Green Bancorp, Inc. Reports First Quarter 2015 Earnings

2015 First Quarter Highlights

• First quarter 2015 earnings per share (diluted) increased 5.9% to $0.18 from the first quarter 2014
• Net income was $4.6 million, a $1.2 million, or 33.3%, increase compared with the first quarter 2014. The increase represents a 0.85% return on average assets
• Nonperforming assets remain low, decreased to 0.63% of first quarter 2015 total assets compared to 1.10% for the first quarter 2014
• Loans increased $406.6 million or 29.0% to $1.8 billion compared with the first quarter 2014
• Deposits increased $445.4 million or 30.0% to $1.9 billion compared with the first quarter 2014
• Board of Directors approves a share repurchase program

HOUSTON, April 30, 2015 (GLOBE NEWSWIRE) -- Green Bancorp, Inc. (Nasdaq:GNBC), the bank holding company that operates Green Bank, N.A., today announced results for its first quarter ended March 31, 2015. The Company reported net income for the quarter of $4.6 million, or $0.18 per diluted common share, compared to net income of $3.5 million or $0.17 per diluted common share reported for the same period in 2014, an increase in net income of $1.2 million, or 33.3%.

Manny Mehos, Chairman and Chief Executive Officer of Green Bancorp, said, "I am pleased with our first quarter results and confident in our strategic plan to grow Green Bank to five billion in assets through both organic loan growth, and disciplined and strategic M&A. Our energy related portfolio is performing well in this lower oil price environment and we remain cautiously optimistic that this performance will continue. Our credit metrics remain strong and we are working with our clients to proactively manage our risk."

Mr. Mehos added, "Given our capital position and our ability to continue to build capital through earnings, we believe a share repurchase program and an active acquisition strategy can co-exist which will lead to improved leverage and return on equity. As a result, our board of directors has approved a share repurchase program whereby we may repurchase up to $15 million of our common stock over time."

Geoff Greenwade, President of Green Bancorp and Chief Executive Officer of Green Bank, continued, "Our loan generation pipeline remains robust and our bankers continue to have excess production capacity to take advantage of opportunities. While an economic slow-down could be on the horizon as a result of energy markets, we have seen limited tangible evidence that a slow-down is occurring."

Results of operations for the quarter ended March 31, 2015

Net income for the quarter ended March 31, 2015 was $4.6 million, compared with $3.5 million for the same period in 2014. Net income per diluted common share was $0.18 for the quarter ended March 31, 2015, compared with $0.17 for the same period in 2014. The increase in net income was principally due to the increase in interest income related to a higher loans held for investment balance in the quarter ended March 31, 2015 due to organic growth and the SharePlus acquisition compared to the same period in 2014. Returns on average assets and average common equity, each on an annualized basis, for the three months ended March 31, 2015 were 0.85% and 6.46%, respectively. Green Bancorp's efficiency ratio, which represents noninterest expense divided by the sum of net interest income and noninterest income, was 60.86% for the three months ended March 31, 2015.

Net interest income before provision for loan losses for the quarter ended March 31, 2015, was $20.5 million, an increase of $4.8 million, or 30.9%, compared with $15.7 million during the same period in 2014. The increase was primarily due to a 29.8% increase in average loan volume driven by the SharePlus acquisition and organic loan growth. The net interest margin for the quarter ended March 31, 2015 increased to 3.93%, compared with 3.79% for the same period in 2014 and increased from 3.92% for the quarter ended December 31, 2014. Increases in noninterest-bearing deposits and shareholders' equity contributed to the improvement in the net interest margin year over year. Average noninterest-bearing deposits for the quarter ended March 31, 2015 were $430.5 million, an increase of $155.0 million compared with the same period in 2014, and an increase of $11.8 million compared to the quarter ended December 31, 2014. Average shareholders' equity for the quarter ended March 31, 2015 was $291.7 million, an increase of $90.7 million compared with the same period in 2014, and an increase of $5.0 million compared to the quarter ended December 31, 2014. Net interest income before provision for loan losses during the quarter ended March 31, 2015 increased 1.1% or $233 thousand, compared with $20.3 million for the quarter ended December 31, 2014, primarily due to a 3.0% increase in average loan volume.

Noninterest income for the quarter ended March 31, 2015 was $2.1 million, an increase of $478 thousand, or 29.7%, compared with $1.6 million for the same period in 2014. This increase was primarily due to a $332 thousand, or 62.5%, increase in customer service fees, a $215 thousand, or 50.0%, increase in gain on sale of the government guaranteed portion of certain loans, offset by a $179 thousand, or 32.5%, decrease in miscellaneous loan fees. When comparing the quarter ended March 31, 2015 to the quarter ended December 31, 2014, noninterest income decreased $52 thousand, or 2.4%, from $2.1 million primarily due to a decrease in miscellaneous loan fees.

Noninterest expense for the quarter ended March 31, 2015 was $13.8 million, an increase of $3.2 million, or 29.8%, compared with $10.6 million for the same period in 2014. The increase was primarily due to a $1.8 million increase in salaries and employee benefits resulting from increased staffing, increased compensation due to our portfolio banker compensation program and general merit compensation increases. Additionally, a $687 thousand increase in professional fees, a $327 thousand increase in occupancy expenses and a $256 thousand increase in data processing, primarily due to the SharePlus acquisition, contributed to the increase in noninterest expense comparing the quarter ended March 31, 2015 to the same period in 2014. When comparing the quarter ended March 31, 2015 to the quarter ended December 31, 2014, noninterest expense decreased 23.1%, or $4.1 million, from $17.9 million, primarily due to the $4.3 million of SharePlus one-time acquisition expenses that were recorded in 2014.

Loans held for investment at March 31, 2015 were $1.8 billion, an increase of $406.6 million, or 29.0%, compared with $1.4 billion at March 31, 2014, primarily due to the SharePlus acquisition at the end of 2014 and continued opportunities for our portfolio bankers to generate new loans and expand existing relationships within our target markets. Loans held for investment at March 31, 2015 increased $11.7 million, or 0.6%, from December 31, 2014 primarily driven by new loan production and changes in funded balances, partially offset by pay-downs and repayments, which includes repayments from energy related borrowers. Average loans increased 29.8% or $409.2 million to $1.8 billion for the quarter ended March 31, 2015, compared with $1.4 billion for the same period in 2014. Average loans for the quarter ended March 31, 2015 increased 3.0% or $51.6 million from the quarter ended December 31, 2014.

Deposits at March 31, 2015 were $1.9 billion, an increase of $445.4 million, or 30.0%, compared to March 31, 2014, primarily due to the $250.6 million in deposits related to the SharePlus acquisition and a $194.8 million increase resulting from our customer focused strategy which increased our commercial deposits. Deposits at March 31, 2015 increased $86.1 million or 4.7% from December 31, 2014. Noninterest-bearing deposits at March 31, 2015 were $459.1 million, an increase of $168.3 million, or 57.9%, compared to March 31, 2014 and an increase of $27.2 million, or 6.3%, compared to December 31, 2014. As of March 31, 2015, noninterest bearing deposits comprised 23.8% of total deposits. Average deposits increased 28.0% or $406.2 million to $1.9 billion for the quarter ended March 31, 2015, compared with the same period of 2014. Average deposits for the quarter ended March 31, 2015 increased 4.2% or $74.6 million compared with the quarter ended December 31, 2014.

Asset Quality

Nonperforming assets totaled $14.2 million or 0.63% of period end total assets at March 31, 2015, down from $19.3 million or 1.10% of period end total assets at March 31, 2014, and up from $12.0 million or 0.55% of period end total assets at December 31, 2014. Accruing loans classified as troubled debt restructures and included in the nonperforming asset totals were $2.4 million at March 31, 2015, compared with $3.9 million at March 31, 2014.

The Company recorded a provision for loan losses of $1.5 million for the quarter ended March 31, 2015, up from the $1.3 million provision for the loan losses recorded for the quarter ended December 31, 2014. The allowance for loan losses was 0.97% of total loans at March 31, 2015, compared with 1.08% of total loans at March 31, 2014. The reduction in the percentage was largely due to acquired SharePlus loans which are accounted for under ASC 310-20 and ASC 310-30. The allowance for loan losses to total loans increased to 0.97% at March 31, 2015, compared with 0.87% of total loans at December 31, 2014 due to additional specific reserves and general reserves related to economic conditions. The Company's allowance for loans losses was 1.10% of total loans excluding acquired loans that are accounted for under ASC 310-20 and ASC 310-30. Further, allowance for loan losses plus acquired loan net discount to total loans adjusted for acquired loan net discount was 1.16% as of March 31, 2015.

Net loan recoveries were $432 thousand for the quarter ended March 31, 2015, compared with net charge offs of $907 thousand for the quarter ended December 31, 2014, and net charge offs of $2.5 million for the quarter ended March 31, 2014.

Acquisition of SP Bancorp, Inc.

As previously reported, Green Bancorp acquired SP Bancorp, Inc. ("SP Bancorp") and its wholly-owned subsidiary, SharePlus Bank ("SharePlus") headquartered in Plano, Texas on October 17, 2014.

Pursuant to the terms of the acquisition agreement, we paid $46.4 million in cash for all outstanding shares of SP Bancorp capital stock, which resulted in goodwill of $14.5 million as of December 31, 2014. Additionally, we recognized $3.5 million of core deposit intangibles as of December 31, 2014. The goodwill amount includes the effects of ongoing analysis of deferred tax attributes through March 31, 2015, which resulted in a $2.5 million increase in goodwill, a $3.5 million decrease in net deferred tax assets and a $951 thousand increase in current tax receivable. These goodwill, deferred tax asset and core deposit intangible balances as of December 31, 2014 do not include subsequent fair value adjustments that are still being finalized.

Non-GAAP Financial Measures

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, the tangible common equity to tangible assets ratio, allowance for loan losses to total loans excluding acquired loans, allowance for loan losses plus net discount on acquired loans to total loans adjusted for acquired loan net discount and selected metrics excluding one-time acquisition expenses. 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.

Capital Management

The Basel III Capital Rules adopted by the federal regulatory authorities in 2013 substantially revised the risk-based capital requirements applicable to Green Bancorp, Inc., and Green Bank, N.A. The Basel III Capital Rules became effective for Green Bancorp on January 1, 2015, subject to a phase-in period for certain provisions. Among other things, the Basel III Capital Rules introduced a new capital measure called "Common Equity Tier 1," which is a comparison of the sum of certain equity capital components to total risk-weighted assets, and revised the risk-weighting approach of the capital ratios with a more risk-sensitive approach that expanded the risk-weighting categories from the previous Basel I derived categories to a much larger and more risk-sensitive number of categories, depending on the nature of the assets.

 Conference Call

As previously announced, Green Bancorp will hold a conference call today, April 30, 2015, to discuss its first quarter ended 2015 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 First Quarter 2015 Earnings Conference Call. A replay will be available starting at 8:00 pm EDT on April 30, 2015 and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode for the replay is 13607607. The replay will be available until 11:59 pm EDT on May 7, 2015.

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, Texas, 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), the Annual Report on Form 10-K for December 31, 2014 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.

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 release 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:

Green Bancorp, Inc.

Notes to Financial Highlights

(Unaudited)

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:

Allowance for Loan Losses to Total Loans excluding Acquired Loans. The allowance for loan losses to total loans excluding acquired loans is a non-GAAP measure used by management to evaluate the Company's financial condition. Due to the application of purchase accounting, we use this non-GAAP ratio that excludes that impact of these items to evaluate our allowance for loan losses to total loans. We calculate: (a) total loans excluding acquired loans as total loans less the fair value of acquired loans accounted for under ASC topics 310-20 and 310-30; and (b) allowance for loan losses to total loans excluding acquired loans as the allowance for loan losses divided by total loans excluding acquired loans (as described in clause (a)). For allowance for loan losses to total loans excluding acquired loans, the most directly comparable financial measure calculated in accordance with GAAP is allowance for loan losses to total loans.

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 the allowance for loan losses to total loans excluding acquired loans. The acquired loans may have a premium or discount associated with them that includes a potential credit loss component with similar characteristics to the allowance for loan losses. This measure reports the allowance for loan loss coverage to only those loans not accounted for pursuant to ASC topics 310-20 and 310-30 which may assist the investor in evaluating the allowance coverage of loans excluding acquired loans.

The following table reconciles, as of the dates set forth below, allowance for loan losses to total loans excluding acquired loans:

Allowance for Loan Losses plus Acquired Loan Net Discount to Total Loans adjusted for Acquired Loan Net Discount. Allowance for loan losses plus acquired loan net discount to total loans adjusted for acquired loan net discount is a non-GAAP measure used by management to evaluate the Company's financial condition. We calculate: (a) allowance for loan losses plus acquired loan net discount as allowance for loan losses plus acquired loan net discount, net of accumulated amortization; (b) total loans adjusted for acquired loan net discount as total loans plus acquired loan net discount, net of accumulated amortization; and (c) allowance for loan losses plus acquired loan net discount to total loans adjusted for acquired loan net discount as allowance for loan losses plus acquired loan net discount (as calculated in clause (a)) divided by total loans adjusted for acquired loan net discount (as calculated in clause (b)).

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 the allowance for loan losses plus the acquired loan net discount to total loans adjusted for the acquired loan net discount. This measure reports the combined allowance for loan loss and acquired loan net discount (or premium) as a percentage of loans inclusive of the acquired loan net discount (or premium) which may assist the investor in evaluating allowance coverage on loans inclusive of additional discount or premium resulting from purchase accounting adjustments.

The following table reconciles, as of the dates set forth below, allowance for loan losses plus acquired loans net discount to total loans adjusted for acquired loan net discount:

Green Bancorp, Inc.

Notes to Financial Highlights

(Unaudited)

Selected Metrics Excluding One-time Acquisition Expenses. The selected metrics excluding one-time acquisition expense are non-GAAP measures used by management to evaluate the Company's performance. We calculate: (a) noninterest expense excluding one-time acquisition expenses as total noninterest expense less the one-time acquisition expenses; (b) net income excluding one-time acquisition expenses as net income less one-time acquisition expenses, net of taxes; (c) diluted earnings per share excluding one-time acquisition expenses as net income excluding one-time acquisition expenses (as calculated in clause (b)) divided by the weighted average diluted shares outstanding; (d) return on average assets excluding one-time acquisition expenses as net income excluding one-time acquisition expenses (as calculated in clause (b)) divided by average total assets; (e) return on average equity excluding one-time acquisition expenses as net income excluding one-time acquisition expenses (as calculated in clause (b)) divided by average total shareholders' equity; and (f) efficiency ratio excluding one-time acquisition expenses as noninterest expense excluding one-time acquisition expenses (as calculated in clause (a)) divided by the sum of net interest income and noninterest income. For noninterest expense excluding one-time acquisition expenses, the most comparable financial measure calculated in accordance with GAAP is noninterest expense. For net income excluding one-time acquisition expenses, the most comparable financial measure calculated in accordance with GAAP is net income. For diluted earnings per share excluding one-time acquisition expenses, the most comparable financial measure calculated in accordance with GAAP is diluted earnings per share. For return on average assets excluding one-time acquisition expenses, the most comparable financial measure calculated in accordance with GAAP is return on average assets. For return on average equity excluding one-time acquisition expenses, the most comparable financial measure calculated in accordance with GAAP is return on average equity. For the efficiency ratio excluding one-time acquisition expenses, the most comparable financial measure calculated in accordance with GAAP is the efficiency ratio.

We believe that these measures are important to many investors in the marketplace who are interested in changes from period to period in noninterest expense, net income, diluted earnings per share, return on average assets, return on average equity and efficiency ratio with the exclusion of one-time acquisition expenses.