SPBC Simplify ETF US Equity PLUS Bitcoin Strategy ETF

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This proxy statement contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. All statements, other than statements of historical fact, are forward-looking statements, including statements identified by words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “plan,” “positions,” “prospects” or “potential,” or the negative of these words and other words or expressions of similar meaning. These forward looking statements are found at various places throughout this proxy statement and relate to a variety of matters, including, but not limited to, effects on the Company if the merger is not completed, our expected financial position, future actions and financial performance, overall trends, liquidity and capital needs, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts.

Such forward-looking statements are necessarily estimates reflecting the best judgment of our management and are subject to numerous assumptions, risks and uncertainties, which change over time and could cause our actual results to differ materially from those suggested by the forward-looking statements.

These forward-looking statements should, therefore, be considered in light of various important factors set forth from time to time in our filings with the Securities and Exchange Commission, or the SEC, including those set forth under the heading “Risk Factors” in our Current Reports on Form 8-K, Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. In addition to other factors and matters contained in this document, these statements are subject to risks, uncertainties and other factors, including, among others:

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The forward-looking statements contained in this proxy statement speak only as of the date the statement is made, and we undertake no obligation to publicly update or revise forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. You are cautioned that our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions, which change over time. Actual results, developments and outcomes may differ materially from those expressed in, or implied by, our forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed above and under the caption “Risk Factors” of our most recent filings on Forms 10-Q and 10-K. We operate in a continually changing business environment, and new risk factors emerge from time to time. We cannot predict these new risk factors, nor can we assess the impact, if any, of the new risk factors on our business or the extent to which any factor or combination of factors may cause actual results or outcomes to differ materially from those expressed or implied by any forward-looking statement. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this proxy statement might not occur.

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THE SPECIAL MEETING

Date, Time, Place and Purpose

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by SP Bancorp for use at the special meeting to be held on [                    ], 2014 starting at [                    ] a.m. local time at [                    ], or at any adjournment or postponement thereof.

The purpose of the special meeting is for our stockholders to consider and vote upon the following proposals:

Our stockholders holding a majority of the outstanding shares of our common stock must vote to adopt the merger proposal for the merger to occur. If our stockholders fail to adopt the merger proposal, the merger will not occur. A copy of the merger agreement is attached to this proxy statement as Annex A and you are urged to read the merger agreement in its entirety.

Recommendation of the Strategic Review Committee and the Board of Directors

After deliberation and consultation with our financial and legal advisors, and after consultation with the strategic review committee formed for the purpose of overseeing the strategic review process, including the evaluation and negotiation of a potential strategic transaction, our board of directors has determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable to, and in the best interests of, our stockholders. Our board of directors unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and unanimously recommends that you vote “ FOR ” the merger proposal. See “ The Merger—Background of the Merger” and “The Merger—Recommendation of the Strategic Review Committee and the Board of Directors; Reasons for Recommending Adoption of the Merger Proposal .”

Our board of directors also unanimously recommends that you vote “ FOR ” the merger-related compensation proposal and “ FOR ” the adjournment proposal (if necessary or appropriate).

Record Date and Quorum

The close of business on [                    ], 2014 is the record date for determining our stockholders entitled to receive notice of, and to vote at, the special meeting or any postponement or adjournment thereof. On the record date, [            ] shares of our common stock were outstanding. Each share of our common stock entitles its holder to one vote on each matter properly coming before the special meeting.

The presence at the special meeting, in person or by proxy, of the holders of a majority of the outstanding shares of our common stock that are entitled to vote at the special meeting will constitute a quorum, permitting us to conduct business at the special meeting. All shares of our common stock, whether present in person or represented by proxy, including abstentions and broker non-votes, will be counted for purposes of determining whether a quorum is present. See the section of this proxy statement entitled “— Abstentions and Broker Non-Votes ” for additional information regarding the treatment of shares of our common stock held in “street name” by brokers, banks and other nominees.

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Required Vote

Adoption of the merger proposal requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote thereon. Adoption of the merger-related compensation proposal and the adjournment proposal (if necessary or appropriate) each requires the affirmative vote of a majority of the votes cast on the proposal. In addition, the merger agreement provides that stockholder approval of the merger proposal is a condition to the completion of the merger.

Abstentions and Broker Non-Votes

An abstention occurs when a stockholder attends a meeting, either in person or by proxy, but abstains from voting. Abstentions will be included in the calculation of the number of shares of our common stock represented at the special meeting for purposes of determining whether a quorum has been achieved. Abstaining from voting will have the same effect as a vote “AGAINST” the merger proposal, and will have no effect on the adoption of the merger-related compensation proposal or the adjournment proposal (if necessary or appropriate) as long as a quorum is present at the meeting.

Broker non-votes occur when shares held in “street name” by brokers, banks and other nominees are present or represented by proxy at the special meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial owner of such shares how to vote on a particular proposal and such broker, bank or nominee does not have discretionary voting authority on such proposal. Under NASDAQ rules, brokers, banks and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the three proposals described in this proxy statement. As such, if a beneficial owner of shares of our common stock held in “street name” does not give voting instructions to the broker, bank or other nominee, then those shares will not be voted at the special meeting. If you fail to issue voting instructions to your broker, bank or other nominee, it will have the same effect as a vote “AGAINST” the merger proposal, and will have no effect on the adoption of the merger-related compensation proposal or the adjournment proposal (if necessary or appropriate) as long as a quorum is present at the meeting.

Failure to Vote

If you execute and duly return your proxy card, but do not provide instructions as to how to vote the shares of our common stock listed on the proxy card (including no instruction to abstain from voting), the proxy will be voted “ FOR ” the merger proposal, “ FOR ” the merger-related compensation proposal and “ FOR ” the adjournment proposal (if necessary or appropriate).

If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting (unless you are a record holder as of the record date and attend the special meeting in person) and will have the same effect as a vote “AGAINST” the adoption of the merger proposal, and will have no effect on the adoption of the merger-related compensation proposal or the adjournment proposal (if necessary or appropriate) as long as a quorum is present at the meeting.

Stock Ownership and Interests of Certain Persons

On May 5, 2014, each of our directors and named executive officers entered into voting agreements with Green, pursuant to which such directors and executive officers agreed, solely in their capacity as stockholders of SP Bancorp, to, among other things, vote all of their shares of our common stock in favor of the adoption of the merger proposal. As of the record date, our directors and named executive officers were entitled to vote approximately 187,270 shares, or approximately 11.7%, of our outstanding common stock entitled to vote at the special meeting.

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As of the record date, Green and its subsidiaries held no shares of our common stock (other than shares held as a fiduciary, custodian or agent), and its directors and executive officers or their affiliates held no shares of our common stock.

You should be aware that some of our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. See “ The Merger—Interests of Our Directors and Executive Officers in the Merger. ”

Voting and Revocation of Proxies

If you hold shares of our common stock in your name as a stockholder of record on the record date, then you received this proxy statement and a proxy card from us. You may submit a proxy for your shares by Internet, telephone, or mail without attending the special meeting. To submit a proxy by Internet or telephone 24 hours a day, seven days a week, follow the instructions on the proxy card. To submit a proxy by mail, complete, sign, and date the proxy card and return it in the accompanying reply envelope. Internet and telephone proxy facilities for stockholders of record will close at [        ] a.m., local time on [                    ], 2014. If you hold shares of our common stock in “street name” through a broker, bank or other nominee, then you received this proxy statement from such nominee, along with the nominee’s voting instructions. You should instruct your broker, bank or other nominee on how to vote your shares of common stock using the voting instructions provided to you by your broker, banker or other nominee.

Proxies received at any time before the special meeting, and not changed or revoked before being voted, will be voted at the special meeting.

If you hold your shares in your name as a stockholder of record, you have the right to change or revoke your proxy at any time before the vote is taken at the special meeting by:

If your shares are registered differently and are in more than one account, you may receive more than one proxy card or voting instruction form. Please complete, sign, date and return all of the proxy cards and voting instruction forms you receive regarding the special meeting (or submit your proxy for all shares by telephone or Internet) to ensure that all of your shares are voted.

If you hold your shares through a broker, bank or other nominee, you have the right to change or revoke your proxy at any time before the vote is taken at the special meeting by following the directions received from your broker, bank or other nominee to change or revoke those instructions.

PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD. IF THE MERGER IS COMPLETED, A SEPARATE LETTER OF TRANSMITTAL WILL BE MAILED TO YOU (IF YOU ARE A STOCKHOLDER OF RECORD) THAT WILL ENABLE YOU TO RECEIVE THE PER SHARE MERGER CONSIDERATION IN EXCHANGE FOR YOUR STOCK CERTIFICATES.

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Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. We do not anticipate that we will adjourn or postpone the special meeting unless necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger proposal or we are advised by counsel that such adjournment or postponement is necessary under applicable law. In addition to the foregoing, our bylaws authorize the chairman of the meeting to adjourn the special meeting without further notice to a date not more than 120 days after the original record date. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow our stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting, as adjourned or postponed.

Solicitation of Proxies

We will bear the cost of solicitation of proxies. These costs include the preparation, assembly and mailing of this proxy statement, the notice of the special meeting of stockholders and the enclosed proxy card and the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of our outstanding common stock. Our directors, officers and regular employees may, without compensation other than their regular compensation, solicit proxies by mail, personal conversation, e-mail, telephone, or via the Internet on our behalf. We have engaged AST Phoenix Advisors to assist in the solicitation of proxies for the special meeting. We estimate that we will pay AST Phoenix Advisors a fee of approximately $6,500 for proxy solicitation services, and have agreed to reimburse AST Phoenix Advisors for reasonable expenses it incurs in connection with its engagement.

Attending the Meeting

All holders of our common stock, including stockholders of record and stockholders who hold their shares through a broker, bank or other nominee, are invited to attend the special meeting. Stockholders of record can vote in person at the special meeting. If you are not a stockholder of record, to be able to vote in person at the special meeting you must obtain a proxy executed in your favor from the record holder of your shares, such as a broker, bank or other nominee. If you plan to attend the special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted to the special meeting. We reserve the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the special meeting is prohibited without our express written consent.

Questions and Additional Information

If you have more questions about the merger, or require assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card, please contact our proxy solicitor:

AST Phoenix Advisors

6201 15th Avenue

3 ^rd Floor

Brooklyn, NY 11219

BANKS AND BROKERS CALL: (212) 493-3910

ALL OTHERS CALL TOLL FREE: (877) 283-0321

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THE MERGER

Parties to the Merger

SP Bancorp, Inc.

SP Bancorp, Inc. is a Maryland corporation with principal executive offices located at 5224 W. Plano Parkway, Plano, Texas 75093, and its telephone number is (972) 931-5311. SP Bancorp is a bank holding company and the parent of the Bank. We are regulated by the Board of Governors of the Federal Reserve System. The Bank is a Texas chartered state bank that is a member of the Federal Reserve System, and it operates as a full-service commercial bank, providing services that include the acceptance of checking and savings deposits, the origination of one- to four-family residential mortgage, mortgage warehouse, commercial real estate, commercial business, home equity, automobile and personal loans. Our common stock is listed on the NASDAQ Capital Market under the symbol “SPBC.” Additional information about us is contained in our filings with the SEC and in the section of this proxy statement entitled “ Additional Information. ”

Green and Merger Sub

Green is a Texas corporation with principal executive offices located at 4000 Greenbriar St., Houston, Texas 77098, and its telephone number is (713) 275-8220. Green is a bank holding company and the parent of Green Bank, National Association.

Searchlight Merger Sub, Inc., a wholly owned subsidiary of Green, is a newly formed Maryland corporation created solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not carried on any activities other than in connection with the merger. The address of Merger Sub is 4000 Greenbriar St., Houston, Texas 77098, and its telephone number is (713) 275-8220.

Upon completion of the merger, Merger Sub will merge with and into SP Bancorp and will cease to exist, and SP Bancorp will continue as the surviving corporation.

Background of the Merger

As part of their ongoing consideration and evaluation of our long-term prospects and strategies, our board of directors and senior management regularly review and assess our business strategies and objectives, including strategic opportunities and challenges, all with the goal of enhancing value for our stockholders. These strategic discussions have focused on, among other things, the business environment facing financial institutions generally and SP Bancorp in particular, as well as conditions and ongoing consolidation in the financial services industry. The three general long-term strategies our board of directors considered were organic growth, growth through the acquisition of other banks and a business combination, including a merger of equals, that would provide us with improved scale. Historically, our board of directors had focused on the organic growth and earnings potential of the Company.

On October 29, 2010, in connection with a public offering pursuant to which we issued a total of 1,725,000 shares of our common stock for an aggregate of $17.25 million in total gross offering proceeds, we completed the mutual to stock conversion of the Bank to facilitate the growth of our operations and to provide our board of directors with improved capital management alternatives, including the ability to pay dividends to our stockholders and repurchase shares of our common stock from time to time. Under certain Office of Thrift Supervision regulations, for three years following this conversion, no person could acquire or offer to acquire more than ten percent of our common stock without prior written approval from the Office of Thrift Supervision (referred to in this proxy statement as the “three year restriction”).

With the three year restriction expiring in October 2013, at a time when there was increasing consolidation in the financial services industry generally and financial institutions were faced with increasing costs of regulatory compliance, our board of directors engaged in periodic discussions regarding the long term prospects and strategies for SP Bancorp, including the prospects of receiving an unsolicited offer upon expiration of the three year restriction.

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During the second half of 2012 and the first half of 2013, Jeff Weaver, our chief executive officer, and Paul Zmigrosky, chairman of our board of directors, held several informal discussions with representatives of other financial institutions, including Green, regarding industry trends and customary banking matters.

On August 2, 2012, Messrs. Zmigrosky and Weaver had dinner with Geoff Greenwade, Tom Yenne, and Manny Mehos of Green, during which the representatives of Green initiated a high level discussion of a potential reverse merger with SP Bancorp following expiration of the three year restriction.

On May 8, 2013, Messrs. Zmigrosky and Weaver met with representatives of Commerce Street Capital, LLC, or Commerce Street Capital, to discuss long-term strategic alternatives and capital planning and the process involved in responding to any potential unsolicited offers that may be received by our board of directors following expiration of the three year restriction at the end of October 2013. In addition, due to the increasing regulatory and public company costs and our board’s belief that increasing the Company’s scale would mitigate the financial impact of these costs, the parties discussed strategies to grow the Company’s operations more quickly than provided for in the existing strategic plan.

In early July 2013, the board of directors engaged Commerce Street Capital to assist in the review of strategic alternatives, including the review of any potential unsolicited offers from third parties.

On August 19, 2013, at Green’s request, Mr. Weaver and the Bank’s chief credit officer, Steve Boswell, met with representatives of Green to discuss their respective companies, industry and market trends, and preliminary views on the possibility of a strategic transaction between the two companies.

At a meeting of our board of directors held on September 14, 2013, members of the board discussed, and received advice from Commerce Street Capital regarding, our potential for organic growth in the current market along with the possibility of engaging in one or more other hypothetical strategic alternatives, including growth through the acquisition of other smaller financial institutions, a merger of equals, a reverse merger or an acquisition of SP Bancorp by a larger company. Representatives of Commerce Street Capital discussed with our board of directors different potential growth strategies to achieve efficiencies that would allow us to improve returns to our stockholders and compared these strategies against the alternative of organic growth.

At our board’s request, in October 2013, Commerce Street Capital contacted ten potential parties to determine if they would be interested in a possible transaction. Over the next two months, Messrs. Zmigrosky and Weaver, together with certain members of our senior management and our financial and legal advisors, engaged in preliminary exploratory discussions with several of these parties other than Green.

Following these initial contacts, one of the parties contacted, a larger private banking institution referred to as Party A, executed a confidentiality agreement to facilitate its due diligence review in connection with a possible transaction.

On December 18, 2013, Mr. Weaver met with Messrs. Yenne and Greenwade of Green, who indicated that Green intended to submit a letter of intent to acquire SP Bancorp but did not specify a price.

On January 9, 2014, our board of directors received a letter of intent signed by Green pursuant to which it offered to acquire SP Bancorp for aggregate cash consideration of $43.0 million, which represented a price per share of approximately $25.91, subject to reduction if our adjusted tangible book value at the closing of such transaction was below $32 million.

At a meeting on January 10, 2014, our board of directors discussed the strategic review process, including the receipt of the letter of intent from Green, and the fact that informal discussions were continuing with Party A. To facilitate the strategic review and negotiation process, our board of directors authorized the formation of the M&A sub-committee, referred to as the strategic review committee, comprised entirely of independent directors, including Paul Zmigrosky, Chairman, Carl Forsythe, Stan Keith and Jeff Williams, to oversee the strategic review process and make recommendations to our board of directors as to any possible strategic transaction.

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At strategic review committee meetings on January 13, 2014 and January 17, 2014, the strategic review committee met to evaluate the Green letter of intent and whether potential synergies and cost savings that could be achieved by Green could support an increase in the per share consideration that would be received by our stockholders. The strategic review committee discussed, and received advice from its advisors with respect to, a form of response to recommend to our board of directors and how to proceed with the other parties with whom they had had preliminary discussions. Over the following week, members of the strategic review committee, along with representatives of Commerce Street Capital, our financial advisor, discussed with the full board of directors the terms of both the Green letter of intent and a possible transaction with Party A, and our board of directors discussed how it should respond to the Green letter of intent.

At a meeting of our board of directors held on January 23, 2014, the board discussed the Green offer together with representatives of Commerce Street Capital and their legal counsel. Representatives of Commerce Street Capital provided their analysis of the terms of Green’s proposal relative to other recent comparable transactions. Following discussion, our board of directors determined to request that Green increase the economic terms of its offer and that the strategic review committee would continue discussions with the other financial institutions who had indicated a preliminary interest in an effort to understand the indicative economic terms, if any, of these other indications of interest.

On January 24, 2014, our board of directors delivered a letter to Green in response to its letter of intent, in which it stated that the strategic review committee and our board of directors had reviewed, together with its legal and financial advisors, the terms in the letter of intent and had determined that they would be interested in exploring a possible transaction in which our stockholders would receive a higher price per share than what Green offered initially.

Over the next several weeks, the strategic review committee, in consultation with the Company’s advisors, continued to (a) discuss the metrics of recently announced transactions in the industry, (b) engage in discussions with representatives of Green, Party A and other potential strategic partners with respect to a possible transaction, (c) negotiate the terms of a potential transaction with each of Green and Party A and (d) review scenarios under which we would remain independent and rely on continued earnings to build our book value in preparation for a future strategic transaction.

At a meeting of the strategic review committee on February 5, 2014, the strategic review committee discussed the potential terms of a transaction with Party A. Party A proposed a transaction with an aggregate value of approximately $37.2 million, or approximately $23.78 per share, consisting of $7.2 million in cash and the issuance of unregistered securities of Party A that Party A assigned a proposed value of approximately $30.0 million. Party A also proposed to register the securities issued to our stockholders in connection with the proposed transaction. The strategic review committee determined that the terms of the combination stock/cash transaction proposed by Party A were not attractive because the transaction would be materially dilutive, on an economic basis, to our stockholders. Further, the scenarios under which the proposal from Party A would offer comparable value to the Green proposal would be subject to significant execution risk. Specifically, the strategic review committee was concerned about Party A’s relatively limited history of financial performance and the uncertainty surrounding the valuation of Party A’s common stock after such shares were registered. Further, the strategic review committee believed that the Party A common stock issued to our stockholders would suffer significant economic dilution and would only deliver sufficient value to our stockholders if Party A successfully executed its business plan over multiple fiscal years. The strategic review committee also discussed the Green proposal and whether potential cost savings could help Green increase its price.

At a strategic review committee meeting on February 12, 2014, the strategic review committee discussed a revised proposal from Party A but continued to believe that the transaction would be economically dilutive to our stockholders and subject to significant execution risk.

On February 20, 2014, following an expression of interest in a strategic transaction by a party that had not been contacted initially by Commerce Street Capital, the party executed a confidentiality agreement to facilitate

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due diligence and further discussions. However, discussions with this party did not progress beyond a preliminary stage because the party did not believe it could offer a price near the price offered by Green.

At a strategic review committee meeting on February 21, 2014, the strategic review committee discussed a letter of intent from Party A received in February 2014 proposing a reverse merger with terms substantially equivalent to the prior proposal. After discussion and consultation with its advisors, the strategic review committee determined to suspend discussions with Party A because of the economically dilutive terms of Party A’s proposal, as well as its belief that the Green offer presented more value to our stockholders and that such offer could moreover be improved through continued negotiations with Green.

On February 26, 2014, the strategic review committee met to evaluate the results of the strategic review process, including the all cash acquisition proposal from Green and the cash-stock proposal from Party A, as well as the alternative of remaining independent. After extensive discussion of the relative terms, current and net present values, execution risks and uncertainties and other factors of each proposal, the strategic review committee agreed to recommend that our board of directors execute the revised Green letter of intent and negotiate with Green on an exclusive basis with respect to a strategic transaction with aggregate cash consideration of $46.2 million, subject to reduction if the Company’s adjusted tangible book value at closing was below $29.5 million. Based on certain assumptions and calculations with respect to the anticipated impact of the tangible book value adjustment on the per share merger consideration payable to our stockholders, it was estimated that this enhanced proposal from Green represented an increase of approximately 21% over Green’s initial offer.

On February 27, 2014, our board of directors held a meeting to discuss an update from the strategic review committee on the process to date. Our board of directors reviewed the terms of the proposals from Party A and Green as well as the status of discussions with other potential parties. In summary, of the ten parties contacted, two parties signed confidentiality agreements and discussions with eight parties did not progress beyond a preliminary stage, and discussions with the party that was not initially contacted by Commerce Street Capital but executed a confidentiality agreement also did not progress beyond a preliminary stage. Following this discussion, our board of directors determined that the Green offer provided significantly greater value to our stockholders than any other indication of interest or the Company’s organic growth options and approved the entry into the non-binding letter of intent with Green. The board also determined to terminate discussions with Party A due to the potential economic dilution and execution risk. Finally, our board of directors directed the strategic review committee to work to negotiate a definitive agreement with Green that would include flexibility in the event of a third party superior proposal to acquire SP Bancorp, as well as other terms that would be in the best interest of our stockholders.

Following the execution of the letter of intent, our board of directors engaged Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), to provide additional legal advice in connection with the proposed transaction and to help negotiate the terms of definitive transaction documents with Green’s outside counsel, Skadden Arps, Slate, Meagher & Flom LLP (“Skadden”).

Over the course of the following weeks, representatives of SP Bancorp and Green (including outside legal counsel and other advisors and consultants) conducted mutual due diligence involving the management teams from both companies.

At a meeting of the strategic review committee on March 31, 2014, the committee discussed an approximate 3% interest in Green common stock held by Commerce Street Financial Partners, LP, a fund managed by an affiliate of Commerce Street Capital (the Company’s financial advisor). The committee determined that Commerce Street Capital had no current, recent or pending commercial relationship with Green. Following this discussion, in consultation with our legal advisors, the strategic review committee decided to seek to engage an independent financial advisor for the purposes of rendering an independent fairness opinion on any transaction that might result with Green.

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Following contact with several independent financial advisory firms, on April 3, 2014, our board of directors engaged Mercer Capital Management, Inc., or Mercer Capital, to opine as to the fairness of the proposed merger, from a financial point of view, to the Company’s stockholders. Mercer Capital was engaged based on its familiarity with the Company and the regional community banking industry, its knowledge of the banking industry as a whole, and its experience in evaluating acquisitions and other significant corporate events and in rendering fairness opinions. See the section of this proxy statement entitled “— Opinion of Our Financial Advisor ” for a description of Mercer Capital’s analysis and the fee to be paid to Mercer Capital.

Over the course of the following weeks, Green and its advisors continued to conduct due diligence with respect to the Company, and the Company and Wachtell Lipton negotiated the terms of the draft merger agreement that had been prepared by Skadden. Given the possible continuing role of our executives in the post-merger entity, our executives were not actively involved in the negotiation of the merger agreement. During the course of negotiations, representatives of Green also discussed their expectation that our directors and certain of our officers would enter into customary voting agreements agreeing to vote their shares in favor of the proposed transaction with Green. During this period, the Company’s advisors regularly updated the strategic review committee and the board of directors regarding the status of negotiations with Green.

At a meeting of the strategic review committee on April 22, 2014, the committee members continued to discuss the offer from Green, together with representatives of Commerce Street Capital and one of our legal advisors, Haynes and Boone, LLP. Following such discussion, the strategic review committee determined to recommend approval of the Green transaction to our full board of directors, subject to the satisfactory conclusion of remaining open negotiating points.

On April 24, 2014, our board of directors met with representatives of Commerce Street Capital, Mercer Capital and Wachtell Lipton to discuss the status of the proposed transaction with Green. The Commerce Street Capital representatives presented a slide deck summarizing the negotiation history with Green and various other parties, the terms of the proposed transaction and certain valuation analyses. Representatives of Wachtell Lipton then reviewed the terms of the current draft of the definitive merger agreement and related transaction documents. A representative of Mercer Capital reviewed their preliminary conclusions in preparing their fairness opinion for the transaction, indicating a strong comfort level that the proposed transaction met or exceeded “fair value” for our stockholders. After extensive discussion of various other terms of the transaction, all of the directors indicated that they supported the transaction. At the conclusion of the meeting, our board of directors instructed our outside advisors to continue to work to finalize negotiations with Green.

During the following week, the parties and their advisors continued to negotiate and finalize the merger agreement and the other transaction documents.

On May 1, 2014, our board of directors held a meeting to consider the proposed merger. The strategic review committee provided our board of directors with its perspective on the proposed merger and representatives of Wachtell Lipton reviewed with our board of directors the legal standards applicable to our board of directors’ decisions and actions on the proposed merger. Our board of directors considered presentations from our outside financial advisors regarding the key financial terms of the transaction and the strategic and financial rationales for the proposed merger. Representatives of Mercer Capital and Commerce Street Capital reviewed with our board of directors additional information, including financial information regarding SP Bancorp, Green and the proposed transaction. In addition, representatives of Wachtell Lipton reviewed the most recent draft of the proposed merger agreement and related transaction documents. Our senior management and outside legal and financial advisors responded to questions from the directors throughout the meeting and there were discussions among the directors and management. Following our board of directors meeting, the parties and their outside counsel worked to finalize the terms of the merger agreement and the related transaction documents.

Over the course of the following days, the parties finalized the merger agreement and the other transaction documents.

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On May 5, 2014, our board of directors held a telephonic meeting during which representatives of Mercer Capital, Commerce Street Capital and Wachtell Lipton presented updates regarding the status of the definitive transaction documents. Mercer Capital delivered its opinion to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Mercer Capital as set forth in such opinion, the proposed merger was fair, from a financial point of view, to our stockholders. Following a discussion among the members of our board of directors, including consideration of the factors described in the section of this proxy statement entitled “— Recommendation of the Strategic Review Committee and the Board of Directors; Reasons for Recommending Adoption of the Merger Proposal ,” our board of directors unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable to, and in the best interests of, our stockholders, approved the merger agreement and the transactions contemplated thereby, including the merger, and recommended that our stockholders adopt the merger proposal.

Pursuant to the engagement letter with Commerce Street Capital, upon completion of the merger, we will pay Commerce Street Capital a fee of approximately $562,000 (plus expenses).

Recommendation of the Strategic Review Committee and the Board of Directors; Reasons for Recommending Adoption of the Merger Proposal

Our board of directors created the strategic review committee for administrative purposes to oversee the strategic review process and make recommendations to our board of directors as to any possible strategic transaction, including the merger. Our board of directors authorized the strategic review committee to make recommendations to the board, but the strategic review committee did not have authority to approve or reject a strategic transaction.

After consideration of the factors described below and subject to the satisfactory conclusion of remaining open items the strategic review committee unanimously determined to recommend approval of the Green transaction to our full board of directors.

Following the recommendation of the strategic review committee, our board of directors carefully considered the terms of the merger agreement and the value of the consideration to be received by our stockholders upon completion of the merger. In reviewing the merger agreement and the consideration to be received by our stockholders, our board of directors took into consideration several issues including, among others, the recommendation of the strategic review committee, the feasibility of remaining independent, our ability to compete with much larger regional banks and the need to eventually raise additional capital to facilitate growth, which could be dilutive to our existing stockholders. After careful consideration, our board of directors determined that it was advisable to, and in the best interests of, SP Bancorp and our stockholders to enter into the merger agreement. Accordingly, our board of directors unanimously recommends that our stockholders vote “FOR” the merger proposal.

In reaching its decision to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger, and recommend that our stockholders approve the merger proposal, the strategic review committee and our board of directors consulted their legal and financial advisors as well as our management, and considered a number of factors, including:

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The strategic review committee and our board of directors also considered potential risks and a variety of potentially negative factors in connection with its deliberations concerning the merger agreement and the merger, including:

The foregoing discussion of the factors considered by the strategic review committee and our board of directors is not intended to be exhaustive, but, rather, includes certain factors considered by the strategic review committee and our board of directors. In reaching its decision to approve and adopt the merger agreement and the transactions contemplated thereby, including the merger, the strategic review committee and our board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The strategic review committee and our board of directors considered all of these factors as a whole, including discussions with, and questioning of, our management and our financial and legal advisors, and our board of directors’ consultation with the strategic review committee, and overall considered the factors to be favorable to, and to support, their determination. The strategic review

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committee and our board of directors also relied on the experience of Commerce Street Capital and Mercer Capital, their financial advisors, for analyses of the financial terms of the merger and for the opinion of Mercer Capital as to the fairness of the merger, from a financial point of view, to our stockholders.

For the reasons set forth above, our board of directors has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and recommends that our stockholders vote “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal (if necessary or appropriate).

Each of our directors and named executive officers has entered into a voting agreement, solely in their capacity as stockholders of SP Bancorp, pursuant to which they have agreed to vote all shares of our common stock held by them in favor of adopting the merger proposal, among other things. For more information regarding the voting agreements, please see the section of this proxy statement entitled “ —Voting Agreements. ”

Opinion of Our Financial Advisor

We engaged Mercer Capital to opine as to the fairness of the merger, from a financial point of view, to our stockholders. We selected Mercer Capital because the firm is regularly engaged to assist financial and non-financial companies to evaluate acquisitions and other significant corporate events, including rendering fairness opinions, and because of its familiarity with us and the regional community banking industry, as well as its knowledge of the banking industry as a whole. Mercer Capital was paid a fee of $45,000 (plus reimbursement of expenses) to conduct its analysis and render its opinion which is not contingent on the completion of the merger. Within the prior three years, Mercer Capital has not provided valuation services to or received compensation from either SP Bancorp or Green. Mercer Capital does not have and has not had an interest in the common stock, debt or any other security issued by SP Bancorp or Green.

On May 5, 2014, Mercer Capital rendered an opinion that as of such date, the merger was fair, from a financial point of view, to the holders of our common stock.

Our stockholders are urged to read the opinion in its entirety for a description of the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Mercer Capital. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion which is attached as Annex C to this proxy statement and is incorporated herein by reference.

Mercer Capital’s opinion speaks only as of the date of the opinion. Such opinion is directed to our board of directors and addresses only the fairness of the merger, from a financial point of view, to our stockholders. It does not address the underlying business decisions to proceed with the merger and does not constitute a recommendation to any of our stockholders as to how the stockholder should vote at the special meeting on the merger proposal or any related matter.

In rendering its opinion, Mercer Capital reviewed, among other things:

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As part of its analysis, Mercer Capital visited with our management to gain insight into the historical financial performance, prospective performance, regulatory relations and other factors that led to the decision to pursue the marketing of SP Bancorp to potential acquirers. In addition, Mercer Capital visited with Commerce Street Capital and our corporate counsel to obtain additional insight into the marketing process.

Mercer Capital relied upon financial and other information we provided without independent verification. Mercer Capital did not examine our loan portfolio or the adequacy of the loan loss reserve. Mercer Capital was supplied with certain forecasts for SP Bancorp. For purposes of the analysis, Mercer Capital consulted with our management regarding future financial performance expectations, the reasonableness of the forecasts, and certain other assumptions to extrapolate from the forecasts through 2017.

The following is a summary of the material analyses performed by Mercer Capital, which were summarized by Mercer Capital in its presentation to our board of directors in connection with the rendering of its fairness opinion. The summary is not a complete description of the analyses underlying the Mercer Capital opinion, or the presentation, but summarizes the material analyses performed and presented in connection with such opinion. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description.

Summary of the Proposed Transaction .

Mercer Capital noted that Green will acquire 100% of the Company’s common stock for $46.2 million of cash, or $29.55 per share before any closing adjustments or reductions for withholding taxes. Should the adjusted tangible book value (as described in the section of this proxy statement entitled “ The Merger Agreement—Merger Consideration ”) be less than $29.5 million, the aggregate merger consideration will be adjusted downward on a dollar-for-dollar basis. In connection with the fairness opinion delivered on May 5, 2014, Mercer Capital estimated that the per share merger consideration would be approximately $29.43 per share based upon adjustments identified by our management as of such date. As part of the merger agreement, Green has represented and warranted that it will have sufficient cash to consummate the transaction immediately prior to the effective time of the merger.

Mercer Capital calculated the following transaction multiples:

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The estimated purchase price per share of $29.43 represented a 44% premium to the closing price of our common stock at April 28, 2014 and a 46% premium to the closing price of our common stock for the 30-day period ending April 28, 2014.

SP Bancorp Historical Financial Perspective.

Mercer Capital reviewed SP Bancorp’s historical financial performance and near-term earnings outlook based upon management’s 2014 budget. Mercer Capital noted that from 2010 through 2013 earnings ranged from $524 thousand (2010) to $1.5 million (2012) with an ROA range of 0.23% (2010) to 0.53% (2012). A significant contributor to rising earnings during 2010-2012 was the SP Bancorp mortgage banking unit. Mercer Capital noted that gains on the sale of mortgages ranged between 118% of pre-tax income in 2010 to 98% in 2012 when origination volumes and secondary market sales were higher than 2010 as a result of a refinancing wave that was benefiting the industry. A subsequent increase in intermediate- and long-term interest rates during 2013 led to a reduced level of mortgage banking originations and secondary market sales, which in turn contributed to a reduction in SP Bancorp’s 2013 net income to $1.2 million from $1.5 million in 2012. Mercer Capital noted this negative trend continued into 2014 when we reported first quarter net income of $96 thousand compared to $385 thousand in the same period of 2013 as gains on sales of loans declined to $153 thousand from $576 thousand. Mercer Capital also noted that we did not pay any dividends from 2010 through 2013 and that SP Bancorp’s tangible book value per share increased from $18.61 per share at year-end 2010 to $20.68 per share at March 31, 2014.

Peer Comparison. Mercer Capital compared SP Bancorp’s recent financial performance and pricing multiples to other publicly traded banks located in Texas and/or nearby states to provide additional perspective on SP Bancorp’s performance and relative valuation in the public market. The peer group consisted of:

The table below sets forth the data for SP Bancorp and the median data for the peer group as of April 28, 2014:

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Recent Transactions Analysis .

Mercer Capital reviewed acquisition multiples for banks and thrifts with similar characteristics to SP Bancorp as reported by SNL Financial, a firm that tracks public market and M&A pricing in the financial services industry. The database was screened for the following characteristics to derive five groups of banks and thrifts that had agreed to be acquired in deals announced after December 31, 2012. All transaction groups were also screened to exclude targets with non-performing assets as a percentage of assets greater than 3%.

(a) Forty targets with assets between $200 and $500 million and profitable (no negative earnings in the YTD or prior YTD period).

(b) Seven targets located in Arizona, New Mexico, Oklahoma, or Texas and having assets between $100 and $750 million.

(c) Twenty three targets with return on average assets between 0.20% and 0.80% in the trailing twelve month period and assets between $200 and $500 million.

(d) Twenty eight targets with tangible common equity as a percentage of assets greater than 9.5% and assets between $200 million and $500 million.

(e) Nine targets where consideration paid for the target was 100% cash and the target was profitable (no negative earnings in year-to-date or prior year-to-date period) and the target had assets between $200 and $500 million.

The table below details the price/earnings and price/core earnings multiples for SP Bancorp relative to the five transaction groups.

The table below details the price/book multiples, price/tangible book multiples and core deposit premiums for SP Bancorp relative to the five transaction groups.

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Mercer Capital determined a range of value based upon the multiples observed for the recent transactions as follows:

Discounted Cash Flow Analysis .

Mercer Capital used the discounted cash flow method to derive a range of values for SP Bancorp based upon projected cash flows that would accrue to our stockholders. The analysis examined two scenarios: an “organic growth” scenario whereby the forecasts were based upon our management’s organic growth forecasts for 2014 through 2017 and a “milk” scenario in which Mercer Capital adjusted our management’s “organic growth” forecasts to reflect slower growth and the implementation of a common dividend such that all tangible equity in excess of 9.0% were deemed to be distributed to our stockholders. Both scenarios assume that SP Bancorp is sold at the end of the forecast period with a terminal year price/earnings multiple range of 17x to 22x.

Projected cash flows for the “organic growth” scenario were discounted to a present value based upon a discount rate of 15.62%. Mercer Capital derived the discount rate from the sum of (a) 3.20% for the risk-free rate derived from the yield on 20-year U.S. Treasuries; (b) the product of the estimated small-cap banking industry beta of 1.02x and the common stock premium of 5.50% based upon Mercer Capital’s review of long-term market return data; (c) the small capitalization stock equity premium of 3.81% based upon the micro-cap size premium derived by Ibbotson & Associates and (d) 3.0% for an incremental risk premium Mercer Capital deemed to be appropriate given the execution risk for SP Bancorp’s transition towards rapid commercial growth and the significant improvement in SP Bancorp’s profitability forecast relative to recent historical performance. The discount rate for the “milk” scenario was 13.62% as only a 1% specific company risk premium was applied to reflect that execution risks were deemed to be lower by Mercer Capital than the “organic growth” scenario.

“Organic Growth” DCF Indicated Value.

Mercer Capital derived a value of $40.9 million ($26.15 per share) for the “organic growth” scenario based upon the present value of the product of forecasted 2017 net income and a terminal value P/E multiple of 20.0x. Mercer Capital also presented a sensitivity analysis in which the terminal value was varied based upon a range of forecasted 2017 net income of $2.9 to $3.9 million and P/E multiples of 17x to 22x. The range of values was $28.8 to $50.1 million ($18.40 to $32.05 per share). Lastly, Mercer Capital presented a sensitivity analysis in which the discount rate was varied from 12.6% to 17.6% and forecasted 2017 net income was varied from $2.9 to $3.9 million. The range of values was $37.4 million to $42.8 million ($23.90 to $27.35 per share).

“Milk” DCF Indicated Value.

Mercer Capital derived a value of $36.2 million ($23.15 per share) for the “milk” scenario based upon the present value of the product of (a) excess capital that was assumed to be distributed in 2014, 2015, 2016, and

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2017 and (b) forecasted 2017 net income and a terminal value P/E multiple of 20.0x. Mercer Capital also presented a sensitivity analysis in which the terminal value was varied based upon a range of forecasted 2017 net income of $1.8 to $2.8 million and P/E multiples of 17x to 22x. The range of values was $25.3 to $44.6 million ($16.20 to $28.55 per share). Lastly, Mercer Capital presented a sensitivity analysis in which the discount rate was varied from 10.6% to 15.6% and forecasted 2017 net income was varied from $1.8 to $2.8 million. The range of values was $31.1 million to $38.1 million ($19.90 to $24.35 per share).

Other Considerations

Mercer Capital noted that the merger agreement included a representation and warranty by Green that it would have sufficient cash at the time the merger is to be consummated to pay the merger consideration. Mercer Capital also reviewed Green’s cash and capital structure at the parent and subsidiary bank levels as well as certain schedules provided by Green’s management detailing pro forma capital ratios to assess Green’s capacity to consummate the merger. Mercer Capital also noted that the implied return to our stockholders since SP Bancorp’s initial public offering in 2010 vastly outstripped industry and broad market indices.

Certain Effects of the Merger

If the merger proposal is adopted by our stockholders and the other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into SP Bancorp with SP Bancorp continuing as the surviving corporation and each share of our common stock (other than treasury shares and shares owned, directly or indirectly, by Green, Merger Sub or us) will be canceled and converted into the right to receive a cash payment equal to the per share merger consideration of $29.55 per share (without giving effect to any potential adjustments), which is equal to the adjusted aggregate merger consideration (described below) divided by the 1,563,263 shares of our common stock (excluding unvested shares of restricted common stock) outstanding as of the date of the merger agreement. In all cases, the per share merger consideration will be paid without interest and subject to downward adjustment under certain circumstances described below.

The adjusted aggregate merger consideration will be determined shortly before the completion of the merger and will equal $46.2 million, reduced dollar-for-dollar if and to the extent that our adjusted tangible book value is less than $29.5 million. Our adjusted tangible book value will be equal to our book value reduced by any intangible items such as goodwill, as well as certain transaction expenses and the consideration paid to holders of stock options and holders of unvested restricted stock. Our adjusted tangible book value will be calculated at the month-end prior to the closing of the merger, or, if the merger is expected to close in the first ten days of a month, as of the earlier preceding month-end. Green is entitled to withhold from the consideration otherwise payable any amounts required to be withheld under applicable law.

Pursuant to the terms of the merger agreement, Green is not obligated to close the merger if our final adjusted tangible book value, as determined in accordance with the merger agreement, is less than $26 million. If our final adjusted tangible book value is less than $26 million, Green may waive the related closing condition in accordance with the terms of the merger agreement, but Green does not have any obligation to waive this condition. If our final adjusted tangible book value is equal to $26 million, the per share merger consideration

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would be equal to $27.31. The per share merger consideration could be lower than $27.31 if Green waives the condition relating to our final adjusted tangible book value. The per share merger consideration payable if our final adjusted tangible book value is equal to $26 million is calculated by (x) reducing the adjusted aggregate merger consideration by $3.5 million to $42.7 million pursuant to the adjustment provision in the merger agreement and dividing this amount by (y) 1,563,263, which is the number of shares of our common stock (excluding unvested shares of restricted common stock) outstanding as of the date of the merger agreement. We do not expect to resolicit proxies if Green waives the satisfaction of the condition to closing the merger related to our final adjusted tangible book value or any other material condition to the consummation of the merger after our stockholders approve the merger.

The amount of per share merger consideration to be received by our stockholders is dependent upon a number of factors that are not currently determinable, including our future stockholders’ equity and our transaction expenses. Consequently, the exact per share merger consideration to be received as a result of the merger will not be known at the time our stockholders vote on the merger proposal. Further information about the calculation of the per share merger consideration is contained in the section of this proxy statement entitled “ The Merger Agreement—Merger Consideration ” beginning on page 41. You will not be entitled to receive shares of the surviving corporation or of Green or any of its affiliates.

Our common stock is currently registered under the Exchange Act and is quoted on The NASDAQ Capital Market under the symbol “SPBC.” As a result of the merger, we will be a privately held corporation, and there will be no public market for our common stock. After the merger, our common stock will cease to be quoted on The NASDAQ Capital Market and the registration of our common stock under the Exchange Act is expected to be terminated.

After completion of the merger, the board of directors of Merger Sub will become the board of directors of the surviving corporation until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified. The officers of Merger Sub immediately prior to the effective time of the merger will become the officers of the surviving corporation, until the earlier of their death, resignation or removal or until their respective successors are duly appointed and qualified. At the effective time of the merger, the articles of incorporation of Merger Sub will become the articles of incorporation of the surviving corporation and the bylaws of Merger Sub will become the bylaws of the surviving corporation.

Interests of Our Directors and Executive Officers in the Merger

In considering the recommendation of our board of directors that you vote to adopt the merger proposal, you should be aware that our executive officers and directors have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. The members of our board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that our stockholders adopt the merger proposal. These interests are described in further detail below, and certain of them are quantified in the narrative and table below. For purposes of the following description, references to “executive officer” shall be deemed to refer to “named executive officer” because SP Bancorp’s named executive officers are its only executive officers. See “ —Background of the Merger, ” and “ —Recommendation of the Strategic Review Committee and the Board of Directors; Reasons for Recommending Adoption of the Merger Proposal. ”

Summary of Consideration to be Received Pursuant to the Merger

The following table sets forth the estimated consideration that each of our named executive officers and directors will receive in connection with the completion of the merger (without accounting for any applicable withholding taxes), based on his or her ownership of our common stock, stock options and restricted stock as of July 16, 2014. The amounts in the table below assume that (a) the merger is consummated on July 16, 2014 and (b) there is no downward adjustment to the aggregate merger consideration and each share of our common stock

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is entitled to receive an amount in cash equal to $29.55. The amounts reported below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described in this document, and do not reflect certain compensation actions that may occur before the completion of the merger. As a result, the actual amounts, if any, to be received by a named executive officer or director may materially differ from the amounts set forth below.

Treatment of Equity-Based Awards

Stock Options. Each outstanding stock option, including those held by our executive officers and directors, whether vested or unvested, will be automatically canceled as of the effective time of the merger in exchange for the right to receive an amount in cash (subject to deduction for any required withholding taxes) equal to the product of (a) the positive difference, if any, of the per share merger consideration minus the exercise price per share of such stock option being canceled multiplied by (b) the number of shares of our common stock subject to such stock option immediately prior to the effective time of the merger, payable as soon as reasonably practicable, and in any event within ten days after the effective time of the merger. If the exercise price per share of any stock option is equal to or greater than the per share merger consideration, such stock option will be canceled and the holder will not be entitled to any cash payment in respect thereof. As of the record date, our directors and named executive officers owned, in the aggregate, options to purchase 94,375 shares of our common stock, with exercise prices ranging from $15.25 to $19.40 per share.

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Restricted Stock. Each outstanding unvested share of restricted stock, including those held by our executive officers and directors, will become fully vested at the effective time of the merger and automatically, without any required action on the part of the holder thereof, be canceled and converted into the right to receive an amount in cash (subject to deduction for any required withholding taxes) equal to the per share merger consideration, payable as soon as reasonably practicable, and in any event within ten days after the effective time of the merger. As of the record date, our directors and named executive officers owned, in the aggregate, 31,900 shares of unvested restricted stock.

Summary of Consideration to be Received in Connection with the Treatment of Equity-Based Awards . For an estimate of the amounts that will become payable to SP Bancorp’s named executive officers in respect of their stock options and unvested restricted stock in connection with the merger, see “ —Interests of Our Directors and Executive Officers in the Merger—Advisory Vote on Merger-Related Compensation .” The aggregate amount that would become payable to all of our non-employee directors in respect of their stock options and unvested restricted stock if the effective time of the merger were July 17, 2014, and based on a per share merger consideration of $29.55, is estimated to be $1,198,595. The actual amounts to be received by our named executive officers and directors in respect of their stock options and restricted shares in connection with the merger will depend on certain factors, including the adjustments to adjusted tangible book value (as described in the section of this proxy statement entitled “ The Merger Agreement—Merger Consideration ”).

Treatment of Employee Stock Ownership Plan

The ESOP will be terminated, contingent upon the closing of the merger, effective not later than the day immediately preceding the effective time of the merger. The ESOP trustee will apply the per share merger consideration received with respect to unallocated shares to repay any outstanding debt owed by the ESOP, and any remaining cash will then be allocated to the participants’ accounts in proportion to their relative amount of applicable compensation consistent with past practice. In addition, the ESOP trustee will apply the per share merger consideration received with respect to each allocated share to the participants’ accounts. As soon as practicable following the receipt of a favorable determination letter from the Internal Revenue Service regarding the continued qualified status of the ESOP, the ESOP trustee will distribute the account balances of all ESOP participants and their beneficiaries in cash in accordance with the terms of the ESOP. Each of our named executive officers is an ESOP participant.

Indemnification of Directors and Officers; Directors’ and Officers’ Insurance

Pursuant to the terms of the merger agreement, our directors and executive officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies from Green following the effective time of the merger. See “ The Merger Agreement — Other Covenants and Agreements—Indemnification and Insurance .”

Severance and Change in Control Agreements

Each of our named executive officers and directors previously entered into change in control agreements with SP Bancorp that provide for certain severance payments to be paid in the event that his or her employment with, or service to, us is terminated (a) by us without “cause” or (b) by the executive or director for “good reason” (each of (a) and (b), a “qualifying separation from service”), within the two-year period following a change in control of SP Bancorp, provided that the executive or director executes a release of claims against us, our subsidiaries and affiliates within 50 days following a qualifying separation from service. The merger will constitute a change in control under the change in control agreements. An executive or director would forfeit any right to receive severance payments if he or she violates the terms of any restrictive covenants contained in any written agreement with us or if his or her employment with, or service to, us is terminated (x) by us for “cause,” (y) by the executive or director without “good reason,” or (z) due to the executive’s or director’s death or disability.

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If Mr. Weaver experiences a qualifying separation from service within the two-year period following the merger, Mr. Weaver’s change in control agreement provides for severance payments equal to one year of his then current base salary (or, if his base salary was reduced following the change in control, his base salary as in effect immediately preceding the reduction), payable in equal installments over the one-year period beginning on the first payroll date on or immediately following the date that is 60 days after his qualifying separation from service. If Ms. Salls or Ms. Rowland experiences a qualifying separation from service within the two-year period following the merger, each of their respective change in control agreements provides for severance payments equal to nine months of her then current base salary (or, if her base salary was reduced following the change in control, her base salary as in effect immediately preceding the reduction), payable in equal installments over the nine-month period beginning on the first payroll date on or immediately following the date that is 60 days after a qualifying separation from service.

For an estimate of the amount of cash severance payments that could become payable to each of SP Bancorp’s named executive officers pursuant to their change in control agreements following completion of the merger, see “ —Interests of Our Directors and Executive Officers in the Merger—Advisory Vote on Merger-Related Compensation .”

Under their respective change in control agreements, upon completion of the merger each director will be entitled to receive severance payments equal to the total value of director fees (retainer fees and meeting fees) he or she received in the nine-month period immediately preceding the completion of the merger, payable in equal installments over the nine-month period beginning on the first payroll date on or immediately following the date that is 60 days after the merger. The aggregate amount of the cash severance payments that could become payable to all of our non-employee directors pursuant to their change in control agreements if the effective time of the merger were July 17, 2014 and they all experienced a qualifying separation from service at such time is estimated to be $211,620.

Advisory Vote on Merger-Related Compensation

The discussion and table below reflect the estimated amount of compensation and benefits that each of our named executive officers is entitled to receive where the compensation or benefits are based on or otherwise relate to the merger. This compensation is referred to as “golden parachute compensation” by the applicable SEC disclosure rules and is the subject of the merger-related compensation proposal.

The amounts in the table below assume that (a) the merger is consummated on July 17, 2014, (b) there is no downward adjustment to the aggregate merger consideration and each share of our common stock is entitled to receive an amount in cash equal to $29.55, and (c) each named executive officer experiences a qualifying separation from service on July 17, 2014. Amounts in the table below do not include compensation under the ESOP and other compensation and benefits available to all of our employees generally on a non-discriminatory basis. The amounts reported below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described in this document, and do not reflect certain compensation actions that may occur before the completion of the merger. As a result, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.

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Employment Arrangements

As of the date of this proxy statement, none of our executive officers has entered into any agreement, arrangement or understanding with Green or any of its subsidiaries regarding employment with, or the right to purchase or participate in the equity of, Green or the surviving corporation. Although no such agreement, arrangement or understanding exists as of the date of this proxy statement, certain of our executive officers may, prior to the completion of the merger, enter into new arrangements with Green or its subsidiaries regarding employment with, or the right to purchase or participate in the equity of, Green, certain of its subsidiaries or the surviving corporation.

Voting Agreements

As of May 5, 2014, each of Jeffrey L. Weaver, Suzanne C. Salls, M. Gaye Rowland, Paul M. Zmigrosky, Christopher C. Cozby, Carl W. Forsythe, P. Stan Keith, David C. Rader, Randall E. Sloan, David Stephens, Lora J. Villarreal and Jeffrey B. Williams (solely in their capacities as stockholders of SP Bancorp) entered into a voting agreement with Green, pursuant to which each of them agreed to, among other things, vote his or her shares of our common stock in favor of the adoption of the merger proposal at the special meeting, and against certain other actions, proposals, transactions or agreements that would be detrimental to the completion of the merger. Pursuant to the voting agreements, the above-referenced directors and officers also agreed not to sell or otherwise dispose of any shares of our common stock held by them, subject to limited exceptions. The voting agreements will terminate automatically upon the earlier of (a) the effective time of the merger and (b) the termination of the merger agreement in accordance with its terms. The directors and executive officers who are parties to the voting agreements collectively owned approximately 11.7% of the outstanding shares of our common stock as of the record date. The foregoing description is not intended to be complete and is qualified in its entirety by the form of voting agreement attached as Annex B to this proxy statement, which you should read in its entirety.

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Effects on SP Bancorp if the Merger is Not Completed

If the merger is not completed for any reason, our stockholders will not receive the per share merger consideration, our current management, under the direction of our board of directors, will continue to manage us as a stand-alone, independent public company and the value of shares of our common stock will continue to be subject to the risks and uncertainties identified in our Annual Report on Form 10-K for the year ended December 31, 2013, as amended. See “ Additional Information .”

Material United States Federal Income Tax Considerations

The following summary is a general discussion of the material U.S. federal income tax consequences to holders of our common stock whose shares of common stock are converted into the right to receive cash in the merger, or the Holders. This summary is based on the current provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable Treasury Regulations, judicial authority, and administrative rulings, all of which are subject to change, possibly with retroactive effect. Any such change could alter the tax consequences to the Holders as described herein. No ruling from the Internal Revenue Service, or the IRS, has been or will be sought with respect to any aspect of the merger. This summary is for the general information of the Holders only and does not purport to be a complete analysis of all potential tax effects of the merger. For example, it does not consider the effect of any applicable state, local, or foreign income tax laws, or of any non-income tax laws. In addition, this discussion does not address the tax consequences of transactions effectuated prior to or after the completion of the merger (whether or not such transactions occur in connection with the merger), including, without limitation, the acquisition or disposition of shares of common stock other than pursuant to the merger, or the tax consequences to holders of stock options issued by SP Bancorp which are canceled or converted, as the case may be, in connection with the merger. Furthermore, this summary only applies to Holders that hold their shares of common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). In addition, it does not address all aspects of U.S. federal income taxation that may affect particular Holders in light of their particular circumstances, including Holders:

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of our common stock, the tax treatment of a partner in the partnership generally will depend on the status of the partner and on the activities of the partner and the partnership. We encourage partners of partnerships holding our common stock to consult their own tax advisors.

U.S. Holders

For purposes of this summary, a “U.S. Holder” is a Holder that is, for U.S. federal income tax purposes:

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Payments with Respect to Common Stock. The conversion of our common stock into the right to receive cash in the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, this means that each U.S. Holder will recognize capital gain or loss, if any, equal to the difference between the amount of cash received by such U.S. Holder in the merger and the U.S. Holder’s adjusted tax basis in its shares of common stock (generally the purchase price paid by the U.S. Holder to acquire such shares of common stock). For this purpose, U.S. Holders who acquired different blocks of shares of common stock at different times for different prices must calculate gain or loss separately for each identifiable block of shares of common stock surrendered in the merger. Any such capital gain or loss will be long-term capital gain or loss if the holding period for the shares of common stock exceeds one year as of the date of the completion of the merger. For non-corporate U.S. Holders, short-term capital gains are taxable at the ordinary income tax rate of up to 39.6% and long-term capital gains generally are taxable at a reduced rate (either 20% for individuals in the 39.6% income tax bracket or up to 15% for other individuals). The deductibility of capital losses is subject to certain limitations. Certain U.S. Holders may be subject to an additional 3.8% tax on “net investment income,” which generally includes capital gains from the sale of stock.

Backup Withholding Tax. U.S. Holders may be subject to “backup withholding” at a rate of 28% with respect to the cash received in the merger for the U.S. Holder’s shares of common stock. Backup withholding will generally not apply, however, to a U.S. Holder who furnishes the disbursing agent with a correct taxpayer identification number on Form W-9 (and who does not subsequently become subject to backup withholding) or who otherwise establishes a basis for exemption from backup withholding (such as a corporation). Each U.S. Holder should complete and sign an IRS Form W-9 in order to provide the information and certification necessary to avoid the imposition of backup withholding, unless an exemption applies and is established in a manner satisfactory to the disbursing agent. Backup withholding is not an additional tax and any amounts withheld from payments to a U.S. Holder under the backup withholding rules generally will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the U.S. Holder furnishes the required information to the IRS. U.S. Holders who fail to provide the correct taxpayer identification numbers and the appropriate certifications, or to establish an exemption as described above, will be subject to backup withholding on cash they receive in the merger and may be subject to a penalty imposed by the IRS. If the disbursing agent withholds on a payment to a U.S. Holder and the withholding results in an overpayment of taxes by that U.S. Holder, a refund may be obtained from the IRS, provided that the U.S. Holder furnishes the required information to the IRS.

Non-U.S. Holders

The following is a summary of the material U.S. federal income tax consequences that will apply to Non-U.S. Holders of our common stock exchanged in the merger. For purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of any shares of our common stock (other than a partnership or any entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder as described above.

Payments with Respect to Common Stock. The receipt of cash in exchange for shares of common stock pursuant to the merger by a Non-U.S. Holder generally will be exempt from U.S. federal income tax unless:

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In the case of a corporate Non-U.S. Holder, “effectively connected” gains that are recognized may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if such Non-U.S. Holder is eligible for the benefits of an income tax treaty that provides for a lower rate.

SP Bancorp has not been, is not and does not anticipate becoming, a United States real property holding corporation for U.S. federal income tax purposes.

Backup Withholding Tax. In general, a Non-U.S. Holder will not be subject to backup withholding or information reporting with respect to cash received in exchange for the Non-U.S. Holder’s shares of common stock in the merger if the Non-U.S. Holder certifies the Non-U.S. Holder’s non-U.S. status on a properly executed Form W-8BEN or W-8ECI (if the gain is effectively connected with the conduct of a U.S. trade or business). If the Non-U.S. Holder’s shares of common stock are held through a foreign partnership or other flow-through entity, such holder will be required to furnish a properly executed Form W8-IMY associated with certain other documentation requirements also apply to the partnership or other flow-through entity. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will generally be credited against a Non-U.S. Holder’s U.S. federal income tax liability, and the Non U.S. Holder may obtain a refund of any amounts withheld in excess of its U.S. federal income tax liability provided that the Non-U.S. Holder furnishes the required information to the IRS in a timely manner.

BECAUSE YOUR INDIVIDUAL CIRCUMSTANCES MAY DIFFER, WE ENCOURAGE YOU TO CONSULT WITH YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE MERGER ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

Anticipated Accounting Treatment of the Merger

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

Governmental and Regulatory Approvals

We must receive regulatory approval from Federal Reserve, the Office of the Comptroller of the Currency, or the OCC, the Federal Deposit Insurance Corporation, or the FDIC, and the Texas Department of Banking and certain other regulatory authorities as a condition to closing the merger. In connection with the merger, we and Green must file articles of merger with the Maryland State Department of Assessments and Taxation in accordance with the relevant provisions of the Maryland General Corporation Law as soon as practicable on or after the closing date of the merger. As of the date of this proxy statement, Green has submitted applications with respect to the required regulatory approvals.

In connection with the merger, we and Green have agreed to use reasonable best efforts to take, or cause to be taken, all actions that are necessary, proper or advisable to (a) obtain all necessary actions or nonactions, waivers, consents, approvals, orders and authorizations from governmental entities, make all necessary registrations, declarations and filings and take all steps as may be necessary to obtain an approval or waiver from, or to avoid any action by, any governmental entity and (b) vigorously resist and contest any action, including administrative or judicial action, and seek to have vacated, lifted, reversed or overturned any decree, judgment,

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injunction or other order (whether temporary, preliminary or permanent) that is in effect and that could restrict, prevent or prohibit consummation of the transactions contemplated by the merger agreement, including, without limitation, by vigorously pursuing all avenues of administrative and judicial appeal.

However, Green and its affiliates are not required to take any action if the taking of such action or the obtaining of or compliance with any permits, consents, approvals or authorizations is reasonably likely to result in a restriction, requirement or condition having a material adverse effect on Green, the surviving company, or any of their affiliates, in each case measured on a scale relative to the Company (including any requirement to maintain certain capital ratios).

Litigation

Two putative class action lawsuits have been filed in Maryland,  Gary W. Stisser v. SP Bancorp, Inc. , et al. , in the Circuit Court for Baltimore City, Case No. 24C14003610 (the “Stisser Suit”) and Fundamental Partners v. Jeffrey L. Weaver, et. al. , in the Circuit Court for Baltimore City, Case No. 24C14003651 (the “Fundamental Partners Suit”). Both lawsuits name as defendants SP Bancorp, the members of our board of directors, Merger Sub and Green.

The Fundamental Partners Suit alleges that the per share merger consideration is inadequate, and that the members of our board of directors were operating under a conflict of interest because of the benefits to be received by them from the merger, resulting in a breach of their fiduciary duties of good faith, loyalty, fair dealing and due care to our stockholders. The Fundamental Partners Suit also alleges that we and our board of directors breached a fiduciary duty by not disclosing certain allegedly material facts in the initial preliminary proxy statement on subjects which include alleged conflicts of interest, our financial projections, additional information about actions of the strategic review committee, and additional information about the analysis performed by Mercer Capital. Finally, the Fundamental Partners Suit alleges that Green aided and abetted the breach of fiduciary duty. The relief sought includes class certification, a declaration that there has been a breach of fiduciary duty, damages, and interest and fees, including attorney’s fees.

The Stisser Suit alleges a breach of fiduciary duty by the failure to disclose material facts in the initial preliminary proxy statement on subjects which include our financial projections, the process leading to the proposed transaction, potential conflicts of interest, and additional information about the analysis performed by Mercer Capital. The Stisser Suit also alleges that Green aided and abetted the breach of fiduciary duty. The relief sought includes class certification, an injunction against the merger until all alleged breaches have been cured, damages if the merger has been completed prior to the entry of final judgment, costs and attorney’s fees.

The plaintiffs have filed a motion to consolidate the two cases. A demand for jury trial has been made in each case, and a motion for preliminary injunction to enjoin the merger pending a trial of the case and requesting expedited discovery has been filed in each case. We believe that the claims in these lawsuits are without merit and intend to vigorously defend ourselves against them. However, there can be no assurance as to the outcome of these lawsuits.

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THE MERGER AGREEMENT

The following discussion of the merger agreement is only a summary of its material terms and may not include all of the information that is important to you. You are urged to read the merger agreement, a copy of which has been included as Annex A to this proxy statement and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not the summary set forth in this section or any other information contained in this proxy statement, and such summaries are qualified in their entirety by reference to the complete text of the merger agreement.

The merger agreement has been included to provide you with information regarding its terms and provisions. The merger agreement contains, among other things, representations, warranties and covenants of SP Bancorp, Green and Merger Sub, which are solely for the benefit of the parties to the merger agreement. These representations, warranties and covenants may be subject to important limitations and qualifications agreed to by the contracting parties, including being qualified by confidential disclosures exchanged between the parties, and qualifications with respect to materiality and knowledge. Furthermore, these representations and warranties in the merger agreement were used for the purpose of allocating risk between the parties to the merger agreement rather than establishing matters as facts and may be subject to a contractual standard of materiality or material adverse effect different from that generally applicable to public disclosures to stockholders and are qualified in some cases by confidential disclosures which are not reflected in the merger agreement. Factual disclosures about SP Bancorp, Green, Merger Sub or their respective affiliates contained in this proxy statement or in SP Bancorp’s public reports filed with the SEC, which are available without charge at www.sec.gov, may supplement, update or modify the factual disclosures about SP Bancorp, Green, Merger Sub or their respective affiliates contained in the merger agreement.

Structure of the Merger

The merger agreement provides for the merger of Merger Sub, a wholly owned subsidiary of Green, with and into SP Bancorp upon the terms and subject to the conditions set forth in the merger agreement. After the merger, SP Bancorp will continue as the surviving corporation and a wholly owned subsidiary of Green.

The surviving corporation will be a privately held corporation and our current stockholders will cease to have any ownership interest in the surviving corporation or rights as stockholders. Therefore, such current stockholders will not participate in any future earnings or growth of the surviving corporation and will not benefit from any appreciation in value of the surviving corporation.

At the effective time of the merger, the directors of Merger Sub will become the directors of the surviving corporation and the officers of Merger Sub will become the officers of the surviving corporation. The articles of incorporation of Merger Sub will be the articles of incorporation of the surviving corporation and the bylaws of Merger Sub will be the bylaws of the surviving corporation. After the merger, our common stock will be delisted from The NASDAQ Capital Market and it is expected that it will be deregistered under the Exchange Act.

Effective Time

The merger will be effective at such time as the articles of merger are accepted by the Maryland State Department of Assessments and Taxations or such later time as may be agreed upon by us and Green and specified in the articles of merger. Unless otherwise agreed to in writing by us and Green, the closing of the merger will occur on the fifth business day following the satisfaction or, to the extent permitted by applicable law, waiver of the conditions described in this proxy statement under “ The Merger Agreement—Conditions to the Completion of the Merger. ”

Merger Consideration

If the merger is completed, each share of our common stock (other than treasury shares and shares owned, directly or indirectly, by Green, Merger Sub or us) will be canceled and converted into the right to receive a cash

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payment equal to the per share merger consideration of $29.55 per share (without giving effect to any potential adjustments), which is equal to the adjusted aggregate merger consideration (described below) divided by the 1,563,263 shares of our common stock (excluding unvested shares of restricted common stock) outstanding as of the date of the merger agreement. In all cases, the per share merger consideration will be paid without interest, subject to downward adjustment under certain circumstances described below and rounded to four decimal points.

The aggregate merger consideration will be adjusted downward on a dollar-for-dollar basis if and to the extent that our final adjusted tangible book value is less than $29.5 million. Our final adjusted tangible book value is our adjusted tangible book value at the month-end prior to the closing of the merger, or, if the merger is expected to close in the first ten days of a month, as of the earlier preceding month-end. Adjusted tangible book value is calculated as our consolidated tangible stockholders’ equity, also referred to as our tangible book value (which is calculated as our consolidated stockholders’ equity, or book value, less goodwill and other customary intangible deductions), less, to the extent not already included in tangible book value, the sum of (x) all financial advisory and opinion fees, costs and expenses, legal fees and expenses, fees in connection with the preparation and filing of this proxy statement and the special meeting (including printing costs, solicitation expenses and meeting expenses) and any other out-of-pocket costs, fees or expenses, in each case incurred or to be incurred by us or our subsidiaries in connection with the merger agreement, the merger and the other transactions contemplated thereby, (y) the cost of the directors’ and officer’s liability tail insurance policy and fiduciary liability tail insurance policy to be purchased prior to the effective time of the merger as described elsewhere in this proxy statement, any retention expenses of SP Bancorp or any of its subsidiaries resulting from arrangements adopted or implemented after the date of the merger agreement and prior to the closing date other than at the written request or direction of Green, severance payable pursuant to certain change in control agreements to persons specified by Green prior to closing, any merger related litigation and settlement costs and expenses (if any), exclusive of any amounts covered or reasonably expected to be covered by insurance (regardless of whether such amounts are expected to be paid by the insurer prior to or following the effective time), as mutually determined by the parties in good faith, and certain costs incurred in obtaining specified contractual consents or extensions and (z) fifty percent (50%) of the fees, expenses and other costs of the neutral auditor as described below (if any), in the case of each of clauses (x), (y) and (z) on an after-tax basis and without duplication that are incurred as of a given date and/or anticipated to be incurred through the closing date (the items set forth in (x), (y) and (z), collectively, are referred to as the “transaction expenses”), and less amounts payable pursuant to the merger agreement to holders of unvested restricted stock and stock options (outstanding as of the date of the merger agreement) on a pre-tax basis, or the options/restricted stock costs.

As of the date of this proxy statement, we estimate that the total transaction expenses will be approximately $[            ], which does not include any amounts attributable to litigation that may arise with respect to the merger, if any. We can make no assurances as to the final amount of transaction expenses, which may ultimately be more or less than the amount set forth above. The options/restricted stock costs are currently expected to be approximately $2,944,772.78, but we can make no assurances as to the ultimate amount of the options/restricted stock costs, which will depend on our adjusted tangible book value.

Pursuant to the terms of the merger agreement, Green is not obligated to close the merger if our final adjusted tangible book value, as determined in accordance with the merger agreement, is less than $26 million. If our final adjusted tangible book value is less than $26 million, Green may waive the related closing condition in accordance with the terms of the merger agreement, but Green does not have any obligation to waive this condition. If our final adjusted tangible book value is equal to $26 million, the per share merger consideration would be equal to $27.31. The per share merger consideration could be lower than $27.31 if Green waives the condition relating to our final adjusted tangible book value. The per share merger consideration payable if our final adjusted tangible book value is equal to $26 million is calculated by (x) reducing the adjusted aggregate merger consideration by $3.5 million to $42.7 million pursuant to the adjustment provision in the merger agreement and dividing this amount by (y) 1,563,263, which is the number of shares of our common stock (excluding unvested shares of restricted common stock) outstanding as of the date of the merger agreement. We

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do not expect to resolicit proxies if Green waives the satisfaction of the condition to closing the merger related to our final adjusted tangible book value or any other material condition to the consummation of the merger after our stockholders approve the merger.

The amount of per share merger consideration to be received by our stockholders is dependent upon a number of factors that are not currently determinable, including our future stockholders’ equity and our transaction expenses. Consequently, the exact per share merger consideration to be received as a result of the merger will not be known at the time our stockholders vote on the merger proposal.

Not later than ten (10) days after each month-end until the effective time, we will prepare in good faith and deliver to Green an updated preliminary closing statement setting forth (a) the book value, (b) tangible book value, (c) transaction expenses, (d) the options/restricted stock costs, and (e) adjusted tangible book value, as of such month-end (each such statement referred to in this proxy statement as an “interim closing statement”). Each such interim closing statement will be prepared in a manner consistent with the preliminary closing statement delivered to Green as of the date of the merger agreement and each earlier interim closing statement and will set forth our estimate of the book value and the tangible book value as of such month-end, a breakdown of the transaction expenses incurred as of such month-end and/or anticipated to be incurred through the closing date and the adjusted tangible book value resulting therefrom. In the event Green disputes any part of any interim closing statement (including the adjusted tangible book value stated therein), it will give prompt notice to us of such disputed item or items and we and Green will cooperate in good faith to resolve such dispute as promptly as possible.

Not later than three (3) business days prior to the anticipated closing date, we will prepare in good faith and deliver to Green an updated preliminary closing statement as of the month-end immediately preceding the anticipated closing date (such statement, the “final closing statement”); provided, however, that if the closing date is anticipated to occur in the first ten (10) days of a calendar month, then the final closing statement will be prepared as of the month-end of the earlier preceding month (i.e., if the closing date is anticipated to occur on August 1, then the final closing statement will be prepared as of June 30). Such final closing statement will be prepared in a manner consistent with the preliminary closing statement and the interim closing statements and will set forth the book value and the tangible book value as of the month-end immediately preceding the anticipated closing date (or the prior month-end, if applicable), a breakdown of the transaction expenses incurred as of such month-end and/or anticipated to be incurred through the closing date and the final adjusted tangible book value resulting therefrom.

Subject to applicable law, Green will have the right to review, and will have reasonable access to, all relevant work papers, schedules, memoranda and other documents prepared by us or the Bank or our respective accountants in connection with the preparation of the preliminary closing statement, the interim closing statements and the final closing statement, as well as to executive, finance and accounting personnel of the Company and the Bank and any other information which Green may reasonably request in connection with its review of the preliminary closing statement, the interim closing statements and the final closing statement; provided that we and our subsidiaries will not be required to provide Green access to or to disclose information where such access or disclosure would reasonably be expected to waive the protection of any privilege or the work product doctrine. The parties will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.

In the event Green disputes the final closing statement (including the final adjusted tangible book value), Green will, within five (5) business days following the delivery of the final closing statement, give us written notice of its objections thereto (the “objection notice”), describing the nature of the dispute in reasonable detail and specifying those items and amounts as to which Green disagrees and, based on the information at its disposal, specifying Green’s good faith proposed calculation of final adjusted tangible book value. If Green does not timely deliver an objection notice within such five (5) business day period, the final adjusted tangible book value set forth in the final closing statement delivered by us will be utilized for the calculation of the aggregate

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merger consideration and, absent fraud, will be final and binding on all the parties. Any items or amounts set forth in the final closing statement as to which Green does not specifically and timely disagree in the manner set forth above will be final and binding on all the parties, absent fraud.

If Green timely delivers an objection notice, we and Green will cooperate in good faith to resolve such dispute; provided, however, that if we and Green cannot resolve the dispute within five (5) business days after the date of the objection notice, or the initial resolution period, we and Green will appoint KPMG LLP, or if KPMG LLP is unwilling or unable to serve in such capacity, such other mutually acceptable independent accounting firm of national or regional reputation, or the neutral auditor, to arbitrate the dispute under the rules the neutral auditor imposes. The neutral auditor will be limited to addressing only the particular disputes referred to in the objection notice, and the neutral auditor’s resolution of any disputed item will be no greater than the higher amount, and no less than the lower amount, calculated or proposed by the us and Green with respect to such disputed item, as the case may be. Upon reaching its determination of the final adjusted tangible book value, the neutral auditor will deliver a copy of its calculation of the final adjusted tangible book value to us and Green. The determination of the neutral auditor will be made within twenty (20) days after its engagement (which engagement will be made no later than five (5) days after the end of the initial resolution period) and, absent fraud, will be final and binding on all the parties. No party or its affiliates will seek further recourse to courts, other tribunals or otherwise, other than to enforce the final decision of the neutral auditor as to the determination of the final adjusted tangible book value. Fifty percent (50%) of the aggregate fees, expenses and costs of the neutral auditor will be borne by Green, and the other fifty percent (50%) of such fees, expenses and costs will be reflected in transaction expenses. The dispute resolution process contemplated above will be only to determine the disputed items reflected on the final closing statement and necessary to the calculation of the final adjusted tangible book value as of the applicable month-end, regardless of the date on which the neutral auditor delivers its calculation.

At the effective time of the merger, each holder of shares of our common stock, whether in certificate or book-entry form, will no longer have any rights with respect to the shares, except for the right to receive the per share merger consideration upon surrender thereof.

Payment Procedures

On or prior to the closing date, Green will deposit (or cause to be deposited) with a paying agent cash in an amount equal to the aggregate merger consideration. The paying agent will use these funds solely to pay the merger consideration to those stockholders entitled to receive such payment.

Promptly after the effective time of the merger, and in any event within three business days thereafter, Green and the surviving corporation will cause the paying agent to mail all stockholders a letter of transmittal and instructions advising stockholders how to surrender their stock certificates in exchange for the per share merger consideration. If you hold your shares in street name, your broker, bank or other nominee will provide you with instructions on how to surrender your shares of our common stock in exchange for the per share merger consideration. Upon surrender of your stock certificates, together with a properly completed letter of transmittal and any other items required pursuant to the instructions to the letter of transmittal, the paying agent will pay you cash in the amount of the per share merger consideration multiplied by the number of shares of common stock formerly represented by such stock certificates, and your stock certificates will be canceled. If you hold your shares in book-entry form, you will not be required to deliver a letter of transmittal and will be entitled to receive cash in the amount of the per share merger consideration multiplied by the number of shares of common stock formerly represented by such book-entry shares upon the paying agent’s receipt of an “agent’s message.” Interest will not accrue or be paid in respect of the per share merger consideration. The paying agent and the surviving corporation are entitled to reduce the amount of any consideration paid to stockholders by any applicable withholding taxes. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

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If your stock certificates have been lost, stolen or destroyed, you will be required to provide an affidavit to that fact (in form and substance reasonably acceptable to Green) and, if required by Green or the paying agent, post a bond as an indemnity against any claim that may be made against such certificate.

Treatment of Stock Options, Restricted Stock and Employee Stock Ownership Plan

Stock Options

Under the merger agreement, each outstanding stock option will be automatically canceled as of the effective time of the merger in exchange for the right to receive an amount in cash (subject to deduction for any required withholding taxes) equal to the product of (a) the positive difference, if any, of the per share merger consideration minus the exercise price per share of such stock option being canceled multiplied by (b) the number of shares of our common stock subject to such stock option immediately prior to the effective time of the merger, payable as soon as reasonably practicable, and in any event within ten days after the effective time of the merger. If the exercise price per share of any stock option is equal to or greater than the per share merger consideration, such stock option will be canceled and the holder will not be entitled to any cash payment in respect thereof.

Restricted Stock

Under the merger agreement, each outstanding share of unvested restricted stock will become fully vested at the effective time of the merger and automatically, without any required action on the part of the holder thereof, be canceled and converted into the right to receive an amount in cash (subject to deduction for any required withholding taxes) equal to the per share merger consideration, payable as soon as reasonably practicable, and in any event within ten days after the effective time of the merger.

Employee Stock Ownership Plan

The ESOP will be terminated, contingent upon the closing of the merger, effective not later than the day immediately preceding the effective time of the merger. The ESOP trustee will apply the per share merger consideration received with respect to unallocated shares to repay any outstanding debt owed by the ESOP, and any remaining cash will then be allocated to the participants’ accounts in proportion to their relative amount of applicable compensation consistent with past practice. In addition, the ESOP trustee will apply the per share merger consideration received with respect to each allocated share to the participants’ accounts. As soon as practicable following the receipt of a favorable determination letter from the IRS regarding the continued qualified status of the ESOP, the ESOP trustee will distribute the account balances of all ESOP participants and their beneficiaries in cash in accordance with the terms of the ESOP.

Representations and Warranties

The merger agreement contains representations and warranties of SP Bancorp that relate to, among other things:

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The merger agreement also contains various representations and warranties made by each of Green and Merger Sub relating to, among other things:

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Green has represented that it will have at the closing sufficient funds to consummate the merger.

Some of the representations and warranties in the merger agreement are qualified by materiality qualifications or a “material adverse effect” clause. For purposes of the merger agreement, a “material adverse effect” means, with respect to any party:

a material adverse effect on (a) the ability of such party to timely consummate the transactions contemplated by the merger agreement or (b) the financial condition, results of operations, assets, liabilities or business of such party and its subsidiaries taken as a whole other than to the extent caused by:

Conduct of Business Prior to Closing

We agreed in the merger agreement that, until the effective time of the merger, except as consented to in writing in advance by Green (which consent will not be unreasonably withheld, conditioned or delayed) or as otherwise specifically required or permitted by the merger agreement, we will, and will cause each of our subsidiaries to:

We also agreed that, until the effective time of the merger, subject to certain exceptions, except as expressly required by the merger agreement or with Green’s prior written consent (which consent will not be unreasonably withheld, conditioned or delayed) or as required by law, we will not, and will not permit our subsidiaries to:

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No Solicitation

We may not permit or authorize any of our subsidiaries or any of our or our subsidiaries’ directors, officers, employees, investment bankers, financial advisors, attorneys, accountants or other advisors, agents or representatives (collectively referred to as “representatives”), directly or indirectly, to:

We must, and are required to cause each of our subsidiaries and our and our subsidiaries’ representatives to, (a) immediately cease and cause to be terminated all existing discussions or negotiations with any person conducted prior to the date of the merger agreement with respect to any acquisition proposal, (b) request and confirm the prompt return or destruction of all confidential information previously furnished with respect to any

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acquisition proposal and (c) not terminate, waive, amend, release or modify any provision of any confidentiality or standstill agreement to which we or any of our affiliates or representatives is a party with respect to any acquisition proposal, and must enforce the provisions of any such agreement.

Notwithstanding the limitations described above, we will not be prohibited from, at any time prior to obtaining the approval of the merger by the holders of at least a majority of the outstanding shares of our common stock entitled to vote thereon, (a) furnishing information regarding us and our subsidiaries to a person making an acquisition proposal (subject to the execution of an acceptable confidentiality agreement and provided that any non-public information provided to any person given such access has been previously provided to Green or is provided to Green prior to or concurrently with the time it is provided to such person) and (b) participating in discussions and negotiations with the person making such acquisition proposal regarding such acquisition proposal if:

In addition to the obligations set forth above, we are also required to:

Subject to certain exceptions described below, we have agreed that neither our board of directors nor any of its committees will take any of the following actions, each of which is referred to in this proxy statement as an “adverse recommendation change”:

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Further, subject to certain exceptions described below, we also agreed that neither our board of directors nor any of its committees will cause or permit us to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract (other than a confidentiality agreement pursuant to and consistent with the terms of the non-solicitation provisions of the merger agreement) (each being referred to in this proxy statement as an “alternative acquisition agreement”) constituting or related to, or which is intended to or is reasonably likely to lead to, any acquisition proposal, or resolve, agree or publicly propose to take any such actions.

Notwithstanding the foregoing, if at any time prior to obtaining the approval of the merger agreement by the holders of at least a majority of the outstanding shares of our common stock, (a) we receive a written acquisition proposal that has not been withdrawn that our board of directors believes in good faith to be bona fide, (b) such acquisition proposal was unsolicited and did not otherwise result from a breach of the non-solicitation provisions of the merger agreement, (c) our board of directors determines in good faith (after consultation with outside counsel and our financial advisor) that such acquisition proposal constitutes a superior proposal and (d) our board of directors determines in good faith (after consultation with outside counsel) that the failure to do so would be reasonably likely to constitute a breach of its fiduciary duties to our stockholders under applicable law, our board of directors may (x) effect an adverse recommendation change or (y) terminate the merger agreement in accordance with its terms in order to enter into a definitive binding agreement with respect to such superior proposal; provided however that our board of directors may not take either of the actions described in clause (x) or (y) unless:

During the five business day period prior to effecting an adverse recommendation change or terminating the merger agreement as described above, we must, and must cause our financial and legal advisors to, negotiate with Green in good faith (to the extent Green seeks to negotiate) regarding any revisions to the terms of the transactions contemplated by the merger agreement proposed by Green.

Any material violation of the non-solicitation provisions of the merger agreement by a representative of us or any of our subsidiaries, whether or not such person is purporting to act on behalf of us or any of our subsidiaries or otherwise, will be deemed to be a breach of the merger agreement by us.

As described in this proxy statement, “acquisition proposal” means any inquiry, proposal or offer from any person or group of persons (other than Green and its affiliates) (whether or not acting in concert) relating to, or that is reasonably likely to lead to, any direct or indirect acquisition or purchase, in one transaction or a series of transactions, including any merger, reorganization, consolidation, tender offer, self-tender, exchange offer, stock acquisition, asset acquisition, binding share exchange, business combination, recapitalization, primary investment, liquidation, dissolution, joint venture or similar transaction, (a) of assets or businesses of SP Bancorp and its subsidiaries that generate 20% or more of the net revenues or net income or that represent 20% or more of the total assets (based on fair market value), of SP Bancorp and its subsidiaries, taken as a whole, immediately

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prior to such transaction or (b) of 20% or more of any class of capital stock, other equity security or voting power of SP Bancorp or any resulting parent company of SP Bancorp, in each case other than the transactions contemplated by the merger agreement.

As described in this proxy statement, “superior proposal” means any unsolicited bona fide binding written acquisition proposal that (x) our board of directors reasonably determines in good faith (after consultation with outside counsel and its financial advisor), taking into account all legal, financial, regulatory and other aspects of the proposal and the person or persons making the proposal, (1) is more favorable to our stockholders from a financial point of view than the transactions contemplated by the merger agreement (including any adjustment to the terms and conditions proposed by Green in response to such proposal and including any break-up fees and expense reimbursement provisions), and (2) is reasonably likely to be completed on the terms proposed on a timely basis and (y) is not subject to any due diligence investigation or financing condition; provided that, for purposes of this definition of “superior proposal,” references in the term “acquisition proposal” to “20%” shall be deemed to be references to “a majority.”

Other Covenants and Agreements

Access to Information; Confidentiality

Until the earlier of the effective time of the merger and the date of termination of the merger agreement, we will, and will cause our subsidiaries to, provide to Green, Merger Sub and their respective representatives, reasonable access during normal business hours to our and our subsidiaries’ respective properties, assets, books, contracts, commitments, personnel and records. We also will, and will cause our subsidiaries to, furnish promptly to Green (a) a copy of each report, schedule, registration statement and other document filed or received by us during such period pursuant to the requirements of federal or state securities laws and (b) all other information concerning our business, properties and personnel as Green or Merger Sub may reasonably request (including tax returns filed and those in preparation and the workpapers of its auditors); provided, however, that we will not be required to disclose any information to the extent such disclosure would contravene applicable law.

We and our subsidiaries will not be required to provide access to or to disclose information where such access or disclosure would reasonably be expected to violate a contract or obligation of confidentiality owing to a third party, or waive the protection of attorney-client privilege, work product doctrine or other legal privilege. In such circumstances, the parties will make appropriate substitute disclosure arrangements and all information so disclosed must be held confidential in accordance with the terms of a confidentiality agreement between us and Green.

Anti-Takeover Laws

We and our board of directors have agreed not to take any action to cause any anti-takeover law to become applicable to the merger agreement, the merger or any of the other transactions contemplated by the merger agreement. If any anti-takeover law is, becomes, or is reasonably likely to become applicable to the merger agreement, the merger, or any of the other transactions contemplated by the merger agreement, we and our board of directors have agreed to take all action necessary to ensure that the merger and the other transactions contemplated by the merger agreement may be consummated as promptly as practicable on the terms contemplated by the merger agreement and otherwise to minimize the effect of such anti-takeover law with respect to the merger agreement, the merger and the other transactions contemplated by the merger agreement.

Notification of Certain Matters

We and Green must promptly notify each other of (a) any notice or other communication received by such party from any governmental entity in connection with the merger or the other transactions contemplated by the merger agreement or from any person alleging that the consent of such person is or may be required in connection with the merger or the other transactions contemplated by the merger agreement, (b) any other notice or communication from any governmental entity in connection with the transactions contemplated by the merger

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agreement, (c) any action, suit, claim, arbitration, investigation, inquiry, grievance or other proceeding commenced or, to such party’s knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its subsidiaries which relate to the merger or the other transactions contemplated by the merger agreement or (d) any change, condition or event (1) that renders or would reasonably be expected to render any representation or warranty of such party set forth in the merger agreement (disregarding any materiality qualification contained therein) to be untrue or inaccurate in any material respect or (2) that results or would reasonably be expected to result in any failure of such party to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied under the merger agreement; provided, however, that no such notification will affect any of the representations, warranties, covenants, rights or remedies, or the conditions to the obligations of, the parties under the merger agreement.

Indemnification and Insurance

Following the effective time of the merger, Green has agreed to indemnify, defend and hold harmless each of our present and former directors and officers (determined as of the effective time of the merger), and their heirs, estates, executors and administrators, against all costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of actions or omissions occurring at or prior to the effective time of the merger which were committed by such directors or officers in their capacity as such (including the transactions contemplated by the merger agreement) to the same extent that such person would be indemnified, defended and held harmless under our articles of incorporation and bylaws, each as in effect on the date of the merger agreement as if the claim arose on the date of the merger agreement.

The merger agreement also provides that, prior to the effective time of the merger, in consultation with Green, we must purchase a directors’ and officers’ liability tail insurance policy and a fiduciary liability tail insurance policy that, for a period of six years after the effective time of the merger, serves to reimburse our present and former officers and directors and fiduciaries (determined as of the effective time of the merger) with respect to claims against such officers and directors and fiduciaries arising from facts or events occurring at or before the effective time of the merger (including the transactions contemplated by the merger agreement).

Employee Benefit Matters

The merger agreement provides that, following the date of the closing of the merger, Green shall maintain or cause to be maintained employee benefit plans for the benefit of each SP Bancorp employee that provide employee benefits which are substantially comparable to the employee benefits that are provided to similarly situated Green employees (excluding benefits provided pursuant to any closed or frozen Green employee benefit plan). The merger agreement further provides that until such time as Green causes the SP Bancorp employees to participate in Green’s employee benefit plans, an SP Bancorp employee’s continued participation in SP Bancorp employee benefit plans shall be deemed to satisfy the obligation described in the preceding sentence. In addition, pursuant to the merger agreement, with respect to any SP Bancorp employee (other than an SP Bancorp employee who is party to an individual agreement that provides for severance) whose employment is terminated by Green for any reason other than cause on or before the date that is six months after the date of the closing of the merger, Green shall pay or cause to be paid to such SP Bancorp employee an amount of cash severance that is no less than one week of severance for each year of employment, with a maximum of six weeks of severance, determined taking into consideration the service crediting provision described below.

Each SP Bancorp employee will be given full credit for such employee’s service with SP Bancorp for purposes of eligibility, vesting, determination of the level of benefits, and benefit accruals (other than benefit accruals under a defined benefit or post-retirement welfare plan), under any benefit plans maintained by Green or the surviving corporation in which an SP Bancorp employee participates to the same extent recognized by SP Bancorp immediately prior to the effective time of the merger (except that such service shall not be recognized to

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the extent that such recognition would result in a duplication of benefits with respect to the same period of service). Further, Green will, or will cause the surviving corporation to, use commercially reasonable efforts to, (a) waive any preexisting condition limitations otherwise applicable to SP Bancorp employees and their eligible dependents under any Green employee benefit plan that provides health benefits in which SP Bancorp employees may be eligible to participate following the closing of the merger, other than any limitations that were in effect with respect to such employees as of the effective time of the merger under the analogous SP Bancorp employee benefit plan, (b) honor any deductible, co-payment and out-of-pocket maximums incurred by the SP Bancorp employees and their eligible dependents under the health plans in which they participated immediately prior to the effective time of the merger during the portion of the calendar year prior to the effective time of the merger in satisfying any deductibles, co-payments or out-of-pocket maximums under health plans of Green and the surviving corporation in which they are eligible to participate after the effective time of the merger in the same plan year in which such deductibles, co-payments or out-of-pocket maximums were incurred and (c) waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to an SP Bancorp employee and his or her eligible dependents on or after the effective time of the merger, in each case to the extent such employee or eligible dependent had satisfied any similar limitation or requirement under an analogous SP Bancorp employee benefit plan prior to the effective time of the merger.

Bank Merger

We and Green have agreed to take, and to respectively cause the Bank and Green Bank to take, all actions necessary for the Bank and Green Bank to consummate the Bank merger immediately following the effective time of the merger described in this proxy statement, including entering into an agreement and plan of merger to be effective immediately following the effective time of the merger described in this proxy statement in a form reasonably acceptable to Green and to us and executing such other documents as may be reasonably requested by Green or by us in connection with the Bank merger.

Other Covenants

The merger agreement contains additional agreements between us and Green relating to, among other things:

Conditions to the Completion of the Merger

Our obligation and the obligations of Green and Merger Sub to consummate the merger are subject to the satisfaction or waiver of the following conditions on or prior to the closing of the merger:

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In addition to the conditions for all parties to the merger agreement, the obligations of Green and Merger Sub to complete the merger are subject to the satisfaction or waiver of the following conditions at or prior to the effective time of the merger:

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In addition to the conditions for all parties to the merger agreement, our obligation to complete the merger is subject to the satisfaction or waiver of the following conditions at or prior to the effective time of the merger:

Termination of the Merger Agreement

We and Green may terminate the merger agreement without completing the merger at any time, even after our stockholders have approved the merger agreement, by mutual written consent. The merger agreement may also be terminated upon written notice in certain other circumstances, including:

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Termination Fee; Remedies

We will be obligated to pay Green a termination fee of $2,000,000 if:

We will also be obligated to pay Green a termination fee of $2,000,000 if:

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Specific Performance

Each of the parties is entitled to specific performance of the terms of the merger agreement, including an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement in any state or federal court located in the State of Delaware, this being in addition to any other remedy to which such party is entitled at law or in equity. In the merger agreement, each of the parties waived (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.

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ADVISORY VOTE ON MERGER-RELATED COMPENSATION

Vote Required and Board of Directors Recommendation

In accordance with Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to cast an advisory (non-binding) vote on the compensation that may be paid or become payable to our named executive officers in connection with the merger, the value of which is set forth in the section of this proxy statement entitled “ The Merger—Interests of Our Directors and Executive Officers in the Merger—Advisory Vote on Merger-Related Compensation. ” As required by Section 14A of the Exchange Act, we are asking our stockholders to vote on the adoption of the following resolution:

RESOLVED, that the compensation that may be paid or become payable to our named executive officers in connection with the merger, as disclosed in the table in the section of the proxy statement entitled “ The Merger—Interests of Our Directors and Executive Officers in the Merger—Advisory Vote on Merger-Related Compensation ,” including the accompanying narrative discussion, is hereby APPROVED.

The vote on the compensation that may be paid or become payable to our named executive officers in connection with the merger is a vote separate and apart from the vote to adopt the merger proposal. Accordingly, you may vote to adopt the merger-related compensation proposal and vote not to adopt the merger proposal, or vice versa. Because the vote is advisory in nature only, it will not be binding on us. Accordingly, because we are contractually obligated to pay the compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the merger is consummated and regardless of the outcome of the advisory vote.

Adoption of the merger-related compensation proposal requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions and broker non-votes, as well as the failure to vote your shares, will have no effect on the outcome of the proposal, as long as a quorum is present at the meeting. Any signed proxies we receive in which no voting instructions are provided will be voted in favor of the merger-related compensation proposal.

Our board of directors unanimously recommends that our stockholders approve on an advisory (non-binding) basis, the compensation that may be paid or become payable to our named executive officers in connection with the merger, by voting “ FOR ” the above proposal.

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ADJOURNMENT PROPOSAL

If the requisite stockholder vote to adopt the merger proposal has not been received at the time of the special meeting, we may choose to adjourn the special meeting and solicit additional proxies in favor of the adoption of the merger proposal. Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment may be made without notice, other than announcement at the special meeting (unless our board of directors, after such adjournment, fixes a new record date for the adjourned meeting), until a quorum shall be present, in person or by proxy. Adoption of the adjournment proposal requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions and broker non-votes, as well as the failure to vote your shares, will have no effect on the outcome of the proposal, as long as a quorum is present at the meeting.

Any signed proxies we receive in which no voting instructions are provided on such matter will be voted in favor of an adjournment in these circumstances. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow our stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting, as adjourned or postponed.

Our board of directors unanimously recommends that our stockholders approve the adjournment proposal by voting “ FOR ” the above proposal (if necessary or appropriate).

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We have not paid cash dividends on our common stock in the last two years.

Closing Trading Prices

On May 2, 2014, the last trading day prior to the public announcement of the execution of the merger agreement, the closing price of our common stock was $20.50. On July 17, 2014, the most recent practicable trading date prior to the date of this proxy statement, the closing price of our common stock was $28.84. You are urged to obtain a current market price quotation for our common stock.

If the merger is completed, each share of our common stock will be canceled and converted into the right to receive the merger consideration, our common stock will be removed from quotation on The NASDAQ Capital Market and there will be no further public market for shares of our common stock.

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