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Green Bancorp, Inc. Reports Second Quarter 2014 Earnings

2014 Second Quarter Highlights

  • Second quarter 2014 earnings per share (diluted) increased 37.5% to $0.22 compared with the second quarter 2013
  • Net income was $4.7 million, a $1.3 million or 40.1% increase compared with the second quarter 2013
  • Nonperforming assets remain low at 1.03% of second quarter total assets
  • Loans increased $172.7 million or 13.7% to $1.4 billion compared with the second quarter 2013
  • Deposits increased $50.3 million or 3.4% to $1.5 billion compared with the second quarter 2013

HOUSTON, Sept. 11, 2014 (GLOBE NEWSWIRE) -- Green Bancorp, Inc. (Nasdaq:GNBC), the bank holding company that operates Green Bank, N.A., today announced results for its quarter ended June 30, 2014. The Company reported net income for the quarter of $4.7 million, or $0.22 per diluted common share, compared to net income of $3.3 million or $0.16 per diluted common share, an increase in net income of $1.3 million, or 40.1%, reported for the same period in 2013.

"I am pleased to report strong second quarter earnings and continued growth. Following our successful initial public offering completed in August, we are positioned to energize our ongoing acquisition strategy with a strong public currency and capitalize on the organic opportunity existing in our target markets utilizing our portfolio banker growth strategy," said Manny Mehos, Chairman and Chief Executive Officer of Green Bancorp.

Green Bancorp's management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, Green Bancorp reviews tangible book value per common share and the tangible common equity to tangible assets ratio. Green Bancorp has included in this Earnings Release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to the "Notes to Financial Highlights" at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures.

Results of operations for the three months ended June 30, 2014

For the three months ended June 30, 2014, net income was $4.7 million, compared with $3.3 million for the same period in 2013. Net income per diluted common share was $0.22 for the three months ended June 30, 2014, compared with $0.16 for the same period in 2013. The increase in net income was principally due to increased interest income resulting from growth in loans. Other factors also contributed to the increase, including a decrease in interest expense, increase in noninterest income and a decrease in provision for loan losses, offset by increases in noninterest expense and provision for income taxes. Returns on average assets and average common equity, each on an annualized basis, for the three months ended June 30, 2014 were 1.05% and 9.12%, respectively. Green Bancorp's efficiency ratio, which represents noninterest expense divided by the sum of net interest income and noninterest income, was 61.0% for the three months ended June 30, 2014.

Net interest income before provision for loan losses for the quarter ended June 30, 2014 increased 18.7% to $16.7 million, compared with $14.1 million during the same period in 2013. The increase was primarily due to the 13.6% increase in average loan volume, an 11 basis point decrease in the cost of interest-bearing deposits and the $116 thousand decrease in interest expense on other borrowed funds resulting from pay-down of term borrowings. The net interest margin for the three months ended June 30, 2014 increased to 3.87%, compared with 3.43% for the same period in 2013 and increased from 3.79% for the three months ended March 31, 2014. Net interest income before provision for loan losses during the quarter ended June 30, 2014 increased 6.6% or $1.0 million to $16.7 million, compared with $15.7 million during the three months ended March 31, 2014, primarily due to the 3.1% increase in average loan volume and deferred origination fee income earned on loans paid off before maturity.

Noninterest income increased $453 thousand, or 29.7%, to $2.0 million for the three months ended June 30, 2014, compared with $1.5 million for the same period in 2013. This increase was primarily due to the $258 thousand, or 48.2%, increase in gain on sale of government guaranteed portion of loans and the $184 thousand, or 40.9%, increase in customer service fees. When comparing the three months ended June 30, 2014 to the three months ended March 31, 2014, noninterest income increased $371 thousand, or 23.1%, primarily due to the $363 thousand, or 84.4%, increase in gain on sales of the government guaranteed portion of certain loans.

Noninterest expense increased $1.3 million, or 12.9%, to $11.4 million for the three months ended June 30, 2014, compared with $10.1 million for the same period in 2013. This increase was primarily due to a $916 thousand increase in professional expenses related to M&A activities, and a $635 thousand increase in salaries and employee benefits resulting primarily from increased staffing levels. When comparing the three months ended June 30, 2014 to the three months ended March 31, 2014, noninterest expense increased 7.5%, or $799 thousand, primarily due to an increase of $987 thousand in professional expenses related to M&A activities.

Loans at June 30, 2014 were $1.4 billion, an increase of $172.7 million, or 13.7%, compared with $1.3 billion at June 30, 2013, primarily due to continued loan generation within our target markets. Loans at June 30, 2014 increased $29.4 million, or 2.1%, from March 31, 2014 due mainly to the continued marketing activity of our portfolio bankers within our target markets. Average loans increased 13.6% or $169.8 million to $1.4 billion for the quarter ended June 30, 2014, compared with $1.2 billion for the same period in 2013. Average loans for the quarter ended June 30, 2014 increased 3.1% or $42.4 million from the quarter ended March 31, 2014.

Deposits at June 30, 2014 were $1.5 billion, an increase of $50.3 million, or 3.4%, compared to June 30, 2013, primarily due to our customer focused strategy resulting in an increase in our commercial deposits, public deposits, and bankruptcy trustee deposits after allowing certain promotional deposits to run off at the end of 2013 and early 2014. Deposits at June 30, 2014 increased $48.1 million or 3.2% from March 31, 2014 due primarily to our continuing deposit marketing strategy focusing on commercial, public and bankruptcy trustee deposits. Average deposits increased 2.1% or $31.4 million to $1.5 billion for the quarter ended June 30, 2014, compared with the same period of 2013. Average deposits for the quarter ended June 30, 2014 increased 4.3% or $62.3 million compared with the quarter ended March 31, 2014.

Results of operations for the six months ended June 30, 2014

For the six months ended June 30, 2014, net income was $8.2 million, compared with $6.0 million for the same period in 2013. Net income per diluted common share was $0.39 for the six months ended June 30, 2014, compared with $0.29 for the same period in 2013. The increase in net income was principally due to increased interest income resulting from growth in loans. Other factors also contributed to the increase, including a decrease in interest expense, increase in noninterest income and a decrease in provision for loan losses, offset by increases in noninterest expense and provision for income taxes. Returns on average assets and average common equity, each on an annualized basis, for the six months ended June 30, 2014 were 0.94% and 8.10%, respectively. Green Bancorp's efficiency ratio was 61.2% for the six months ended June 30, 2014.

Net interest income before provision for loan losses for the six months ended June 30, 2014, increased $5.0 million or 18.3% to $32.4 million, compared with $27.4 million during the same period in 2013. The increase was primarily due to the 15.0% increase in average loan volume, an 11 basis point decrease in the cost of interest-bearing deposits and the $224 thousand decrease in interest expense on other borrowed funds resulting from the pay-down of term borrowings, partially offset by a 15 basis point decrease in loan yields. The net interest margin for the six months ended June 30, 2014 increased to 3.84%, compared with 3.39% for the same period in 2013.

Noninterest income increased $1.0 million or 38.3% to $3.6 million for the six months ended June 30, 2014, compared with $2.6 million for the same period in 2013. This increase was primarily due to the $431 thousand increase in gain on sale of the guaranteed portion of certain loans, the $376 thousand increase in miscellaneous loan fees primarily prepayment fees, and the $285 thousand increase in customer service fees primarily related to bankruptcy trustee and commercial account treasury management service charges.

Noninterest expense increased $2.5 million or 12.7% to $22.0 million for the six months ended June 30, 2014, compared with $19.5 million for the same period in 2013. This increase was primarily due to an increase in salaries and employee benefits of $1.3 million or 10.5% resulting from increased staffing levels and increased compensation due to our portfolio banker compensation program and general merit compensation increases and the $933 thousand increase in professional expenses related to M&A activities.

Average loans increased 15.0% or $181.7 million to $1.4 billion for the six months ended June 30, 2014, compared with $1.2 billion for the same period in 2013. Average deposits increased 1.2% or $17.2 million to $1.5 billion for the six months ended June 30, 2014, compared with the same period of 2013.

Asset Quality

Nonperforming assets totaled $18.6 million or 1.03% of period end total assets at June 30, 2014, compared with $27.5 million or 1.62% of period end total assets at June 30, 2013, and $19.3 million or 1.10% of period end total assets at March 31, 2014. Accruing loans classified as troubled debt restructures and included in the nonperforming asset totals were $4.0 million at June 30, 2014, compared with $6.6 million at June 30, 2013. The allowance for loan losses was 1.10% of total loans at June 30, 2014, compared with 1.15% of total loans at June 30, 2013 and 1.08% of total loans at March 31, 2014.

The Company recorded no provision for loan losses for the three months ended June 30, 2014 following recoveries related to previously charged-off loans of $640 thousand received in the second quarter. The Company recorded a provision for loan losses of $1.2 million for the three months ended March 31, 2014 and $346 thousand for the three months ended June 30, 2013. The provision for loan losses was $1.2 million for the six months ended June 30, 2014, compared with $1.1 million for the six months ended June 30, 2013.

Net recoveries were $586 thousand for the three months ended June 30, 2014, compared with net charge offs of $2.5 million for the three months ended March 31, 2014 and net charge offs of $1.2 million for the three months ended June 30, 2013. Net charge offs were $1.9 million for the six months ended June 30, 2014, compared with $737 thousand for the six months ended June 30, 2013.

Acquisition of SP Bancorp, Inc.

On May 5, 2014, Green Bancorp entered into a definitive agreement to acquire SP Bancorp, Inc. ("SP Bancorp") and its wholly-owned subsidiary, Share Plus Bank ("Share Plus") headquartered in Plano, Texas. Share Plus operates three banking offices in the Dallas, Texas MSA and one banking office in Louisville, Kentucky. As of June 30, 2014, SP Bancorp, on a consolidated basis, reported total assets of $335.1 million, total loans of $250.2 million and total deposits of $269.0 million. Green Bancorp has received all requisite regulatory approvals and the closing is scheduled to occur in the fourth quarter of 2014 pending SP Bancorp shareholder approval and satisfaction of other customary closing conditions.

Conference Call

As previously announced, Green Bancorp will hold a conference call today, September 11, 2014, to discuss its second quarter 2014 results at 5:00 p.m. (Eastern Time). The conference call can be accessed live over the phone by dialing 1-877-407-0789, or for international callers, 1-201-689-8562 and requesting to be joined to the Green Bancorp Second Quarter 2014 Earnings Conference Call. A replay will be available starting at 8:00 pm EST on September 11, 2014 and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode for the replay is 13590155. The replay will be available until 11:59 pm EST on September 18, 2014.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company's website at investors.greenbank.com. The online replay will remain available for a limited time beginning immediately following the call.

To learn more about Green Bancorp, please visit the company's web site at www.greenbank.com. Green Bancorp uses its web site as a channel of distribution for material Company information. Financial and other material information regarding Green Bancorp is routinely posted on the Company's web site and is readily accessible.

About Green Bancorp, Inc.

Headquartered in Houston, Green Bancorp, Inc. is a bank holding company that operates Green Bank, N.A., in Houston, Dallas and Austin. Commercial-focused, Green Bank is a nationally chartered bank regulated by the Office of the Comptroller of the Currency, a division of the Department of the Treasury of the United States.

Forward Looking Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains, and the remarks by Green Bancorp's management on the conference call may contain, forward-looking statements within the meaning of the securities laws that are based on current expectations, assumptions, estimates and projections about Green Bancorp and its subsidiaries. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of Green Bancorp's control, which may cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include but are not limited to whether Green Bancorp can: successfully identify acquisition targets and integrate the businesses of acquired companies and banks; continue to sustain its current internal growth rate or total growth rate; provide products and services that appeal to its customers; continue to have access to debt and equity capital markets; and achieve its sales objectives. Other risks include, but are not limited to: the possibility that credit quality could deteriorate; actions of competitors; changes in laws and regulations (including changes in governmental interpretations of regulations and changes in accounting standards); a deterioration or downgrade in the credit quality and credit agency ratings of the securities in Green Bancorp's securities portfolio; customer and consumer demand, including customer and consumer response to marketing; effectiveness of spending, investments or programs; fluctuations in the cost and availability of supply chain resources; economic conditions, including currency rate fluctuations and interest rate fluctuations; and weather. These and various other factors are discussed in Green Bancorp's Final Prospectus on Form 424(b)(4) and other reports and statements Green Bancorp has filed with the SEC. Copies of the SEC filings for Green Bancorp may be downloaded from the Internet at no charge from investors.greenbank.com.

Green Bancorp, Inc.
Financial Highlights
(Unaudited)

Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013
(Dollars in thousands)
Period End Balance Sheet Data:
Cash and cash equivalents $ 68,329 $ 42,561 $ 34,757 $ 120,136 $ 137,491
Securities 253,208 250,878 255,515 255,415 247,287
Other investments 8,865 8,862 7,730 6,419 6,412
Loans held for investment 1,433,702 1,404,275 1,359,415 1,270,559 1,261,015
Allowance for loan losses (15,705) (15,119) (16,361) (14,874) (14,541)
Goodwill 15,672 15,672 15,672 15,672 15,672
Core deposit intangibles, net 862 923 984 1,046 1,107
Real estate acquired through foreclosure 4,863 6,690 6,690 6,841 7,353
Premises and equipment, net 21,326 21,476 21,365 20,849 20,316
Other assets 16,742 15,345 17,360 15,011 16,078
Total assets $ 1,807,864 $ 1,751,563 $ 1,703,127 $ 1,697,074 $ 1,698,190
Noninterest-bearing deposits $ 342,617 $ 290,782 $ 282,227 $ 268,123 $ 278,108
Interest-bearing transaction and savings deposits 613,954 621,879 590,795 617,601 619,500
Certificates and other time deposits 578,001 573,779 574,350 597,577 586,648
Total deposits 1,534,572 1,486,440 1,447,372 1,483,301 1,484,256
Securities sold under agreements to repurchase 5,617 8,383 2,583 3,296 1,301
Other borrowed funds 51,835 46,846 46,858 7,596 14,775
Other liabilities 7,088 6,294 7,096 6,508 5,675
Total liabilities 1,599,112 1,547,963 1,503,909 1,500,701 1,506,007
Shareholders' equity 208,752 203,600 199,218 196,373 192,183
Total liabilities and equity $ 1,807,864 $ 1,751,563 $ 1,703,127 $ 1,697,074 $ 1,698,190
As of and for the
As of and for the Three Months Ended Six Months Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013 2014 2013
(Dollars in thousands)
Income Statement Data:
Interest income:
Loans, including fees $ 17,986 $ 16,976 $ 16,970 $ 16,121 $ 16,025 $ 34,962 $ 31,313
Securities 1,024 1,029 964 870 779 2,053 1,537
Other investments 81 78 77 80 78 159 156
Federal funds sold -- -- 1 -- -- -- --
Deposits in financial institutions 32 24 77 75 97 56 218
Total interest income 19,123 18,107 18,089 17,146 16,979 37,230 33,224
Interest expense:
Transaction and savings deposits 621 577 709 708 776 1,198 1,793
Certificates and other time deposits 1,760 1,810 1,984 2,044 1,975 3,570 3,761
Other borrowed funds 36 44 17 100 150 80 301
Total interest expense 2,417 2,431 2,710 2,852 2,901 4,848 5,855
Net interest income 16,706 15,676 15,379 14,294 14,078 32,382 27,369
Provision for loan losses -- 1,223 1,247 (1) 346 1,223 1,127
Net interest income after provisions for loan losses 16,706 14,453 14,132 14,295 13,732 31,159 26,242
Noninterest income:
Customer service fees 634 531 476 470 450 1,165 880
Loan fees 462 550 339 295 327 1,012 636
Gain on sale of guaranteed portion of loans, net 793 430 197 240 535 1,223 792
Other 89 96 95 107 213 185 285
Total noninterest income 1,978 1,607 1,107 1,112 1,525 3,585 2,593
Noninterest expense:
Salaries and employee benefits 7,149 6,931 6,245 6,629 6,514 14,080 12,744
Occupancy 1,172 1,133 1,226 1,189 1,178 2,305 2,310
Professional and regulatory fees 1,767 780 848 762 851 2,547 1,614
Data processing 389 388 363 347 359 777 719
Software license and maintenance 341 315 278 258 232 656 429
Marketing 196 172 101 242 131 368 262
Loan related 85 117 357 229 132 202 227
Real estate acquired by foreclosure 62 169 29 (552) (9) 231 (72)
Other 235 592 1,275 633 703 827 1,273
Total noninterest expense 11,396 10,597 10,722 9,737 10,091 21,993 19,506
Income before income taxes 7,288 5,463 4,517 5,670 5,166 12,751 9,329
Provision for income taxes 2,614 1,975 1,453 2,109 1,830 4,589 3,344
Net income $ 4,674 $ 3,488 $ 3,064 $ 3,561 $ 3,336 $ 8,162 $ 5,985
As of and for the
As of and for the Three Months Ended Six Months Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013 2014 2013
(In thousands, except per share data)
Per Share Data (Common Stock):
Basic earnings per common share $ 0.22 $ 0.17 $ 0.15 $ 0.17 $ 0.16 $ 0.39 $ 0.29
Diluted earnings per share 0.22 0.17 0.15 0.17 0.16 0.39 0.29
Book value per common share 10.05 9.80 9.59 9.46 9.26 10.05 9.26
Tangible book value per common share (1) 9.25 9.00 8.79 8.66 8.45 9.25 8.45
Common Stock Data:
Shares outstanding at period end 20,780 20,780 20,771 20,748 20,748 20,780 20,748
Weighted average basic shares outstanding for the period 20,780 20,775 20,749 20,748 20,748 20,778 20,748
Weighted average diluted shares outstanding for the period 20,936 20,907 20,881 20,836 20,834 20,921 20,803
Selected Performance Metrics:
Return on average assets 1.05% 0.82% 0.71% 0.84% 0.79% 0.94% 0.72%
Return on average equity 9.12 7.04 6.15 7.29 6.98 8.10 6.34
Efficiency ratio 60.99 61.31 65.04 63.20 64.67 61.15 65.10
Loans to deposits ratio 93.43 94.47 93.92 85.66 84.96 93.43 84.96
Noninterest expense to average assets 2.56 2.49 2.50 2.29 2.38 2.53 2.34
Capital Ratios:
Average shareholders' equity to average total assets 11.5% 11.6% 11.6% 11.5% 11.3% 11.6% 11.3%
Tier 1 capital to average assets 10.4 10.5 10.3 10.3 10.0 10.4 10.0
Tier 1 capital to risk-weighted assets 11.6 11.6 11.4 12.4 12.2 11.6 12.2
Total capital to risk-weighted assets 12.6 12.6 12.5 13.4 13.2 12.6 13.2
Tangible common equity to tangible assets (1) 10.7 10.8 10.8 10.7 10.4 10.7 10.4
Selected Other Metrics:
Number of full time equivalent employees 216 216 214 216 210 216 210
Number of portfolio bankers 49 50 48 48 49 49 49
Period end actual loan portfolio average per portfolio banker $ 27,741 $ 26,742 $ 26,807 $ 24,848 $ 23,052 $ 27,741 $ 23,052
Period end target loan portfolio average per portfolio banker $ 47,633 $ 47,180 $ 48,104 $ 49,458 $ 50,286 $ 47,633 $ 50,286
Estimated remaining capacity to target loan portfolio size 41.76% 43.32% 44.27% 49.76% 54.16% 41.76% 54.16%
(1) Refer to "Notes to Financial Highlights" at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.
For the Three Months Ended
June 30, 2014 March 31, 2014 June 30, 2013
Interest Interest Interest
Average Earned/ Average Average Earned/ Average Average Earned/ Average
Outstanding Interest Yield/ Outstanding Interest Yield/ Outstanding Interest Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans $ 1,416,665 $ 17,986 5.09% $ 1,374,230 $ 16,976 5.01% $ 1,246,915 $ 16,025 5.15%
Securities 256,584 1,024 1.60 255,039 1,029 1.64 241,961 779 1.29
Other investments 8,861 81 3.67 9,021 78 3.51 6,398 78 4.89
Federal funds sold 761 -- -- 596 -- -- 1,555 -- --
Interest earning deposits in financial institutions 46,730 32 0.27 36,621 24 0.27 150,317 97 0.26
Total interest-earning assets 1,729,601 19,123 4.43% 1,675,507 18,107 4.38% 1,647,146 16,979 4.13%
Allowance for loan losses (15,531) (16,792) (15,356)
Noninterest-earning assets 69,897 69,815 66,385
Total assets $ 1,783,967 $ 1,728,530 $ 1,698,175
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction and savings deposits $ 613,561 $ 621 0.41% $ 603,653 $ 577 0.39% $ 644,654 $ 776 0.48%
Certificates and other time deposits 582,354 1,760 1.21 572,389 1,810 1.28 575,145 1,975 1.38
Securities sold under agreements to repurchase 6,696 3 0.18 6,234 2 0.13 3,451 1 0.12
Other borrowed funds 51,565 33 0.26 64,338 42 0.26 14,820 149 4.03
Total interest-bearing liabilities 1,254,176 2,417 0.77% 1,246,614 2,431 0.79% 1,238,070 2,901 0.94%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 318,056 275,584 262,758
Other liabilities 6,168 5,314 5,553
Total liabilities 1,578,400 1,527,512 1,506,381
Shareholders' equity 205,567 201,018 191,794
Total liabilities and shareholders' equity $ 1,783,967 $ 1,728,530 $ 1,698,175
Net interest rate spread 3.66% 3.59% 3.19%
Net interest income and margin(1) $ 16,706 3.87% $ 15,676 3.79% $ 14,078 3.43%
(1) Net interest margin is equal to net interest income divided by interest-earning assets.
For the Six Months Ended June 30,
2014 2013
Interest Interest
Average Earned/ Average Average Earned/ Average
Outstanding Interest Yield/ Outstanding Interest Yield/
Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
Assets
Interest-Earning Assets:
Loans $ 1,395,565 $ 34,962 5.05% $ 1,213,905 $ 31,313 5.20%
Securities 255,816 2,053 1.62 238,969 1,537 1.30
Other investments 8,940 159 3.59 6,371 156 4.94
Federal funds sold 679 -- -- 1,170 -- --
Interest earning deposits in financial institutions 41,703 56 0.27 167,299 218 0.26
Total interest-earning assets 1,702,703 37,230 4.41% 1,627,714 33,224 4.12%
Allowance for loan losses (16,158) (14,963)
Noninterest-earning assets 69,856 66,211
Total assets $ 1,756,401 $ 1,678,962
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing transaction and savings deposits $ 608,634 $ 1,198 0.40% $ 657,958 $ 1,793 0.55%
Certificates and other time deposits 577,399 3,570 1.25 556,591 3,761 1.36
Securities sold under agreements to repurchase 6,467 5 0.16 2,815 2 0.14
Other borrowed funds 57,916 75 0.26 14,885 299 4.05
Total interest-bearing liabilities 1,250,416 4,848 0.78% 1,232,249 5,855 0.96%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 296,937 251,175
Other liabilities 5,743 5,080
Total liabilities 1,553,096 1,488,504
Shareholders' equity 203,305 190,458
Total liabilities and shareholders' equity $ 1,756,401 $ 1,678,962
Net interest rate spread 3.63% 3.16%
Net interest income and margin(1) $ 32,382 3.84% $ 27,369 3.39%
(1) Net interest margin is equal to net interest income divided by interest-earning assets.
Yield Trend
For the Three Months Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013
Average yield on interest-earning assets:
Loans, including fees 5.09% 5.01% 5.25% 5.05% 5.15%
Securities 1.60 1.64 1.50 1.35 1.29
Other investments 3.67 3.51 5.00 4.95 4.89
Federal funds sold -- -- 0.27 -- --
Interest-earning deposits in financial institutions 0.27 0.27 0.29 0.28 0.26
Total interest-earning assets 4.43% 4.38% 4.35% 4.16% 4.13%
Average rate on interest-bearing liabilities:
Interest bearing transaction and savings 0.41% 0.39% 0.45% 0.46% 0.48%
Certificates and other time deposits 1.21 1.28 1.34 1.36 1.38
Other borrowed funds 0.25 0.25 1.23 2.75 3.29
Total interest-bearing liabilities 0.77% 0.79% 0.88% 0.92% 0.94%
Net interest rate spread 3.66% 3.59% 3.47% 3.23% 3.19%
Net interest margin (1) 3.87% 3.79% 3.69% 3.47% 3.43%
(1) Net interest margin is equal to net interest income divided by interest-earning assets.
Supplemental Yield Trend
For the Three Months Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013
Average yield on loans, excluding fees (2) 4.57% 4.64% 4.81% 4.69% 4.80%
Average cost of interest-bearing deposits 0.80 0.82 0.88 0.90 0.90
Average cost of total deposits, including noninterest-bearing 0.63 0.67 0.72 0.74 0.74
(2) Average yield on loans, excluding fees is equal to loan interest income divided by average loan principal.
Interest Rate Sensitivity
Percentage Change in Net Interest Income over a 12-month Horizon as of
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013
+200 basis point change in interest rates 17.55% 16.36% 20.06% 17.56% 18.55%
+100 basis point change in interest rates 9.29 8.66 10.57 8.96 9.35
No change in interest rates -- -- -- -- --
-100 basis point change in interest rates (3.53) (3.46) (3.53) (2.15) (1.44)
Portfolio Composition
Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013
Period End Balances (Dollars in thousands)
Commercial loans:
Commercial & industrial $ 710,915 49.6% $ 675,812 48.1% $ 681,290 50.1% $ 635,951 50.1% $ 659,758 52.3%
Owner occupied commercial real estate 142,484 9.9 152,515 10.9 156,961 11.6 147,521 11.6 137,767 10.9
Commercial real estate 281,882 19.7 310,379 22.1 267,011 19.6 238,053 18.7 218,637 17.4
Construction, land & land development 188,691 13.2 152,327 10.8 140,067 10.3 141,927 11.2 132,874 10.5
Total commercial loans 1,323,972 92.4 1,291,033 91.9 1,245,329 91.6 1,163,452 91.6 1,149,036 91.1
Consumer loans:
Residential mortgage 104,913 7.3 107,408 7.7 106,362 7.8 99,283 7.8 104,327 8.3
Other consumer 4,817 0.3 5,834 0.4 7,724 0.6 7,824 0.6 7,652 0.6
Total consumer loans 109,730 7.6 113,242 8.1 114,086 8.4 107,107 8.4 111,979 8.9
Total loans held for investment $ 1,433,702 100.0% $ 1,404,275 100.0% $ 1,359,415 100.0% $ 1,270,559 100.0% $ 1,261,015 100.0%
Deposits:
Noninterest-bearing $ 342,617 22.3% $ 290,782 19.6% $ 282,227 19.5% $ 268,123 18.1% $ 278,108 18.8%
Interest-bearing transaction 77,836 5.1 84,533 5.7 76,984 5.3 69,343 4.7 67,215 4.5
Money market 502,535 32.7 501,424 33.7 477,627 33.0 512,314 34.5 516,863 34.8
Savings 33,583 2.2 35,922 2.4 36,184 2.5 35,944 2.4 35,422 2.4
Certificates and other time deposits 578,001 37.7 573,779 38.6 574,350 39.7 597,577 40.3 586,648 39.5
Total deposits $ 1,534,572 100.0% $ 1,486,440 100.0% $ 1,447,372 100.0% $ 1,483,301 100.0% $ 1,484,256 100.0%
Loan to Deposit Ratio 93.4% 94.5% 93.9% 85.7% 85.0%
Asset Quality
As of and for the Six
As of and for the Three Months Ended Months Ended June 30,
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013 2014 2013
(Dollars in thousands)
Nonperforming Assets:
Nonaccrual loans $ 2,141 $ 1,972 $ 1,496 $ 6,314 $ 2,319 $ 2,141 $ 2,319
Accruing loans 90 or more days past due 604 33 1,316 133 99 604 99
Restructured loans—nonaccrual 6,983 6,746 9,864 9,139 11,143 6,983 11,143
Restructured loans—accrual 3,999 3,907 4,072 6,483 6,585 3,999 6,585
Total nonperforming loans 13,727 12,658 16,748 22,069 20,146 13,727 20,146
Real estate acquired through foreclosure 4,863 6,690 6,690 6,841 7,353 4,863 7,353
Total nonperforming assets $ 18,590 $ 19,348 $ 23,438 $ 28,910 $ 27,499 $ 18,590 $ 27,499
Charge-offs:
Commercial and industrial $ (50) $ (1,238) $ (2) $ (17) $ (899) $ (1,288) $ (899)
Commercial real estate -- -- -- -- (333) -- (333)
Residential mortgage -- -- -- -- -- -- (186)
Other consumer (4) (1,281) -- (2) (2) (1,285) (50)
Total charge-offs (54) (2,519) (2) (19) (1,234) (2,573) (1,468)
Recoveries:
Commercial and industrial $ 6 $ 49 $ 154 $ 252 $ 6 $ 55 $ 638
Owner occupied commercial real estate 14 -- 85 83 30 14 53
Commercial real estate -- 1 -- -- -- 1 21
Construction, land & land development -- -- -- -- -- -- --
Residential mortgage 5 3 3 10 7 8 15
Other consumer 615 1 -- 8 3 616 4
Total recoveries 640 54 242 353 46 694 731
Net recoveries (charge-offs) $ 586 $ (2,465) $ 240 $ 334 $ (1,188) $ (1,879) $ (737)
Allowance for loan losses at end of period $ 15,705 $ 15,119 $ 16,361 $ 14,874 $ 14,541 $ 15,705 $ 14,541
Asset Quality Ratios:
Nonperforming assets to total assets 1.03% 1.10% 1.38% 1.70% 1.62% 1.03% 1.62%
Nonperforming loans to total loans 0.96 0.90 1.23 1.74 1.60 0.96 1.60
Total classified assets to total regulatory capital 9.29 9.61 11.87 14.85 16.90 9.29 16.90
Allowance for loan losses to total loans 1.10 1.08 1.20 1.17 1.15 1.10 1.15
Net charge-offs (recoveries) to average loans outstanding (0.04) 0.18 (0.02) (0.03) 0.10 0.13 0.06

Green Bancorp, Inc.
Notes to Financial Highlights
(Unaudited)

We identify certain financial measures discussed in this release 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 release 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 release when comparing such non‑GAAP financial measures.

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:

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013
(In thousands, except per share data)
Tangible Common Equity
Total shareholders' equity $ 208,752 $ 203,600 $ 199,218 $ 196,373 $ 192,183
Adjustments:
Goodwill 15,672 15,672 15,672 15,672 15,672
Core deposit intangibles 862 923 984 1,046 1,107
Tangible common equity $ 192,218 $ 187,005 $ 182,562 $ 179,655 $ 175,404
Common shares outstanding (1) 20,780 20,780 20,771 20,748 20,748
Book value per common share (1) $ 10.05 $ 9.80 $ 9.59 $ 9.46 $ 9.26
Tangible book value per common share (1) $ 9.25 $ 9.00 $ 8.79 $ 8.66 $ 8.45
(1) Excludes the dilutive effect of common stock issuable upon exercise of outstanding stock options. The number of exercisable options outstanding was 1,006,510 as of June 30, 2014; 910,208 as of March 31, 2014; 910,793 as of December 31, 2013; 931,680 as of September 30, 2013; and 923,568 as of June 30, 2013.

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.

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

Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2014 2014 2013 2013 2013
(Dollars in thousands)
Tangible Common Equity
Total shareholders' equity $ 208,752 $ 203,600 $ 199,218 $ 196,373 $ 192,183
Adjustments:
Goodwill 15,672 15,672 15,672 15,672 15,672
Core deposit intangibles 862 923 984 1,046 1,107
Tangible common equity $ 192,218 $ 187,005 $ 182,562 $ 179,655 $ 175,404
Tangible Assets
Total assets $ 1,807,864 $ 1,751,563 $ 1,703,127 $ 1,697,074 $ 1,698,190
Adjustments:
Goodwill 15,672 15,672 15,672 15,672 15,672
Core deposit intangibles 862 923 984 1,046 1,107
Tangible assets $ 1,791,330 $ 1,734,968 $ 1,686,471 $ 1,680,356 $ 1,681,411
Tangible Common Equity to Tangible Assets 10.7% 10.8% 10.8% 10.7% 10.4%

CONTACT: Media Contact: Mike Barone 713-275-8243 mbarone@greenbank.com Investor Relations: 713-275-8220 investors@greenbank.com

Source:Green Bancorp, Inc.