarter of 2014 or the 2013, 2012 or 2011 fiscal years.

        The following tables summarize the contractual maturity of securities and their weighted average yields as of March 31, 2014 and December 31, 2013. The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures. Available-for-sale securities are shown at fair value and held-to-maturity securities are shown at cost, adjusted for the amortization of premiums and the accretion of discounts.

 
  March 31, 2014  
 
  Within
One Year
  After One
Year
but Within
Five Years
  After Five
Years
but Within
Ten Years
  After
Ten Years
  Total  
 
  Amount   Yield   Amount   Yield   Amount   Yield   Amount   Yield   Total   Yield  
 
  (Dollars in thousands)
 

Obligations of the U.S. Treasury or other U.S. government agencies or sponsored entities

  $ 5,009     0.33 % $ 40,108     0.61 %                 $ 45,117     0.58 %

Mortgaged-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored entities

                  $ 19,939     2.39 % $ 185,822     2.10 %   205,761     2.13  
                                           

Total

  $ 5,009     0.33 % $ 40,108     0.61 % $ 19,939     2.39 % $ 185,822     2.10 % $ 250,878     1.85 %
                                           
                                           

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  December 31, 2013  
 
  Within
One Year
  After One Year
but Within
Five Years
  After Five Years
but Within
Ten Years
  After
Ten Years
  Total  
 
  Amount   Yield   Amount   Yield   Amount   Yield   Amount   Yield   Total   Yield  
 
  (Dollars in thousands)
 

Obligations of the U.S. Treasury or other U.S. government agencies or sponsored entities

  $ 10,010     0.19 % $ 35,101     0.55 %                 $ 45,111     0.47 %

Mortgaged-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored entities

                  $ 20,946     2.34 % $ 189,458     2.02 %   210,404     2.06  
                                           

Total

  $ 10,010     0.19 % $ 35,101     0.55 % $ 20,946     2.34 % $ 189,458     2.02 % $ 255,515     1.78 %
                                           
                                           

        The contractual maturity of mortgage-backed securities and collateralized mortgage obligations is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any time. Mortgage-backed securities monthly pay downs cause the average lives of the securities to be much different than their stated lives. During a period of increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal and consequently, the average life of this security will be lengthened. If interest rates begin to fall, prepayments may increase, thereby shortening the estimated life of this security. The weighted average life of our complete portfolio is 4.6 years with a modified duration of 3.1 years at March 31, 2014.

        At March 31, 2014 and December 31, 2013 and 2012, we did not own securities of any one issuer (other than the U.S. government and its agencies or sponsored entities) for which aggregate adjusted cost exceeded 10% of the consolidated shareholders' equity at such respective dates.

        The average yield of securities portfolio was 1.64% during the three months ended March 31, 2014 compared with 1.30% for the three months ended March 31, 2013. The increase in average yield was due to a decrease in amortization of premiums due to slower prepayments and reinvestment of funds at higher rates in 2014.

        The average yield of the securities portfolio was 1.36% during 2013 compared with 1.28% during 2012 and 1.60% during 2011. The increase in average yield during 2013 compared to 2012 was primarily due to the reinvestment of funds at higher rates in 2013 and the slowing of prepayments on our mortgage-backed securities and collateralized mortgage obligation portfolios. The overall growth in the average securities portfolio over the comparable periods was primarily funded by the investment of excess liquidity.

        Mortgage-backed securities are securities that have been developed by pooling a number of real estate mortgages and which are principally issued by federal agencies such as Government National Mortgage Association ("Ginnie Mae"), Fannie Mae and Freddie Mac. These securities are deemed to have high credit ratings, and minimum regular monthly cash flows of principal and interest are guaranteed by the issuing agencies.

        Unlike U.S. Treasury and U.S. government agency securities, which have a lump sum payment at maturity, mortgage-backed securities provide cash flows from regular principal and interest payments and principal prepayments throughout the lives of the securities. Premiums and discounts on mortgage-backed securities are amortized and accreted over the expected life of the security and may be impacted by prepayments. As such, mortgage-backed securities which are purchased at a premium will generally produce decreasing net yields as interest rates drop because home owners tend to refinance their mortgages resulting in prepayments and an acceleration of premium amortization. Securities purchased at a discount will obtain higher net yields in a decreasing interest rate environment as

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prepayments result in an acceleration of discount accretion. At March 31, 2014 and December 31, 2013, 86.6% and 86.3% of the mortgage-backed securities held by us had contractual final maturities of more than ten years with a weighted average life of 6.1 years and 6.5 years and a modified duration of 3.8 years and 4.0 years, respectively.

        Collateralized mortgage obligations are bonds that are backed by pools of mortgages. The pools can be Ginnie Mae, Fannie Mae or Freddie Mac pools or they can be private-label pools. At this time we do not own any private-label pools. Collateralized mortgage obligations are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments. This is accomplished by dividing the bonds into classes to which payments on the underlying mortgage pools are allocated in different order. The bond's cash flow, for example, can be dedicated to one class of bondholders at a time, thereby increasing call protection to bondholders.

Deposits

        Our lending and investing activities are primarily funded by deposits. We offer a variety of deposit accounts having a wide range of interest rates and terms including demand, savings, money market and time accounts. We rely primarily on competitive pricing policies, convenient locations and personalized service to attract and retain these deposits.

        Total deposits at March 31, 2014 were $1.5 billion, an increase of $39.1 million, or 2.7%, compared to December 31, 2013, due primarily to an increase in money market accounts of $23.8 million, including $20.4 million in accounts opened during the period with promotional rates, an increase in noninterest-bearing demand deposits of $8.6 million and an increase in interest-bearing checking accounts of $7.5 million, partially offset by a decrease in time deposits of $0.6 million. Noninterest-bearing deposits at March 31, 2014 were $290.8 million compared with $282.2 million at December 31, 2013, an increase of $8.6 million or 3.0%. Interest-bearing deposits at March 31, 2014 were $1.2 billion an increase of $30.5 million or 2.6% compared with December 31, 2013.

        Total deposits at December 31, 2013 were $1.4 billion, a decrease of $14.1 million, or 1.0%, compared to December 31, 2012 due primarily to a decrease in money market accounts of $90.2 million including a decrease of $56.0 million in accounts with expired promotional rates, partially offset by increases in time deposits of $43.9 million and noninterest-bearing demand deposits of $33.5 million. Total deposits at December 31, 2012, were $1.5 billion, an increase of $303.8 million or 26.2% compared with $1.2 billion at December 31, 2011 due primarily to an increase in money market accounts of $211.4 million (including an increase of $154.6 million in financial institution accounts), an increase in time deposits of $64.7 million and an increase in noninterest-bearing demand accounts of $22.7 million. Noninterest-bearing deposits at December 31, 2013, were $282.2 million compared with $248.7 million at December 31, 2012, an increase of $33.5 million or 13.5%. Noninterest-bearing deposits at December 31, 2012, were $248.7 million compared with $226.0 million at December 31, 2011, an increase of $22.7 million or 10.0%. Interest-bearing deposits at December 31, 2013, were $1.2 billion, down $47.6 million or 3.9% compared with $1.2 billion at December 31, 2012. Interest-bearing deposits at December 31, 2012, were $1.2 billion, up $281.1 million or 30.2% compared with $931.6 million at December 31, 2011.

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        The following table presents the daily average balances and weighted average rates paid on deposits for the periods indicated:

 
  For the Three Months Ended March 31,   For the Years Ended December 31,  
 
  2014   2013   2013   2012   2011  
 
  Average
Balance
  Average
Rate
  Average
Balance
  Average
Rate
  Average
Balance
  Average
Rate
  Average
Balance
  Average
Rate
  Average
Balance
  Average
Rate
 
 
   
   
   
   
  (Dollars in thousands)
 

Interest-bearing demand deposits

  $ 75,770     0.22 % $ 68,093     0.26 % $ 70,612     0.23 % $ 62,555     0.31 % $ 38,621     0.34 %

Savings deposits

    527,883     0.41     603,317     0.65     569,836     0.53     474,114     0.59     324,299     0.71  

Certificates and other time deposits

    572,389     1.28     537,831     1.35     574,294     1.36     497,923     1.28     339,536     1.46  
                                                     

Total interest-bearing deposits

    1,176,042     0.82     1,209,241     0.94     1,214,742     0.91     1,034,592     0.90     702,456     1.05  

Noninterest-bearing deposits

    275,584     0.00     239,464     0.00     260,446     0.00     224,441     0.00     153,827     0.00  
                                                     

Total deposits

  $ 1,451,626     0.67 % $ 1,448,705     0.78 % $ 1,475,188     0.75 % $ 1,259,033     0.74 % $ 856,283     0.86 %
                                                     
                                                     

        Our ratio of average noninterest-bearing deposits to average total deposits for the three months ended March 31, 2014 and 2013 was 19.0% and 16.5%, respectively. Our ratio of average noninterest-bearing deposits to average total deposits for the years ended December 31, 2013, 2012 and 2011 was 17.7%, 17.8% and 18.0%, respectively.

        The following table sets forth the amount of our certificates of deposit that are $100,000 or greater by time remaining until maturity:

 
  March 31,   December 31,  
 
  2014   2013   2012  
 
  (Dollars in thousands)
 

Three months or less

  $ 70,710   $ 81,518   $ 66,427  

Over three through six months

    83,028     67,817     40,974  

Over six through twelve months

    109,299     111,067     85,545  

Over one through two years

    52,991     44,866     111,908  

Over two through three years

    26,847     28,822     17,098  

Over three through four years

    60,536     37,335     29,274  

Over four through five years

    43,525     68,955     35,927  
               

Total

  $ 446,936   $ 440,380   $ 387,153  
               
               

Other Borrowed Funds

        We utilize borrowings to supplement deposits to fund our lending and investment activities. Borrowings consist of funds from the FHLB, the Dallas Fed and its correspondent banks, and securities sold under repurchase agreements.

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        The following table presents our borrowings at the dates indicated. There were no borrowings outstanding under our arrangement with the Dallas Fed and there were no federal funds purchased outstanding at the dates indicated.

 
  FHLB
Advances
  Securities
Sold Under
Repurchase
Agreements
 
 
  (Dollars in thousands)
 

March 31, 2014

             

Amount outstanding at quarter-end

  $ 46,846   $ 8,383  

Weighted average interest rate at quarter-end

    0.28 %   0.15 %

Maximum month-end balance during the quarter

  $ 61,850   $ 9,147  

Average balance outstanding during the quarter

  $ 64,338   $ 6,234  

Weighted average interest rate during the quarter

    0.26 %   0.13 %

March 31, 2013

   
 
   
 
 

Amount outstanding at quarter-end

  $ 14,906   $ 1,489  

Weighted average interest rate at quarter-end

    4.02 %   0.15 %

Maximum month-end balance during the quarter

  $ 14,993   $ 2,557  

Average balance outstanding during the quarter

  $ 14,951   $ 2,171  

Weighted average interest rate during the quarter

    4.07 %   0.19 %

December 31, 2013

   
 
   
 
 

Amount outstanding at year-end

  $ 46,858   $ 2,583  

Weighted average interest rate at year-end

    0.32 %   0.15 %

Maximum month-end balance during the year

  $ 46,858   $ 3,296  

Average balance outstanding during the year

  $ 10,593   $ 3,203  

Weighted average interest rate during the year

    3.90 %   0.16 %

December 31, 2012

   
 
   
 
 

Amount outstanding at year-end

  $ 15,037   $ 3,480  

Weighted average interest rate at year-end

    4.02 %   0.15 %

Maximum month-end balance during the year

  $ 35,377   $ 7,494  

Average balance outstanding during the year

  $ 15,330   $ 3,109  

Weighted average interest rate during the year

    4.01 %   0.16 %

December 31, 2011

   
 
   
 
 

Amount outstanding at year-end

  $ 15,544   $ 3,685  

Weighted average interest rate at year-end

    4.02 %   0.15 %

Maximum month-end balance during the year

  $ 15,992   $ 7,020  

Average balance outstanding during the year

  $ 15,770   $ 4,514  

Weighted average interest rate during the year

    4.03 %   0.13 %

        FHLB advances —We have an available borrowing arrangement with the FHLB, which allows us to borrow on a collateralized basis. At March 31, 2014 and December 31, 2013, 2012 and 2011, total borrowing capacity of $313.9 million, $301.0 million, $326.7 million and $230.2 million, respectively, was available under this arrangement and $46.8 million, $46.9 million, $15.0 million and $15.5 million, respectively, was outstanding with an average interest rate of 0.28%, 0.32%, 4.02% and 4.02%, respectively. At March 31, 2014 and December 31, 2013, 2012 and 2011, all of our FHLB advances mature within five years. These borrowings are collateralized by a blanket lien on certain loans. We utilize these borrowings to meet liquidity needs and to fund certain fixed rate loans in our portfolio.

        Securities Sold Under Agreements to Repurchase —Securities sold under agreements to repurchase represent the purchase of interests in securities by banking customers. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. We do not account for any of our repurchase agreements as sales for accounting purposes in our financial

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statements. Repurchase agreements with banking customers are settled on the following business day. All securities sold under agreements to repurchase are collateralized by pledged securities. The securities underlying the repurchase agreements are held in safekeeping by the Bank's safekeeping agent. At March 31, 2014 and December 31, 2013, 2012 and 2011, we had securities sold under agreements to repurchase with banking customers of $8.4 million, $2.6 million, $3.5 million and $3.7 million, respectively.

        Dallas Fed —We have an available borrower in custody arrangement with the Dallas Fed, which allows us to borrow on a collateralized basis. Certain commercial and consumer loans are pledged under this arrangement. We maintain this borrowing arrangement to meet liquidity needs pursuant to our contingency funding plan. At March 31, 2014 and December 31, 2013, 2012 and 2011, $313.5 million, $288.6 million, $291.5 million and $139.0 million, respectively, were available under this arrangement and no borrowings were outstanding.

        Federal Funds Purchased —We have available federal funds lines of credit with our correspondent banks. As of March 31, 2014 and December 31, 2013, 2012 and 2011, there were no federal funds purchased outstanding.

Interest Rate Sensitivity and Market Risk

        Our asset liability and funds management policy provides management with the guidelines for effective funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We manage our sensitivity position within our established guidelines.

        As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

        We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. We do not enter into instruments such as leveraged derivatives, interest rate swaps, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk. We enter into interest rate swaps as an accommodation to our customers in connection with our interest rate swap program. See "Business—Our Banking Services—Other Products and Services." Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.

        Our exposure to interest rate risk is managed by the Asset Liability Committee ("ALCO"), which is composed of certain members of our board of directors, in accordance with policies approved by our board of directors. The ALCO formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management uses two methodologies to manage interest rate risk: (i) an analysis of relationships between interest-earning assets and interest-bearing liabilities; and (ii) an interest rate shock simulation model.

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        We use an interest rate risk simulation model and shock analysis to test the interest rate sensitivity of net interest income and the balance sheet, respectively. Contractual maturities and repricing opportunities of loans are incorporated in the model as are prepayment assumptions, maturity data and call options within the investment portfolio. Assumptions based on past experience are incorporated into the model for nonmaturity deposit accounts. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

        We utilize static balance sheet rate shocks to estimate the potential impact on net interest income of changes in interest rates under various rate scenarios. This analysis estimates a percentage of change in the metric from the stable rate base scenario versus alternative scenarios of rising and falling market interest rates by instantaneously shocking a static balance sheet. The following table summarizes the simulated change in net interest income over a 12-month horizon as of March 31, 2014:

Change in Interest
Rates (Basis Points)
  Percent Change
in Net Interest
Income
 

+200

    16.36 %

+100

    8.66 %

Base

    0.00 %

-100

    -3.46 %

        The results are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations. We have found that, historically, interest rates on these deposits change more slowly than changes in the discount and federal funds rates. This assumption is incorporated into the simulation model and is generally not fully reflected in a GAP analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model's simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.

Liquidity and Capital Resources

Liquidity

        Liquidity involves our ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events. During the three months ended March 31, 2014 and the 2013 and 2012 fiscal years, our liquidity needs have primarily been met by core deposits, security and loan maturities and amortizing investment and loan portfolios. Although access to purchased funds from correspondent banks and overnight advances from the FHLB and the Dallas Fed are available and have been utilized on occasion to take advantage of investment opportunities, we do not generally rely on these external funding sources.

        The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $1.7 billion for the three months ended March 31, 2014, the

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three months ended March 31, 2013 and the year ended December 31, 2013 compared to $1.5 billion for the year ended December 31, 2012.

 
  March 31,   December 31,  
 
  2014   2013   2013   2012  

Sources of Funds:

                         

Deposits:

                         

Noninterest-bearing

    16.0 %   14.4 %   15.4 %   15.5 %

Interest-bearing

    68.0     72.9     72.0     71.2  

Securities sold under agreements to repurchase

    0.4     0.1     0.2     0.2  

Other borrowed funds

    3.7     0.9     0.6     1.1  

Other liabilities

    0.3     0.3     0.3     0.3  

Shareholders' equity

    11.6     11.4     11.5     11.7  
                   

Total

    100.0     100.0     100.0     100.0  
                   
                   

Uses of Funds:

   
 
   
 
   
 
   
 
 

Loans

    79.5     71.1     73.7     73.1  

Securities

    14.7     14.2     14.6     16.0  

Federal funds sold and other interest-earning assets

    2.7     11.6     8.6     7.5  

Other noninterest-earning assets

    3.1     3.1     3.1     3.4  
                   

Total

    100.0 %   100.0 %   100.0 %   100.0 %
                   
                   

Average noninterest-bearing deposits to average deposits

    19.0 %   16.5 %   17.7 %   17.8 %

Average loans to average deposits

    94.7     81.5     84.3     84.4  

        Our largest source of funds is deposits and our largest uses of funds are loans and securities. We do not expect a change in the source or use of our funds in the foreseeable future. Our average loans were $1.4 billion for the three months ended March 31, 2014, an increase of 16.4% over the three months ended March 31, 2013. Our average loans increased 17.1% for the year ended December 31, 2013 compared with the year ended December 31, 2012. We predominantly invest excess deposits in Dallas Fed balances, securities, federal funds sold or other short-term liquid investments until the funds are needed to fund loan growth. Our securities portfolio has a weighted average life of 4.6 years and a modified duration of 3.1 years at March 31, 2014.

        As of March 31, 2014, we had outstanding $397.7 million in commitments to extend credit and $13.0 million in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

        As of March 31, 2014, we had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature.

        As of March 31, 2014, we had cash and cash equivalents of $42.6 million, an increase of $7.8 million compared with December 31, 2013. The increase was primarily due to an increase in the Federal Reserve cash letter. As of December 31, 2013, we had cash and cash equivalents of $34.8 million compared with $178.5 million at December 31, 2012. The decrease was primarily due to an increase of $154.7 million in total loans.

Contractual Obligations

        The following table summarizes our contractual obligations and other commitments to make future payments as of March 31, 2014 (other than securities sold under repurchase agreements), which consist of our future cash payments associated with our contractual obligations pursuant to our FHLB

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advances and noncancelable future operating leases. Payments for FHLB advances include interest of $32 thousand that will be paid over the future periods. Payments related to leases are based on actual payments specified in underlying contracts.

 
  1 Year
or Less
  More Than
1 Year but Less
Than 3 Years
  3 Years or
More but Less
Than 5 Years
  5 Years
or More
  Total  
 
  (Dollars in thousands)
 

Certificates and other time deposits

  $ 339,429   $ 104,358   $ 129,992   $   $ 573,779  

FHLB advances

    46,878                 46,878  

Noncancelable future operating leases

    1,141     1,788     1,327   $ 2,532     6,788  
                       

Total

  $ 387,448   $ 106,146   $ 131,319   $ 2,532   $ 627,445  
                       
                       

Off-Balance Sheet Items

        In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

        Our commitments associated with outstanding standby and commercial letters of credit and commitments to extend credit expiring by period as of March 31, 2014 are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements:

 
  1 Year
or Less
  More Than
1 Year but Less
Than 3 Years
  3 Years or
More but Less
Than 5 Years
  5 Years
or More
  Total  
 
  (Dollars in thousands)
 

Standby and commercial letters of credit

  $ 10,844   $ 2,169   $ 8   $   $ 13,021  

Commitments to extend credit

    107,144     173,617     62,303     54,614     397,678  
                       

Total

  $ 117,988   $ 175,786   $ 62,311   $ 54,614   $ 410,699  
                       
                       

        Standby and Commercial Letters of Credit.     Standby and commercial letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third-party. In the event of nonperformance by the customer, we have rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. The credit risk to us in issuing letters of credit is essentially the same as that involved in extending loan facilities to our customers.

        Commitments to Extend Credit.     Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. We evaluate each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by us, upon extension of credit, is based on management's credit evaluation of the customer.

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Capital Resources

        Capital management consists of providing equity to support our current and future operations. The federal bank regulators view capital levels as important indicators of an institution's financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. As a bank holding company and a national bank, the Company and the Bank are subject to regulatory capital requirements.

        The Federal Reserve has established risk-based and leverage capital guidelines for bank holding companies, including the Company. The OCC has established substantially similar risk-based and leverage capital guidelines applicable to national banks, including the Bank. Under current guidelines, the minimum ratio of total capital to risk-weighted assets (which are primarily the credit risk equivalents of balance sheet assets and certain off-balance sheet items such as standby letters of credit) is 8.0%. At least half of total capital must be composed of tier 1 capital, which includes common shareholders' equity (including retained earnings), qualifying non-cumulative perpetual preferred stock (and, for bank holding companies only, a limited amount of qualifying cumulative perpetual preferred stock and a limited amount of trust preferred securities), and minority interests in the equity accounts of consolidated subsidiaries, less goodwill, other disallowed intangibles, and disallowed deferred tax assets, among other items. The Federal Reserve also has adopted a minimum leverage ratio requiring tier 1 capital of at least 4.0% of average quarterly total consolidated assets (as defined for regulatory purposes), net of goodwill and certain other intangible assets, for all but the most highly rated bank holding companies. The federal banking agencies have also established risk-based and leverage capital guidelines that FDIC-insured depository institutions are required to meet. These regulations are generally similar to those established by the Federal Reserve for bank holding companies.

        Under the Federal Deposit Insurance Act (the "FDIA"), the federal bank regulatory agencies must take "prompt corrective action" against undercapitalized U.S. depository institutions. U.S. depository institutions are assigned one of five capital categories: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized," and are subjected to different regulation corresponding to the capital category within which the institution falls. A depository institution is deemed to be "well capitalized" if the banking institution has a total risk-based capital ratio of 10.0% or greater, a tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and the institution is not subject to an order, written agreement, capital directive or prompt corrective action directive to meet and maintain a specific level for any capital measure. Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. A banking institution that is undercapitalized is required to submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary's compliance with the capital restoration plan up to a certain specified amount.

        Failure to meet capital guidelines could subject the institution to a variety of enforcement remedies by federal bank regulatory agencies, including: termination of deposit insurance by the FDIC, restrictions on certain business activities and appointment of the FDIC as conservator or receiver. As of March 31, 2014, the Company and the Bank were each well-capitalized.

        Total shareholders' equity was $203.6 million at March 31, 2014, an increase of $4.3 million or 2.2% compared with December 31, 2013. The increase was the result of retained earnings of $3.5 million for the three month period and an increase in the value of available-for-sale securities recognized in other accumulated comprehensive earnings of $0.8 million. Total shareholders' equity was $199.2 million at December 31, 2013, compared with $188.2 million at December 31, 2012, an increase of $11.0 million or 5.8%. This increase was primarily the result of retained earnings, partially offset by

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a decrease in the value of available-for-sale securities recognized in other accumulated comprehensive earnings.

        The following table provides a comparison of the Company's and the Bank's leverage and risk-weighted capital ratios as of March 31, 2014 to the minimum and well-capitalized regulatory standards:

 
  Actual   Minimum
Required
For Capital
Adequacy Purposes
  To Be Categorized
as Well Capitalized
Under Prompt
Corrective Action
Provisions
 
 
  Amount   Ratio   Amount   Ratio   Amount   Ratio  
 
  (Dollars in thousands)
 

The Company (1)

                                     

Total capital (to risk weighted assets)

  $ 193,471     12.6 % $ 122,819     8.0 %   N/A     N/A  

Tier 1 capital (to risk weighted assets)

    178,172     11.6     61,409     4.0     N/A     N/A  

Tier 1 capital (to average assets)

    178,172     10.5     68,213     4.0     N/A     N/A  

The Bank (2)

   
 
   
 
   
 
   
 
   
 
   
 
 

Total capital (to risk weighted assets)

  $ 188,225     12.3 % $ 122,749     8.0 % $ 153,436     10.0 %

Tier 1 capital (to risk weighted assets)

    172,927     11.3     61,374     4.0     92,062     6.0  

Tier 1 capital (to average assets)

    172,927     10.2     68,038     4.0     85,048     5.0  

(1)
The Federal Reserve may require the Company to maintain capital ratios above the required minimums.

(2)
The FDIC or the OCC may require the Bank to maintain capital ratios above the required minimums.

        In July 2013, the federal banking agencies published final rules establishing a new comprehensive capital framework for U.S. banking organizations. These rules will become effective as applied to the Company and the Bank on January 1, 2015, with a phase in period from January 1, 2015 through January 1, 2019. See "Regulation and Supervision—US Implementation of Basel III."

Quantitative and Qualitative Disclosures About Market Risk

        For information regarding the market risk of our financial instruments, see "—Financial Condition—Interest Rate Sensitivity and Market Risk." Our principal market risk exposure is to changes in interest rates.

Non-GAAP Financial Measures

        We identify certain financial measures discussed in this prospectus as being "non-GAAP financial measures." In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States in our statements of income, balance sheet or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

        The non-GAAP financial measures that we discuss in this prospectus should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this prospectus may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in this prospectus when comparing such non-GAAP financial measures.

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        Tangible Book Value Per Common Share.     Tangible book value is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization; and (b) tangible book value per common share as tangible common equity (as described in clause (a)) divided by shares of common stock outstanding. For tangible book value, the most directly comparable financial measure calculated in accordance with GAAP is our book value.

        We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.

        The following table reconciles, as of the dates set forth below, total shareholders' equity to tangible common equity and presents our tangible book value per common share compared with our book value per common share:

 
  March 31,   December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (Dollars in thousands, except per share data)
 

Tangible Common Equity

                                           

Total shareholders' equity

  $ 203,600   $ 190,828   $ 199,218   $ 188,211   $ 153,423   $ 150,525   $ 53,598  

Adjustments:

                                           

Goodwill

    15,672     15,672     15,672     15,672     15,672     8,522     6,933  

Core deposit intangibles

    923     1,169     984     1,230     1,245     313      
                               

Tangible common equity

  $ 187,005   $ 173,987   $ 182,562   $ 171,309   $ 136,506   $ 141,690   $ 46,665  
                               
                               

Common shares outstanding (1)

    20,780,254     20,748,172     20,771,087     20,748,172     17,970,395     17,970,395     5,729,881  

Book value per common share (1)

  $ 9.80   $ 9.20   $ 9.59   $ 9.07   $ 8.54   $ 8.38   $ 9.35  

Tangible book value per common share (1)

  $ 9.00   $ 8.39   $ 8.79   $ 8.26   $ 7.60   $ 7.88   $ 8.14  

(1)
Excludes the dilutive effect of 910,208 and 827,268 shares of common stock issuable upon exercise of outstanding stock options as of March 31, 2014 and March 31, 2013, respectively, 910,793 shares as of December 31, 2013, 818,518 shares as of December 31, 2012, 684,562 shares as of December 31, 2011, 648,732 shares as of December 31, 2010 and 565,607 shares as of December 31, 2009.

        Tangible Common Equity to Tangible Assets.     Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as shareholders' equity less goodwill and core deposit intangibles, net of accumulated amortization; (b) tangible assets as total assets less goodwill and core deposit intangibles, net of accumulated amortization; and (c) tangible common equity to tangible assets as tangible common equity (as described in clause (a)) divided by tangible assets (as described in clause (b)). For common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is total shareholders' equity to total assets.

        We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total shareholders' equity and assets while not increasing our tangible common equity or tangible assets.

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        The following table reconciles, as of the dates set forth below, total shareholders' equity to tangible common equity and total assets to tangible assets:

 
  March 31,   December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (Dollars in thousands, except per share data)
 

Tangible Common Equity

                                           

Total shareholders' equity

  $ 203,600   $ 190,828   $ 199,218   $ 188,211   $ 153,423   $ 150,525   $ 53,598  

Adjustments:

                                           

Goodwill

    15,672     15,672     15,672     15,672     15,672     8,522     6,933  

Core deposit intangibles

    923     1,169     984     1,230     1,245     313      
                               

Tangible common equity

  $ 187,005   $ 173,987   $ 182,562   $ 171,309   $ 136,506   $ 141,690   $ 46,665  
                               
                               

Tangible Assets

                                           

Total assets

  $ 1,751,563   $ 1,674,747   $ 1,703,127   $ 1,674,800   $ 1,335,376   $ 874,115   $ 545,441  

Adjustments:

                                           

Goodwill

    15,672     15,672     15,672     15,672     15,672     8,522     6,933  

Core deposit intangibles

    923     1,169     984     1,230     1,245     313      
                               

Tangible assets

  $ 1,734,968   $ 1,657,906   $ 1,686,471   $ 1,657,898   $ 1,318,459   $ 865,280   $ 538,508  
                               
                               

Tangible Common Equity to Tangible Assets

    10.8 %   10.5 %   10.8 %   10.3 %   10.4 %   16.4 %   8.7 %
                               
                               

        Efficiency Ratio.     The efficiency ratio is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate the efficiency ratio by dividing noninterest expense by the sum of net interest income and noninterest income, excluding bargain purchase gain from acquisitions. The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income.

        In our judgment, the adjustment made to noninterest income allows investors and analysts to better assess our operating expenses in relation to our core operating revenue by removing one-time bargain purchase gains associated with acquisitions.

        The following table reconciles, as of the dates set forth below, our efficiency ratio to the GAAP-based efficiency ratio:

 
  March 31,   December 31,  
 
  2014   2013   2013   2012   2011   2010   2009  
 
  (Dollars in thousands, except per share data)
 

Efficiency Ratio

                                           

Noninterest expense

  $ 10,597   $ 9,415   $ 39,965   $ 35,742   $ 26,459   $ 17,797   $ 14,960  

Net interest income

    15,676     13,291     57,042     51,608     34,662     21,559     13,893  

Noninterest income

    1,607     1,068     4,812     5,109     2,087     1,835     571  

Adjustments:

                                           

Bargain purchase gain from acquisitions

                578              
                               

Noninterest income, excluding bargain purchase gains from acquisitions

  $ 1,607   $ 1,068   $ 4,812   $ 4,531   $ 2,087   $ 1,835   $ 571  
                               
                               

Efficiency Ratio

    61.31 %   65.57 %   64.61 %   63.67 %   72.00 %   76.08 %   103.43 %
                               

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BUSINESS

Our Company

        We are a Texas focused bank holding company headquartered in Houston, Texas. Our wholly owned subsidiary, Green Bank, N.A., a nationally chartered commercial bank, provides commercial and private banking services primarily to Texas based customers through twelve full service branches in the Houston, Dallas and Austin MSAs. The Houston, Dallas and Austin MSAs are our target markets, and we believe their growing economies and attractive demographics, together with our scalable platform, provide us with opportunities for long-term and sustainable growth. Our emphasis is on continuing to expand our existing business by executing on our proven portfolio banker driven business model as well as pursuing select strategic acquisitions and attracting additional talented bankers. As of March 31, 2014, we had consolidated total assets of $1.8 billion, total loans of $1.4 billion (of which $1.39 billion were originated by us and $18.8 million were acquired), total deposits of $1.5 billion and total shareholders' equity of $203.6 million.

Our History and Growth

        We are a Texas corporation that was incorporated on October 20, 2004. We began operations as a bank holding company on December 31, 2006 when we acquired Redstone Bank, a Houston community bank with two branches and $219.3 million in total assets. We were formed by our Chairman and Chief Executive Officer, Manny Mehos, who previously founded, led and sold Coastal Bancorp, Inc. after overseeing its growth from one branch and less than $11 million in assets in 1986 to 43 branches and $2.7 billion in assets in 2004, with the objective of building a commercially focused bank in attractive Texas metropolitan markets.

        We have experienced significant growth since commencing operations, while maintaining what we believe to be a healthy balance sheet. During the period from December 31, 2009 through March 31, 2014, we experienced a 37% compounded annual growth rate in total loans and a 31% compounded annual growth rate in total deposits, while extending our branch footprint from five to twelve locations and expanding our team of portfolio bankers from 21 to 50. A key aspect of our growth has been increasing our commercial and industrial loan balances, and as of December 31, 2013, we had the eleventh largest commercial and industrial loan portfolio among banks headquartered in Texas. Our scale has allowed us to leverage our infrastructure to operate our business more efficiently as evidenced by the decrease in our efficiency ratio from 103.4% for the year ended December 31, 2009 to 64.6% for the year ended December 31, 2013, while our total assets grew from $545.4 million to $1.7 billion as of December 31, 2009 and 2013, respectively. We have also increased our net income from a loss of $3.3 million in 2009 to net income of $12.6 million in 2013, while preserving a strong credit culture and conservative risk profile as evidenced by the fact that our historical non-performing assets to total assets ratio has consistently remained below the average among all publicly traded banks in the United States, according to information obtained from SNL Financial.

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Loans
(Dollars in millions)

  Deposits
(Dollars in millions)


 

 

 

GRAPHIC
 
GRAPHIC

 

Net income
(Dollars in thousands)

  Return on Average Assets

 

 

 

GRAPHIC
 
GRAPHIC

        Following our acquisition of Redstone Bank, we have supplemented our organic growth and increased our total deposits by successfully completing and integrating the following acquisitions:

        These acquisitions have provided significant strategic benefits and opportunities, including additional quality deposits which have provided funding for our lending business, new business lines which have contributed to the expansion of our product offerings and additional branches which have extended our geographic footprint and provided opportunities for consolidation of our support areas.

        In addition, we recently entered into a definitive agreement for the acquisition of SharePlus. As of March 31, 2014, SharePlus had four branches, $33.1 million in stockholders' equity, $315.8 million in total assets, $273.5 million in deposits and $228.7 million in loans. See "Summary—Recent Developments" for more information.

        Other than SharePlus, we have no current plans, arrangements or understandings to make any acquisitions. However, at any given time we may be evaluating other acquisition candidates, conducting

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due diligence and may have entered into one or more letters of intent. We cannot assure you that we will enter into any definitive agreements in respect of any such transaction.

Our Strategy

        Our goal is to be a leading provider of personalized commercial and private banking services to Texas businesses, entrepreneurs and individuals while capitalizing on the vibrant and growing economies of our target markets. We have made the strategic decision to focus on the Houston, Dallas and Austin MSAs because we believe these markets offer a compelling combination of economic growth, favorable demographics and desirable prospective customers.

        We employ a portfolio banking model that relies upon experienced bankers to originate quality loans, attract and retain low cost deposits and generate fee income. Within this model, our customers are generally assigned a dedicated portfolio banker who acts as the primary point of contact and relationship manager, eliminating the need to utilize a less personal call center to interact with our customers. We believe that this model allows us to build and maintain long-term relationships, leading to increased business opportunities and referrals, while improving our risk profile through ongoing and proactive credit monitoring and loan servicing. Our portfolio banking model has been the primary driver of our loan growth and has also helped us achieve what we believe to be a comparatively high level of average deposits per branch. Our portfolio banking model incorporates a two-tiered incentive structure designed to compensate our portfolio bankers at a level that is commensurate with their contribution to the successful execution of our business strategy.

        Our target commercial customers include Texas based small and medium-sized businesses in the manufacturing, distribution, supply and energy sectors, as well as real estate investors, mortgage originators and professional firms. We offer a wide variety of banking products and services, including loans, deposit products, including demand, savings, money market and time accounts, treasury management services, an interest rate swap program and a full suite of online banking solutions. We also seek to attract traditional retail customers and to generate retail business from mass affluent individuals with the capacity to maintain significant deposit balances with us through a combination of diverse product offerings with attractive rates, convenient branch locations and personalized service.

        As a significant portion of our historical growth has occurred in a low interest rate environment, a key aspect of our strategy has been the maintenance of an asset-sensitive balance sheet that we believe will produce increased net interest income if market interest rates rise. As of March 31, 2014, 76.9% of our total loans were comprised of floating-rate loans, which may be subject to changes in yield as the interest rate environment changes. Our loan portfolio has grown to $1.4 billion as of March 31, 2014 from $373.0 million as of December 31, 2009, largely as a result of new loans originated by us during that period. Accordingly, our loan portfolio includes loans that we originated within the past two years, which we consider to be relatively unseasoned because of their limited payment history.

        We intend to continue our legacy of growth by executing our portfolio banker driven organic growth strategy complemented by disciplined strategic acquisitions.

        Portfolio Banker Growth Strategy.     Our portfolio banker driven growth strategy will continue to emphasize organic growth through:

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        Strategic Acquisitions.     We intend to supplement our organic growth by executing a disciplined acquisition strategy:

Our Competitive Strengths

        We believe the following competitive strengths will allow us to capitalize on our substantial market opportunity and achieve our business goals:

        Well-positioned within attractive major metropolitan markets in Texas.     We are one of the few Texas based banking franchises focused primarily on the major metropolitan markets in the state with a presence in each of the Houston, Dallas and Austin MSAs. Substantially all of our branches are strategically located within these markets in areas that we consider to be among the most attractive in terms of serving existing and attracting new customers. We believe our model will allow us to continue to capitalize on the favorable demographic and commercial characteristics of our economically robust target markets. Within these markets, we target commercial customers with annual revenues between $5 and $150 million, and we believe that we offer customers of this size a greater level of attention than our larger competitors while providing access to a broad range of sophisticated banking products that cannot be matched by most community banks. There are numerous businesses located in the markets we serve meeting this profile and we believe that we are well-positioned to attract these target customers relative to our competitors as a result of our extensive local knowledge, broad service offerings and portfolio banking model.

        Scalable portfolio banking and operational platforms with the capacity to generate and accommodate significant organic growth.     Our management team has built a capable and knowledgeable staff and made significant investments in the technology and systems necessary to build a scalable corporate infrastructure with the capacity to support continued growth, while also improving operational efficiencies. As a result of the personalized nature of our portfolio banking model, we generally expect that it will take up to five years for our portfolio bankers to reach full capacity in terms of customer relationships and profitability. As of March 31, 2014, the average tenure across our team of portfolio bankers was approximately three years, and we believe that our current team has the capacity to grow loans, deposits and fee income without significant additional overhead expense. Furthermore, we

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believe that our scalable credit, operational, technology and governance infrastructure will continue to allow us to efficiently and effectively manage the growth driven by our strategies. For example, our efficiency ratio has decreased from 103.4% for the year ended December 31, 2009 to 64.6% for the year ended December 31, 2013, while our total assets grew from $545.4 million to $1.7 billion as of December 31, 2009 and 2013, respectively.

        Disciplined and sophisticated credit governance process.     Our approach to credit risk management balances well-defined credit policies, disciplined underwriting criteria and ongoing risk monitoring and review processes with our portfolio banking model which demands that we respond promptly to our customers' needs. Our processes emphasize early-stage review of loans and regular credit evaluations, which supplement the ongoing and proactive credit monitoring and loan servicing provided by our portfolio bankers. This balanced team approach has augmented our ability to identify potential problem loans early and has allowed us to maintain strong credit metrics while executing our growth strategy, as evidenced by the fact that our historical non-performing assets to total assets ratio has consistently remained below the average among all publicly-traded banks in the United States, according to information obtained from SNL Financial. In addition, we believe our nimble and responsive credit culture and underwriting process will help us to attract and retain experienced bankers who are eager to be more responsive to customers' credit requests.

        Experienced acquirer and integrator of financial institutions.     We have developed a proven platform to identify acquisition candidates, conduct comprehensive due diligence, model financial expectations, and effectively consummate the transaction and integrate the acquired institution into our scalable infrastructure and achieve synergies. Since completing a successful capital raise in 2010, we have completed three acquisitions and have recently entered into a definitive agreement to acquire SharePlus. While we have no current plans, arrangements or understandings to make any acquisitions, at any given time we may be evaluating other acquisition candidates and may enter into one or more letters of intent. We cannot assure you if or when we will announce any such transaction. In addition, members of our senior management team have successfully led over 30 bank merger and acquisition transactions since the mid-1980s, including public company transactions. There are approximately 500 banks headquartered in Texas, approximately 150 of which are headquartered in our target markets. Of these 150 banks, 85 reported total assets between $100 million and $1.5 billion as of December 31, 2013. These banks provide us with opportunities to selectively pursue strategic transactions that meet our stringent financial, cultural and risk criteria to support our continued growth. We believe that becoming a publicly traded company will further enhance our ability to execute on our acquisition strategy since we will be able to offer publicly traded stock as consideration.

        Strong and experienced management team.     We are managed by a team of banking executives with complementary experience and personal attributes who have a history of managing large teams, leading acquisition and divestiture projects and managing significant growth in diverse markets and economic climates. Our four executive management team members are career bankers and each has over 25 years of banking experience, including significant experience within large, nationally recognized financial institutions. As a result, our executive management team has substantial expertise with numerous sophisticated banking products, extensive knowledge of the bank regulatory landscape, significant experience throughout numerous interest rate and credit cycles and a range of experience with banks of all sizes. We believe that this varied experience has resulted in a diverse and adaptive culture that enhances our ability to attract driven, entrepreneurial bankers as well as seasoned and capable credit professionals.

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Our Banking Services

        The following is a general discussion of our major types of business activities:

        We offer a variety of loans, including commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner occupied commercial properties), reserve-based energy loans, mortgage-warehouse lines, term loans, equipment financing, acquisition, expansion and development loans, borrowing base loans, real estate construction loans, homebuilder loans, SBA loans, purchased receivables financing, letters of credit and other loan products to national and regional companies, oil and gas producers, real estate developers, mortgage lenders, manufacturing and industrial companies and other businesses. We also offer various consumer loans to individuals and professionals including residential real estate loans, home equity loans, HELOCs, installment loans, unsecured and secured personal lines of credit, overdraft protection and letters of credit. Lending activities originate from the efforts of our portfolio bankers, with an emphasis on lending to individuals, professionals, small to medium-sized businesses and commercial companies located in the Houston, Dallas and Austin MSAs.

        At March 31, 2014, we had total loans of $1.4 billion, representing 80.2% of our total assets. Our loan portfolio consisted of the following loans as of March 31, 2014:

 
  Originated   Acquired   Total   Percentage
of Total
 
 
  (Dollars in thousands)
 

Commercial and Industrial

  $ 673,175   $ 2,637   $ 675,812     48.1 %

Owner Occupied Commercial Real Estate

    149,149     3,366     152,515     10.9  

Commercial Real Estate

    298,623     11,756     310,379     22.1  

Construction, Land and Land Development

    152,145     182     152,327     10.8  

Residential Mortgage

    106,947     461     107,408     7.7  

Other Consumer

    5,472     362     5,834     0.4  
                   

Total

  $ 1,385,511   $ 18,764   $ 1,404,275     100.0 %
                   
                   

        As of March 31, 2014, the aggregate amount of loans to our 10 and 25 largest borrowers (including related entities) amounted to approximately $147.7 million, or 10.5% of total loans, and $287.8 million, or 20.5% of total loans, respectively. See "Risk Factors—Risk Related to Our Business—We have a significant amount of loans outstanding to a limited number of borrowers, which may increase our risk of loss."

        Loan Underwriting and Approval.     Historically, we have made sound, high quality loans while recognizing that lending money involves a degree of business risk. We have loan policies designed to assist us in managing this business risk. These policies provide a general framework for our loan origination, monitoring and funding activities, while recognizing that not all risks can be anticipated. Our board of directors delegates loan authority up to board-approved hold limits collectively to our Loan Committee, which is comprised of members of our executive management team and credit risk executives. Our board of directors also delegates more limited individual lending authority to our Chief Executive Officer, President and Corporate Chief Credit Officer, credit risk personnel, and, on a further limited basis, to selected lending managers in each of our target markets. Lending officers and relationship managers, including our portfolio bankers, do not have individual loan authority. When the total relationship exceeds an individual's loan authority, a higher authority or Loan Committee

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approval is required. The objective of the Bank's approval process is to provide a disciplined, collaborative approach to larger credits while maintaining responsiveness to client needs.

        Loan decisions are documented as to the borrower's business, purpose of the loan, evaluation of the repayment source and the associated risks, evaluation of collateral, covenants and monitoring requirements, and the risk rating rationale. Our strategy for approving or disapproving loans is to follow conservative loan policies and consistent underwriting practices which include:

        Managing credit risk is a Company-wide process. Our strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria and ongoing risk monitoring and review processes for all commercial and consumer credit exposures. Our processes emphasize early-stage review of loans, regular credit evaluations and management reviews of loans, which supplement the ongoing and proactive credit monitoring and loan servicing provided by our portfolio bankers. Our Corporate Chief Credit Officer provides Company-wide credit oversight and periodically reviews all credit risk portfolios to ensure that the risk identification processes are functioning properly and that our credit standards are followed. In addition, a third-party loan review is performed, at least annually, to identify problem assets and confirm our internal risk rating of loans. We attempt to identify potential problem loans early in an effort to seek aggressive resolution of these situations before the loans become a loss, record any necessary charge-offs promptly and maintain adequate allowance levels for probable loan losses inherent in the loan portfolio.

        Our loan policies generally include other underwriting guidelines for loans collateralized by real estate. These underwriting standards are designed to determine the maximum loan amount that a borrower has the capacity to repay based upon the type of collateral securing the loan and the borrower's income. Such loan policies include maximum amortization schedules and loan terms for each category of loans collateralized by liens on real estate.

        In addition, our loan policies provide guidelines for personal guarantees; an environmental review; loans to employees, executive officers and directors; problem loan identification; maintenance of an adequate allowance for loan losses and other matters relating to lending practices.

        Lending Limits.     Our lending activities are subject to a variety of lending limits imposed by federal law. In general, the Bank is subject to a legal lending limit on loans to a single borrower based on the Bank's capital level. The dollar amounts of the Bank's lending limit increases or decreases as the Bank's capital increases or decreases. The Bank is able to sell participations in its larger loans to other financial institutions, which allows it to manage the risk involved in these loans and to meet the lending needs of its customers requiring extensions of credit in excess of these limits.

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        The Bank's legal lending limit as of March 31, 2014 on loans to a single borrower was approximately $28.2 million, which we expect to increase following the consummation of this offering. However, we maintain an in-house, board-approved "hold" limit of $20.0 million for loans to a single borrower. Currently, only mortgage-warehouse and reserve-based energy loans are authorized to utilize the full hold limit, while all other products and businesses are subject to a $15 million hold limit. We have strict policies and procedures in place for the establishment of hold limits with respect to specific products and businesses and evaluating exceptions to the hold limits for individual relationships.

        Our loan policies provide general guidelines for loan-to-value ratios that restrict the size of loans to a maximum percentage of the value of the collateral securing the loans, which percentage varies by the type of collateral. Our internal loan-to-value limitations follow limits established by applicable law.

        Loan Types.     We provide commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner occupied commercial properties), reserve-based energy loans, mortgage-warehouse lines, term loans, equipment financing, acquisition, expansion and development loans, borrowing base loans, real estate construction loans, homebuilder loans, SBA loans, purchased receivables financing, letters of credit and other loan products to national and regional companies, oil and gas producers, real estate developers, mortgage lenders, manufacturing and industrial companies and other businesses. The types of loans we make to consumers include residential real estate loans, home equity loans, HELOCs, installment loans, unsecured and secured personal lines of credit, overdraft protection and letters of credit. Lending activities originate from the efforts of our portfolio bankers, with an emphasis on lending to individuals, professionals, small to medium-sized businesses and commercial companies located in the Houston, Dallas and Austin MSAs.

         Commercial and Industrial Loans .    We make commercial and industrial loans, including commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner occupied commercial properties), reserve-based energy loans, mortgage-warehouse lines, term loans, equipment financing, acquisition, expansion and development loans, borrowing base loans, real estate construction loans, homebuilder loans, SBA loans, purchased receivables financing, letters of credit and other loan products, primarily in our target markets that are underwritten on the basis of the borrower's ability to service the debt from income. We take as collateral a lien on general business assets including, among other things, available real estate, accounts receivable, inventory and equipment and generally obtain a personal guaranty of the borrower or principal. Our commercial and industrial loans generally have variable interest rates and terms that typically range from one to five years depending on factors such as the type and size of the loan, the financial strength of the borrower/guarantor and the age, type and value of the collateral. Fixed rate commercial and industrial loan maturities are generally short-term, with three-to-five year maturities, or include periodic interest rate resets. Terms greater than five years may be appropriate in some circumstances, based upon the useful life of the underlying asset being financed or if some form of credit enhancement, such as an SBA or USDA guarantee is obtained. As of March 31, 2014, we had $43.4 million of commercial and industrial loans due after five years, comprised of loans with SBA/USDA guarantees and a small number of syndicated loans and corporate borrowers. These loans had a weighted average maturity of approximately seven years.

        In general, commercial and industrial loans may involve increased credit risk and, therefore, typically yield a higher return. The increased risk in commercial and industrial loans derives from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan. In addition, the collateral securing commercial and industrial loans generally includes moveable property such as equipment and inventory, which may decline in value more rapidly than we anticipate exposing us to increased credit risk. As a result of these additional

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complexities, variables and risks, commercial and industrial loans require extensive underwriting and servicing.

         Reserve-based Energy Loans .    As part of our commercial and industrial loan portfolio, we make reserve-based energy loans to small and medium-sized independent oil and gas producers who derive a majority of their revenues from the sale of oil and gas products and whose credit needs require a technical evaluation of oil and gas reserves. The primary collateral for reserve-based loans are the borrower's interests in oil and gas leases and related facilities, the majority of which are proven developed producing properties. Collateral is evaluated on a case-by-case basis by a third-party petroleum engineer. In order to determine the collateral value and derive the appropriate loan structure, loans require an engineering evaluation of property value and cash flow no less frequently than semi-annually. We formulate a borrowing base or loan amount and an appropriate amortization, taking into account factors such as overall financial capacity of the borrower and secondary sources of repayment and whether the cash flow will amortize the loan within safe margins. Our reserve-based energy loans generally have variable interest rates and terms that typically range from one to two years. As of March 31, 2014, we had $138.8 million of reserve-based energy loans outstanding.

        Payments on loans secured by oil and gas reserves are generally dependent on the borrower's ability to economically extract, transport and sell the underlying oil and/or gas. Accordingly, repayment of these loans may be subject to adverse developments in commodity prices and the local, national and global economy to a greater extent than other types of loans. In underwriting reserve-based energy loans, we seek to minimize these risks in a variety of ways, including by lending only to borrowers with a proven track record and who measurably possess the capacity, with emphasis on cash flow, to repay the loan. Although an evaluation of the oil and gas collateral typically is the basis for the capacity portion of the lending decision, the borrower's future cash flow position is critical in understanding the risk profile of the transaction as is complete knowledge of the purpose of the loan, the income and expense sources, and the complete financial obligations of the borrower.

         Owner Occupied and Non-Owner Occupied Commercial Real Estate Loans .    We make commercial mortgage loans collateralized by real estate, which may be owner occupied or non-owner occupied real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. We require our commercial real estate loans to be secured by well-managed property with adequate margins and generally obtain a guarantee from responsible parties. Our commercial mortgage loans generally are collateralized by first liens on real estate, have variable or fixed interest rates and amortize over a 10-to-25 year period with balloon payments or rate adjustments due at the end of three to seven years.

        Payments on loans secured by such properties are often dependent on the successful operation (in the case of owner occupied real estate) or management (in the case of non-owner occupied real estate) of the properties. Accordingly, repayment of these loans may be subject to adverse conditions in the real estate market or the economy to a greater extent than other types of loans. In underwriting commercial real estate loans, we seek to minimize these risks in a variety of ways, including giving careful consideration to the property's age, condition, operating history, future operating projections, current and projected market rental rates, vacancy rates, location and physical condition. The underwriting analysis also may include credit verification, reviews of appraisals, environmental hazards or reports, the borrower's liquidity and leverage, management experience of the owners or principals, economic condition and industry trends.

         Construction, Land and Land Development Loans .    We make loans to finance the construction of residential and non-residential properties. Construction loans generally are collateralized by first liens on real estate and have floating interest rates. We conduct periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to

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those described above also are used in our construction lending activities. Our construction loans generally have terms that typically range from three to five years depending on factors such as the type and size of the development and the financial strength of the borrower/guarantor and generally utilize a one- to three-year interest-only period during development/construction followed by a two- to five-year period requiring amortization or in some cases principal curtailments. Our policy requires all commercial real estate loans with an initial maturity in excess of three years (other than construction and development loans) to have principal amortization at least sufficient to repay the loan on a 25 year schedule. We offer an owner-occupied commercial real estate loan product, which includes construction financing, with terms up to 20 years. As of March 31, 2014, we had approximately $43.9 million of construction, land and development loans due after five years, with a weighted average maturity of eight years.

        Construction loans generally involve additional risks attributable to the fact that loan funds are advanced upon the security of a project under construction, and the project is of uncertain value prior to its completion. Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio. As a result of these uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If we are forced to foreclose on a project prior to completion, there is no assurance that we will be able to recover the entire unpaid portion of the loan. In addition, we may be required to fund additional amounts to complete a project and it may be necessary to hold the property for an indeterminate period of time subject to the regulatory limitations imposed by the National Bank Act and the OCC.

         Residential Mortgage Loans .    We make residential real estate loans collateralized by owner occupied properties located in our market areas. We offer a variety of mortgage loan products with amortization periods up to 30 years. Loans collateralized by one-to-four family residential real estate generally are originated in amounts of no more than 80% of appraised value. Home equity loans and HELOCs are generally limited to a combined loan-to-value ratio of 80%, including the subordinate lien. We retain a valid lien on real estate, obtain a title insurance policy that insures that the property is free from encumbrances and require hazard insurance.

         Other Consumer Loans .    We make a variety of loans to individuals for personal and household purposes, including secured and unsecured term loans and home improvement loans. Consumer loans are underwritten based on the individual borrower's income, current debt level, past credit history and the value of any available collateral. The terms of consumer loans vary considerably based upon the loan type, nature of collateral and size of the loan. Consumer loans entail greater risk than do residential real estate loans because they may be unsecured or, if secured, the value of the collateral, such as an automobile or boat, may be more difficult to assess and more likely to decrease in value than real estate. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan balance. The remaining deficiency often will not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans.

        Our services include the usual deposit functions of commercial banks, safe deposit facilities, commercial and personal banking services in addition to our loan offerings. Our principal source of funds is deposits. We offer a variety of deposit products and services consistent with the goal of

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attracting a wide variety of customers, including small to medium-sized businesses. The types of deposit accounts consist of demand, savings, money market and time accounts. We actively pursue business checking accounts by offering competitive rates, telephone banking, online banking and other convenient services to our customers.

        We actively pursue commercial deposit accounts that will benefit from the utilization of our treasury management services. This line of business provided $191.3 million in commercial demand deposit accounts as of March 31, 2014.

        We have developed a specialty in providing depository services to Texas based municipal utility districts and other public entities. These deposits are generally insured time deposits with some customers utilizing FHLB letters of credit to secure the uninsured portion of deposits greater than $250,000. This line of business provided $106.1 million in time deposit funding with $23.4 million in pledged letters of credit as of March 31, 2014.

        We offer a money market account for financial institutions which generally pays a rate slightly above alternative rates available from the Federal Reserve Banks or correspondent banks through traditional federal funds. This product is marketed by specialty bankers specifically focused on this line of business, and provided $137.4 million in money market account funding as of March 31, 2014.

        In addition, we provide enhanced depository services, including customized reporting, for trustees appointed by the U.S. Bankruptcy Court. These deposits are generally demand deposits with a portion of our securities portfolio pledged to the uninsured portion of single debtor accounts exceeding the FDIC insurance limits. This line of business provided $70.3 million in demand deposit funding in 2,150 separate accounts with $38.2 million in securities pledged as of March 31, 2014.

        We offer banking products and services that are attractively priced and easily understood by the customer, with a focus on convenience and accessibility. We offer a full suite of online banking solutions including access to account balances, online transfers, online bill payment and electronic delivery of customer statements, as well as extended drive-through hours, ATMs and banking by telephone, mail and personal appointment. We also offer debit cards, night depository, direct deposit, cashier's and travelers checks and letters of credit, as well as treasury management services, wire transfer services and automated clearing house ("ACH") services.

        We are currently focused on expanding noninterest income though increased income from our treasury management services and our interest rate swap program. We offer a full array of commercial treasury management services designed to be competitive with banks of all sizes. Treasury Management Services include balance reporting (including current day and previous day activity), transfers between accounts, wire transfer initiation, ACH origination and stop payments. Cash management deposit products consist of lockbox, remote deposit capture, positive pay, reverse positive pay, account reconciliation services, zero balance accounts and sweep accounts including loan sweep.

        Our interest rate swap program has been developed as an accommodation to our customers who desire a fixed rate on loans over a certain size threshold with a defined repayment schedule. In such cases, we enter into an interest rate swap contract with our borrower using a standard International Swaps and Derivative Association Agreement and confirmation, while simultaneously entering into a "mirror" interest rate swap contract with a correspondent bank counterparty. The two interest rate swaps are carried at market value with changes in value offsetting. We carried $32.1 million in notional value customer interest rate swaps and $32.1 million notional value interest rate swaps outstanding with correspondent bank counterparties as of March 31, 2014.

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Our Market Areas

        We believe that a key factor contributing to our ability to achieve our business objectives and to create shareholder value is the attractiveness of the Texas market, including the favorable demographic and economic characteristics of our target markets within Texas.

        Texas is the second most populous state in the country with an estimated population in 2013 of 26.4 million. Population within the state grew 5.2% from April 1, 2010 to July 1, 2013, compared to growth of 2.4% for the nation as a whole during the same period according to the U.S. Census Bureau. According to SNL Financial, the five-year population growth rate for the period from 2013 to 2018 is projected to be 7.6%, compared to a 3.6% projected growth rate for the nation as a whole during the same period, and the five-year household income growth rate for the period from 2013 to 2018 is projected to be 21.6% compared to 16.1% for the nation as a whole during the same period. According to the Dallas Fed, Texas led the nation in job growth for the period from 2000-2013, with employment increasing 24.9% compared to an increase of 4.7% for the rest of the nation. According to the Dallas Fed, a significant number of Texas jobs created during this period were in the top half of the pay scale, with 55% of new jobs falling within the two highest wage quartiles, substantially outpacing growth among these quartiles for the rest of the nation. In addition, as illustrated below, job losses resulting from the recent economic recession were substantially less severe in Texas than for the nation as a whole and Texas was among the first states to emerge from the recession, surpassing its pre-recession employment peak in 2011. By contrast, the nation as a whole has yet to restore all of the jobs lost in the recession, remaining over a million jobs short of its pre-recession high as of December 2013, according to the Dallas Fed.


Total Nonagricultural Employment in Selected
States Since the Recession Began


GRAPHIC


                       Source: The Dallas Fed

        Our primary markets are the Houston, Dallas and Austin MSAs, which we consider to be among the most attractive markets in the United States. The 2013 median household income and the projected five-year population and median household income growth rates for these MSAs are substantially greater than the nation as a whole. The following map illustrates the projected 2018 population and

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projected annual percentage growth in population for the period from 2013 to 2018 among Texas MSAs according to SNL Financial:

GRAPHIC

        The table below summarizes certain key demographic information relating to our target markets and our presence within these markets:

 
  Number of
Branches (1)
  Number of
Portfolio
Bankers (1)
  Total
Loans (1)
  Total
Deposits (1)
  2013 Total
Population (2)
  2013 - 2018
Projected
Population
Growth (3)
  2013 - 2018
Projected
Household
Income
Growth (3)
 
 
  (Dollars in millions)
 

Houston MSA

    7     25   $ 937.3   $ 983.8     6,313,158     9.1 %   28.6 %

Dallas MSA

    4     20     344.5     444.6     6,810,913     8.2 %   26.7 %

Austin MSA

    1     5     122.5     58.0     1,883,051     12.9 %   28.3 %

Texas

                            26,448,193     7.6 %   21.7 %

United States

                            316,128,839     3.6 %   16.1 %

(1)
As of March 31, 2014; excludes branches to be acquired in the SharePlus acquisition.

(2)
As of July 1, 2013, according to U.S. Census Bureau estimates.

(3)
According to SNL Financial.

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        Houston.     Houston ranks second in the nation as a home to Fortune 500 company headquarters, including Phillips 66, ConocoPhillips, Marathon Oil and Sysco, along with the Texas Medical Center, which is the largest health complex in the world, and benefits from a vibrant and diverse economy underpinned by a strong energy sector. The Houston MSA is the fifth largest in the country and the city of Houston is the fourth most populous city in the United States, according to 2012 U.S. Census Bureau estimates. The Houston MSA had the second highest percentage employment growth of the 12 most populous MSAs during the 12 months ended October 2013, according to the U.S. Bureau of Labor Statistics.

        Dallas.     Dallas ranks third in the nation as a home to Fortune 500 company headquarters, including ExxonMobil, AT&T, Texas Instruments and Southwest Airlines. The Dallas MSA is the fourth largest in the country and the city of Dallas is the ninth most populous city in the United States, according to 2012 U.S. Census Bureau estimates. The Dallas MSA had the highest percentage employment growth of the 12 most populous MSAs during the 12 months ended October 2013, according to the U.S. Bureau of Labor Statistics.

        Austin.     Austin is the capital of Texas, home to the University of Texas, and a major national cultural, arts, film and media center and a home to numerous company headquarters including Dell and Whole Foods Markets. The Austin MSA ranked ninth among the nation's 10 fastest growing MSAs with a 37.3% population increase between 2000 and 2010, according to 2010 U.S. Census data. The city of Austin experienced 11.8% private sector job growth over the five-year period ending October 2013, and was the only city in the nation to post double-digit percentage growth during that period. Austin was recently ranked first among the best cities for future job growth by Forbes.com.

Our Portfolio Banking Model

        We employ a portfolio banking model that relies upon experienced bankers to originate quality loans, attract and retain low cost deposits and generate fee income. Within this model, customers are assigned a dedicated portfolio banker who acts as the primary point of contact and relationship manager, eliminating the need to utilize a less personal call center to interact with our customers.

        We have implemented a two-tiered incentive structure designed to compensate our portfolio bankers at a level that is commensurate with their contribution to the successful execution of our business strategy. Pursuant to our Portfolio Banker Compensation Program, each eligible portfolio banker's base salary is determined by reference to a salary matrix and net interest margin target. The salary matrix is scaled based on the size of the banker's "portfolio," which includes the amount of loans and weighted deposits attributable to such banker. Deposits are weighted by category according to cost with noninterest-bearing deposits receiving maximum credit. Base salaries are subject to adjustment based on performance appraisals as well as our portfolio bankers' management of credit risk within their portfolio.

        Under our Portfolio Banker Incentive Program, portfolio bankers receive an incentive award based on the achievement of loan and deposit growth targets and asset quality and performance goals. Generally, the incentive award represents an uncapped share in the growth in loans and weighted deposits generated by eligible portfolio bankers during the applicable period, according to an established formula. Eligible portfolio bankers also receive a percentage of the attributable net loan origination and certain other fees received by us. Incentive awards are subject to adjustment based on performance appraisals as well as our portfolio bankers' management of credit risk as growth objectives are pursued.

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Investments

        The primary objectives of our investment policy are to provide a source of liquidity, to provide an appropriate return on funds invested, to manage interest rate risk, to meet pledging requirements and to meet regulatory capital requirements.

        As of March 31, 2014, the book value of our investment portfolio totaled $250.9 million, with an average yield of 1.64% and an estimated duration of approximately 3.1 years.

        Our Bank board of directors and ALCO are responsible for the regular review of our investment activities and the review and approval of our investment policy. Day to day transactions affecting our investment securities portfolio are managed by our senior executives in accordance with the guidelines set forth in our investment policy. These investment activities are reviewed by our Bank board of directors and ALCO.

        Our investment policy outlines investment type limitations, security mix parameters, authorization guidelines and risk management guidelines. The policy authorizes us to invest in a variety of investment securities, subject to various limitations. Our current investment portfolio consists of obligations of the U.S. Treasury and other U.S. government agencies or sponsored entities, including mortgage-backed securities and collateralized mortgage obligations.

Information Technology Systems

        We have recently made and continue to make significant investments in our information technology systems for our banking and lending operations and treasury management activities. We believe this is a necessary investment in order to enhance our capabilities to offer new products and overall customer experience, and to provide scale for future growth and acquisitions. We outsource our core data and item processing services to a nationally recognized bank software vendor, and have recently upgraded to the vendor's primary system which has the capability of serving our primary data processing needs well beyond the $5 billion total assets size range. Our internal network and e-mail systems are maintained in-house and we recently invested in the establishment of a back-up site out of our Richardson, Texas location. This back-up site provides for redundancy and disaster recovery capabilities.

        The majority of our other systems including our electronic funds transfer, transaction processing and our online banking services are hosted by third-party service providers. The scalability of this infrastructure will support our growth strategy. In addition, the tested capability of these vendors to automatically switch over to standby systems should allow us to recover our systems and provide business continuity quickly in case of a disaster.

Competition

        The banking business is highly competitive, and our profitability will depend principally upon our ability to compete with other banks and non-bank financial institutions located in our market areas in Texas for lending opportunities, deposit funds, bankers and acquisition candidates. Our banking competitors in our target markets include Chase, Wells Fargo, Bank of America, BBVA Compass, Amegy, Comerica, Regions, Prosperity Bank, BancorpSouth, Independent Bank, Texas Capital and various community banks.

        We are subject to vigorous competition in all aspects of our business from banks, savings banks, savings and loan associations, finance companies, credit unions and other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies, asset-based non-bank lenders, insurance companies and certain other non-financial entities, including retail stores which may maintain their own credit programs and certain governmental organizations which may offer more favorable financing than we can.

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        Many of the banks and other financial institutions with which we compete have greater financial strength, marketing capability and name recognition than us and operate on a statewide, regional or nationwide basis. These institutions are also likely to have legal loan limits substantially in excess of those that we maintain. Such institutions can perform certain functions for their customers, including trust, securities brokerage and international banking services, which we presently do not offer directly. Although we may offer these services through correspondent banks, the inability to provide such services directly may be a competitive disadvantage and this may affect our ability to generate business, attract experienced bankers and capitalize on acquisition opportunities.

        We also face competition for acquisition opportunities in connection with the implementation of our acquisition strategy. Because there are a limited number of acquisition opportunities in our target markets, we face competition from other banks and financial institutions, many of which possess greater financial, human, technical and other resources than we do. Our ability to compete in acquiring target institutions will depend on our available financial resources to fund the acquisitions, including the amount of cash and cash equivalents we have and the liquidity and market price of common stock. In addition, increased competition may also drive up the acquisition consideration that we will be required to pay in order to successfully capitalize on attractive acquisition opportunities.

        In addition, recent developments in technology and mass marketing have permitted larger companies to market loans and other products and services more aggressively to our small business customers. Such advantages may enable our competitors to realize greater economies of scale and operating efficiencies than we can. Further, some of the non-bank competitors are not subject to the same extensive regulations that govern the Company and the Bank. Various legislative acts in recent years have led to increased competition among financial institutions and competition from both financial and non-financial institutions is expected to continue. See "Risk Factors—We face strong competition from financial services companies and other companies that offer banking services, which could harm our business."

        We have been able to compete effectively with other financial institutions by providing a high level of personalized banking service to professionals and owner-operated businesses and by emphasizing quick and flexible responses to customer demands; establishing long-term customer relationships and building customer loyalty; and by offering products and services designed to address the specific needs of our customers. We rely heavily on the continued business generation of our portfolio bankers and the efforts of our officers and directors for the solicitation and referral of potential customers and we expect this to continue for the foreseeable future.

Our Employees

        As of March 31, 2014, we had 216 full time employees and no part-time employees. None of our employees is represented by a union. Management believes that our relationship with employees is good.

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Our Properties

        Our principal offices are located at 4000 Greenbriar, Houston, Texas 77098. All of our branches are located in Texas. The following table sets forth a list of our branches and certain other properties which we own or lease as of March 31, 2014:

Houston MSA  
Location
  Own or Lease   Sq. Ft.  

Greenbriar Branch
4000 Greenbriar
Houston, Texas 77098

  Own  
  
    
    19,310  

Houstonian Branch
109 North Post Oak Lane, Suite 100
Houston, Texas 77024

 

Lease

   
5,736
 

Tanglewood Branch
5018 San Felipe, Suite D
Houston, Texas 77056

 

Lease 
    

   
3,550
 

Woodlands Branch
1455 Research Forest Drive
The Woodlands, Texas 77380

 

Own

   
7,492
 

Kingwood Branch
1102 Kingwood Drive
Kingwood, Texas 77339

 

Own 
    

   
3,400
 

Cleveland Branch
908 E. Houston Street
Cleveland, Texas 77327

 

Own

   
7,854
 

Eagle Springs Branch
5444 Atascocita Road, Suite 100
Humble, Texas 77346

 

Lease 
    

   
1,946
 

 

Dallas MSA  
Location
  Own or Lease   Sq. Ft.  

Dallas Uptown Branch
2408 Cedar Springs
Dallas, Texas 75201

  Lease  
  
    
    2,703  

Addison Branch
16771 Dallas Parkway
Addison, Texas 75001

 

Own

   
4,100
 

Dallas Preston Center Branch
4029 Northwest Highway
Dallas, Texas 75225

 

Lease 
    

   
2,170
 

Richardson Branch
1301 E. Campbell Road
Richardson, Texas 75081

 

Own

   
10,458
 

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Austin MSA  
Location
  Own or Lease   Sq. Ft.  

Austin Hartland Plaza Branch
1717 W. 6th Street
Austin, Texas 78703

  Lease  
  
    
    4,490  

 

Other  
Location
  Own or Lease   Sq. Ft.  

Memorial Motor Bank
8611 Memorial Drive
Houston, Texas 77024

  Lease  
  
    
    1,390  

Brookhollow Support Services Office
2900 North Loop South
Houston, Texas 77092

 

Lease

   
21,265
 

Sherry Lane Loan Production Office
5950 Sherry Lane, Suite 400
Dallas, Texas 75225

 

Lease 
    

   
6,303
 

        Our operational support functions are centralized in our Brookhollow office in Northwest Houston, which houses management and staff totaling approximately 60 people with the capacity to significantly increase staffing within the existing space. In addition, certain credit support functions are performed out of our Richardson office.

Legal Proceedings

        We are from time to time subject to claims and litigation arising in the ordinary course of business. These claims and litigation may include, among other things, allegations of violation of banking and other applicable regulations, competition law, labor laws and consumer protection laws, as well as claims or litigation relating to intellectual property, securities, breach of contract and tort. We intend to defend ourselves vigorously against any pending or future claims and litigation.

        At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our combined results of operations, financial condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management's attention and may materially adversely affect our reputation, even if resolved in our favor.

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REGULATION AND SUPERVISION

        The U.S. banking industry is highly regulated under federal and state law. These laws and regulations affect the operations of the Company and its subsidiaries.

        Statutes, regulations and policies limit the activities in which we may engage and the manner in which we conduct of our permitted activities. Further, the regulatory system imposes reporting and information collection obligations. We incur significant costs relating to compliance with these laws and regulations. Banking statutes, regulations and policies are continually under review by federal and state legislatures and regulatory agencies, and a change in them, including changes in how they are interpreted or implemented, could have a material adverse effect on our business.

        The material statutory and regulatory requirements that are applicable to us are summarized below. The description below is not intended to summarize all laws and regulations applicable to us, and the description is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are described herein.

Bank and Bank Holding Company Regulation

        The Bank is currently a national bank. As a national bank organized under the National Bank Act, the Bank is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the OCC.

        Any entity that directly or indirectly controls a bank must be approved by the Federal Reserve under the BHC Act to become a bank holding company (a "BHC"). BHCs are subject to regulation, inspection, examination, supervision and enforcement by the Federal Reserve under the BHC Act. The Federal Reserve's jurisdiction also extends to any company that is directly or indirectly controlled by a BHC.

        The Company, which controls the Bank, became a BHC in 2006. As a BHC, the Company is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Federal Reserve. The Company is also subject to supervision, regulation, examination and enforcement by the Texas Department of Banking.

FDIC Deposit Insurance

        The FDIC is an independent federal agency that insures the deposits of federally insured depository institutions up to applicable limits. The FDIC also has certain regulatory, examination and enforcement powers with respect to FDIC-insured institutions. The deposits of the Bank are insured by the FDIC up to applicable limits. As a general matter, the maximum deposit insurance amount is $250,000 per depositor.

Broad Supervision, Examination and Enforcement Powers

        A principal objective of the U.S. bank regulatory system is to protect depositors by ensuring the financial safety and soundness of banking organizations. To that end, the banking regulators have broad regulatory, examination and enforcement authority. The regulators regularly examine the operations of banking organizations. In addition, banking organizations are subject to periodic reporting requirements.

        The regulators have various remedies available if they determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of a banking organization's operations are unsatisfactory. The regulators may also take action if they determine that

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the banking organization or its management is violating or has violated any law or regulation. The regulators have the power to, among other things:

    enjoin "unsafe or unsound" practices;

    require affirmative actions to correct any violation or practice;

    issue administrative orders that can be judicially enforced;

    direct increases in capital;

    direct the sale of subsidiaries or other assets;

    limit dividends and distributions;

    restrict growth;

    assess civil monetary penalties;

    remove officers and directors; and

    terminate deposit insurance.

        The FDIC may terminate a depository institution's deposit insurance upon a finding that the institution's financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution's regulatory agency. Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreements could subject the Company, and subsidiaries of the Company or their officers, directors and institution-affiliated parties to the remedies described above and other sanctions.

The Dodd-Frank Act

        On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank Act is having a broad impact on the financial services industry, and imposes significant regulatory and compliance requirements, including the designation of certain financial companies as systemically important financial companies, the changing roles of credit rating agencies, the imposition of increased capital, leverage, and liquidity requirements, and numerous other provisions designed to improve supervision and oversight of, and strengthen safety and soundness within, the financial services sector. Additionally, the Dodd-Frank Act establishes a new framework of authority to conduct systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve, the OCC and the FDIC.

        The following items provide a brief description of certain provisions of the Dodd-Frank Act that are most relevant to the Company and the Bank.

    Source of strength.   The Dodd-Frank Act requires all companies, including BHCs, that directly or indirectly control an insured depository institution to serve as a source of strength for the institution. Under this requirement, the Company in the future could be required to provide financial assistance to the Bank should it experience financial distress.

    Limitation on federal preemption.   The Dodd-Frank Act significantly reduces the ability of national banks to rely on federal preemption of state consumer financial laws. Although the OCC, as the primary regulator of national banks, will have the ability to make preemption determinations where certain conditions are met, the broad rollback of federal preemption has the potential to create a patchwork of federal and state compliance obligations. This could, in turn, result in significant new regulatory requirements applicable to the Bank, with potentially

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      significant changes in our operations and increases in our compliance costs. It could also result in uncertainty concerning compliance, with attendant regulatory and litigation risks.

    Mortgage loan origination and risk retention.   The Dodd-Frank Act imposes new standards for mortgage loan originations on all lenders, including banking organizations, in an effort to require steps to verify a borrower's ability to repay. In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells or mortgage and other asset-backed securities that the securitizer issues. On January 10, 2013, federal regulators released the "qualified mortgage" rule. The qualified mortgage rule is intended to clarify the application of the Dodd-Frank Act requirement that mortgage lenders have a reasonable belief that borrowers can afford their mortgages, or the lender may not be able to foreclose on the mortgage.

      On August 28, 2013, the OCC, the Federal Reserve, the FDIC, the SEC, the Federal Housing Finance Agency and the Department of Housing and Urban Development issued a proposed rule in connection with the risk retention requirement mandated by Section 941 of the Dodd-Frank Act. The risk retention requirement generally requires a securitizer to retain no less than 5% of the credit risk in assets it sells into a securitization and prohibits a securitizer from directly or indirectly hedging or otherwise transferring the credit risk that the securitizer is required to retain, subject to limited exemptions. One significant exemption is for securities entirely collateralized by "qualified residential mortgages" ("QRMs"), which are loans deemed to have a lower risk of default. The proposed rule defines QRMs to have the same meaning as the term "qualified mortgage," as defined by the CFPB. In addition, the proposed rule provides for reduced risk retention requirements for qualifying commercial loan, commercial real estate loan and auto loan securitizations.

    Imposition of restrictions on certain activities.   The Dodd-Frank Act imposes a new regulatory structure on the over-the-counter derivatives market, including requirements for clearing, exchange trading, capital, margin, reporting and record keeping. In addition, certain swaps and other derivatives activities are required to be "pushed out" of insured depository institutions and conducted in separately capitalized non-bank affiliates. The Dodd-Frank Act also requires certain persons to register as a "major swap participant," "swap dealer," "major security-based swap participant" or a "security-based swap dealer." The U.S. Commodity Futures Trading Commission has substantially completed adopting regulations to implement much of the new derivatives regulatory structure of the Dodd-Frank Act. The SEC and other U.S. regulators are still in the process of adopting regulations to implement the new derivatives regulatory structure of the Dodd-Frank Act. With regard to security-based swaps, it is anticipated that this further rulemaking will further clarify, among other things, reporting and recordkeeping obligations, margin and capital requirements, the scope of registration requirements and the types of swaps that are required to be centrally cleared and exchange-traded. Rules will also be issued to enhance the oversight of clearing and trading entities. As these remaining rules are implemented, new restrictions or limitations may affect our ability to manage certain risks in our business.

    Expanded FDIC resolution authority.   While insured depository institutions have long been subject to the FDIC's resolution process, the Dodd-Frank Act creates a new mechanism for the FDIC to conduct the orderly liquidation of certain "covered financial companies," including bank and thrift holding companies and systemically significant non-bank financial companies. Upon certain findings being made, the FDIC may be appointed receiver for a covered financial company, and would conduct an orderly liquidation of the entity. The FDIC liquidation process is modeled on the existing FDIA and generally gives the FDIC more discretion than in the traditional bankruptcy context. The FDIC has issued final rules implementing the orderly liquidation authority.

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    Consumer Financial Protection Bureau.   The Dodd-Frank Act created a new, independent CFPB. The CFPB is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The CFPB has rulemaking authority over many of the statutes governing products and services offered to bank and thrift consumers. For banking organizations with assets of $10 billion or more, the CFPB has exclusive rule making and examination, and primary enforcement authority under federal consumer financial laws. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB. Compliance with any such new regulations would increase our cost of operations.

    Deposit insurance.   The Dodd-Frank Act made permanent the general $250,000 deposit insurance limit for insured deposits. Amendments to the FDIA also revised the assessment base against which an insured depository institution's deposit insurance premiums paid to the DIF of the FDIC will be calculated. Under the amendments, the assessment base is no longer the institution's deposit base, but rather its average consolidated total assets less its average tangible equity. Additionally, the Dodd-Frank Act made changes to the minimum designated reserve ratio of the DIF, increasing the minimum from 1.15% to 1.35% of the estimated amount of total insured deposits, and eliminating the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. Several of these provisions may impact the FDIC deposit insurance premiums paid by the Bank.

    Transactions with affiliates and insiders.   The Dodd-Frank Act generally enhanced the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of "covered transactions" and clarification regarding the amount of time for which collateral requirements regarding covered credit transactions must be satisfied. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivatives transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution's board of directors.

    Enhanced lending limits.   The Dodd-Frank Act strengthens the existing limits on a depository institution's credit exposure to one borrower. On June 25, 2013, the OCC published a final rule amending its existing lending limits to incorporate changes made by the Dodd-Frank Act. The Dodd-Frank Act and the final rule amend the OCC's lending limit regulation to include credit exposures arising from derivative transactions and repurchase agreements, reverse repurchase agreements, securities lending transactions and securities borrowing transactions. The final rule exempts certain types of transactions, and outlines the methods that banks can choose from to measure credit exposures of derivative transactions and securities financing transactions. In most cases, a bank may choose which method it will use; the OCC, however, may specify that a bank use a particular method for safety and soundness reasons.

    Corporate governance.   The Dodd-Frank Act addresses many investor protection, corporate governance and executive compensation matters that will affect most U.S. publicly traded companies, including the Company. The Dodd-Frank Act (1) grants shareholders of U.S. publicly traded companies an advisory vote on executive compensation; (2) enhances independence requirements for compensation committee members; (3) requires companies listed on national securities exchanges to adopt incentive-based compensation clawback policies for executive officers and (4) provides the SEC with authority to adopt proxy access rules that would allow shareholders of publicly traded companies to nominate candidates for election as a director and have those nominees included in a company's proxy materials. For so long as we are an

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      emerging growth company, we may take advantage of the provisions of the JOBS Act allowing us to not seek a non-binding advisory vote on executive compensation or golden parachute arrangements.

        The requirements of the Dodd-Frank Act are in the process of being implemented over time and most will be subject to regulations implemented over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full extent of the impact such requirements will have on our operations is unclear. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to certain of our business practices, impose upon us more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements.

        Failure to comply with the new requirements may negatively impact our results of operations and financial condition.

The Volcker Rule

        On December 10, 2013, five U.S. financial regulators, including the Federal Reserve and the OCC, adopted a final rule implementing the so-called "Volcker Rule." The Volcker Rule was created by Section 619 of the Dodd-Frank Act and generally prohibits "banking entities" from engaging in "proprietary trading" and making investments and conducting certain other activities with "private equity funds and hedge funds."

        Although the final rule provides some tiering of compliance and reporting obligations based on size, the fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the Company and the Bank. The final regulations were published in the Federal Register on January 31, 2014, and became effective April 1, 2014; however, at the time the agencies released the final Volcker Rule, the Federal Reserve announced an extension of the conformance period for all banking entities until July 21, 2015.

        In response to industry questions regarding the final Volcker Rule, the OCC, Federal Reserve, the FDIC, the SEC and the CFTC issued a clarifying interim final rule on January 14, 2014, permitting banking entities to retain interests in certain collateralized debt obligations ("CDOs") backed by trust preferred securities if the CDO meets certain requirements.

        We are currently reviewing the scope of the regulations implementing the Volcker Rule to determine the impact of the rule on our operations.

Notice and Approval Requirements Related to Control

        Banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution. These laws include the BHC Act, the Change in Bank Control Act and the Savings and Loan Holding Company Act. Among other things, these laws require regulatory filings by a shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution. The determination whether an investor "controls" a depository institution is based on all of the facts and circumstances surrounding the investment. As a general matter, a party is deemed to control a depository institution or other company if the party owns or controls 25% or more of any class of voting stock. Subject to rebuttal, a party may be presumed to control a depository institution or other company if the investor owns or controls 10% or more of any class of voting stock. Ownership by affiliated parties, or parties acting in concert, is typically aggregated for these purposes. If a party's ownership of the Company were to exceed certain thresholds, the investor could be deemed to "control" the Company for regulatory purposes. This could subject the investor to regulatory filings or other regulatory consequences.

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        In addition, except under limited circumstances, BHCs are prohibited from acquiring, without prior approval:

    control of any other bank or BHC or all or substantially all the assets thereof; or

    more than 5% of the voting shares of a bank or BHC which is not already a subsidiary.

Permissible Activities and Investments

        Banking laws generally restrict the ability of the Company from engaging in, or acquiring 5% or more of the voting shares of a company engaged in, activities other than those determined by the Federal Reserve to be so closely related to banking as to be a proper incident thereto. The Gramm-Leach-Bliley Financial Modernization Act of 1999 (the "GLB Act") expanded the scope of permissible activities for a BHC that qualifies as a financial holding company. Under the regulations implementing the GLB Act, a financial holding company may engage in additional activities that are financial in nature or incidental or complementary to a financial activity. Those activities include, among other activities, certain insurance and securities activities. Qualifications for becoming a financial holding company include, among other things, meeting certain specified capital standards and achieving certain management ratings in examinations. Under the Dodd-Frank Act, BHCs and their subsidiaries must be well-capitalized and well-managed in order for the BHC and its nonbank affiliates to engage in the expanded financial activities permissible only for a financial holding company.

        In addition, as a general matter, the establishment or acquisition by the Company of a depository institution or, in certain cases, a non-bank entity, requires prior regulatory approval.

Regulatory Capital Requirements and Capital Adequacy

        The federal bank regulators view capital levels as important indicators of an institution's financial soundness. As a general matter, national banks and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. The final supervisory determination on an institution's capital adequacy is based on the regulator's assessment of numerous factors.

        As a BHC and a national bank, the Company and the Bank are subject to regulatory capital requirements.

        The Federal Reserve has established risk-based and leverage capital guidelines for BHCs, including the Company. The OCC has established substantially similar risk-based and leverage capital guidelines applicable to national banks, including the Bank. The current risk-based capital guidelines, commonly referred to as "Basel I," are based upon the 1988 capital accord of the International Basel Committee on Banking Supervision ("Basel Committee"), a committee of central banks and bank supervisors, as implemented by the U.S. federal banking agencies. The federal banking agencies subsequently adopted separate risk-based capital guidelines for so-called "core banks" based upon the Revised Framework for the International Convergence of Capital Measurement and Capital Standards ("Basel II") issued by the Basel Committee in November 2005, and most recently are in the process of implementing the recently revised framework referred to as "Basel III."

Basel I

        Under Basel I, the minimum ratio of total capital to risk-weighted assets (which are primarily the credit risk equivalents of balance sheet assets and certain off-balance sheet items such as standby letters of credit) is 8%. At least half of total capital must be composed of tier 1 capital, which includes common shareholders' equity (including retained earnings), qualifying non-cumulative perpetual preferred stock (and, for BHCs only, a limited amount of qualifying cumulative perpetual preferred stock and a limited amount of trust preferred securities), and minority interests in the equity accounts

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of consolidated subsidiaries, less goodwill, other disallowed intangibles and disallowed deferred tax assets, among other items. The Federal Reserve also has adopted a minimum leverage ratio requiring tier 1 capital of at least 4.0% of average quarterly total consolidated assets (as defined for regulatory purposes), net of goodwill and certain other intangible assets for all but the most highly rated BHCs.

        The federal banking agencies have also established risk-based and leverage capital guidelines that FDIC-insured depository institutions are required to meet. These regulations are generally similar to those established by the Federal Reserve for bank holding companies.

Basel II

        Under the final U.S. Basel II rules issued by the federal banking agencies, there are a small number of "core" banking organizations that will be required to use the advanced approaches under Basel II for calculating risk-based capital related to credit risk and operational risk, instead of the methodology reflected in the regulations effective prior to adoption of Basel II. The rules also require core banking organizations to have rigorous processes for assessing overall capital adequacy in relation to their total risk profiles, and to publicly disclose certain information about their risk profiles and capital adequacy. The Company and the Bank are not among the core banking organizations required to use Basel II advanced approaches.

Basel III

        On December 16, 2010, the Basel Committee released its final framework for strengthening international capital and liquidity regulation, known as Basel III. The Basel III calibration and phase-in arrangements were previously endorsed by the Seoul G20 Leaders Summit in November 2010, and are subject to individual adoption by member nations, including the United States. Under these standards, when fully phased-in on January 1, 2019, banking institutions will be required to satisfy three risk-based capital ratios:

    i.
    A common equity tier 1 ratio of at least 7.0%, inclusive of 4.5% minimum common equity tier 1 ratio, net of regulatory deductions, and the new 2.5% "capital conservation buffer" of common equity to risk-weighted assets;

    ii.
    A tier 1 capital ratio of at least 8.5%, inclusive of the 2.5% capital conservation buffer; and

    iii.
    A total capital ratio of at least 10.5%, inclusive of the 2.5% capital conservation buffer.

US Implementation of Basel III

        In July 2013, the federal banking agencies published final rules (the "Basel III Capital Rules") that revised their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to implement, in part, agreements reached by the Basel Committee and certain provisions of the Dodd-Frank Act. While some provisions are tailored to larger institutions, the Basel III Capital Rules generally apply to all banking organizations, including the Company and the Bank.

        Among other things, the Basel III Capital Rules: (i) introduce a new capital measure entitled "Common Equity Tier 1" ("CET1"); (ii) specify that tier 1 capital consist of CET1 and additional financial instruments satisfying specified requirements that permit inclusion in tier 1 capital; (iii) define CET1 narrowly by requiring that most deductions or adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expand the scope of the deductions or adjustments from capital as compared to the existing regulations.

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        Under the Basel III Capital Rules, banking organizations are provided a one-time option in their initial regulatory financial report filed after January 1, 2015, to remove certain components of accumulated other comprehensive income from the computation of common equity regulatory capital.

        The Basel III Capital Rules also provide a permanent exemption from the proposed phase out of existing trust preferred securities and cumulative perpetual preferred stock from regulatory capital for banking organizations with less than $15 billion in total assets, while also implementing stricter eligibility requirements for regulatory capital instruments that should serve to disallow the inclusion of all non-exempt issuances of trust preferred securities and cumulative perpetual preferred stock from tier 1 capital. The Basel III Capital Rules also provide additional constraints on the inclusion of minority interests, mortgage servicing assets, deferred tax assets and certain investments in the capital of unconsolidated financial institutions in tier 1 capital, as well as providing stricter risk weighting rules to these assets.

        The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios:

    i.
    4.5% based upon CET1;

    ii.
    6.0% based upon tier 1 capital; and

    iii.
    8.0% based upon total regulatory capital.

        A minimum leverage ratio (tier 1 capital as a percentage of total assets) of 4.0% is also required under the Basel III Capital Rules. The Basel III Capital Rules additionally require institutions to retain a capital conservation buffer of 2.5% above these required minimum capital ratio levels. Banking organizations that fail to maintain the minimum 2.5% capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers, with distributions and discretionary bonus payments being completely prohibited if no capital conservation buffer exists, or in the event of the following: (i) the banking organization's capital conservation buffer was below 2.5% at the beginning of a quarter and (ii) its cumulative net income for the most recent quarterly period plus the preceding four calendar quarters is less than its cumulative capital distributions (as well as associated tax effects not already reflected in net income) during the same measurement period.

        The Basel III Capital Rules also provide stricter rules related to the risk weighting of past due and certain commercial real estate loans, as well as on some equity investment exposures, and replaces the existing credit rating approach for determining the risk weighting of securitization exposures with an alternative approach.

        Finally, the Basel III Capital Rules amend the thresholds under the "prompt corrective action" framework enforced with respect to the Bank by the OCC to reflect both (i) the generally heightened requirements for regulatory capital ratios as well as (ii) the introduction of the CET1 capital measure.

        The enactment of the Basel III Capital Rules will increase the required capital levels that the Company and the Bank must maintain. The Basel III Capital Rules become effective as applied to the Company and the Bank on January 1, 2015, with a phase in period from January 1, 2015 through January 1, 2019.

Liquidity Coverage Ratio.

        The Basel III Capital Rules adopted in July 2013 did not address the proposed liquidity coverage ratio ("LCR") called for by the Basel Committee's Basel III framework. On October 24, 2013, the Federal Reserve issued a proposed rule implementing a LCR requirement in the United States for larger banking organizations. Neither the Company nor the Bank would be subject to the LCR requirement as proposed.

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Prompt Corrective Action

        Under the FDIA, the federal bank regulatory agencies must take "prompt corrective action" against undercapitalized U.S. depository institutions. U.S. depository institutions are assigned one of five capital categories: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized," and are subjected to different regulation corresponding to the capital category within which the institution falls. Currently, a depository institution is deemed to be "well capitalized" if the banking institution has a total risk-based capital ratio of 10.0% or greater, a tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and the institution is not subject to an order, written agreement, capital directive or prompt corrective action directive to meet and maintain a specific level for any capital measure. Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. A banking institution that is undercapitalized is required to submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary's compliance with the capital restoration plan up to a certain specified amount.

        Failure to meet capital guidelines could subject the institution to a variety of enforcement remedies by federal bank regulatory agencies, including: termination of deposit insurance by the FDIC, restrictions on certain business activities and appointment of the FDIC as conservator or receiver. As of March 31, 2014, the Company and the Bank were each well-capitalized.

        As noted above, the Basel III Capital Rules amend the thresholds under the "prompt corrective action" framework enforced with respect to the Bank by the OCC to reflect both (i) the generally heightened requirements for regulatory capital ratios as well as (ii) the introduction of the CET1 capital measure.

Regulatory Limits on Dividends and Distributions

        Federal law currently imposes limitations upon certain capital distributions by national banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital. The Federal Reserve and OCC regulate all capital distributions by the Bank directly or indirectly to the Company, including dividend payments.

        For example, under applicable regulations, the Bank must file an application for OCC approval of a capital distribution if the total capital distributions for the applicable calendar year exceed the sum of the Bank's net income for that year to date plus the Bank's retained net income for the preceding two years. Additionally, the Bank may not pay dividends to the Company if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements, or in the event the OCC notified the Bank that it was in need of more than normal supervision. Under the FDIA, an insured depository institution such as the Bank is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become "undercapitalized." Payment of dividends by the Bank also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.

        In addition, the Bank may become subject to supervisory limits on its ability to declare or pay a dividend or reduce its capital unless certain conditions are satisfied.

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Reserve Requirements

        Pursuant to regulations of the Federal Reserve, all banking organizations are required to maintain average daily reserves at mandated ratios against their transaction accounts. In addition, reserves must be maintained on certain non-personal time deposits. These reserves must be maintained in the form of vault cash or in an account at a Federal Reserve Bank.

Limits on Transactions with Affiliates and Insiders

        Insured depository institutions are subject to restrictions on their ability to conduct transactions with affiliates and other related parties. Section 23A of the Federal Reserve Act imposes quantitative limits, qualitative requirements and collateral requirements on certain transactions by an insured depository institution with, or for the benefit of, its affiliates. Transactions covered by Section 23A include loans, extensions of credit, investment in securities issued by an affiliate and acquisitions of assets from an affiliate. Section 23B of the Federal Reserve Act requires that most types of transactions by an insured depository institution with, or for the benefit of, an affiliate be on terms at least as favorable to the insured depository institution as if the transaction were conducted with an unaffiliated third-party.

        As noted above, the Dodd-Frank Act generally enhances the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of "covered transactions" and a clarification regarding the amount of time for which collateral requirements regarding covered credit transactions must be satisfied. The ability of the Federal Reserve to grant exemptions from these restrictions is also narrowed by the Dodd-Frank Act, including by requiring coordination with other bank regulators.

        The Federal Reserve's Regulation O and OCC regulations impose restrictions and procedural requirements in connection with the extension of credit by an insured depository institution to directors, executive officers, principal shareholders and their related interests.

Brokered Deposits

        The FDIA restricts the use of brokered deposits by certain depository institutions. Under the applicable regulations, (i) a "well capitalized insured depository institution" may solicit and accept, renew or roll over any brokered deposit without restriction, (ii) an "adequately capitalized insured depository institution" may not accept, renew or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC and (iii) an "undercapitalized insured depository institution" may not accept, renew or roll over any brokered deposit. The FDIC may, on a case-by-case basis and upon application by an adequately capitalized insured depository institution, waive the restriction on brokered deposits upon a finding that the acceptance of brokered deposits does not constitute an unsafe or unsound practice with respect to such institution.

Concentrated Commercial Real Estate Lending Guidance

        The federal banking agencies, including the OCC, have promulgated guidance governing financial institutions with concentrations in commercial real estate lending. The guidance provides that a bank has a concentration in commercial real estate lending if (i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multifamily and non-farm residential properties and loans for construction, land development, and other land represent 300% or more of total capital and the bank's commercial real estate loan portfolio has increased 50% or more during the prior 36 months. Owner occupied commercial real estate loans are excluded from this second category. If a concentration is present, management must employ heightened risk management practices that address the following key elements: including board and management oversight and strategic planning, portfolio management,

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development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and maintenance of increased capital levels as needed to support the level of commercial real estate lending.

Examination Fees

        The OCC currently charges fees to recover the costs of examining national banks, processing applications and other filings, and covering direct and indirect expenses in regulating national banks. The Dodd-Frank Act provides various agencies with the authority to assess additional supervision fees.

Deposit Insurance Assessments

        FDIC-insured depository institutions are required to pay deposit insurance assessments to the FDIC. The amount of a particular institution's deposit insurance assessment is based on that institution's risk classification under an FDIC risk-based assessment system. An institution's risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. Deposit insurance assessments fund the DIF. As noted above, the Dodd-Frank Act changed the way an insured depository institution's deposit insurance premiums are calculated. These changes may impact assessment rates, which could impact the profitability of our operations.

Depositor Preference

        The FDIA provides that, in the event of the "liquidation or other resolution" of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If we invest in or acquire an insured depository institution that fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including us, with respect to any extensions of credit they have made to such insured depository institution.

Anti-Money Laundering and OFAC

        Under federal law, financial institutions must maintain anti-money laundering programs that include established internal policies, procedures and controls; a designated compliance officer; an ongoing employee training program and testing of the program by an independent audit function. Financial institutions are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and customer identification in their dealings with non-U.S. financial institutions and non-U.S. customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and law enforcement authorities have been granted increased access to financial information maintained by financial institutions. Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution's compliance with such obligations in connection with the regulatory review of applications, including applications for banking mergers and acquisitions. The regulatory authorities have imposed "cease and desist" orders and civil money penalty sanctions against institutions found to be violating these obligations.

        OFAC is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons, organizations and countries suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If the Company or the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, the Company

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or the Bank must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities.

Consumer Laws and Regulations

        Banking organizations are subject to numerous laws and regulations intended to protect consumers. These laws include, among others:

    Truth in Lending Act;

    Truth in Savings Act;

    Electronic Funds Transfer Act;

    Expedited Funds Availability Act;

    Equal Credit Opportunity Act;

    Fair and Accurate Credit Transactions Act;

    Fair Housing Act;

    Fair Credit Reporting Act;

    Fair Debt Collection Act;

    GLB Act;

    Home Mortgage Disclosure Act;

    Right to Financial Privacy Act;

    Real Estate Settlement Procedures Act;

    laws regarding unfair and deceptive acts and practices; and

    usury laws.

        Many states and local jurisdictions have consumer protection laws analogous, and in addition to, those listed above. These federal, state and local laws regulate the manner in which financial institutions deal with customers when taking deposits, making loans or conducting other types of transactions. Failure to comply with these laws and regulations could give rise to regulatory sanctions, customer rescission rights, action by state and local attorneys general and civil or criminal liability. The creation of the CFPB by the Dodd-Frank Act has led to enhanced enforcement of consumer financial protection laws.

The Community Reinvestment Act

        The CRA is intended to encourage banks to help meet the credit needs of their service areas, including low and moderate-income neighborhoods, consistent with safe and sound operations. The bank regulators examine and assign each bank a public CRA rating. The CRA then requires bank regulators to take into account the federally insured bank's record in meeting the needs of its service area when considering an application by a bank to establish or relocate a branch or to conduct certain mergers or acquisitions. The Federal Reserve is required to consider the CRA records of a BHC's controlled banks when considering an application by the BHC to acquire a banking organization or to merge with another BHC. When the Company or the Bank applies for regulatory approval to engage in certain transactions, the regulators will consider the CRA record of the target institution and our depository institution subsidiaries. An unsatisfactory CRA record could substantially delay approval or result in denial of an application. The regulatory agency's assessment of the institution's record is made

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available to the public. Following its most recent CRA examination in July 2013, the Bank received an overall rating of "Satisfactory."

Changes in Laws, Regulations or Policies

        Federal, state and local legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirements applicable to banks, their holding companies and other financial institutions. Changes in laws, regulations or regulatory policies could adversely affect the operating environment for the Company in substantial and unpredictable ways, increase our cost of doing business, impose new restrictions on the way in which we conduct our operations or add significant operational constraints that might impair our profitability. We cannot predict whether new legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, would have on our business, financial condition or results of operations. The Dodd-Frank Act is in the process of imposing substantial changes to the regulatory framework applicable to us and our subsidiaries. The majority of these changes will be implemented over time by various regulatory agencies. The full effect that these changes will have on us remains uncertain at this time and may have a material adverse effect on our business and results of operations.

Effect on Economic Environment

        The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of bank holding companies and their subsidiaries. Among the means available to the Federal Reserve to affect the money supply are open market operations in U.S. government securities, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid for deposits.

        Federal Reserve monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effect of such policies on the business and earnings of the Company and its subsidiaries cannot be predicted.

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MANAGEMENT

Executive Officers and Directors

        The following table sets forth information regarding our directors and executive officers as of the date of this prospectus.

Name
  Age   Position

Manuel J. Mehos

    60   Chairman and Chief Executive Officer

Geoffrey D. Greenwade

    53   President

John P. Durie

    53   Executive Vice President and Chief Financial Officer

Donald S. Perschbacher

    52   Executive Vice President and Corporate Chief Credit Officer

Stephen Eisenstein

    52   Director

Steven D. Lerner

    60   Director

Cas A. Schneller

    36   Director

Stefanie L. Shelley

    51   Director

Alan M. Silberstein

    66   Director

Robert B.B. Smith

    50   Director

William Spiegel

    52   Director

        Manuel J. Mehos.     Mr. Mehos is the founder as well as the Chairman and Chief Executive Officer of the Company. Prior to founding the Company in 2004, Mr. Mehos was the founder, Chairman and Chief Executive Officer of Coastal Bancorp, Inc. and its banking subsidiary, Coastal Banc, a publicly traded company that was sold in May 2004 to Hibernia Corporation. Mr. Mehos is a Certified Public Accountant in the State of Texas. He currently serves as a Director of the Board for Sentinel Trust Company. He has served as a Director on the Board for Federal Home Loan Bank of Dallas, Texas Finance Commission, Texas Savings & Community Bankers Association and America's Community Bankers. Mr. Mehos received his M.B.A. from the University of Texas. Mr. Mehos' qualifications to serve on our board of directors include his extensive experience in overseeing the Company and in the banking industry and his previous experience serving as Chairman of the board of a publicly traded bank holding company.

        Geoffrey D. Greenwade.     Mr. Greenwade has served as the President of the Company since 2013, and currently serves as President and Chief Executive Officer of the Bank. From 2008 to 2013, Mr. Greenwade served as Executive Vice President of the Company. Prior to joining the Company in 2008, Mr. Greenwade worked at Wells Fargo as Regional Manager of the Business Banking Department and Executive Vice President of the Commercial Banking Department. He has also served as Market President, Lending Manager and Commercial Loan Officer of Bank of America. Mr. Greenwade received his M.B.A. from Baylor University and his B.B.A. in Finance from Texas A&M University.

        John P. Durie.     Mr. Durie has served as Executive Vice President and Chief Financial Officer of the Company since 2006 and currently serves as Executive Vice President and Chief Financial Officer of the Bank. Before joining the Company in 2006 as a result of the merger with Redstone Bank, N.A., he served as Executive Vice President and Chief Financial Officer of Redstone Bank from 2004 to 2006 and as President and Chief Operating Officer of Northwest Bank, N.A. from 1996 to 2000. He also worked at First Interstate Bank where he managed its Texas mergers and acquisitions activities and served as Chief Financial Officer of Consolidated Asset Management Company, the Oklahoma workout subsidiary. Mr. Durie received his B.B.A. in Finance from the University of Oklahoma.

        Donald Perschbacher.     Mr. Perschbacher has served as Executive Vice President and Corporate Chief Credit Officer of the Company since 2012 and currently serves as Executive Vice President and Corporate Chief Credit Officer of the Bank. Prior to joining the Company in March 2012,

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Mr. Perschbacher served as Credit Risk Executive for the Asset Recovery Management & Solutions Group of BBVA Compass Bank in Dallas, Texas, where he was responsible for maximizing the recovery and value of impaired assets. Prior to joining BBVA, Mr. Perschbacher served from 2006 to 2009 as Executive Vice President and Chief Credit Officer of Guaranty Bank, a consumer and business bank with more than 150 banking centers in Texas and California. In that role, Mr. Perschbacher was responsible for the overall asset quality of the bank's lending portfolio. He also served as Senior Vice President and Director of Risk Management (Corporate Banking) of Guaranty Bank from 2001 to 2006. Prior to joining Guaranty Bank, Mr. Perschbacher served as Senior Vice President and Senior Approval Officer for Bank of America's Dallas, Texas operations. Mr. Perschbacher received his B.B.A. in Finance from Texas A&M University.

        Stephen Eisenstein.     Mr. Eisenstein has served as a Director of the Company since 2010 and serves as Senior Managing Director of Harvest Partners, LP, a New York-based private equity firm. Mr. Eisenstein has over 20 years of private equity experience. Before joining Harvest in 1999, he was a founding Partner at Paribas Principal Partners. Prior to founding Paribas Principal Partners, Mr. Eisenstein was a Managing Director at Banque Paribas, specializing in financing and investing in leveraged buyouts. Before joining Paribas, he worked in corporate finance at Chase Manhattan Bank and in equity research at Paine Webber Inc. Mr. Eisenstein serves on the Boards of Packers Holdings and Encanto Restaurants. He has a B.A. in Economics from Tufts University and an M.B.A. from The Wharton School of the University of Pennsylvania. Mr. Eisenstein's qualifications to serve on our board of directors include his significant experience overseeing the business of Harvest's numerous portfolio companies, his extensive board experience having previously served on the board of directors of 12 public and private companies and his significant financial, investment and strategic business planning experience.

        Steven D. Lerner.     Mr. Lerner has served as a Director of the Company since 2006 and currently serves as a Director of the Bank. He is President and Chief Executive Officer of The Redstone Companies, LP, a privately held investment management and development firm. Previously, Mr. Lerner served as Executive Vice President and General Counsel of The Redstone Companies, LP, Redstone Group, Ltd. and related entities from 1998. Prior to joining The Redstone Companies, LP, Mr. Lerner served as a Partner at Schlanger, Silver, Barg & Paine, LLP. He is a member of the State Bar of Texas and Florida Bar. Mr. Lerner received his Doctor of Jurisprudence from the University of Texas Law School. Mr. Lerner's qualifications to serve on our board of directors include his extensive financial and investment experience, his experience in the development of real estate and his long-standing relationships within the business, political and charitable communities.

        Cas A. Schneller.     Mr. Schneller has served as a Director of the Company since 2010 and currently serves as a Director of the Bank. He is a Managing Director of Friedman Fleischer & Lowe, LLC ("FFL"), a San Francisco-based private equity firm. Before joining FFL in 2006, he worked at GTCR Golder Rauner, a Chicago-based private equity firm. Mr. Schneller also worked at William Blair & Company as an analyst in the Mergers and Acquisitions group and at Luxor Capital Group as an investment analyst. He graduated summa cum laude from the University of Notre Dame with a B.B.A. in Finance and Business Economics and earned an M.B.A. from the Harvard Business School. Mr. Schneller's qualifications to serve on our board of directors include his significant experience overseeing the business of FFL's numerous portfolio companies, his board experience having served on the board of directors of six public and private companies and his significant financial, investment and strategic business planning experience.

        Stefanie L. Shelley.     Ms. Shelley has served as a Director of the Company since 2010 and currently serves as a Director of the Bank. She is the Chief Marketing Officer of Broadridge Financial Solutions, Inc., a leading provider of technology, operations and communications solutions to the global financial services industry. Prior to joining Broadridge in 2010, Ms. Shelley was Executive Vice

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President, Bank Marketing of Capital One Bank from 2007 to 2009. Previously, she held an executive position at Citibank, where she managed the product management and marketing of a $100 billion retail deposit product portfolio. Prior to Citibank, Ms. Shelley was the Chief Marketing Officer for Small Business Banking at JP Morgan Chase. Ms. Shelley holds a B.A. in Economics from Colgate University and an M.B.A. in Marketing from The Wharton School of the University of Pennsylvania. Ms. Shelley's qualifications to serve on our board of directors include her broad functional background in business strategy, marketing and product management and extensive experience in launching, building and restructuring businesses.

        Alan M. Silberstein.     Mr. Silberstein has served as a Director of the Company since 2010 and currently serves as a Director of the Bank. He is the current President of Allston Associates, LLC, a management consulting company. Prior to joining Allston Associates in 2004, Mr. Silberstein served as President and Chief Executive Officer of Debt Resolve, Inc. from 2003 to 2004. Previously, he served as Chief Executive Officer of Western Union and Executive Vice President of First Data Corporation, its parent, from 2000 to 2001. Previously, in 1996, he joined Travelers Property Casualty Insurance to serve as Chairman and Chief Executive Officer of Claim Services. Prior to joining Travelers, Mr. Silberstein worked in the banking sector for twenty-two years, holding various executive positions in consumer banking. Mr. Silberstein is active in numerous banking industry groups and has served as chair of the American Bankers Association Retail Executive Committee, a three-year term on the Federal Reserve Board's Consumer Advisory Council, and on the boards of both the New York Cash Exchange and CIRRUS ATM networks. He currently serves on the Board of Global Payments Inc. Mr. Silberstein received his B.S. in engineering from Columbia University and his M.B.A. from the Harvard Business School. Mr. Silberstein's qualifications to serve on our board of directors include his extensive experience in the banking and financial services industries, his experience serving as a director on the board of a public company and his long-standing relationships within the business, political and charitable communities.

        Robert B.B. Smith.     Mr. Smith has served as a Director of the Company since 2006 and currently serves as a Director of the Bank. He serves as Director, Investments at Friedkin Companies, Inc, a holding company providing financial and other services to a group of affiliated companies including Gulf States Toyota Distributors and has been with Friedkin since 1996. Mr. Smith has over 10 years of experience in serving on bank boards, including as a director of Redstone Bank, N.A. Mr. Smith is a member of the Chartered Financial Analyst Institute. He received his M.B.A. from Texas A&M University. Mr. Smith's qualifications to serve on our board of directors include his extensive experience in the banking industry, serving as a director on bank boards, his significant financial, investment and strategic business planning experience and his long-standing relationships within the business, political and charitable communities.

        William Spiegel.     Mr. Spiegel has served as a Director of the Company since 2010. He is Managing Director of Pine Brook Road Partners, LLC, a New York-based investment firm, with over 20 years of private equity investment experience. Prior to joining Pine Brook in 2006, he was with the Cypress Group from its inception in 1994, managing its financial services and healthcare investing activities. Prior to joining the Cypress Group, Mr. Spiegel worked in the Merchant Banking Group at Lehman Brothers. Mr. Spiegel currently serves on the Board of Directors of Essent Group Ltd. and Third Point Reinsurance Ltd. Mr. Spiegel holds a B.Sc. in Economics from the London School of Economics, an M.A. in Economics from the University of Western Ontario and an M.B.A. from the University of Chicago. Mr. Spiegel's qualifications to serve on our board of directors include his extensive experience in overseeing the business of Pine Brook's numerous portfolio companies, his extensive board experience having served on the board of directors of 17 public and private companies, and his significant financial, investment and strategic business planning experience.

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Composition of the Board of Directors; Classes of Directors

        At the time of this offering, our board of directors will consist of eight members, seven of whom will qualify as independent directors under the corporate governance standards of the NASDAQ Global Select Market.

        Upon completion of this offering, we expect that our board of directors will be divided into three classes, denominated as class I, class II and class III. At each annual meeting of our shareholders beginning in 2015, the successors to the directors whose term expires at that meeting will be elected to serve until the third annual meeting after their election or until their successors have been elected and qualified. William L. Spiegel and Stefanie L. Shelley will serve as class I directors whose terms expire at the 2015 annual meeting of shareholders. Stephen Eisenstein, Manuel J. Mehos and Steven D. Lerner will serve as class II directors whose terms expire at the 2016 annual meeting of shareholders. Cas A. Schneller, Alan M. Silberstein and Robert B.B. Smith will serve as class III directors whose terms expire at the 2017 annual meeting of shareholders.

        In connection with this offering, we will enter into a director nomination agreement with funds affiliated with Friedman Fleischer & Lowe, LLC, Harvest Partners, LP and Pine Brook Road Partners, LLC (the "Sponsor Funds") that will provide for the rights of the Sponsor Funds to nominate individuals for election to our board of directors. See "Certain Relationships and Related Party Transactions—Director Nomination Agreement." Messrs. Eisenstein, Schneller and Spiegel were nominated for election to our board of directors by funds affiliated with Harvest Partners, LP, Friedman Fleischer & Lowe, LLC and Pine Brook Road Partners, LLC, respectively, pursuant to our Shareholders Agreement. See "Certain Relationships and Related Party Transactions—Shareholders Agreement."

Director Independence

        Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has determined that Stephen Eisenstein, Steven D. Lerner, Cas A. Schneller, Stefanie L. Shelley, Alan M. Silberstein, Robert B.B. Smith and William L. Spiegel do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the applicable rules and regulations of the SEC and the listing standards of the NASDAQ Global Select Market. In making these determinations, our board of directors considered the current and prior relationships that each director has with the Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each director, and the transactions involving them described in the section titled "Certain Relationships and Related Party Transactions."

Risk Management and Oversight

        Our board of directors oversees our risk management process, including the Company-wide approach to risk management, carried out by our management. Our full board determines the appropriate risk for us generally, assesses the specific risks faced by us, and reviews the steps taken by management to manage those risks. While our full board maintains the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas. In particular, our compensation committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee oversees management of enterprise risks as well as financial risks and, effective upon the consummation of this offering, will also be responsible for overseeing potential conflicts of interests. Effective upon the listing of our common stock on an exchange, our nominating and corporate governance committee will be responsible for overseeing the management of

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risks associated with the independence of our board of directors. Pursuant to our board's instruction, management regularly reports on applicable risks to the relevant committee or the full board, as appropriate, with additional review or reporting on risks conducted as needed or as requested by our board of directors and its committees.

Committees of the Board of Directors

        Our board of directors has established the following committees: an audit committee, a compensation committee and a corporate governance and nominating committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit Committee

        Our audit committee consists of Steven D. Lerner, Stefanie L. Shelley and Alan M. Silberstein, with Steven D. Lerner serving as chair of the audit committee. Our audit committee has responsibility for, among other things:

        Rule 10A-3 promulgated by the SEC under the Exchange Act and applicable NASDAQ Global Select Market rules require our audit committee to be composed entirely of independent directors upon the effective date of our registration statement. Our board of directors has affirmatively determined that each of the members of our audit committee meet the definition of "independent directors" under the rules of the NASDAQ Global Select Market and for purposes of serving on an audit committee under applicable SEC rules. Our board of directors also has determined that Steven D. Lerner qualifies as an "audit committee financial expert" as defined by the SEC.

        Our board of directors has adopted a written charter for our audit committee, which will be available on our corporate website.

Compensation Committee

        Our compensation committee consists of Stephen Eisenstein, Cas A. Schneller, William L. Spiegel and Alan M. Silberstein, with Alan M. Silberstein serving as chair of the compensation committee. The compensation committee is responsible for, among other things:

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        Our board of directors has evaluated the independence of the members of our compensation committee and has determined that each of the members of our compensation committee is an "independent director" under the NASDAQ Global Select Market standards. The members of the compensation committee also satisfy the independence requirements and additional independence criteria under Rule 10C-1 under the Exchange Act, qualify as "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act and "outside directors" within the meaning of Section 162(m) of the Code.

        Our board of directors has adopted a written charter for our compensation committee, which will be available on our corporate website.

Corporate Governance and Nominating Committee

        Our corporate governance and nominating committee consists of Stephen Eisenstein, William L. Spiegel, Cas A. Schneller and Steven D. Lerner, with Steven D. Lerner serving as chair of the corporate governance and nominating committee. The corporate governance and nominating committee is responsible for, among other things:

        Our board of directors has evaluated the independence of the members of our corporate governance and nominating committee and has determined that each of the members of our corporate governance and nominating committee is "independent" under the NASDAQ Global Select Market standards.

        Our board of directors has adopted a written charter for our corporate governance and nominating committee, which will be available on our corporate website.

Compensation Committee Interlocks and Insider Participation

        None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee. During the year ended December 31, 2013, we had a compensation committee, on which Messrs. Stephen Eisenstein, Cas A. Schneller, Alan M. Silberstein and William Spiegel served as members, and none of them was or had ever been an officer or employee of us.

Code of Business Conduct and Ethics

        Our board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers and directors. The full text of our code of business conduct and ethics will be available on our corporate website.

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EXECUTIVE COMPENSATION AND OTHER MATTERS

        We are providing compensation disclosure that satisfies the requirements applicable to emerging growth companies, as defined in the JOBS Act. The table below sets forth the annual compensation earned during the year ended December 31, 2013 by our chief executive officer, chief financial officer and our next most highly compensated executive officer, or our named executive officers.


2013 SUMMARY COMPENSATION TABLE

Name and Principal Position
  Year   Salary
($)
  Bonus
($)
  Stock
Awards
($)
  Option
Awards
($)
  Non-Equity
Incentive Plan
Compensation
($) (1)
  Nonqualified
Deferred
Compensation
Earnings
($)
  All Other
Compensation
($)
  Total
($)
 

Manuel J. Mehos, Chief Executive Officer & Chairman of the Board

    2013     300,000                 219,000         20,515 (2)   539,515  

Geoffrey D. Greenwade, President

   
2013
   
330,000
   
   
   
   
240,900
   
   
36,136

(3)
 
607,036
 

John P. Durie, Executive Vice President & Chief Financial Officer

   
2013
   
290,000
   
   
   
   
211,700
   
   
27,724

(4)
 
529,424
 

(1)
Amounts were earned pursuant to the 2013 Executive Incentive Program, as described in greater detail below in "—Executive Incentive Program."

(2)
Represents $792 of life insurance premiums; $15,300 of 401(k) company contributions; and $4,423 of club membership fees.

(3)
Represents $424 of life insurance premiums; $15,300 of 401(k) company contributions; $6,012 of club membership fees; and a $14,400 auto allowance.

(4)
Represents $424 of life insurance premiums; $15,300 of 401(k) company contributions; and a $12,000 auto allowance.

Executive Incentive Program

        Each of our named executive officers participated in the 2013 Executive Incentive Program (the "2013 EIP") for the year ended December 31, 2013. The 2013 EIP provided for the payment of bonuses based on the achievement of certain measurable targets relating to profitability and franchise value. The "profitability" component was comprised of metrics relating to net income, non-interest expense to average assets ratio and total non-interest income. The "franchise value" component was comprised of metrics relating to deposit growth, loan growth, core deposits to total deposits and classified assets to total loans and other real estate. The 2013 EIP established a threshold, budget and stretch objective for each measureable target and the terms of the plan provided that 30% of each component award would be earned when the performance threshold is met, 80% of the component award would be earned when the budgeted objective is achieved, and 120% of the component award would be earned when the stretch objective is achieved. The 2013 EIP provided that any performance results between the performance threshold and the stretch objective will be interpolated on a linear basis and assigned a payout level in 10% increments. The budgeted amounts for the year ended December 31, 2013 for each of Messrs. Mehos, Greenwade and Durie were $285,000, $327,180 and $286,904, respectively.

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2013 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

        The following table sets forth information relating to the unexercised options held by the named executive officers as of December 31, 2013. None of the named executive officers held outstanding stock awards as of December 31, 2013.

 
  Option Awards
Name
  Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
  Equity Incentive Plan
Awards: Number of
Securities Underlying
Unexercised Unearned
Options
(#)
  Option Exercise
Price
($)
  Option Expiration
Date

Manuel J. Mehos

    150,000             10.00   6/21/2016

    85,482     28,494 (1)   448,011 (3)   8.17   6/30/2020

Geoffrey D. Greenwade

   
60,000
   
   
   
10.00
 

4/14/2018

    12,500             10.00   12/5/2018

    11,250     3,750 (2)       8.25   2/1/2020

    54,274     27,137 (1)   320,008 (3)   8.17   6/30/2020

John P. Durie

   
9,166

(4)
 
   
   
8.25
 

3/1/2014

    18,332             7.86   12/21/2015

    18,332             9.71   12/29/2016

    5,000             10.00   12/5/2018

    7,500     2,500 (2)       8.25   2/1/2020

    43,420     21,709 (1)   256,006 (3)   8.17   6/30/2020

(1)
Such options vest on June 30, 2014, subject to the named executive officer's continued employment through such date.

(2)
Such options vested on February 1, 2014.

(3)
76% of such options are "performance options" and 24% of such options are "super performance options," and such options will vest, if at all, upon satisfaction of the performance criteria described below in "—Option Agreements."

(4)
Such options were exercised on February 20, 2014.

        As of December 31, 2013, each of our named executive officers held outstanding options under the 2010 Stock Option Plan (the "2010 Option Plan") and certain other option plans adopted prior to the 2010 Option Plan (the "Prior Option Plans"). The Prior Option Plans are frozen to new grants and all of the outstanding options held by named executive officers under the Prior Option Plans were vested as of December 31, 2013.

2010 Stock Option Plan

        In 2010, we adopted the 2010 Option Plan to advance the interests of us and our affiliates by providing for the grant of non-qualified stock options to purchase shares of our common stock. The maximum number of shares of our common stock that may be issued pursuant to options under the 2010 Option Plan is 2,239,906. As of the date of this prospectus, we have granted options to purchase 2,108,007 shares of our common stock under the 2010 Option Plan. We have granted options under the 2010 Option Plan to our named executive officers, as described in greater detail below in "—Option Agreements." After this offering, no further options will be granted under the 2010 Option Plan. A summary of the material terms of the 2010 Option Plan are described below.

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        Plan Administration.     The 2010 Option Plan is administered by the board of directors or a committee of the board (the "Committee").

        Eligibility.     The plan permits the grant of stock options to key employees or directors of us or our affiliates who are selected by the board of directors or, if expressly permitted by the board of directors, the Committee.

        Stock Option Provisions.     The terms of each stock option grant (including terms relating to vesting) are generally determined by the Committee (subject to the limitations in the 2010 Option Plan) and are set forth in an option award agreement; provided that each stock option will expire no later than the 10th anniversary of the date of grant.

        Transfer Restrictions.     The stock options are generally non-transferrable (other than by will or by the laws of descent and distribution).

        Termination of Employment.     Unless the Committee provides otherwise in an award agreement, upon a termination of a participant's employment, such participant's stock options will generally cease to be exercisable and will terminate, except that (i) upon a termination of employment other than for "cause," death or "disability" (each as defined in the 2010 Option Plan), the participant will have 90 days post-termination to exercise any options which were vested as of the date of termination and (ii) upon a termination of employment for death or disability, the participant will have 12 months post-termination to exercise any stock options which were vested as of the date of termination.

        Change in Control.     Unless the Committee provides otherwise in an award agreement, upon a "change in control" (as defined in the 2010 Option Plan) in which there is an acquiring or surviving entity, the Committee may generally provide for the continuation, assumption or substitution of all or some of the outstanding stock options. In the event of a change in control in which there is no assumption, continuation or substitution of some or all outstanding stock options, the Committee will either preserve the intrinsic value of the stock options, accelerate time-based stock options, accelerate delivery of shares of common stock issuable under such stock options or cancel any stock options in exchange for a cash payment equal to the excess, if any, of the fair market value of our shares of common stock over the exercise price of such stock options.

        Adjustments.     The 2010 Option Plan generally provides that the Committee may take appropriate actions to adjust the stock options in the event of certain corporate transactions and corporate events in order to prevent the enlargement or dilution of benefits under the option grants.

        Amendment and Termination.     The Committee may, in its discretion, amend or alter the terms of the 2010 Option Plan or any outstanding award under the 2010 Option Plan at any time; provided that, in general, no changes may be made which would adversely affect a participant's rights under an option grant or under the 2010 Option Plan.

Option Agreements

        We entered into option agreements under our 2010 Option Plan with each of our named executive officers on June 30, 2010. The option agreements provide for the grant of time-based options, performance-based options and "super performance options," each as described in greater detail below.

        The time-based options generally vest on each of the second, third and fourth anniversaries of the date of grant.

        The performance-based options will generally vest upon a sale of the Company or a "calculation event" (generally defined as a qualifying initial public offering or any period in which the shares of our common stock are publicly traded on a national securities exchange or automated quotation system and have a minimum public float of at least $75 million for any consecutive 90 day trading period) that

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occurs prior to a sale of the Company as follows: (i) one-third of the performance options will vest if the "investor return" (as defined in the option agreements) of the Sponsor Funds exceeds 1.75x as of the date of any such sale of the Company or calculation event (each, a "liquidity event"), (ii) one-third of the performance options will vest if the investor return of the Sponsor Funds exceeds 2.00x as of the date of such liquidity event, and (iii) the remaining one-third of the performance options will vest if the investor return of the Sponsor Funds exceeds 2.50x as of the date of such liquidity event; provided that to the extent the applicable liquidity event occurs after June 30, 2015, the performance options will only vest if one of the following additional performance hurdles are also satisfied: either (x) our return on average equity from and after June 30, 2010 until the date of the applicable liquidity event exceeds 11% (compounded annually), or (y) the internal rate of return of the Sponsor Funds from and after June 30, 2010 with respect to their investment in our shares as of the date of the applicable liquidity event exceeds 15%.

        The super performance options will vest in full upon a liquidity event in which the "investor return" of the Sponsor Funds exceeds 3.25x.

        The option agreements also provide that upon a termination of the named executive officer's employment without "cause" or for "good reason" (each as defined in the named executive officer's employment agreement) following a "change in control" (as defined in the 2010 Option Plan), the time-based options will become fully vested and exercisable.

Employment Agreements

        Each of our named executive officers has entered into an employment agreement which provides that the named executive officer will be paid an annual base salary, which will be reviewed annually and may be increased from time to time in the sole discretion of the board of directors of us.

        The employment agreements for each of Messrs. Durie and Greenwade provide that, upon an involuntary termination of the named executive officer's employment without "cause," for "good reason" (each as defined in the named executive officer's employment agreement), or due to our material breach of the employment agreement, as of December 31, 2013, subject to the named executive officer's execution and non-revocation of a general release of claims in favor of us, the executive officer will be entitled to base salary continuation for 21 months (with such severance period to increase based on the passage of time, with a maximum severance period of 24 months being achieved on June 30, 2014). Notwithstanding the above, the employment agreements also provide that upon any such involuntary termination of the executive officer's employment following the earlier to occur of (i) vesting of 2/3 of the performance options or (ii) a sale of the Company, the salary continuation period will not exceed 12 months. As of December 31, 2013, neither of these conditions had occurred. The employment agreements also contain post-termination non-solicitation covenants for the greater of (x) 12 months post-termination and (y) the salary continuation severance period.

        The employment agreement for Mr. Mehos provides that upon a termination of Mr. Mehos' employment without "cause" or for "good reason" (each as defined in Mr. Mehos' employment agreement) and subject to Mr. Mehos' execution and non-revocation of a general release of claims in favor of us, Mr. Mehos will be entitled to 12 months of base salary continuation. The employment agreement for Mr. Mehos also contains a 12-month post-termination non-solicitation covenant.

Change in Control Severance Plan

        Messrs. Mehos, Greenwade and Durie are participants in our Change in Control Severance Plan (the "CIC Plan"), which was adopted on June 3, 2014 for the purpose of retaining employees, maintaining a stable work environment and providing economic security in the event of a termination of employment following a change in control.

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        The CIC Plan generally provides that if a termination of the executive's employment, other than for death, disability or "cause," or by the executive for "good reason" (each as defined in the applicable executive's employment agreement), occurs during the period commencing on a change in control (or, if earlier, the execution of an acquisition agreement contemplating a change in control) and ending eighteen months following such change in control, the executive will be entitled to severance payments equal to two and one half (2.5) times the sum of (i) the executive's annual base salary, (ii) the executive's target bonus, and (iii) our annual contribution to the cost of medical, dental and vision coverage for the executive and his dependents. The executive will also be entitled to a pro-rata bonus and outplacement services not to exceed $25,000. Any severance payments under the CIC Plan will be offset by any severance payments made to our NEOs under their employment agreements. The CIC Plan also contains a 12-month non-solicitation covenant.

Equity Compensation Plans

    2014 Omnibus Equity Incentive Plan

        Our board of directors and stockholders have adopted and approved our 2014 Omnibus Equity Incentive Plan, or 2014 Plan, which will become effective immediately prior to the date this offering. The purpose of our 2014 Plan is to enable us to grant equity-based incentive awards intended to attract, motivate and retain qualified employees, directors and other eligible service providers, and to align their financial interests with those of our stockholders. In connection with this offering, we intend to grant restricted stock units under the 2014 Plan to each of our NEOs in the following amounts: 15,000 for each of Messrs. Mehos and Durie and 20,000 for Mr. Greenwade.

        Following is a brief summary of the material terms of our 2014 Plan, which will be subject to the actual terms of the 2014 Plan.

        Eligibility for Participation.     Our 2014 Plan permits the grant of incentive stock options, or ISOs, within the meaning of Section 422 of the Code, to our and any of our subsidiaries' employees, and the grant of non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares and other forms of equity-based awards to our and any of our affiliates' (or, if necessary to avoid the imposition of additional taxes under Section 409A of the Code, our subsidiaries') employees, directors, consultants and independent contractors.

        Authorized Shares.     We have reserved 1,273,838 shares of our common stock for issuance under our 2014 Plan. If any shares of our common stock subject to an award under the 2014 Plan are forfeited, cancelled, exchanged or surrendered or if an award otherwise terminates or expires without a distribution of shares to the applicable participant, or if an award is paid or settled in cash, the shares with respect to such award will, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for awards under the 2014 Plan. When Section 162(m) of the Code becomes applicable to us, the maximum aggregate number of shares of our common stock subject to awards that may be granted during any fiscal year to any individual will be 250,000.

        Administration.     In general, our 2014 Plan will be administered by the compensation committee of our board of directors. Subject to the discretion of the board, in the case of awards intended to qualify for the "performance-based compensation" exemption from Section 162(m) of the Code, the committee will consist of at least two "outside directors" within the meaning of Section 162(m) of the Code. Subject to the terms of our 2014 Plan, the committee (or its designee) may select, from those eligible participants, the persons who will receive awards, the types of awards to be granted, the purchase price (if any) to be paid for shares covered by the awards, and the vesting (including acceleration of vesting), forfeiture, cancellation and other terms and conditions of the awards, and will have the authority to make all other determinations necessary or advisable for the administration of the plan. The

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compensation committee will also have the ability to construe and interpret the terms and provisions of the 2014 Plan (and any award agreement relating thereto).

        Stock Options.     We may issue non-qualified stock options and "incentive stock options" or "ISOs" (within the meaning of Section 422 of the Code) under the 2014 Plan. The terms and conditions of any options granted to a participant will be set forth in an award agreement and, subject to the provisions in the 2014 Plan, will be determined by the compensation committee. The exercise price of any option granted under our 2014 Plan must be at least equal to the fair market value of our common stock on the date the option is granted (110% of fair market value in the case of ISOs granted to ten percent stockholders). The maximum term of an option granted under our 2014 Plan is ten years. Subject to our 2014 Plan, the compensation committee will determine the vesting and other terms and conditions of options granted under our 2014 Plan and the compensation committee will have the authority to accelerate the vesting of any option in its sole discretion. Unless the applicable option award agreement provides otherwise, in the event of an optionee's termination of employment or service for any reason other than for cause, disability or death, such optionee's options, to the extent exercisable at the time of such termination, will generally remain exercisable until 90 days after such termination and then expire. Unless the applicable option agreement provides otherwise, in the event of an optionee's termination of employment or service due to disability or death, such optionee's options, to the extent exercisable at the time of such termination, will generally remain exercisable until one year after such termination and will then expire. In the event of an optionee's termination of employment or service for cause, such optionee's outstanding options will expire at the commencement of business on the date of such termination. In no event, however, may an option be exercised after the expiration of its term.

        Stock Appreciation Rights.     The terms and conditions of any stock appreciation rights, or SARs, granted to a participant will be set forth in an award agreement and, subject to the provisions in the 2014 Plan, will be determined by the compensation committee. A SAR allows the recipient to receive payment, in cash and/or shares of our common stock, in an amount equal to the appreciation in the fair market value of our common stock between the date the stock appreciation right is granted and the date it is exercised. SARs may be granted under the 2014 Plan either alone or in conjunction with all or part of any option granted under the 2014 Plan. A free-standing SAR granted under the Plan entitles its holder to receive, at the time of exercise, an amount per share equal to the excess of the fair market value (at the date of exercise) of a share of common stock over a specified price fixed by the compensation committee (which shall be no less than fair market value at the date of grant). A SAR granted in conjunction with all or part of an option under the 2014 Plan entitles its holder to receive, at the time of exercise of the SAR and surrender of such all or part of the related option, an amount per share equal to the excess of the fair market value (at the date of exercise) of a share of common stock over the exercise price of the related option. In the event of a participant's termination of employment or service, SARs will generally be exercisable at such times and subject to terms and conditions applicable to options granted under the 2014 Plan. The maximum term of a SAR granted under our 2014 Plan is ten years.

        Restricted Stock.     The terms and conditions of any restricted stock awards granted to a participant will be set forth in an award agreement and, subject to the provisions in the 2014 Plan, will be determined by the compensation committee. Under a restricted stock award, we issue shares of our common stock to the recipient of the award, subject to vesting conditions and transfer restrictions that lapse over time or upon achievement of performance conditions. The compensation committee will determine the vesting schedule and performance objectives, if any, applicable to each restricted stock award. Subject to the provisions of the 2014 Plan and the applicable award agreement, the compensation committee has the sole discretion to provide for the lapse of restrictions or the acceleration or waiver of restrictions (in whole or part) under certain circumstances including, without limitation, the attainment of certain performance goals, a participant's termination of employment or service or a participant's death or disability. Unless the compensation committee determines otherwise,

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the recipient may vote and receive dividends on shares of restricted stock issued under our 2014 Plan. The rights of a participant with respect to his or her shares of restricted stock will be determined by the compensation committee and will be set forth in the participant's award agreement.

        Performance Units/Performance Shares.     Performance units and performance shares are awards that are payable in cash or shares of our common stock upon the achievement of specific performance goals established in advance by our compensation committee. A performance share is an award that has an initial value equal to one share of our common stock. A performance unit is an award that has an initial value equal to a specified dollar amount. The value of a performance share or performance unit at the end of the applicable performance period will depend on whether and the extent to which the specified performance goals are achieved.

        Other Share-Based Awards and Cash Awards.     Our compensation committee may make other forms of equity-based awards under our 2014 Plan, including, for example, restricted stock units, stock bonus awards and dividend equivalent awards. The terms and conditions of any such awards granted to a participant will be set forth in an award agreement and, subject to the provisions in the 2014 Plan, will be determined by the compensation committee. In addition, our 2014 Plan authorizes us to make annual and other cash incentive awards based on achieving performance goals that are pre-established by our compensation committee. No more than $1,500,000 may be awarded as a cash incentive award to any "covered employee" for any calendar year once we become subject to Section 162(m) of the Code.

        Performance Goals.     The compensation committee may grant awards of restricted stock, performance units, performance shares and other stock-based awards that are intended to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code. These awards may be granted, vest and be paid based on attainment of specified performance goals established by the committee. Any one or more of the following performance factors may be used by the compensation committee in establishing performance goals for awards intended to qualify as "performance-based compensation": (i) earnings, including one or more of operating income, net operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization, adjusted EBITDA, economic earnings, or extraordinary or special items or book value per share (which may exclude nonrecurring items); (ii) pre-tax income or after-tax income; (iii) earnings per share (basic or diluted); (iv) operating profit; (v) revenue, revenue growth or rate of revenue growth; (vi) return on assets (gross or net), return on investment, return on capital, or return on equity; (vii) returns on sales or revenues; (viii) operating expenses; (ix) share price appreciation; (x) cash flow, cash flow per share, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xi) implementation or completion of critical projects or processes; (xii) cumulative earnings per share growth; (xiii) operating margin or profit margin; (xiv) non-interest income and expense related measures, including non-interest income to average assets, non-interest expense to average assets, non-interest income compared to targeted thresholds and non-interest expense compared to targeted thresholds; (xv) cost targets, reductions and savings, productivity and efficiencies; (xvi) growth related measures, including deposit growth (including growth related to specific types of deposits), weighted deposit growth and loan growth (including growth related to specific types of loans); (xvii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (xviii) credit related measures, including classified assets to total loans plus owned real estate, non-performing assets to total assets and net charge-offs to total loans; (xix) personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other

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corporate transactions; (xx) any combination of, or a specified increase in, any of the foregoing, (xxi) economic value created; and (xxii) share price or total shareholder return.

        Award Agreements.     Awards granted under the 2014 Plan will be evidenced by award agreements, which need not be identical, that provide additional terms, conditions, restrictions or limitations covering the grant of the award, including, without limitation, additional terms providing for the acceleration of exercisability or vesting of awards in the event of a change in control or conditions regarding the participant's employment, as determined by the compensation committee in accordance with the 2014 Plan.

        Transferability of Awards.     In general, awards made under our 2014 Plan may not be transferred or assigned, except as may be permitted by our compensation committee. An option or stock appreciation right granted under our 2014 Plan may be exercised only by the recipient during his or her lifetime, except as may be permitted by our compensation committee.

        Capital Changes.     In the event of certain changes in our capitalization, such as a reorganization, stock split, merger or similar change in our corporate structure or the number of outstanding shares of our common stock, our compensation committee will make appropriate adjustments to the aggregate and individual share limits and to the number, kind, class and/or exercise price under outstanding awards in order to prevent undue diminution or enlargement of the benefits or potential benefits available under our 2014 Plan. The compensation committee may also provide, in its sole discretion, for the cancellation of any outstanding award in exchange for a payment in cash or other property having an aggregate fair market value of the shares of common stock covered by such award, reduced by the aggregate exercise price or purchase price thereof, if any.

        Change in Control.     Unless otherwise determined by the compensation committee and evidenced in an award agreement (or unless as otherwise provided in a written agreement between us and a participant), in the event that a "change in control" (as defined in the 2014 Plan) occurs and (i) awards under the 2014 Plan continue or are assumed or substituted by any successor and a participant's employment is terminated without "cause" (as defined in the 2014 Plan) or, if the participant has a written agreement providing for "good reason" severance protections, for "good reason", on or after the effective date of the change in control but prior to 12 months following the change in control or (ii) awards under the 2014 Plan are not continued or assumed or substituted by any successor, then any unvested or unexercisable portion of any award carrying a right to exercise shall become fully vested and exercisable, and the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to an award granted under the 2014 Plan will lapse and such unvested awards will be deemed fully vested and any performance conditions imposed with respect to such awards will be deemed to be fully achieved at the target level.

        Amendment and Termination.     Our board of directors has the authority to amend or terminate our 2014 Plan, provided such action does not adversely affect then outstanding awards. Amendments to our 2014 Plan will be subject to stockholder approval if such approval is necessary in order to satisfy applicable legal or stock exchange listing requirements. Unless sooner terminated, our 2014 Plan will automatically terminate in 2024, on the tenth anniversary of its effective date.

        Clawback.     Notwithstanding any provision in the 2014 Plan, any award which is subject to recovery under any law, governmental regulation or stock exchange listing requirement (or any policy of the company pursuant to any such regulation or requirement), will be subject to such deductions or clawbacks as may be required.

        We intend to file with the SEC a registration statement on Form S-8 covering the shares issuable under the 2014 Plan.

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        The following is a summary of certain United States Federal income tax consequences of awards under the 2014 Plan. It does not purport to be a complete description of all applicable rules, and those rules (including those summarized here) are subject to change.

        An optionee generally will not recognize taxable income upon the grant of a non-qualified stock option. Rather, at the time of exercise of such non-qualified stock option, the optionee will recognize ordinary income for income tax purposes in an amount equal to the excess of the fair market value of the shares purchased over the exercise price. We generally will be entitled to a tax deduction at such time and in the same amount that the optionee recognizes ordinary income. If shares acquired upon exercise of a non-qualified stock option are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of such shares on the date of such exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the optionee) depending upon the length of time such shares were held by the optionee.

        In general, no taxable income is realized by a participant upon the grant of an ISO. If shares of common stock are purchased by a participant, or option shares, pursuant to the exercise of an ISO granted under the Plan and the participant does not dispose of the option shares within the two-year period after the date of grant or within one year after the receipt of such option shares by the participant, such disposition a disqualifying disposition, then, generally (1) the participant will not realize ordinary income upon exercise and (2) upon sale of such option shares, any amount realized in excess of the exercise price paid for the option shares will be taxed to such participant as capital gain (or loss). The amount by which the fair market value of the common stock on the exercise date of an ISO exceeds the purchase price generally will constitute an item which increases the participant's "alternative minimum taxable income." If option shares acquired upon the exercise of an ISO are disposed of in a disqualifying disposition, the participant generally would include in ordinary income in the year of disposition an amount equal to the excess of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on the disposition of the option shares), over the exercise price paid for the option shares. Subject to certain exceptions, an option generally will not be treated as an ISO if it is exercised more than three months following termination of employment. If an ISO is exercised at a time when it no longer qualifies as an ISO, such option will be treated as a nonqualified stock option as discussed above. In general, we will receive an income tax deduction at the same time and in the same amount as the participant recognizes ordinary income.

        A participant who is granted a stock appreciation right will not recognize ordinary income upon receipt of the share appreciation right. At the time of exercise, however, the participant will recognize compensation income equal to the value of any cash received and the fair market value on the date of exercise of any shares received. We will not be entitled to a deduction upon the grant of a stock appreciation right, but generally will be entitled to a compensation deduction for the amount of compensation income the participant recognizes upon the participant's exercise of the stock appreciation right. The participant's tax basis in any shares received will be the fair market value on the date of exercise and, if the shares are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of the shares on the date of exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the participant) depending upon the length of time such shares were held by the participant.

        A participant generally will not be taxed upon the grant of restricted stock or performance shares, but rather will recognize ordinary income in an amount equal to the fair market value of the shares at the earlier of the time the shares become transferable or are no longer subject to a substantial risk of forfeiture (within the meaning of the Code). We generally will be entitled to a deduction at the time when, and in the amount that, the participant recognizes ordinary income on account of the lapse of

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the restrictions. A participant's tax basis in the shares will equal their fair market value at the time the restrictions lapse, and the participant's holding period for capital gains purposes will begin at that time. Any cash dividends paid on the shares before the restrictions lapse will be taxable to the participant as additional compensation and not as dividend income. Under Section 83(b) of the Code, a participant may elect to recognize ordinary income at the time the restricted or performance shares are awarded in an amount equal to their fair market value at that time, notwithstanding the fact that such shares are subject to restrictions or transfer and a substantial risk of forfeiture. If such an election is made, no additional taxable income will be recognized by such participant at the time the restrictions lapse, the participant will have a tax basis in the shares equal to their fair market value on the date of their award, and the participant's holding period for capital gains purposes will begin at that time. We generally will be entitled to a tax deduction at the time when, and to the extent that, ordinary income is recognized by such participant.

        With respect to other awards under the 2014 Plan, generally when the participant receives payment with respect to an award, the amount of cash and fair market value of any other property received will be ordinary income to the participant, and we generally will be entitled to a tax deduction in the same amount.


2013 DIRECTOR COMPENSATION

        The following table sets forth the compensation paid to each non-employee director who served on our board of directors in 2013. Messrs. Spiegel, Schneller and Eisenstein did not receive any compensation for their services as directors in fiscal year 2013. We also reimburse all non-employee directors for their reasonable out-of-pocket travel expenses incurred in attending meetings of our board of directors or any committees of the board of directors.

Name
  Fees Earned or
Paid in Cash ($) (1)
  Option Awards ($) (2)   Total ($)  

Steven D. Lerner

    50,000         50,000  

Stefanie L. Shelley

    40,000         40,000  

Alan M. Silberstein

    50,000         50,000  

Robert B.B. Smith

    40,000         40,000  

William Spiegel, Cas A. Schneller, Stephen Eisenstein

             

(1)
Each of Messrs. Lerner, Silberstein and Smith and Ms. Shelley received an annual retainer of $40,000 in respect of service during the year ended December 31, 2013. Messrs. Lerner and Silberstein each received an additional annual fee of $10,000 as compensation for service as chairman of the Audit and Compensation Committees, respectively.

(2)
No options were granted to directors during the year ended December 31, 2013; however, as of December 31, 2013, Mr. Lerner held options to acquire 52,915 shares of our common stock, of which 25,437 were unvested, and each of Ms. Shelley and Messrs. Silberstein and Smith held options to acquire 30,000 shares of our common stock, of which 25,437 were unvested.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth information with respect to the beneficial ownership of our common stock as of March 31, 2014, subject to certain assumptions set forth in the footnotes and as adjusted to reflect the sale of the shares of our common stock offered in this offering for:

        Beneficial ownership is determined in accordance with rules of the SEC and generally includes any shares over which a person exercises sole or shared voting and/or investment power. Shares of common stock subject to options and warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated, we believe the beneficial owners of the common stock listed below, based on information furnished by them, have sole voting and investment power with respect to the number of shares listed opposite their names.

        The number of shares to be sold in this offering and the number of shares and percentages of beneficial ownership after this offering set forth below are based on the number of shares of our common stock to be issued and outstanding immediately after the consummation of this offering, assuming no exercise of the underwriters' option to purchase additional shares.

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        Unless otherwise indicated, the address of each of the individuals and entities named in the table below under "Executive Officers and Directors" is c/o Green Bancorp, Inc., 4000 Greenbriar, Houston, Texas 77098.

Name
  Shares Beneficially Owned
Prior to this Offering
  Shares Beneficially
Owned After Giving
Effect to this Offering
 
 
  Number   Percentage   Number   Percentage  

Executive Officers and Directors:

                         

Manuel J. Mehos (1)

    535,482     2.6 %   535,482     2.1 %

Geoffrey D. Greenwade (2)

    141,874     *     141,874     *  

John P. Durie (3)

    104,828     *     104,828     *  

Stephen Eisenstein (4)

    5,005,894     24.1 %   5,005,894     19.7 %

Steven D. Lerner (5)

    582,723     2.8 %   582,723     2.3 %

Cas A. Schneller (6)

    123     *     123     *  

Stefanie L. Shelley (7)

    4,686     *     4,686     *  

Alan M. Silberstein (8)

    16,810     *     16,810     *  

Robert B.B. Smith (9)

    4,685     *     4,685     *  

William Spiegel

                 

All Executive Officers and Directors as a group (10 persons)

    6,397,105     30.0 %   6,397,105     25.1 %

5% Shareholders:

   
 
   
 
   
 
   
 
 

Investment funds affiliated with Friedman Fleischer & Lowe, LLC (10)

    5,005,894     24.1 %   5,005,894     19.7 %

Investment funds affiliated with Harvest Partners, LP (4)

    5,005,894     24.1 %   5,005,894     19.7 %

Investment funds affiliated with Pine Brook Road Partners, LLC (11)

    5,005,894     24.1 %   5,005,894     19.7 %

*
Amount represents less than 1% of outstanding common stock.

(1)
Includes stock options to purchase 235,482 shares.

(2)
Includes stock options to purchase 141,774 shares.

(3)
Includes stock options to purchase 95,084 shares.

(4)
Consists of 4,959,769 shares of common stock held by Harvest Partners V, L.P. ("HP V") and 46,125 shares of common stock held by Harvest Strategic Associates V, L.P. ("HSA V") (collectively, the "Harvest Funds"). Harvest Associates V, L.P. is the general partner of HP V. Harvest Associates V, L.L.C. is the general partner of Harvest Associates V, L.P. and HSA V. Harvest Partners, LP provides management services for HP V and HSA V. ISTM Associates, L.L.C. ("ISTM") is the managing member of Harvest Associates V, L.L.C. and the general partner of Harvest Partners, LP. ISTM has four members who may be deemed to share beneficial ownership of the shares of our common stock owned by HP V and HSA V. The four members are Stephen Eisenstein, who is a member of our board of directors and a Senior Managing Director of Harvest Partners, LP, Ira Kleinman, Thomas Arenz and Michael DeFlorio. Each of Messrs. Eisenstein, Kleinman, Arenz and DeFlorio disclaims beneficial ownership of the shares of common stock owned by HP V and HSA V. The address of each of the entities and persons identified in this note is c/o Harvest Partners, LP, 280 Park Avenue, 25th Floor, New York, NY, 10017.

(5)
Represents 40,887 shares personally owned by Mr. Lerner (including stock options to purchase 27,478 shares) and 541,836 shares controlled by Mr. Lerner in connection with a voting agreement

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    among 61 shareholders created in connection with our acquisition of Redstone Bank in 2006. Shares owned by Messrs. Smith, Silberstein and Durie and subject to the voting agreement are reported in this table by the record owner.

(6)
Consists of director qualifying shares related to Mr. Schneller's service as a director of the Bank.

(7)
Includes stock options to purchase 4,563 shares.

(8)
Includes stock options to purchase 4,563 shares.

(9)
Includes stock options to purchase 4,563 shares.

(10)
Consists of 2,938,822 shares of common stock held by Friedman Fleischer & Lowe Capital Partners III, L.P., 1,947,510 shares of common stock held by Friedman Fleischer & Lowe Parallel Fund III, L.P., 62,255 shares of common stock held by FFL Individual Partners III, L.P. and 57,307 shares of common stock held by FFL Executive Partners III, L.P. (collectively, the "FFL Funds"). The FFL Funds are controlled by Friedman Fleischer & Lowe GP III, L.P., their general partner, which is controlled by Friedman Fleischer & Lowe GP III, LLC, its general partner. Friedman Fleischer & Lowe GP III, LLC is controlled by Tully M. Friedman, Spencer C. Fleischer and Christopher A. Masto, its three managing members. Accordingly, Friedman Fleischer & Lowe GP III, L.P., Friedman Fleischer & Lowe GP III, LLC and Messrs. Friedman, Fleischer and Masto (the "FFL Related Parties") may be deemed to beneficially own the shares owned by the FFL Funds. Each FFL Related Party expressly disclaims beneficial ownership of the shares shown as beneficially owned by the FFL Funds in which such FFL Related Party does not have a pecuniary interest. Investment, disposition and voting decisions with respect to shares held by each of the FFL Funds are made by an investment committee of certain limited partners of Friedman Fleischer & Lowe GP III, L.P., currently consisting of eight individuals (the "Investment Committee"), including Tully Friedman, Spencer Fleischer, Christopher Masto, Rajat Duggal, Aaron Money, Nancy Ford, Cas Schneller and John Tudor. All members of the Investment Committee expressly disclaim beneficial ownership of the shares shown as beneficially owned by the FFL Funds in which such members do not have a pecuniary interest. The address of each of the entities and persons identified in this note is c/o Friedman Fleischer & Lowe, LLC, One Maritime Plaza, Ste. 2200, San Francisco, CA 94111.

(11)
Consists of 4,016,352 shares of common stock held by Pine Brook Capital Partners, L.P., 709,046 shares of common stock held by Pine Brook Capital Partners (SSP), L.P., and 280,496 shares of common stock held by Green PB-4, LLC (collectively, the "Pine Brook Funds"). Pine Brook Capital Partners (Cayman), L.P. is the sole member of Green PB-4 LLC. Pine Brook Road Associates, L.P. is the general partner of Pine Brook Capital Partners, L.P., Pine Brook Capital Partners (SSP), L.P. and Pine Brook Capital Partners (Cayman), L.P. PBRA, LLC controls Pine Brook Road Associates, L.P. in its capacity as General Partner. Howard Newman is the sole member of PBRA LLC, and has investment and voting control over the shares held or controlled by the Pine Brook Funds. The address of each of the entities identified in this note is c/o Pine Brook Road Partners, LLC, 60 East 42nd street, 50th Floor, New York, NY 10165.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

General

        Some of our officers, directors and principal shareholders and their affiliates are customers of us. Such officers, directors and principal shareholders and their affiliates have had transactions in the ordinary course of business with us, including borrowings, all of which were effected on substantially the same terms and conditions, including interest rate and collateral, as those prevailing from time to time for comparable transactions with persons unaffiliated with us, and did not involve more than the normal risk of collectability or other unfavorable features. We expect to continue to have such transactions on similar terms and conditions with such officers, directors and shareholders and their affiliates in the future.

        In addition to the above-described relationships and the director and executive officer compensation arrangements discussed above under "Executive Compensation and Other Matters," the following is a description of transactions since January 1, 2010, including currently proposed transactions to which we have been or are to be a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors (including nominees), executive officers or beneficial holders of more than 5% of our capital stock, or their immediate family members or entities affiliated with them, had or will have a direct or indirect material interest. We believe the terms and conditions set forth in such agreements are reasonable and customary for transactions of this type.

Registration Rights Agreement

        On June 30, 2010, in connection with their initial investment in us, we entered into a registration rights agreement with the Sponsor Funds. Under the terms of this agreement, the Sponsor Funds or their transferees are entitled to certain rights with respect to the registration of the shares owned by them, which we refer to as the Registrable Securities, under the Securities Act.

        Pursuant to the registration rights agreement the Sponsor Funds, as holders of Registrable Securities, each have the right to demand on three occasions that we use our commercially reasonable best efforts to register their Registrable Securities and maintain the effectiveness of the corresponding registration statement for at least 180 days. Subject to the lock-up agreements described in "Underwriting—Lock-Up Agreements," these demand rights may be exercised at any time after the earlier of June 30, 2014 and six months after the occurrence of our initial public offering. Once in any given 12-month period, we may postpone the filing of such a registration statement for up to 90 days if our board of directors believes, in good faith, that the registration would require the premature disclosure of non-public information and that such disclosure would not be in our best interests. The Sponsor Fund that initially exercises its demand rights has the right to select a lead underwriter for the demand offering, subject to our approval, which may not be unreasonably withheld.

        If we register any of our common stock either for our own account or for the account of other security holders, including the registration of common stock pursuant to this offering, the Sponsor Funds are entitled to notice of such registration and are entitled to certain "piggyback" registration rights allowing them to include their Registrable Securities in such registration, subject to certain marketing and other limitations. In addition, all expenses of such registrations, other than underwriting discounts and commissions incurred by any Sponsor Fund exercising its registration rights in connection with registrations, filings or qualifications, must be paid by us.

Shareholders Agreement

        On June 30, 2010, we entered into a Shareholders Agreement with each of the Sponsor Funds and certain members of our management. This agreement provides for certain drag-along rights and minority consent rights as well as rights to nominate members of our board of directors. This

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agreement has been terminated by written consent of each parties thereto effective as of the closing date of this offering.

Director Nomination Agreement

        In connection with this offering, we have entered into a director nomination agreement with each of the Sponsor Funds that provides for the rights of the Sponsor Funds to nominate individuals for election to our board of directors. The Sponsor Funds will have the right to nominate individuals for election to our board of directors at each meeting of shareholders where directors are to be elected and, subject to limited exceptions, we will include in the slate of nominees recommended to our shareholders for election as directors the number of individuals designated by the Sponsor Funds as follows:

        In addition, each of the Sponsor Funds will have the right to designate a non-voting observer to attend any meetings of our board of directors (or committees thereof) and of the board of directors of the Bank (or committees thereof), until such time as such Sponsor Fund ceases to own at least 3% of our outstanding common stock, subject to the right of the chairperson of such meeting to cause any non-voting observer to leave the meeting.

Voting Agreement

        On December 31, 2006, in connection with the our acquisition of Redstone Bank, certain smaller existing shareholders of Redstone Bank received shares of the Company and became party to a voting agreement (the "Voting Agreement") with respect to such shares. Under the terms of the Voting Agreement, each of these former Redstone shareholders (1) appointed David Shindeldecker, or if he is unable to serve, Steven Lerner, as the shareholder representative, (2) agreed to vote their shares as directed by the shareholder representative and (3) granted an irrevocable proxy to the shareholder representative to vote their shares. Steven Lerner, a director of the Company, currently serves as the shareholder representative. As of March 31, 2014, approximately 541,836 shares were subject to the Voting Agreement. The Voting Agreement has been terminated effective upon the expiration of the lock-up period described under "Underwriting—Lock-Up Agreements."

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Private Placement of Common Stock

        On June 29, 2012, we issued an aggregate of approximately 2,777,778 shares of our common stock to the Sponsor Funds for aggregate consideration of $25.0 million in a private placement transaction. At the time of the transaction, each of the purchasers was a beneficial owner of more than 5% of our outstanding capital stock.

Directed Share Program

        At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the common stock being offered by this prospectus to our directors, officers, employees and other individuals associated with us and their family members who have expressed an interest in purchasing our common stock in this offering. We will offer these shares to the extent permitted under applicable regulations in the United States through a directed share program. The number of shares of our common stock available for sale to the general public will be reduced by the number of directed shares purchased by participants in the program. Any directed shares not purchased will be offered by the underwriters to the general public on the same terms as the other shares of our common stock offered hereby. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with the sale of shares through the directed share program.

Review and Approval of Transactions with Related Persons

        Transactions by us with related parties are subject to a formal written policy, as well as regulatory requirements and restrictions. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act (which govern certain transactions by the Bank with its affiliates) and the Federal Reserve's Regulation O (which governs certain loans by the Bank to its executive officers, directors and principal shareholders). See "Regulation and Supervision—Limits on Transactions with Affiliates and Insiders." We have adopted policies to comply with these regulatory requirements and restrictions. In addition, each of the Sponsor Funds provided a set of passivity commitments to the Federal Reserve in connection with their initial investments in us. These passivity commitments include, among other things, limitations on the ability of the Sponsor Funds to conduct transactions with us or our affiliates. These passivity commitments also include the agreement of each of the Sponsor Funds not to, without the prior approval of the Federal Reserve, among other things, exercise or attempt to exercise a controlling influence over our management or policies, have or seek to have more than one representative serve on our board of directors or permit any representative to serve as the chairman of our board of directors or any committee thereof. Each of the Sponsor Funds has also agreed not to permit any representative to serve on our audit committee.

        We have adopted a related person transaction policy in order to comply with all applicable requirements of the SEC and the NASDAQ Global Select Market concerning related party transactions. Related party transactions will be referred for approval or ratification to our audit committee. In determining whether to approve a related party transaction, our audit committee will consider, among other factors, the related party's relationship to the Company, the nature of the proposed transaction, the nature of the related party's direct or indirect interest in the transaction, and the related party's relationship to or ownership interest in any other party to, or which has an interest in the transaction. A copy of this policy and our audit committee charter will be available on our corporate website.

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DESCRIPTION OF CAPITAL STOCK

General

        The following discussion summarizes some of the important rights of our shareholders upon completion of this offering. This discussion does not purport to be a complete description of these rights and may not contain all of the information regarding our common stock that is important to you. These rights can be determined in full only by reference to federal and state banking laws and regulations, the Texas Business Organizations Code and our certificate of formation and bylaws.

        We are incorporated in the State of Texas. The rights of our shareholders are generally covered by Texas law and our certificate of formation and bylaws (each as amended and restated and in effect as of the completion of this offering). The terms of our capital stock are therefore subject to Texas law, including the Texas Business Organizations Code, and the common and constitutional law of Texas that will be in effect at the closing of this offering. The following discussion describes the terms of our certificate of formation and bylaws that will be in effect at the closing of this offering. Our certificate of formation and bylaws have been filed with the SEC as Exhibit 3.1 and Exhibit 3.2 to the registration statement on Form S-1 of which this prospectus is a part, and we encourage you to read those documents.

        Upon completion of this offering, our authorized capital stock will consist of 90,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. As of March 31, 2014, we had 20,780,254 shares of our common stock outstanding held by 159 shareholders of record, and no shares of our preferred stock were outstanding. All of our shares outstanding at that date were fully paid and non-assessable. Immediately following the completion of this offering, we will have 25,467,754 shares of common stock outstanding, not including shares that may be issued to the underwriters upon their exercise of their option to purchase additional shares. There will be no shares of preferred stock outstanding immediately following this offering.

Our Common Stock

        Voting Rights.     Subject to any special voting rights that may be given to any series of preferred stock that we may issue in the future, holders of our common stock are entitled to one vote per share in the election of directors and on all other matters submitted to a vote at a meeting of shareholders. No shareholder has the right of cumulative voting with respect to the election of directors. Directors will be elected by a plurality of the votes cast.

        Dividend Rights.     Holders of our common stock are entitled to dividends when, as and if declared by our board of directors out of funds legally available therefor.

        Liquidation Rights.     On liquidation of the Company, the holders of the common stock are entitled to share pro rata in any distribution of the assets of the Company after the holders of shares of preferred stock or other senior securities have received the liquidation preference of their shares plus any declared but unpaid dividends, if any, and after all other indebtedness of the Company has been retired.

        Other.     Our common stock has no preemptive or conversion rights and is not entitled to the benefits of any redemption or sinking fund provision.

Preferred Stock

        Our certificate of formation grants the board of directors the authority to issue up to 10,000,000 shares of preferred stock in series with such rights (including voting, dividends and conversion), preferences and designations as it deems necessary or advisable without any action by our shareholders. This is commonly referred to as "blank check" preferred stock, which is available to and utilized by

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many financial institutions to satisfy their continuing capital requirements. The preferred stock would have such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as shall be expressed in the resolution or resolutions providing for the issuance of such stock adopted by our board of directors from time to time, including, but not limited to:

        All 10,000,000 shares of preferred stock would be available for issuance without further action by our shareholders, and we do not intend to seek shareholder approval prior to the issuance of any preferred stock, unless otherwise required by applicable laws, rules or regulations.

        We may issue shares of, or rights to purchase shares of, one or more series of our preferred stock that have been designated from time to time, the terms of which might:

        Any of these actions could have an anti-takeover effect and discourage a transaction that some or a majority of our shareholders might believe to be in their best interests or in which our shareholders might receive a premium for their stock over our then market price.

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Registration Rights

        We have granted each of the Sponsor Funds registration rights pursuant to a registration rights agreement. For a further description of these rights, see "Certain Relationships and Related Party Transactions—Registration Rights Agreement."

Business Combinations under Texas Law

        A number of provisions of Texas law, our certificate of formation and bylaws could have an anti-takeover effect and make any potential acquisition of the Company by means of a tender offer, a proxy contest or otherwise and the removal of incumbent directors more difficult. These provisions are intended to discourage coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of the Company to negotiate first with our board of directors.

        We are subject to the provisions of Title 2, Chapter 21, Subchapter M of the Texas Business Organizations Code (the "Texas Business Combination Law"), which provides that a Texas corporation that qualifies as an "issuing public corporation" (as defined in the Texas Business Combination Law) may not engage in specified types of business combinations, including mergers, consolidations and asset sales, with a person, or an affiliate or associate of that person, who is an "affiliated shareholder." For purposes of this law, an "affiliated shareholder" is, or was, during the prior three years, the beneficial owner of 20% or more of the corporation's voting shares. The prohibition on certain transactions with such affiliated shareholders extends for a three-year period from the date such shareholder first becomes an affiliated shareholder. The law's prohibitions do not apply if:

        As we currently have more than 100 shareholders, we are considered an "issuing public corporation" for purposes of this law. The Texas Business Combination Law does not apply to the following:

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        Our certificate of formation expressly provides that we will be subject to Section 21.606 (Three-Year Moratorium on Certain Business Combinations) of the Texas Business Combination Law. As a result, the Texas Business Combination Law may prevent a non-negotiated merger or other business combination involving our Company, even if such a merger or combination would be beneficial to our shareholders.

Action by Consent

        Under Texas law, no action required or permitted to be taken at an annual or special meeting of shareholders may be taken by written consent in lieu of a meeting of shareholders without the unanimous written consent of all shareholders entitled to vote on the action unless the certificate of formation specifically allows action to be taken by a written consent of the shareholders holding the minimum number of shares necessary to take the action that is subject to that consent at a meeting of shareholders, even though such consent is not signed by all of the corporation's shareholders. Our certificate of formation prohibits shareholder action by less than unanimous written consent.

Certain Certificate of Formation and Bylaw Provisions Potentially Having an Anti-takeover Effect

        Certain provisions of our certificate of formation and bylaws may have an anti-takeover effect and thus discourage potential takeover attempts and make it more difficult for our shareholders to change management or receive a premium for their shares. These provisions may include:

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        In addition to these provisions, banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution. These laws include the BHC Act, the Change in Bank Control Act and the Savings and Loan Holding Company Act. These laws could delay or prevent an acquisition. See "Regulation and Supervision—Notice and Approval Requirements Related to Control."

Limitation on Liability and Indemnification of Directors and Officers

        Our certificate of formation provides that our directors and officers will be indemnified by us to the fullest extent permitted by the Texas Business Organizations Code and applicable federal law, against all expenses incurred in connection with any pending or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, with respect to which such director or officer is a party, or is threatened to be made a party. In addition, our certificate of formation provides that our directors and officers will not be personally liable for monetary damages to us to the fullest extent permitted by the Texas Business Organizations Code.

        We have entered into indemnification agreements with our officers and directors pursuant to which they are indemnified as described above and will be advanced costs and expenses subject to the condition that an indemnitee shall reimburse the indemnitor for all the amounts paid if a final judicial determination is made that the indemnitee is not entitled to be so indemnified under applicable law.

Transfer Agent and Registrar

        The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.

Listing

        We intend to apply to list our common stock on the NASDAQ Global Select Market under the symbol "GNBC."

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, there has been no public market for our common stock, and no predictions can be made about the effect, if any, that market sales of shares of our common stock or the availability of such shares for sale will have on the market price prevailing from time to time. Nevertheless, the actual sale of, or the perceived potential for the sale of, our common stock in the public market may have a material adverse effect on the market price for our common stock and could impair our ability to raise capital through future sales of our securities.

Sale of Restricted Shares

        Upon completion of this offering, we will have an aggregate of 25,467,754 shares of our common stock outstanding (or 26,170,879 shares of our common stock if the underwriters exercise their option to purchase additional shares in full). Of these shares, the 4,687,500 shares of our common stock to be sold in this offering (or 5,390,625 shares of our common stock if the underwriters exercise their option to purchase additional shares in full) will be freely tradable without restriction or further registration under the Securities Act, except for any shares which may be subsequently acquired by any of our affiliates as that term is defined in Rule 144 under the Securities Act. The remaining 20,780,254 shares of our common stock outstanding will be restricted securities, as that term is defined in Rule 144, and such shares and any unrestricted shares acquired by any of our affiliates may in the future be sold without restriction under the Securities Act to the extent permitted by Rule 144 or any applicable exemption under the Securities Act.

Registration Rights

        We have granted the Sponsor Funds registration rights with respect to up to a total of 15,017,682 shares of our common stock pursuant to a registration rights agreement. For a further description of these rights, see "Certain Relationships and Related Party Transactions—Registration Rights Agreement."

Omnibus Incentive Plan

        Following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act with the SEC to register 4,046,623 shares of our common stock issued or reserved for issuance under our Prior Option Plans, 2010 Option Plan and 2014 Omnibus Plan. Subject to the expiration of any lock-up restrictions as described below and following the completion of any vesting periods, shares of our common stock issuable upon the exercise of options granted or to be granted under our plan will be freely tradable without restriction under the Securities Act, unless such shares are held by any of our affiliates.

Lock-up Agreements

        Except for the sale of shares of our common stock pursuant to this offering, our executive officers, directors, the Sponsor Funds and certain other current shareholders including participants in the directed share program, have agreed not to sell any shares of our common stock for a period of at least 180 days from the date of this prospectus, subject to certain exceptions. See "Underwriting."

Rule 144

        In general, under Rule 144 under the Securities Act as currently in effect, beginning 90 days after the date of this offering, a person who is not one of our affiliates who has beneficially owned shares of our common stock for at least six months may sell shares without restriction, provided the current public information requirements of Rule 144 continue to be satisfied. In addition, any person who is not one of our affiliates at any time during the three months immediately preceding a proposed sale,

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and who has beneficially owned shares of our common stock for at least one year, would be entitled to sell an unlimited number of shares without restriction. Our affiliates who have beneficially owned shares of our common stock for at least six months are entitled to sell within any three-month period a number of shares that does not exceed the greater of:

        Sales of restricted shares under Rule 144 are also subject to requirements regarding the manner of sale, notice and the availability of current public information about us. Rule 144 also provides that affiliates relying on Rule 144 to sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement.

Rule 701

        In general, under Rule 701 of the Securities Act, most of our employees, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement are eligible to resell those shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with the holding period or certain other restrictions contained in Rule 144.

Stock Options

        As of March 31, 2014, time-based options to purchase a total of 1,092,295 shares of common stock pursuant to our stock option plans were outstanding, of which options to purchase 910,208 shares were exercisable, and performance-based options to purchase a total of 1,680,490 shares of common stock were outstanding, none of which were exercisable. The registration statement on Form S-8 referenced above is expected to become effective immediately upon filing, and shares covered by the registration statement will then become eligible for sale in the public market, subject to the Rule 144 limitations applicable to affiliates, vesting restrictions and any applicable lock-up agreements and market standoff agreements. See the section titled "Executive Compensation and Other Matters" for a description of our stock option plans.

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U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS

        The following is a general discussion of the U.S. federal income tax consequences of the ownership and disposition of our common stock by a non-U.S. holder (as defined below) that purchases our common stock pursuant to this offering and holds such common stock as a capital asset (generally, property held for investment). This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable U.S. Treasury regulations promulgated thereunder, judicial decisions, and rulings and pronouncements of the U.S. Internal Revenue Service, or the IRS, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or subject to different interpretation. This discussion does not address all the tax consequences that may be relevant to specific holders in light of their particular circumstances or to holders subject to special treatment under U.S. federal income tax laws (such as financial institutions, insurance companies, tax-exempt organizations, controlled foreign corporations, passive foreign investment companies, retirement plans, partnerships and their partners, dealers in securities, brokers, U.S. expatriates, persons who have acquired our common stock as compensation or otherwise in connection with the performance of services, or persons who have acquired our common stock as part of a straddle, hedge, conversion transaction or other integrated investment). In addition, this discussion does not address any other U.S. federal tax consequences (e.g., the Medicare contribution tax or estate or gift tax) or any aspects of state, local, or foreign tax laws. Prospective investors should consult their tax advisors regarding the U.S. federal tax consequences of owning and disposing of our common stock, as well as the applicability and effect of any state, local or foreign tax laws.

        If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partnership that holds our common stock and any partner who owns an interest in such a partnership should consult their tax advisors regarding the U.S. federal income tax consequences of an investment in our common stock.

        As used in this discussion, the term "non-U.S. holder" refers to a beneficial owner of our common stock that for U.S. federal income tax purposes is neither a partnership (including any entity or arrangement treated as a partnership for such purposes) nor:

Dividends

        In the event that we make a distribution of cash or other property (other than certain distributions of our stock) in respect of our common stock, the distribution generally will be treated as a dividend to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. Any portion of a distribution that exceeds our current and accumulated earnings and profits will generally be treated first as a tax-free return of capital, on a share-by-share basis, to the extent of the non-U.S. holder's tax basis in our common stock (and will reduce the non-U.S. holder's basis in such common stock), and, to the extent such portion exceeds the non-U.S. holder's tax basis in our common stock, the excess will be treated as gain from the disposition of the common stock, the tax treatment of which is discussed below under "Sale, Exchange or Other Taxable Disposition."

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        The gross amount of dividends paid to a non-U.S. holder with respect to our common stock generally will be subject to U.S. federal withholding tax at a rate of 30%, unless (i) an applicable income tax treaty reduces or eliminates such tax, and the non-U.S. holder certifies that it is eligible for the benefits of such treaty in the manner described below, or (ii) the dividends are effectively connected with the non-U.S. holder's conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment maintained by the non-U.S. holder in the United States) and the non-U.S. holder provides the applicable withholding agent with a valid IRS Form W-8ECI (or other applicable form) properly certifying such exemption.

        Although not subject to U.S. withholding tax, a non-U.S. holder that receives dividends that are effectively connected with the non-U.S. holder's conduct of a U.S. trade or business will be subject to U.S. federal income tax with respect to such dividends on a net income basis at regular graduated U.S. federal income tax rates in the same manner as a United States person (as defined under the Code). Additionally, a non-U.S. holder that is a corporation may be subject to a branch profits tax equal to 30% (or such lower rate as may be specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items.

        A non-U.S. holder that wishes to claim the benefit of an applicable income tax treaty with respect to dividends on our common stock will be required to provide the applicable withholding agent with a valid IRS Form W-8BEN (or other applicable form) and certify under penalties of perjury that such holder (i) is not a United States person (as defined under the Code) and (ii) is eligible for the benefits of such treaty, and the withholding agent must not have actual knowledge or reason to know that the certification is incorrect. This certification must be provided to the applicable withholding agent prior to the payment of dividends and may be required to be updated periodically. If our common stock is held through a non-U.S. intermediary, such intermediary will also be required to comply with additional certification requirements under applicable Treasury regulations.

        A non-U.S. holder eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

Sale, Exchange or Other Taxable Disposition

        A non-U.S. holder generally will not be subject to U.S. federal income tax on gain realized upon the sale, exchange, or other taxable disposition of our common stock unless (i) such non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of the sale, exchange, or other taxable disposition and certain other conditions are satisfied, (ii) the gain is effectively connected with such non-U.S. holder's conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States), or (iii) we are or become a "U.S. real property holding corporation" (as defined in section 897(c) of the Code) at any time during the shorter of the five-year period ending on the date of disposition or the non-U.S. holder's holding period for our common stock and either (a) our common stock has ceased to be regularly traded on an established securities market prior to the beginning of the calendar year in which the sale, exchange or other taxable disposition occurs, or (b) the non-U.S. holder owns (actually or constructively) more than five percent of our common stock at some time during the shorter of the five-year period ending on the date of disposition or such holder's holding period for our common stock. Although there can be no assurances, we believe that we are not a U.S. real property holding corporation, and we do not expect to become a U.S. real property holding corporation.

        Gain described in clauses (ii) and (iii) of the immediately preceding paragraph will be subject to tax on a net income basis at regular graduated U.S. federal income tax rates in the same manner as if

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the non-U.S. holder were a United States person (as defined under the Code). A non-U.S. holder that is a corporation may also be subject to a branch profits tax equal to 30% (or at such lower rate as may be specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. An individual non-U.S. holder described in clause (i) of the immediately preceding paragraph will be required to pay (subject to applicable income tax treaties) a flat 30% tax on the gain derived from the sale, which may be offset by certain United States source capital losses, even though the individual is not considered a resident of the United States.

Information Reporting and Backup Withholding

        Information returns will be filed with the IRS in connection with payments of dividends and the proceeds from a sale or other disposition of our common stock. Information reporting and backup withholding (at the then applicable rate) may also apply to payments made to a non-U.S. holder on or with respect to our common stock, unless the non-U.S. holder certifies as to its status as a non-U.S. person under penalties of perjury or otherwise establishes an exemption and certain other conditions are satisfied. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder will be allowed as a refund or a credit against such non-U.S. holder's U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.

Foreign Account Tax Compliance Act

        Withholding at a rate of 30% generally will be required in certain circumstances on dividends in respect of, and, after December 31, 2016, gross proceeds from the sale or other disposition of, our common stock held by or through certain foreign financial institutions (including investment funds), unless such institution (i) enters into, and complies with, an agreement with the Internal Revenue Service to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (ii) if required under an intergovernmental agreement between the U.S. and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. authorities. An intergovernmental agreement between the United States and an applicable foreign country, or other guidance, may modify these requirements. Accordingly, the entity through which our common stock is held will affect the determination of whether such withholding is required. Similarly, in certain circumstances, dividends in respect of, and, after December 31, 2016, gross proceeds from the sale or other disposition of, our common stock held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exemptions generally will be subject to withholding at a rate of 30%, unless such entity either (i) certifies that such entity does not have any "substantial United States owners" or (ii) provides certain information regarding the entity's "substantial United States owners," which we will in turn provide to the Internal Revenue Service. We will not pay any additional amounts to stockholders in respect of any amounts withheld. Prospective investors should consult their tax advisors regarding the possible implications of these rules on their investment in our common stock.

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UNDERWRITING

        We are offering the shares of our common stock described in this prospectus in an underwritten offering in which we and Sandler O'Neill + Partners, L.P. and Jefferies LLC, as representatives of the underwriters for this offering, will enter into an underwriting agreement with respect to the common stock being offered. Subject to the terms and conditions contained in the underwriting agreement, the underwriters named below have agreed, severally and not jointly, to purchase the respective number of shares of our common stock set forth opposite their respective names below:

Name
  Number of
Shares

Sandler O'Neill + Partners, L.P. 

                  

Jefferies LLC

                  

J.P. Morgan Securities LLC

   

RBC Capital Markets, LLC

   

Keefe, Bruyette & Woods, Inc. 

   
     

Total

  4,687,500
     
     

        The underwriting agreement provides that the underwriters' obligation to purchase shares of our common stock depends on the satisfaction of the conditions contained in the underwriting agreement, including:

        Subject to these conditions, the underwriters are committed to purchase and pay for all of the shares of our common stock offered by this prospectus, if any such shares are purchased. However, the underwriters are not obligated to take or pay for the shares of our common stock covered by the underwriters' purchase option described below, unless and until that option is exercised. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of nondefaulting underwriters may be increased or this offering may be terminated.

        We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "GNBC."

Purchase Option

        We have granted the underwriters the option to purchase up to an additional 703,125 shares of our common stock from us, exercisable no later than 30 days after the date of the underwriting agreement, at the initial public offering price, less the underwriting discounts and commissions set forth on the cover page of this prospectus. We will be obligated to sell these shares of common stock to the underwriters to the extent the purchase option is exercised.

Discounts, Commissions and Expenses

        The underwriters propose to offer our common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to dealers at the initial public offering price less a concession not in excess of $      per share. After the public offering of our common stock, the underwriters may change the offering price, concessions and other selling terms. The underwriters

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reserve the right to reject an order for the purchase of shares, in whole or in part. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

        The following table shows the per share and total underwriting discounts and commissions that we will pay to the underwriters and the proceeds we will receive before expenses. These amounts are shown assuming both no exercise and full exercise of the underwriters' purchase option.

 
  Per Share   No Exercise   Full Exercise  

Initial public offering price

  $                $                  $                   

Underwriting discounts and commissions to be paid by us

                                                          

Proceeds to us, before expenses

                                                          

        We estimate that the total expenses of this offering, exclusive of the underwriting discounts and commissions, will be approximately $2,138,000, and are payable by us.

Offering Price Determination

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

Indemnification

        We have agreed to indemnify the underwriters, and persons who control the underwriters, against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of these liabilities.

Lock-Up Agreements

        We, our directors and officers, the Sponsor Funds, directed share participants and certain other current shareholders have entered into lock-up agreements with the underwriters. Under these agreements, for a period of 180 days after the date of the underwriting agreement, we and each of these persons may not, without the prior written approval of the representatives, subject to limited exceptions,

    offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any of our common stock or any securities convertible into or exchangeable or exercisable for our common stock, whether now owned or hereafter acquired or with respect to which such person has or hereafter acquires the power of disposition, or file any registration statement under the Securities Act, with respect to any of the foregoing; or

    enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of our common stock,

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      whether any such swap or transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise.

Directed Share Program

        At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the common stock being offered by this prospectus, to our directors, officers, employees and other individuals associated with us and their family members who have expressed an interest in purchasing our common stock in this offering. The number of shares available for sale to the general public in the offering will be reduced to the extent these persons purchase the reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares. Any shares sold in the directed share program to directors, officers and employees will be subject to the 180-day lock-up agreements described above.

Stabilization

        In connection with this offering, the underwriters may, but are not obligated to, engage in stabilizing transactions, overallotment transactions, syndicate covering transactions and penalty bids.

    Stabilizing transactions permit bids to purchase shares of common stock so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or mitigating a decline in the market price of the common stock while this offering is in progress.

    Overallotment transactions involve sales by the underwriters of shares of common stock in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position that may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock over-allotted by the underwriters is not greater than the number of shares that they may purchase in the purchase option. In a naked short position, the number of shares involved is greater than the number of shares in the purchase option. The underwriters may close out any short position by exercising their purchase option and/or purchasing shares in the open market.

    Syndicate covering transactions involve purchases of common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the purchase option. If the underwriters sell more shares than could be covered by exercise of the purchase option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in this offering.

    Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the common stock originally sold by that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.

        These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected on the NASDAQ Global Select Market, in the over-the-counter market or otherwise and, if commenced, may

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be discontinued at any time. Neither we nor the underwriters can assure investors that an active trading market will develop for shares of our common stock, or that the shares will trade in the public market at or above the initial public offering price.

Electronic Distribution

        This prospectus may be made available in electronic format on websites or through other online services maintained by one or more of the underwriters, or by their affiliates.

        Other than this prospectus in electronic format, information on such websites and any information contained in any other website maintained by the underwriters or any of their affiliates is not part of this prospectus or registration statement of which the prospectus forms a part, has not been approved or endorsed by us or the underwriters in their capacities as underwriters and should not be relied on by investors.

Our Relationship with the Underwriters

        Certain of the underwriters and/or their affiliates have engaged, and may in the future engage, in investment banking transactions with us in the ordinary course of their business. They have received, and expect to receive, customary compensation and expense reimbursement for these investment banking transactions.

Relationship with Solebury Capital LLC

        Solebury Capital LLC ("Solebury"), a FINRA member, is acting as our financial advisor in connection with this offering. Solebury is not acting as an underwriter and will not sell or offer to sell any securities and will not identify, solicit or engage directly with potential investors. In addition, Solebury will not underwrite or purchase any of the offered securities or otherwise participate in any such undertaking.

Sales Outside of the United States

        Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

        This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), from and including the date on which the

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European Union Prospectus Directive (the "EU Prospectus Directive") was implemented in that Relevant Member State (the "Relevant Implementation Date") an offer of securities described in this prospectus may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that, with effect from and including the Relevant Implementation Date, an offer of securities described in this prospectus may be made to the public in that Relevant Member State at any time:

    to any legal entity which is a qualified investor as defined under the EU Prospectus Directive;

    to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive); or

    in any other circumstances falling within Article 3(2) of the EU Prospectus Directive, provided that no such offer of securities described in this prospectus shall result in a requirement for the publication by us of a prospectus pursuant to Article 3 of the EU Prospectus Directive.

For the purposes of this provision, the expression an "offer of securities to the public" in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State. The expression "EU Prospectus Directive" means Directive 2003/71/EC (and any amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State, and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

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LEGAL MATTERS

        Certain legal matters, including the legality of the shares being offered herein, will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and the validity of the common stock offered hereby will be passed upon for the underwriters by Bracewell & Giuliani LLP, Houston, Texas. Bracewell & Giuliani LLP represents us from time to time in connection with various matters.


EXPERTS

        The consolidated financial statements as of December 31, 2013 and 2012, and for each of the three years in the period ended December 31, 2013, included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such consolidated financial statements have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.


WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1 under the Securities Act relating to the common stock that includes important business and financial information about us that is not included in or delivered with this prospectus. If we have made references in this prospectus to any contracts, agreements or other documents and also filed any of those contracts, agreements or other documents as exhibits to the registration statement, you should read the relevant exhibit for a more complete understanding of the document or the matter involved.

        You may read and copy the registration statement and the related exhibits, and the reports, proxy statements and other information we will file with the SEC, at the SEC's public reference room maintained by the SEC at Room 1580, 100 F Street N.E., Washington, D.C. 20549. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. The SEC also maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file with the SEC. The site's Internet address is www.sec.gov. We also maintain a website at www.greenbank.com. Upon completion of this offering, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only. You should not rely on any such information in making your decision whether to purchase our securities.

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INDEX TO FINANCIAL STATEMENTS

Unaudited Consolidated Financial Statements of Green Bancorp, Inc.:

       

Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013

   
F-2
 

Consolidated Statements of Income for the Three Months Ended March 31, 2014 and 2013

    F-3  

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2014 and 2013

    F-4  

Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 2014 and 2013

    F-5  

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013

    F-6  

Notes to Unaudited Consolidated Financial Statements

    F-8  

Audited Consolidated Financial Statements of Green Bancorp, Inc.:

   
 
 

Report of Independent Registered Public Accounting Firm

   
F-41
 

Consolidated Balance Sheets as of December 31, 2013 and 2012

    F-42  

Consolidated Statements of Income for the Years Ended December 31, 2013, 2012 and 2011

    F-43  

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011

    F-44  

Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2013, 2012 and 2011

    F-45  

Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011

    F-46  

Notes to Consolidated Financial Statements

    F-48  

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2014 and DECEMBER 31, 2013

(In thousands, except share data)

(Unaudited)

 
  March 31,
2014
  December 31,
2013
 

ASSETS

             

Cash and due from banks

 
$

15,869
 
$

9,836
 

Interest-bearing deposits in financial institutions

    26,692     24,921  
           

Cash and cash equivalents

    42,561     34,757  

Available-for-sale securities, at fair value

   
193,851
   
198,237
 

Held-to-maturity securities, at amortized cost (fair value of $56,799 and $56,588, respectively)

    57,027     57,278  

Federal Reserve Bank stock

    5,145     5,140  

Federal Home Loan Bank of Dallas stock

    3,717     2,590  

Loans held for investment

   
1,404,275
   
1,359,415
 

Allowance for loan losses

    (15,119 )   (16,361 )
           

Loans, net

    1,389,156     1,343,054  

Premises and equipment, net

    21,476     21,365  

Goodwill

    15,672     15,672  

Core deposit intangibles, net of accumulated amortization

    923     984  

Accrued interest receivable

    4,253     3,994  

Deferred tax asset, net

    8,455     8,853  

Real estate acquired by foreclosure

    6,690     6,690  

Other assets

    2,637     4,513  
           

TOTAL

  $ 1,751,563   $ 1,703,127  
           
           

LIABILITIES AND SHAREHOLDERS' EQUITY

             

LIABILITIES:

   
 
   
 
 

Deposits:

             

Noninterest-bearing demand

  $ 290,782   $ 282,227  

Interest-bearing demand

    621,879     590,795  

Certificates and other time deposits

    573,779     574,350  
           

Total deposits

    1,486,440     1,447,372  

Securities sold under agreements to repurchase

   
8,383
   
2,583
 

Other borrowed funds

    46,846     46,858  

Accrued interest payable

    865     930  

Other liabilities

    5,429     6,166  
           

Total liabilities

    1,547,963     1,503,909  
           

COMMITMENTS AND CONTINGENCIES

             

SHAREHOLDERS' EQUITY:

   
 
   
 
 

Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding

         

Common stock, $0.01 par value, 90,000,000 shares authorized and 20,780,254 and 20,771,087 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively

    208     208  

Capital surplus

    179,344     179,219  

Retained earnings

    23,406     19,918  

Accumulated other comprehensive (loss) income, net

    642     (127 )
           

Total shareholders' equity

    203,600     199,218  
           

TOTAL

  $ 1,751,563   $ 1,703,127  
           
           

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2014 and 2013

(In thousands, except per share data)

(Unaudited)

 
  March 31,  
 
  2014   2013  

INTEREST INCOME:

             

Loans, including fees

  $ 16,976   $ 15,288  

Securities

    1,029     758  

Other investments

    78     78  

Deposits in financial institutions

    24     121  
           

Total interest income

    18,107     16,245  
           

INTEREST EXPENSE:

             

Demand and savings deposits

    577     1,017  

Certificates and other time deposits

    1,810     1,786  

Other borrowed funds

    44     151  
           

Total interest expense

    2,431     2,954  
           

NET INTEREST INCOME

    15,676     13,291  

PROVISION FOR LOAN LOSSES

   
1,223
   
781
 
           

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

    14,453     12,510  
           

NONINTEREST INCOME:

             

Customer service fees

    531     430  

Loan fees

    550     309  

Gain on sale of guaranteed portion of loans

    430     257  

Other

    96     72  
           

Total noninterest income

    1,607     1,068  
           

NONINTEREST EXPENSE:

             

Salaries and employee benefits

    6,931     6,230  

Occupancy

    1,133     1,132  

Professional and regulatory fees

    780     763  

Data processing

    388     360  

Software license and maintenance

    315     197  

Marketing

    172     131  

Loan related

    117     95  

Real estate acquired by foreclosure

    169     (63 )

Other

    592     570  
           

Total noninterest expense

    10,597     9,415  
           

INCOME BEFORE INCOME TAXES

    5,463     4,163  

PROVISION FOR INCOME TAXES

   
1,975
   
1,514
 
           

NET INCOME

  $ 3,488   $ 2,649  
           
           

EARNINGS PER SHARE:

             

Basic

  $ 0.17   $ 0.13  
           
           

Diluted

  $ 0.17   $ 0.13  
           
           

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(In thousands)

(Unaudited)

 
  March 31,  
 
  2014   2013  

NET INCOME

  $ 3,488   $ 2,649  
           

OTHER COMPREHENSIVE INCOME, BEFORE TAX:

             

Change in unrealized gain (loss) on securities available-for-sale

    1,183     (176 )
           

Total other comprehensive income (loss)

    1,183     (176 )
           

DEFERRED TAX EXPENSE (BENEFIT) RELATED TO OTHER COMPREHENSIVE INCOME

    414     (60 )

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

   
769
   
(116

)
           

COMPREHENSIVE INCOME

  $ 4,257   $ 2,533  
           
           

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(In thousands)

(Unaudited)

 
  Common Stock    
   
  Accumulated
Other
Comprehensive
Income
   
 
 
  Capital
Surplus
  Retained
Earnings
   
 
 
  Shares   Amount   Total  

BALANCE—January 1, 2013

    20,748   $ 207   $ 178,695   $ 7,308   $ 2,001   $ 188,211  

Net income

                2,649         2,649  

Net change in unrealized gains and losses on available-for-sale securities, net of taxes of $60 and reclassification adjustment

                    (116 )   (116 )

Stock-based compensation expense

            84             84  
                           

BALANCE—March 31, 2013

    20,748   $ 207   $ 178,779   $ 9,957   $ 1,885   $ 190,828  
                           
                           

BALANCE—January 1, 2014

    20,771   $ 208   $ 179,219   $ 19,918   $ (127 ) $ 199,218  

Net income

                3,488         3,488  

Net change in unrealized gains and losses on available-for-sale securities, net of taxes of $414 and reclassification adjustment

                    769     769  

Issuance of common stock in connection with the exercise of stock options

    9         76             76  

Stock-based compensation expense

            49             49  
                           

BALANCE—March 31, 2014

    20,780   $ 208   $ 179,344   $ 23,406   $ 642   $ 203,600  
                           
                           

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(In thousands)

(Unaudited)

 
  March 31,  
 
  2014   2013  

CASH FLOWS FROM OPERATING ACTIVITIES:

             

Net income

  $ 3,488   $ 2,649  

Adjustments to reconcile net income to net cash provided (used) by operating activities:        

             

Amortization and accretion of premiums and discounts on securities, net

    291     617  

Accretion of loan discounts, net

    (141 )   (138 )

Amortization of deposit premiums

    (93 )   (179 )

Amortization of core deposit intangibles

    61     61  

Provision for loan losses

    1,223     781  

Depreciation

    336     341  

Net gain on sale of real estate acquired by foreclosure

        (59 )

Net gain on sale of guaranteed portion of loans

    (430 )   (257 )

Stock-based compensation expense

    49     84  

Decrease (increase) in accrued interest receivable and other assets, net

    1,601     (228 )

Increase in accrued interest payable and other liabilities, net

    (802 )   (605 )
           

Net cash provided by operating activities

    5,583     3,067  
           

CASH FLOWS FROM INVESTING ACTIVITIES:

             

Proceeds from the maturities or calls and paydowns of available-for-sale securities

    15,328     14,203  

Purchases of available-for-sale securities

    (10,015 )   (4,957 )

Proceeds from the maturities or calls and paydowns of held-to-maturity securities

    2,204     2,779  

Purchases of held-to-maturity securities

    (1,988 )   (2,001 )

Proceeds from sale of guaranteed portion of loans

    6,312     2,237  

Proceeds from sale of real estate acquired by foreclosure

        628  

Net increase in Federal Home Loan Bank of Dallas stock

    (5 )   (1 )

Net increase in Federal Reserve Bank stock

    (1,127 )   (5 )

Net increase in loans held for investment

    (53,066 )   (14,361 )

Investment in construction of premises and purchases of other fixed assets

    (447 )   (203 )
           

Net cash used in investing activities

    (42,804 )   (1,681 )
           

(Continued)

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(In thousands)

(Unaudited)

 
  March 31,  
 
  2014   2013  

CASH FLOWS FROM FINANCING ACTIVITIES:

             

Net increase in deposit accounts

    39,161     236  

Net increase (decrease) in securities sold under agreements to repurchase

    5,800     (1,991 )

Proceeds from other borrowed funds

    861,322     101  

Repayment of other borrowed funds

    (861,334 )   (232 )

Proceeds from issuance of common stock due to exercise of stock options

    76      
           

Net cash provided by (used in) financing activities

    45,025     (1,886 )
           

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

  $ 7,804   $ (500 )

CASH AND CASH EQUIVALENTS:

   
 
   
 
 

Beginning of year

    34,757     178,492  
           

End of period

  $ 42,561   $ 177,992  
           
           

SUPPLEMENTAL INFORMATION:

             

Interest paid

  $ 2,496   $ 2,921  
           
           

Income taxes paid

  $ 100   $  
           
           

(Concluded)

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014
(Unaudited)

1. BASIS OF PRESENTATION

        The interim consolidated financial statements include the accounts of Green Bancorp, Inc. ("Green Bancorp"), together with Green Bank, N.A., its subsidiary bank, (the "Company"). All intercompany transactions and balances have been eliminated.

        The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial information. In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are of a normal recurring nature. These financial statements and the accompanying notes should be read in conjunction with the Company's audited financial statements for the years ended December 31, 2013 and 2012. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any other period.

        The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired through foreclosure, acquired loans and deposits, deferred tax assets, goodwill, and stock-based compensation.

2. EARNINGS PER COMMON SHARE

        Basic earnings per common share are calculated using the two-class method. The two-class method provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of basic earnings per share.

        Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

2. EARNINGS PER COMMON SHARE (Continued)

        The following table illustrates the computation of basic and diluted earnings per share:

 
  2014   2013  
 
  Amount   Per Share
Amount
  Amount   Per Share
Amount
 
 
  (Amounts in thousands, except per share amounts)
 

Net income

  $ 3,488         $ 2,649        

Basic:

   
 
   
 
   
 
   
 
 

Weighted average shares outstanding

    20,775   $ 0.17     20,748   $ 0.13  

Diluted:

   
 
   
 
   
 
   
 
 

Add incremental shares for:

                         

Effect of dilutive securities—options

    132           24        
                       

Total

    20,907   $ 0.17     20,772   $ 0.13  
                       
                       

3. RECENT ACCOUNTING STANDARDS

        FASB ASU No. 2013-02 " Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ", amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. The adoption of ASU 2013-02 becomes effective prospectively for the Company for reporting periods beginning after December 15, 2013.

        FASB ASU No. 2013-11— "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" updates prior guidance. The update requires that an unrecognized tax benefit be presented in the statements of financial condition as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the statements of financial condition as a liability and should not be combined with deferred tax assets. The adoption of this ASU becomes effective for the Company for reporting periods beginning after December 15, 2013.

        FASB ASU No. 2014-04 —"Receivables—Troubled Debt Restructuring by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure" clarifies when an insubstance foreclosure occurs, that is, when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. This is the point when the consumer mortgage loan should be derecognized and the real property recognized. The adoption of the ASU becomes effective for the Company for reporting periods beginning after December 31, 2014 and early adoption is permitted.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

4. ACQUISITIONS

        On May 5, 2014, the Company entered into a definitive agreement to acquire SP Bancorp, Inc., and its wholly owned subsidiary, SharePlus Bank for aggregate cash consideration of $46.2 million, subject to adjustment as set forth in the definitive agreement. SharePlus Bank is a Texas chartered state bank headquartered in Plano, Texas, with four branches, two in Plano, Texas, one in Dallas, Texas and one in Louisville, Kentucky. The transaction is subject to certain conditions, including SP Bancorp, Inc. shareholder approval and customary regulatory approvals and is expected to close in the third quarter of 2014, subject to satisfaction of all conditions.

        At March 31, 2014, SP Bancorp, Inc. reported $228.7 million in loans, $273.5 million in deposits and $33.1 million in stockholders' equity.

5. CASH AND CASH EQUIVALENTS

        The Bank, as a correspondent of the Federal Reserve Bank, is required to maintain average reserve balances. Interest-bearing deposits include restricted amounts of $25.1 million and $26.7 million at March 31, 2014 and December 31, 2013, respectively, as a result of this requirement.

6. SECURITIES

        The amortized cost and fair value of securities at March 31, 2014 and December 31, 2013 were as follows (in thousands):

 
  March 31, 2014  
 
  Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair Value  

Available-for-sale:

                         

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 45,148   $ 49   $ (80 ) $ 45,117  

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

    116,413     1,800     (497 )   117,716  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    31,303     79     (364 )   31,018  
                   

Total

  $ 192,864   $ 1,928   $ (941 ) $ 193,851  
                   
                   

Held-to-maturity:

                         

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

  $ 17,923   $ 429   $ (421 ) $ 17,931  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    39,104     115     (351 )   38,868  
                   

Total

  $ 57,027   $ 544   $ (772 ) $ 56,799  
                   
                   

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

6. SECURITIES (Continued)


 
  December 31, 2013  
 
  Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair Value  

Available-for-sale:

                         

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 45,168   $ 38   $ (95 ) $ 45,111  

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

    121,042     1,282     (934 )   121,390  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    32,223     42     (529 )   31,736  
                   

Total

  $ 198,433   $ 1,362   $ (1,558 ) $ 198,237  
                   
                   

Held-to-maturity:

                         

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

  $ 16,788   $ 409   $ (528 ) $ 16,669  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    40,490     135     (706 )   39,919  
                   

Total

  $ 57,278   $ 544   $ (1,234 ) $ 56,588  
                   
                   

        Expected maturities of securities will differ from contractual maturities because the underlying borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The contractual maturities of securities at March 31, 2014 are shown below (in thousands):

 
  March 31, 2014  
 
  Available-for-Sale   Held-to-Maturity  
 
  Amortized
Cost
  Fair
Value
  Amortized
Cost
  Fair
Value
 

Due in one year or less

  $ 5,002   $ 5,009   $   $  

Due after one year through five years

    40,146     40,108          

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

    116,413     117,716     17,923     17,931  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    31,303     31,018     39,104     38,868  
                   

Total

  $ 192,864   $ 193,851   $ 57,027   $ 56,799  
                   
                   

        There were no sales of securities during the three months ended March 31, 2014 or 2013.

        Declines in the fair value of individual securities below their cost that are other-than-temporary would result in writedowns, as a realized loss, to their fair value. In evaluating other-than-temporary impairment losses, management considers several factors including the severity and the duration that the fair value has been less than cost, the credit quality of the issuer, and whether it is more likely than

F-11


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

6. SECURITIES (Continued)

not that the Company will be required to sell the security before a recovery in value. The Company has not realized any losses due to other-than-temporary impairment of securities.

        Securities with unrealized losses segregated by length of continuous unrealized loss position at March 31, 2014 and December 31, 2013 were as follows (in thousands):

 
  March 31, 2014  
 
  Less than 12 Months   More than 12 Months  
 
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
 

Available-for-sale:

                                     

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 25,003   $ (80 ) $ 24,923   $   $   $  

Mortgage-backed securities issued by U.S. governement agencies or sponsored entities

    35,978     (497 )   35,481              

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    13,071     (134 )   12,937     4,333     (230 )   4,103  
                           

Total

  $ 74,052   $ (711 ) $ 73,341   $ 4,333   $ (230 ) $ 4,103  
                           
                           

Held-to-maturity:

                                     

Mortgage-backed securities issued by U.S. governement agencies or sponsored entities

  $ 7,981   $ (341 ) $ 7,640   $ 1,012   $ (80 ) $ 932  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    24,248     (351 )   23,897              
                           

Total

  $ 32,229   $ (692 ) $ 31,537   $ 1,012   $ (80 ) $ 932  
                           
                           

F-12


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

6. SECURITIES (Continued)


 
  December 31, 2013  
 
  Less than 12 Months   More than 12 Months  
 
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
 

Available-for-sale:

                                     

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 25,008   $ (95 ) $ 24,913   $   $   $  

Mortgage-backed securities issued by U.S. governement agencies or sponsored entities

    51,576     (934 )   50,642              

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    18,447     (215 )   18,232     4,481     (314 )   4,167  
                           

Total

  $ 95,031   $ (1,244 ) $ 93,787   $ 4,481   $ (314 ) $ 4,167  
                           
                           

Held-to-maturity:

                                     

Mortgage-backed securities issued by U.S. governement agencies or sponsored entities

  $ 6,033   $ (429 ) $ 5,604   $ 1,022   $ (99 ) $ 923  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    23,060     (706 )   22,354              
                           

Total

  $ 29,093   $ (1,135 ) $ 27,958   $ 1,022   $ (99 ) $ 923  
                           
                           

        The average loss on securities in an unrealized loss position was 1.53% and 1.92% of the amortized cost basis at March 31, 2014 and December 31, 2013, respectively. There were two securities in an unrealized loss position of greater than 12 months at both March 31, 2014 and December 31, 2013.

        The Company did not own securities of any one issuer (other than the U.S. government and its agencies or sponsored enterprises) for which the aggregate adjusted cost exceeds 10% of the consolidated shareholders' equity at March 31, 2014 or December 31, 2013.

        Securities with an amortized cost of $17.6 million and $10.3 million and fair value of $17.8 million and $10.5 million were pledged and available to be sold under repurchase agreements at March 31, 2014 and December 31, 2013, respectively. Securities with an amortized cost of $38.2 million and $38.2 million and fair value of $38.2 million and $37.5 million were pledged to various Federal Reserve Districts related to deposits of bankruptcy trustees at March 31, 2014 and December 31, 2013, respectively. In addition, securities with an amortized cost of $835 thousand and $895 thousand and fair value of $870 thousand and $929 thousand were pledged as collateral for the Company's derivative instruments at March 31, 2014 and December 31, 2013, respectively.

F-13


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS

        The loan portfolio is classified by type and class at March 31, 2014 and December 31, 2013, as follows (in thousands):

 
  March 31, 2014  
 
  Originated   Acquired   Total  

Commercial:

                   

Commercial and industrial

  $ 673,175   $ 2,637   $ 675,812  

Owner occupied commercial real estate

    149,149     3,366     152,515  

Commercial real estate

    298,623     11,756     310,379  

Construction, land and land development

    152,145     182     152,327  
               

    1,273,092     17,941     1,291,033  
               

Consumer:

                   

Residential mortgage

    106,947     461     107,408  

Other consumer

    5,472     362     5,834  
               

    112,419     823     113,242  
               

Total loans held for investment

  $ 1,385,511   $ 18,764   $ 1,404,275  
               
               

 

 
  December 31, 2013  
 
  Originated   Acquired   Total  

Commercial:

                   

Commercial and industrial

  $ 674,621   $ 6,669   $ 681,290  

Owner occupied commercial real estate

    153,507     3,454     156,961  

Commercial real estate

    254,838     12,173     267,011  

Construction, land and land development

    139,867     200     140,067  
               

    1,222,833     22,496     1,245,329  
               

Consumer:

                   

Residential mortgage

    105,888     474     106,362  

Other consumer

    7,296     428     7,724  
               

    113,184     902     114,086  
               

Total loans held for investment

  $ 1,336,017   $ 23,398   $ 1,359,415  
               
               

        The loan portfolio is comprised of two types, commercial loans and consumer loans. The commercial loans are further segregated into commercial and industrial, owner occupied commercial real estate, commercial real estate, which includes multi-family loans, and construction, land and land development, which includes both commercial construction and loans for the construction of residential properties. The consumer loans are further segregated into residential mortgage, which includes first and second liens and home equity lines, and other consumer loans, which includes various types of loans to consumers and overdrafts. Loans are further separated between loans originated by the Company and loans acquired.

F-14


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        Included in the loans held for investment balance was $7.4 million and $7.1 million of net deferred loan origination fees and unamortized premium and discount at March 31, 2014 and December 31, 2013, respectively. Also included in loans at March 31, 2014 and December 31, 2013, respectively was $332 thousand and $375 thousand in non-accretable discount on acquired credit impaired loans. Accrued interest receivable on loans was $3.7 million and $3.5 million at March 31, 2014 and December 31, 2013, respectively. Other consumer loans include overdrafts of $24 thousand and $21 thousand as of March 31, 2014 and December 31, 2013, respectively.

        The loan portfolio consists of various types of loans made principally to borrowers located in the Houston, Dallas and Austin metropolitan areas. Although the portfolio is diversified and generally secured by various types of collateral, a substantial portion of its debtors' ability to honor their obligations is dependent on local economic conditions.

        As of March 31, 2014 and December 31, 2013, there was no concentration of loans to any one type of industry exceeding 10% of total loans nor were there any loans classified as highly leveraged transactions.

        Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported in the balance sheet as loans held for investment stated at the principal amount outstanding adjusted for charge-offs, the allowance for loan losses, deferred fees or costs and unamortized premiums or discounts.

        Loans are classified as held-for-sale when management has positively determined that the loans will be sold in the foreseeable future and the Company has the ability to do so. The classification may be made upon origination or subsequent to the origination or purchase. Once a decision has been made to sell loans not previously classified as held-for-sale, such loans are transferred into the held-for-sale classification and carried at the lower of cost or fair value. There were no loans classified as held-for-sale at either March 31, 2014 or December 31, 2013.

F-15


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        Loan maturities and rate sensitivity of the loans held for investment at March 31, 2014, was as follows (in thousands):

 
  Due in
One Year
or Less
  Due After
One Year
Through
Five Years
  Due After
Five Years
  Total  

Commercial:

                         

Commercial and industrial

  $ 206,300   $ 426,146   $ 43,366   $ 675,812  

Owner occupied commercial real estate

    7,015     97,658     47,842     152,515  

Commercial real estate

    14,406     228,182     67,791     310,379  

Construction, land and land development

    24,691     83,768     43,868     152,327  

Consumer:

                         

Residential mortgage

    5,573     64,213     37,622     107,408  

Other consumer

    4,911     885     38     5,834  
                   

Total loans

  $ 262,896   $ 900,852   $ 240,527   $ 1,404,275  
                   
                   

Loans with a fixed interest rate

  $ 23,563   $ 243,852   $ 57,126   $ 324,541  

Loans with a floating interest rate

    239,333     657,000     183,401     1,079,734  
                   

Total loans

  $ 262,896   $ 900,852   $ 240,527   $ 1,404,275  
                   
                   

        In the ordinary course of business, the Company has granted loans to certain directors, officers and their affiliates. In the opinion of management, all transactions entered into between the Bank and such related parties have been and are in the ordinary course of business, made on the same terms and conditions as similar transactions with unaffiliated persons.

        As of March 31, 2014 and December 31, 2013 there were no balances outstanding on the lines of credit granted to directors, executive officers and their affiliates, nor were there any advances or repayments during the three months ended March 31, 2014 or the year ended December 31, 2013.

F-16


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        Acquired Loans —The outstanding principal balance and recorded investment in the total acquired loans from all acquisitions at March 31, 2014 and December 31, 2013, was as follows (in thousands):

 
  March 31,
2014
  December 31,
2013
 

Credit impaired acquired loans:

             

Outstanding principal balance

  $ 8,157   $ 8,477  

Recorded investment

    7,238     7,498  
           

Net of discount

  $ 919   $ 979  
           
           

Other acquired loans:

             

Outstanding principal balance

    11,675     16,187  

Recorded investment

    11,526     15,900  
           

Net of discount

  $ 149   $ 287  
           
           

Total acquired loans:

             

Outstanding principal balance

    19,832     24,664  

Recorded investment

    18,764     23,398  
           

Net of discount

  $ 1,068   $ 1,266  
           
           

        Changes in the accretable yield for credit impaired acquired loans for the three months ended March 31, 2014 and 2013, were as follows (in thousands):

 
  Three Months
Ended
March 31,
 
 
  2014   2013  

Balance at beginning of period

  $ 603   $ 510  

Reclassifications from nonaccretable yield

    44     40  

Accretion

    (60 )   (40 )
           

Balance at period end

  $ 587   $ 510  
           
           

        Purchased credit impaired loans are evaluated on an ongoing basis after acquisition. Reclassifications from nonaccretable yield to accretable yield are recorded based on the current estimates of the timing and amount of expected future cash flows.

        Nonaccrual and Past Due Loans —When management doubts a borrower's ability to meet payment obligations, which typically occurs when principal or interest payments are more than 90 days past due, the loans are placed on nonaccrual status.

F-17


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        The age analysis of loans, segregated by class, as of March 31, 2014 and December 31, 2013 was as follows (in thousands):

 
  March 31, 2014  
 
  Loans Past Due and
Still Accruing
   
   
   
   
 
Originated
  30 - 89
Days
Past Due
  90 Days
or More
Past Due
  Total   Nonaccrual   Purchased
Credit
Impaired
  Current   Total
Loans
 

Commercial:

                                           

Commercial & industrial

  $ 1,678   $   $ 1,678   $ 6,196   $   $ 665,301   $ 673,175  

Owner occupied commercial real estate

    4,327         4,327             144,822     149,149  

Commercial real estate

    559         559             298,064     298,623  

Construction, land & land development

        31     31     574         151,540     152,145  
                               

    6,564     31     6,595     6,770         1,259,727     1,273,092  
                               

Consumer:

                                           

Residential mortgage

    357         357     1,317         105,273     106,947  

Other consumer

    224         224     1         5,247     5,472  
                               

    581         581     1,318         110,520     112,419  
                               

Total orignated loans

  $ 7,145   $ 31   $ 7,176   $ 8,088   $   $ 1,370,247   $ 1,385,511  
                               
                               

Acquired
         
 
   
 
   
 
   
 
   
 
   
 
 

Commercial:

                                           

Commercial & industrial

  $ 8   $   $ 8   $   $ 837   $ 1,792   $ 2,637  

Owner occupied commercial real estate

                    1,609     1,757     3,366  

Commercial real estate

                630     4,532     6,594     11,756  

Construction, land & land development

                    88     94     182  
                               

    8         8     630     7,066     10,237     17,941  
                               

Consumer:

                                           

Residential mortgage

                    172     289     461  

Other consumer

    19     2     21             341     362  
                               

    19     2     21         172     630     823  
                               

Total acquired loans

  $ 27   $ 2   $ 29   $ 630   $ 7,238   $ 10,867   $ 18,764  
                               
                               

F-18


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)


 
  December 31, 2013  
 
  Loans Past Due and
Still Accruing
   
   
   
   
 
Originated
  30 - 89
Days
Past Due
  90 Days
or More
Past Due
  Total   Nonaccrual   Purchased
Credit
Impaired
  Current   Total
Loans
 

Commercial:

                                           

Commercial & industrial

  $ 4,988   $   $ 4,988   $ 7,345   $   $ 662,288   $ 674,621  

Owner occupied commercial real estate

    780     536     1,316             152,191     153,507  

Commercial real estate

        780     780     164         253,894     254,838  

Construction, land & land development

                587         139,280     139,867  
                               

    5,768     1,316     7,084     8,096         1,207,653     1,222,833  
                               

Consumer:

                                           

Residential mortgage

    221         221     1,328         104,339     105,888  

Other consumer

    208         208     1,284         5,804     7,296  
                               

    429         429     2,612         110,143     113,184  
                               

Total orignated loans

  $ 6,197   $ 1,316   $ 7,513   $ 10,708   $   $ 1,317,796   $ 1,336,017  
                               
                               

Acquired
         
 
   
 
   
 
   
 
   
 
   
 
 

Commercial:

                                           

Commercial & industrial

  $   $   $   $   $ 895   $ 5,774   $ 6,669  

Owner occupied commercial real estate

                    1,655     1,799     3,454  

Commercial real estate

                652     4,676     6,845     12,173  

Construction, land & land development

                    96     104     200  
                               

                652     7,322     14,522     22,496  
                               

Consumer:

                                           

Residential mortgage

                    176     298     474  

Other consumer

    24         24             404     428  
                               

    24         24         176     702     902  
                               

Total acquired loans

  $ 24   $   $ 24   $ 652   $ 7,498   $ 15,224   $ 23,398  
                               
                               

F-19


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        Impaired Loans —The following is a summary of information related to impaired, nonaccrual and restructured loans at March 31, 2014 and December 31, 2013 (in thousands):

 
  March 31,
2014
  December 31,
2013
 

Nonaccrual loans

  $ 1,972   $ 1,496  

Accruing loans past due 90 days or more

    33     1,316  

Restructured loans—nonaccrual

    6,746     9,864  

Restructured loans—accruing

    3,907     4,072  
           

Total nonperforming loans

  $ 12,658   $ 16,748  
           
           

        Based on an analysis of impaired loans at March 31, 2014 and December 31, 2013, an allowance of $1.9 million and $4.3 million, respectively, was allocated to impaired loans. The average recorded investment in nonperforming loans for the quarter ended March 31, 2014 and for the year ended December 31, 2013, was $15.5 million and $38.0 million, respectively. There was approximately $55 thousand and $51 thousand in interest recognized on nonperforming loans, for the three months ended March 31, 2014 and 2013, respectively.

        Nonperforming loans of $8.7 million and $11.4 million at March 31, 2014 and December 31, 2013 respectively, have been categorized by management as nonaccrual loans. Interest foregone on nonaccrual loans for the three months ended March 31, 2014 and 2013 was approximately $398 thousand and $623 thousand, respectively.

F-20


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        The following table presents additional information regarding impaired loans that were individually evaluated for impairment at March 31, 2014 and December 31, 2013 (in thousands):

 
  March 31, 2014   December 31, 2013  
 
  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
 

With no related allowance recorded:

                                     

Commercial & industrial

  $ 576   $ 577   $   $ 631   $ 631   $  

Owner occupied commercial real estate

                         

Commercial real estate

    2,502     2,502         2,690     2,692      

Construction, land & land development

    1,738     1,738         1,751     1,751      

Residential mortgage

                1,213     1,213      

Other Consumer

    42     42         170     170      

With an allowance recorded:

   
 
   
 
   
 
   
 
   
 
   
 
 

Commercial & industrial

    5,820     5,822     1,726     6,932     6,932     2,924  

Owner occupied commercial real estate

                         

Commercial real estate

    630     630     29     653     653     45  

Construction, land & land development

                         

Residential mortgage

    1,317     1,317     134     114     114     88  

Other Consumer

                1,278     1,278     1,278  

Total:

   
 
   
 
   
 
   
 
   
 
   
 
 

Commercial

  $ 11,266   $ 11,269   $ 1,755   $ 12,657   $ 12,659   $ 2,969  

Consumer

    1,359     1,359     134     2,775     2,775     1,366  
                           

  $ 12,625   $ 12,628   $ 1,889   $ 15,432   $ 15,434   $ 4,335  
                           
                           

        Credit Quality —Internally assigned risk grades for loans are defined as follows:

        Grade 1 (Highest Quality—No Apparent Risk) —This category includes loans to borrowers of unquestioned credit standing which are secured by readily marketable collateral of undisputed value, with appropriate margin. It also includes loans to borrowing entities with: excellent capitalization, liquidity and earnings levels; quality management; positive financial trends; and favorable industry conditions.

        Grade 2 (Good Quality—Minimal Risk) —This category includes loans to investment grade entities with: good liquidity and financial condition, nominal term debt, strong debt service capability, solid management, and quality financial information. These loans are usually secured with current assets, but may be unsecured. Alternative financing from other lenders is generally available to these borrowers.

F-21


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        Grade 3 (Satisfactory Quality—Acceptable Risk—Tier One) —This category includes loans to entities maintaining fair liquidity and acceptable financial conditions. The level of term debt is moderate, with adequate debt service capability. Earnings may be volatile, but borrowers in this category generally do not show a loss within the last three years. Primary debt service must be supported by identified secondary repayment sources or by guarantors with adequate and proven responsibility and capacity.

        Grade 4 (Satisfactory Quality—Acceptable Risk—Tier Two) —This category includes loans to borrowers maintaining acceptable financial conditions; however may exhibit certain characteristics of leverage or asset dependency that reflect a greater level of risk than Tier One credits. This category may also include borrowers exhibiting explainable interim losses within the previous three years and/or industry characteristics that warrant frequent monitoring.

        Grade 5 (Monitored Loans) —This category includes loans with trends or characteristics which, if continued, could result in impaired repayment ability. The borrower may exhibit a low degree of liquidity and relatively high leverage, erratic earnings history (including the possibility of a reported loss in the past four years), significant term debt and a nominal cushion for debt service capacity. Loans in this category may also include financing to start-up borrowers backed by experienced management and significant capital investment or established companies in distressed industry conditions.

        Grade 6 (Other Assets Especially Mentioned) —This category includes loans which have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or a weakening of the Company's credit position at some future date. Grade 6 loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

        Grade 7 (Substandard—Accruing) —This category includes loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any, or loans with identified weaknesses but where there is sufficient collateral value and/or cash flow coverage. This category includes loans that: (1) may require a secondary source of repayment (liquidation of collateral or repayment by a guarantor), (2) lack current financial information or appraisals, and/or (3) have collateral deficiencies such that the Company would be in an unsecured position with an obligor not deserving unsecured credit. This category may also include borrowers with operating losses in recent periods.

        Grade 8 (Substandard—Nonaccrual) —This category includes loans with the same basic characteristics as Grade 7 loans and also meet the Company's criteria for nonaccrual status, but do not warrant a Grade 9 or Grade 10 classification.

        Grade 9 (Doubtful/Exposure) —This category includes loans with all the Grade 7 or 8 characteristics but with weaknesses that make collection (or liquidation) highly questionable and improbable.

        Grade 10 (Loss) —This category includes loans which are considered uncollectible, or of such little value that they should no longer be carried as an asset of the Company.

F-22


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        The credit risk profile of loans aggregated by class and internally assigned risk grades at March 31, 2014 and December 31, 2013 (in thousands):

 
  March 31, 2014  
 
  Commercial &
Industrial
  Owner
Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Grade 1

  $ 6,367   $   $   $   $ 290   $ 526   $ 7,183  

Grade 2

    7,951                         7,951  

Grade 3

    177,085     26,401     37,213     12,730     70,328     3,327     327,084  

Grade 4

    437,773     113,915     259,268     136,604     34,740     1,707     984,007  

Grade 5

    27,678     10,535     6,950     2,300     146     121     47,730  

Grade 6

    9,888         1,291                 11,179  

Grade 7

    2,037     55     495     31     415     152     3,185  

Grade 8

    6,196         630     574     1,317     1     8,718  

Grade 9

                             
                               

    674,975     150,906     305,847     152,239     107,236     5,834     1,397,037  

Purchased credit impaired

   
837
   
1,609
   
4,532
   
88
   
172
   
   
7,238
 
                               

Total loans

  $ 675,812   $ 152,515   $ 310,379   $ 152,327   $ 107,408   $ 5,834   $ 1,404,275  
                               
                               

 

 
  December 31, 2013  
 
  Commercial &
Industrial
  Owner
Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Grade 1

  $ 2,657   $   $   $   $ 292   $ 548   $ 3,497  

Grade 2

    7,750                     50     7,800  

Grade 3

    161,581     26,548     37,750     12,058     71,264     3,785     312,986  

Grade 4

    474,831     118,070     213,946     124,972     32,735     1,653     966,207  

Grade 5

    10,970     10,631     8,752     2,323     149     248     33,073  

Grade 6

    11,790         569             107     12,466  

Grade 7

    3,471     57     502     31     418     49     4,528  

Grade 8

    6,106         816     587     1,328     6     8,843  

Grade 9

    1,239                     1,278     2,517  
                               

    680,395     155,306     262,335     139,971     106,186     7,724     1,351,917  

Purchased credit impaired

   
895
   
1,655
   
4,676
   
96
   
176
   
   
7,498
 
                               

Total loans

  $ 681,290   $ 156,961   $ 267,011   $ 140,067   $ 106,362   $ 7,724   $ 1,359,415  
                               
                               

F-23


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

7. LOANS (Continued)

        Troubled Debt Restructurings —The restructuring of a loan is considered a troubled debt restructuring if both the borrower is experiencing financial difficulties and the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

        There were no loans restructured during the three months ended March 31, 2014.

        Restructured loans are individually evaluated for impairment. The allowance for loan losses included specific reserves of $872 thousand related to these loans at March 31, 2014.

        Troubled debt restructurings identified during the three months ended March 31, 2013 are as follows (dollars in thousands):

 
  Number of
Contracts
  Pre-Modification
Outstanding
Recorded
Investment
  Recorded
Investment
 

Commercial & industrial

    5   $ 2,737   $ 2,723  

Construction, land and land development

    1     2,171     2,171  

Other consumer

    1     122     122  
               

Total

    7   $ 5,030   $ 5,016  
               
               

        The modifications primarily related to extending the maturity date of the loans, which includes loans modified post bankruptcy. The Company did not forgive any principal or interest on the restructured loans. Following the restructure, $4.9 million were paid in full prior to March 31, 2014.

F-24


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

8. ALLOWANCE FOR LOAN LOSSES

        An analysis of activity in the allowance for loan losses for the three months ended March 31, 2014, the year ended December 31, 2013 and the three months ended March 31, 2013, and the balance of loans receivable by the method of impairment evaluation for those periods is as follows (in thousands):

 
  As of and for the Three Months Ended March 31, 2014  
 
  Commercial &
Industrial
  Owner
Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Allowance for loan losses:

                                           

Balance—January 1, 2014

  $ 10,196   $ 874   $ 2,216   $ 1,103   $ 654   $ 1,318   $ 16,361  

Provision

    471     (82 )   499     (24 )   66     293     1,223  

Charge-offs

    (1,239 )                   (1,281 )   (2,520 )

Recoveries

    50         1         3     1     55  
                               

Balance—March 31, 2014

  $ 9,478   $ 792   $ 2,716   $ 1,079   $ 723   $ 331   $ 15,119  
                               
                               

Allowance for loan losses:

                                           

Collectively evaluated for impairment

  $ 7,752   $ 789   $ 2,537   $ 1,060   $ 589   $ 330   $ 13,057  

Individually evaluated for impairment

    1,726         29         134         1,889  

Acquired with deteriorated credit quality

        3     150     19         1     173  

Loans:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Collectively evaluated for impairment

  $ 668,579   $ 150,906   $ 302,715   $ 150,501   $ 105,919   $ 5,792   $ 1,384,412  

Individually evaluated for impairment

    6,396         3,132     1,738     1,317     42     12,625  

Acquired with deteriorated credit quality

    837     1,609     4,532     88     172         7,238  
                               

Total loans evaluated for impairment

  $ 675,812   $ 152,515   $ 310,379   $ 152,327   $ 107,408   $ 5,834   $ 1,404,275  
                               
                               

F-25


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

8. ALLOWANCE FOR LOAN LOSSES (Continued)


 
  As of and for the Year Ended December 31, 2013  
 
  Commercial &
Industrial
  Owner
Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Allowance for loan losses:

                                           

Balance—January 1, 2013

  $ 9,109   $ 763   $ 2,380   $ 1,352   $ 492   $ 55   $ 14,151  

Provision

    959     (111 )   148     (249 )   321     1,305     2,373  

Charge-offs

    (916 )       (333 )       (186 )   (54 )   (1,489 )

Recoveries

    1,044     222     21         27     12     1,326  
                               

Balance—December 31, 2013

  $ 10,196   $ 874   $ 2,216   $ 1,103   $ 654   $ 1,318   $ 16,361  
                               
                               

Allowance for loan losses:

                                           

Collectively evaluated for impairment

  $ 7,272   $ 872   $ 2,021   $ 1,082   $ 566   $ 39   $ 11,852  

Individually evaluated for impairment

    2,924         45         88     1,278     4,335  

Acquired with deteriorated credit quality

        2     150     21         1     174  

Loans:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Collectively evaluated for impairment

  $ 672,831   $ 155,306   $ 258,993   $ 138,220   $ 104,858   $ 6,277   $ 1,336,485  

Individually evaluated for impairment

    7,564         3,342     1,751     1,328     1,447     15,432  

Acquired with deteriorated credit quality

    895     1,655     4,676     96     176         7,498  
                               

Total loans evaluated for impairment

  $ 681,290   $ 156,961   $ 267,011   $ 140,067   $ 106,362   $ 7,724   $ 1,359,415  
                               
                               

F-26


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

8. ALLOWANCE FOR LOAN LOSSES (Continued)


 
  As of and for the Three Months March 31, 2013  
 
  Commercial &
Industrial
  Owner
Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Allowance for loan losses:

                                           

Balance—January 1, 2013

  $ 9,109   $ 763   $ 2,380   $ 1,352   $ 492   $ 55   $ 14,151  

Provision

    (702 )   102     321     (500 )   237     1,323     781  

Charge-offs

                    (186 )   (48 )   (234 )

Recoveries

    632     23     21         8     1     685  
                               

Balance—March 31, 2013

  $ 9,039   $ 888   $ 2,722   $ 852   $ 551   $ 1,331   $ 15,383  
                               
                               

Allowance for loan losses:

                                           

Collectively evaluated for impairment

  $ 8,204   $ 769   $ 2,232   $ 824   $ 551   $ 51   $ 12,631  

Individually evaluated for impairment

    835     119     342             1,279     2,575  

Acquired with deteriorated credit quality

            148     28         1     177  

Loans:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Collectively evaluated for impairment

  $ 614,252   $ 129,153   $ 230,926   $ 109,778   $ 96,848   $ 6,267   $ 1,187,224  

Individually evaluated for impairment

    10,871     484     2,608     4,972     1,387     1,439     21,761  

Acquired with deteriorated credit quality

    1,064     2,464     4,893     64     188     1     8,674  
                               

Total loans evaluated for impairment

  $ 626,187   $ 132,101   $ 238,427   $ 114,814   $ 98,423   $ 7,707   $ 1,217,659  
                               
                               

9. PREMISES AND EQUIPMENT

        Premises and equipment as of March 31, 2014 and December 31, 2013, are summarized as follows (in thousands):

 
  March 31,
2014
  December 31,
2013
 

Land

  $ 6,588   $ 6,588  

Buildings and improvements

    16,606     16,238  

Furniture, fixtures, and equipment

    6,002     5,923  
           

    29,196     28,749  

Less accumulated depreciation

   
(7,720

)
 
(7,384

)
           

Total

  $ 21,476   $ 21,365  
           
           

        Depreciation of premises and equipment totaled $336 thousand and $341 thousand for the three months ended March 31, 2014 and 2013, respectively.

F-27


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

10. GOODWILL AND CORE DEPOSIT INTANGIBLES

        The Company reviews its goodwill for impairment annually, or more frequently, if indicators of impairment exist. At March 31, 2014 and December 31, 2013, management determined that goodwill, as reflected in the Company's financial statements, was not impaired.

        Changes in the carrying amount of goodwill and core deposit intangibles for the three months ended March 31, 2014 and the year ended December 31, 2013 were as follows (in thousands):

 
  Goodwill   Core Deposit
Intangibles
 

Balance as of January 1, 2013

  $ 15,672   $ 1,230  

Less—amortization

        (246 )
           

Balance as of December 31, 2013

    15,672     984  

Less—amortization

        (61 )
           

Balance as of March 31, 2014

  $ 15,672   $ 923  
           
           

        Core deposit intangibles are amortized on an accelerated basis over their estimated lives, which the Company believes is approximately six to eight years. The estimated future amortization expense for the core deposit intangibles remaining as of December 31, 2013 is as follows (in thousands):

2014

  $ 246  

2015

    246  

2016

    246  

2017

    218  

2018

    28  
       

Total

  $ 984  
       
       

11. DEPOSITS

        Included in certificates and other time deposits are individual amounts of $100,000 or more including brokered certificates of deposit, if any. The remaining maturities of these deposits as of March 31, 2014 and December 31, 2013, respectively, are as follows (in thousands):

 
  March 31,
2014
  December 31,
2013
 

Three months or less

  $ 70,710   $ 81,518  

Over three through six months

    83,028     67,817  

Over six through twelve months

    109,299     111,067  

Over one through two years

    52,991     44,866  

Over two through three years

    26,847     28,822  

Over three through four years

    60,536     37,335  

Over four through five years

    43,525     68,955  
           

  $ 446,936   $ 440,380  
           
           

F-28


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

11. DEPOSITS (Continued)

        Interest expense for certificates of deposit and other time deposits of $100,000 or more was approximately $1.4 million and $1.4 million for the for the three months ended March 31, 2014 and 2013, respectively.

        The Company had $5.8 million and $14.8 million in brokered time deposits, at March 31, 2014 and December 31, 2013, respectively.

        There are no major concentrations of deposits with any one depositor.

12. OTHER BORROWED FUNDS

        Other borrowed funds as of March 31, 2014 and December 31, 2013, are as follows (in thousands):

 
  March 31,
2014
  December 31,
2013
 

Federal Home Loan Bank advances

  $ 46,846   $ 46,858  

Repurchase agreements

    8,383     2,583  
           

Total

  $ 55,229   $ 49,441  
           
           

        Federal Home Loan Bank Advances —The Company has an available borrowing arrangement with the FHLB, which allows the Company to borrow on a collateralized basis. At March 31, 2014 and December 31, 2013, total borrowing capacity of $313.9 million and $301.0 million, respectively, was available under this arrangement and $46.8 million and $46.9 million, respectively, was outstanding with an average interest rate of 0.28% and 0.32%, respectively. At March 31, 2014 and December 31, 2013, all of the Company's FHLB advances mature within one year. These borrowings are collateralized by a blanket lien on certain loans. The Company utilizes these borrowings to meet liquidity needs and to fund certain fixed rate loans in its loan portfolio.

        Federal Reserve Bank —The Company has an available borrower in custody arrangement with the Federal Reserve Bank of Dallas (the "Fed"), which allows the Company to borrow, on a collateralized basis. Certain commercial and consumer loans are pledged under this arrangement. The Company maintains this borrowing arrangement to meet liquidity needs pursuant to its contingency funding plan. At March 31, 2014 and December 31, 2013, $313.5 million and $288.6 million, respectively, were available under this arrangement and no borrowings were outstanding.

        Securities Sold Under Agreements to Repurchase —Securities sold under agreements to repurchase represent the purchase of interests in securities by banking customers. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. Repurchase agreements with banking customers are settled on the following business day. All securities sold under agreements to repurchase are collateralized by pledged securities. The securities underlying the repurchase agreements are held in safekeeping by the Bank's safekeeping agent. At March 31, 2014 and December 31, 2013, the Company had securities sold under agreements to repurchase with banking customers of $8.4 million and $2.6 million, respectively.

        Federal Funds Purchased —The Company has available federal funds lines of credit with its correspondent banks. As of March 31, 2014 and December 31, 2013, there were no federal funds purchased outstanding.

F-29


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

13. INCOME TAXES

        Income tax expense was $2.0 million for the three months ended March 31, 2014 and $1.5 million for the three months ended March 31, 2013. The Company's effective tax rate was 36.2% and 36.4% for the three months ended March 31, 2014 and 2013, respectively.

14. EMPLOYEE BENEFITS

        Stock Option Plan —The Green Bancorp, Inc. 2010 Stock Option Plan (the "2010 Option Plan"), was approved by the Company's Board of Directors on June 30, 2010. The 2010 Option Plan permits the grants of up to 2,239,906 options. The non-qualified stock options are in the form of time-based options and performance options. The options may be granted to a director, officer or employee of the Company. The 2010 Option Plan is administered by the Compensation Committee of the Board of Directors, who establish at the time of the grant, the allocation of options between time-based and performance, the period over which the time-based options vest, the form of payment upon exercise and the exercise price of the awards.

        Typically time-based options under the 2010 Option Plan vest over a period of four years and expire on the tenth anniversary of the date of the grant. Performance options under the 2010 Option Plan vest upon the occurrence of a liquidity event, with the vested amounts determined based on the achievement of specified performance and market metrics. At March 31, 2014 and December 31, 2013 there were 427,517 and 425,320 time based options and 1,680,490 and 1,670,525 performance options outstanding under the 2010 Option Plan, respectively.

        The Company has two additional stock options plans, which are frozen to further issuance.

        The Green Bancorp, Inc. 2006 Stock Option Plan (the "2006 Option Plan"), which was approved by the shareholders of the Company on June 21, 2006, permitted the grant of up to 450,000 options. The options granted may have been in the form of nonqualified stock options, which may have been granted to a director, officer or employee of the Company, or incentive stock options, which may have been granted only to officers of the Company. Awards under the 2006 Option Plan vest over a four-year period, which began on the first anniversary of the grant date, and must be exercised within 10 years from the grant date. The 2006 Option Plan was frozen to further issuance upon approval of the 2010 Option Plan. At March 31, 2014 and December 31, 2013 there were 367,500 options outstanding under the 2006 Option Plan.

        In addition to the 2006 Option Plan, the Company's Board of Directors adopted the Redstone Bank 2004 Stock Option Plan (the "Redstone Option Plan") and froze the plan to further issuance, following the Company's acquisition of Redstone Bank. At the time of adoption, all options to acquire stock of Redstone Bank were converted to options to acquire stock of the Company and adjusted in terms of number and exercise price based on the terms of the merger agreement. All options issued under the Redstone Option Plan are fully vested as a result of the 2006 change of control event. At March 31, 2014 and December 31, 2013, respectively, there were 297,278 and 306,444 options outstanding under the Redstone Option Plan.

        The Company's performance-based options will vest only upon the occurrence of a liquidity event. The numbers of options to be vested will be determined based on the achievement of specified

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

14. EMPLOYEE BENEFITS (Continued)

performance and market metrics. At March 31, 2014 there were 1,680,490 performance based options outstanding under the 2010 Option Plan.

        Stock Appreciation Rights Plan —On May 18, 2007, the Company's Board of Directors adopted the Green Bancorp Stock Appreciation Rights Plan (the "SAR Plan"). The SAR Plan provides for the issuance of up to 200,000 units to plan participants at an exercise price of no less than the fair market value of the common stock of the Company at the time of grant. Units are redeemable by plan participants under certain circumstances whereby the participant will be paid the excess, if any, of the book value of the Company's common stock at the time of exercise over the exercise price. The SAR Plan provides for a 10-year maximum term for units issued, vesting and exercisability limitations and accelerated vesting and deemed exercise in the event of a change of control. As of March 31, 2014 and December 31, 2013, there were 165,000 units outstanding and 35,000 units available under the SAR Plan.

        The Company has elected to account for the accrued SAR Plan liability under the intrinsic-value method as allowed for non-public companies by FASB ASC 718, Compensation—Stock Compensation .

        Benefit Plan —The Company sponsors a 401(k) plan (the "401k Plan"), which is a defined contribution plan available to substantially all employees. Participants in the 401k Plan may make salary deferral contributions up to the amount allowed by law. The Company makes safe harbor matching contributions to the 401k Plan equal to 100% of the participant's elective contribution for the plan year up to a maximum of 6% of the participant's salary. The Company contributions are fully vested at the date of contribution. The total of Company contributions for the three months ended March 31, 2014 and 2013, were $187 thousand and $167 thousand, respectively.

15. OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES

        The following table summarizes the Company's contractual obligations and other commitments to make future payments as of March 31, 2014 (other than securities sold under agreements to repurchase). The Company's future cash payments associated with its contractual obligations pursuant to it's Federal Home Loan Bank advances and operating leases as of March 31, 2014 are as follows (in thousands):

 
  1 year or
less
  More than
1 year but
less than
3 years
  3 years or
more but
less than
5 years
  5 years or
more
  Total  

Certificate and other time deposits

  $ 339,429   $ 104,358   $ 129,992   $   $ 573,779  

Federal Home Loan Bank advances

    46,878                 46,878  

Operating leases

    1,141     1,788     1,327     2,532     6,788  
                       

Total

  $ 387,448   $ 106,146   $ 131,319   $ 2,532   $ 627,445  
                       
                       

        Payments for Federal Home Loan Bank advances include interest of $32 thousand that will be paid over the future periods. Payments related to leases are based on actual payments specified in underlying contracts.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

15. OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES (Continued)

        Leases —A summary as of December 31, 2013, of the Company's noncancelable future operating lease commitments is as follows (in thousands):

2014

  $ 1,263  

2015

    918  

2016

    870  

2017

    802  

2018

    525  

Thereafter

    2,532  
       

Total

  $ 6,910  
       
       

        The Company leases certain office facilities and equipment under operating leases. Rent expense under all noncancelable operating lease obligations, net of income from noncancelable subleases aggregated, was approximately $329 thousand and $353 thousand for the three months ended March 31, 2014 and 2013, respectively.

        Litigation —The Company from time to time is involved in routine litigation arising from the normal course of business. Management does not believe that there are any pending or threatened proceedings against the Company which, upon resolution, would have a material effect on the consolidated financial statements.

        Financial Instruments with Off-Balance Sheet Risk —In the normal course of business, the Company is a party to various financial instruments with off-balance sheet risk to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual or notional amount of these instruments. The Company uses the same credit policies in making these commitments and conditional obligations as it does for on-balance sheet instruments.

        The following is a summary of the various financial instruments outstanding as of March 31, 2014 (in thousands):

 
  1 year or
less
  More than
1 year but
less than
3 years
  3 years or
more but
less than
5 years
  5 years or
more
  Total  

Commitments to extend credit

  $ 107,144     173,617     62,303     54,614     397,678  

Standby letters of credit

    10,844     2,169     8         13,021  
                       

Total

  $ 117,988   $ 175,786   $ 62,311   $ 54,614   $ 410,699  
                       
                       

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

15. OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES (Continued)

        Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company, upon extension of credit, is based on management's credit evaluation of the customer.

        Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer, the Company has rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. The credit risk to the Company in issuing letters of credit is essentially the same as that involved in extending loan facilities to its customers.

16. DERIVATIVE FINANCIAL INSTRUMENTS

        In order to accommodate the borrowing needs of certain commercial customers, the Company entered into interest rate swap agreements with those customers. In order to offset the exposure and manage interest rate risk, at the time an agreement was entered into with a customer, the Company entered into an interest rate swap with a correspondent bank counterparty with offsetting terms. These derivative instruments are not designated as accounting hedges and changes in the net fair value are recognized in noninterest income or expense. Due to the nature of the offset in values between customer and correspondent swaps, the Company did not recognize any changes in the net fair value of the derivative instruments during the three months ended March 31, 2014 or 2013. The fair value amounts are included in other assets and other liabilities.

        The following is a summary of the derivative instruments outstanding at March 31, 2014 and December 31, 2013 (in thousands):

 
  March 31, 2014  
 
  Notional
Amount
  Fixed
Rate
  Floating Rate   Maturity   Fair
Value
 

Non-hedging derivative instruments:

                         

Customer interest rate swap:

                         

receive fixed/pay floating

  $ 32,112   4.87% - 6.02%   LIBOR 1 month +
3.25% - 4.50%
  Wtd avg.
3.1 years
  $ 413  

Correspondent interest rate swap:

                         

pay fixed/receive floating

    32,112   4.87% - 6.02%   LIBOR 1 month +
3.25% - 4.50%
  Wtd avg.
3.1 years
    (439 )

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

16. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)


 
  December 31, 2013  
 
  Notional
Amount
  Fixed
Rate
  Floating Rate   Maturity   Fair
Value
 

Non-hedging derivative instruments:

                         

Customer interest rate swap:

                         

receive fixed/pay floating

  $ 30,145   4.87% - 6.02%   LIBOR 1 month +
3.75% - 4.50%
  Wtd avg.
3.1 years
  $ 433  

Correspondent interest rate swap:

                         

pay fixed/receive floating

    30,145   4.87% - 6.02%   LIBOR 1 month +
3.75% - 4.50%
  Wtd avg.
3.1 years
    (456 )

        The notional amounts and estimated fair values of the non-hedging derivative instruments by classification as of March 31, 2014 and December 31, 2013 (in thousands):

 
  March 31, 2014  
 
  Notional
Amount
  Fair
Value
 

Customer interest rate swaps (commercial customer counterparty):

             

Assets

  $ 30,171   $ 417  

Liabilities

    1,941     (4 )
           

  $ 32,112   $ 413  

Correspondent interest rate swap (financial institution counterparty):

             

Assets

  $ 30,171   $ (443 )

Liabilities

    1,941     4  
           

  $ 32,112   $ (439 )

 

 
  December 31, 2013  
 
  Notional
Amount
  Fair
Value
 

Customer interest rate swaps (commercial customer counterparty):

             

Assets

  $ 28,190   $ 437  

Liabilities

    1,955     (4 )
           

  $ 30,145   $ 433  

Correspondent interest rate swap (financial institution counterparty):

             

Assets

  $ 28,190   $ (460 )

Liabilities

    1,955     4  
           

  $ 30,145   $ (456 )

F-34


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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

17. REGULATORY MATTERS

        Capital Requirements —The Company is subject to various regulatory capital requirements administered by federal banking agencies. Any institution that fails to meet its minimum capital requirements is subject to actions by regulators that could have a direct material effect on its financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines based on the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's capital amount and classification under the regulatory framework for prompt corrective action are also subject to qualitative judgments by the regulators.

        To meet the capital adequacy requirements, Green Bancorp and the Bank must maintain minimum capital amounts and ratios as defined in the regulations. Management believes, as of December 31, 2013 and 2012, that Green Bancorp and the Bank met all capital adequacy requirements to which they are subject.

        The most recent notification from the regulatory banking agencies categorized Green Bank as "well capitalized" under the regulatory capital framework for prompt corrective action and there have been no events since that notification that management believes have changed the Bank's category.

        The Company's consolidated capital ratios and the Bank's capital ratios as of March 31, 2014 And December 31, 2013 are presented in the following table (in thousands, except percentage amounts):

 
  As of March 31, 2014  
 
  Actual   For Capital
Adequacy Purposes
  To be Categorized
as Well Capitalized
under Prompt
Corrective Action
Provisions
 
 
  Amount   Ratio   Amount   Ratio   Amount   Ratio  

Consolidated

                                     

Total capital (to risk weighted assets)

  $ 193,471     12.6 % $ 122,819     8.0 %   N/A     N/A  

Tier 1 capital (to risk weighted assets)

    178,172     11.6     61,409     4.0     N/A     N/A  

Tier 1 capital (to average assets)

    178,172     10.5     68,213     4.0     N/A     N/A  

Green Bank

   
 
   
 
   
 
   
 
   
 
   
 
 

Total capital (to risk weighted assets)

  $ 188,225     12.3 % $ 122,749     8.0 % $ 153,436     10.0 %

Tier 1 capital (to risk weighted assets)

    172,927     11.3     61,374     4.0     92,062     6.0  

Tier 1 capital (to average assets)

    172,927     10.2     68,038     4.0     85,048     5.0  

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

17. REGULATORY MATTERS (Continued)


 
  As of December 31, 2013  
 
  Actual   For Capital Adequacy Purposes   To be Categorized
as Well Capitalized
under Prompt
Corrective Action
Provisions
 
 
  Amount   Ratio   Amount   Ratio   Amount   Ratio  

Consolidated

                                     

Total capital (to risk weighted assets)

  $ 190,229     12.5 % $ 121,719     8.0 %   N/A     N/A  

Tier 1 capital (to risk weighted assets)

    173,680     11.4     60,859     4.0     N/A     N/A  

Tier 1 capital (to average assets)

    173,680     10.3     67,196     4.0     N/A     N/A  

Green Bank

   
 
   
 
   
 
   
 
   
 
   
 
 

Total capital (to risk weighted assets)

  $ 184,908     12.2 % $ 121,619     8.0 % $ 152,023     10.0 %

Tier 1 capital (to risk weighted assets)

    168,359     11.1     60,809     4.0     91,214     6.0  

Tier 1 capital (to average assets)

    168,359     10.0     67,021     4.0     83,776     5.0  

        Dividend Restrictions —Dividends paid by the Bank are subject to certain restrictions imposed by regulatory agencies.

18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

        As discussed in Note 1, FASB ASC 820 applies to reported balances that are required or permitted to be measured at fair value under an existing accounting pronouncement. FASB ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability and establishes a fair value hierarchy. The fair value hierarchy consists of three levels of inputs that may be used to measure fair value as follows:

        Level 1 —Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 1 assets and liabilities include debt and equity securities that are traded in an active exchange market, as well as certain U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets.

        Level 2 —Inputs other than those quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 2 assets and liabilities include available-for-sale securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Available-for-sale securities are valued using observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, prepayment speeds, credit information, and the bond's terms and conditions, among other things. Derivative valuations utilize certain Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The significance of the

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

impact of these credit valuation adjustments on the overall valuation of derivative positions are not significant to the overall valuation and result in all derivative valuations being classified in Level 2 of the fair value hierarchy.

        Level 3 —Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. This category includes certain interest-only strip securities where independent pricing information was not able to be obtained for a significant portion of the underlying assets and loans held for sale.

        The tables below presents the Company's assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands).

 
  March 31, 2014  
 
  Balance at
December 31,
2013
  Quoted Prices in
Active Markets for
Identical
Instruments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Available-for-sale securities

  $ 193,851   $ 15,007   $ 178,844   $  

Customer interest rate swaps

    413         413      

Financial liabilities—correspondent interest rate swaps

   
439
   
   
439
   
 

 

 
  December 31, 2013  
 
  Balance at
December 31,
2013
  Quoted Prices in
Active Markets for
Identical
Instruments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Available-for-sale securities

  $ 198,237   $ 15,000   $ 183,237   $  

Customer interest rate swaps

    433         433      

Financial liabilities—correspondent interest rate swaps

   
456
   
   
456
   
 

F-37


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

        Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Assets measured on a nonrecurring basis include impaired loans, real estate acquired by foreclosure and other repossessed assets, which are measured using appraisals and third-party estimates, and are considered Level 3 inputs within the fair value hierarchy.

        At March 31, 2014, the Company had loans receivable of $1.9 million which were recorded at fair value based on the value of the underlying collateral. The determination of the fair value of these loans resulted in a charge to the allowance for loan losses of $31 thousand during the three months ended March 31, 2014. At December 31, 2013, the Company had loans receivable of $767 thousand which were recorded at fair value based on the value of the underlying collateral. The determination of the fair value of these loans resulted in a charge to the allowance for loan losses of $133 thousand during 2013. The Company had $3.8 million in additions to other real estate owned or other repossessed assets, of which $3.6 million were outstanding at December 31, 2013 and measured using the fair value hierarchy.

        The estimated fair values of financial instruments were determined by management as of March 31, 2014 and December 31, 2013, and required judgment. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair values presented.

        The following methods and assumptions were used to estimate the fair value of cash and of financial instruments for which it is practicable to estimate that value:

        Cash and Short-Term Investments —The carrying amount is a reasonable estimate of fair value.

        Securities —Securities are valued based on quoted prices in an active market when available. These securities are classified in Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows or Level 2 of the valuation hierarchy.

        Loans Held for Sale —The fair value of consumer residential mortgages held-for-sale is based on commitments from investors or prevailing market prices.

        Loans Held for Investment —The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

        Real Estate Acquired by Foreclosure —Real estate acquired by foreclosure is adjusted to fair value less estimated costs to sell at the time of foreclosure. Subsequently, these assets are carried at the lower of carrying value or fair value less estimated costs to sell. Fair value is generally based upon market prices or appraised values of the property, and accordingly, the Company classifies real estate acquired by foreclosure as Level 3.

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

        Deposit Liabilities —The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

        Other Borrowed Funds —The carrying amount of securities sold under agreements to repurchase is a reasonable estimate of fair value because these borrowings reprice at market rates generally daily. The fair value of long term FHLB advances is estimated using the rates currently offered for advances of similar remaining maturities.

        Off-Balance Sheet Financial Instruments —The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. These amounts were not significant at the reporting dates. The fair value of interest rate swaps is derived from pricing models based on past, present and projected future market conditions, quoted market prices of instruments with similar characteristics or discounted cash flows, classified in Level 2 of the fair value hierarchy.

        The estimated fair values of the Company's financial instruments for the periods ended March 31, 2014 and December 31, 2013 are as follows (in thousands):

 
  Balance at
March 31, 2014
  Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
  Significant Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Cash and short term investments

  $ 42,561   $ 42,561   $   $  

Available-for-sale securities

    193,851     15,007     178,844      

Held-to-maturity securities

    56,799         56,799      

Other securities

    8,862     8,862          

Loans held for investment

    1,392,955             1,392,955  

Real estate acquired by foreclosure

    6,690             6,690  
                   

Total

  $ 1,701,718   $ 66,430   $ 235,643   $ 1,399,645  
                   
                   

Financial liabilities:

                         

Deposits

  $ 1,491,645   $   $ 1,491,645   $  

Securities sold under agreements to repurchase

    8,383         8,383      

Other borrowed funds

    46,870         46,870      
                   

Total

  $ 1,546,898   $   $ 1,546,898   $  
                   
                   

F-39


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MARCH 31, 2014
(Unaudited)

18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

 
  Balance at
December 31,
2013
  Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Cash and short term investments

  $ 34,757   $ 34,757   $   $  

Available-for-sale securities

    198,237     15,000     183,237      

Held-to-maturity securities

    56,588         56,588      

Other securities

    7,730     7,730          

Loans held for investment

    1,342,269             1,342,269  

Real estate acquired by foreclosure

    6,690             6,690  
                   

Total

  $ 1,646,271   $ 57,487   $ 239,825   $ 1,348,959  
                   
                   

Financial liabilities:

                         

Deposits

  $ 1,452,900   $   $ 1,452,900   $  

Securities sold under agreements to repurchase

    2,583         2,583      

Other borrowed funds

    46,895         46,895      
                   

Total

  $ 1,502,378   $   $ 1,502,378   $  
                   
                   

* * * * * *

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
Green Bancorp, Inc.
Houston, Texas

        We have audited the accompanying consolidated balance sheets of Green Bancorp, Inc. and subsidiary (the "Bank") as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Green Bancorp, Inc. and subsidiary as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
Houston, Texas
March 31, 2014

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND 2012

(In thousands, except share data)

 
  2013   2012  

ASSETS

             

Cash and due from banks

 
$

9,836
 
$

16,224
 

Interest-bearing deposits in financial institutions

    24,921     162,268  
           

Cash and cash equivalents

    34,757     178,492  

Available-for-sale securities, at fair value

   
198,237
   
182,609
 

Held-to-maturity securities, at amortized cost (fair value of $56,588 and $60,473, respectively)

    57,278     59,652  

Federal Reserve Bank stock

    5,140     5,129  

Federal Home Loan Bank of Dallas stock

    2,590     1,211  

Loans held for investment

   
1,359,415
   
1,204,689
 

Allowance for loan losses

    (16,361 )   (14,151 )
           

Loans, net

    1,343,054     1,190,538  

Premises and equipment, net

   
21,365
   
20,018
 

Goodwill

    15,672     15,672  

Core deposit intangibles, net of accumulated amortization

    984     1,230  

Accrued interest receivable

    3,994     3,476  

Deferred tax asset, net

    8,853     7,183  

Real estate acquired by foreclosure

    6,690     5,961  

Other assets

    4,513     3,629  
           

TOTAL

  $ 1,703,127   $ 1,674,800  
           
           

LIABILITIES AND SHAREHOLDERS' EQUITY

             

LIABILITIES:

   
 
   
 
 

Deposits:

             

Noninterest-bearing demand

  $ 282,227   $ 248,701  

Interest-bearing demand

    590,795     682,308  

Certificates and other time deposits

    574,350     530,442  
           

Total deposits

    1,447,372     1,461,451  

Securities sold under agreements to repurchase

   
2,583
   
3,480
 

Other borrowed funds

    46,858     15,037  

Accrued interest payable

    930     887  

Other liabilities

    6,166     5,734  
           

Total liabilities

    1,503,909     1,486,589  
           

COMMITMENTS AND CONTINGENCIES

             

SHAREHOLDERS' EQUITY:

   
 
   
 
 

Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding

         

Common stock, $0.01 par value, 90,000,000 shares authorized and 20,771,087 and 20,748,172 shares issued and outstanding at December 31, 2013 and 2012, respectively

    208     207  

Capital surplus

    179,219     178,695  

Retained earnings

    19,918     7,308  

Accumulated other comprehensive (loss) income, net

    (127 )   2,001  
           

Total shareholders' equity

    199,218     188,211  
           

TOTAL

  $ 1,703,127   $ 1,674,800  
           
           

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 and 2011

(In thousands)

 
  2013   2012   2011  

INTEREST INCOME:

                   

Loans, including fees

  $ 64,404   $ 58,037   $ 39,561  

Securities

    3,371     2,977     2,408  

Other investments

    313     285     246  

Federal funds sold

    1     2     2  

Deposits in financial institutions

    370     280     482  
               

Total interest income

    68,459     61,581     42,699  
               

INTEREST EXPENSE:

                   

Demand and savings deposits

    3,210     2,973     2,447  

Certificates and other time deposits

    7,789     6,381     4,949  

Other borrowed funds

    418     619     641  
               

Total interest expense

    11,417     9,973     8,037  
               

NET INTEREST INCOME

    57,042     51,608     34,662  

PROVISION FOR LOAN LOSSES

   
2,373
   
8,060
   
8,391
 
               

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

    54,669     43,548     26,271  
               

NONINTEREST INCOME:

                   

Customer service fees

    1,826     1,699     1,048  

Loan fees

    1,270     930     543  

Gain (loss) on sale of available-for-sale securities, net

    (7 )   950     95  

Gain on sale of guaranteed portion of loans

    1,229         95  

Bargain purchase gain

        578      

Other

    494     952     306  
               

Total noninterest income

    4,812     5,109     2,087  
               

NONINTEREST EXPENSE:

                   

Salaries and employee benefits

    25,618     22,021     16,271  

Occupancy

    4,725     4,194     3,130  

Professional and regulatory fees

    3,224     3,506     2,493  

Data processing

    1,429     1,826     1,142  

Software license and maintenance

    965     750     413  

Marketing

    605     626     512  

Loan related

    813     584     888  

Real estate acquired by foreclosure

    (595 )   107     69  

Other

    3,181     2,128     1,541  
               

Total noninterest expense

    39,965     35,742     26,459  
               

INCOME BEFORE INCOME TAXES

    19,516     12,915     1,899  

PROVISION FOR INCOME TAXES

   
6,906
   
4,380
   
882
 
               

NET INCOME

  $ 12,610   $ 8,535   $ 1,017  
               
               

EARNINGS PER SHARE:

                   

Basic

  $ 0.61   $ 0.44   $ 0.06  
               
               

Diluted

  $ 0.60   $ 0.44   $ 0.06  
               
               

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

 
  2013   2012   2011  

NET INCOME

  $ 12,610   $ 8,535   $ 1,017  
               

OTHER COMPREHENSIVE INCOME, BEFORE TAX:

                   

Change in unrealized (loss) gain on securities available-for-sale

    (3,227 )   1,810     2,309  
               

Total other comprehensive income

    (3,227 )   1,810     2,309  

DEFERRED TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME

    (1,099 )   615     785  
               

OTHER COMPREHENSIVE INCOME, NET OF TAX

    (2,128 )   1,195     1,524  
               

COMPREHENSIVE INCOME

  $ 10,482   $ 9,730   $ 2,541  
               
               

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

 
  Common Stock    
   
  Accumulated
Other
Comprehensive
Income
   
 
 
  Capital
Surplus
  Retained
Earnings
(Deficit)
   
 
 
  Shares   Amount   Total  

BALANCE—January 1, 2011

    17,970   $ 180   $ 153,307   $ (2,244 ) $ (718 ) $ 150,525  

Net income

   
   
   
   
1,017
   
   
1,017
 

Net change in unrealized gains and losses on available-for-sale securities, net of taxes of $785 and reclassification adjustment

   
   
   
   
   
1,524
   
1,524
 

Stock-based compensation expense

   
   
   
357
   
   
   
357
 
                           

BALANCE—December 31, 2011

    17,970     180     153,664     (1,227 )   806     153,423  

Net income

   
   
   
   
8,535
   
   
8,535
 

Net change in unrealized gains and losses on available-for-sale securities, net of taxes of $615 and reclassification adjustment

   
   
   
   
   
1,195
   
1,195
 

Issuance of common stock, net of issuance costs

   
2,778
   
27
   
24,707
   
   
   
24,734
 

Stock-based compensation expense

   
   
   
324
   
   
   
324
 
                           

BALANCE—December 31, 2012

    20,748     207     178,695     7,308     2,001     188,211  

Net income

   
   
   
   
12,610
   
   
12,610
 

Net change in unrealized gains and losses on available-for-sale securities, net of taxes of $1,099 and reclassification adjustment

   
   
   
   
   
(2,128

)
 
(2,128

)

Issuance of common stock in connection with the exercise of stock options

   
23
   
1
   
189
   
   
   
190
 

Stock-based compensation expense

   
   
   
335
   
   
   
335
 
                           

BALANCE—December 31, 2013

    20,771   $ 208   $ 179,219   $ 19,918   $ (127 ) $ 199,218  
                           
                           

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

 
  2013   2012   2011  

CASH FLOWS FROM OPERATING ACTIVITIES:

                   

Net income

  $ 12,610   $ 8,535   $ 1,017  

Adjustments to reconcile net income to net cash provided (used) by operating activities:

                   

Amortization and accretion of premiums and discounts on securities, net

    2,165     3,249     1,750  

Accretion of loan discounts, net

    (456 )   (344 )    

Amortization of deposit premiums

    (535 )   (1,120 )   (938 )

Amortization of core deposit intangibles

    246     231     71  

Provision for loan losses

    2,373     8,060     8,391  

Depreciation and amortization

    1,352     1,247     909  

Net loss (gain) on sale of available-for-sale securities

    7     (950 )   (95 )

Net gain on sale of real estate acquired by foreclosure

    (569 )   (132 )   (278 )

Net gain on sale of guaranteed portion of loans

    (1,229 )        

Write down of real estate acquired by foreclosure

        22      

Net gain on loans held-for-sale

            (95 )

Bargain purchase gain

        (578 )    

Deferred income tax benefit

    (540 )   (687 )   (582 )

Stock-based compensation expense

    335     324     357  

Purchase of loans held-for-sale

            (8,168 )

Proceeds from sale of loans held-for-sale

            6,357  

Change in other assets and liabilities:

                   

Decrease (increase) in accrued interest receivable and other assets, net

    (1,433 )   8     (1,031 )

Increase in accrued interest payable and other liabilities, net

    475     1,462     2,125  

Other

            76  
               

Net cash provided by operating activities

    14,801     19,327     9,866  
               

CASH FLOWS FROM INVESTING ACTIVITIES:

                   

Proceeds from the maturities or calls and paydowns of available-for-sale securities

    49,050     55,414     34,593  

Proceeds from the sale of available-for-sale securities

    6,736     39,236     6,657  

Purchases of available-for-sale securities

    (76,612 )   (75,942 )   (131,553 )

Proceeds from the maturities or calls and paydowns of held-to-maturity securities

    11,161     9,835     3,694  

Purchases of held-to-maturity securities

    (8,988 )   (20,710 )   (37,951 )

Proceeds from sale of guaranteed portion of loans

    13,186         980  

Proceeds from sale of real estate acquired by foreclosure

    3,655     1,524     2,533  

Net increase in Federal Home Loan Bank of Dallas stock

    (1,379 )   (50 )   (3 )

Net increase in Federal Reserve Bank stock

    (11 )   (815 )   (60 )

Net increase in loans held for investment

    (170,205 )   (293,561 )   (334,538 )

Investment in construction of premises and purchases of other fixed assets

    (2,699 )   (3,326 )   (1,393 )

Cash and cash equivalents acquired in purchase of Opportunity Bancshares, Inc. 

        11,463      

Cash and cash equivalents acquired in purchase of Main Street branches

            151,621  

Premium paid for Main Street branches

            (6,658 )
               

Net cash used in investing activities

    (176,106 )   (276,932 )   (312,078 )
               

(Continued)

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

(In thousands)

 
  2013   2012   2011  

CASH FLOWS FROM FINANCING ACTIVITIES:

                   

Net (decrease) increase in deposit accounts

    (13,544 )   260,885     288,602  

Net (decrease) increase in securities sold under agreements to repurchase

    (897 )   (205 )   1,305  

Proceeds from other borrowed funds

    75,307     22,157     171  

Repayment of other borrowed funds

    (43,486 )   (22,664 )   (659 )

Proceeds from issuance of common stock due to exercise of stock options

    190          

Proceeds from issuance of common stock, net of issuance expenses

        24,734      
               

Net cash provided by financing activities

    17,570     284,907     289,419  
               

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

  $ (143,735 ) $ 27,302   $ (12,793 )

CASH AND CASH EQUIVALENTS:

   
 
   
 
   
 
 

Beginning of year

    178,492     151,190     163,983  
               

End of year

  $ 34,757   $ 178,492   $ 151,190  
               
               

SUPPLEMENTAL INFORMATION:

                   

Interest paid

  $ 11,374   $ 9,908   $ 7,806  
               
               

Income taxes paid

  $ 7,116   $ 4,650   $ 1,500  
               
               

Noncash investing and financing activities—acquisition of real estate through foreclosure of collateral

  $ 3,815   $ 3,643   $ 5,794  
               
               

Transfer of loans to loans held-for-sale

  $   $   $ 885  
               
               

(Concluded)

   

See notes to consolidated financial statements.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

        Organization —Green Bancorp, Inc. ("Green Bancorp"), together with its subsidiary bank (the "Company"), is a Texas corporation that was incorporated on October 20, 2004. In 2006 Green Bancorp entered into an agreement and plan of merger with Redstone Bank, National Association ("Redstone Bank"), a national banking association located in Houston, Texas, for the purpose of acquiring all of the issued and outstanding stock of Redstone Bank. The acquisition was completed on December 31, 2006, and Green Bancorp became a bank holding company registered under the Bank Holding Company Act of 1956, as amended.

        Green Bank, N.A. (the "Bank") is a national banking association, which was chartered under the laws of the United States of America as a national bank on February 17, 1999, as Redstone Bank. On September 14, 2007, the name was changed to Green Bank, N.A. The Bank provides commercial and consumer banking services in the greater Houston, Dallas and Austin metropolitan areas.

        Summary of Significant Accounting and Reporting Policies —The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and the prevailing practices within the financial services industry. A summary of significant accounting policies follows:

        The Company has evaluated subsequent events through March 31, 2014, the date the consolidated financial statements were available to be issued.

        Basis of Presentation —The consolidated financial statements include the accounts of Green Bancorp and its subsidiary. Intercompany transactions have been eliminated in consolidation. Operations are managed and financial performance is evaluated on a company-wide basis. The Company operates its business as one segment providing banking services to a variety of customers.

        Use of Estimates —The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired through foreclosure, acquired loans and deposits, deferred tax assets, goodwill, and stock-based compensation.

        Cash and Cash Equivalents —Cash and cash equivalents include cash due from banks, federal funds sold and interest-bearing deposits in financial institutions with original maturities of three months or less. Federal funds sold are invested for a period of three days or less. Interest bearing deposits include demand balances at the Federal Reserve Bank and balances with other financial institutions with original maturities of three months or less. Balances at the Federal Reserve Bank include restricted amounts required to satisfy reserve requirements, which are provided in Note 3.

        Earnings Per Common Share —Basic earnings per common share are calculated using the two-class method. The two-class method provides that unvested share-based payment awards that contain

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of basic earnings per share.

        Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares.

        The following table illustrates the computation of basic and diluted earnings per share:

 
  Year Ended December 31,  
 
  2013   2012   2011  
 
  Amount   Per Share
Amount
  Amount   Per Share
Amount
  Amount   Per Share
Amount
 
 
  (Amounts in thousands, except per share amounts)
 

Net income

  $ 12,610         $ 8,535         $ 1,017        

Basic:

   
 
   
 
   
 
   
 
   
 
   
 
 

Weighted average shares outstanding

    20,748   $ 0.61     19,382   $ 0.44     17,970   $ 0.06  

Diluted:

   
 
   
 
   
 
   
 
   
 
   
 
 

Add incremental shares for:

                                     

Effect of dilutive securities—options

    132           23           19        
                                 

Total

    20,880   $ 0.60     19,405   $ 0.44     17,989   $ 0.06  
                                 
                                 

        Securities —Securities classified as held-to-maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts. Management has the positive intent, and the Company has the ability, to hold these assets until their maturities. Under certain circumstances (including the deterioration of the issuer's creditworthiness or a change in tax law or statutory or regulatory requirements), these securities may be sold or transferred to another portfolio.

        Securities classified as available-for-sale are carried at fair value. Unrealized gains and losses are excluded from earnings and reported, net of tax, as accumulated comprehensive income or loss until realized. Declines in the fair value of individual securities below their cost that are determined to be other-than-temporary would result in writedowns, as a realized loss, of the individual securities to their fair value. In evaluating other-than-temporary impairment losses, management considers several factors, including the severity and the duration of time that the fair value has been less than cost, the credit quality of the issuer, and whether it is more likely than not that the Company will be required to sell the security before a recovery in value. Securities within the available-for-sale portfolio may be used as part of the Company's asset and liability management strategy and may be sold in response to changes in interest rate risk, prepayment risk or other factors.

        Premiums and discounts are amortized and accreted to operations using the level-yield method of accounting, adjusted for prepayments as applicable. The specific identification method of accounting is

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

used to compute gains or losses on the sales of securities. Interest earned on these assets is included in interest income.

        Other securities are stated at cost and include stock of the Federal Reserve Bank and the Federal Home Loan Bank of Dallas ("FHLB"). Dividends received on these investments are included in interest income.

        Loans Held for Sale —Loans held-for-sale are carried at the lower of cost or estimated fair value. Fair value of consumer residential mortgages held-for-sale is based on commitments from investors or prevailing market prices. Gains and losses on sales are recorded in noninterest income and determined on a specific identification basis.

        Loans Held for Investment —Loans held for investment are stated at the principal amount outstanding, net of the unearned discount and deferred loan fees or costs. Interest income for loans is recognized principally by the simple interest method.

        A loan is defined as impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, both interest and principal, according to the contractual terms of the loan agreement. The allowance for loan losses related to impaired loans is determined based on the difference between the carrying value of the impaired loan and its fair value. The fair value is determined based on the present value of expected cash flows discounted at the loan's effective interest rate or, as a practical expedient, the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized.

        Acquired loans are recorded at fair value as of the date of acquisition. Determining the fair value of the acquired loans involves estimating the amount and timing of future expected cash flows and discounting those cash flows at a market rate of interest. Future expected cash flows are estimated by adjusting the projected monthly prinicipal and interest cash flows based on contractual terms for prepayments and loss expectations. The excess of cash flows expected at acquisition over the estimated fair value is considered the accretable discount and is recognized in interest income over the remaining life of the loan on a level yield basis.

        Acquired loans with evidence of credit deterioration and the probability that all contractually required payments will not be collected as of the date of acquisition are accounted for in accordance with ASC 310-30. The difference between contractually required payments at acquisition and the cash flows expected to be collected is considered the non-accretable discount. The non-accretable discount represents the future credit losses expected to be incurred over the life of the loan. Subsequent increases in the expected cash flows will result in a recovery of any previously recorded allowance for loan losses and a reclassification from non-accretable discount to accretable discount.

        Nonperforming Loans and Past Due Loans —Nonperforming loans are loans which have been categorized by management as nonaccrual because collection of interest is doubtful and loans which have been restructured due to the borrower's financial difficulty and which result in a concessionary modification.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

        When the payment of principal or interest on a loan is delinquent for 90 days, or earlier in some cases, the loan is placed on nonaccrual status and classified as impaired unless the loan is in the process of collection and the underlying collateral fully supports the carrying value of the loan. If the decision is made to continue accruing interest on the loan, periodic reviews are made to evaluate the appropriateness of its accruing status. When a loan is placed on nonaccrual status, all accrued but unpaid interest is charged to operations. Payments received on nonaccrual loans are applied first to outstanding loan amounts and next to the recovery of charged-off loan amounts. Any excess is treated as a recovery of lost interest.

        Loans are classified as restructured (accruing) in cases where a borrower experiences financial difficulty and the Company makes certain concessionary modifications to contractual terms. Restructured loans typically involve a modification of terms such as a reduction of the stated interest rate or face amount of the loan, a reduction of accrued interest, or an extension of the maturity date(s) at a stated interest rate lower than the current market rate for a new loan with similar risk.

        Generally, a nonaccrual loan that is restructured remains on nonaccrual for a period of six months to demonstrate that the borrower can meet the restructured terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of restructuring or after a shorter performance period. If the borrower's ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan.

        The restructuring of a loan is considered a troubled debt restructuring if both the borrower is experiencing financial difficulties and the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. Loans restructured in a troubled debt restructuring are considered impaired. Impairment loss of restructured loans is based on the difference between the original loan's carrying amount and the present value of expected future cash flows discounted at the original, contractual rate of the loan.

        Allowance for Loan Losses —The allowance for loan losses is a valuation allowance for losses incurred on loans. All losses are charged to the allowance when the loss actually occurs or when a determination is made that a loss is probable. Recoveries are credited to the allowance at the time of recovery. The Company's allowance for loan losses consists of two components including a general component based upon probable but unidentified losses inherent in the portfolio and a specific component on individual loans that are considered impaired.

        The general component of the allowance for loan losses related to probable but unidentified losses inherent in the portfolio is based on various factors including the Company's historical loss experience, historical loss experience for peer banks, growth trends, loan concentrations, migration trends between internal loan risk ratings, current economic conditions and other qualitative factors. The other qualitative factors considered may include changes in lending policies and procedures, changes in the experience and ability of lending and credit staff and management, changes in the quality of the loan review system and other factors.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

        To arrive at the general component of the allowance, loans are first separated into originated and acquired groups and then further separated by loan type for each group. The factors described above are calculated for the applicable loan groups and for each loan type within the applicable group and then applied to the loan balance by type to calculate the general reserve. The actual loss factor is based on our actual three year loss history as a percentage of loans by type. A peer loss factor is calculated by weighting our actual loss history and that of our peer banks as a percentage of loans by type for the same historical three year period. A peer loss factor is added to increase the allowance if our actual loss history is less than the calculated peer loss factor. Additional factors are evaluated based on our loan growth when compared to prior year growth, loan concentrations in groups of similar loan types, migration in our loans by internal risk grade and the level of monitored and classified loans to capital. Management also evaluates various economic indicators, such as state and national unemployment, initial jobless claims, consumer confidence, natural gas price, GDP and a composite city home price index, to establish an economic factor.

        The specific component of the allowance for loan losses is calculated based on a review of individual loans considered impaired. The analysis of impaired losses may be based on the present value of expected future cash flows discounted at the effective loan rate, an observable market price or the fair value of the underlying collateral on collateral dependent loans. In determining the collectability of certain loans, management also considers the fair value of any underlying collateral. The amount ultimately realized may differ from the carrying value of these assets because of economic, operating, or other conditions beyond the Company's control.

        Throughout the year, management estimates the probable level of losses to determine whether the allowance for loan losses is adequate to absorb inherent losses in the existing portfolio. Based on these estimates, an amount is charged to the provision for loan losses and credited to the allowance for loan losses in order to adjust the allowance to a level determined to be adequate to absorb inherent losses.

        Estimates of loan losses involve an exercise of judgment. While it is reasonably possible that in the near term the Company may sustain losses which are substantial relative to the allowance for loan losses, it is the judgment of management that the allowance for loan losses reflected in the consolidated balance sheets is adequate to absorb probable losses that exist in the current loan portfolio.

        Premises and Equipment —Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation expense is computed primarily using the straight-line method over the estimated useful lives (ranging from two to thirty years) of the assets. Leasehold improvements are amortized using the straight-line method over the periods of the leases or the estimated useful lives, whichever is shorter.

        Goodwill and Other Intangibles —Goodwill has an indefinite useful life and is subject to an annual impairment test and more frequently if a triggering event occurs. We completed our annual impairment analysis of goodwill as of December 31, 2013. The goodwill impairment test involves a two-step process. Under the first step, the estimation of fair value of the reporting unit is compared with its carrying value including goodwill. If step one indicates a potential impairment, the second step is performed to measure the amount of impairment, if any. Goodwill impairment exists when the implied fair value of

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

goodwill is less than its carrying value. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. As part of its impairment analysis, the Company uses a variety of methodologies in determining the fair value of the reporting unit, including cash flow analyses that are consistent with the assumptions management believes hypothetical marketplace participants would use.

        Core deposit intangibles are amortized on an accelerated basis over the years expected to be benefited, which the Company estimates to be approximately six to eight years.

        Real Estate Acquired by Foreclosure —The Company records real estate acquired by foreclosure at fair value less estimated costs to sell. Adjustments are made to reflect declines in value subsequent to acquisition, if any, below the recorded amounts. Required developmental costs associated with foreclosed property under construction are capitalized and considered in determining the fair value of the property. Operating expenses of such properties, net of related income, and gains and losses on their disposition are included in noninterest expense.

        Derivative Financial Instruments —The Company's interest rate risk management strategy includes hedging the repricing characteristics of certain assets and liabilities so as to mitigate adverse effects on the Company's net interest margin and cash flows from changes in interest rates. The Company uses certain derivative instruments to add stability to the Company's net interest income and to manage the Company's exposure to interest rate movements.

        The Company may designate a derivative as either an accounting hedge of the fair value of a recognized fixed rate asset or an unrecognized firm commitment ("fair value" hedge) or an accounting hedge of a forecasted transaction or of the variability of future cash flows of a floating rate asset or liability ("cash flow" hedge). All derivatives are recorded as other assets or other liabilities on the balance sheet at their respective fair values. The Company estimates the fair value of its interest rate derivatives using a standardized methodology that nets the discounted expected future cash receipts and cash payments (based on observable market inputs). These future net cash flows, however, are susceptible to change due primarily to fluctuations in interest rates. As a result, the estimated values of these derivatives will typically change over time as cash is received and paid and also as market conditions change. As these changes take place, they may have a positive or negative impact on the Company's estimated valuations.

        Fair Value Measurements —The Company follows Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures , for financial assets and financial liabilities. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under an existing accounting pronouncement. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability and establishes a fair value hierarchy. The fair value hierarchy consists of three levels of inputs that may be used to measure fair value, which are defined in Note 17.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

        Revenue Recognition —Revenue is recognized in accordance with ASC 605 on an accrual basis. Amounts are recognized as income in the period in which they are earned as evidenced by contractual agreements so long as the amount is deemed to be collectable and no evidence of impairment exists.

        Income Taxes —Green Bancorp files a consolidated federal income tax return with its subsidiary. Each computes income taxes as if it filed a separate return and remits to, or is reimbursed by, Green Bancorp based on the portion of taxes currently due or refundable.

        Deferred income taxes are accounted for by applying the expected statutory tax rates at which the differences between the book basis and the tax basis of assets and liabilities are expected to be recovered. The resulting deferred tax assets and liabilities are adjusted to reflect changes in enacted tax laws or rates.

        Realization of the net deferred tax asset is dependent on generating sufficient future taxable income. Although realization is not assured, management believes it is more likely than not that all of the net deferred tax asset will be realized.

        Stock-Based Compensation —The Company's stock-based compensation policy applies to stock options, which are accounted for under the fair-value method as required by accounting principles generally accepted in the United States of America. The expense associated with stock-based compensation is recognized over the vesting period of each individual arrangement.

        The fair value of each time-based stock option award is estimated on the date of grant using a Black-Scholes-Merton option valuation model.

        Comprehensive Income —Comprehensive income includes all changes in equity during the period presented that result from transactions and other economic events other than transactions with shareholders. The Company reports comprehensive income in the consolidated statements of comprehensive income.

        Recent Accounting Standards —FASB ASU 2011-02, "A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring." ASU 2011-02 was issued April 5, 2011 and provides additional guidance or clarification to help determine whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. Disclosures that relate to activity during a reporting period were required for the Company's financial statements that include periods beginning on or after January 1, 2012. The required disclosures are presented in Note 5.

        FASB ASU No. 2011-05, "Comprehensive Income (Topic 220)—Presentation of Comprehensive Income." Under ASU 2011-05, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other operating income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total of other comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as a part of the statement of changes in shareholders'

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Continued)

equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 was effective for the Company on January 1, 2012. The Company elected to prepare separate Consolidated Statements of Comprehensive Income.

        FASB ASU No. 2011-08, "Testing Goodwill for Impairment," amends the guidance in FASB ASC 350-20. Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step 1 of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The adoption of ASU 2011-08 became effective for the Company on January 1, 2012, and its adoption did not have a significant impact on the Company's financial statements.

        FASB ASU No. 2013-02 " Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ," amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. The adoption of ASU 2013-02 becomes effective prospectively for the Company for reporting periods beginning after December 15, 2013.

        FASB ASU No. 2013-11— "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" updates prior guidance. The update requires that an unrecognized tax benefit be presented in the statements of financial condition as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward or tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use and the entity does not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the statements of financial condition as a liability and should not be combined with deferred tax assets. The adoption of this ASU becomes effective for the Company for reporting periods beginning after December 15, 2013.

        FASB ASU No. 2014-04 —"Receivables—Troubled Debt Restructuring by Creditors (Subtopic 310-40): Reclassification of Residential Real Esate Collateralized Consumer Mortgage Loans Upon Foreclosure" clarifies when an insubstance foreclosure occurs, that is, when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. This is the point when the consumer mortgage loan should be derecognized and the real property recognized. The adoption of the ASU becomes effective for the Company for reporting periods beginning after December 31, 2014 and early adoption is permitted.

2. ACQUISITIONS

        On May 31, 2012, the Company completed the acquisition of 100% of the voting equity interest of Opportunity Bancshares, Inc. and its wholly owned subsidiary, Opportunity Bank, Richardson, Texas. The Company acquired Opportunity Bancshares, Inc. to increase its market share in the Dallas area.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

2. ACQUISITIONS (Continued)

        The Company acquired approximately $52.6 million in assets, including $20.1 million cash and cash equivalents, $25.6 million in loans, $3.7 million in branch premises and equipment, $2.4 million in net deferred tax assets and $1.3 million in other assets. The Company also acquired $44.1 million in deposits and $70 thousand in other liabilities. The acquisition was accounted for using the acquisition method of accounting. Accordingly, the acquired assets and liabilities were recorded at their fair values at the acquisition date. The excess of the estimated fair value of the net assets over the purchase price was recorded as a bargain purchase gain of $578 thousand.

        In connection with the purchase, the Company recorded core deposit intangibles of $216 thousand. Acquisition-related expenses of $1.2 million were included in noninterest expense for the year ended December 31, 2012 and are reported primarily in the categories of salaries and employee benefits, data processing and professional and regulatory fees. The results of operations for this transaction have been included in the Company's financial statements since May 31, 2012.

        On October 21, 2011, the Company completed the acquisition of branches in Kingwood, Eagle Springs and Cleveland from Main Street Bank. The Company assumed approximately $167.7 million in deposits and acquired approximately $12.7 million in community bank loans and approximately $1.1 million in branch premises and equipment and approximately $0.8 million in other assets. The Company paid a premium of $6.7 million. The acquisition was accounted for using the acquisition method of accounting. Accordingly, the acquired assets and liabilities were recorded at their fair values at the acquisition date. The excess of the purchase price over the estimated fair value of the net assets was recorded as goodwill.

        In connection with the purchase, the Company recorded a premium of $8.2 million, of which $1.0 million was identified as core deposit intangibles and the remaining $7.2 million as goodwill. Acquisition-related expenses of $456 thousand were included in noninterest expense for the year ended December 31, 2011. The results of operations for this transaction have been included in the Company's financial statements since October 21, 2011.

3. CASH AND CASH EQUIVALENTS

        The Bank, as a correspondent of the Federal Reserve Bank, is required to maintain average reserve balances. Interest-bearing deposits include restricted amounts of $26.7 million and $21.9 million, at December 31, 2013 and 2012, respectively, as a result of this requirement.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4. SECURITIES

        The amortized cost and fair value of securities at December 31, 2013 and 2012 are as follows (in thousands):

2013
  Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair Value  

Available-for-sale:

                         

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 45,168   $ 38   $ (95 ) $ 45,111  

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

    121,042     1,282     (934 )   121,390  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    32,223     42     (529 )   31,736  
                   

Total

  $ 198,433   $ 1,362   $ (1,558 ) $ 198,237  
                   
                   

Held-to-maturity:

                         

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

  $ 16,788   $ 409   $ (528 ) $ 16,669  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    40,490     135     (706 )   39,919  
                   

Total

  $ 57,278   $ 544   $ (1,234 ) $ 56,588  
                   
                   

 

2012
  Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair Value  

Available-for-sale:

                         

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 45,624   $ 67   $ (17 ) $ 45,674  

Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    133,953     3,122     (140 )   136,935  
                   

Total

  $ 179,577   $ 3,189   $ (157 ) $ 182,609  
                   
                   

Held-to-maturity—mortgage-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

  $ 59,652   $ 997   $ (176 ) $ 60,473  
                   

Total

  $ 59,652   $ 997   $ (176 ) $ 60,473  
                   
                   

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4. SECURITIES (Continued)

        Expected maturities of securities will differ from contractual maturities because the underlying borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The contractual maturities of securities at December 31, 2013, are shown below (in thousands):

 
  Available-for-Sale   Held-to-Maturity  
2013
  Amortized
Cost
  Fair
Value
  Amortized
Cost
  Fair
Value
 

Due in one year or less

  $ 10,007   $ 10,010   $   $  

Due after one year through five years

    35,161     35,101          

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

    121,042     121,390     16,788     16,669  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    32,223     31,736     40,490     39,919  
                   

Total

  $ 198,433   $ 198,237   $ 57,278   $ 56,588  
                   
                   

        Proceeds from sales of securities classified as available-for-sale of $6.7 million, $39.2 million and $6.7 million were received during the years ended December 31, 2013, 2012 and 2011, respectively. Net realized losses of $7 thousand were recorded as a result of these sales for the year ended December 31, 2013, which is comprised of $110 in gross realized losses offset by $103 thousand in gross realized gains. Gross realized gains of $950 thousand and $95 thousand were recorded as a result of these sales for the years ended December 31, 2012 and 2011, respectively.

        Declines in the fair value of individual securities below their cost that are other-than-temporary would result in writedowns, as a realized loss, to their fair value. In evaluating other-than-temporary impairment losses, management considers several factors including the severity and the duration that the fair value has been less than cost, the credit quality of the issuer, and whether it is more likely than not that the Company will be required to sell the security before a recovery in value. The Company has not realized any losses due to other-than-temporary impairment of securities.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4. SECURITIES (Continued)

        Securities with unrealized losses segregated by length of continuous unrealized loss position at December 31, 2013 and 2012 were as follows (in thousands):

 
  Less than 12 Months   More than 12 Months  
2013
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
 

Available-for-sale:

                                     

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 25,008   $ (95 ) $ 24,913   $   $   $  

Mortgage-backed securities issued by U.S. governement agencies or sponsored entities

    51,576     (934 )   50,642              

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    18,447     (215 )   18,232     4,481     (314 )   4,167  
                           

Total

  $ 95,031   $ (1,244 ) $ 93,787   $ 4,481   $ (314 ) $ 4,167  
                           
                           

Held-to-maturity:

                                     

Mortgage-backed securities issued by U.S. governement agencies or sponsored entities

  $ 6,033   $ (429 ) $ 5,604   $ 1,022   $ (99 ) $ 923  

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    23,060     (706 )   22,354              
                           

Total

  $ 29,093   $ (1,135 ) $ 27,958   $ 1,022   $ (99 ) $ 923  
                           
                           

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

4. SECURITIES (Continued)


 
  Less than 12 Months   More than 12 Months  
2012
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
  Amortized
Cost
  Gross
Unrealized
Losses
  Fair
Value
 

Available-for-sale:

                                     

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

  $ 30,152   $ (17 ) $ 30,135   $   $   $  

Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

    4,962     (140 )   4,822              
                           

Total

  $ 35,114   $ (157 ) $ 34,957   $   $   $  
                           
                           

Held-to-maturity—mortgage-backed securities and collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

  $ 17,559   $ (176 ) $ 17,383   $   $   $  
                           

Total

  $ 17,559   $ (176 ) $ 17,383   $   $   $  
                           
                           

        The average loss on securities in an unrealized loss position was 1.92% and 0.63% of the amortized cost basis at December 31, 2013 and 2012, respectively. There were two securities in an unrealized loss position of greater than 12 months at December 31, 2013. There were no securities in an unrealized loss position of greater than 12 months at December 31, 2012.

        The Company does not own securities of any one issuer (other than the U.S. government and its agencies or sponsored enterprises) for which the aggregate adjusted cost exceeds 10% of the consolidated shareholders' equity at December 31, 2013 and 2012.

        Securities with an amortized cost of $10.3 million and $6.3 million and fair value of $10.5 million and $6.6 million were pledged and available to be sold under repurchase agreements at December 31, 2013 and 2012, respectively. Securities with an amortized cost of $38.2 million and $3.4 million and fair value of $37.5 million and $3.4 million were pledged to various Federal Reserve Districts related to deposits of bankruptcy trustees at December 31, 2013 and 2012, respectively. In addition, securities with an amortized cost of $895 thousand and $1.0 million and fair value of $929 thousand and $1.0 million were pledged as collateral for the Company's derivative instruments at December 31, 2013 and 2012 respectively.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS

        The loan portfolio is classified by type and class at December 31, 2013 and 2012, as follows (in thousands):

 
  2013  
 
  Originated   Acquired   Total  

Commercial:

                   

Commercial & industrial

  $ 674,621   $ 6,669   $ 681,290  

Owner occupied commercial real estate

    153,507     3,454     156,961  

Commercial real estate

    254,838     12,173     267,011  

Construction, land & land development

    139,867     200     140,067  
               

    1,222,833     22,496     1,245,329  

Consumer:

   
 
   
 
   
 
 

Residential mortgage

    105,888     474     106,362  

Other consumer

    7,296     428     7,724  
               

    113,184     902     114,086  
               

Total loans held for investment

  $ 1,336,017   $ 23,398   $ 1,359,415  
               
               

Total loans held-for sale

  $   $   $  
               
               

 
  2012  
 
  Originated   Acquired   Total  

Commercial:

                   

Commercial & industrial

  $ 624,620   $ 13,149   $ 637,769  

Owner occupied commercial real estate

    108,951     5,336     114,287  

Commercial real estate

    203,794     9,456     213,250  

Construction, land & land development

    135,672     186     135,858  
               

    1,073,037     28,127     1,101,164  

Consumer:

   
 
   
 
   
 
 

Residential mortgage

    94,427     569     94,996  

Other consumer

    7,489     1,040     8,529  
               

    101,916     1,609     103,525  
               

Total loans held for investment

  $ 1,174,953   $ 29,736   $ 1,204,689  
               
               

Total loans held-for sale

  $   $   $  
               
               

        The loan portfolio is comprised of two types, commercial loans and consumer loans. The commercial loans are further segregated into commercial and industrial, owner occupied commercial real estate, commercial real estate, which includes multi-family loans, and construction, land and land development, which includes both commercial construction and loans for the construction of residential properties. The consumer loans are further segregated into residential mortgage, which includes first and second liens and home equity lines, and other consumer loans, which includes various types of loans to consumers and overdrafts.

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

        Included in the loans held for investment balance was $7.1 million and $5.6 million of net deferred loan origination fees and unamortized premium and discount at December 31, 2013 and 2012, respectively. Also included in loans at December 31, 2013 and December 31, 2012, respectively was $375 thousand and $573 thousand in non-accretable discount on acquired credit impaired loans. Accrued interest receivable on loans was $3.5 million and $2.9 million at December 31, 2013 and 2012, respectively. Other consumer loans include overdrafts of $21 thousand and $54 thousand as of December 31, 2013 and 2012, respectively.

        The loan portfolio consists of various types of loans, most of which are made to borrowers located in the Houston, Dallas and Austin metropolitan areas. Although the portfolio is diversified and generally secured by various types of collateral, the majority of the loan portfolio consists of commercial and industrial and commercial real estate loans and a substantial portion of its debtors' ability to honor their obligations is dependent on local economic conditions in Texas, including conditions affecting the energy industry.

        As of December 31, 2013, there was no concentration of loans to any one type of industry exceeding 10% of total loans nor were there any loans classified as highly leveraged transactions.

        Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported in the balance sheet as loans held for investment stated at the principal amount outstanding adjusted for charge-offs, the allowance for loan losses, deferred fees or costs and unamortized premiums or discounts.

        Loans are classified as held-for-sale when management has positively determined that the loans will be sold in the foreseeable future and the Company has the ability to do so. The classification may be made upon origination or subsequent to the origination or purchase. Once a decision has been made to sell loans not previously classified as held-for-sale, such loans are transferred into the held-for-sale classification and carried at the lower of cost or fair value. There were no loans classified as held-for-sale at either December 31, 2013 or 2012.

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

        Loan maturities and rate sensitivity of the loans held for investment at December 31, 2013, was as follows (in thousands):

 
  Due in
One Year
or Less
  Due After
One Year
Through
Five Years
  Due After
Five Years
  Total  

Commercial:

                         

Commercial and industrial

  $ 214,049   $ 418,472   $ 48,769   $ 681,290  

Owner occupied commercial real estate

    6,065     103,574     47,322     156,961  

Commercial real estate

    12,972     213,712     40,327     267,011  

Construction, land and land development

    8,502     94,014     37,551     140,067  

Consumer:

                         

Residential mortgage

    5,738     66,455     34,169     106,362  

Other consumer

    6,347     1,337     40     7,724  
                   

Total loans

  $ 253,673   $ 897,564   $ 208,178   $ 1,359,415  
                   
                   

Loans with a fixed interest rate

  $ 19,912   $ 242,472   $ 47,274   $ 309,658  

Loans with a floating interest rate

    233,761     655,092     160,904     1,049,757  
                   

Total loans

  $ 253,673   $ 897,564   $ 208,178   $ 1,359,415  
                   
                   

        In the ordinary course of business, the Company has granted loans to certain directors, officers and their affiliates. In the opinion of management, all transactions entered into between the Bank and such related parties have been and are in the ordinary course of business, made on the same terms and conditions as similar transactions with unaffiliated persons.

        An analysis of activity with respect to these related-party loans for the years ended December 31, 2013 and 2012 is as follows (in thousands):

 
  2013   2012  

Beginning balance

  $   $  

Advances

        1  

Repayments

        (1 )
           

Ending balance

  $   $  
           
           

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

        Acquired Loans —The outstanding principal balance and recorded investment in loans acquired from Opportunity Bancshares, Inc. at December 31, 2013 and May 31, 2012, was as follows (in thousands):

 
  December 31,
2013
  May 31,
2012
 

Credit impaired acquired loans:

             

Outstanding principal balance

  $ 3,817   $ 5,647  

Recorded investment

    3,406     5,146  
           

Net of discount

  $ 411   $ 501  
           
           

Other acquired loans:

             

Outstanding principal balance

    12,161     20,678  

Recorded investment

    11,948     20,464  
           

Net of discount

  $ 213   $ 214  
           
           

Total acquired loans:

             

Outstanding principal balance

    15,978     26,325  

Recorded investment

    15,354     25,610  
           

Net of discount

  $ 624   $ 715  
           
           

        The outstanding principal balance and recorded investment in the total acquired loans from all acquisitions at December 31, 2013 and 2012, was as follows (in thousands):

 
  2013   2012  

Credit impaired acquired loans:

             

Outstanding principal balance

  $ 8,477   $ 10,032  

Recorded investment

    7,498     8,950  
           

Net of discount

  $ 979   $ 1,082  
           
           

Other acquired loans:

             

Outstanding principal balance

    16,187     21,000  

Recorded investment

    15,900     20,788  
           

Net of discount

  $ 287   $ 212  
           
           

Total acquired loans:

             

Outstanding principal balance

    24,664     31,032  

Recorded investment

    23,398     29,738  
           

Net of discount

  $ 1,266   $ 1,294  
           
           

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

        Changes in the accretable yield for credit impaired acquired loans for the years ended December 31, 2013 and 2012, were as follows (in thousands):

 
  2013   2012  

Balance at beginning of period

  $ 510   $ 88  

Additions

        73  

Reclassifications from nonaccretable yield

    192     362  

Accretion

    (99 )   (13 )
           

Balance at period end

  $ 603   $ 510  
           
           

        Purchased credit impaired loans are evaluated on an ongoing basis after acquisition. Reclassifications from nonaccretable yield to accretable yield are recorded based on the current estimates of the timing and amount of expected future cash flows.

        Nonaccrual and Past Due Loans —When management doubts a borrower's ability to meet payment obligations, which typically occurs when principal or interest payments are more than 90 days past due, the loans are placed on nonaccrual status.

        The age analysis of loans, segregated by class, as of December 31, 2013 and 2012 was as follows (in thousands):

 
  Loans Past Due and Still
Accruing
   
   
   
   
 
2013
  30 - 89
Days
Past Due
  90 Days
or More
Past Due
  Total   Nonaccrual   Purchased
Credit
Impaired
  Current   Total Loans  

Originated Loans

                                           

Commercial:

                                           

Commercial & industrial

    4,988         4,988     7,345         662,288     674,621  

Owner occupied commercial real estate

    780     536     1,316             152,191     153,507  

Commercial real estate

        780     780     164         253,894     254,838  

Construction, land & land development

                587         139,280     139,867  
                               

    5,768     1,316     7,084     8,096         1,207,653     1,222,833  

Consumer:

                                           

Residential mortgage

    221         221     1,328         104,339     105,888  

Other consumer

    208         208     1,284         5,804     7,296  
                               

    429         429     2,612         110,143     113,184  
                               

Total loans held for investment

  $ 6,197   $ 1,316   $ 7,513   $ 10,708   $   $ 1,317,796   $ 1,336,017  
                               
                               

Acquired Loans

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Commercial:

                                           

Commercial & industrial

                    895     5,774     6,669  

Owner occupied commercial real estate

                    1,655     1,799     3,454  

Commercial real estate

                652     4,676     6,845     12,173  

Construction, land & land development

                    96     104     200  
                               

                652     7,322     14,522     22,496  

Consumer:

                                           

Residential mortgage

                    176     298     474  

Other consumer

    24         24             404     428  
                               

    24         24         176     702     902  
                               

Total loans held for investment

  $ 24   $   $ 24   $ 652   $ 7,498   $ 15,224   $ 23,398  
                               
                               

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)


 
  Loans Past Due and Still
Accruing
   
   
   
   
 
2012
  30 - 89
Days
Past Due
  90 Days
or More
Past Due
  Total   Nonaccrual   Purchased
Credit Impaired
  Current   Total Loans  

Originated Loans

                                           

Commercial:

                                           

Commercial & industrial

    3,509     4,056     7,565     7,619         609,436     624,620  

Owner occupied commercial real estate

    1,640         1,640     484         106,827     108,951  

Commercial real estate

                2,780         201,014     203,794  

Construction, land & land development

                2,998         132,674     135,672  
                               

    5,149     4,056     9,205     13,881         1,049,951     1,073,037  

Consumer:

                                           

Residential mortgage

    1,059     25     1,084     1,388         91,955     94,427  

Other consumer

    203     982     1,185     23         6,281     7,489  
                               

    1,262     1,007     2,269     1,411         98,236     101,916  
                               

Total loans held for investment

  $ 6,411   $ 5,063   $ 11,474   $ 15,292   $   $ 1,148,187   $ 1,174,953  
                               
                               

Acquired Loans

                                           

Commercial:

                                           

Commercial & industrial

    125     499     624         1,265     11,260     13,149  

Owner occupied commercial real estate

    7         7         2,477     2,852     5,336  

Commercial real estate

    397         397           4,939     4,120     9,456  

Construction, land & land development

                    75     111     186  
                               

    529     499     1,028         8,756     18,343     28,127  

Consumer:

                                           

Residential mortgage

                    192     377     569  

Other consumer

    53     31     84     10     2     944     1,040  
                               

    53     31     84     10     194     1,321     1,609  
                               

Total loans held for investment

  $ 582   $ 530   $ 1,112   $ 10   $ 8,950   $ 19,664   $ 29,736  
                               
                               

        Impaired Loans —The following is a summary of information related to impaired, nonaccrual and restructured loans at December 31, 2013 and 2012 (in thousands):

 
  2013   2012  

Nonaccrual loans

  $ 1,496   $ 5,196  

Accruing loans past due 90 days or more

    1,316     579  

Restructured loans—nonaccrual

    9,864     10,106  

Restructured loans—accruing

    4,072     6,621  
           

Total nonperforming loans

  $ 16,748   $ 22,502  
           
           

        Based on an analysis of impaired loans at December 31, 2013 and 2012, an allowance of $4.3 million and $1.4 million, respectively, was allocated to impaired loans. The average recorded investment in nonperforming loans for the years ended December 31, 2013 and 2012, was $38.0 million and $36.1 million, respectively. There was approximately $373 thousand and $253 thousand in interest recognized on nonperforming loans, for the years ended December 31, 2013 and 2012, respectively. There was no interest received on nonperforming loans for the year ended December 31, 2011.

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

        Nonperforming loans of $11.4 million and $15.3 million at December 31, 2013 and 2012, respectively, have been categorized by management as nonaccrual loans. Interest foregone on nonaccrual loans for 2013, 2012 and 2011 was approximately $657 thousand, $775 thousand and $930 thousand, respectively.

        The following table presents additional information regarding impaired loans that were individually evaluated for impairment at December 31, 2013 and 2012 (in thousands):

 
  2013   2012  
 
  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
 

With no related allowance recorded:

                                     

Commercial & industrial

  $ 631   $ 631   $   $ 11,259   $ 11,281   $  

Owner occupied commercial real estate

                         

Commercial real estate

    2,690     2,692         845     850      

Construction, land & land development

    1,751     1,751         2,811     2,817      

Residential mortgage

    1,213     1,213         1,388     1,388      

Other Consumer

    170     170         1,337     1,337      

With an allowance recorded:

   
 
   
 
   
 
   
 
   
 
   
 
 

Commercial & industrial

    6,932     6,932     2,924     1,282     1,282     653  

Owner occupied commercial real estate

                484     484     118  

Commercial real estate

    653     653     45     2,320     2,320     419  

Construction, land & land development

                187     187     186  

Residential mortgage

    114     114     88              

Other Consumer

    1,278     1,278     1,278     10     10     8  
                           

Total:

   
 
   
 
   
 
   
 
   
 
   
 
 

Commercial

  $ 12,657   $ 12,659   $ 2,969   $ 19,188   $ 19,221   $ 1,376  

Consumer

    2,775     2,775     1,366     2,735     2,735     8  
                           

  $ 15,432   $ 15,434   $ 4,335   $ 21,923   $ 21,956   $ 1,384  
                           
                           

        Credit Quality —Internally assigned risk grades for loans are defined as follows:

        Grade 1 (Highest Quality—No Apparent Risk) —This category includes loans to borrowers of unquestioned credit standing which are secured by readily marketable collateral of undisputed value, with appropriate margin. It also includes loans to borrowing entities with: excellent capitalization, liquidity and earnings levels, quality management, positive financial trends, and favorable industry conditions.

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

        Grade 2 (Good Quality—Minimal Risk) —This category includes loans to investment grade entities with: good liquidity and financial condition, nominal term debt, strong debt service capability, solid management, and quality financial information. These loans are usually secured with current assets, but may be unsecured. Alternative financing from other lenders is generally available to these borrowers.

        Grade 3 (Satisfactory Quality—Acceptable Risk—Tier One) —This category includes loans to entities maintaining fair liquidity and acceptable financial conditions. The level of term debt is moderate, with adequate debt service capability. Earnings may be volatile, but borrowers in this category generally do not show a loss within the last three years. Primary debt service must be supported by identified secondary repayment sources or by guarantors with adequate and proven responsibility and capacity.

        Grade 4 (Satisfactory Quality—Acceptable Risk—Tier Two) —This category includes loans to borrowers maintaining acceptable financial conditions; however may exhibit certain characteristics of leverage or asset dependency that reflect a greater level of risk than Tier One credits. This category may also include borrowers exhibiting explainable interim losses within the previous three years and/or industry characteristics that warrant frequent monitoring.

        Grade 5 (Monitored Loans) —This category includes loans with trends or characteristics which, if continued, could result in impaired repayment ability. The borrower may exhibit a low degree of liquidity and relatively high leverage, erratic earnings history (including the possibility of a reported loss in the past four years), significant term debt and a nominal cushion for debt service capacity. Loans in this category may also include financing to start-up borrowers backed by experienced management and significant capital investment or established companies in distressed industry conditions.

        Grade 6 (Other Assets Especially Mentioned) —This category includes loans which have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or a weakening of the Company's credit position at some future date. Grade 6 loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

        Grade 7 (Substandard—Accruing) —This category includes loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any, or loans with identified weaknesses but where there is sufficient collateral value and/or cash flow coverage. This category includes loans that: (1) may require a secondary source of repayment (liquidation of collateral or repayment by a guarantor), (2) lack current financial information or appraisals, and/or (3) have collateral deficiencies such that the Company would be in an unsecured position with an obligor not deserving unsecured credit. This category may also include borrowers with operating losses in recent periods.

        Grade 8 (Substandard—Nonaccrual) —This category includes loans with the same basic characteristics as Grade 7 loans and also meet the Company's criteria for nonaccrual status, but do not warrant a Grade 9 or Grade 10 classification.

        Grade 9 (Doubtful/Exposure) —This category includes loans with all the Grade 7 or 8 characteristics but with weaknesses that make collection (or liquidation) highly questionable and improbable.

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

        Grade 10 (Loss) —This category includes loans which are considered uncollectible, or of such little value that they should no longer be carried as an asset of the Company.

        The credit risk profile of loans aggregated by class and internally assigned risk grades at December 31, 2013 and 2012 (in thousands):

2013
  Commercial &
Industrial
  Owner Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Grade 1

  $ 2,657   $   $   $   $ 292   $ 548   $ 3,497  

Grade 2

    7,750                     50     7,800  

Grade 3

    161,581     26,548     37,750     12,058     71,264     3,785     312,986  

Grade 4

    474,831     118,070     213,946     124,972     32,735     1,653     966,207  

Grade 5

    10,970     10,631     8,752     2,323     149     248     33,073  

Grade 6

    11,790         569             107     12,466  

Grade 7

    3,471     57     502     31     418     49     4,528  

Grade 8

    6,106         816     587     1,328     6     8,843  

Grade 9

    1,239                     1,278     2,517  
                               

    680,395     155,306     262,335     139,971     106,186     7,724     1,351,917  

Purchased credit impaired

    895     1,655     4,676     96     176         7,498  
                               

Total loans

  $ 681,290   $ 156,961   $ 267,011   $ 140,067   $ 106,362   $ 7,724   $ 1,359,415  
                               
                               

 

2012
  Commercial &
Industrial
  Owner Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Grade 1

  $ 3,662   $   $   $   $ 307   $ 1,310   $ 5,279  

Grade 2

    10,761                     75     10,836  

Grade 3

    170,003     15,879     29,175     23,582     69,889     4,206     312,734  

Grade 4

    387,134     82,858     155,106     105,593     23,062     1,424     755,177  

Grade 5

    46,475     8,882     10,527     3,610     158     44     69,696  

Grade 6

    49     2,959     9,440             120     12,568  

Grade 7

    10,801     748     1,283             1,315     14,147  

Grade 8

    7,619     484     2,780     2,998     1,388     33     15,302  

Grade 9

                             
                               

    636,504     111,810     208,311     135,783     94,804     8,527     1,195,739  

Purchased credit impaired

    1,265     2,477     4,939     75     192     2     8,950  
                               

Total loans

  $ 637,769   $ 114,287   $ 213,250   $ 135,858   $ 94,996   $ 8,529   $ 1,204,689  
                               
                               

        Troubled Debt Restructurings —The restructuring of a loan is considered a troubled debt restructuring if both the borrower is experiencing financial difficulties and the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

5. LOANS (Continued)

forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. Troubled debt restructurings identified during the year ended December 31, 2013 are as follows (dollars in thousands):

 
  Number of
Contracts
  Pre- Modification
Outstanding
Recorded
Investment
  Recorded
Investment
 

Commercial & industrial

    8   $ 8,400   $ 5,587  

Commercial real estate

    1     2,562     2,526  

Construction, land and land development

    3     4,783     1,164  

Other consumer

    2     146     146  
               

Total

    14   $ 15,891   $ 9,423  
               
               

        During the year ended December 31, 2013, the Company added $15.9 million in new troubled debt restructurings. The modifications primarily related to extending the maturity date of the loans, which includes loans modified post bankruptcy. The Company did not forgive any principal or interest on the restructured loans. Following the restructure, $4.8 million were paid in full and $65 thousand defaulted on the modified terms and were charged off during the year. The restructured loans were individually evaluated for impairment. The allowance for loan losses included specific reserves of $3.7 million related to these loans at December 31, 2013.

        The Company reassessed all loan modifications occurring during the year ended December 31, 2012 for possible identification as troubled debt restructurings. Troubled debt restructurings identified during the year ended December 31, 2012 are as follows (dollars in thousands):

 
  Number of
Contracts
  Pre- Modification
Outstanding
Recorded
Investment
  Recorded
Investment
 

Commercial & industrial

    10   $ 8,831   $ 10,647  

Owner occupied commercial real estate

    1     484     484  

Commercial real estate

    5     894     894  

Construction, land and land development

    2     1,266     932  

Other consumer

    2     1,326     1,292  
               

Total

    20   $ 12,801   $ 14,249  
               
               

        During the year ended December 31, 2012, the Company added $12.8 million in new troubled debt restructurings. The modifications primarily related to extending the maturity date of the loans, which includes loans modified post bankruptcy. The Company did not forgive any principal or interest on the restructured loans. Following the restructure, $5.0 million defaulted on the modified terms and $205 thousand were charged off during the year. The restructured loans were individually evaluated for impairment. The allowance for loan losses included specific reserves of $348 thousand related to these loans at December 31, 2012. Subsequent to December 31, 2012, a restructured loan in the amount of $3.8 million has been paid in full.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

6. ALLOWANCE FOR LOAN LOSSES

        An analysis of activity in the allowance for loan losses for the years ended December 31, 2013 and 2012, and the balance of loans receivable by the method of impairment evaluation at December 31, 2013 and 2012 is as follows (in thousands):

2013
  Commercial &
Industrial
  Owner
Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Allowance for loan losses:

                                           

Balance—December 31, 2012

  $ 9,109   $ 763   $ 2,380   $ 1,352   $ 492   $ 55   $ 14,151  

Provision

    959     (111 )   148     (249 )   321     1,305     2,373  

Charge-offs

    (916 )       (333 )       (186 )   (54 )   (1,489 )

Recoveries

    1,044     222     21         27     12     1,326  
                               

Balance—December 31, 2013

  $ 10,196   $ 874   $ 2,216   $ 1,103   $ 654   $ 1,318   $ 16,361  
                               
                               

Allowance for loan losses:

                                           

Collectively evaluated for impairment

  $ 7,272   $ 872   $ 2,021   $ 1,082   $ 566   $ 39   $ 11,852  

Individually evaluated for impairment

    2,924         45         88     1,278     4,335  

Acquired with deteriorated credit quality

        2     150     21         1     174  

Loans:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Collectively evaluated for impairment

  $ 672,831   $ 155,306   $ 258,993   $ 138,220   $ 104,858   $ 6,277   $ 1,336,485  

Individually evaluated for impairment

    7,564         3,342     1,751     1,328     1,447     15,432  

Acquired with deteriorated credit quality

    895     1,655     4,676     96     176         7,498  
                               

Total loans evaluated for impairment

  $ 681,290   $ 156,961   $ 267,011   $ 140,067   $ 106,362   $ 7,724   $ 1,359,415  
                               
                               

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

6. ALLOWANCE FOR LOAN LOSSES (Continued)


2012
  Commercial &
Industrial
  Owner
Occupied
Commercial
Real Estate
  Commercial
Real Estate
  Construction &
Land
Development
  Residential
Mortgage
  Other
Consumer
  Total  

Allowance for loan losses:

                                           

Balance—December 31, 2011

  $ 6,701   $ 711   $ 919   $ 1,271   $ 871   $ 101   $ 10,574  

Provision

    4,153     413     3,731     81     (318 )       8,060  

Charge-offs

    (1,832 )   (361 )   (2,270 )       (94 )   (57 )   (4,614 )

Recoveries

    87                 33     11     131  
                               

Balance—December 31, 2012

  $ 9,109   $ 763   $ 2,380   $ 1,352   $ 492   $ 55   $ 14,151  
                               
                               

Allowance for loan losses:

                                           

Collectively evaluated for impairment

  $ 8,456   $ 645   $ 1,954   $ 1,136   $ 492   $ 45   $ 12,728  

Individually evaluated for impairment

    653     118     418     186         8     1,383  

Acquired with deteriorated credit quality

            8     30         2     40  

Loans:

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Collectively evaluated for impairment

  $ 623,963   $ 111,326   $ 205,146   $ 132,785   $ 93,416   $ 7,180   $ 1,173,816  

Individually evaluated for impairment

    12,541     484     3,165     2,998     1,388     1,347     21,923  

Acquired with deteriorated credit quality

    1,265     2,477     4,939     75     192     2     8,950  
                               

Total loans evaluated for impairment

  $ 637,769   $ 114,287   $ 213,250   $ 135,858   $ 94,996   $ 8,529   $ 1,204,689  
                               
                               

        An analysis of activity in the allowance for loan losses for the year ended December 31, 2011 is as follows (in thousands):

 
  2011  

Beginning Balance

  $ 7,132  

Provision

    8,391  

Charge-offs

    (5,035 )

Recoveries

    86  
       

Ending balance

  $ 10,574  
       
       

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

7. PREMISES AND EQUIPMENT

        Premises and equipment as of December 31, 2013 and 2012, are summarized as follows (in thousands):

 
  2013   2012  

Land

  $ 6,588   $ 6,588  

Buildings and improvements

    16,238     14,301  

Furniture, fixtures, and equipment

    5,923     5,308  
           

    28,749     26,197  

Less accumulated depreciation

    (7,384 )   (6,179 )
           

Total

  $ 21,365   $ 20,018  
           
           

        Depreciation of premises and equipment totaled $1.4 million, $1.2 million and $909 thousand in 2013, 2012 and 2011, respectively.

8. GOODWILL AND CORE DEPOSIT INTANGIBLES

        The Company reviews its goodwill for impairment annually, or more frequently, if indicators of impairment exist. At December 31, 2013 and 2012, management determined that goodwill, as reflected in the Company's financial statements, was not impaired.

        Changes in the carrying amount of goodwill and core deposit intangibles for the years ended December 31, 2013 and 2012 were as follows (in thousands):

 
  Goodwill   Core Deposit
Intangibles
 

Balance as of December 31, 2011

  $ 15,672   $ 1,245  

Add—acquisition of Opportunity Bank

        216  

Less—amortization

        (231 )
           

Balance as of December 31, 2012

    15,672     1,230  

Less—amortization

        (246 )
           

Balance as of December 31, 2013

  $ 15,672   $ 984  
           
           

        Core deposit intangibles are amortized on an accelerated basis over their estimated lives, which the Company believes is approximately six to eight years. The estimated future amortization expense for the core deposit intangibles remaining as of December 31, 2013 is as follows (in thousands):

2014

  $ 246  

2015

    246  

2016

    246  

2017

    218  

2018

    28  
       

Total

  $ 984  
       
       

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

9. DEPOSITS

        Included in certificates and other time deposits are individual amounts of $100,000 or more including brokered certificates of deposit, if any. The remaining maturities of these deposits as of December 31, 2013 and 2012, respectively, are as follows (in thousands):

 
  2013   2012  

Three months or less

  $ 81,518   $ 66,427  

Over three through six months

    67,817     40,974  

Over six through twelve months

    111,067     85,545  

Over one through two years

    44,866     111,908  

Over two through three years

    28,822     17,098  

Over three through four years

    37,335     29,274  

Over four through five years

    68,955     35,927  
           

  $ 440,380   $ 387,153  
           
           

        Interest expense for certificates of deposit and other time deposits of $100,000 or more was approximately $6.1 million, $5.2 million and $4.0 million for the years ended December 31, 2013, 2012 and 2011, respectively.

        The Company had $14.8 million and $31.2 million in brokered time deposits, at December 31, 2013 and 2012, respectively.

        There are no major concentrations of deposits with any one depositor.

10. OTHER BORROWED FUNDS

        Other borrowed funds as of December 31, 2013 and 2012, are as follows (in thousands):

 
  2013   2012  

Federal Home Loan Bank advances

  $ 46,858   $ 15,037  

Repurchase agreements

    2,583     3,480  
           

Total

  $ 49,441   $ 18,517  
           
           

        Federal Home Loan Bank Advances —The Company has an available borrowing arrangement with the FHLB, which allows the Company to borrow on a collateralized basis. At December 31, 2013 and 2012, total borrowing capacity of $301.0 million and $326.7 million, respectively, was available under this arrangement and $46.9 million and $15.0 million, respectively, was outstanding with an average interest rate of 0.32% and 4.02% respectively. At December 31, 2013 and 2012, all of the Company's FHLB advances mature within five years. These borrowings are collateralized by a blanket lien on certain loans. The Company utilizes these borrowings to meet liquidity needs and to fund certain fixed rate loans in its loan portfolio.

        Federal Reserve Bank —The Company has an available borrower in custody arrangement with the Federal Reserve Bank of Dallas (the "Fed"), which allows the Company to borrow, on a collateralized basis. Certain commercial and consumer loans are pledged under this arrangement. The Company maintains this borrowing arrangement to meet liquidity needs pursuant to its contingency funding plan. At December 31, 2013 and 2012, $288.6 million and $291.5 million, respectively, were available under this arrangement and no borrowings were outstanding.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

10. OTHER BORROWED FUNDS (Continued)

        Securities Sold Under Agreements to Repurchase —Securities sold under agreements to repurchase represent the purchase of interests in securities by banking customers. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. Repurchase agreements with banking customers are settled on the following business day. All securities sold under agreements to repurchase are collateralized by pledged securities. The securities underlying the repurchase agreements are held in safekeeping by the Bank's safekeeping agent. At December 31, 2013 and 2012, the Company had securities sold under agreements to repurchase with banking customers of $2.6 million and $3.5 million, respectively.

        Federal Funds Purchased —The Company has available federal funds lines of credit with its correspondent banks. As of December 31, 2013 and 2012, there were no federal funds purchased outstanding.

11. INCOME TAXES

        The components of the provision for income taxes for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

 
  2013   2012   2011  

Current income tax provision

  $ 7,446   $ 5,067   $ 1,464  

Deferred income tax benefit

    (540 )   (687 )   (582 )
               

Total income tax provision

  $ 6,906   $ 4,380   $ 882  
               
               

        The provision for income taxes differs from the amount computed by applying the federal income tax statutory rates of 35% to income from continuing operations for the year ended December 31, 2013 and 34% for the years ended December 31, 2012 and 2011, as follows (in thousands):

 
  2013   2012   2011  

Taxes calculated at statutory rate

  $ 6,831   $ 4,391   $ 646  

Increase (decrease) resulting from:

                   

State tax expense, net of federal effect

    174     119     92  

Non-deductible expenses

    65     58     53  

Incentive stock compensation expense

    5     9     17  

Bargain purchase gain

        (197 )    

Change in applicable statutory rate

    (211 )        

Other, net

    42         74  
               

Income tax provision—as reported

  $ 6,906   $ 4,380   $ 882  
               
               

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

11. INCOME TAXES (Continued)

        Significant deferred tax assets and liabilities at December 31 were as follows (in thousands):

 
  2013   2012  

Deferred tax assets:

             

Allowance for credit losses

  $ 5,727   $ 4,811  

Net operating loss carryforward

    1,969     2,017  

Nonqualified stock options

    882     739  

Deposit valuation allowance

    114     293  

Loan valuation allowance

    348     394  

Pre-opening expenses

    191     208  

Real estate acquired by foreclosure write-downs

    443     430  

Unrealized loss on available-for-sale securities

    68      

Other

    254     138  
           

Total deferred tax assets

    9,996     9,030  
           

Deferred tax liabilities:

             

Depreciable assets

    335     310  

Unrealized gain on available-for-sale securities

        1,031  

Deferred loan costs

    568     453  

Goodwill

    240     53  
           

Total deferred tax liabilities

    1,143     1,847  
           

Net deferred tax asset

  $ 8,853   $ 7,183  
           
           

        The deferred tax asset is evaluated by management on an ongoing basis to determine if a valuation allowance is required. Assessing the need for a valuation allowance requires that management evaluate all evidence, both negative and positive, to determine whether a valuation allowance is needed. Based on management's analysis of the evidence, no valuation allowance was required to be recorded against the net deferred tax asset of $8.9 million at December 31, 2013. The deferred tax assets are primarily supported by future reversals of existing timing differences and the generation of future taxable income.

        Net operating loss carryfowards for federal income tax purposes were $5.6 million and $5.9 million at December 31, 2013 and 2012, respectively. The carryforwards expire beginning in 2032.

        The Company files income tax returns in the U.S. federal jurisdiction and the Texas state jurisdiction. As of December 31, 2013 and 2012, the Company had identified no unrecognized tax benefits related to returns with open periods subject to examination. The Company is subject to examination from 2002 forward for federal income tax returns and from 2009 forward for state income tax returns. The Company's policy is that it recognizes interest and penalties as a component of income tax expense. As of December 31, 2013 and 2012, the Company had no accrued interest or penalties.

12. EMPLOYEE BENEFITS

        Stock Option Plan —The Green Bancorp, Inc. 2010 Stock Option Plan (the "2010 Option Plan"), was approved by the Company's Board of Directors on June 30, 2010. The 2010 Option Plan permits the grants of up to 2,239,906 options. The non-qualified stock options are in the form of time-based

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

12. EMPLOYEE BENEFITS (Continued)

options and performance options. The options may be granted to a director, officer or employee of the Company. The 2010 Option Plan is administered by the Compensation Committee of the Board of Directors, who establish at the time of the grant, the allocation of options between time-based and performance, the period over which the time-based options vest, the form of payment upon exercise and the exercise price of the awards.

        Typically time-based options under the 2010 Option Plan vest over a period of four years and expire on the tenth anniversary of the date of the grant. Performance options under the 2010 Option Plan vest upon the occurrence of a liquidity event, with the vested amounts determined based on the achievement of specified performance and market metrics.

        The Company has two additional stock options plans, which are frozen to further issuance.

        The Green Bancorp, Inc. 2006 Stock Option Plan (the "2006 Option Plan"), which was approved by the shareholders of the Company on June 21, 2006, permitted the grant of up to 450,000 options. The options granted may have been in the form of nonqualified stock options, which may have been granted to a director, officer or employee of the Company, or incentive stock options, which may have been granted only to officers of the Company. Awards under the 2006 Option Plan vest over a four-year period, which began on the first anniversary of the grant date, and must be exercised within 10 years from the grant date. The 2006 Option Plan was frozen to further issuance upon approval of the 2010 Option Plan. At December 31, 2013 there were 367,500 options outstanding under the 2006 Option Plan.

        In addition to the 2006 Option Plan, the Company's Board of Directors adopted the Redstone Bank 2004 Stock Option Plan (the "Redstone Option Plan") and froze the plan to further issuance, following the Company's acquisition of Redstone Bank. At the time of adoption, all options to acquire stock of Redstone Bank were converted to options to acquire stock of the Company and adjusted in terms of number and exercise price based on the terms of the merger agreement. All options issued under the Redstone Option Plan are fully vested as a result of the 2006 change of control event. At December 31, 2013 there were 306,444 options outstanding under the Redstone Option Plan.

        The fair value of each time-based option award is estimated on the date of grant using a Black-Scholes-Merton option valuation model. The Black-Scholes-Merton formula assumes that option exercises occur at the end of the contractual term of the option, and that expected volatility, expected dividends, and risk-free interest rates are constant over the option's term. The Black-Scholes-Merton formula is adjusted to take into account certain characteristics of employee share options and similar instruments that are not consistent with the assumptions contained in the model. Because of the nature of the formula, those adjustments take the form of weighted-average assumptions about those characteristics. The expected term represents the period of time that options granted are expected to be outstanding. The risk-free interest rate of the option is based on the U.S. Treasury zero-coupon with a remaining term equal to the expected term used in the assumption model. The expected volatility is an estimated measure of fluctuations in the Company's share price.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

12. EMPLOYEE BENEFITS (Continued)

        The fair value of time-based options granted during 2013 and 2012 was estimated using the following assumptions:

 
  2013   2012  

Expected term (years)

    6.50     6.50  

Risk-free interest rate

    1.19% - 2.10 %   0.89% - 1.25 %

Expected volatility

    35 %   35 %

Dividend yield

    %   %

        A summary of changes in outstanding time-based stock options as of December 31, 2013, is as follows:

 
  Number of
Options
  Weighted-
Average
Exercise
Price
  Average
Remaining
Contractual
Term
(In Years)
 

Shares under option—December 31, 2012

    1,082,092   $ 9.11     5.32  

Shares granted

   
43,298
   
10.71
       

Shares forfeited or expired

    (3,211 )   9.72        

Shares exercised

    (22,915 )   8.25        
                   

Shares under option—December 31, 2013

    1,099,264     9.19     4.60  
                   
                   

Shares exercisable—December 31, 2013

    910,793     9.24     4.01  
                   
                   

Shares under option—December 31, 2011

    1,053,801     9.11     6.21  

Shares granted

   
31,333
   
9.01
       

Shares forfeited or expired

    (3,042 )   9.17        

Shares exercised

                 
                   

Shares under option—December 31, 2012

    1,082,092     9.11     5.32  
                   
                   

Shares exercisable—December 31, 2012

    818,518     9.36     4.54  
                   
                   

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

12. EMPLOYEE BENEFITS (Continued)

        A summary of the status of the Company's nonvested time-based options as of December 31, 2013, is presented below:

 
  Number of
Options
  Average
Grant-Date
Fair Value
 

Nonvested options—December 31, 2012

    263,574   $ 3.14  

Shares granted

    43,298     1.64  

Shares forfeited

    (3,211 )   3.21  

Shares vested

    (115,190 )   3.11  
             

Nonvested options—December 31, 2013

    188,471   $ 1.87  
             
             

Nonvested options—December 31, 2011

    369,239   $ 2.96  

Shares granted

    31,333     3.28  

Shares forfeited

    (3,042 )   3.36  

Shares vested

    (133,956 )   2.87  
             

Nonvested options—December 31, 2012

    263,574   $ 3.14  
             
             

        As of December 31, 2013 and 2012, there was $283 thousand and $547 thousand, respectively, of total unrecognized compensation expense related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.49 years. The total fair value of shares vested during the years ended December 31, 2013 and 2012, was $358 thousand and $384 thousand, respectively.

        Total stock-based compensation expense that was charged against income was $335 thousand, $324 thousand and $357 thousand for 2013, 2012 and 2011, respectively. The total income tax benefit recognized in the statements of operations for share-based compensation arrangements was $113 thousand, $101 thousand and $104 thousand for 2013, 2012 and 2011, respectively.

        The Company issued 170,202 performance options during the year ended December 31, 2013. The performance-based options will vest only upon the occurrence of a liquidity event. The numbers of options to be vested will be determined based on the achievement of specified performance and market metrics. The total fair value of the performance options granted during the year ended December 31, 2013 was $167 thousand. Stock-based compensation expense related to the performance options will be recorded upon the occurrence of a qualifying liquidity event. At December 31, 2013 there were 1,670,525 performance based options outstanding under the 2010 Option Plan.

        Stock Appreciation Rights Plan —On May 18, 2007, the Company's Board of Directors adopted the Green Bancorp Stock Appreciation Rights Plan (the "SAR Plan"). The SAR Plan provides for the issuance of up to 200,000 units to plan participants at an exercise price of no less than the fair market value of the common stock of the Company at the time of grant. Units are redeemable by plan participants under certain circumstances whereby the participant will be paid the excess, if any, of the book value of the Company's common stock at the time of exercise over the exercise price. The SAR Plan provides for a 10-year maximum term for units issued, vesting and exercisability limitations and accelerated vesting and deemed exercise in the event of a change of control. As of December 31, 2013, there were 165,000 units outstanding and 35,000 units available under the SAR Plan.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

12. EMPLOYEE BENEFITS (Continued)

        The Company has elected to account for the accrued SAR Plan liability under the intrinsic-value method as allowed for non-public companies by FASB ASC 718, Compensation—Stock Compensation . During the year ended December 31, 2013, the rights began to appreciate and expense of $31 thousand was recorded.

        Benefit Plan —The Company sponsors a 401(k) plan (the "401k Plan"), which is a defined contribution plan available to substantially all employees. Participants in the 401k Plan may make salary deferral contributions up to the amount allowed by law. The Company makes safe harbor matching contributions to the 401k Plan equal to 100% of the participant's elective contribution for the plan year up to a maximum of 6% of the participant's salary. The Company contributions are fully vested at the date of contribution. The total of Company contributions for the years ended December 31, 2013, 2012 and 2011 were $690 thousand, $592 thousand and $436 thousand, respectively.

13. SHAREHOLDERS' EQUITY

        Common Stock —On June 29, 2012, the Company issued 2.8 million shares of its common stock through investment agreements with three investment firms, which resulted in gross proceeds of $25.0 million. After deducting advisory fees and transaction expenses, net proceeds were approximately $24.7 million. No single investor owns more than 24.9% of the issued and outstanding common stock of the Company. During the year ended December 31, 2012, the Company invested $25.0 million in the Bank. During the year ended December 31, 2011, the Company invested $10.0 million in the Bank.

14. OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES

        The following table summarizes the Company's contractual obligations and other commitments to make future payments as of December 31, 2013 (other than securities sold under agreements to repurchase). The Company's future cash payments associated with its contractual obligations pursuant to it's certificate and other time deposits, Federal Home Loan Bank advances and operating leases as of December 31, 2013 are as follows (in thousands):

 
  1 year or less   More than
1 year
but less than
3 years
  3 years
or more but
less than
5 years
  5 years
or more
  Total  

Certificate and other time deposits

  $ 343,402   $ 98,085   $ 132,863   $   $ 574,350  

Federal Home Loan Bank advances

    46,904                 46,904  

Operating leases

    1,263     1,788     1,327     2,532     6,910  
                       

Total

  $ 391,569   $ 99,873   $ 134,190   $ 2,532   $ 628,164  
                       

        Payments for Federal Home Loan Bank advances include interest of $46 thousand that will be paid over the future periods. Payments related to leases are based on actual payments specified in underlying contracts.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

14. OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES (Continued)

        Leases —A summary as of December 31, 2013, of the Company's noncancelable future operating lease commitments is as follows (in thousands):

2014

  $ 1,263  

2015

    918  

2016

    870  

2017

    802  

2018

    525  

Thereafter

    2,532  
       

Total

  $ 6,910  
       
       

        The Company leases certain office facilities and equipment under operating leases. Rent expense under all noncancelable operating lease obligations, net of income from noncancelable subleases aggregated, was approximately $1.4 million, $1.2 million and $1.0 million for 2013, 2012 and 2011, respectively.

        Litigation —The Company from time to time is involved in routine litigation arising from the normal course of business. Management does not believe that there are any pending or threatened proceedings against the Company which, upon resolution, would have a material effect on the consolidated financial statements.

        Financial Instruments with Off-Balance Sheet Risk —In the normal course of business, the Company is a party to various financial instruments with off-balance sheet risk to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual or notional amount of these instruments. The Company uses the same credit policies in making these commitments and conditional obligations as it does for on-balance sheet instruments.

        For the year ended December 31, 2013, the following is a summary of the various financial instruments entered into by the Company (in thousands):

2013
  1 year
or less
  More than
1 year
but less than
3 years
  More than
3 years but
less than
5 years
  5 years
or more
  Total  

Commitments to extend credit

  $ 102,962     150,533     102,606     49,670     405,771  

Standby letters of credit

    12,484     2,333     8         14,825  
                       

Total

  $ 115,446   $ 152,866   $ 102,614   $ 49,670   $ 420,596  
                       

        Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

14. OFF-BALANCE SHEET ARRANGEMENTS, COMMITMENTS AND CONTINGENCIES (Continued)

are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company, upon extension of credit, is based on management's credit evaluation of the customer.

        Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer, the Company has rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. The credit risk to the Company in issuing letters of credit is essentially the same as that involved in extending loan facilities to its customers.

15. DERIVATIVE FINANCIAL INSTRUMENTS

        In order to accommodate the borrowing needs of certain commercial customers, the Company entered into interest rate swap agreements with those customers. In order to offset the exposure and manage interest rate risk, at the time an agreement was entered into with a customer, the Company entered into an interest rate swap with a correspondent bank counterparty with offsetting terms. These derivative instruments are not designated as accounting hedges and changes in the net fair value are recognized in noninterest income or expense. Due to the nature of the offset in values between customer and correspondent swaps, the Company did not recognize any changes in the net fair value of the derivative instruments during the years ended December 31, 2013, 2012 or 2011. The fair value amounts are included in other assets and other liabilities.

        The following is a summary of the derivative instruments outstanding at December 31, 2013 and 2012 (in thousands):

2013
  Notional
Amount
  Fixed Rate   Floating Rate   Maturity   Fair
Value
 

Non-hedging derivative instruments:

                         

Customer interest rate swap:

                         

receive fixed/pay floating

  $ 30,145   4.87% - 6.02%   LIBOR 1 month + 3.75% - 4.50%   Wtd avg. 3.1 years   $ 433  

Correspondent interest rate swap:

                         

pay fixed/receive floating

    30,145   4.87% - 6.02%   LIBOR 1 month + 3.75% - 4.50%   Wtd avg. 3.1 years     (456 )

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

15. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)


2012
  Amount   Rate   Floating Rate   Maturity   Value  

Non-hedging derivative instruments:

                         

Customer interest rate swap:

                         

receive fixed/pay floating

  $ 30,951   4.87% - 6.02%   LIBOR 1 month + 3.75% - 4.50%   Wtd avg. 4.1 years   $ 881  

Correspondent interest rate swap:

                         

pay fixed/receive floating

    30,951   4.87% - 6.02%   LIBOR 1 month + 3.75% - 4.50%   Wtd avg. 4.1 years     (932 )

        For the years ended December 31, 2013, the notional amounts and estimated fair values of the non-hedging derivative instruments by classification (in thousands):

 
  Notional
Amount
  Fair
Value
 

Customer interest rate swaps (commercial customer counterparty):

             

Assets

  $ 28,190   $ 437  

Liabilities

    1,955     (4 )
           

  $ 30,145   $ 433  

Correspondent interest rate swap (financial institution counterparty):

   
 
   
 
 

Assets

  $ 28,190   $ (460 )

Liabilities

    1,955     4  
           

  $ 30,145   $ (456 )

16. REGULATORY MATTERS

        Capital Requirements —The Company is subject to various regulatory capital requirements administered by federal banking agencies. Any institution that fails to meet its minimum capital requirements is subject to actions by regulators that could have a direct material effect on its financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines based on the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's capital amount and classification under the regulatory framework for prompt corrective action are also subject to qualitative judgments by the regulators.

        To meet the capital adequacy requirements, Green Bancorp and the Bank must maintain minimum capital amounts and ratios as defined in the regulations. Management believes, as of December 31, 2013 and 2012, that Green Bancorp and the Bank met all capital adequacy requirements to which they are subject.

        The most recent notification from the regulatory banking agencies categorized Green Bank as "well capitalized" under the regulatory capital framework for prompt corrective action and there have been no events since that notification that management believes have changed the Bank's category.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

16. REGULATORY MATTERS (Continued)

        The Company's consolidated and the Bank's capital ratios as of December 31, 2013 and 2012 are presented in the following table (in thousands, except percentage amounts):

 
  Actual   For Capital
Adequacy Purposes
  To be Categorized
as Well Capitalized
under Prompt
Corrective Action
Provisions
 
Consolidated
  Amount   Ratio   Amount   Ratio   Amount   Ratio  

As of December 31, 2013:

                                     

Total capital (to risk weighted assets)

  $ 190,229     12.5 % $ 121,719     8.0 %   N/A     N/A  

Tier 1 capital (to risk weighted assets)

    173,680     11.4     60,859     4.0     N/A     N/A  

Tier 1 capital (to average assets)

    173,680     10.3     67,196     4.0     N/A     N/A  

Green Bank

 

 


 

 


 

 


 

 


 

 


 

 


 

As of December 31, 2013:

   
 
   
 
   
 
   
 
   
 
   
 
 

Total capital (to risk weighted assets)

  $ 184,908     12.2 % $ 121,619     8.0 % $ 152,023     10.0 %

Tier 1 capital (to risk weighted assets)

    168,359     11.1     60,809     4.0     91,214     6.0  

Tier 1 capital (to average assets)

    168,359     10.0     67,021     4.0     83,776     5.0  

 

 
  Actual   For Capital
Adequacy Purposes
  To be Categorized
as Well Capitalized
under Prompt
Corrective Action
Provisions
 
Consolidated
  Amount   Ratio   Amount   Ratio   Amount   Ratio  

As of December 31, 2012:

                                     

Total capital (to risk weighted assets)

  $ 176,148     13.3 % $ 105,623     8.0 %   N/A     N/A  

Tier 1 capital (to risk weighted assets)

    161,997     12.3     52,812     4.0     N/A     N/A  

Tier 1 capital (to average assets)

    161,997     10.3     63,139     4.0     N/A     N/A  

Green Bank

 

 


 

 


 

 


 

 


 

 


 

 


 

As of December 31, 2012:

   
 
   
 
   
 
   
 
   
 
   
 
 

Total capital (to risk weighted assets)

  $ 170,386     12.9 % $ 105,500     8.0 % $ 131,875     10.0 %

Tier 1 capital (to risk weighted assets)

    156,235     11.9     52,750     4.0     79,125     6.0  

Tier 1 capital (to average assets)

    156,235     9.9     62,915     4.0     78,644     5.0  

        Dividend Restrictions —The Company is regarded as a legal entity separate and distinct from the Bank. The principal source of the Company's revenues is dividends received from the Bank. Federal law currently imposes limitations upon certain capital distributions by national banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital. The Board of Governors of the Federal Reserve System (the "Federal Reserve") and Office of the Comptroller of the Currency (the "OCC") regulate all capital distributions by the Bank directly or indirectly to the Company, including dividend payments. For example, under applicable regulations, the Bank must file an application for OCC approval of a capital distribution if the total capital distributions for the applicable calendar year exceed the sum of the Bank's net income for that year to date plus the Bank's retained net income for the preceding two years. Additionally, the Bank may not pay dividends to the Company if, after paying those dividends, it would fail to meet the required minimum levels under

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

16. REGULATORY MATTERS (Continued)

risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements, or in the event the OCC notified the Bank that it was in need of more than normal supervision. Under the Federal Deposit Insurance Act, an insured depository institution such as the Bank is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become "undercapitalized." Payment of dividends by the Bank also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice. In addition, the Bank may become subject to supervisory limits on its ability to declare or pay a dividend or reduce its capital unless certain conditions are satisfied.

17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

        As discussed in Note 1, FASB ASC 820 applies to reported balances that are required or permitted to be measured at fair value under an existing accounting pronouncement. FASB ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability and establishes a fair value hierarchy. The fair value hierarchy consists of three levels of inputs that may be used to measure fair value as follows:

        Level 1 —Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 1 assets and liabilities include debt and equity securities that are traded in an active exchange market, as well as certain U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets.

        Level 2 —Inputs other than those quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 2 assets and liabilities include available-for-sale securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Available-for-sale securities are valued using observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, prepayment speeds, credit information, and the bond's terms and conditions, among other things. Derivative valuations utilize certain Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The significance of the impact of these credit valuation adjustments on the overall valuation of derivative positions are not significant to the overall valuation and result in all derivative valuations being classified in Level 2 of the fair value hierarchy.

        Level 3 —Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. This category includes certain interest-only strip securities where independent pricing information was not able to be obtained for a significant portion of the underlying assets and loans held for sale.

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

        The estimated fair values of financial instruments were determined by management as of December 31, 2013 and 2012, and required judgment. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair values presented.

        The tables below present the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands).

 
  Balance at
December 31,
2013
  Quoted Prices in
Active Markets for
Identical
Instruments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Available-for-sale securities

  $ 198,237   $ 15,000   $ 183,237   $  

Customer interest rate swaps

    433         433      

Financial liabilities—correspondent interest rate swaps

   
456
   
   
456
   
 

 

 
  Balance at
December 31,
2012
  Quoted Prices in
Active Markets for
Identical
Instruments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Available-for-sale securities

  $ 182,609   $ 20,335   $ 162,274   $  

Customer interest rate swaps

    881         881      

Financial liabilities—correspondent interest rate swaps

   
932
   
   
932
   
 

        Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Assets measured on a nonrecurring basis include impaired loans, real estate acquired by foreclosure and other repossessed assets, which are measured using appraisals and third-party estimates, and are considered Level 3 inputs within the fair value hierarchy. The Chief Appraiser coordinates appraisals for real estate securing collateral dependent impaired loans and real estate acquired by foreclosure on an annual basis. The value from the appraisal is further adjusted for expected holding and liquidation costs. If an appraisal is not available, the initial value is determined based on the present value of expected cash flows at the loan's effective interest rate, the observable market price of the loan or an internal evaluation, whichever is most appropriate. The net realizable value of the collateral for impaired loans is reviewed monthly to determine if it is reasonable or if deterioration has occurred.

        At December 31, 2013, the Company had loans receivable of $767 thousand which were recorded at fair value based on the value of the underlying collateral. The determination of the fair value of

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

these loans resulted in a charge to the allowance for loan losses of $133 thousand during 2013. At December 31, 2012, the Company had loans receivable of $2.9 million which were recorded at fair value based on the value of the underlying collateral. The determination of the fair value of these loans resulted in a charge to the allowance for loan losses of $1.4 million during 2012. The Company had $3.8 million in additions to other real estate owned or other repossessed assets, of which $3.6 million were outstanding at December 31, 2013 and measured using the fair value hierarchy. The Company had $3.6 million in additions to other real estate owned or other repossessed assets which were outstanding at December 31, 2012 and measured using the fair value hierarchy.

        The following methods and assumptions were used to estimate the fair value of cash and of financial instruments for which it is practicable to estimate that value:

        Cash and Short-Term Investments —The carrying amount for cash and these short term investments is a reasonable estimate of fair value. The Company classifies the estimated fair value of these assets as Level 1.

        Securities —Securities valued based on quoted prices in an active market are classified in Level 1 of the valuation hierarchy. Level 1 securities include US Treasury securities. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows or Level 2 of the valuation hierarchy. Level 2 securities include all other available-for-sale and held-to-maturity securities.

        Other Securities —Other securities include Federal Home Loan Bank of Dallas stock and Federal Reserve Bank stock and are considered a Level 1 fair value. The value of these assets is estimated to be equal to the carrying value. All transactions in the stock are executed at the stated par value.

        Loans Held for Investment —The carrying value of adjustable rate loans that reprice frequently is considered to be the fair value. The fair value of fixed rate loans and adjustable rate loans that reprice infrequently is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The Company classifies the estimated fair value of loans held for investment as Level 3.

        Real Estate Acquired by Foreclosure —Real estate acquired by foreclosure is adjusted to fair value less estimated costs to sell at the time of foreclosure. Subsequently, these assets are carried at the lower of carrying value or fair value less estimated costs to sell. Fair value is generally based upon market prices or appraised values of the property, and accordingly, the Company classifies real estate acquired by foreclosure as Level 3.

        Deposit Liabilities —The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. Deposit fair value measurements utilize Level 2 inputs.

        Other Borrowed Funds —The carrying amount of securities sold under agreements to repurchase is a reasonable estimate of fair value because these borrowings reprice at market rates generally daily. The fair value of long term FHLB advances is estimated using the rates currently offered for advances

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

of similar remaining maturities. The Company classifies the estimated fair value of other borrowings as Level 2.

        Off-Balance Sheet Financial Instruments —The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. These amounts were not significant at the reporting dates. The fair value of interest rate swaps is derived from pricing models based on past, present and projected future market conditions, quoted market prices of instruments with similar characteristics or discounted cash flows, classified in Level 2 of the fair value hierarchy.

        The estimated fair values of the Company's financial instruments for the years ended December 31, 2013 and 2012 are as follows (in thousands):

 
  Balance at
December 31,
2013
  Quoted Prices in
Active Markets for
Identical
Instruments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Cash and short term investments

  $ 34,757   $ 34,757   $   $  

Available-for-sale securities

    198,237     15,000     183,237      

Held-to-maturity securities

    56,588         56,588      

Other securities

    7,730     7,730          

Loans held for investment

    1,342,269             1,342,269  

Real estate acquired by foreclosure

    6,690             6,690  
                   

Total

  $ 1,646,271   $ 57,487   $ 239,825   $ 1,348,959  
                   
                   

Financial liabilities:

                         

Deposits

  $ 1,452,900   $   $ 1,452,900   $  

Securities sold under agreements to repurchase

    2,583         2,583      

Other borrowed funds

    46,895         46,895      
                   

Total

  $ 1,502,378   $   $ 1,502,378   $  
                   
                   

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)


 
  Balance at
December 31,
2012
  Quoted Prices in
Active Markets for
Identical
Instruments
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial assets:

                         

Cash and short term investments

  $ 178,492   $ 178,492   $   $  

Available-for-sale securities

    182,609     20,335     162,274      

Held-to-maturity securities

    60,473         60,473      

Other securities

    6,340     6,340          

Loans held for investment

    1,208,339             1,208,339  

Real estate acquired by foreclosure

    5,961             5,961  
                   

Total

  $ 1,642,214   $ 205,167   $ 222,747   $ 1,214,300  
                   
                   

Financial liabilities:

                         

Deposits

  $ 1,469,207   $   $ 1,469,207   $  

Securities sold under agreements to repurchase

    3,480         3,480      

Other borrowed funds

    15,445         15,445      
                   

Total

  $ 1,488,132   $   $ 1,488,132   $  
                   
                   

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GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

18. PARENT ONLY FINANCIAL STATEMENTS

GREEN BANCORP, INC.
(Parent Company Only)
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2013 AND 2012
(In thousands)

   
 
  2013   2012  

ASSETS

             

CASH AND DUE FROM BANKS

  $ 603   $ 120  

INTEREST-BEARING DEPOSITS IN FINANCIAL INSTITUTIONS

    4,350     5,327  
           

Cash and cash equivalents

    4,953     5,447  

DEFERRED TAX ASSET, Net

    141     155  

INVESTMENT IN GREEN BANK, N.A. 

    193,755     182,295  

OTHER ASSETS

    382     318  
           

TOTAL

  $ 199,231   $ 188,215  
           
           

LIABILITIES AND SHAREHOLDERS' EQUITY

             

LIABILITIES—Other liabilities

  $ 13   $ 4  
           

Total liabilities

    13     4  
           

SHAREHOLDERS' EQUITY:

             

Common stock

    208     207  

Capital surplus

    179,219     178,695  

Retained earnings (deficit)

    19,918     7,308  

Accumulated other comprehensive income, net

    (127 )   2,001  
           

Total shareholders' equity

    199,218     188,211  
           

TOTAL

  $ 199,231   $ 188,215  
           
           

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Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

18. PARENT ONLY FINANCIAL STATEMENTS (Continued)

GREEN BANCORP, INC.
(Parent Company Only)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands)

   
 
  2013   2012   2011  

INCOME—Interest income

  $ 23   $ 27   $ 49  
               

Total income

    23     27     49  
               

EXPENSE—General and administrative

    1,012     851     875  
               

Total expense

    1,012     851     875  
               

LOSS BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY AND INCOME TAXES

    (989 )   (824 )   (826 )

EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY, Net of tax

    13,253     9,079     1,562  
               

INCOME BEFORE INCOME TAXES

    12,264     8,255     736  

BENEFIT FOR INCOME TAXES

    346     280     281  
               

NET INCOME

  $ 12,610   $ 8,535   $ 1,017  
               
               

GREEN BANCORP, INC.
(Parent Company Only)
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands)

   
 
  2013   2012   2011  

NET INCOME

  $ 12,610   $ 8,535   $ 1,017  
               

OTHER COMPREHENSIVE INCOME BEFORE TAX:

                   

Change in unrealized (loss) gain on securities available-for-sale

    (3,227 )   1,810     2,309  
               

Total other comprehensive income

    (3,227 )   1,810     2,309  
               

DEFERRED TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME

    (1,099 )   615     785  

OTHER COMPREHENSIVE INCOME, NET OF TAX

   
(2,128

)
 
1,195
   
1,524
 
               

COMPREHENSIVE INCOME

  $ 10,482   $ 9,730   $ 2,541  
               
               

F-91


Table of Contents


GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

18. PARENT ONLY FINANCIAL STATEMENTS (Continued)

GREEN BANCORP, INC.
(Parent Company Only)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(In thousands)

   
 
  2013   2012   2011  

CASH FLOWS FROM OPERATING ACTIVITIES:

                   

Net income

  $ 12,610   $ 8,535   $ 1,017  

Adjustments to reconcile net income (loss) to net cash used by operating activities:

                   

Equity in undistributed earnings of subsidiary

    (13,253 )   (9,079 )   (1,562 )

Deferred income tax benefit

    14     17     152  

Decrease (increase) in other assets, net

    (64 )   25     (329 )

Increase (decrease) in other liabilities, net

    9     (5 )   (9 )
               

Net cash used by operating activities

    (684 )   (507 )   (731 )
               

CASH FLOWS FROM INVESTING ACTIVITIES:

                   

Capital contributed to subsidiary

        (25,000 )   (10,000 )
               

Net cash used by investing activities

        (25,000 )   (10,000 )
               

CASH FLOWS FROM FINANCING ACTIVITIES:

                   

Proceeds from issuance of common stock, net of issuance expenses        

        24,734      

Common stock issued in connection with the exercise of stock options

    190          
               

Net cash provided by financing activities

    190     24,734      
               

NET INCREASE IN CASH AND CASH EQUIVALENTS

    (494 )   (773 )   (10,731 )

CASH AND CASH EQUIVALENTS:

   
 
   
 
   
 
 

Beginning of year

    5,447     6,220     16,951  
               

End of year

  $ 4,953   $ 5,447   $ 6,220  
               
               

* * * * * *

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4,687,500 Shares

LOGO

Green Bancorp, Inc.

Common Stock



PROSPECTUS



SANDLER O'NEILL + PARTNERS, L.P.

  Jefferies

 

J.P. Morgan   RBC Capital Markets   Keefe, Bruyette & Woods
                                       
A Stifel Company

The date of this prospectus is                        , 2014

        Until                        , 2014, all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to any unsold allotments or subscriptions.


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PART II

Information Not Required In Prospectus

ITEM 13.    Other Expenses of Issuance and Distribution

        The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Green Bancorp, Inc. (the "Registrant") in connection with the issuance and distribution of the securities being registered. All amounts shown are estimates, except the SEC registration, the FINRA filing and the stock exchange listing fees. All fees below are payable by the Registrant.

SEC registration fee

  $ 13,000  

FINRA filing fee

    16,000  

Stock exchange listing fee

    124,000  

Printing and engraving costs

    175,000  

Legal fees and expenses

    1,229,000  

Accountants' fees and expenses

    473,000  

Transfer agent fees

    8,000  

Miscellaneous

    100,000  
       

Total

  $ 2,138,000  
       
       

ITEM 14.    Indemnification of Directors and Officers

        The Registrant's certificate of formation provides that its directors and officers will be indemnified by the Registrant to the fullest extent permitted by the Texas Business Organizations Code and applicable federal law against all expenses incurred in connection with any pending or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, with respect to which such director or officer is a party, or is threatened to be made a party. In addition, the Registrant's certificate of formation provides that its directors and officers will not be personally liable for monetary damages to the Registrant to the fullest extent permitted by the Texas Business Organizations Code.

        The Registrant has entered into indemnification agreements with its officers and directors (each an "indemnitee") pursuant to which they are indemnified as described above and will be advanced costs and expenses subject to the condition that an indemnitee shall reimburse the indemnitor for all the amounts paid if a final judicial determination is made that the indemnitee is not entitled to be so indemnified under applicable law.

        The Registrant also maintains directors' and officers' liability insurance.

        The form of Underwriting Agreement to be filed as Exhibit 1.1 hereto obligates the underwriters to indemnify our directors, officers and controlling persons under limited circumstances against certain liabilities under the Securities Act.

ITEM 15.    Recent Sales of Unregistered Securities

        In the three years preceding the filing of this registration statement, the Registrant has issued the following securities:

    On June 29, 2012, the Registrant issued an aggregate of approximately 2,777,778 shares of its common stock to funds affiliated with Friedman Fleischer & Lowe, LLC, Harvest Partners, LP and Pine Brook Road Partners, LLC for aggregate consideration of $25.0 million in a private placement transaction; and

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    We periodically issue grants of certain equity based awards to our executive officers, directors and other key employees pursuant to our Stock Appreciation Rights Plan and 2010 Stock Option Plan, as amended. Since 2011, we have granted a total of 425,500 options, including 86,292 time based options and 339,208 performance based options, to purchase an aggregate of 425,500 shares of our common stock pursuant to the 2010 Stock Option Plan, as amended, at exercise prices ranging from $9.00 to $10.81 per share, and a total of 57,500 stock appreciation rights pursuant to the Stock Appreciation Rights Plan at exercise prices ranging from $8.17 to $10.81 per share.

        The issuances of securities described in the preceding paragraphs were made in reliance upon the exemption from registration under Section 4(2) or its successor 4(a)(2) of the Securities Act of 1933, as amended, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. The recipients of securities in the transactions exempt under Section 4(2) or its successor 4(a)(2) of the Securities Act represented their intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the stock certificates and instruments issued in such transactions.

ITEM 16.    Exhibits and Financial Statements Schedules

    (a)
    Exhibits

        See the Exhibit Index on the page immediately following the signature page for a list of exhibits filed as part of this Registration Statement on Form S-1, which Exhibit Index is incorporated herein by reference.

    (b)
    Financial Statement Schedules

        All schedules are omitted because the required information is either not present, not present in material amounts or is presented within the consolidated financial statements included in the prospectus that is part of this Registration Statement.

ITEM 17.    Undertakings

        The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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        The undersigned Registrant hereby undertakes that:

              (i)  for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

             (ii)  for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment No. 1 to the Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on July 29, 2014.

  Green Bancorp, Inc.



 

By:

 

/s/ JOHN P. DURIE

      Name:   John P. Durie

      Title:   Chief Financial Officer

        Pursuant to the requirements of the Securities Act, this Amendment No. 1 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated below.

Name
 
Title
 
Date

 

 

 

 

 

 

 
*

Manuel J. Mehos
  Chairman and Chief Executive Officer (Principal Executive Officer)   July 29, 2014

/s/ JOHN P. DURIE

John P. Durie

 

Executive Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer)

 

July 29, 2014

*

Stephen Eisenstein

 

Director

 

July 29, 2014

*

Steven D. Lerner

 

Director

 

July 29, 2014

*

Robert B.B. Smith

 

Director

 

July 29, 2014

*

Cas A. Schneller

 

Director

 

July 29, 2014

 

 

 

 

 

 

 

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Table of Contents

Name
 
Title
 
Date

*

Stefanie L. Shelley

 

Director

 

July 29, 2014
*

Alan M. Silberstein
  Director   July 29, 2014

*

William Spiegel

 

Director

 

July 29, 2014

*By:

 

/s/ JOHN P. DURIE

John P. Durie
Attorney-in-Fact

 

 

 

 

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Table of Contents

EXHIBIT INDEX

Exhibit
Number
  Description
  1.1   Form of Underwriting Agreement

 

2.1

**

Merger Agreement, dated June 28, 2006, by and between Redstone Bank, National Association and Green Bancorp, Inc.†

 

2.2

**

Purchase and Assumption Agreement, dated March 14, 2010, by and between OneWest Bank and Green Bank, N.A.†

 

2.3

**

Purchase and Assumption Agreement, dated June 17, 2011, by and between Main Street Bank and Green Bank, N.A.†

 

2.4

**

Merger Agreement, dated March 14, 2012, by and among Opportunity Merger Sub Corp., Opportunity Bancshares, Inc. and Green Bancorp. Inc.†

 

2.5

**

Agreement and Plan of Merger, dated May 5, 2014, by and among SP Bancorp, Inc., Searchlight Merger Sub Corp. and Green Bancorp, Inc.†

 

3.1

 

Form of Amended and Restated Certificate of Formation of Green Bancorp, Inc.

 

3.2

 

Form of Amended and Restated Bylaws of Green Bancorp, Inc.

 

5.1

 

Opinion of Skadden, Arps, Slate, Meagher & Flom LLP

 

10.1a

**

Executive Employment Agreement, dated April 9, 2010, among Green Bancorp, Inc., Green Bank, N.A. and Manuel J. Mehos

 

10.1b

**

Executive Employment Agreement, dated April 9, 2010, among Green Bancorp, Inc., Green Bank, N.A. and John P. Durie

 

10.1c

**

Executive Employment Agreement, dated April 9, 2010, among Green Bancorp, Inc., Green Bank, N.A. and Geoffrey D. Greenwade

 

10.2a

**

Redstone Bank, N.A. 2004 Stock Option Plan (including form of option agreement)

 

10.2b

**

Green Bancorp, Inc. 2006 Stock Option Plan (including form of option agreement)

 

10.2c

**

Green Bancorp, Inc. 2010 Stock Option Plan, as amended (including form of option agreement)

 

10.2d

**

Green Bancorp, Inc. Stock Appreciation Rights Plan (including form of award)

 

10.2e

**

Green Bancorp, Inc. 2013 Executive Incentive Program

 

10.2f

 

Green Bancorp, Inc. 2014 Omnibus Incentive Plan

 

10.2g

 

Green Bancorp, Inc. Form of Restricted Stock Unit Award Grant Notice

 

10.3

 

Form of Director and Executive Officer Indemnification Agreement

 

10.4

**

Registration Rights Agreement, dated June 30, 2010, by and among Green Bancorp, Inc. and the shareholders named therein

 

10.5

 

Form of Director Nomination Agreement

 

10.6

**

Voting Agreement, dated December 31, 2006, among Green Bancorp, Inc., David C. Shindeldecker and the shareholders named therein

 

10.7

**

Green Bancorp, Inc. Change in Control Severance Plan

 

21.1

**

Subsidiaries of Green Bancorp, Inc.

 

23.1

 

Consent of Deloitte & Touche LLP

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Table of Contents

Exhibit
Number
  Description
  23.2   Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in its opinion filed as Exhibit 5.1 hereto)

 

24.1

**

Powers of Attorney

**
Previously filed.

The schedules and/or exhibits to this agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish copies of such schedules and/or exhibits to the SEC upon request.

II-7




Exhibit 1.1

 

[ · ] Shares

 

Green Bancorp, Inc.

 

Common Stock
par value $0.01 per share

 

Underwriting Agreement

 

[ · ], 2014

 

Sandler O’Neill & Partners, L.P.
Jefferies LLC
c/o Sandler O’Neill & Partners, L.P.
1251 Avenue of the Americas, 6
th  Floor
New York, New York 10020
                                                as representatives of the Underwriters named in Schedule I hereto

 

Ladies and Gentlemen:

 

Green Bancorp, Inc., a Texas corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the “Underwriters”), for whom Sandler O’Neill & Partners, L.P. and Jefferies LLC are acting as Representatives (the “Representatives”), an aggregate of [ · ] shares (the “Firm Shares”) of common stock, par value $0.01 per share, of the Company (the “Common Stock”).  The Company also proposes to sell to the Underwriters all or any part of [ · ] additional shares of Common Stock (the “Optional Shares”) pursuant to the option described in Section 2 hereof (the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the “Shares”).  A purpose of the proposed offering is to support the long-term growth of the Company and Green Bank, N.A. (the “Bank”), a national banking association organized under the laws of the United States and the Company’s wholly-owned subsidiary, as set forth in the Registration Statement (as defined below).

 

The Underwriters have agreed to initially reserve [ · ] of the Firm Shares to be purchased under this Agreement for sale at the public offering price to the Company’s directors, officers, employees and others identified by the Company (collectively, “Directed Share Purchasers”) pursuant to a directed share program (the “Directed Share Program”).  The Firm Shares to be sold under the Directed Share Program by the Underwriters are referred to hereinafter as the “Directed Shares.” Any Directed Shares not purchased through the Directed Share Program will be offered to the public by the Underwriters.

 

The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (No. 333-196982), including the related preliminary prospectus or prospectuses, covering the registration of the Shares under the Securities Act of 1933, as amended (the “1933 Act”). Promptly after execution and delivery of this Agreement, the

 



 

Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission under the 1933 Act (the “1933 Act Regulations”) and paragraph (b) of Rule 424 (“Rule 424(b)”) of the 1933 Act Regulations.  The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to paragraph (b) of Rule 430A is referred to as “Rule 430A Information.” Each prospectus used in connection with the offer of Shares before such registration statement became effective, and any prospectus that omitted the Rule 430A Information that was used in connection with the offer of Shares after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “preliminary prospectus.” Such registration statement, as amended by the amendments thereto, including the exhibits and any schedules thereto, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement.” Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the “Rule 462(b) Registration Statement,” and after such filing the term “Registration Statement” shall include the Rule 462(b) Registration Statement. The final prospectus in the form first furnished to the Representatives for use in connection with the offering of the Shares is herein called the “Prospectus.”

 

For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to be the copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”).

 

1.                                       (a)                                  The Company represents and warrants to each Underwriter as of the date hereof, as of the Applicable Time referred to in Section 1(a)(i) hereof, as of the Closing Time referred to in Section 4(a) hereof, and as of each Date of Delivery (if any) referred to in Section 2 hereof, and agrees with each Underwriter, as follows:

 

(i)                                                         Each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment thereto has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement, any Rule 462(b) Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act and no proceedings for that purpose have been instituted by or are pending before or, to the knowledge of the Company, are threatened by the Commission, and any request on the part of the Commission to the Company for additional information has been complied with.

 

At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any Optional Shares are purchased, at each Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  The General Disclosure Package (as hereinafter defined) as of the Applicable Time did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendments or supplements thereto (including any

 

2



 

prospectus wrapper), at the time the Prospectus or any such amendment or supplement was issued and at the Closing Time (and, if any Optional Shares are purchased, at each Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that the foregoing representations and warranties shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by the Underwriters consists of the information described in Section 8(b) hereof.

 

As used in this subsection and elsewhere in this Agreement:

 

“Applicable Time” means [ · ] p.m. (Eastern Time) on [ · ], 2014.

 

“General Disclosure Package” means (i) the preliminary prospectus dated [ · ], 2014, (ii) the pricing information set forth on Schedule II hereto, and (iii) the “issuer free writing prospectuses”, as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”) identified in Schedule II hereto, considered together.

 

“Issuer-Represented Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433, relating to the Shares that (i) is required to be filed with the Commission by the Company, (ii) is a “road show that is a written communication” within the meaning of Rule 433(d)(8)(ii) or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Shares or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

 

Each individual Issuer-Represented Free Writing Prospectus, when considered together with the General Disclosure Package as of the Applicable Time did not, and as of the Closing Time and each additional Date of Delivery, as the case may be, will not, contain any untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and did not and will not include any information that conflicted or will conflict with the information contained in the Registration Statement, any preliminary prospectus or the Prospectus that, in each case, has not been superseded or modified; provided , however , that this representation and warranty shall not apply to  any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by the Underwriters consists of the information described as such in Section 8(b) hereof.

 

(ii)                                                      Any preliminary prospectus, the Prospectus and each Issuer Represented Free Writing Prospectus when filed, if filed by electronic transmission, pursuant to EDGAR (except as may be permitted by Regulation S-T under the 1933 Act), was identical to the copy thereof delivered to the Representatives for use in connection with the offer and sale of the Shares.

 

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(iii)                                                   From the time of initial confidential submission of the Registration Statement to the Commission through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the 1933 Act (an “Emerging Growth Company”).

 

(iv)                                                  The financial statements, including the related schedules and notes, filed with the Commission as a part of the Registration Statement, the General Disclosure Package and the Prospectus (the “Financial Statements”) present fairly in all material respects the consolidated financial position of the Company and its subsidiaries as of and at the dates indicated and the consolidated results of their operations and consolidated cash flows of the Company and its subsidiaries for the periods specified.  Such Financial Statements, unless otherwise noted therein, have been prepared in conformity with generally accepted accounting principles in effect in the United States (“GAAP”) applied on a consistent basis throughout the periods involved. No other financial statements or supporting schedules are required to be included in the Registration Statement, the General Disclosure Package or the Prospectus. The consolidated statement of income data, balance sheet data and earnings per share data for the three fiscal years ended December 31, 2013 as set forth in the Prospectus under the caption “Summary Consolidated Financial Data” and “Selected Consolidated Financial Data” fairly present in all material respects the information therein on a basis consistent with that of the audited consolidated financial statements contained in the Registration Statement, the General Disclosure Package and the Prospectus.  To the extent applicable, all disclosures contained in the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply in all material respects with Regulation G of the Securities Exchange Act of 1934, as amended (“1934 Act”), the rules and regulations of the Commission under the 1934 Act (the “1934 Act Regulations”) and Item 10 of Regulation S-K, to the extent applicable.

 

(v)                                                     Deloitte and Touche LLP, the independent registered public accounting firm that audited the financial statements of the Company and its subsidiaries that are included in the Registration Statement and the Prospectus, is an independent registered public accounting firm as required by the 1933 Act and the 1933 Act Regulations.

 

(vi)                                                  The statistical and market related data contained in the Registration Statement, the General Disclosure Package and the Prospectus are based on or derived from sources which the Company reasonably believes are reliable and accurate.

 

(vii)                                               This Agreement has been duly authorized, executed and delivered by the Company.

 

(viii)                                            Since the date of the most recently dated audited consolidated balance sheet contained in the Registration Statement, the General Disclosure Package and the Prospectus, except as described or contemplated in the Registration Statement, the General Disclosure Package and the Prospectus, (A) the Company and its subsidiaries, considered as one enterprise, have not sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, and there has not been any material change in the capital stock or long-term debt of the Company and its subsidiaries or any material adverse change, or any development known to the Company that is reasonably expected to cause a prospective

 

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material adverse change, in or affecting the general affairs, management, earnings, business, properties, assets, consolidated financial position, business prospects, consolidated shareholders’ equity or consolidated results of operations of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company or any of its subsidiaries which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

 

(ix)                                                  The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all mortgages, pledges, security interests, claims, restrictions, liens, encumbrances and defects except such as are described generally in the Registration Statement, the General Disclosure Package and the Prospectus or such as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, except where the invalidity or unenforceability of any such lease would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(x)                                                     The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (“BHCA”), and has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Texas, with the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement.  The Company is duly qualified as a foreign corporation to transact business and is in good standing under the laws of each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect.

 

(xi)                                                  Each subsidiary of the Company has been duly incorporated or organized and is validly existing as a corporation, limited liability company, trust company, statutory business trust, limited partnership or national banking association in good standing under the laws of the jurisdiction of its incorporation or organization, has the power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and is duly qualified as a foreign entity to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The activities of the Company’s subsidiaries are permitted of subsidiaries of a bank holding company under applicable law and the rules and regulations of the Board of Governors of the Federal Reserve System (the “FRB”) set forth in Title 12 of the Code of Federal Regulations. Except as otherwise disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, all of the issued and outstanding capital stock, limited liability company units or limited partnership units of each

 

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such subsidiary have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity.  There are no outstanding rights, warrants or options to acquire or instruments convertible into or exchangeable for any capital stock or equity securities of any of the Company’s subsidiaries. None of the outstanding shares of capital stock, limited liability company units or limited partnership units of any subsidiary of the Company was issued in violation of the preemptive or similar rights of any securityholder of such subsidiary.  Except as otherwise disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, no subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distributions on such subsidiary’s capital stock or common securities or equity interests, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company.  The only subsidiaries of the Company are the subsidiaries listed on Schedule III hereto.

 

(xii)                                               The Company has an authorized capitalization as set forth in the Registration Statement, the General Disclosure Package and the Prospectus under the heading “Capitalization,” and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and have been issued in compliance with applicable federal and state securities laws. None of the outstanding shares of capital stock of the Company were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. The description of the Company’s stock option, stock bonus, restricted stock and other stock plans or compensation arrangements and the options, restricted stock or other rights granted thereunder, set forth in the Registration Statement, the General Disclosure Package and the Prospectus, accurately and fairly presents, in all material respects, the information required to be described therein with respect to such plans, arrangements, options and rights.

 

(xiii)                                            The Shares to be issued and sold by the Company to the Underwriters hereunder have been duly authorized and, when issued and delivered against payment therefor as provided herein, will be validly issued and fully paid and non-assessable and will conform to the description of the capital stock contained in the Registration Statement, the General Disclosure Package and the Prospectus and the issuance of the Shares is not subject to the preemptive or other similar rights of any securityholder of the Company.

 

(xiv)                                           Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus and as have been complied with or waived, (A) there are no outstanding rights (contractual or otherwise), warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of capital stock of or other equity interest in the Company and (B) there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the 1933 Act or otherwise register any securities of the Company owned or to be owned by such person.

 

(xv)                                              The issue and sale of the Shares by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated have been duly authorized by all necessary corporate action

 

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and do not and will not, whether with or without the giving of notice or passage of time or both, (A) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default or result in a Repayment Event (as defined below) under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (B) result in any violation of the provisions of the certificate of formation, articles of association or other organizational documents (as applicable) or bylaws of the Company or any of its subsidiaries, or (C) result in any violation of any statute or any order, rule or regulation of any federal, state, local or foreign court, arbitrator, regulatory authority or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties (each a “Governmental Entity”), except for in the case of clauses (A) and (C) those conflicts, breaches, violations, defaults or Repayment Events that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; no consent, approval, authorization, order, registration or qualification of or with any such court or Governmental Entity is required for the issue and sale of the Shares, the performance by the Company of its obligations hereunder or the consummation by the Company of the transactions contemplated by this Agreement, except such as have been already obtained or as may be required under the 1933 Act, the 1933 Act Regulations, the rules and regulations of the Nasdaq Stock Market (“Nasdaq”) or the Financial Industry Regulatory Authority (“FINRA”) and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters.  As used herein, a “Repayment Event” means any event or condition that gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any subsidiary prior to its scheduled maturity.

 

(xvi)                                           Neither the Company nor any of its subsidiaries is (A) in violation of its certificate of formation, articles of association, bylaws or other similar organizational documents or (B) in breach, violation or default (with or without notice or lapse of time or both) of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or to which any of the property or assets of the Company or any subsidiary is subject except for such breaches, violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(xvii)                                        The statements set forth in the Registration Statement, the General Disclosure Package and the Prospectus under the caption “Description of Capital Stock,” insofar as they purport to constitute a summary of the terms of the capital stock of the Company, and under the captions “Regulation and Supervision” and “Underwriting,” insofar as they purport to summarize the provisions of the laws and documents referred to therein, are accurate summaries in all material respects.

 

(xviii)                                     Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company and its subsidiaries have, during all periods for which financial statements are presented in the Registration Statement, conducted and are

 

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conducting their respective businesses in compliance in all material respects with all federal, state, local and foreign statutes, laws, rules, regulations, decisions, directives and orders of any Governmental Entity applicable to them, (including, without limitation, all regulations and orders of, or agreements with, the FRB, the Office of the Comptroller of the Currency (the “OCC”), and the Federal Deposit Insurance Corporation (the “FDIC”), and the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, all other applicable fair lending laws or other laws relating to discrimination and the Bank Secrecy Act and Title III of the USA Patriot Act), and neither the Company nor any of its subsidiaries has received any written or oral communication from any Governmental Entity asserting that the Company or any of its subsidiaries is not in material compliance with any statute, law, rule, regulation, decision, directive or order.

 

(xix)                                           There are no legal or governmental actions or suits, investigations, inquiries or proceedings before or by any court or Government Entity, now pending or, to the knowledge of the Company, threatened or contemplated, to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject (A) that is required to be disclosed in the Registration Statement by the 1933 Act or the 1933 Act Regulations and is not disclosed therein or (B) which, if determined adversely to the Company or any of its subsidiaries, would be reasonably expected to result, individually or in the aggregate, in a Material Adverse Effect; all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to their respective businesses, are not reasonably expected to result, individually or in the aggregate, in a Material Adverse Effect and there are no contracts or documents of the Company or any of its subsidiaries which are required to be described in the Registration Statement or to be filed as exhibits thereto by the 1933 Act or the 1933 Act Regulations which have not been so described or filed.

 

(xx)                                              Each of the Company and its subsidiaries possesses all permits, licenses, approvals, consents and other authorizations of (collectively, “Governmental Licenses”), and has made all filings, applications and registrations with, all Governmental Entities necessary under applicable law to permit the Company or such subsidiary to conduct the business now operated by the Company or such subsidiary, except for any of the foregoing that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  All of the Governmental Licenses currently held by the Company or any of its subsidiaries are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, individually or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses. Neither the Company nor any of its subsidiaries has failed to file with applicable regulatory authorities any statement, report, information or form required by any applicable law, regulation or order, except where the failure to so file in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; all such filings were in compliance in all respects with applicable laws when filed and no deficiencies have been asserted

 

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by any regulatory commission, agency or authority with respect to any such filings or submissions, except where the failure to so comply or the asserted deficiency would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

(xxi)                                           Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus and except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state or local statute, law, rule, regulation, ordinance or code or any applicable judicial or administrative interpretation thereof (including any judicial or administrative order, consent, decree or judgment) relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) each of the Company and its subsidiaries has all permits, authorizations and approvals required to be held by it under any applicable Environmental Laws and is in compliance with the requirements of each such permit, authorization and approval held by it, (C) there are no pending or, to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries, and (D) to the knowledge of the Company, there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or Governmental Entity, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws.

 

(xxii)                                        The Company and each of its subsidiaries own or possess adequate rights to use or can acquire on reasonable terms ownership or rights to use all patents, patent applications, patent rights, licenses, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and know-how (including trade secrets and other unpatented and/or unpatenable proprietary or confidential information, systems or procedures and excluding generally commercially available “off the shelf” software programs licensed pursuant to shrink wrap or “click and accept” licenses) (collectively, “Intellectual Property”) necessary for the conduct of their respective businesses, except where the failure to own or possess such rights would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, and have not received any notice of any claim of infringement or conflict with, any such rights of others or any facts or circumstances that would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, except where such infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, individually or in the aggregate, would not be reasonably expected to result in a Material Adverse Effect.

 

(xxiii)                                     No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries on the one hand, and the directors, officers, shareholders,

 

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customers or suppliers of the Company or any of its subsidiaries on the other hand, which is required to be described in the Registration Statement and the Prospectus by the 1933 Act or the 1933 Act Regulations which has not been so described.

 

(xxiv)                                    The Company is not currently, and immediately after giving effect to the offering and sale of the Shares as contemplated herein and the application of the net proceeds as described in each of the Registration Statement, the General Disclosure Package and the Prospectus, will not be, an “investment company,” as such term is defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

 

(xxv)                                       Neither the Company nor any of its subsidiaries, nor any controlled affiliates of the Company or its subsidiaries, has taken or will take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.

 

(xxvi)                                    Neither the Company, its subsidiaries nor any director, officer or employee of the Company or any of its subsidiaries, nor, to the knowledge of the Company, any agent, affiliate or other persons acting on behalf of the Company or any of its subsidiaries has (A) used any corporate funds of the Company or any of its subsidiaries for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (B) made or taken an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment to any foreign or domestic government or regulatory official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office, from corporate funds of the Company or any of its subsidiaries, (C) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery or anti-corruption laws, (D) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment, (E) violated or is in violation of the USA Patriot Act and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency implementing the provisions of the USA Patriot Act; or (F) materially violated applicable privacy of customer information requirements contained in any federal or state privacy act laws and regulations applicable to the Company or such subsidiary. The Company has instituted and maintains policies and procedures designed to ensure compliance with applicable anti-bribery or anti-corruption laws.

 

(xxvii)                                 The Company and the Bank maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management’s general or specific authorization, and (D) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and each of its subsidiaries maintain a system of internal control

 

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over financial reporting (as such term is defined in Rule 13a-15(f) of the 1934 Act), that complies with the requirements of the 1934 Act, as applicable to them; except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (X) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (Y) no change in the Company’s internal control over financial reporting that has materially affected adversely, or is reasonably likely to materially affect adversely, the Company’s internal control over financial reporting.

 

(xxviii)                              Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, neither the Company nor any of its subsidiaries is subject or is party to, or has received any notice that any of them may become subject or party to, any investigation with respect to, any corrective, suspension or cease-and-desist order, agreement, consent agreement, memorandum of understanding or other regulatory enforcement action, proceeding or order with or by, or is a party to any commitment letter, or is subject to any directive by, or has been a recipient of any supervisory letter from any Regulatory Agency (as defined below) that, in each case, currently relates to or materially restricts in any respect the conduct of their business or that in any manner relates to capital adequacy, credit policies or management, nor at the request or direction of any Regulatory Agency has the Company or any of its subsidiaries adopted any board resolution that would reasonably be expected to result in a Material Adverse Effect (each, a “Regulatory Agreement”), nor has the Company or any of its subsidiaries been advised in writing by any Regulatory Agency that such Regulatory Agency is considering issuing or requesting any such Regulatory Agreement or any such Regulatory Agreement is pending or, to the knowledge of the Company, threatened.  Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company and its subsidiaries are each in compliance with any Regulatory Agreements, and there is no unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company or any of its subsidiaries which, in the reasonable judgment of the Company, currently results in or is reasonably expected to result in a Material Adverse Effect.  As used herein, the term “Regulatory Agency” means any Governmental Entity having supervisory or regulatory authority with respect to the Company or any of its subsidiaries, including, but not limited to, any federal or state agency charged with the supervision or regulation of depositary institutions or holding companies of depositary institutions, or engaged in the insurance of depositary institution deposits.

 

(xxix)                                    Each “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company and its subsidiaries is in compliance with ERISA, except where the failure to be in compliance with ERISA would not result in a Material Adverse Effect. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their “ERISA Affiliates” (as defined below). “ERISA Affiliate” means, with respect to the Company or a subsidiary, any member of any group of organizations described in Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company or such subsidiary is a member. No “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their

 

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ERISA Affiliates, if such “employee benefit plan” were terminated, would have any material “amount of unfunded benefit liabilities” (as defined under ERISA). None of the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (A) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (B) Sections 412, 4971 or 4975 of the Code. Each “employee benefit plan” established or maintained by the Company or its subsidiaries that is intended to be qualified under Section 401(a) of the Code has received a favorable determination or approval letter from the Internal Revenue Service regarding its qualification under such section and, to the knowledge of the Company, nothing has occurred whether by action or failure to act, which would cause the loss of such qualification.

 

(xxx)                                       The Company and its subsidiaries, taken as a whole, are insured against such losses and risks and in such amounts as the Company reasonably believes are prudent and customary in the business in which they are engaged and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to obtain insurance coverage from insurers similar to their current insurers as may be necessary to continue its business at a cost that would not be reasonably expected to have a Material Adverse Effect.

 

(xxxi)                                    Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company, or the Underwriters, for a brokerage commission, finder’s fee or other like payment in connection with the sale of the Shares.

 

(xxxii)                                 The Company and its subsidiaries have (i) filed all material federal, state and foreign income and franchise tax returns that they are required to have filed or have properly requested extensions of the deadline for the filing therefor, and all such tax returns as filed are true, complete and correct in all material respects and (ii) have paid all taxes required to be paid by any of them except for any such tax, assessment, fine or penalty that is currently being contested in good faith by appropriate actions and except for such taxes, assessments, fines or penalties the nonpayment of which would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.  To the extent required by GAAP, the Company has made adequate charges, accruals and reserves in the applicable Financial Statements referred to in Section 1(a)(iv) above in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any of its subsidiaries has not been finally determined.

 

(xxxiii)                              No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent, which would reasonably be expected to result in a Material Adverse Effect.

 

(xxxiv)                             Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the operations of the Company and its subsidiaries are and have been conducted at all times in compliance in all respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, money laundering statutes applicable to the Company and its subsidiaries, the rules and regulations thereunder and any related or similar rules, regulations or

 

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guidelines, issued, administered or enforced by any governmental agency (collectively, for purposes of this section, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

(xxxv)                                The Company has not distributed and, prior to the later to occur of (i) the Closing Time and (ii) completion of the distribution of the Shares, will not distribute any prospectus (as such term is defined in the 1933 Act and the 1933 Act Regulations) in connection with the offering and sale of the Shares other than the Registration Statement, any preliminary prospectus, the Prospectus or other materials, if any, permitted by the 1933 Act or the 1933 Act Regulations and approved by the Representatives.

 

(xxxvi)                             No forward-looking statement (within the meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act) contained in the Registration Statement, the General Disclosure Package, the Prospectus or any Issuer-Represented Free Writing Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

(xxxvii)                          Any and all material swaps, caps, floors, futures, forward contracts, option agreements (other than employee stock options and restricted stock) and other derivative financial instruments, contracts or arrangements, whether entered into for the account of the Company or one of its subsidiaries or for the account of a customer of the Company or one of its subsidiaries, were entered into in the ordinary course of business and in accordance in all material respects with applicable laws, rules, regulations and policies of all applicable regulatory agencies and with counterparties believed to be financially responsible at the time of execution of such instruments, contracts or arrangements.  The Company and each of its subsidiaries have duly performed all of their obligations thereunder to the extent that such obligations to perform have accrued, and there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder, except for such failures to perform, breaches, violations, defaults, allegations or assertions that, individually or in the aggregate, would not result in a Material Adverse Effect.

 

(xxxviii)                       The Company is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the rules and regulations of the Commission thereunder applicable to the Company and as to which compliance is currently required by the Company.

 

(xxxix)                             The Shares have been approved for listing, subject to official notice of issuance and evidence of satisfactory distribution, on Nasdaq Global Select Market, and the Company has taken no action designed to, or likely to have the effect of, delisting the Shares from Nasdaq, nor has the Company received any notification that the Commission or Nasdaq Global Select Market is contemplating terminating such registration or listing.

 

(xl)                                                  Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent or employee of the Company or any of its subsidiaries or any agent or other person associated with or acting on behalf of the Company or any of its subsidiaries, (A) is currently subject to any sanctions administered or enforced by the

 

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U.S. Governmental Entity (including, without limitation, the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), or the U.S. Department of State), the United Nations Security Council or other relevant sanctions authority (collectively, “Sanctions”); or (B) is located, organized or resident in a country or territory that is the subject or target of Sanctions, including, without limitation, Burma/Myanmar, Cuba, Iran, North Korea, Sudan and Syria (each, a “Sanctioned Country”). The Company will not, directly or indirectly, use the proceeds of the offering contemplated hereby, or lend, contribute or otherwise make available such proceeds to any of its subsidiaries, joint venture partner or other person or entity, (x) for the purpose of financing or facilitating the activities of any person, or engage in dealings or transaction with any person, in any country or territory, currently subject to any Sanctions, (y) to finance or facilitate any activities of, or business in, any Sanctioned Country or (z) in any manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, initial purchaser, advisor, investor or otherwise) of Sanctions. For the past five years, neither the Company nor any subsidiary of the Company have knowingly engaged in or are now knowingly engaged in any dealings or transactions with any persons that at the time of such dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country.

 

(xli)                                               Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, there are no material off-balance sheet transactions, arrangements, obligations (including contingent obligations), or any other relationships with unconsolidated entities or other persons, that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(xlii)                                                                         The Company has not engaged in any oral or written communication with potential investors in the offering contemplated hereby in reliance on Section 5(d) of the 1933 Act.

 

(xliii)                                         No consent, approval, authorization, order, registration or qualification of or with any Governmental Entity, other than such as have been obtained, is required in connection with the offering of the Directed Shares in any jurisdiction where the Directed Shares are being offered; the Company has not offered, or caused the Underwriters to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (a) any client of the Company to alter the client’s level or type of business with the Company or (b) a trade journalist or publication to write or publish favorable information about the Company or its products; the Company has identified the Directed Share Purchasers and instructed the Underwriters to sell Shares to such Directed Share Purchasers solely for the benefit of the Company and its subsidiaries.

 

(b)                                  The Bank represents and warrants to each Underwriter as of the date hereof, as of the Applicable Time referred to in Section 1(a)(i) hereof, as of the Closing Time referred to in Section 4(a) hereof, and as of each Date of Delivery (if any) referred to in Section 2 hereof, and agrees with each Underwriter, as follows:

 

(i)                                                         The Bank has been duly organized and is validly existing as a national banking association under the laws of the United States, with the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the

 

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Prospectus and to enter into and perform its obligations under this Agreement. The Bank is the only insured depository institution subsidiary of the Company, and the Bank is a member in good standing of the Federal Home Loan Bank System. The Bank is duly qualified to transact business in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect. The activities of the Bank are permitted under the laws of the United States and the regulations issued by the OCC, the deposit accounts in the Bank are insured up to the applicable limits by the FDIC and no proceeding for the termination or revocation of such insurance is pending or, to the knowledge of the Bank, threatened against the Bank.  The Bank does not have any subsidiaries.

 

(ii)                                                      The Bank is in not violation of its articles of association or other organizational documents (as applicable) or bylaws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, note, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound or to which any of the property or assets of the Bank is subject except for such defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(iii)                                                   This Agreement has been duly authorized, executed and delivered by the Bank.

 

(iv)                                                  The execution, delivery and performance of this Agreement by the Bank and the compliance by the Bank with all of the provisions of this Agreement and the consummation of the transactions herein contemplated do not and will not, whether with or without the giving of notice or passage or time or both, conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default or result in a Repayment Event under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Bank is a party or by which the Bank is bound or to which any of the property or assets of the Bank is subject, nor will such action result in any violation of the provisions of the articles of incorporation or bylaws of the Bank or any statute or any order, rule or regulation of any Governmental Entity having jurisdiction over the Bank or any of their properties, except for those conflicts, breaches, violations, defaults or Repayment Events that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(v)                                                     The Bank is not and, immediately after giving effect to the consummation of the transactions contemplated herein, will not be an “investment company,” as such term is defined in the Investment Company Act.

 

(vi)                                                  At March 31, 2014, the Bank met or exceeded the standards to be considered “well capitalized” under the OCC’s regulatory framework for prompt corrective action.

 

(d)                                  Any certificate signed by an officer of the Company or the Bank and delivered to the Representatives or to counsel for the Underwriters in connection with the offering of Shares shall be deemed to be a representation and warranty by the Company and/or the Bank, as applicable, to the Underwriters as to the matters set forth therein.

 

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2.                                       (a)                                  On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each of the  Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase from the Company, at a purchase price per share of $[ · ] (the “Purchase Price”), the number of Firm Shares set forth in Schedule I opposite the name of such Underwriter, plus any additional number of Firm Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 9 hereof, bears to the total number of Firm Shares, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional securities. It is understood that [ · ] Firm Shares initially will be reserved by the Underwriters for offer and sale to the Directed Share Purchasers upon the terms and conditions set forth in the Prospectus and in accordance with the rules and regulations of FINRA. Under no circumstances will the Representatives or any Underwriter be liable to the Company or to any Directed Share Purchaser for any action taken or omitted to be taken in good faith in connection with the administration of such Directed Share Program. Notwithstanding the foregoing, to the extent that any Directed Shares are not affirmatively reconfirmed for purchase by any Directed Share Purchaser listed on Schedule IV hereto on or immediately after the date of this Agreement (the “Unsold Directed Shares”), such Unsold Directed Shares may be offered by the Underwriters to the public as part of the public offering contemplated herein.

 

(b)                                  In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional [ · ] shares of Common Stock, as set forth in Schedule I, at the Purchase Price. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time upon notice by the Representatives to the Company setting forth the aggregate number of Optional Shares as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Optional Shares. Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representatives, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the Optional Shares, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Optional Shares then being purchased which the number of Firm Shares set forth in Schedule I opposite the name of such Underwriter, plus any additional number of Firm Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 9 hereof, bears to the total number of Firm Shares, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional securities.

 

(c)                                   It is understood that each Underwriter has authorized the Representatives, for such Underwriter’s account, to accept delivery of, receipt for, and make payment of the purchase price for, the Firm Shares and the Optional Shares, if any, which such Underwriter has agreed to purchase. Sandler O’Neill & Partners, L.P. and Jefferies LLC, each individually and not as Representatives of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Firm Shares or the Optional Shares, if any, to be purchased by any Underwriter whose funds have not been received by Sandler O’Neill & Partners, L.P. and Jefferies

 

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LLC by the Closing Time or the relevant Date of Delivery but such payment shall not relieve such Underwriter from its obligations hereunder.

 

3.                                       Upon the authorization by the Representatives of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus.

 

4.                                       (a)                                  The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as the Representatives may request upon at least forty-eight hours prior notice to the Company shall be delivered by or on behalf of the Company to the Representatives, through the facilities of DTC, for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same day) funds to the account specified by the Company in the case of Firm Shares or Optional Shares sold by the Company to the Representatives at least forty-eight hours in advance. The Company will cause any certificates representing the Shares to be purchased at the Closing Time or a Date of Delivery that are requested by the Representatives in accordance with this Section 4(b) to be made available for checking and packaging at least twenty four hours prior to the Closing Time or the Date of Delivery with respect thereto. The time and date of such delivery and payment shall be, with respect to the Firm Shares, 10:00 A.M. (Eastern time) on [ · ], 2014 (such time and date of payment and delivery being herein called “Closing Time”) or such other time and date as the Representatives and the Company may agree.

 

The documents to be delivered at Closing Time by or on behalf of the parties hereto, including the cross receipt for the Shares, will be delivered at the offices of Bracewell & Giuliani LLP, 711 Louisiana, Suite 2300, Houston, Texas 77002, or at such other place as shall be agreed upon by the Representatives and the Company, at the Closing Time, or such other time and date as the Representatives and the Company may agree.

 

(b)                                        In addition, in the event that any or all of the Optional Shares are purchased by the Underwriters, payment of the purchase price for such Optional Shares shall be made by wire transfer of Federal (same day) funds as set forth in Section 4(a) above and delivery of certificates for such Optional Shares shall be made at the above mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company on each Date of Delivery as specified in the notice from the Representatives to the Company.

 

5.                                       The Company further covenants and agrees with each of the Underwriters as follows:

 

(a)                                        The Company will prepare the Prospectus in a form approved by the Representatives (such approval not to be unreasonably withheld or delayed) and file such Prospectus pursuant to Rule 424(b) under the 1933 Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the 1933 Act and will make no further amendment or any supplement to the Registration Statement or the Prospectus which shall be reasonably disapproved by the Representatives as soon as reasonably practicable after reasonable notice thereof.  The Company will advise the Representatives, as soon as reasonably practicable after it receives notice thereof, of the time when any amendment to the

 

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Registration Statement has been filed with the Commission or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed with the Commission and furnish the Representatives with copies thereof and will advise the Representatives, as soon as reasonably practicable after it receives notice thereof, of the issuance by the Commission of any stop order with respect to the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, any Issuer-Represented Free Writing Prospectus or the Prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement, any preliminary prospectus, any Issuer-Represented Free Writing Prospectus or the Prospectus or for additional information, and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any preliminary prospectus, any Issuer-Represented Free Writing Prospectus or Prospectus or suspending any such qualification, promptly use its reasonable best efforts to obtain the withdrawal of such order as soon as reasonably practicable.

 

(b)                                        The Company will give the Representatives notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), or any amendment, supplement or revision to either any preliminary prospectus (including the prospectus included in the Registration Statement at the time it became effective) or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall reasonably object.

 

(c)                                         The Company has furnished or will deliver upon request to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge upon request, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits).  The copies of the Registration Statement and each amendment thereto furnished to the Representatives will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

 

(d)                                        As soon as reasonably practicable from time to time, the Company will take such action as the Representatives may reasonably request to qualify the Shares for offering and sale under the securities laws of such states and other jurisdictions as the Representatives may reasonably request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required (i) to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction or (ii) subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.  In each state or other jurisdiction in which the Shares have been so qualified, the Company will file such statements and reports as may be required by the laws of such state or other jurisdiction to continue such qualification in effect until the completion of the distribution of the Shares. The Company will also supply the Representatives with such information as is

 

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necessary for the determination of the legality of the Shares for investment under the laws of such jurisdiction as the Representatives may reasonably request.

 

(e)                                         During the period when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Shares, the Company will furnish the Underwriters with copies of the Prospectus (as amended or supplemented) in New York City in such quantities as the Representatives may from time to time reasonably request.

 

(f)                                          The Company will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and in the Prospectus. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Shares, any event shall occur or condition shall exist as a result of which it is necessary, in the reasonable opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the reasonable opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 5(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Company will furnish to the Representatives such number of copies of such amendment or supplement as the Representatives may reasonably request. If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has promptly notified or will promptly notify the Representatives and has promptly amended or will promptly amend or supplement, at its own expense, such Issuer-Represented Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

 

(g)                                         The Company will make generally available to its securityholders as soon as practicable, an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the 1933 Act and the 1933 Act Regulations (including, at the option of the Company, Rule 158).

 

(h)                                        During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus (the “Lock-up Period”), the Company will not directly or indirectly, offer, sell, contract or grant any option to sell, pledge, transfer or establish an open “put equivalent position” within the meaning of Rule 16a-l(h) under the 1934 Act, or otherwise dispose of or transfer, or announce the offering of, or file a registration statement under the 1933 Act in respect of, except as provided hereunder, any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock

 

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or any such substantially similar securities, without the Representatives’ prior written consent.  The foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, (C) any grants of stock options, restricted stock, notional units or other equity securities to employees, directors or contractors granted under any existing equity incentive plans of the Company disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, issuances of Common Stock pursuant to the exercise, conversion or vesting of such equity securities or the exercise, conversion or vesting of any other employee stock options or units outstanding on the date hereof or (D) the issuance of Common Stock or other securities (including securities convertible into or exchangeable or exercisable for Common Stock or other securities) issued as consideration for the acquisition by the Company or any of its subsidiaries of the securities, business, properties or other assets of another person or entity; provided that the persons receiving such Common Stock or other securities enter into a written agreement substantially similar to the form of lock-up attached hereto as Exhibit A. If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up agreement executed and delivered under Section 7(h) for an executive officer or director of the Company and the Representatives provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, upon the Representatives’ request, the Company agrees to announce or cause to be announced the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver. Additionally, the Company may file with the Commission registration statements on Form S-8 for any of the plans set forth in clause (B) and (C) above during the restrictive period set forth in this Section 5(h).

 

(i)                                            The Company will use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Registration Statement, the General Disclosure Package and the Prospectus under the caption “Use of Proceeds.”

 

(j)                                           If the Company elects to rely on Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 8:00 a.m., Eastern time on the business day next succeeding the date of this Agreement or such other time as shall be reasonably agreed among the Company and the Representatives, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the 1933 Act.

 

(k)                                        The Company will use its reasonable best efforts to list for quotation and to maintain the listing of the Common Stock (including the Shares) on NASDAQ Global Select Market.

 

(l)                                      Until completion of the distribution of the Shares, the Company will file (i) all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations and (ii) such information on Form 10-K or Form 10-Q as may be required by Rule 463 under the 1933 Act.

 

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(m)                              Unless it obtains the prior written consent of the Representatives, the Company will not make any offer relating to the Shares that would constitute an Issuer-Represented Free Writing Prospectus and has complied and will comply with the requirements of Rule 433 applicable to any Issuer-Represented Free Writing Prospectus, including, where and when required, timely filing with the Commission, legending and record keeping. The Representatives will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule II hereto, if any. The Company represents that it has treated or agrees that it will treat each Shareholder Permitted Free Writing Prospectus to which it has consented as an “issuer free writing prospectus,” as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable to any Shareholder Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping.

 

(n)                                  The Company will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock or any other reference security, whether to facilitate the sale or resale of the Shares or otherwise, and the Company will, and shall use its commercially reasonable efforts to cause each of its controlled affiliates to, comply with all applicable provisions of Regulation M with respect to the Shares.

 

(o)                                  During the Lock-up Period, the Company will enforce all existing agreements between the Company and any of its securityholders that prohibit the sale, transfer, assignment, pledge or hypothecation of any of the Company’s securities. In addition, the Company will direct the transfer agent to place stop transfer restrictions upon any such securities of the Company that are bound by such existing “lock-up” agreements for the duration of the periods contemplated in such agreements, including, without limitation, “lock-up” agreements entered into by the Company’s officers and directors, Directed Share Purchasers and certain shareholders pursuant to Section 7(h).

 

(p)                                  The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (a) completion of the distribution of the Shares within the meaning of the 1933 Act and (b) 15 days following completion of the restricted period referred to in Section 5(h).

 

( q )                                  The Company will comply, and will furnish such information as may be required and otherwise cooperate with the Underwriters to enable the Underwriters to comply, with all applicable securities and other applicable laws, rules and regulations, including, without limitation, the rules and regulations of Nasdaq and FINRA, in each jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program.

 

6.                                       The Company covenants and agrees with the Representatives that the Company will pay or cause to be paid the following, whether or not the transactions contemplated herein are completed: (i) the cost of obtaining all FINRA and bank regulatory approvals, including any required FINRA fees, including the filing fees incident thereto and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith, provided, however, that all such counsel fees and disbursements shall not exceed $25,000; (ii)  all fees and disbursements of the Company’s counsel and accountants in connection with the registration of the Shares under the

 

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1933 Act and all other expenses in connection with the preparation, printing and filing of amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities as provided in Section 5(d) hereof, including the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey, provided, however, that all such counsel fees and disbursements shall not exceed $10,000; (iv) all fees and expenses in connection with listing the Shares on NASDAQ Global Select Market; (v) the cost of printing or reproducing any agreement among Underwriters, this Agreement, the Blue Sky survey, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and charges of any transfer agent or registrar; (viii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Shares, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of aircraft and other transportation chartered in connection with the road show with the consent of the Company; (ix) any stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program ; and (x)  all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that except as provided in this Section, Section 7 and Section 8 hereof, the Underwriters will pay all of their expenses, including the fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them, and any advertising expenses for any ads they place.

 

7.                                       The obligations of the Underwriters hereunder to purchase and pay for the Shares as provided herein on the Closing Time and, with respect to the Optional Shares, each additional Date of Delivery with respect to the Optional Shares being purchased, shall be subject, in its discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Closing Time and, with respect to the Optional Shares, at and as of each Date of Delivery, true and correct, the condition that the Company shall have performed all of their respective obligations hereunder theretofore to be performed, and the following additional conditions:

 

(a)                                  The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the 1933 Act Regulations and in accordance with Section 5(a) hereof (or a post-effective amendment shall have been filed and declared effective in accordance with the requirements of Rule 430A), if the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have been filed with the Commission on the date of this Agreement and shall have become effective upon filing, no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or, to the Company’s knowledge, threatened by the Commission, and all requests for additional information on the part of the Commission shall have been complied with, and FINRA shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements.

 

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(b)                                  At the Closing Time, the Representatives shall have received the opinions, dated as of Closing Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Company, in form and substance reasonably satisfactory to counsel for the Underwriters, to the effect set forth in Exhibit C hereto. Such counsel may also state that, insofar as such opinions involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials.

 

(c)                                   At the Closing Time, the Representatives shall have received the opinion, dated as of Closing Time, of Bracewell & Giuliani LLP, counsel for the Underwriters. The opinion shall address the matters as the Representatives may reasonably request. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials.

 

(d)                                  On the date of this Agreement, at the Closing Time and at each Date of Delivery, Deloitte & Touche LLP shall have furnished to the Representatives a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to the Representatives, containing statements and information of the type ordinarily included in accountants “comfort letters” to underwriters with respect to the financial statements of the Company and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus, provided that the letter delivered as of the Closing Time or the additional Date of Delivery shall use a “cut-off” date no more than three business days prior to such Closing Time or additional Date of Delivery, as applicable.

 

(e)                                   (i) The Company and its subsidiaries, considered as one enterprise, shall not have sustained since the date of the latest audited financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental or regulatory action, order or decree, otherwise than as set forth or contemplated in the Registration Statement, the General Disclosure Package and the Prospectus, and (ii) since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package and the Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, earnings, business, properties, assets, consolidated financial position, business prospects, consolidated shareholders’ equity or consolidated results of operations of the Company and its subsidiaries considered as one enterprise, otherwise than as set forth or contemplated in the Registration Statement, the General Disclosure Package and the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at the Closing Time and, with respect to the Optional Shares, each additional Date of Delivery on the terms and in the manner contemplated in the Prospectus.

 

(f)                                    On or after the date hereof there shall not have occurred any of the following:  (i) a suspension or material limitation in trading in securities generally on Nasdaq; (ii) a suspension or material limitation in trading in the Company’s securities on Nasdaq; (iii) a

 

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general moratorium on commercial banking activities declared by either Federal or Texas authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war; or (v) the occurrence of any other calamity or crisis or any material adverse change in financial, political or economic conditions in the United States or elsewhere, including without limitation, as a result of terrorist activities occurring after the date hereof, if the effect of any such event specified in clause (iv) or (v), in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at the Closing Time and, with respect to the Optional Shares, each additional Date of Delivery on the terms and in the manner contemplated in the Prospectus.

 

(g)                                   The Shares shall have been approved for listing, subject to official notice of issuance and evidence of satisfactory distribution, on NASDAQ Global Select Market.

 

(h)                                  The Company has obtained and delivered to the Underwriters on or before the date of this Agreement executed copies of an agreement from each officer and director, Directed Share Purchaser and certain shareholders, in each case as listed on Schedule IV hereto, of the Company, substantially in the form of Exhibit A.

 

(i)                                      The Representatives shall have received a certificate of the Chairman and Chief Executive Officer or the President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time and, with respect to the Optional Shares, each additional Date of Delivery, to the effect that, (i) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though made at and as of Closing Time and, with respect to the Optional Shares, each additional Date of Delivery, (ii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time and, with respect to the Optional Shares, each additional Date of Delivery, and (iii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or are, to their knowledge, threatened by the Commission.

 

(j)                                     The Representatives shall have received a certificate from the President or a Vice President of the Bank and of the chief financial or chief accounting officer of the Bank, dated as of the Closing Time and, with respect to the Optional Shares, each additional Date of Delivery, to the effect that the representations and warranties in Section 1(b) are true and correct with the same force and effect as though made at and as of Closing Time and, with respect to the Optional Shares, each additional Date of Delivery.

 

If any condition specified in this Section shall not have been satisfied when and as required to be satisfied or shall not have been waived by such time, this Agreement may be terminated by the Representatives by notice to the Company at any time on or prior to the Closing Time. If the sale of the Shares provided for herein is not consummated because any condition set forth in this Section 7 is not satisfied, or because of any termination pursuant to Section 11(a) hereof, or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will reimburse the Underwriters through the Representatives upon demand for all documented out-of-pocket expenses (including

 

24



 

reasonable fees and disbursements of counsel) that shall have been actually incurred by the Underwriters in connection with the proposed offering of the Shares.  In addition, such termination shall be subject to Section 6 hereof, and Sections 1, 8 and 10 hereof shall survive any such termination and remain in full force and effect.

 

8.                                       (a)                                  The Company and the Bank, jointly and severally, will indemnify and hold harmless each Underwriter, each person, if any, who controls such Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and their respective partners, directors, officers, employees and agents and each affiliate of any Underwriter within the meaning of Rule 405 under the 1933 Act against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Issuer-Represented Free Writing Prospectus, any preliminary prospectus, the Registration Statement, the General Disclosure Package, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Underwriters for any legal or other expenses reasonably incurred by the Underwriters in connection with investigating or defending any such action or claim as such expenses are incurred; provided , however , that the Company and the Bank shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Issuer-Represented Free Writing Prospectus, any preliminary prospectus, the Registration Statement, the General Disclosure Package, the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by an Underwriter through the Representatives expressly for use therein, provided that the Company, the Bank and the Underwriters hereby acknowledge and agree that the only information that the Underwriters have furnished to the Company consists solely of the information described as such in subsection (b) below. Notwithstanding the foregoing, the indemnification provided for by the Bank in this paragraph shall be limited with respect to the Bank to the extent such indemnification would result in a violation of Sections 23A or 23B of the Federal Reserve Act, as amended, or any implementing regulation, policy or directive of a Governmental Entity having jurisdiction over the Bank.

 

(b)                            Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its officers, directors and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any losses, claims, damages or liabilities to which the Company may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Issuer-Represented Free Writing Prospectus, any preliminary prospectus, the Registration Statement, the General Disclosure Package or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any preliminary prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon

 

25



 

and in conformity with written information furnished to the Company by the Underwriters through the Representatives expressly for use therein (provided, however, that the Company and the Underwriters hereby acknowledge and agree that the only such information that the Underwriters have furnished to the Company consists solely of the following:  the information in the first paragraph under the heading “Underwriting—Discounts, Commissions and Expenses,” the information in the second, third, fourth and fifth paragraphs under the heading “Underwriting—Stabilization” and the information under the heading “Underwriting—Electronic Distribution,” and the share allocation, concession and reallowance figures appearing in the section entitled “Underwriting,” in each case contained in the Prospectus) and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred.

 

(c)                                   Promptly after receipt by an indemnified party under subsection (a) or (b)  above or subsection (e) below of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party hereunder, unless the indemnifying party has been materially prejudiced thereby; provided that failure to notify the indemnifying party shall not relieve it from any liability it may have to an indemnified party otherwise than under this Section 8.  In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall elect, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties.  After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party.  The indemnifying party under this Section 8 shall not be liable for any settlement of any proceedings effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment.

 

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Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by this Section 8(c), the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into in good faith by the indemnified party more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have reasonable notice of the terms of such settlement at least 30 days prior to such settlement being entered into, and (iii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request and shall not have contested the reasonableness of such fees and expenses, in each case prior to the date of such settlement. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

 

(d)                                  If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above or subsection (e) below in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand and the Underwriters on the other from the offering of the Shares.  If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportions as the total net proceeds from the offering (before deducting expenses) received by the Company bears to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Bank and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this

 

27



 

subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each officer and employee of an Underwriter and each person, if any, who controls such Underwriter within the meaning of the 1933 Act and the 1934 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company with the meaning of the 1933 Act and the 1934 Act shall have the same rights to contribution as the Company.  Notwithstanding the foregoing, the contribution provided for by the Bank in this paragraph shall be limited with respect to the Bank to the extent such contribution would result in a violation of Sections 23A or 23B of the Federal Reserve Act, as amended, or any implementing regulation, policy or directive of a Governmental Entity having jurisdiction over the Bank.

 

(e)                                         In connection with the offer and sale of Directed Shares, the Company agrees, promptly upon written notice, to indemnify and hold harmless each Underwriter and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each affiliate of any Underwriter within the meaning of Rule 405 of the Securities Act from and against any and all losses, liabilities, claims, damages and expenses incurred by them (i) as a result of the violation of any applicable laws or regulations of any foreign jurisdictions where Directed Shares have been offered or (ii) as a result of the failure of any Directed Share Purchaser, who has agreed to purchase Directed Shares, to pay for and accept delivery of the Directed Shares, or (iii) related to, arising out of, or in connection with the Directed Share Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the gross negligence or willful misconduct of such Underwriter.

 

(f)                                    The obligations of the Company and the Bank under this Section 8 shall be in addition to any liability which the Company and the Bank may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls (within the meaning of the 1933 Act) any Underwriter, or any of the respective partners, directors, officers and employees of any Underwriter or any such controlling person.

 

(g)                                         The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to an indemnified party at law or in equity.

 

9.                                       (a)                                  If any Underwriter shall default in its obligation to purchase and pay for the Shares which it has agreed to purchase hereunder at the Closing Time or a Date of Delivery, the Representatives may in their discretion arrange for themselves or another party or other parties reasonably satisfactory to the Company to purchase such Shares on the terms contained herein. If within 36 hours after such default by any Underwriter, the Representatives does not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of 36 hours within which to procure another party or other parties reasonably satisfactory to the Representatives to

 

28



 

purchase such Shares on such terms. In the event that, within the respective prescribed periods, the Representatives notify the Company that they have so arranged for the purchase of such Shares, or the Company notifies the Representatives that it has so arranged for the purchase of such Shares, the Representatives or the Company shall have the right to postpone the Closing Time or such Date of Delivery, as the case may be, for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the General Disclosure Package or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which the Representatives may determine to be made necessary thereby. The term “Underwriter” as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares.

 

(b)                                  If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the Representatives or the Company as provided in Section 9(a) above, the aggregate number of such Shares which remains unpurchased does not exceed one tenth of the aggregate number of all the Shares to be purchased at the Closing Time or such Date of Delivery, as the case may be, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of shares which such Underwriter agreed to purchase hereunder at the Closing Time or such Date of Delivery, as the case may be, and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

 

(c)                                   If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the Representatives and the Company as provided in Section 9(a) above, the aggregate number of such Shares which remains unpurchased exceeds one tenth of the aggregate number of all of the Shares to be purchased at the Closing Time or such Date of Delivery, as the case may be, or if the Company shall not exercise the right described in Section 9(b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

 

10.                                The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares.

 

11 .                                (a)                                  The Representatives may terminate this Agreement, by notice to the Company, at any time on or prior to the Closing Time if, since the time of execution of this Agreement or, in the case of (i) below, since the date of the most recent balance sheets included in

 

29



 

the Financial Statements, there has occurred, (i) any Material Adverse Effect, (ii) a suspension or material limitation in trading in the Company’s securities on Nasdaq, (iii) a general moratorium on commercial banking activities declared by either Federal, New York or Texas authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States, (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any material adverse change in financial, political or economic conditions in the United States or elsewhere, including without limitation, as a result of terrorist activities occurring after the date hereof, if the effect of any such event specified in clause (iv) or (v), in the judgment of the Representatives make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at the Closing Time and, with respect to the Optional Shares, each additional Date of Delivery on the terms and in the manner contemplated in the Prospectus.

 

(b)                                  If this Agreement is terminated pursuant to this Section 11 hereof, such termination shall be without liability of any party to any other party except as provided in Section 6 hereof and provided further that Sections 1, 8 and 10 hereof shall survive such termination and remain in full force and effect.

 

12.                                In all dealings hereunder, the Representatives shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the Representatives.

 

13.                                All statements, requests, notices and agreements hereunder shall be in writing, and if to the Representatives shall be delivered or sent by mail, telex or facsimile transmission to the Representatives c/o Sandler O’Neill & Partners, L.P. at 1251 Avenue of the Americas, 6 th  Floor, New York, New York 10020, Attention:  General Counsel, with a copy to Bracewell & Giuliani LLP, 711 Louisiana, Houston, Texas 77002, Attention:  William S. Anderson; if to the Company shall be delivered or sent by mail or facsimile to Green Bancorp, Inc., 4000 Greenbriar, Houston, Texas 77098; Attention:  Chief Financial Officer, with copies to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036, Attention:  Michael J. Zeidel.  Any such statements, requests, notices or agreements shall take effect upon receipt thereof.

 

14 .                                This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters and the Company and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company or the Underwriters, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement.  No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.

 

15 .                                Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

 

16 .                                The Company acknowledges and agrees that (i) the purchase and sale of the Shares pursuant to this Agreement, including the determination of the public offering price of the Shares and any related discounts and commissions, is an arm’s-length commercial transaction between the Company on the one hand, and the Underwriters, on the other hand, and the Company is

 

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capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement, (ii) in connection with the offering contemplated hereby and the process leading to such transaction the Underwriters are and have been acting solely as principals and are not the agents or fiduciaries of the Company, its subsidiaries, or the Company’s shareholders, creditors, employees or any other third party, (iii) the Underwriters have not assumed nor will they assume an advisory or fiduciary responsibility in favor of the Company or its subsidiaries with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether any Underwriter has advised or is currently advising the Company or its subsidiaries on any other matters) and the Underwriters have no obligation to the Company or its subsidiaries with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement, (iv) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company or its subsidiaries and the Underwriters have no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship, (v) the Company and its subsidiaries waive, to the fullest extent permitted by law, any claims the Company may have against the Underwriters for breach of fiduciary duty or alleged breach of fiduciary duty and agree that the Underwriters shall have no liability (whether direct or indirect) to the Company or its subsidiaries in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including shareholders, employees or creditors of the Company and (vi) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby,  and the Company and the Bank consulted their own legal, accounting, regulatory and tax advisors to the extent they deemed appropriate.

 

17 .                                THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OF SAID STATE OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES, AND EACH UNDERWRITER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT.  THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES, AND EACH UNDERWRITER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

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18.                                This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.

 

19.                                No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

 

20.                                The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

 

21.                                This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company, the Bank and the Underwriters, or any of them, with respect to the subject matter hereof.

 

[Signatures on Next Page]

 

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If the foregoing is in accordance with your understanding, please sign and return to us four counterparts hereof, and upon the acceptance hereof by you, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters, the Bank and the Company.

 

 

 

Very truly yours,

 

 

 

 

 

 

 

 

GREEN BANCORP, INC.

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

GREEN BANK, N.A.

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

[Signature Page to Underwriting Agreement]

 



 

Accepted as of the date hereof:

 

 

 

 

 

SANDLER O’NEILL & PARTNERS, L.P.

 

 

 

as Representative of the several Underwriters

 

 

 

 

 

 

 

 

By:

Sandler O’Neill & Partners Corp.,

 

 

 

the sole general partner

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

JEFFERIES LLC

 

 

 

as Representative of the several Underwriters

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

34



 

Schedule I

 

Underwriter

 

Total Number of
Firm Shares to be
Purchased

 

Number of Optional
Shares to be Purchased if
Option Exercised in Full

 

 

 

 

 

 

 

Sandler O’Neill & Partners, L.P.
Jefferies LLC
J.P. Morgan Securities LLC
RBC Capital Markets, LLC
Keefe, Bruyette & Woods, Inc., a Stifel Company

 

 

 

 

 

Total

 

 

 

 

 

 

I-1



 

Schedule II

 

a.                                       Pricing Information

 

Number of Firm Shares:  [ · ]

 

Public Offering Price:  $[ · ]

 

Underwriters’ Purchase Price:  $[ · ]

 

b.                                       Issuer-Represented Free Writing Prospectus

 

II-1



 

Schedule III

 

List of Subsidiaries

 

Green Bank, N.A.

 

Searchlight Merger Sub Corp.

 

III-1



 

Schedule IV

 

List of Executive Officers, Directors, Shareholders and Selling

Shareholders Subject to the Lock-up Agreement

 

IV-1


 

EXHIBIT A

 

                                    , 2014

 

Sandler O’Neill & Partners, L.P.
Jefferies LLC
c/o Sandler O’Neill & Partners, L.P.
1251 Avenue of the Americas, 6
th  Floor
New York, NY 10020

 

Re:          Proposed Public Offering by Green Bancorp, Inc.

 

The undersigned, an executive officer or director and/or shareholder of Green Bancorp, Inc., a Texas corporation (the “Company”), or Green Bank, N.A., understands that Sandler O’Neill & Partners, L.P. and Jefferies LLC, as representatives of one or more underwriters, (the “Representatives”), proposes to enter into an Underwriting Agreement (the “Underwriting Agreement”) with the Company providing for the public offering (the “Public Offering”) of shares (the “Shares”) of the Company’s common stock, $0.01 par value per share (the “Stock”).  In recognition of the benefit that such an offering will confer upon the undersigned as an executive officer or director and/or shareholder of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with the Representatives that, during a period of 180 days from the date of the Underwriting Agreement (the “Lock-up Period”), the undersigned will not, without the prior written consent of the Representatives, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of the Company’s Stock or any securities convertible into or exchangeable or exercisable for Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition, (ii) make any demand or exercise any right with respect to the filing of any registration statement under the Securities Act of 1933, as amended, with respect to any of the foregoing in clause (i) or (iii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Stock, whether any such swap or transaction is to be settled by delivery of Stock or other securities, in cash or otherwise.

 

Notwithstanding the foregoing, the undersigned may transfer the undersigned’s shares of Stock (i) as a bona fide gift or gifts or by will or intestate succession, provided that the donee or donees agree to be bound in writing by the restrictions set forth herein for the balance of the Lock-up Period, (ii) pursuant to the exercise by the undersigned of stock options or warrants that have been granted by the Company prior to, and are outstanding as of, the date of the Underwriting Agreement, where the Stock received upon any such exercise is held by the undersigned, individually or as fiduciary, in accordance with the terms of this Lock-Up Agreement, (iii) to the Company to satisfy any tax withholding obligations of the Company or the undersigned upon the

 

A-1



 

exercise or vesting of equity awards under any equity incentive plan of the Company, (iv) acquired in open market transactions after the completion of the Public Offering; provided that no filing or public disclosure, reporting any sale, transfer or other disposition of shares of Shares or any reduction in beneficial ownership of shares of Stock by any party, shall be required, or voluntarily made, under the Exchange Act of 1934, as amended (“Exchange Act”), (v) to any wholly-owned subsidiary or any stockholders, partners or members of the undersigned provided that such transferee agrees to be bound in writing by the restrictions set forth herein for the balance of the Lock-up Period, (vi) to any trust, family limited partnership or similar entity for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the trustee of the trust, general partner of the family limited partnership or similar person, as the case may be, agrees to be bound by the restrictions set forth herein for the balance of the Lock-up Period, (vii) to charitable organizations, family foundations or donor-advised funds at sponsoring organizations, and in each case such transfer does not involve a disposition for value provided that such transferee agrees to be bound in writing by the restrictions set forth herein for the balance of the Lock-up Period, (viii) to a nominee or custodian of a person to whom a transfer or disposition would be permitted hereunder provided that such transferee agrees to be bound in writing by the restrictions set forth herein for the balance of the Lock-up Period, (ix) to affiliates (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned provided that such transferee agrees to be bound in writing by the restrictions set forth herein for the balance of the Lock-up Period, (x) to any investment manager or advisor that has investment discretionary authority with respect to the undersigned’s investments pursuant to an investment advisory or similar agreement, provided that the transferee agrees to be bound in writing by the restrictions set forth herein for the balance of the Lock-Up Period (xi) to any corporation, partnership or other business entity with which the undersigned shares in common an investment manager or advisor that has investment discretionary authority with respect to the undersigned’s and the entity’s investments pursuant to an investment advisory or similar agreement, provided that the transferee agrees to be bound in writing by the restrictions set forth herein for the balance of the Lock-Up Period, (xii) pledged in a bona fide transaction outstanding as of the date hereof to a lender to the undersigned and disclosed in an appendix to this letter (xiii) with the prior written consent of the Representatives.  For purposes of this Lock-Up Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.  The undersigned now owns and, except as contemplated by clause (i) through (xiii) above, for the duration of this Agreement will own the undersigned’s shares of Stock, free and clear of all liens, encumbrances and contractual obligations existing as of the date hereof which could foreseeably result in a disposition of the undersigned’s shares of Stock during the Lock-Up Period, except for those (if any) disclosed in an appendix to this letter.  The undersigned also agrees and consents to the entry of stop transfer instructions with the Company and its transfer agent and registrar against the transfer of the undersigned’s shares of Stock, except in compliance with the foregoing restrictions. In furtherance of the foregoing, the Company is hereby authorized to decline to make or authorize any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Agreement.

 

In addition to the preceding paragraph and notwithstanding anything to the contrary herein, the undersigned may enter into an agreement or trading plan to allow brokerage sales of all or a portion of the undersigned’s shares of Stock pursuant to Rule 10b5-1 of the Exchange Act, provided that (i) any such brokerage sales or transfers may not occur prior to the expiration of the

 

A-2



 

Lock-Up Period, and (ii) prior to the expiration of the Lock-Up Period, no public disclosure or filing under the Exchange Act or Rule 144 under the U.S. Securities Act of 1933, as amended, by any party shall be required, or made, voluntarily reporting such agreement or trading plan.

 

The undersigned understands that the Company, the Representatives and the other underwriters party to the Underwriting Agreement are relying upon this Lock-Up Agreement in proceeding toward consummation of the Offering.  The undersigned represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement.  The undersigned further understands that this Lock-Up Agreement is irrevocable and agrees that the provisions of this Lock-Up Agreement shall be binding also upon the successors, assigns, heirs and personal representatives of the undersigned.

 

The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be sold thereunder (other than any shares of Common Stock subject to the Underwriters’ purchase option), the undersigned shall be released from all obligations under this Lock-Up Agreement.  Notwithstanding anything herein to the contrary, this Lock-Up Agreement shall automatically terminate and be of no further effect as of the earlier of (i) 4:00 p.m. Eastern Time on December 31, 2014 if a closing for the offering of the Shares has not yet occurred as of that time and (ii) the date on which the Company notifies the Representatives that it no longer intends to pursue the Public Offering.

 

This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

 

 

 

Very truly yours,

 

 

 

 

 

 

 

 

Signature:

 

 

 

 

 

 

 

Print Name:

 

 

A-3



 

EXHIBIT B

 

Form of Press Release

 

Green Bancorp, Inc.
[Date]

 

Green Bancorp, Inc. (the “ Company ”) announced today that Sandler O’Neill & Partners. L.P. and Jefferies LLC, the representatives of the underwriters in the Company’s recent public offering of                 shares of common stock, are [waiving] [releasing] a lock-up restriction with respect to                     shares of the Company’s common stock held by [certain officers or directors] [an officer or director] [certain shareholders] of the Company.  The [waiver] [release] will take effect on                    , 201 [4] , and the shares may be sold on or after such date.

 

This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

B-1



 

EXHIBIT C

 

Form of Opinion of Counsel to the Company

 

Form of Opinion of Skadden, Arps, Slate, Meagher and Flom LLP

to be delivered pursuant to Section 7(b)

 

C-1




Exhibit 3.1

 

FORM OF

RESTATED
CERTIFICATE OF FORMATION

(WITH AMENDMENTS)
OF
GREEN BANCORP, INC.

 

Green Bancorp, Inc. (the “ Corporation ”), pursuant to the provisions of Sections 3.051, 3.057, 3.059 and 21.056 of the Texas Business Organizations Code (the “ TBOC ”), hereby adopts this Restated Certificate of Formation (with Amendments) (the “ Restated Certificate ”), which accurately states the Corporation’s existing certificate of formation and all amendments thereto that are in effect as of the date hereof (the “ Original Certificate ”), as further amended by this Restated Certificate. The Restated Certificate does not contain any other change except for information permitted to be omitted by Section 3.059(b) of the TBOC.

 

1.             The name of the Corporation is Green Bancorp, Inc.

 

2.             Each such amendment made by this Restated Certificate has been made in accordance with the provisions of the TBOC.

 

3.             Each such amendment made by this Restated Certificate has been approved in the manner required by the TBOC and the constituent documents of the Corporation.

 

4.             Articles 8, 10 , 11, 12, 13, 14, 15, 16 and 17 of the Original Certificate are each amended and restated in their entirety to read as set forth in Articles 8, 10 , 11, 12, 13, 14, 15, 16 and 17 of the Restated Certificate.

 

5.             The Original Certificate and all amendments and supplements thereto are hereby superseded by the following Restated Certificate:

 

RESTATED
CERTIFICATE OF FORMATION
OF
GREEN BANCORP, INC.

 

Article 1.      Name .  The name of the corporation is Green Bancorp, Inc. (hereinafter referred to as the “ Corporation ”).  The filing number issued to the Corporation by the secretary of state is 0800404196.

 

Article 2.      Duration .  The period of duration of the Corporation shall be perpetual.

 

Article 3.      Registered Office and Registered Agent .  The address of the registered office of the Corporation in the State of Texas is 4000 Greenbriar, Houston 77098.  The name of the registered agent at such address is John P. Durie.

 



 

Article 4.      Purpose of Corporation .  The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Business Organizations Code of the State of Texas.

 

Article 5.      Capital Stock .

 

A.   Total Capital Stock .  The total number of shares of capital stock which the Corporation has authority to issue is 100,000,000, of which 10,000,000 shall be preferred stock, $.01 par value per share (hereinafter the “ Preferred Stock ”), and 90,000,000 shall be common stock, par value $.01 per share (hereinafter the “ Common Stock ”).  Each share of Common Stock shall be entitled to one (1) vote on any matter on which shareholders are entitled to vote.

 

B.   The Preferred Stock .  The Board of Directors is hereby expressly authorized, by resolution or resolutions to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock.  Before any shares of any such series are issued, the Board of Directors shall fix, and hereby is expressly empowered to fix, by resolution or resolutions, the following provisions of the shares thereof:

 

(a)          the designation of such series, the number of shares to constitute such series and the stated value thereof if different from the par value thereof;

 

(b)          whether the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights, which may be general or limited;

 

(c)           the dividends, if any, payable on such series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, and the preference or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of this class;

 

(d)          whether the shares of such series shall be subject to redemption by the Corporation, and, if so, the times, prices and other conditions of such redemption;

 

(e)           the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or upon any distribution of the assets of the Corporation;

 

(f)           whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof;

 

2



 

(g)           whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other series of this class or any other securities, and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange;

 

(h)          the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock or shares of stock of any other class or any other series of this class;

 

(i)            the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock, including additional shares of such series or of any other series of this class or of any other class; and

 

(j)           any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof.

 

The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.  All shares of any one series of Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall accrue and/or be cumulative.

 

Shares of the capital stock of the Corporation may be issued from time to time as authorized by the Board of Directors without further approval of the shareholders except to the extent such approval is required by governing law, rule or regulation.

 

Article 6.      [Reserved].

 

Article 7.      Preemptive Rights .  No holder of the capital stock of the Corporation shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever of the Corporation, or of treasury shares, or of securities convertible into stock of any class whatsoever, whether now or hereafter authorized, or whether issued for cash or other consideration or by way of a dividend.

 

Article 8.      Directors .  The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors.  Except as otherwise fixed pursuant to the provisions of Article 5B hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors, the number of directors shall be fixed from time to time exclusively by resolution of the Board of Directors.

 

3



 

A.   Term .  The full Board of Directors, other than those who may be elected by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, shall be divided into three classes, with respect to the time for which they severally hold office, designated Class I, Class II, and Class III.  Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the full Board of Directors.  The initial division of the Board of Directors following the effective date of the Certificate of Formation shall be as follows:

 

The Class I directors will initially consist of the following individuals, and their term shall expire at the annual meeting of shareholders to be held in 2015:

 

William L. Spiegel

4000 Greenbriar

 

Houston, Texas 77098

 

 

Stefanie L. Shelley

4000 Greenbriar

 

Houston, Texas 77098

 

The Class II directors will initially consist of the following individuals, and their term shall expire at the annual meeting of shareholders to be held in 2016:

 

Stephen Eisenstein

4000 Greenbriar

 

Houston, Texas 77098

 

 

Manuel J. Mehos

4000 Greenbriar

 

Houston, Texas 77098

 

 

Steven D. Lerner

4000 Greenbriar

 

Houston, Texas 77098

 

The Class III directors will initially consist of the following individuals, and their term shall expire at the annual meeting of shareholders to be held in 2017:

 

Cas A. Schneller

4000 Greenbriar

 

Houston, Texas 77098

 

 

Alan M. Silberstein

4000 Greenbriar

 

Houston, Texas 77098

 

 

Robert B.B. Smith

4000 Greenbriar

 

Houston, Texas 77098

 

A director shall hold office until the annual meeting of shareholders for the year in which his or her respective term expires and until his or her respective successor shall be elected and shall be qualified or until his or her earlier death, resignation, retirement, disqualification or removal from office.  Except as otherwise fixed pursuant to the provisions of Article 5B hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation

 

4



 

to elect directors, (i) at each succeeding annual meeting of shareholders beginning in 2015, successors to the class of directors whose term expires at that meeting shall be elected for a three-year term and (ii) if the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class to as nearly as possible to one-third of the total number of directors, but in no case will a decrease in the number of directors shorten the term of any incumbent director.  In any election of directors, the persons receiving a plurality of the votes cast, up to the number of directors to be elected in such election, shall be deemed elected.  Directors need not be shareholders of the Corporation.  Shareholders of the Corporation shall not be permitted to cumulate their votes for the election of directors.

 

B.   Vacancies .  Except as otherwise fixed pursuant to the provisions of Article 5B hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors, any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the directors then in office or by a sole remaining director, and any director so chosen shall hold office for the remainder of the term to which the director has been selected and until such director’s successor shall have been elected and qualified.

 

C.   Removal .  Subject to the rights of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect directors, any director (including persons elected by the directors to fill vacancies in the Board of Directors) may be removed from office only for cause and only by the affirmative vote of a majority of the votes entitled to be cast by the shares of the then outstanding capital stock of the Corporation present in person or represented by proxy and entitled to vote generally in the election of directors (the “ Voting Shares ”) at a duly constituted meeting of shareholders.

 

Article 9.      Liability of Directors and Officers .  The personal liability of the directors and officers of the Corporation for monetary damages shall be eliminated to the fullest extent permitted by the Business Organizations Code of the State of Texas.  No amendment, modification or repeal of this Article 9 shall adversely affect the rights provided hereby with respect to any claim, issue or matter in any proceeding that is based in any respect on any alleged action or failure to act prior to such amendment, modification or repeal.

 

Article 10.       Indemnification The Corporation shall indemnify its directors, officers, employees, agents and former directors, officers, employees and agents, and any other persons serving at the request of the Corporation as a director, officer, employee or agent of another corporation, association, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) incurred in connection with any pending or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, with respect to which such director, officer, employee, agent or other person is a party, or is

 

5



 

threatened to be made a party, to the full extent permitted by the Business Organizations Code of the State of Texas and applicable federal law.  The indemnification provided herein (i) shall not be deemed exclusive of any other right to which any person seeking indemnification may be entitled under any bylaw, agreement or vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity, and (ii) shall inure to the benefit of the heirs, executors and administrators of any such person.  The right to indemnification conferred by this Article 10 shall, to the extent permitted by the Business Organizations Code of the State of Texas, include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition.  Except as prohibited by the Business Organizations Code of the State of Texas, the Corporation shall have the power, but shall not be obligated, to purchase and maintain insurance on behalf of any person or persons enumerated above against any liability asserted against or incurred by them or any of them arising out of their status as corporate directors, officers, employees, or agents whether or not the Corporation would have the power to indemnify them against such liability under the provisions of this Article 10. Any repeal or modification of this Article 10 shall not adversely affect any rights to indemnification and to the advancement of expenses existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.  Notwithstanding any provision of this Article 10 to the contrary, all indemnification payments shall be consistent with the requirements of Section 18(k) of the Federal Deposit Insurance Act and the implementing regulations thereunder.

 

Article 11.       Special Meetings of Shareholders .  Except as otherwise required by law and subject to the rights of the holders of any class or series of Preferred Stock, special meetings of the shareholders may be called only by the Chairman of the Board, by the President, by the Board of Directors pursuant to a resolution approved by the affirmative vote of at least a majority of the directors then in office, or by the holders of record of not less than fifty percent (50%) of the then outstanding Voting Shares.

 

Article 12.       Unanimous Consent of Shareholders in Lieu of a Meeting .  Any action required to be taken by the shareholders at any annual or special meeting of such shareholders, or any action which may be taken at any annual or special meeting of shareholders of this Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by every holder of shares entitled to vote at such meeting and shall be delivered to the Corporation by delivery to its principal office.

 

Article 13.       [RESERVED]

 

Article 14.

 

Article 15.       Election By Corporation .  The Corporation expressly elects to be governed by Section 21.606 (Three-Year Moratorium on Certain Business Combinations) of the Texas Business Organizations Code (or any successor to such statute).

 

6



 

Article 16.       Amendment of Certificate of Formation and Bylaws .

 

A.   Certificate of Formation .  The Corporation reserves the right to amend, alter, change or repeal any provision contained in the Certificate of Formation, in the manner now or hereafter prescribed by law, and all rights conferred upon shareholders herein are granted subject to this reservation.  Except as otherwise permitted by statute, no amendment, addition, alteration, change or repeal of this Certificate of Formation shall be made unless it is first approved by the Board of Directors of the Corporation pursuant to a resolution adopted by the affirmative vote of a majority of the directors then in office, and is thereafter approved by the affirmative vote of a majority of the Voting Shares, voting together as a single class, as well as such additional vote of the Preferred Stock as may be required by the provisions of any series thereof; provided that no amendment, alteration, change or repeal may be made to Articles 8-16 without the affirmative vote of the holders of at least two-thirds of the Voting Shares.

 

B.   Bylaws .  The Board of Directors or shareholders may adopt, alter, amend or repeal the Bylaws of the Corporation.  Such action by the Board of Directors shall require the affirmative vote of a majority of the directors then in office at any regular or special meeting of the Board of Directors.  Such action by the shareholders shall require the affirmative vote of at least two-thirds of the Voting Shares, as well as such additional vote of the Preferred Stock as may be required by the provisions of any series thereof.

 

Article 17.       Exclusive Jurisdiction .  Any state or federal court located in Harris County in the State of Texas shall be the sole and exclusive forum for (a) any actual or purported derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the Corporation to the Corporation or the Corporation’s shareholders or creditors, (c) any action asserting a claim against the Corporation or any director or officer of the Corporation arising pursuant to any provision of the Business Organizations Code of the State of Texas, the Certificate of Formation or the Bylaws of the Corporation, or (d) any action asserting a claim against the Corporation or any director or officer of the Corporation governed by the internal affairs doctrine.

 

Article 18.       Corporate Opportunities .  To the fullest extent permitted by applicable law or regulation, no director of the Corporation shall be obligated to refer or present any particular business opportunity to the Corporation unless such opportunity is presented to such director expressly and solely in writing as a business opportunity for the Corporation, even if such opportunity is of a character that, if referred or presented to the Corporation, could be taken by the Corporation, and any such director or affiliate thereof shall have the right to take for its own account (individually or as a partner, shareholder, member, participant or fiduciary) or to recommend to others such particular opportunity.

 

*                    *                    *

 

7



 

IN WITNESS WHEREOF, the undersigned has executed this document on this [  ] day of [   ], 2014.

 

 

 

GREEN BANCORP, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

8




Exhibit 3.2

 

FORM OF

 

AMENDED AND RESTATED BYLAWS

 

OF

 

GREEN BANCORP, INC.

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I OFFICES

1

1.1

Registered Office and Registered Agent

1

1.2

Other Offices

1

ARTICLE II STOCKHOLDERS’ MEETINGS

1

2.1

Meeting Place

1

2.2

Annual Meeting

1

2.3

Conduct of Meetings

1

2.4

Special Meetings

2

2.5

Notice

2

2.6

Nature of Business at Meetings of Stockholders

2

2.7

Nomination of Directors

4

2.8

Record List of Stockholders

7

2.9

Quorum; Actions of Stockholders

8

2.10

Voting of Shares

8

2.11

Closing of Transfer Books and Fixing of the Record Date

8

2.12

Proxies

9

2.13

Waiver of Notice

9

2.14

Voting of Shares in the Name of Two or More Persons

10

2.15

Voting of Shares by Certain Holders

10

2.16

Inspectors

10

2.17

Unanimous Consent of Stockholders in Lieu of a Meeting

11

ARTICLE III CAPITAL STOCK

11

3.1

Certificates

11

3.2

Transfers

11

3.3

Registered Owner

12

3.4

Lost, Stolen or Destroyed Certificates

12

3.5

Fractional Shares or Scrip

12

3.6

Shares of Another Corporation

12

ARTICLE IV BOARD OF DIRECTORS

12

4.1

Powers

12

4.2

Number of Directors

13

4.3

Classes

13

4.4

Vacancies

13

4.5

Removal of Directors

14

4.6

Regular Meetings

14

4.7

Special Meetings

14

4.8

Waiver of Notice

14

4.9

Quorum; Actions of the Board of Directors

15

4.10

Action by Directors Without a Meeting

15

4.11

Action by Directors by Communications Equipment

15

4.12

Registering Dissent

15

 

i



 

4.13

Committees

15

4.14

Remuneration

16

4.15

Interested Directors

16

ARTICLE V OFFICERS

16

5.1

Designations

16

5.2

Powers and Duties

17

5.3

Delegation

17

5.4

Vacancies

17

5.5

Term - Removal

17

5.6

Bonds

17

ARTICLE VI INDEMNIFICATION, ETC. OF DIRECTORS, OFFICERS AND EMPLOYEES

17

6.1

Mandatory Indemnification

17

6.2

Permissive Indemnification

18

6.3

Expenses Payable in Advance

18

6.4

Authorization of Indemnification

18

6.5

Indemnitee Rights

19

6.6

Good Faith Defined

19

6.7

Indemnification by a Court

19

6.8

Nonexclusivity of Indemnification and Advancement of Expenses

20

6.9

Insurance

20

6.10

Certain Definitions

20

6.11

Survival of Indemnification and Advancement of Expenses

20

6.12

Limitation on Indemnification

21

6.13

Indemnification of Employees and Agents

21

ARTICLE VII DIVIDENDS; FINANCE; AND FISCAL YEAR

21

7.1

Dividends

21

7.2

Disbursements

21

7.3

Depositories

21

7.4

Fiscal Year

21

ARTICLE VIII NOTICES

22

8.1

Notices

22

8.2

Waivers of Notice

22

ARTICLE IX SEAL

23

ARTICLE X BOOKS AND RECORDS

23

ARTICLE XI

23

11.1

Forum For Adjudication of Certain Disputes

23

ARTICLE XII AMENDMENTS

23

ARTICLE XIII USE OF PRONOUNS

24

 

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AMENDED AND RESTATED BYLAWS
OF
GREEN BANCORP, INC.

 

ARTICLE I

 

OFFICES

 

1.1          Registered Office and Registered Agent .  The registered office of Green Bancorp, Inc. (the “ Corporation ”) shall be located in the State of Texas at such place as may be fixed from time to time by the Board of Directors upon filing of such notices as may be required by law, and the registered agent shall have a business office identical with such registered office.

 

1.2          Other Offices .  The Corporation may have other offices within or without the State of Texas at such place or places as the Board of Directors may from time to time determine.

 

ARTICLE II

 

STOCKHOLDERS’ MEETINGS

 

2.1          Meeting Place .  All meetings of the stockholders shall be held at the principal place of business of the Corporation, or at such other place within or without the State of Texas as shall be determined from time to time by the Board of Directors, and the place at which any such meeting shall be held shall be stated in the notice of the meeting.  Any meeting of stockholders may be held by means of remote communications pursuant to the requirements of Section 6.002 of the Texas Business Organizations Code (the “ TBOC ”) or any successor statute.

 

2.2          Annual Meeting .  The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year on such date and time as determined by the Board of Directors and stated in the notice of such meeting.

 

2.3          Conduct of Meetings .  The Board of Directors of the Corporation may adopt by resolution such rules and regulations for the conduct of any meeting of the stockholders as it shall deem appropriate.  Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting.  Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following:  (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (vi) limitations on the time allotted to questions or comments by participants.

 



 

2.4          Special Meetings .  Unless otherwise required by law or by the Certificate of Formation of the Corporation, as amended and restated from time to time, special meetings of stockholders, for any purpose or purposes, may be called (i) by the Chairman of the Board (ii) by the President, (iii) by the Board of Directors pursuant to a resolution approved by the affirmative vote of at least a majority of the directors then in office or (iv) stockholders owning not less than fifty percent (50%) of the capital stock of the Corporation issued and outstanding and entitled to vote.  Other than as set forth in clause (iv) of the preceding sentence, any power of the stockholders to call a special meeting of stockholders is hereby specifically denied.  Such request shall state the purpose or purposes of the proposed meeting.  At a special meeting of stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto), which notice, in the case of a special meeting called by stockholders, shall include all business requested by such stockholders to be transacted at such meeting, shall be transacted at any special meeting.

 

2.5          Notice .

 

(a)           Notice of the date, time and place, if any, of the annual meeting of stockholders and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be given by delivering personally, by electronic transmission or by mailing a written notice of the same, not less than ten (10) days and not more than sixty (60) days prior to the date of the meeting, to each stockholder of record entitled to vote at such meeting.  When any stockholders’ meeting, either annual or special, is adjourned for thirty (30) days or more, or if a new record date is fixed for an adjourned meeting of stockholders, notice of the adjourned meeting shall be given as in the case of an original meeting.  It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than thirty days (unless a new record date is fixed therefor), other than an announcement at the meeting at which such adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.

 

(b)           Not less than ten (10) days and not more than sixty (60) days prior to the meeting, a written notice of each special meeting of stockholders, stating the place, day and hour of such meeting, and the purpose or purposes for which the meeting is called, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be either delivered personally, by electronic transmission or mailed to each stockholder of record entitled to vote at such meeting.

 

(c)           Any notice required to be given under the Corporation’s Certificate of Formation or Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given as set forth in Section 21.3531 of the TBOC.

 

2.6          Nature of Business at Meetings of Stockholders .

 

(a)           Only such business (other than nominations for election to the Board of Directors, which must comply with the provisions of Section 2.7 of this Article II) may be transacted at an annual meeting of stockholders as is either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at

 

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the direction of the Board of Directors (or any duly authorized committee thereof), or (iii) otherwise properly brought before the annual meeting by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.6 of this Article II and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting and (B) who complies with the notice procedures set forth in this Section 2.6 of this Article II.

 

(b)           In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.  To be timely, a stockholder’s notice to the Secretary must be delivered to or be mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided , however , that in the event that the annual meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs.  In no event shall the adjournment or postponement of an annual meeting, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

(c)           To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information: (i) as to each matter such stockholder proposes to bring before the annual meeting, a brief description of the business desired to be brought before the annual meeting and the proposed text of any proposal regarding such business (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend these Bylaws, the text of the proposed amendment), and the reasons for conducting such business at the annual meeting, and (ii) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the proposal is being made, (A) the name and address of such person, (B) (1) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (2) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder, (3) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation and (4) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; (C) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such person, or any affiliates or associates of such person, and any other person or persons (including their names) in connection with or relating to (1)

 

3



 

the Corporation or (2) the proposal, including any material interest in, or anticipated benefit from the proposal to such person, or any affiliates or associates of such person, (D) a representation that the stockholder giving notice intends to appear in person or by proxy at the annual meeting to bring such business before the meeting; and (E) any other information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such person with respect to the proposed business to be brought by such person before the annual meeting pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the rules and regulations promulgated thereunder.

 

(d)           A stockholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.6 of this Article II shall be true and correct as of the record date for determining the stockholders entitled to receive notice of the annual meeting and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of the annual meeting.

 

(e)           No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.6 of this Article II; provided , however , that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.6 of this Article II shall be deemed to preclude discussion by any stockholder of any such business.  If the chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

 

(f)            Nothing contained in this Section 2.6 of this Article II shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act (or any successor provision of law).

 

2.7          Nomination of Directors .

 

(a)           Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Formation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances.  Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.7 of this Article II and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting or special meeting and (B) who complies with the notice procedures set forth in this Section 2.7 of this Article II.

 

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(b)           In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.  To be timely, a stockholder’s notice to the Secretary must be delivered to or be mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided , however , that in the event that the annual meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.  In no event shall the adjournment or postponement of an annual meeting or a special meeting called for the purpose of electing directors, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

(c)           To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information: (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) (1) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (2) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder, (3) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation and (4) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation, (D) such person’s written representation and agreement that such person (1) is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question, (2) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation in such representation and agreement and (3) in such person’s individual capacity, would be in compliance, if elected as a director of the Corporation, and will comply with, all applicable publicly disclosed confidentiality, corporate governance, conflict of interest,

 

5


 

Regulation FD, code of conduct and ethics, and stock ownership and trading policies and guidelines of the Corporation and (E) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice, and the beneficial owner, if any, on whose behalf the nomination is being made, (A) the name and record address of the stockholder giving the notice and the name and principal place of business of such beneficial owner; (B)(1) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (2) the name of each nominee holder of shares of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of shares of stock of the Corporation held by each such nominee holder, (3) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation and (4) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; (C) a description of (1) all agreements, arrangements, or understandings (whether written or oral) between such person, or any affiliates or associates of such person, and any proposed nominee, or any affiliates or associates of such proposed nominee, (2) all agreements, arrangements, or understandings (whether written or oral) between such person, or any affiliates or associates of such person, and any other person or persons (including their names) pursuant to which the nomination(s) are being made by such person, or otherwise relating to the Corporation or their ownership of capital stock of the Corporation, and (3) any material interest of such person, or any affiliates or associates of such person, in such nomination, including any anticipated benefit therefrom to such person, or any affiliates or associates of such person; (D) a representation that the stockholder giving notice intends to appear in person or by proxy at the annual meeting or special meeting to nominate the persons named in its notice; and (E) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.  In addition, any proposed nominee shall furnish such other information as the Corporation may reasonably require, including such information as may be necessary or appropriate in determining the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.  Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

 

(d)           A stockholder providing notice of any nomination proposed to be made at an annual meeting or special meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.7 of this Article II shall be true and correct as of the record date for determining the stockholders

 

6



 

entitled to receive notice of the annual meeting or special meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such annual meeting or special meeting.

 

(e)           No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.7 of this Article II.  If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

 

(f)            Notwithstanding any provision of this Section 2.7 of this Article II to the contrary, a nomination of persons for election to the Board of Directors may be submitted for inclusion in the Corporation’s proxy materials pursuant to the final rules adopted by the Securities and Exchange Commission (the “ SEC ”) providing for such nominations and inclusion (“ final proxy access rules ”), and, if such nomination is submitted under the final proxy access rules, such submission (a) in order to be timely, must be delivered to, or be mailed and received by, the Secretary at the principal executive offices of the Corporation no later than one hundred twenty (120) calendar days before the date that the Corporation mailed (or otherwise disseminated) its proxy materials for the prior year’s annual meeting (or such other date as may be set forth in the final proxy access rules for companies without advance notice bylaws); (b) in all other respects, must be made pursuant to, and in accordance with, the terms of the final proxy access rules, as in effect at the time of the nomination, or any successor rules or regulations of the SEC then in effect; and (c) must provide the Corporation with any other information required by this Section 2.7 of this Article II for nominations not made under the final proxy access rules except to the extent that requiring such information to be furnished is prohibited by the final proxy access rules. The provisions of this paragraph of this Section 2.7 of this Article II do not provide stockholders of the Corporation with any rights, nor impose upon the Corporation any obligations, other than the rights and obligations set forth in the final proxy access rules.

 

2.8          Record List of Stockholders .

 

(a)           At least ten (10) days before each meeting of stockholders, a complete record of the stockholders entitled to vote at such meeting, or any adjournment thereof, shall be made, arranged in alphabetical order, with the address of and number of shares registered in the name of each, in written form or accessible on an electronic network as permitted by Section 21.372 of the TBOC, which record shall be kept open to the inspection of any stockholder in accordance with the TBOC.  The record also shall be kept open during the whole time and place of such meeting for the inspection of any stockholder. If the meeting is held by means of remote communication, the list must be open to the examination of any stockholder for the duration of the meeting on a reasonably accessible electronic network, and the information required to access the list must be provided to stockholders with the notice of the meeting.

 

(b)           The Corporation’s original stock transfer records shall be prima-facie evidence as to which stockholders are entitled to examine such list or to vote at any meeting of shareholders.

 

7



 

(c)           Failure to comply with the requirements of this section shall not affect the validity of any action taken at any meeting of stockholders.

 

2.9          Quorum; Actions of Stockholders .  Except as otherwise required by law or the Corporation’s Certificate of Formation:

 

(a)           A quorum at any annual or special meeting of stockholders shall consist of stockholders representing, either in person or by proxy, a majority of the outstanding capital stock of the Corporation entitled to vote at such meeting. If a quorum shall not be present at any meeting of the stockholders, the stockholders present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, as may be determined by a vote of the holders of a majority of the votes entitled to be cast by such stockholders, present in person or represented by proxy, until a quorum shall be present.

 

(b)           In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on and that voted for or against or expressly abstained with respect to that matter shall be the act of the stockholders.  Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.  If, at any meeting of the stockholders, due to a vacancy or vacancies or otherwise, directors of more than one class of the Board of Directors are to be elected, each class of directors to be elected at the meeting shall be elected in a separate election by a plurality vote. Cumulative voting shall not be permitted in the election of directors.

 

2.10        Voting of Shares .  Except as otherwise provided in these Bylaws or to the extent that voting rights of the shares of any class or classes are limited or denied by the Certificate of Formation, or permitted by the rules of any stock exchange on which the Corporation’s shares are listed and traded, each stockholder, on each matter submitted to a vote at a meeting of stockholders, shall have one vote for each share of stock registered in his name on the books of the Corporation. Such votes may be cast in person or by proxy as provided in Section 2.12 of this Article II.  The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of the stockholders, in such officer’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

 

2.11        Closing of Transfer Books and Fixing of the Record Date .  For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed sixty (60) days nor less than ten (10) days preceding such meeting.  In lieu of closing the stock transfer books, the Board of Directors may fix in advance a record date for any such determination of stockholders, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) days and, in case of a meeting of stockholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a distribution (other than a distribution involving a purchase or redemption by the Corporation of

 

8



 

any of its own shares) or dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such distribution or dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof except where the determination has been made through closing of share transfer records and the stated period of closing has expired.

 

2.12        Proxies .  Each stockholder entitled to vote at a meeting of the stockholders may authorize another person or persons to act for such stockholder as proxy, but no such proxy shall be voted upon after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.  Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, the following shall constitute a valid means by which a stockholder may grant such authority:

 

(a)           A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy.  Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.

 

(b)

 

(i)    A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder.  If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information on which they relied.

 

(ii)   Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided , however , that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

 

2.13        Waiver of Notice .  A waiver of any notice required to be given any stockholder, signed by the person or persons entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein for the meeting, shall

 

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be equivalent to the giving of such notice.  The attendance of any stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice by such stockholder, except where a stockholder attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or commenced.

 

2.14        Voting of Shares in the Name of Two or More Persons .  When ownership stands in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, at any meeting of the stockholders of the Corporation any one or more of such stockholders may cast, in person or by proxy, all votes to which such ownership is entitled.  In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

 

2.15        Voting of Shares by Certain Holders .  Shares standing in the name of another corporation may be voted by an officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.  Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name.  Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed.  A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

 

2.16        Inspectors .  For each meeting of stockholders, the Board of Directors shall appoint one or more inspectors of election, who shall make a written report of such meeting.  If for any meeting the inspector(s) appointed by the Board of Directors shall be unable to act or the Board of Directors shall fail to appoint any inspector, one or more inspectors shall be appointed at the meeting by the chairman thereof.  Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of his ability.  An inspector or inspectors shall (a) ascertain the number of shares outstanding and the voting power of each, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots.  The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman thereof.  An inspector or inspectors shall not accept a ballot, proxy or vote, nor any revocations thereof or changes thereto, after the closing of the polls (unless a court

 

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having jurisdiction in the State of Texas upon application by a stockholder shall determine otherwise) and may appoint or retain other persons or entities to assist them in the performance of their duties.  Inspectors need not be stockholders and may not be nominees for election as directors.

 

2.17        Unanimous Consent of Stockholders in Lieu of a Meeting .  Any action required to be taken by the stockholders at any annual or special meeting of such stockholders, or any action which may be taken at any annual or special meeting of stockholders of this Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by every holder of shares entitled to vote thereon and shall be delivered to the Corporation by delivery to its principal office or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.

 

ARTICLE III

 

CAPITAL STOCK

 

3.1          Certificates .  Certificates of stock shall be issued in numerical order, and each stockholder shall be entitled to a certificate signed by the Chairman of the Board or the President, and the Secretary or the Treasurer, and may be sealed with the seal of the Corporation or facsimile thereof.  The signatures of such officers may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation.  If an officer who has signed or whose facsimile signature has been placed upon such certificate ceases to be an officer before the certificate is issued, it may be issued by the Corporation with the same effect as if the person were an officer on the date of issue.  Each certificate of stock shall state: (a) that the Corporation is organized under the laws of the State of Texas; (b) the name of the person to whom issued; (c) the number and class of shares and the designation of the series, if any, which such certificate represents; and (d) the par value of each share represented by such certificate, or a statement that such shares are without par value. Notwithstanding anything to the contrary provided in these bylaws, the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares (except that the foregoing shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation), and by the approval and adoption of these bylaws the Board of Directors has determined that all classes or series of the Corporation’s stock may be uncertificated, whether upon original issuance, re-issuance, or subsequent transfer.

 

3.2          Transfers .

 

(a)           Transfers of stock shall be made only upon the stock transfer books of the Corporation, kept at the registered office of the Corporation or at its principal place of business, or at the office of its transfer agent or registrar, and before a new certificate is issued the old certificate shall be surrendered for cancellation.  The Board of Directors may, by resolution, open a share register in any state of the United States, and may employ an agent or agents to keep such register, and to record transfers of shares therein.

 

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(b)           Shares of stock shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate or an assignment separate from the certificate, or by a written power of attorney to sell, assign and transfer the same, signed by the holder of said certificate.  No shares of stock shall be transferred on the books of the Corporation until the outstanding certificates therefor have been surrendered to the Corporation.

 

(c)           A written restriction on the transfer or registration of transfer of a certificate evidencing stock of the Corporation, if permitted by the TBOC and noted conspicuously on such certificate, may be enforced against the holder of the restricted certificate or any successor or transferee of the holder, including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.

 

3.3          Registered Owner .  Registered stockholders shall be treated by the Corporation as the holders in fact of the stock standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of Texas.

 

3.4          Lost, Stolen or Destroyed Certificates .  The Corporation may issue a new certificate of stock in place of any certificate previously issued by it which is alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

 

3.5          Fractional Shares or Scrip .  The Corporation may (a) issue fractions of a share which shall entitle the holder to exercise voting rights, to receive dividends thereon and to participate in any of the assets of the Corporation in the event of liquidation; (b) arrange for the disposition of fractional interests by those entitled thereto; (c) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such shares are determined; or (d) issue scrip in registered form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip aggregating a full share.

 

3.6          Shares of Another Corporation .  Shares owned by the Corporation in another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the Board of Directors may determine or, in the absence of such determination, by the President of the Corporation.

 

ARTICLE IV

 

BOARD OF DIRECTORS

 

4.1          Powers .  The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, which may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Formation or these Bylaws directed or required to be exercised or done by the stockholders.

 

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4.2          Number of Directors .  Except pursuant to the provisions of Article 5B of the Certificate of Formation relating to the rights of the holders of any class or series of stock having the right to elect a director by the vote solely of the holders of that class or series of stock, the number and class of directors of the Corporation shall be fixed from time to time by the affirmative vote of a majority of the entire Board of Directors or pursuant to these Bylaws.

 

4.3          Classes, Term .  The directors, other than those who may be elected by the holders of shares of any class or series of stock having the right to elect a director by the vote solely of the holders of that class or series of stock pursuant to the terms of Article 5B of the Certificate of Formation or any resolution or resolutions providing for the establishment of such class or series of stock adopted by the Board of Directors, shall be divided into three classes, with respect to the time for which they severally hold office, designated Class I, Class II and Class III.  Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The initial classifications and terms of the Board of Directors are set forth in the Certificate of Formation.  A director shall hold office until the annual meeting of shareholders for the year in which his or her respective term expires and until his or her respective successor shall be elected and shall be qualified or until his or her earlier death, resignation, retirement, disqualification or removal from office.  Except as otherwise fixed pursuant to the provisions of Article 5B of the Certificate of Formation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors, (i) at each succeeding annual meeting of shareholders beginning in 2015, successors to the class of directors whose term expires at that meeting shall be elected for a three-year term and (ii) if the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class to as nearly as possible to one-third of the total number of directors, but in no case will a decrease in the number of directors shorten the term of any incumbent director.  In any election of directors, the persons receiving a plurality of the votes cast, up to the number of directors to be elected in such election, shall be deemed elected.  Directors need not be shareholders of the Corporation.

 

4.4          Vacancies .  Subject to other provisions of this Section 4.4 and except as otherwise fixed pursuant to the provisions of Article 5B of the Certificate of Formation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors, any vacancy occurring in the Board of Directors may be filled by election at an annual or special meeting of the stockholders called for that purpose or by the affirmative vote of a majority of the directors then in office (even if the remaining directors constitute less than a quorum of the Board of Directors), and any director so chosen shall hold office for the remainder of the term to which the director has been selected and until such director’s successor shall have been elected and qualified. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of the stockholders called for that purpose or may be filled by the Board of Directors for a term of office continuing only until the next election of one or more directors by the stockholders; provided that the Board of Directors may not fill more than two such directorships during the period between any two successive annual meetings of the stockholders. Notwithstanding the foregoing, whenever the holders of shares of any class or series of shares are entitled to elect one or more directors by the provisions of the Certificate of Formation, any vacancies in such directorships and any newly created directorships of such class or series to be filled by reason of an increase in the number of such directors may be filled by the affirmative vote

 

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of a majority of the directors elected by such class or series then in office or by a sole remaining director so elected, or by the vote of the holders of the outstanding shares of such class or series, and such directorships shall not in any case be filled by the vote of the remaining directors or the holders of the outstanding shares as a whole unless otherwise provided in the Certificate of Formation.

 

4.5          Removal of Directors .  Subject to the rights of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect directors, any director (including persons elected by the directors to fill vacancies in the Board of Directors) may be removed from office only for cause and only by the affirmative vote of a majority of the votes entitled to be cast by the shares of the then outstanding capital stock of the Corporation present in person or represented by proxy and entitled to vote generally in the election of directors at a duly constituted meeting of shareholders. Notwithstanding the foregoing, whenever the holders of any class or series of shares are entitled to elect one or more directors by the provisions of the Certificate of Formation, only the holders of shares of that class or series shall be entitled to vote for or against the removal of any director elected by the holders of shares of that class or series.

 

4.6          Regular Meetings .  Regular meetings of the Board of Directors or any committee thereof may be held without notice at the principal place of business of the Corporation or at such other place or places, either within or without the State of Texas, as the Board of Directors or such committee, as the case may be, may from time to time designate. Unless otherwise determined by the Board of Directors, the annual meeting of the Board of Directors shall be held without notice immediately after the adjournment of the annual meeting of stockholders. Notice of such meetings shall be provided to directors in accordance with the provisions of the TBOC.

 

4.7          Special Meetings .

 

                (a)           Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, the President or by any director, to be held at the principal place of business of the Corporation or at such other place or places as the Board of Directors or the person or persons calling such meeting may from time to time designate. Notice of all special meetings of the Board of Directors shall be given to each director at least twenty-four (24) hours prior to such meeting if notice is given in person or by telephone, telegraph, telex, facsimile or other electronic transmission and at least three (3) days prior to such meeting if notice is given in writing and delivered by postage prepaid mail. Such notice need not specify the business to be transacted at, nor the purpose of, the meeting.

 

(b)           Special meetings of any committee of the Board of Directors may be called at any time by any committee member or by the Chairman of the Board, and with such notice as shall be specified for such committee by the Board of Directors, or in the absence of such specification, in the manner and with the notice required for special meetings of the Board of Directors.

 

4.8          Waiver of Notice .  Attendance of a director at a regular or special meeting of the Board or of a committee thereof, shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. A waiver of notice signed by the director or

 

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directors, whether before or after the time stated for the regular or special meeting of the Board or of a committee thereof, shall be equivalent to the giving of notice.

 

4.9          Quorum; Actions of the Board of Directors .  Except as may be otherwise specifically provided by law, the Certificate of Formation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

 

4.10        Action by Directors Without a Meeting .  Any action required or which may be taken at a meeting of the directors, or of a committee thereof, may be taken without a meeting if a consent in writing or by electronic transmission, setting forth the action so taken or to be taken, shall be signed by all of the directors, or all of the members of the committee, as the case may be, and such consents or electronic transmissions (in paper form) are filed with the minutes of proceedings of the Board of Directors or committee, as the case may be. Such consent shall have the same effect as a unanimous vote.

 

4.11        Action by Directors by Communications Equipment .  Any action required or which may be taken at a meeting of directors, or of a committee thereof, may be taken by means of a conference telephone or similar communications equipment subject to any applicable provisions of the TBOC.

 

4.12        Registering Dissent .  A director who is present at a meeting of the Board of Directors at which action on a corporate matter is taken shall be presumed to have assented to such action unless his dissent shall be entered in the minutes of the meeting, or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting, before the adjournment thereof, or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

 

4.13        Committees .  The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation.  Each member of a committee must meet the requirements for membership, if any, imposed by applicable law and the rules and regulations of any securities exchange or quotation system on which the securities of the Corporation are listed or quoted for trading.  The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee.  Subject to the rules and regulations of any securities exchange or quotation system on which the securities of the Corporation are listed or quoted for trading, in the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another qualified member of the Board of Directors to act at the meeting in the place of any absent or disqualified member.  Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority

 

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of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.  Each committee shall keep regular minutes and report to the Board of Directors when required.  Notwithstanding anything to the contrary contained in this Article IV, the resolution of the Board of Directors establishing any committee of the Board of Directors and/or the charter of any such committee may establish requirements or procedures relating to the governance and/or operation of such committee that are different from, or in addition to, those set forth in these Bylaws and, to the extent that there is any inconsistency between these Bylaws and any such resolution or charter, the terms of such resolution or charter shall be controlling.

 

4.14        Remuneration .  The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors, a stated salary as director and/or such other compensation as may be fixed by the Board of Directors.  Members of special or standing committees may be allowed like compensation for serving on committees of the Board of Directors. No such payments shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

 

4.15        Interested Directors .  No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because any such director’s or officer’s vote is counted for such purpose if: (i) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders.  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

 

ARTICLE V

 

OFFICERS

 

5.1          Designations .  The officers of the Corporation shall be a Chairman of the Board, a President, a Secretary and a Treasurer appointed by the Board of Directors, as well as such Executive Vice Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers as the Board of Directors or the Chairman of the Board and President may designate.  Officers of the Corporation shall be elected for one year by the directors at their first meeting after the annual meeting of stockholders, and officers of the

 

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Corporation shall hold office until their successors are elected and qualified.  Any two or more offices may be held by the same person, except the offices of President and Secretary.

 

5.2          Powers and Duties .  The officers of the Corporation shall have such authority and perform such duties as the Board of Directors or, in the case of officers with a title of Executive Vice President or lower, the Chairman of the Board and President, may from time to time authorize or determine.  In the absence of action by the Board of Directors or the Chairman of the Board and President, as applicable, the officers shall have such powers and duties as generally pertain to their respective offices.

 

5.3          Delegation .  In the case of absence or inability to act of any officer of the Corporation and of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer or any director or other person whom it may select.

 

5.4          Vacancies .  Vacancies in any office arising from any cause may be filled by the Board of Directors at any regular or special meeting of the Board.

 

5.5          Term - Removal .  The officers of the Corporation shall hold office until their successors are chosen and qualified.  Any officer or agent elected or appointed by the Board of Directors or by the Chairman and the President may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

 

5.6          Bonds .  The Board of Directors may, by resolution, require any and all of the officers to give bonds to the Corporation, with sufficient surety or sureties, conditions for the faithful performance of the duties of their respective offices, and to comply with such other conditions as may from time to time be required by the Board of Directors.

 

ARTICLE VI

 

INDEMNIFICATION, ETC. OF DIRECTORS,
OFFICERS AND EMPLOYEES

 

6.1          Mandatory Indemnification . Subject to the limitations and conditions as provided in this Article VI, the Corporation shall indemnify any person who was, is, or is threatened to be made, a party to a proceeding (as hereinafter defined) by reason of the fact that he or she (i) is or was a director or officer of the Corporation or (ii) while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, manager, managing member, venturer, proprietor, trustee, employee, agent or similar functionary (each, a “ Corporate Functionary ”) of another foreign or domestic corporation, partnership, limited liability company, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, in each of those capacities, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding to the fullest extent permitted under the TBOC, the Certificate of Formation and these Bylaws, as the same exist or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights

 

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than such law permitted the Corporation to provide immediately prior to such amendment), and such indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation or to serve in any of such other capacities at the time the indemnification or payment of expenses pursuant hereto is sought or at the time any proceeding relating thereto exists or is brought. As used in this Article VI, the term “proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit, or proceeding, any inquiry or investigation that could lead to such an action, suit, or proceeding.

 

6.2          Permissive Indemnification. The Corporation may, in the sole and absolute discretion of the Board of Directors of the Corporation, also indemnify any employee or agent of the Corporation against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with a proceeding to the fullest extent permitted by the TBOC, the Certificate of Formation and these Bylaws, as the same exist or may hereafter be amended.

 

6.3          Expenses Payable in Advance . Each indemnitee under Section 6.1 of this Article VI shall have the right to be paid by the Corporation expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by such indemnitee in defending any proceeding in advance of its final disposition to the maximum extent permitted under the TBOC, the Certificate of Formation and these Bylaws, as the same exist or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader advancement of expenses than such law permitted the Corporation to provide immediately prior to such amendment), subject only to such written affirmation or undertaking as may be required to be furnished by the claimant under the TBOC.

 

6.4          Authorization of Indemnification .  Any indemnification under Section 6.1 or 6.2 of this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in the TBOC.  Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are disinterested and independent and are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders.  Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation.  To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case. The Corporation shall not indemnify any persons enumerated in Section 6.1 of this Article VI against expenses, penalties or other payments incurred in respect of an administrative proceeding or action instituted by an appropriate bank regulatory agency if such proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to

 

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the Corporation, except that in this instance, the Corporation may indemnify for reasonable expenses actually incurred in connection with such proceeding. In addition, no indemnification will be made of any person pursuant to this Article VI if any banking regulatory agency, in connection with a review of such indemnification, determines through appropriate administrative action that such indemnification shall not be made.

 

6.5          Indemnitee Rights . The rights under this Article VI shall be contractual and as such shall inure to the benefit of any director or officer who is elected and accepts the position of director or officer of the Corporation or elects to continue to serve as a director or officer of the Corporation while this Article VI is in effect. In the event of the death of any person having a right of indemnification under the foregoing provisions, such right shall inure to the benefit of his or her heirs, executors, administrators and personal representatives. Notwithstanding the other provisions of this Article VI, to the extent that a director, officer or Corporate Functionary of the Corporation has been successful on the merits or otherwise in defense of any proceeding referred to in Section 6.1 of this Article VI, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

 

6.6          Good Faith Defined .  For purposes of any determination under Section 6.3 of this Article VI, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise.  The provisions of this Section 6.6 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in the TBOC.

 

6.7          Indemnification by a Court .  Notwithstanding any contrary determination in the specific case under Section 6.3 of this Article VI, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Texas for indemnification to the extent otherwise permissible under Section 6.1 or Section 6.2 of this Article VI.  The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is fairly and reasonably entitled to indemnification in view of all relevant circumstances. Neither a contrary determination in the specific case under Section 6.3 of this Article VI nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct.  Notice of any application for indemnification pursuant to this Section 6.7 shall be given to the Corporation promptly upon the filing of such application.  The indemnification ordered by the court pursuant to this Section 6.7 shall be limited to reasonable expenses if the director or officer is found liable to the Corporation or is found liable because such officer or director improperly received a personal benefit, without regard to whether the benefit resulted from an action taken in the person’s official

 

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capacity. If otherwise successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

 

6.8          Nonexclusivity of Indemnification and Advancement of Expenses .  The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Formation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Section 6.1 or Section 6.2 of this Article VI shall be made to the fullest extent permitted by law.  The provisions of this Article VI shall not be deemed to preclude the indemnification of any person who is not specified in Section 6.1 or Section 6.2 of this Article VI but whom the Corporation has the power or obligation to indemnify under the provisions of the TBOC, or otherwise.

 

6.9          Insurance .  The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VI.

 

6.10        Certain Definitions .  For purposes of this Article VI, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.  The term “another enterprise” as used in this Article VI shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent.  For purposes of this Article VI, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VI.

 

6.11        Survival of Indemnification and Advancement of Expenses .  The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless

 

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otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

6.12        Limitation on Indemnification .  Notwithstanding anything contained in this Article VI to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 6.7 of this Article VI), the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation.

 

6.13        Indemnification of Employees and Agents .  The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VI to directors and officers of the Corporation.

 

ARTICLE VII

 

DIVIDENDS; FINANCE; AND FISCAL YEAR

 

7.1          Dividends .  Subject to the applicable provisions of the TBOC, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property or in shares of the capital stock of the Corporation.  Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, may deem proper as a reserve or reserves to meet contingencies, or for dividends, or for repairing or maintaining any property of the Corporation, or for any other proper purpose, and the Board of Directors may modify or abolish any such reserve.

 

7.2          Disbursements .  All checks or demand for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

 

7.3          Depositories .  The monies of the Corporation shall be deposited in the name of the Corporation in such bank or banks or trust company or trust companies as the Board of Directors shall designate, and shall be drawn out by wire transfer, check or other order for payment of money signed by such persons, or in any other such manner as may be determined by resolution of the Board of Directors.

 

7.4          Fiscal Year .  The fiscal year of the Corporation shall end on the 31st day of December of each year.

 

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ARTICLE VIII

 

NOTICES

 

8.1          Notices .  Whenever written notice is required by law, the Certificate of Formation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person’s address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail.  Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under applicable law, the Certificate of Formation or these Bylaws shall be effective if given by a form of electronic transmission if consented to by the stockholder to whom the notice is given.  Any such consent shall be revocable by the stockholder by written notice to the Corporation.  Any such consent shall be deemed to be revoked if (i) the Corporation is unable to deliver by electronic transmission two (2) consecutive notices by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided , however , that the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.  Notice given by electronic transmission, as described above, shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network, together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if communicated to the stockholder by any other form of electronic transmission consented to by the stockholder.  Notice to directors or committee members may be given personally or by telegram, telex, cable or by means of electronic transmission.

 

8.2          Waivers of Notice .  Whenever any notice is required by applicable law, the Certificate of Formation or these Bylaws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to notice, or a waiver by electronic transmission by the person or persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto.  Attendance of a person at a meeting, present in person or represented by proxy, shall constitute a waiver of notice of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any annual or special meeting of stockholders or any regular or special meeting of the directors or members of a committee of directors need be specified in any written waiver of notice unless so required by law, the Certificate of Formation or these Bylaws.

 

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ARTICLE IX

 

SEAL

 

The corporate seal of the Corporation shall be in such form and bear such inscription as may be adopted by resolution of the Board of Directors.

 

ARTICLE X

 

BOOKS AND RECORDS

 

The Corporation shall keep correct and complete books and records of account and shall keep minutes of meetings and proceedings of its stockholders and Board of Directors (including committees thereof); and it shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each.  Any books, records and minutes may be in written form or any other form capable of being converted into written form within a reasonable time.

 

ARTICLE XI

 

11.1        Forum For Adjudication of Certain Disputes .   Unless the Corporation consents in writing to the selection of an alternative forum, Harris County in the State of Texas shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation or any director, officer, or employee of the Corporation arising pursuant to any provision of the TBOC or the Corporation’s Certificate of Formation or Bylaws, or (iv) any action asserting a claim against the Corporation or any director, officer, or employee of the Corporation governed by the internal affairs doctrine of the State of Texas; provided , however , that, in the event that the Harris County in the State of Texas lacks jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Texas.  Failure to enforce the foregoing provisions would cause the Corporation irreparable harm and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.  Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 11.1 of Article XI.

 

ARTICLE XII

 

AMENDMENTS

 

These Bylaws may be altered, amended or repealed only as set forth in the Corporation’s Certificate of Formation, which provisions are incorporated herein with the same effect as if they were set forth herein.

 

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ARTICLE XIII

 

USE OF PRONOUNS

 

Use of the masculine gender in these Bylaws shall be considered to represent either masculine or feminine gender whenever appropriate.

 

 

 

Approved and adopted this

 

 

 

           day of [     ], 2014:

 

 

 

 

 

GREEN BANCORP, INC .

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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Exhibit 5.1

 

July 29, 2014

 

Green Bancorp, Inc.

4000 Greenbriar

Houston, Texas 77098

 

Re:                              Green Bancorp, Inc.

Registration Statement on Form S-1

(File No. 333-196982)

 

Ladies and Gentlemen:

 

We have acted as special counsel to Green Bancorp, Inc., a Texas corporation (the “ Company ”), in connection with the initial public offering by the Company (the “ IPO ”) relating to the sale by the Company to the Underwriters (as defined below) of 4,687,500 shares (the “ Firm Shares ”) of the Company’s common stock, par value $0.01 per share (the “ Common Stock ”), and up to an additional 703,125 shares of Common Stock (the “ Option Shares ” and, together with the Firm Shares, the “ Company Shares ”) at the Underwriters’ option.

 

This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K of the General Rules and Regulations under the Securities Act of 1933, as amended (the “ Act ”).

 

In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of (a) the Registration Statement on Form S-1 (File No. 333-196982) of the Company, as filed with the Securities and Exchange Commission (the “ Commission ”) under the Act on June 23, 2014; (b) Pre-Effective Amendment No. 1 thereto (such Registration Statement, as so amended, being hereinafter referred to as the “ Registration Statement ”); (c) the form of underwriting agreement (the “ Underwriting Agreement ”) proposed to be entered into by and among Sandler O’Neill & Partners, L.P. and Jefferies LLC, as representatives of the several underwriters named in Schedule I thereto  (the “ Underwriters ”), the Company and Green Bank, N.A., filed as Exhibit 1.1 to the Registration Statement; (d) the

 



 

Amended and Restated Certificate of Formation of the Company, as amended to date and currently in effect; (e) the Amended and Restated Bylaws of the Company, as amended to date and currently in effect; (f) the form of Restated Certificate of Formation of the Company (the “ New Charter ”), to be in effect immediately prior to the consummation of the IPO and filed as Exhibit 3.1 to the Registration Statement; (g) the form of Amended and Restated Bylaws of the Company (the “ New Bylaws ”), to be in effect immediately prior to the consummation of the IPO and filed as Exhibit 3.2 to the Registration Statement; and (h) certain resolutions of the Board of Directors of the Company relating to the issuance of the Company Shares and related matters. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates and receipts of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth below.

 

We have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified or photostatic copies, and the authenticity of the originals of such copies.  In making our examination of executed documents, we have assumed that the parties thereto, other than the Company, had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties.  As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and others and of public officials.

 

Members of our firm are admitted to the bar in the State of New York, and we do not express any opinion with respect to the law of any jurisdiction other than Texas corporate law (including, to the extent applicable, the Texas constitution and judicial decisions) and we do not express any opinion as to the effect of any other laws on the opinions herein stated.

 

Based upon and subject to the foregoing, we are of the opinion that:

 

Upon the (i) due filing of the New Charter with the Texas Secretary of State and the effectiveness thereof under Texas law, (ii) adoption by the Board of Directors of the Company of the New Bylaws, (iii) due action by a duly appointed committee of the Board of Directors of the Company to determine the price per share of the Company Shares and (iv) due execution and delivery of the Underwriting Agreement and issuance of the Company Shares against payment therefor in accordance with the Underwriting Agreement, the Company Shares will have been duly authorized by all necessary corporate action of the Company and will be validly issued, fully paid and nonassessable.

 

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We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. We also consent to the reference to our firm under the caption “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.

 

 

 

Very truly yours,

 

 

 

 

 

/s/ Skadden, Arps, Slate, Meagher & Flom LLP

 

3




Exhibit 10.2f

 

GREEN BANCORP, INC.
2014 OMNIBUS EQUITY INCENTIVE PLAN

 

Section 1. Purpose of Plan.

 

The name of the Plan is the Green Bancorp, Inc. 2014 Omnibus Equity Incentive Plan. The purposes of the Plan are to provide an additional incentive to selected employees, directors, independent contractors and consultants of the Company or its Affiliates  whose contributions are essential to the growth and success of the Company’s business, in order to strengthen the commitment of such persons to the Company and its Subsidiaries, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of the Company. To accomplish such purposes, the Plan provides that the Company may grant Options, Share Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance Shares, Other Share-Based Awards, Cash Awards or any combination of the foregoing.

 

Section 2. Definitions.

 

For purposes of the Plan, the following terms shall be defined as set forth below:

 

(a)           “ Administrator ” means the Board, or, if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 3 hereof.

 

(b)           “ Affiliate ” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. An entity shall be deemed an Affiliate of the Company for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.

 

(c)           “ Applicable Laws ” means the applicable requirements under U.S. federal and state corporate laws, U.S. federal and state securities laws, including the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Awards are granted under the Plan, as are in effect from time to time.

 

(d)           “ Award ” means any Option, Share Appreciation Right, Restricted Share, Restricted Stock Unit, Performance Share, Other Share-Based Award or Cash Award granted under the Plan.

 

(e)           “ Award Agreement ” means any written agreement, contract or other instrument or document evidencing an Award.

 

(f)            “ Beneficial Owner (or any variant thereof) has the meaning defined in Rule 13d-3 under the Exchange Act.

 



 

(g)           “ Board ” means the Board of Directors of the Company.

 

(h)           “ Bylaws ” mean the bylaws of the Company, as may be amended and/or restated from time to time.

 

(i)            “ Cash Award ” means cash awarded under Section 11 of the Plan, including cash awarded as a bonus or upon the attainment of Performance Goals or otherwise as permitted under the Plan.

 

(j)            “ Cause ” shall have the meaning assigned to such term in any individual employment, severance agreement or Award Agreement with the Participant or, if no such agreement exists or if such agreement does not define “Cause,” Cause means (i) the conviction, guilty plea or plea of “no contest” by the Participant to any felony or a crime involving moral turpitude or the Participant’s commission of any other act or omission involving dishonesty or fraud, (ii) the substantial and repeated failure of the Participant to perform duties of the office held by the Participant, (iii) the Participant’s gross negligence, willful misconduct or breach of fiduciary duty with respect to the Company or any of its Subsidiaries or Affiliates, (iv) any breach by the Participant of any restrictive covenants to which the Participant is subject, and/or (v) any material breach of the Company’s policies or procedures.  Any voluntary termination of Employment by the Participant in anticipation of an involuntary termination of the Participant’s employment for Cause shall be deemed to be a termination for Cause.

 

(k)           “ Change in Capitalization ” means any (i) merger, amalgamation, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase or other reorganization or corporate transaction or event, (ii) special or extraordinary dividend or other extraordinary distribution (whether in the form of cash, Common Stock or other property), stock split, reverse stock split, share subdivision or consolidation, (iii) combination or exchange of shares or (iv) other change in corporate structure, which, in any such case, the Administrator determines, in its sole discretion, affects the Shares such that an adjustment pursuant to Section 5 hereof is appropriate.

 

(l)            “ Change in Control ” means an event set forth in any one of the following paragraphs shall have occurred:

 

(1)           any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person or any securities acquired directly from the Company or any Affiliate thereof) representing 50% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (3) below; or

 

(2)           the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board:  individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders

 

2



 

was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended (“ Incumbent Directors ”); or

 

(3)           there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary with any other corporation or other entity, other than (i) a merger or consolidation which results in (A) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary, more than 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation and (B) the Incumbent Directors continuing immediately thereafter to represent at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a Subsidiary, the ultimate parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 50% or more of the combined voting power of the Company’s then outstanding securities; or

 

(4)           the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than (A) a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders of the Company following the completion of such transaction in substantially the same proportions as their ownership of the Company immediately prior to such sale or (B) a sale or disposition of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or, if such entity is a subsidiary, the ultimate parent thereof.

 

Notwithstanding the foregoing, (i) a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the holders of Common Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions and (ii) for each Award that constitutes deferred compensation under Section 409A of the Code, and to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, a Change in Control shall be deemed to have occurred under the Plan with respect to such Award only if a change in the ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code.

 

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(m)          “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

 

(n)           “ Committee ” means any committee or subcommittee the Board may appoint to administer the Plan. Subject to the discretion of the Board, the Committee shall be composed entirely of individuals who meet the qualifications of an “outside director” within the meaning of Section 162(m) of the Code (but only to the extent necessary and desirable to maintain qualification of Awards as “performance-based compensation” under Section 162(m) of the Code), a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and any other qualifications required by the applicable stock exchange on which the Common Stock is traded.  If at any time or to any extent the Board shall not administer the Plan, then the functions of the Administrator specified in the Plan shall be exercised by the Committee. Except as otherwise provided in the Certificate of Formation or Bylaws of the Company, any action of the Committee with respect to the administration of the Plan shall be taken by a majority vote at a meeting at which a quorum is duly constituted or unanimous written consent of the Committee’s members.

 

(o)           “ Common Stock ” means the common stock, par value $0.01 per share, of the Company.

 

(p)           “ Company ” means Green Bancorp, Inc., a Texas corporation (or any successor company, except as the term “Company” is used in the definition of “Change in Control” above).

 

(q)           “ Covered Employee ” has the meaning ascribed to the term “covered employee” set forth in Section 162(m) of the Code.

 

(r)            “ Disability ” shall have the meaning set forth in the employment, severance, or change in control agreement between the Participant and the Company, provided that if no such agreement or definition exists, then “Disability” means, with respect to any Participant, that such Participant (i) as determined by the Administrator in its sole discretion, is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company or an Affiliate thereof.

 

(s)            “ Effective Date ” has the meaning set forth in Section 19 hereof.

 

(t)            “ Eligible Recipient ” means an employee, director, independent contractor or consultant of the Company or any Affiliate of the Company who has been selected as an eligible participant by the Administrator; provided , however , to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, an Eligible Recipient of an Option or a Stock Appreciation Right means an employee, non-employee director, independent contractor or consultant of the Company or any Affiliate of the Company with

 

4



 

respect to whom the Company is an “eligible issuer of service recipient stock” within the meaning of Section 409A of the Code.

 

(u)           “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time.

 

(v)           “ Exercise Price ” means, with respect to any Award under which the holder may purchase Shares, the per share price at which a holder of such Award granted hereunder may purchase Shares issuable upon exercise of such Award, which in any event will not be less than one hundred percent (100%) of the Fair Market Value of a related Share on the date of grant.

 

(w)          “ Fair Market Value ” of a Share or another security as of a particular date shall mean the fair market value  as determined by the Administrator in its sole discretion; provided , however , (i) if the Common Stock or other security is admitted to trading on a national securities exchange, the fair market value on any date shall be the closing sale price reported  on such date, or (ii) if the Common Stock or other security is then traded in an over-the-counter market, the fair market value  on any date shall be the average of the closing bid and  asked prices for such share in such over-the-counter market for the last preceding date on which there was a sale of such share in such market.

 

(x)           “ Good Reason ” shall have the meaning assigned to such term in any individual employment, severance agreement or Award Agreement with the Participant and, if no such agreement exists or if such agreement does not define “Good Reason,” Good Reason shall not apply to the Participant.

 

(y)           “ ISO ” means an Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code.

 

(z)           “ Nonqualified Stock Option ” shall mean an Option that is not designated as an ISO.

 

(aa)         “ Option ”  means an option to purchase Shares granted pursuant to Section 7 hereof.  The term “Option” as used in the Plan includes the terms “Nonqualified Stock Option” and “ISO.”

 

(bb)         “ Other Share-Based Award ” means a right or other interest granted pursuant to Section 10 hereof that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the Common Stock, including, but not limited to, unrestricted Shares, restricted stock units, dividend equivalents or performance units, each of which may be subject to the attainment of Performance Goals or a period of continued employment or other terms or conditions as permitted under the Plan.

 

(cc)         “ Participant ” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority provided for in Section 3 below, to receive grants of Awards, and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be.

 

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(dd)         “ Performance Goals ” means performance goals based on one or more of the following criteria: (i) earnings, including one or more of operating income, net operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization, adjusted EBITDA, economic earnings, or extraordinary or special items or book value per share (which may exclude nonrecurring items); (ii) pre-tax income or after-tax income; (iii) earnings per share (basic or diluted); (iv) operating profit; (v) revenue, revenue growth or rate of revenue growth; (vi) return on assets (gross or net), return on investment, return on capital, or return on equity; (vii) returns on sales or revenues; (viii) operating expenses; (ix) share price appreciation; (x) cash flow, cash flow per share, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xi) implementation or completion of critical projects or processes; (xii) cumulative earnings per share growth; (xiii) operating margin or profit margin; (xiv) n on-interest income and expense related measures, including non-interest income to average assets, non-interest expense to average assets, non-interest income compared to targeted thresholds and non-interest expense compared to targeted thresholds; (xv) cost targets, reductions and savings, productivity and efficiencies; (xvi) g rowth related measures, including deposit growth (including growth related to specific types of deposits), weighted deposit growth and loan growth (including growth related to specific types of loans); (xvii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (xviii) c redit related measures, including classified assets to total loans plus owned real estate, non-performing assets to total assets and net charge-offs to total loans; (xix)  personal professional objectives, including any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions; (xx) any combination of, or a specified increase in, any of the foregoing, (xxi) economic value created; and (xxii) share price or total shareholder return.  Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company or any Affiliate thereof, or a division or strategic business unit of the Company or any Affiliate thereof, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Committee.  The Performance Goals may include a threshold level of performance below which no payment shall be made (or no vesting shall occur), levels of performance at which specified payments shall be made (or specified vesting shall occur), and a maximum level of performance above which no additional payment shall be made (or at which full vesting shall occur).  Each of the foregoing Performance Goals shall be determined in accordance with generally accepted accounting principles (to the extent applicable) and shall be subject to certification by the Committee; provided, that, to the extent permitted by Section 162(m) of the Code to the extent applicable, the Committee shall make equitable adjustments to the Performance Goals in recognition of unusual or non-recurring events affecting the Company or any Affiliate thereof or the financial statements of the Company or any Affiliate thereof, in response to changes in Applicable Laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a

 

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segment of a business or related to a change in accounting principles.  Notwithstanding the foregoing, the Committee shall take any actions pursuant to this paragraph to the extent necessary and desirable to maintain qualification of Awards as performance-based compensation under Section 162(m) of the Code.

 

(ee)         “ Performance Shares ” means Shares or units denominated in Shares that are subject to restrictions that lapse upon the attainment of specified performance objectives and that are granted pursuant to Section 9 below.

 

(ff)          “ Person ” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any Subsidiary thereof, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary thereof, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of the Company.

 

(gg)         “ Plan ” means this Green Bancorp, Inc. 2014 Omnibus Equity Incentive Plan, including any appendixes thereto.

 

(hh)         Restricted Shares ” means Shares granted pursuant to Section 9 below subject to certain restrictions that lapse at the end of a specified period or periods.

 

(ii)           “ Restricted Stock Unit ” means the right granted pursuant to Section 9 hereof to receive a Share at the end of a specified restricted period (or periods) of time and/or upon attainment of specified performance objectives.

 

(jj)           “ Shares ” means Common Stock reserved for issuance under the Plan, as adjusted pursuant to the Plan, and any successor (pursuant to a merger, amalgamation, consolidation or other reorganization) security.

 

(kk)         “ Share Appreciation Right ” means the right pursuant to an Award granted under Section 8 below to receive an amount equal to the excess, if any, of (i) the aggregate Fair Market Value, as of the date such Award or portion thereof is surrendered, of the Shares covered by such Award or such portion thereof, over (ii) the aggregate Exercise Price of such Award or such portion thereof.

 

(ll)           “ Subsidiary ” means, with respect to any Person, as of any date of determination, any other Person as to which such first Person owns or otherwise controls, directly or indirectly, more than 50% of the voting shares or other similar interests or a sole general partner interest or managing member or similar interest of such other Person. An entity shall be deemed a Subsidiary of the Company for purposes of this definition only for such periods as the requisite ownership or control relationship is maintained.

 

Section 3. Administration.

 

(a)           The Plan shall be administered by the Administrator and shall be administered in accordance with the requirements of Section 162(m) of the Code (but only to the

 

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extent necessary and desirable to maintain qualification of Awards as performance-based compensation under Section 162(m) of the Code) and, to the extent applicable, Rule 16b-3 under the Exchange Act (“ Rule 16b-3 ”).

 

(b)           Pursuant to the terms of the Plan, the Administrator, subject, in the case of any Committee, to any restrictions on the authority delegated to it by the Board, shall have the power and authority, without limitation:

 

(1)           to select those Eligible Recipients who shall be Participants;

 

(2)           to determine whether and to what extent Options, Share Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance Shares, Cash Awards, Other Share-Based Awards or a combination of any of the foregoing, are to be granted hereunder to Participants;

 

(3)           to determine the number of Shares to be covered by each Award granted hereunder;

 

(4)           to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder (including, but not limited to, (i) the restrictions applicable to Restricted Shares or Restricted Stock Units and the conditions under which restrictions applicable to such Restricted Shares or Restricted Stock Units shall lapse, (ii) the Performance Goals and periods applicable to Awards, (iii) the Exercise Price of each Award, (iv) the vesting schedule applicable to each Award, (v) the number of Shares or amount of cash or other property subject to each Award and (vi) subject to the requirements of Section 409A of the Code (to the extent applicable), any amendments to the terms and conditions of outstanding Awards, including, but not limited to, extending the exercise period of such Awards and accelerating the vesting schedule of such Awards);

 

(5)           to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Awards;

 

(6)           to determine the Fair Market Value in accordance with the terms of the Plan;

 

(7)           to determine the duration and purpose of leaves of absence which may be granted to a Participant without constituting termination of the Participant’s employment for purposes of Awards granted under the Plan;

 

(8)           to adopt, alter and repeal such administrative rules, regulations, guidelines and practices governing the Plan as it shall from time to time deem advisable;

 

(9)           to construe and interpret the terms and provisions of, and supply or correct omissions in, the Plan and any Award issued under the Plan (and any Award Agreement relating thereto), and to otherwise supervise the administration of the Plan and to exercise all powers and authorities either specifically granted under the Plan or necessary and advisable in the administration of the Plan; and

 

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(10)         to prescribe, amend and rescind rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws, which rules and regulations may be set forth in an appendix or appendixes to the Plan.

 

(c)           Subject to Section 5, neither the Board nor the Committee shall have the authority to reprice or cancel and regrant any Award at a lower exercise, base or purchase price or cancel any Award with an exercise, base or purchase price in exchange for cash, property or other Awards without first obtaining the approval of the Company’s shareholders.

 

(d)           All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants. No member of the Board or the Committee, nor any officer or employee of the Company or any Subsidiary thereof acting on behalf of the Board or the Committee, shall be personally liable for any action, omission, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company and of any Subsidiary thereof acting on their behalf shall, to the maximum extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, omission, determination or interpretation.

 

Section 4. Shares Reserved for Issuance Under the Plan.

 

(a)           Subject to Section 5 hereof, the number of Shares that are reserved and available for issuance pursuant to Awards granted under the Plan shall be equal to 1,273,838 Shares.  From and after such time as the Plan is subject to 162(m) of the Code, the aggregate Awards denominated in Shares granted during any single fiscal year to any individual who is likely to be a Covered Employee shall not exceed 250,000 Shares.  The maximum Cash Award that any Covered Employee may receive with respect to a Cash Award in respect of any annual performance period is $1,500,000 and for any other performance period, such amount multiplied by a fraction, the numerator of which is the number of months in the performance period and the denominator of which is twelve (12).

 

(b)           Shares issued under the Plan may, in whole or in part, be authorized but unissued Shares or Shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any Shares subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Participant, the Shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Notwithstanding the foregoing, Shares surrendered or withheld as payment of either the Exercise Price of an Award (including Shares otherwise underlying an Award of a Share Appreciation Right that are retained by the Company to account for the Exercise Price of such Share Appreciation Right) and/or withholding taxes in respect of an Award shall no longer be available for grant under the Plan.  In addition, (i) to the extent an Award is denominated in Shares, but paid or settled in cash, the number of Shares with respect to which such payment or settlement is made shall again be available for grants of Awards pursuant to the Plan and (ii) Shares underlying Awards that can only be settled in cash shall not be counted against the aggregate number of Shares available for Awards under the Plan.

 

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(c)           No more than 500,000 Shares shall be issued pursuant to the exercise of ISOs.

 

Section 5. Equitable Adjustments.

 

In the event of any Change in Capitalization, an equitable substitution or proportionate adjustment shall be made, in each case, as may be determined by the Administrator, in its sole discretion, in (i) the aggregate number of Shares reserved for issuance under the Plan pursuant to Section 4 and the maximum number of Shares that may be subject to Awards granted to any Participant in any calendar or fiscal year (including the limits set forth in Sections 4(a) and 4(c)), (ii) the kind, number of securities subject to, and Exercise Price subject to outstanding Options and Share Appreciation Rights granted under the Plan, and (iii) the kind, number and purchase price of Shares or other securities or the amount of cash or amount or type of other property subject to outstanding Restricted Shares, Restricted Stock Units, Performance Shares or Other Share-Based Awards granted under the Plan; provided , however , that any fractional shares resulting from the adjustment shall be eliminated. Such other equitable substitutions or adjustments shall be made as may be determined by the Administrator, in its sole discretion. Without limiting the generality of the foregoing, in connection with a Change in Capitalization, the Administrator may provide, in its sole discretion, but subject in all events to the requirements of Section 409A of the Code, for the cancellation of any outstanding Award granted hereunder in exchange for payment in cash or other property having an aggregate Fair Market Value of the Shares covered by such Award, reduced by the aggregate Exercise Price or purchase price thereof, if any; provided , however , that if the Exercise Price or purchase price of any outstanding Award is equal to or greater than the Fair Market Value of the Shares, cash or other property covered by such Award, the Board may cancel such Award without the payment of any consideration to the Participant.   Further, without limiting the generality of the foregoing, with respect to Awards subject to foreign laws, adjustments made hereunder shall be made in compliance with applicable requirements.  Except to the extent determined by the Administrator, any adjustments to ISOs under this Section 5 shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code.  The Administrator’s determinations pursuant to this Section 5 shall be final, binding and conclusive.

 

Section 6. Eligibility.

 

The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from those individuals that qualify as Eligible Recipients, provided , however , that no non-employee director under the Plan shall be granted Awards in any consecutive 12-month period having a value of more than $250,000.

 

Section 7. Options.

 

(a)           General .  Options granted under the Plan shall be designated as Nonqualified Stock Options or ISOs.  Each Participant who is granted an Option shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, which Award Agreement shall set forth,

 

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among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option, and whether the Option is intended to be an ISO or a Nonqualified Stock Option (and in the event the Award Agreement has no such designation, the Option shall be a Nonqualified Stock Option).  The provisions of each Option need not be the same with respect to each Participant.  More than one Option may be granted to the same Participant and be outstanding concurrently hereunder. Options granted under the Plan shall be subject to the terms and conditions set forth in this Section 7 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable and set forth in the applicable Award Agreement.

 

(b)           Exercise Price . The Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at the time of grant, but in no event shall the exercise price of an Option be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant.

 

(c)           Option Term . The maximum term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten (10) years after the date such Option is granted. Each Option’s term is subject to earlier expiration pursuant to the applicable provisions in the Plan and the Award Agreement. Notwithstanding the foregoing, the Administrator shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such circumstances as the Administrator, in its sole discretion, deems appropriate.

 

(d)           Exercisability . Each Option shall be exercisable at such time or times and subject to such terms and conditions, including the attainment of pre-established Performance Goals, as shall be determined by the Administrator in the applicable Award Agreement. The Administrator may also provide that any Option shall be exercisable only in installments, and the Administrator may waive any such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine in its sole discretion. Notwithstanding anything to the contrary contained herein, an Option may not be exercised for a fraction of a share.

 

(e)           Method of Exercise . Options may be exercised in whole or in part by giving written notice of exercise to the Company specifying the number of whole Shares to be purchased, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent, as determined by the Administrator. As determined by the Administrator, in its sole discretion, with respect to any Option or category of Options, payment in whole or in part may also be made (i) by means of consideration received under any cashless exercise procedure approved by the Administrator (including the withholding of Shares otherwise issuable upon exercise), (ii) in the form of unrestricted Shares already owned by the Participant which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (iii) any other form of consideration approved by the Administrator and permitted by Applicable Laws or (iv) any combination of the foregoing.

 

(f)            ISOs . The terms and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations and

 

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administrative procedures established by the Administrator from time to time in accordance with the Plan.  At the discretion of the Administrator, ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or a Subsidiary.

 

(1)           ISO Grants to 10% Stockholders .  Notwithstanding anything to the contrary in the Plan, if an ISO is granted to a Participant who owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or a Subsidiary, the term of the ISO shall not exceed five (5) years from the time of grant of such ISO and the Exercise Price shall be at least one hundred and ten percent (110%) of the Fair Market Value of the Shares on the date of grant.

 

(2)           $100,000 Per Year Limitation For ISOs .  To the extent the aggregate Fair Market Value (determined on the date of grant) of the Shares for which ISOs are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess ISOs shall be treated as Nonqualified Stock Options.

 

(3)           Disqualifying Dispositions .  Each Participant awarded an ISO under the Plan shall notify the Company in writing immediately after the date he or she makes a “disqualifying disposition” of any Share acquired pursuant to the exercise of such ISO.  A “disqualifying disposition” is any disposition (including any sale) of such Shares before the later of (i) two years after the date of grant of the ISO and (ii) one year after the date the Participant acquired the Shares by exercising the ISO.  The Company may, if determined by the Administrator and in accordance with procedures established by it, retain possession of any Shares acquired pursuant to the exercise of an ISO as agent for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such shares.

 

(g)           Rights as Stockholder .  A Participant shall have no rights to dividends, dividend equivalents or distributions or any other rights of a stockholder with respect to the Shares subject to an Option until the Participant has given written notice of the exercise thereof, and has paid in full for such Shares and has satisfied the requirements of Section 16 hereof.

 

(h)           Termination of Employment or Service .  Unless otherwise provided by the Committee or in the applicable Award Agreement:

 

(1)           In the event that the employment or service of a Participant with the Company and all Affiliates thereof (including by reason of the Participant’s employer ceasing to be an Affiliate of the Company) shall terminate for any reason other than Cause, Disability, or death, (A) Options granted to such Participant, to the extent that they are exercisable at the time of such termination, shall remain exercisable until the date that is ninety (90) days after such termination, on which date they shall expire, and (B) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination.  Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term.

 

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(2)           In the event that the employment or service of a Participant with the Company and all Affiliates thereof shall terminate on account of the Disability, or death of the Participant, (A) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the date that is twelve (12) months after such termination, on which date they shall expire and (B) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination.  Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term.

 

(3)           In the event of the termination of a Participant’s employment or service for Cause, all outstanding Options granted to such Participant shall expire at the commencement of business on the date of such termination.

 

(i)            Other Change in Employment Status .  An Option shall be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment, partial Disability or other changes in the employment status of a Participant, in the discretion of the Administrator.

 

Section 8. Share Appreciation Rights.

 

(a)           General . Share Appreciation Rights may be granted either alone (“ Free Standing Rights ”) or in conjunction with all or part of any Option granted under the Plan (“ Related Rights ”). Related Rights may be granted either at or after the time of the grant of such Option. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, grants of Share Appreciation Rights shall be made.  Each Participant who is granted a Share Appreciation Right shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, which Award Agreement shall set forth, among other things, the number of Shares to be awarded, the Exercise Price per Share, and all other conditions of Share Appreciation Rights. Notwithstanding the foregoing, no Related Right may be granted for more Shares than are subject to the Option to which it relates, and any Share Appreciation Right must be granted with an Exercise Price not less than the Fair Market Value of a share of Common Stock on the date of grant. The provisions of Share Appreciation Rights need not be the same with respect to each Participant. Share Appreciation Rights granted under the Plan shall be subject to the following terms and conditions set forth in this Section 8 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable, as set forth in the applicable Award Agreement.

 

(b)           Awards; Rights as Stockholder .  A Participant shall have no rights to dividends or any other rights of a stockholder with respect to the Shares, if any, subject to a Stock Appreciation Right until the Participant has given written notice of the exercise thereof and has satisfied any applicable requirements for exercise and the requirements of Section 16 hereof.

 

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(c) Exercisability .

 

(1)           Share Appreciation Rights that are Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator in the applicable Award Agreement.

 

(2)           Share Appreciation Rights that are Related Rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of Section 7 hereof and this Section 8 of the Plan.

 

(d)           Payment Upon Exercise .

 

(1)           Upon the exercise of a Free Standing Right, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to the excess of the Fair Market Value as of the date of exercise over the Exercise Price per share specified in the Free Standing Right multiplied by the number of Shares in respect of which the Free Standing Right is being exercised.

 

(2)           A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to the excess of the Fair Market Value as of the date of exercise over the Exercise Price specified in the related Option multiplied by the number of Shares in respect of which the Related Right is being exercised. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.

 

(3)           Notwithstanding the foregoing, the Administrator may determine to settle the exercise of a Share Appreciation Right in cash (or in any combination of Shares and cash).

 

(e)           Termination of Employment or Service .  Unless otherwise provided by the Committee or in the applicable Award Agreement:

 

(1)           In the event that the employment or service of a Participant with the Company and all Affiliates thereof (including by reason of the Participant’s employer ceasing to be an Affiliate of the Company) shall terminate for any reason other than Cause, Disability, or death, (A) Share Appreciation Rights granted to such Participant, to the extent that they are exercisable at the time of such termination, shall remain exercisable until the date that is ninety (90) days after such termination, on which date they shall expire, and (B) Share Appreciation Rights granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination.  Notwithstanding the foregoing, no Share Appreciation Right shall be exercisable after the expiration of its term.

 

(2)           In the event that the employment or service of a Participant with the Company and all Affiliates thereof shall terminate on account of the Disability, or death of the Participant, (A) Share Appreciation Rights granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the date that is

 

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twelve (12) months after such termination, on which date they shall expire. Notwithstanding the foregoing, no Share Appreciation Right shall be exercisable after the expiration of its term.

 

(3)           In the event of the termination of a Participant’s employment or service for Cause, all outstanding Share Appreciation Rights granted to such Participant shall expire at the commencement of business on the date of such termination.

 

(f)            Term .

 

(1)           The term of each Free Standing Right shall be fixed by the Administrator, but no Free Standing Right shall be exercisable more than ten (10) years after the date such right is granted.

 

(2)           The term of each Related Right shall be the term of the Option to which it relates, but no Related Right shall be exercisable more than ten (10) years after the date such right is granted.

 

(g)           Other Change in Employment Status .  Share Appreciation Rights shall be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment, partial Disability or other changes in the employment status of a Participant, in the discretion of the Administrator.

 

Section 9. Restricted Shares, Restricted Stock Units and Performance Shares.

 

(a)           General .  Restricted Shares, Restricted Stock Units or Performance Shares may be issued either alone or in addition to other Awards granted under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, Restricted Shares, Restricted Stock Units or Performance Shares shall be made.  Each Participant who is granted Restricted Shares, Restricted Stock Units or Performance Shares shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, which Award Agreement shall set forth, among other things, the number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Shares, Restricted Stock Units or Performance Shares; the period of time restrictions, Performance Goals or other conditions that apply to delivery or vesting of such Awards (the “ Restricted Period ”), and all other conditions applicable to the Restricted Shares, Restricted Stock Units and Performance Shares. If the time restrictions, performance objectives and/or performance or other conditions established by the Administrator are not attained, a Participant shall forfeit his or her Restricted Shares, Restricted Stock Units or Performance Shares, in accordance with the terms of the Award. The provisions of the Restricted Shares, Restricted Stock Units or Performance Shares need not be the same with respect to each Participant.

 

(b)           Awards and Certificates .  Except as otherwise provided below in Section 9(c), (i) each Participant who is granted an Award of Restricted Shares may, in the Company’s sole discretion, be issued a share certificate in respect of such Restricted Shares; and (ii) any such certificate so issued shall be registered in the name of the Participant, and shall bear an

 

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appropriate legend referring to the terms, conditions and restrictions applicable to any such Award.

 

(1)           The Company may require that the share certificates, if any, evidencing Restricted Shares granted hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Award of Restricted Shares, the Participant shall have delivered a share transfer form, endorsed in blank, relating to the Shares covered by such Award.  Certificates for shares of unrestricted Common Stock may, in the Company’s sole discretion, be delivered to the Participant only after the Restricted Period has expired without forfeiture in such Restricted Stock Award.

 

(2)           With respect to Restricted Stock Units to be settled in Shares, at the expiration of the Restricted Period, share certificates in respect of the Shares underlying such Restricted Stock Units may, in the Company’s sole discretion, be delivered to the Participant, or his legal representative, in a number equal to the number of shares of Common stock underlying the Restricted Stock Units Award.

 

(3)           Notwithstanding anything in the Plan to the contrary, any Restricted Shares, Restricted Stock Units to be settled in Shares (at the expiration of the Restricted Period) or Performance Shares (whether before or after any vesting conditions have been satisfied) may, in the Company’s sole discretion, be issued in uncertificated form.

 

(4)           Further, notwithstanding anything in the Plan to the contrary, with respect to Restricted Stock Units, at the expiration of the Restricted Period, Shares, or cash, as applicable, shall promptly be issued (either in certificated or uncertificated form) to the Participant, unless otherwise deferred in accordance with procedures established by the Company in accordance with Section 409A of the Code, and such issuance or payment shall in any event be made within such period as is required to avoid the imposition of a tax under Section 409A of the Code.

 

(c)           Restrictions and Conditions .  The Restricted Shares, Restricted Stock Units and Performance Shares granted pursuant to this Section 9 shall be subject to the following restrictions and conditions and any additional restrictions or conditions as determined by the Administrator at the time of grant or, subject to Section 409A of the Code where applicable, thereafter:

 

(1)           The Administrator may, in its sole discretion, provide for the lapse of restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion, including, but not limited to, the attainment of certain Performance Goals, the Participant’s termination of employment or service with the Company or any Affiliate thereof, or the Participant’s death or Disability, subject to any requirements of Section 162(m) of the Code in the case of any Award which is intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Notwithstanding the foregoing, upon a Change in Control, the outstanding Awards shall be subject to Section 13 hereof.

 

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(2)           Except as provided in the applicable Award Agreement, the Participant shall generally have the rights of a stockholder of the Company with respect to Restricted Shares during the Restricted Period; provided , however , that dividends declared during the Restricted Period with respect to an Award that vests or becomes payable based upon the achievement of Performance Goals, shall only become payable if and to the extent the Performance Goals of the underlying Award are achieved. Except as provided in the applicable Award Agreement, the Participant shall generally not have the rights of a stockholder with respect to Shares subject to Restricted Stock Units or Performance Shares during the Restricted Period; provided , however , that, subject to Section 409A of the Code, an amount equal to dividends declared during the Restricted Period with respect to the number of Shares covered by Restricted Stock Units or Performance Shares shall, unless otherwise set forth in an Award Agreement, be paid to the Participant at the time Shares in respect of the related Restricted Stock Units are delivered to the Participant or the Restricted Period with respect to the Performance Shares expires, provided that the Participant is then providing services to the Company. Certificates for Shares of unrestricted Common Stock may, in the Company’s sole discretion, be delivered to the Participant only after the Restricted Period has expired without forfeiture in respect of such Restricted Shares, Restricted Stock Units or Performance Shares, except as the Administrator, in its sole discretion, shall otherwise determine.

 

(3)           The rights of Participants granted Restricted Shares, Restricted Stock Units or Performance Shares upon termination of employment or service as a director, independent contractor or consultant to the Company or to any Affiliate thereof terminates for any reason during the Restricted Period shall be set forth in the Award Agreement.

 

(d)           Form of Settlement .  The Administrator reserves the right in its sole discretion to provide (either at or after the grant thereof) that any Restricted Stock Unit represent the right to receive the amount of cash per unit that is determined by the Administrator in connection with the Award.

 

Section 10. Other Share-Based Awards.

 

Other forms of Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including but not limited to dividend equivalents, may be granted either alone or in addition to other Awards (other than in connection with Options or Share Appreciation Rights) under the Plan. Any dividend or dividend equivalent awarded hereunder shall be subject to the same restrictions, conditions and risks of forfeiture as the underlying Award.  Subject to the provisions of the Plan, the Administrator shall have sole and complete authority to determine the individuals to whom and the time or times at which such Other Share-Based Awards shall be granted.  Each Participant who is granted an Other Share-Based Award shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, which Award Agreement shall set forth, among other things, the number of Shares to be granted pursuant to such Other Share-Based Awards, or the manner in which such Other Share-Based Awards shall be settled (e.g., in Shares, cash or other property), or the conditions to the vesting and/or payment or settlement of such Other Share-Based Awards (which may include, but not be limited to, achievement of performance criteria) and all other terms and conditions of such Other Share-Based Awards.

 

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Section 11. Cash Awards.

 

The Administrator may grant Awards that are denominated in, or payable to Participants solely in, cash, as deemed by the Administrator to be consistent with the purposes of the Plan, and, except as otherwise provided in this Section 11, such Cash Awards shall be subject to the terms, conditions, restrictions and limitations determined by the Administrator, in its sole discretion, from time to time.  Awards granted pursuant to this Section 11 may be granted with value and payment contingent upon the achievement of Performance Goals.

 

Section 12. Special Provisions Regarding Certain Awards.

 

The Administrator may make Awards hereunder to Covered Employees (or to individuals whom the Administrator believes may become Covered Employees) that are intended to qualify as performance-based compensation under Section 162(m) of the Code. The exercisability and/or payment of such Awards may, to the extent required to qualify as performance-based compensation under Section 162(m) of the Code, be subject to the achievement of performance criteria based upon one or more Performance Goals and to certification of such achievement in writing by the Committee. The Committee may in its discretion reduce the amount of such Awards that would otherwise become exercisable and/or payable upon achievement of such Performance Goals and the certification in writing of such achievement, but may not increase such amounts. Any such Performance Goals shall be established in writing by the Committee not later than the time period prescribed under Section 162(m) of the Code and the regulations thereunder. Notwithstanding anything set forth in the Plan to contrary, all provisions of such Awards which are intended to qualify as performance-based compensation under Section 162(m) of the Code shall be construed in a manner to so comply.

 

Section 13. Change in Control.

 

Unless otherwise provided in a written agreement between the Participant and the Company, or unless otherwise determined by the Administrator and evidenced in an Award Agreement, in the event of a Change in Control:

 

(a)          With respect to each outstanding Award that is assumed or substituted in connection with the Change in Control, in the event the Participant’s employment or service is terminated by the Company, its successor or an Affiliate thereof without Cause or, if applicable, by the Participant for Good Reason on or after the effective date of the Change in Control but prior to twelve (12) months following the Change in Control, then:

 

(1)           any unvested or unexercisable portion of any Award carrying a right to exercise shall become fully vested and exercisable; and

 

(2)           the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to an Award granted under the Plan shall lapse and such Awards shall be deemed fully vested and any performance conditions imposed with respect to such Awards shall be deemed to be fully achieved at target performance levels.

 

18


 

(b)           For purposes of this Section 13, an Award shall be considered assumed or substituted if, following the Change in Control, the Award is of substantially comparable value and remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change in Control except that, if the Award related to Shares, the Award instead confers the right to receive common stock of the acquiring or ultimate parent entity.

 

(c)           If the vesting of any Options and/or Share Appreciation Rights is accelerated in connection with the Change in Control, the Administrator shall have the discretion to provide that all Options and/or Share Appreciation Rights outstanding immediately prior to such Change in Control shall expire on the effective date of such Change in Control

 

Section 14. Amendment and Termination.

 

The Board may amend, alter or terminate the Plan, but no amendment, alteration or termination shall be made that would impair the rights of a Participant under any Award theretofore granted without such Participant’s consent. Unless the Board determines otherwise, the Board shall obtain approval of the Company’s stockholders for any amendment that would require such approval in order to satisfy the requirements of Section 162(m) of the Code, any rules of the stock exchange on which the Common Stock is traded or other Applicable Law. The Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Section 5 of the Plan and the immediately preceding sentence, no such amendment shall materially impair the rights of any Participant without his or her consent.

 

Section 15. Unfunded Status of Plan.

 

The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.

 

Section 16. Withholding Taxes.

 

Each Participant shall, no later than the date as of which the value of an Award first becomes includible in the gross income of such Participant for purposes of applicable taxes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, the minimum amount of any such applicable taxes required by law to be withheld with respect to the Award.  The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant.  Whenever cash is to be paid pursuant to an Award, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any applicable withholding tax requirements related thereto.  Whenever Shares or property other than cash are to be delivered pursuant to an Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any related taxes to be withheld and applied to the tax obligations; provided, that, with the approval of the Administrator, a Participant may satisfy the foregoing requirement by either (i) electing to have the Company withhold from delivery of

 

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Shares or other property, as applicable, or (ii) by delivering already owned unrestricted Shares, in each case, having a value not exceeding the applicable taxes to be withheld and applied to the tax obligations.  Such already owned and unrestricted Shares shall be valued at their Fair Market Value on the date on which the amount of tax to be withheld is determined and any fractional share amounts resulting therefrom shall be settled in cash.  Such an election may be made with respect to all or any portion of the Shares to be delivered pursuant to an award.  The Company may also use any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy its withholding obligation with respect to any Award.

 

Section 17. Transfer of Awards.

 

Until such time as the Awards are fully vested and/or exercisable in accordance with the Plan or an Award Agreement, no purported sale, assignment, mortgage, hypothecation, transfer, charge, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any Award or any agreement or commitment to do any of the foregoing (each, a “ Transfer ”) by any holder thereof in violation of the provisions of the Plan or an Award Agreement will be valid, except with the prior written consent of the Administrator, which consent may be granted or withheld in the sole discretion of the Administrator. Any purported Transfer of an Award or any economic benefit or interest therein in violation of the Plan or an Award Agreement shall be null and void ab initio and shall not create any obligation or liability of the Company, and any Person purportedly acquiring any Award or any economic benefit or interest therein transferred in violation of the Plan or an Award Agreement shall not be entitled to be recognized as a holder of such Shares or other property underlying such Award. Unless otherwise determined by the Administrator in accordance with the provisions of this Section 17, an Option or a Share Appreciation Right may be exercised, during the lifetime of the Participant, only by the Participant or, during any period during which the Participant is under a legal Disability, by the Participant’s guardian or legal representative.

 

Section 18. Continued Employment.

 

Neither the adoption of the Plan nor the grant of an Award shall confer upon any Eligible Recipient any right to continued employment or service with the Company or any Affiliate thereof, as the case may be, nor shall it interfere in any way with the right of the Company or any Affiliate thereof to terminate the employment or service of any of its Eligible Recipients at any time.

 

Section 19. Effective Date.

 

The Plan was adopted by the Board on July 18, 2014 and shall become effective, without further action, upon the earlier of (a) the effectiveness of the Company’s registration statement on Form S-1 filed with the U.S. Securities and Exchange Commissions, as amended, and (b) the Common Stock being listed or approved for listing upon notice of issuance of NASDAQ (the “ Effective Date ”).  No Awards may be granted hereunder prior to the Effective Date.

 

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Section 20. Electronic Signature.

 

A Participant’s electronic signature of an Award Agreement shall have the same validity and effect as a signature affixed by hand.

 

Section 21. Term of Plan.

 

No Award shall be granted pursuant to the Plan on or after the tenth (10 th ) anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.

 

Section 22. Securities Matters and Regulations.

 

(a)           Notwithstanding anything herein to the contrary, the obligation of the Company to sell or deliver Shares with respect to any Award granted under the Plan shall be subject to all Applicable Laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator. The Administrator may require, as a condition of the issuance and delivery of certificates evidencing Shares pursuant to the terms hereof, that the recipient of such shares make such agreements and representations, and that such certificates bear such legends, as the Administrator, in its sole discretion, deems necessary or advisable.

 

(b)           Each Award is subject to the requirement that, if at any time the Administrator determines that the listing, registration or qualification of Shares is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Shares, no such Award shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.

 

(c)           In the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933 (the “ Securities Act ”) and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a Participant receiving Common Stock pursuant to the Plan, as a condition precedent to receipt of such Common Stock, to represent to the Company in writing that the Common Stock acquired by such Participant is acquired for investment only and not with a view to distribution.

 

Section 23. Section 409A of the Code.

 

The Plan as well as payments and benefits under the Plan are intended to be exempt from, or to the extent subject thereto, to comply with Section 409A of the Code, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted in accordance therewith. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Participant shall not be considered to have terminated employment or service with the Company

 

21



 

for purposes of the Plan and no payment shall be due to the Participant under the Plan or any Award until the Participant would be considered to have incurred a “separation from service” from the Company and its Affiliates within the meaning of Section 409A of the Code. Any payments described in the Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent that any Awards (or any other amounts payable under any plan, program or arrangement of the Company or any of its Affiliates) are payable upon a separation from service and such payment would result in the imposition of any individual tax and penalty interest charges imposed under Section 409A of the Code, the settlement and payment of such awards (or other amounts) shall instead be made on the first business day after the date that is six (6) months following such separation from service (or death, if earlier). Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code.  The Company makes no representation that any or all of the payments or benefits described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A.

 

Section 24. Transition Period Under Section 162(m) of the Code.

 

The Plan has been adopted by the Board prior to the initial public offering of Common Stock pursuant to a registration statement under the Securities Act.  The Plan is intended to constitute a plan described in Treasury Regulation Section 1.162-27(f)(1).

 

Section 25. Notification of Election Under Section 83(b) of the Code.

 

If any Participant shall, in connection with the acquisition of Shares under the Plan, make the election permitted under Section 83(b) of the Code, such Participant shall notify the Company of such election within ten (10) days after filing notice of the election with the Internal Revenue Service.

 

Section 26. No Fractional Shares.

 

No fractional Shares shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

Section 27. Beneficiary.

 

A Participant may file with the Administrator a written designation of a beneficiary on such form as may be prescribed by the Administrator and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Participant, the executor or administrator of the Participant’s estate shall be deemed to be the Participant’s beneficiary.

 

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Section 28. Paperless Administration.

 

In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.

 

Section 29. Severability.

 

If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.

 

Section 30. Clawback.

 

Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).

 

Section 31. Governing Law.

 

The Plan shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to principles of conflicts of law of such state.

 

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Exhibit 10.2(g)

 

FORM OF

 

GREEN BANCORP, INC.
2014 OMNIBUS EQUITY INCENTIVE PLAN

 

RESTRICTED STOCK UNIT AWARD GRANT NOTICE

 

Green Bancorp, Inc. (the “ Company ”), pursuant to its 2014 Omnibus Equity Incentive Plan (the “ Plan ”), hereby grants to the individual listed below (the “ Participant ”), an Award of restricted stock units (“ Restricted Stock Units ” or “ RSUs ”).  Each vested Restricted Stock Unit represents the right to receive, in accordance with the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “ Agreement ”), one share of the common stock of the Company (“ Share ”).  This Award of Restricted Stock Units is subject to all of the terms and conditions set forth herein and in the Agreement and the Plan, which are incorporated herein by reference.

 

Capitalized terms not specifically defined herein shall have the meanings specified in the Plan.

 

Participant:                                  [ · ]

 

Grant Date:                                 [ · ]

 

Total Number of RSUs Subject to Grant:                     [ · ]

 

Vesting Schedule:  The RSUs will vest as follows: one-fourth (1/4) of the RSUs will vest on each of: (i) the second (2 nd ) anniversary of the Grant Date; (ii) the third (3 rd ) anniversary of the Grant Date; (iii) the fourth (4 th ) anniversary of the Grant Date; and (iv) the fifth (5 th ) anniversary of the Grant Date (each, a “ Time-Based Vesting Date ”); provided , that, the Participant continues to be in the employ or service of the Company on each Time-Based Vesting Date.

 

Termination:  Except to the extent paid in accordance with the above vesting schedule, the RSUs shall terminate, become forfeited or expire without settlement in accordance with the terms of the Agreement.

 

By his or her signature, the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Notice.  The Participant has reviewed the Agreement, the Plan and this Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice, the Agreement and the Plan.  The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or relating to the Award of RSUs.  [ For employee awards only: In addition, by signing below, the Participant also agrees that the Company, in its sole discretion, may satisfy any withholding obligations in accordance with Section 2.6(b) of the Agreement by (i) withholding shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs, (ii) instructing a broker on the Participant’s behalf to sell shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6(b) of the Agreement or Section 16 the Plan.]

 



 

GREEN BANCORP, INC.

 

PARTICIPANT

 

 

 

By:

 

 

By:

 

 

 

 

Print Name:

 

 

Print Name:

 

 

 

 

Title:

 

 

 

 



 

Exhibit A

 

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

Pursuant to the Restricted Stock Unit Award Grant Notice (the “ Notice ”) to which this Restricted Stock Unit Award Agreement (this “ Agreement ”) is attached, Green Bancorp, Inc. (the “ Company ”), has granted to the Participant an Award of restricted stock units (“ Restricted Stock Units ” or “ RSUs ”) under the Company’s 2014 Omnibus Equity Incentive Plan (the “ Plan ”).  Each vested Restricted Stock Unit represents the right to receive one share of the Common Stock of the Company (“ Share ”) to purchase the number of Shares indicated in the Notice.  Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and Notice.

 

ARTICLE I

 

GENERAL

 

1.1                                Incorporation of Terms of Plan .  The RSUs are subject to the terms and conditions of the Plan, which are incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

 

ARTICLE II

 

GRANT OF RESTRICTED STOCK UNITS

 

2.1                                Grant of RSUs .  In consideration of the Participant’s employment or service to the Company or any Affiliate and other good and valuable consideration, effective as of the Grant Date set forth in the Notice, the Company hereby grants to the Participant an Award of RSUs under the Plan, upon the terms and conditions set forth in the Plan and this Agreement.

 

2.2                                Unsecured Obligation .  Unless and until the RSUs have vested in the manner set forth in Article 2 hereof, the Participant will have no right to receive Common Stock with respect to any such RSUs.  Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

 

2.3                                Vesting Schedule .  Subject to Sections 2.5 and 3.1 hereof, the RSUs shall vest and become nonforfeitable with respect to the applicable portion thereof according to the vesting schedule set forth in the Notice (rounding down to the nearest whole Share).

 

2.4                                Consideration to the Company .  In consideration of the grant of the Award of RSUs pursuant hereto, the Participant agrees to render faithful and efficient employment or other service to the Company or any Affiliate.  Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employment or service of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company and its Affiliates, which rights are hereby expressly reserved, to discharge or terminate the employment or service of the Participant at any time for any reason whatsoever, with or without Cause.

 

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2.5                                Forfeiture, Termination and Cancellation Upon Termination of Employment or Service .

 

(a)                                  Upon the Participant’s termination of employment or service with the Company and all Affiliates thereof, the RSUs shall be treated as follows, subject to Section 3.1 hereof and except as specifically provided in an employment or other agreement between the Company and the Participant:

 

(i)                                      Without Cause, For Good Reason .  In the event that the employment or service of the Participant with the Company and all Affiliates thereof (including by reason of the Participant’s employer ceasing to be an Affiliate of the Company) is terminated by the Company or any Affiliate thereof without Cause or by the Participant for Good Reason, as of the commencement of business on the date of such termination, (A) the RSUs granted to the Participant shall become vested in an amount equal to the product of (x) the number of unvested RSUs as of the date of such termination multiplied by (y) a fraction, the numerator of which is the number of days between the date of such termination and the Grant Date and the denominator of which is 1825 and(B) the restrictions, payment conditions and forfeiture conditions applicable to such vested RSUs shall lapse.

 

(ii)                                   With Cause .  In the event of the termination of the Participant’s employment or service by the Company or any Affiliate thereof for Cause, all outstanding RSUs (whether vested or not) granted to the Participant shall terminate at the commencement of business on the date of such termination.

 

(iii)                                Without Good Reason .  In the event of the termination of the Participant’s employment or service by the Participant without Good Reason, any then-unvested RSUs granted to the Participant shall terminate at the commencement of business on the date of such termination.

 

(iv)                               Death or Disability .  In the event of the termination of the Participant’s employment or service with the Company and all Affiliates thereof by reason of the Participant’s death or Disability, and provided that no event described in Sections 2.5(a)(ii) or 2.5(b) hereof has occurred, as of the commencement of business on the date of such termination, (A) all RSUs granted to the Participant shall become fully vested, (B) the restrictions, payment conditions and forfeiture conditions applicable to such RSUs shall lapse.

 

(b)                                  In the sole discretion of the Committee, RSUs may be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment or other changes in the employment status of the Participant not described in Section 2.5(a) hereof.

 

2.6                                Issuance of Common Stock upon Vesting .

 

(a)                      The RSUs shall represent the right to receive, on the first business day following the Vesting Date, the number of Shares determined in accordance with the Vesting Schedule set forth on the Notice of Grant to have been earned to the extent determined by the Compensation Committee after the applicable year-end audit, and provided that the Participant remains employed by the Company or an Affiliate through the Vesting Date, subject to the

 

A-2



 

provisions of Section 2.5 or Section 3.1.  Notwithstanding the above, earned Shares shall be treated as delivered on the first business day following the Vesting Date (the “ Delivery Date ”) provided that they are delivered on a date following the Delivery Date that is in the same calendar year as the Delivery Date.  On the Delivery Date, the Company shall deliver to the Participant (or any transferee permitted under Section 4.2 hereof) a number of Shares (either by delivering one or more certificates for such Shares or by entering such Shares in book entry form, as determined by the Company in its sole discretion) equal to the number of RSUs subject to this Agreement that vest on the Vesting Date, unless such RSUs terminate prior to the Vesting Date pursuant to Section 2.5 hereof.  Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 22 of the Plan, the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with such Section.

 

(b)                      [ For employee awards only: As set forth in Section 16 of the Plan, the Company shall have the authority and the right to deduct or withhold, or to require the Participant to remit to the Company, an amount sufficient to satisfy all applicable federal, state and local taxes required by law to be withheld with respect to any taxable event arising in connection with the RSUs.  The Company shall not be obligated to deliver any new certificate representing Shares to the Participant or the Participant’s legal representative or enter such Shares in book entry form unless and until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all federal, state and local taxes applicable to the taxable income of the Participant resulting from the grant or vesting of the RSUs or the issuance of Shares.]

 

2.7                                Conditions to Delivery of Shares .  The Shares deliverable hereunder may be either previously authorized but unissued Shares, treasury Shares or issued Shares which have then been reacquired by the Company.  Such Shares shall be fully paid and nonassessable.  The Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares deliverable hereunder prior to fulfillment of the conditions set forth in Section 22 of the Plan.

 

ARTICLE III

 

CHANGE IN CONTROL

 

3.1                                Change in Control .  In the event of a Change in Control, the RSUs shall be treated in accordance with Section 13 of the Plan.

 

ARTICLE IV

 

OTHER PROVISIONS

 

4.1                                Administration .  The Administrator shall have the power and authority to interpret and construe the terms and provisions of this Agreement and to adopt such rules for the administration, interpretation and application of this Agreement as are consistent therewith and to interpret, amend or revoke any such rules.  All decisions made by the Administrator shall be final, conclusive and binding on all persons, including the Participant, the Company and all other interested persons.

 

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4.2                                Transferability of Grant .  Except as otherwise set forth in the Plan:

 

(a)                      The RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution;

 

(b)                      Neither the RSUs nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by Section 4.2(a).

 

4.3                                Voting and Other Rights.

 

(a)                                  The Participant shall have no rights of a stockholder with respect to any RSU (including the right to vote the underlying shares of Company Stock or to receive any distributions or dividends) unless and until a share of Company Stock is issued in respect of such RSU on the applicable Delivery Date.

 

(b)                                  Notwithstanding the foregoing or anything set forth in the Plan to the contrary, on each date that the Company pays a dividend to holders of Company Stock generally between the Grant Date and the applicable Delivery Date, the Company shall credit to the Grantee an additional number of RSUs (the “ Additional RSUs ”) equal to (i) the product of the total number of then-outstanding RSUs and Additional RSUs previously credited to the Grantee under this Agreement and the aggregate amount or value of the dividend paid per share of Company Stock by the Company on such date, (ii) divided by the Fair Market Value per share of Company Stock on the payment date for such dividend.  Any Additional RSUs shall be subject to same vesting and payment provisions as the underlying RSUs.

 

4.4                                Taxes .  The Participant represents that the Participant has consulted with any tax consultants the Participant deems advisable in connection with the grant of RSUs and the issuance of Shares with respect thereto and that the Participant is not relying on the Company for any tax advice.  The Company makes no warranties or representations whatsoever to the Participant regarding the tax consequences of the grant of RSUs or the receipt of Shares with respect thereto.  The Participant shall be solely responsible for any taxes in respect of the RSUs.

 

4.5                                Adjustments .  The Participant acknowledges that the RSUs are subject to modification and termination in certain events as provided in this Agreement and Section 5 of the Plan.

 

4.6                                Notices .  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Legal Department of the Company at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at the Participant’s last address reflected on the Company’s records.

 

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4.7                                Participant’s Representations .  If the Shares issuable hereunder have not been registered under the Securities Act or any applicable state laws on an effective registration statement at the time of such issuance, the Participant shall, if required by the Company, concurrently with such issuance, make such written representations as are deemed necessary or appropriate by the Company and/or its counsel.

 

4.8                                Titles .  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

 

4.9                                Governing Law .  The laws of the State of Texas shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

4.10                         Conformity to Securities Laws .  The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations.  Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted and settled, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

 

4.11                         Amendments and Termination .  To the extent permitted by the Plan, this Agreement may be wholly or partially amended, altered or terminated at any time or from time to time by the Administrator or the Board, but no amendment, alteration, or termination of this Agreement shall be made that would materially impair the rights of a Participant under the RSUs without such Participant’s consent.

 

4.12                         Successors and Assigns .  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer herein set forth in Section 4.2 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

 

4.13                         Limitations Applicable to Section 16 Persons .  Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, then the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

4.14                         Entire Agreement .  The Plan, the Notice and this Agreement (including all Exhibits thereto, if any) [and any employment agreements between the Company and the Participant] constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

 

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4.15                         Section 409A .  This Restricted Stock Unit Award is intended to comply with Code Section 409A to the extent subject thereto and shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Grant Date.  Notwithstanding any provision in the Plan or Agreement to the contrary, no payment or distribution under this Agreement that constitutes an item of deferred compensation under Code Section 409A and becomes payable by reason of the Participant’s termination of employment or service with the Company will be made to the Participant until the Participant’s termination of employment or service constitutes a “separation from service” (as defined in Code Section 409A).  For purposes of this Award Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Code Section 409A.  [ For employee awards only: If a participant is a “specified employee” (as defined in Code Section 409A), then to the extent necessary to avoid the imposition of taxes under Code Section 409A, such Participant shall not be entitled to any payments upon a termination of his or her employment or service until the earlier of:  (i) the expiration of the six (6)-month period measured from the date of such Participant’s “separation from service” or (ii) the date of such Participant’s death.  Upon the expiration of the applicable waiting period set forth in the preceding sentence, all payments and benefits deferred pursuant to this Section 4.15 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such deferral) shall be paid to such Participant in a lump sum as soon as practicable, but in no event later than sixty (60) calendar days, following such expired period, and any remaining payments due under this Agreement will be paid in accordance with the normal payment dates specified for them herein.]  The Administrator may, in its discretion, adopt such amendments to the Plan, this Agreement or the Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate to comply with the requirements of Code Section 409A.

 

4.16                         Electronic Signature; Electronic Delivery and Acceptance .  The Participant’s electronic signature of this Agreement shall have the same validity and effect as a signature affixed by hand.  The Company may, in its sole discretion, decide to deliver any documents related to the Participant’s current or future participation in the Plan by electronic means.  The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

 

4.17                         Compensation Recovery Policy .  The RSUs and any payments or compensation associated therewith shall be subject to forfeiture or recovery by the Company or other action pursuant to any compensation recovery policy adopted by the Board or the Committee at any time, including in response to the requirements of Section 10D of the Exchange Act and any implementing rules and regulations thereunder, or as otherwise required by law.  This Agreement may be unilaterally amended by the Committee to comply with such compensation recovery policy.

 

4.18                         Waiver .  The Participant acknowledges that a waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant.

 

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4.19                         Severability .  The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

 

4.20                         Tax Withholding .  Regardless of any action the Company and its Affiliates or, if Participant is an employee, the employer (the “ Employer ”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax related items related to Participant’s participation in the Plan and legally applicable to Participant (“ Tax-Related Items ”), Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or any Affiliate.  Participant further acknowledges that the Company, its Affiliates and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant or vesting of the RSUs, the subsequent sale of Shares acquired pursuant to the RSUs and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result.  Further, if Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company, its Affiliates and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.  If Participant is subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.  If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant’s participation in the Plan.

 

4.21                         Data Privacy .  Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other grant materials by and among, as applicable, the Company, the Employer and any Affiliate of the Company for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.  Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all RSUs or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“ Data ”), for the exclusive purpose of implementing, administering and managing the Plan.  Participant understands that Data may be transferred to a stock plan transfer agent, trustee, broker or administrator designated by the Company or any such other stock plan service provider as may be designated by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan.  Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and

 

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protections than Participant’s country.  Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative.  Participant authorizes the Company, the Company’s designated transfer agent, trustee, stock plan broker or administrator and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing Participant’s participation in the Plan.  Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan.  Participant understands that he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company.  Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis.  If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment or service relationship with the Company, its Affiliates or Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant RSUs or other equity awards or administer or maintain such awards.  Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan.  For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact the Company.

 

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Exhibit 10.3

 

FORM OF INDEMNIFICATION AGREEMENT

 

This INDEMNIFICATION AGREEMENT, dated as of June 30, 2010, is by and between Green Bancorp, Inc., a Texas corporation (“ Indemnitor ”), and [   ] (the “ Indemnitee ”).

 

WHEREAS, it is essential to Indemnitor to retain and attract as directors the most capable persons available; and

 

WHEREAS, Indemnitee is a director of Indemnitor; and

 

WHEREAS, Indemnitor and Indemnitee recognize the increased risk of litigation and other claims being asserted against managers, directors and officers of companies in today’s environment; and

 

WHEREAS, the Organizational Documents (as defined herein) require Indemnitor to indemnify and advance expenses to its directors to the extent provided therein, and Indemnitee serves as a director of Indemnitor, in part, in reliance on such provisions in the Organizational Documents; and

 

WHEREAS, Indemnitor has determined that its inability to retain and attract as directors the most capable persons available would be detrimental to the interests of Indemnitor, and that Indemnitor therefore should seek to assure such persons that indemnification and insurance coverage will be available in the future; and

 

WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability in order to enhance Indemnitee’s continued service to Indemnitor in an effective manner, the increasing difficulty in obtaining satisfactory director and officer liability insurance coverage, and Indemnitee’s reliance on the Organizational Documents, and in part to provide Indemnitee with specific contractual assurance that the protection promised by the Organizational Documents will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of the applicable provisions of the Organizational Documents or any change in the composition of the governing bodies of Indemnitor or acquisition transaction relating to Indemnitor), Indemnitor wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the directors’ and officers’ liability insurance policy of Indemnitor;

 

NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve Indemnitor directly or, at its request, as an officer, director, manager, member, partner, tax matters partner, fiduciary or trustee of, or in any other capacity with,

 



 

another Person (as defined below) or any employee benefit plan, and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.             Certain Definitions .  In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement:

 

(a)                                  Agreement :  shall mean this Indemnification Agreement, as amended from time to time hereafter.

 

(b)                                  Board of Directors :  shall mean the Board of Directors of Indemnitor.

 

(c)                                   Change in Control :  shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of Indemnitor or a Person owned directly or indirectly by the shareholders of Indemnitor in substantially the same proportions as their ownership of stock of Indemnitor, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of Indemnitor representing 50% or more of the total voting power represented by Indemnitor’s then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director whose appointment by the Board of Directors or nomination for election by Indemnitor’s shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose appointment or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the shareholders of Indemnitor approve a merger or consolidation of Indemnitor with any other Person, other than a merger or consolidation which would result in the Voting Securities of Indemnitor outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50% of the total voting power represented by the Voting Securities of Indemnitor or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of Indemnitor approve a plan of complete liquidation of Indemnitor or an agreement for the sale or disposition by Indemnitor of (in one transaction or a series of transactions) all or substantially all of Indemnitor’s assets.

 

(d)                                  Claim :  means any threatened, asserted, pending or completed civil, criminal, administrative, investigative or other action, suit or proceeding, or appeal thereof, or any inquiry or investigation,

 

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whether instituted by (or in the right of) Indemnitor or any other Person, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other, including any arbitration or other alternative dispute resolution mechanism, in which Indemnitee was, is, or may be or will be involved as a party, witness or otherwise.

 

(e)                                   Fund Entities :       means any Person or employee benefit plan (other than Indemnitor or any other Person or any employee benefit plan Indemnitee has agreed, on behalf of Indemnitor or at Indemnitor’s request, to serve as a director, officer, employee or agent and which service is covered by the indemnity described in this Agreement) from whom an Indemnitee may be entitled to indemnification or advancement of expenses with respect to which, in whole or in part, Indemnitor may also have an indemnification or advancement obligation.

 

(f)                                    Indemnifiable Expenses :  means (i) any and all direct and indirect liabilities, including judgments, damages, arbitration awards, fines, penalties, interest, appeal bonds and amounts paid in settlement with the approval of Indemnitor, (ii) all reasonable expenses and reasonable counsel fees and disbursements (including, without limitation, reasonable experts’ fees, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Claim relating to any Indemnifiable Event, (iii) any liability pursuant to a loan guaranty or otherwise, for any indebtedness of Indemnitor or any subsidiary of Indemnitor, including, without limitation, any indebtedness which Indemnitor or any subsidiary of Indemnitor has assumed or taken subject to, and (iv) any liabilities which an Indemnitee incurs as a result of acting on behalf of Indemnitor (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the United States Internal Revenue Service, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise), and shall include (without limitation) all reasonable expenses and reasonable counsel fees and disbursements paid or incurred by or on behalf of an Indemnitee in connection with preparing and submitting any requests or statements for indemnification, advancement or any other right

 

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provided by this Agreement (including, without limitation, such reasonable fees or expenses incurred in connection with legal proceedings contemplated by Section 2(d) hereof).

 

(g)                                   Indemnifiable Event :  means any event, occurrence, act or omission, whether occurring before, on or after the date of this Agreement, arising from the performance of Indemnitee’s duties or obligations to Indemnitor or any of its subsidiaries or affiliates, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which Indemnitee may hereafter be made a party or subject to by reason of being or having been an officer, director, manager, member, partner, tax matters partner, agent, fiduciary or trustee of, or having served in any other capacity with, another Person or any employee benefit plan at the request of Indemnitor.

 

(h)                                  Independent Legal Counsel :  means an attorney or firm of attorneys, selected in accordance with the provisions of Section 3 , who shall not have otherwise performed services for Indemnitor or the Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).

 

(i)                                      Jointly Indemnifiable Claim :  means any Claim for which Indemnitee shall be entitled to indemnification from both the Fund Entities and Indemnitor pursuant to applicable law, any indemnification agreement or the certificate or articles of incorporation, by-laws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or comparable organizational documents of Indemnitor and the Fund Entities.

 

(j)                                     Organizational Documents :  mean the certificate of formation and bylaws of Indemnitor, each as amended from time to time.

 

(k)                                  Person :  means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

 

(l)                                      Reviewing Party :  means any appropriate person or body consisting of a member or members of the Board of Directors or any other person or body appointed by the Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.

 

(m)                              Voting Securities :  means securities of Indemnitee which vote generally in the election of directors.

 

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2.             Basic Indemnification Arrangement; Advancement of Expenses .

 

(a)           In the event that Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in or was, is or becomes subject to or is threatened to be made subject to, a Claim by reason of (or arising in part out of) an Indemnifiable Event, Indemnitor shall indemnify and hold harmless Indemnitee, or cause such Indemnitee to be indemnified, to the fullest extent permitted by applicable law in effect on the date hereof and as amended from time to time; provided , however , that to the extent allowable under applicable law, no change in such law shall have the effect of reducing the benefits available to Indemnitee hereunder based on such law as in effect on the date hereof or as such benefits may improve as a result of amendments after the date hereof. The rights of Indemnitee provided in this Section 2 shall include, without limitation, the rights set forth in the other sections of this Agreement. Payments of Indemnifiable Expenses shall be made as soon as practicable but in any event no later than thirty (30) days after written demand is presented to Indemnitor, against any and all Indemnifiable Expenses.

 

(b)           If so requested by Indemnitee, Indemnitor shall advance, or cause to be advanced (within ten business days of such request), any and all Indemnifiable Expenses incurred by Indemnitee (an “ Expense Advance ”).  Indemnitor shall, in accordance with such request (but without duplication), either (i) pay, or cause to be paid, such Indemnifiable Expenses on behalf of Indemnitee, or (ii) reimburse, or cause the reimbursement of, Indemnitee for such Indemnifiable Expenses.  Subject to Section (c) below and the requirements of Section 8.104 of the Texas Business Organizations Code, Indemnitee’s right to an Expense Advance is absolute and shall not be subject to any condition that the Board of Directors shall not have determined that Indemnitee is not entitled to be indemnified under applicable law.  However, the obligation of Indemnitor to make an Expense Advance pursuant to this Section 2(b) shall be subject to the condition that, if, when and to the extent that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be so indemnified under applicable law, Indemnitor shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse Indemnitor within ten business days of such request) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by Indemnitee shall be deemed to satisfy any requirement that Indemnitee provide Indemnitor with an undertaking to repay any Expense Advance if it is ultimately determined that Indemnitee is not entitled to indemnification under applicable law).  Indemnitee’s undertaking to repay such Expense Advances shall be unsecured and interest-free.

 

(c)           Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification or advancement of Indemnifiable Expenses pursuant to this Agreement in connection with any Claim initiated by Indemnitee unless (i) Indemnitor has joined in or the Board of Directors of Indemnitor has authorized or consented to the initiation of such Claim or (ii) the Claim is one to enforce Indemnitee’s rights under this Agreement (including an action pursued by Indemnitee to secure a determination that Indemnitee should be indemnified under applicable law).

 

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(d)           Notwithstanding the foregoing, the indemnification obligations of Indemnitor under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 3 is involved) that the indemnification of Indemnitee would not be proper under the circumstances because Indemnitee is not entitled to be indemnified under applicable law.  If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3 .  If there is no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee is not entitled to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the State of Texas having subject matter jurisdiction thereof and in which venue is proper, seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and Indemnitor hereby consents to service of process and to appear in any such proceeding.  If Indemnitee commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding, Indemnitee shall continue to be entitled to receive Expense Advances, and Indemnitee shall not be required to reimburse Indemnitor for any Expense Advance until a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be so indemnified under applicable law.  Any determination by the Reviewing Party otherwise shall be conclusive and binding on Indemnitor and Indemnitee.

 

(e)           To the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Indemnifiable Expenses actually incurred in connection therewith, notwithstanding an earlier determination by the Reviewing Party that Indemnitee is not entitled to indemnification under applicable law.

 

3.             Change in Control .  Indemnitor agrees that if there is a Change in Control of Indemnitor (other than a Change in Control which has been approved by a majority of the Board of Directors who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or the Organizational Documents now or hereafter in effect relating to Claims for Indemnifiable Events, Indemnitor shall seek legal advice only from Independent Legal Counsel selected by Indemnitee and approved by Indemnitor (which approval shall not be unreasonably withheld).  Such counsel, among other things, shall render its written opinion to Indemnitor and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law.  Indemnitor agrees to pay the reasonable fees of the

 

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Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all reasonable expenses (including reasonable counsel fees and disbursements), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

4.             Indemnification for Additional Expenses .  Indemnitor shall indemnify, or cause the indemnification of, Indemnitee against any and all Indemnifiable Expenses and, if requested by Indemnitee, shall advance such Indemnifiable Expenses to Indemnitee subject to and in accordance with Sections 2(b) and 2(d) , which are incurred by Indemnitee in connection with any action brought by Indemnitee for (a) indemnification or an Expense Advance by Indemnitor under this Agreement or any provision of the Organizational Documents and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by Indemnitor, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advance or insurance recovery, as the case may be, but only to the extent allowable under applicable law.

 

5.             Partial Indemnity, Etc.   If Indemnitee is entitled under any provision of this Agreement to indemnification by Indemnitor for some or a portion of the Indemnifiable Expenses in respect of a Claim but not, however, for all of the total amount thereof, Indemnitor shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

 

6.             Burden of Proof .  In connection with any determination by the Reviewing Party, any court or tribunal or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the Reviewing Party, court or tribunal or otherwise shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on Indemnitor (or any other Person disputing such conclusions) to establish, by clear and convincing evidence, that Indemnitee is not so entitled.

 

7.             Reliance as Safe Harbor .  Indemnitee shall be entitled to indemnification for any action or omission to act undertaken (a) in good faith reliance upon the records of Indemnitor, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of Indemnitor or any of its subsidiaries or affiliates in the course of their duties, or by committees of the Board of Directors, or by any other Person as to matters Indemnitee reasonably believes are within such other Person’s professional or expert competence, or (b) on behalf of Indemnitor in furtherance of the interests of Indemnitor in good faith in reliance upon, and in accordance with, the advice of legal counsel or accountants, provided such legal counsel or accountants were selected with reasonable care by or on behalf of Indemnitor.  In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of Indemnitor shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.

 

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8.             No Other Presumptions .  For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.  In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.

 

9.             Nonexclusivity, Etc.   The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Organizational Documents, applicable law, or otherwise.  To the extent that a change in applicable law or the interpretation thereof (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Organizational Documents, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.

 

10.          Liability Insurance .  To the extent Indemnitor maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for Indemnitor directors.

 

11.          Period of Limitations .  No legal action shall be brought and no cause of action shall be asserted by or in the right of Indemnitor against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of Indemnitor shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.

 

12.          Amendments, Etc.   No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

13.          Subrogation .  In the event of payment under this Agreement, Indemnitor shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers reasonably required and shall do everything that may be reasonably necessary to secure such rights, including the

 

8



 

execution of such documents necessary to enable Indemnitor effectively to bring suit to enforce such rights.  Indemnitor shall pay or reimburse all expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

 

14.          Jointly Indemnifiable Claims .  Given that certain Jointly Indemnifiable Claims may arise due to the relationship between the Fund Entities and Indemnitor and the service of Indemnitee as a director of Indemnitor at the request of the Fund Entities, Indemnitor acknowledges and agrees that Indemnitor shall be fully and primarily responsible for the indemnification and advancement of expenses of Indemnitee in connection with any such Jointly Indemnifiable Claim, pursuant to and in accordance with the terms of this Agreement, irrespective of any right of recovery Indemnitee may have from the Fund Entities or any of their respective affiliates.  Under no circumstance shall Indemnitor be entitled to any right of contribution by the Fund Entities or any of their affiliates and no right of recovery Indemnitee may have from the Fund Entities or any of their respective affiliates shall reduce or otherwise alter the rights of Indemnitee or the obligations of Indemnitor hereunder.  In the event that either of the Fund Entities or any of their respective affiliates shall make any payment to Indemnitee in respect of indemnification or advancement with respect to any Jointly Indemnifiable Claim, Indemnitor agrees that such payment or advancement shall not extinguish or affect in any way the rights of the Indemnitee under this Agreement and further agrees that the Fund Entity or affiliate making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee against Indemnitor, who shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the Fund Entities effectively to bring suit to enforce such rights.  Each of the Fund Entities and its respective affiliates shall be third-party beneficiaries with respect to this Section 14 , entitled to enforce this Section 14 against Indemnitor as though each such Fund Entity or affiliate were a party to this Agreement.

 

15.          No Duplication of Payments .  Subject to Section 14 hereof, Indemnitor shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, any provision of the Organizational Documents, or otherwise) of the amounts otherwise indemnifiable hereunder.

 

16.          Defense of Claims .  Indemnitor shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event or to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee; provided that if Indemnitee believes, after consultation with counsel selected by Indemnitee, that (a) the use of counsel chosen by Indemnitor to represent Indemnitee would present such counsel with an actual or potential conflict of interest, (b) the named parties in any such Claim (including any impleaded parties) include Indemnitor or any subsidiary of Indemnitor and Indemnitee and Indemnitee concludes that there may be one or more legal defenses available to him or her that are different from or in addition to those available to Indemnitor or any subsidiary of Indemnitor or (c) any such representation by such counsel would be precluded under the applicable standards of professional

 

9



 

conduct then prevailing, then Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Claim) at Indemnitor’s expense.  Indemnitor shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any Claim relating to an Indemnifiable Event effected without Indemnitor’s prior written consent.  Indemnitor shall not, without the prior written consent of Indemnitee, effect any settlement of any Claim relating to an Indemnifiable Event which Indemnitee is or could have been a party unless such settlement solely involves the payment of money and includes a complete and unconditional release of Indemnitee from all liability on all claims that are the subject matter of such Claim.  Neither Indemnitor nor Indemnitee shall unreasonably withhold, condition or delay its or his or her consent to any proposed settlement; provided that Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of Indemnitee.  In no event shall Indemnitee be required to waive, prejudice or limit attorney client privilege or work product protection or other applicable privilege or protection.

 

17.          Binding Effect, Etc.   This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the capital stock or business and/or assets of Indemnitor), assigns, spouses, heirs, executors and personal and legal representatives.  Indemnitor shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation, or otherwise) to all or substantially all of the capital stock or business and/or assets of Indemnitor, by written agreement in form and substance satisfactory to Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Indemnitor would be required to perform if no such succession had taken place.  This Agreement shall cover acts or omissions by Indemnitee while serving as a director of Indemnitor or while serving in any other capacity with another Person at the request of Indemnitor, regardless of when a Claim is brought.

 

18.          Security .  To the extent requested by Indemnitee and approved by the Board of Directors, Indemnitor may at any time and from time to time provide security to Indemnitee for the obligations of Indemnitor hereunder through an irrevocable bank line of credit, funded trust or other collateral or by other means.  Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of such Indemnitee.

 

19.          Severability .  The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law.

 

10



 

20.          Specific Performance, Etc.   The parties recognize that if any provision of this Agreement is violated by the parties hereto, Indemnitee may be without an adequate remedy at law.  Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.

 

21.          Notices .   All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written document delivered in person or sent by telecopy, nationally recognized overnight courier or personal delivery, addressed to such party at the address set forth below or such other address as may hereafter be designated on the signature pages of this Agreement or in writing by such party to the other parties:

 

(a)                                  If to Indemnitor, to:

 

Green Bancorp, Inc.

4000 Greenbriar

Houston, TX 77098
Attn:  Manuel J. Mehos
Telephone:  (713) 275-8201
Fax:  (713) 275-8228

 

with a copy (which shall not constitute notice) to:

 

Bracewell & Giuliani LLP
1445 Ross Avenue
Suite 3800
Dallas TX 75202
Attn:  Sanford M. Brown
Telephone:  (214) 758-1093
Fax:  (214) 758-8300

 

(b)                                  If to Indemnitee, to the address set forth on the signature page hereto.

 

All such notices, requests, consents and other communications shall be deemed to have been given or made if and when received (including by overnight courier) by the parties at the above addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified above (or at such other address or telecopy number for a party as shall be specified by like notice).  Any notice delivered by any party hereto to any other party hereto shall also be delivered to each other party hereto simultaneously with delivery to the first party receiving such notice.

 

22.          Counterparts .  This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together

 

11



 

shall constitute one and the same agreement.  Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

23.          Headings .  The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

 

24.          Governing Law .  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

 

25.          Effect of 12 U.S.C. 1828(k) . The obligations of Indemnitor and the rights of Indemnitee under this Agreement shall be subject to 12 U.S.C. 1828(k) and the rules and regulations promulgated thereunder.

 

[ Signature Page Immediately Follows ]

 

12



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

GREEN BANCORP, INC.

 

 

 

 

 

 

 

By:

 

 

 

Name: 

 

 

Title:

 

 

 

 

 

 

 

 

 

[Indemnitee]

 

 

 

 

Name and Business Address .

 

 

 

 

 

 

 

 

 

 

Attn:

 

 

Tel:

 

 

Fax:

 

 

[Signature Page to Indemnification Agreement]

 




Exhibit 10.5

 

FORM OF DIRECTOR NOMINATION AGREEMENT

 

DIRECTOR NOMINATION AGREEMENT, dated as of [    ], 2014 (this “ Agreement ”), by and among Green Bancorp, Inc., a Texas corporation (the “ Company ”) and the entities listed under the headings “ FFL Group ”, “ Harvest Group ” and “ Pine Brook Group ” on Schedule A hereto (each, respectively, an “ Investor Group ”, which respective terms shall include Affiliates of the foregoing who receive any shares of Common Stock (as defined below) from any entity comprising a part of such respective Investor Group).

 

WHEREAS, the Company has determined that it is in its best interests to effect an initial public offering (“ IPO ”) of shares of common stock, par value $0.01 per share, of the Company (the “ Common Stock ”); and

 

WHEREAS, in connection with the IPO, the Company desires to agree with each of the Investor Groups, severally and not jointly, desire to enter into this Agreement with the Company, setting forth certain rights and obligations with respect to the nomination of directors to the Board of Directors of the Company (the “ Board ”) and other matters relating to the Board and boards of directors of subsidiaries of the Company from and after the IPO.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

Section 1               Definitions. As used in this Agreement, the following terms shall have the meanings ascribed to them below:

 

Affiliate ” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.

 

Bank ” means Green Bank N.A., a nationally chartered commercial bank, or any successor thereof.

 

Bank Board ” means the Board of Directors of the Bank in office at the applicable time.

 

Bylaws ” means the Amended and Restated By-Laws of the Company, as may be amended from time to time.

 

Certificate of Formation ” means the Amended and Restated Certificate of Formation of the Company, as may be amended from time to time.

 

Original Amount ” means, as it relates to any Investor Group, the aggregate number of shares of Common Stock held by such Investor Group (or any of its Affiliates) on the date hereof

 

1



 

(prior to giving effect to the sale of shares to be effected pursuant to the IPO), as such number may be adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other similar changes in the Company’s capitalization.

 

Person ” means an individual, corporation, partnership, limited liability company, joint venture, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

Subsidiary ” means, of any Person, any other Person (a) in which it directly or indirectly owns at least 50% of such Person’s voting capital securities, (b) with which it is required to be consolidated under U.S. generally accepted accounting principles.

 

Section 2               Board Number; Board Nomination.

 

(a)        For so long as the FFL Group beneficially owns a number of shares of Common Stock that represents at least the lesser of 25% of the Original Amount of the FFL Group (as such number may be adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other similar changes in the Company’s capitalization) or 4.9% of the shares of Common Stock and other securities of the Company entitled to vote together with the Common Stock as a single class of all matters with respect to which the Common Stock is entitled to vote, the Company shall, and shall use its best efforts to cause the Board, whether acting through the Nominating and Corporate Governance Committee of the Board or otherwise, to, include in the slate of nominees recommended to stockholders of the Company (the “ Stockholders ”) for election as a Class III director at any annual or special meeting of the Stockholders (or, if permitted, by any action by written consent of the Stockholders) at or by which Class III directors of the Company are to be elected, one individual identified in advance by the FFL Group (the “ FFL Nominee ”).

 

(b)        For so long as the Harvest Group beneficially owns an amount of Common Stock that represents at least the lesser of 25% of the Original Amount of the Harvest Group (as such number may be adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other similar changes in the Company’s capitalization) or 4.9% of the shares of Common Stock and other securities of the Company entitled to vote together with the Common Stock as a single class of all matters with respect to which the Common Stock is entitled to vote, the Company shall, and shall use its best efforts to cause the Board, whether acting through the Nominating and Corporate Governance Committee of the Board or otherwise, to, include in the slate of nominees recommended to Stockholders for election as a Class II director at any annual or special meeting of the Stockholders (or, if permitted, by any action by written consent of the Stockholders) at or pursuant to which Class II directors of the Company are to be elected, one individual identified in advance by the Harvest Group (the “ Harvest Nominee ”).

 

(c)        For so long as the Pine Brook Group beneficially owns an amount of Common Stock that represents at least the lesser of 25% of the Original Amount of the Pine Brook Group (as such number may be adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other similar changes in the Company’s

 

2



 

capitalization) or 4.9% of the shares of Common Stock and other securities of the Company entitled to vote together with the Common Stock as a single class of all matters with respect to which the Common Stock is entitled to vote, the Company shall, and shall use its best efforts to cause the Board, whether acting through the Nominating and Corporate Governance Committee of the Board or otherwise, to, include in the slate of nominees recommended to Stockholders for election as a Class I director at any annual or special meeting of the Stockholders (or, if permitted, by any action by written consent of the Stockholders) at or pursuant to which Class I directors of the Company are to be elected, one individual identified in advance by the Pine Brook Group (the “ Pine Brook Nominee ” and together with the FFL Nominee, and the Harvest Nominee, the “ Investor Nominees ” and each, an “ Investor Nominee ”).

 

(d)        The Investor Nominees designated hereunder shall be nominated to serve as a Class I, Class II or Class III director (as defined in the Company’s Certificate of Formation) as the case may be.  The initial term of each Class I, Class II and Class III director shall expire as set forth in the Company’s Certificate of Formation. Vacancies arising through the death, resignation or removal of an Investor Nominee, who was nominated to the Board pursuant to this Section 2, may be filled by the Board only with a replacement Investor Nominee chosen by the relevant Investor Group and the director so chosen shall hold office until the next election for the class of director as the director whose termination of services as a director created such vacancy and until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal.

 

(e)        The Company shall use its best efforts to ensure that at all times following the date hereof and while this Agreement remains in effect that the Board shall be comprised of Investor Nominees nominated by each Investor Group which is then entitled to nominate an Investor Nominee pursuant to this Section 2 and only such other directors as are then eligible to serve in accordance with this Agreement and are elected or appointed pursuant to applicable law and the Certificate of Formation and Bylaws.  Each Investor Nominee shall be the nominees of the Company and the Nominating and Governance Committee of the Board and the Company shall solicit proxies for each of such nominees to the same extent it does for any other nominees of the Company to the Board.

 

(f)        Notwithstanding the provisions of this Section 2, any Investor Group shall not be entitled to designate a Person as a nominee to the Board upon a written determination by the Nominating and Corporate Governance Committee of the Company (which determination shall set forth in writing reasonable grounds for such determination) that such Person would not be qualified under any applicable law, rule or regulation to serve as a director of the Company. In such an event, such Investor Group shall be entitled to select a Person as a replacement nominee and the Company shall use its best efforts to cause such Person to be nominated as the Investor Nominee of the relevant Investor Group, as the case may be, at the same meeting (or, if permitted, pursuant to the same action by written consent of the Stockholders) as such initial Person was to be nominated.  Other than with respect to the issue set forth in the preceding sentence, neither the Company nor any other party to this Agreement shall have the right to object to any Investor Nominee.

 

(g)        So long as an Investor Group holds an amount of Common Stock that represents at least the lesser of 25% of the Original Amount of such Investor Group (as such

 

3



 

number may be adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other similar changes in the Company’s capitalization) or 4.9% of the shares of Common Stock and other securities of the Company entitled to vote together with the Common Stock as a single class of all matters with respect to which the Common Stock is entitled to vote, the Company shall notify such Investor Group in writing of the date on which proxy materials are expected to be mailed by the Company in connection with an election of directors at an annual or special meeting of the Stockholders (and the Company shall deliver such notice at least 60 days (or such shorter period to which any Investor Group consents, which consent need not be in writing) prior to such expected mailing date or such earlier date as may be specified by the Company reasonably in advance of such earlier delivery date on the basis that such earlier delivery is necessary so as to ensure that such nominee may be included in such proxy materials at the time such proxy materials are mailed). The Company shall provide each such Investor Group with a reasonable opportunity to review and provide comments on any portion of the proxy materials relating to the Investor Nominee of such Investor Group or the rights and obligations provided under this Agreement and to discuss any such comments with the Company.

 

(h)        So long as an Investor Group holds an amount of Common Stock that represents at least 3.0% of the outstanding Common Stock, if such Investor Group shall lose its respective right to nominate an Investor Nominee pursuant to this Agreement by virtue of ceasing to hold the requisite number of shares of Common Stock, such Investor Group shall have the right, exercisable by delivering written notice to the Company, to designate a non-voting observer to attend any meetings of the Board (or committees thereof) and of the Bank Board (or any committee thereof); provided , however , that the chairperson of such meeting shall have the right to cause any non-voting observer to leave any such meeting of the Board (or committee thereof) or the Bank Board for such period as the chairperson of such meeting may specify, including as necessary to comply with rules or regulatory guidance regarding confidential supervisory information. Each such Investor Group shall have the right to remove and replace its non-voting observer at any time and from time to time.  Notice of meetings of the Board (or committees thereof) shall be furnished to each non-voting observer no later than, and using the same form of communication as, notice of meetings of the Board are furnished to directors in accordance with the Bylaws.

 

(i)         In the event that any Investor Group loses its respective right to nominate an Investor Nominee pursuant to this Agreement by virtue of ceasing to hold the requisite number of shares of Common Stock, such Investor Group shall use its best efforts to cause its Investor Nominee to resign from the Board immediately prior to such time as a replacement director is nominated or elected by the Board or the Company’s stockholders.

 

(j)         If requested in writing by any Investor Group that holds an amount of Common Stock that represents at least the lesser of 25% of the Original Amount of such Investor Group (as such number may be adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split or other similar changes in the Company’s capitalization) or 4.9% of the shares of Common Stock and other securities of the Company entitled to vote together with the Common Stock as a single class of all matters with respect to which the Common Stock is entitled to vote, the Company shall take such actions as shall be necessary in order to appoint or elect one individual designated by such Investor Group to the Bank Board.

 

4



 

(k)        So long as this Agreement shall remain in effect, subject to applicable legal requirements, the Bylaws and the Certificate of Formation and the organizational documents applicable to the Bank Board shall accommodate and be subject to and not in any respect conflict with the rights and obligations set forth herein.

 

Section 3.              Miscellaneous.

 

(a)        Avoidance of Cross-Guaranty Liability.  Neither the Company nor any party hereto shall take, permit or allow any action that would cause the Company or any Subsidiary to become a “commonly controlled insured depository institution” (as that term is defined and interpreted for purposes of 12 U.S.C. § 1815(e), as may be amended or supplemented from time to time, and any successor thereto) with respect to any institution that is not a direct or indirect Subsidiary of the Company.  Each party hereto that breaches its obligations under this Section 4(a) or that believes it is reasonably likely to breach such obligation, shall immediately notify the other parties hereto and the Company and shall cooperate in good faith with the Board promptly to take such actions as are necessary to cure or avoid such breach.

 

(b)        Governing Law. This Agreement and the rights and obligations of the parties hereunder and the Persons subject hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas, without giving effect to the choice of law principles thereof.

 

(c)        Certain Adjustments. The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution for the shares of Common Stock, by combination, recapitalization, reclassification, merger, consolidation or otherwise and the term “Common Stock” shall include all such other securities.

 

(d)        Enforcement. Each of the parties agrees that in the event of a breach of any provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such remedies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which any party hereto may have. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts in Harris County, Texas for the purposes of any suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereof. Subject to applicable law, each party hereto hereby consents to service of process made in accordance with Section 4(g).

 

(e)        Successors and Assigns. Except as otherwise provided herein, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. Each party hereto that is a member of an Investor Group may assign its rights and obligations hereunder, in whole or in part, to any other member of such Investor Group in connection with a transfer of shares of Common Stock to such member; provided , however , that each Investor Group shall have the right

 

5



 

to designate only one Investor Nominee and one Board observer as set forth in Section 2 hereof, and such rights shall be exercised collectively by the members of such Investor Group.

 

(f)        Entire Agreement; Termination. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof and supersedes all prior oral or written (and all contemporaneous oral) agreements or understandings with respect to the subject matter hereof.  This Agreement shall terminate and be of no further force and effect at such time as each Investor Group ceases to beneficially own at least 3.0% of the shares of Common Stock and other securities of the Company entitled to vote together with the Common Stock as a single class of all matters with respect to which the Common Stock is entitled to vote.  This Agreement shall cease to be binding or effective against any Investor Group (except with respect to such Investor Group’s obligations relating to the resignation of its Investor Nominee), and such Investor Group shall cease to have any rights hereunder, at such time as such Investor Group ceases to beneficially own at least 3.0% of the shares of Common Stock and other securities of the Company entitled to vote together with the Common Stock as a single class of all matters with respect to which the Common Stock is entitled to vote.

 

(g)        Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered personally, (b) mailed, certified or registered mail with postage prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent by fax, as set forth on Schedule B hereto (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof).  All such notices, requests, demands, waivers and other communications shall be deemed to have been received by (w) if by personal delivery, on the day delivered, (x) if by certified or registered mail, on the fifth business day after the mailing thereof, (y) if by next-day or overnight mail or delivery, on the day delivered, or (z) if by fax, on the day delivered, provided that such delivery is confirmed.

 

(h)        Waiver. Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party to assert its or his or her rights hereunder on any occasion or series of occasions.

 

(i)         Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

(j)         Headings. The headings to sections in this Agreement are for the convenience of the parties only and shall not control or affect the meaning or construction of any provision hereof.

 

(k)        Invalidity of Provision. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the

 

6



 

remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction.

 

(l)         Amendments and Waivers. The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived or modified, with and only with an agreement or consent in writing signed by each of the parties hereto who then have rights hereunder pursuant to Section 4(f) hereof.

 

(m)      Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto or Person subject hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement.

 

(n)        Third Party Beneficiaries.  This Agreement is not intended to, and does not, confer upon any Person other than the parties hereto any rights or remedies.

 

[ Remainder of Page Intentionally Left Blank ]

 

7


 

IN WITNESS WHEREOF this Agreement has been signed by each of the parties hereto, and shall be effective as of the date first above written.

 

 

GREEN BANCORP, INC.

 

 

 

 

 

By:

 

 

Name:

Manuel J. Mehos

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

 

FRIEDMAN FLEISCHER & LOWE CAPITAL PARTNERS III, L.P.

 

 

 

By:

Friedman Fleischer & Lowe GP III, L.P., the General Partner

 

 

 

 

 

By:

Friedman Fleischer & Lowe GP III, LLC, its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:  Managing Member

 

 

 

 

 

 

 

 

 

 

 

FRIEDMAN FLEISCHER & LOWE PARALLEL FUND III, L.P.

 

 

 

By:

Friedman Fleischer & Lowe GP III, L.P., the General Partner

 

 

 

 

 

By:

Friedman Fleischer & Lowe GP III, LLC, its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:  Managing Member

 

8



 

 

FFL INDIVIDUAL PARTNERS III, L.P.

 

 

 

By:

Friedman Fleischer & Lowe GP III, L.P., the General Partner

 

 

 

 

 

By:

Friedman Fleischer & Lowe GP III, LLC, its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:  Managing Member

 

 

 

 

 

 

 

 

 

 

 

FFL EXECUTIVE PARTNERS III, L.P.

 

 

 

By:

Friedman Fleischer & Lowe GP III, L.P., the General Partner

 

 

 

 

 

By:

Friedman Fleischer & Lowe GP III, LLC, its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:  Managing Member

 

 

 

 

 

 

 

 

 

 

 

HARVEST PARTNERS V, L.P.

 

 

 

   By:

Harvest Associates V, L.P.

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

HARVEST STRATEGIC ASSOCIATES V, L.P.

 

 

 

   By:

Harvest Associates V, LLC

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

9



 

 

PINE BROOK CAPITAL PARTNERS, L.P.

 

 

 

By:

Pine Brook Road Associates, L.P.,

 

 

its General Partner

 

 

 

 

By:

PBRA, LLC,

 

 

its General Partner

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

William Spiegel

 

 

 

Title:

Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

PINE BROOK CAPITAL PARTNERS (SSP), L.P.

 

 

 

By:

Pine Brook Road Associates, L.P.,

 

 

its General Partner

 

 

 

 

By:

PBRA, LLC,

 

 

its General Partner

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

William Spiegel

 

 

 

Title:

Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

GREEN PB-4, LLC

 

 

 

By:

Pine Brook Road Associates, L.P., as General Partner of Pine Brook Capital Partners (Cayman), L.P., its sole member

 

 

 

 

 

By:

PBRA , LLC, its General Partner

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

10



 

SCHEDULE A

 

Names of Members of Investor Groups

 

“FFL Group”

 

Friedman Fleischer & Lowe Capital Partners III, L.P.

Friedman Fleischer & Lowe Parallel Fund III, L.P.

FFL Individual Partners III, L.P.

FFL Executive Partners III, L.P.

 

“Harvest Group”

 

Harvest Partners V, L.P.

Harvest Strategic Associates V, L.P.

 

“Pine Brook Group”

 

Green PB-4, LLC

Pine Brook Capital Partners, L.P.

Pine Brook Capital Partners (SSP), L.P.

 

11



 

SCHEDULE B

 

Notice Information

 

If to the Company:

 

Green Bancorp, Inc.

4000 Greenbriar

Houston, Texas 77098

Attention: Manuel J. Mehos

Telephone: (713) 275-8220

 

With copies (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY  10036

Attention:  Sven G. Mickisch

Telephone:  (212) 735-3000

Fax: (212) 735-2000

 

If to the FFL Group:

 

Friedman Fleischer & Lowe, LLC
One Maritime Plaza
22nd Floor
San Francisco, California 94111
Attention:  Cas Schneller
Telephone:  (415) 402-2100
Fax:  (415) 402-2111

 

With copies (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention:  Sven G. Mickisch
Telephone:  (212) 735-3000
Fax:  (212) 735-2000

 

If to the Harvest Group:

 

Harvest Partners, LP
280 Park Avenue
25th Floor
New York, New York 10017

12



 

Attention:  Stephen Eisenstein
Telephone:  (212) 599-6300
Fax:  (212) 812-0100

 

With copies (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention:  Sven G. Mickisch
Telephone:  (212) 735-3000
Fax:  (212) 735-2000

 

If to the Pine Brook Group:

 

Pine Brook Road Partners, LLC
One Grand Central Place
60 East 42nd Street, 50
th  Floor
New York, New York 10165
Attention:  William Spiegel
Telephone:  (212) 847-4333
Fax:  (212) 847-4334

 

with a copy to (which copy alone shall not constitute notice):

 

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention:  Sven G. Mickisch
Telephone:  (212) 735-3000
Fax:  (212) 735-2000

 

13




Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the use in this Amendment No. 1 to Registration Statement No. 333-196982 of our report dated March 31, 2014 relating to the consolidated financial statements of Green Bancorp, Inc. and subsidiary, appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus.

/s/ DELOITTE & TOUCHE LLP    
Houston, Texas
July 29, 2014