Green Bancorp, Inc. Reports Second Quarter 2018 Financial Results


 2018 Second Quarter Significant Items (GAAP) 

  • Second quarter 2018 net income totaled $16.4 million, an increase of 27.3% from the second quarter 2017

  • Diluted earnings per common share were $0.44 for the second quarter 2018

  • Annualized return on average assets was 1.54% during the second quarter 2018

  • Second quarter 2018 efficiency ratio was 50.05%

  • Second quarter 2018 net interest margin expanded 7 bps to 3.94% from 3.87% during first quarter 2018

  • Nonperforming assets to total assets declined 64 bps to 1.36% at June 30, 2018

  • Total loans increased $83.3 million during second quarter 2018, an annualized rate of 10.6%; annualized loan production increased 69.2% from the second quarter of 2017 to $1.5 billion. 

2018 Second Quarter Significant Items (Non-GAAP) 

  • Second quarter 2018 net operating earnings totaled $16.6 million, or $0.44 per diluted share

  • Annualized return on average tangible common equity totaled 17.65% during the second quarter 2018

  • Second quarter 2018 operating efficiency ratio was 49.45%, representing the 5th consecutive quarter below 50.0%

  • Pre-tax, pre-provision operating return on average assets (annualized) was 2.15% for the second quarter 2018, representing the 5th consecutive quarter over 2.00% 

HOUSTON, July 24, 2018 (GLOBE NEWSWIRE) -- Green Bancorp, Inc. (NASDAQ:GNBC), the bank holding company (“Green Bancorp” or the “Company”) that operates Green Bank, N.A. (“Green Bank”), today announced results for its second quarter and six months ended June 30, 2018.  The Company reported net income for the quarter of $16.4 million, or $0.44 per diluted common share. 

Manny Mehos, Chairman and Chief Executive Officer of Green Bancorp, said, “We are excited to announce our merger with Veritex, which would create a high-performing company located in the strongest markets in Texas. I believe this merger positions our combined bank to become the premier Texas franchise and that Green Bancorp shareholders will benefit from the long-term value creation that this platform is uniquely positioned to generate. In fact, we expect meaningful earnings accretion and strong returns as we realize the benefits of the combination. As I have said in recent years, the best way to create value for shareholders is through a merger and our combination with Veritex is the right transaction to maximize value for all stakeholders.” 

Geoff Greenwade, President of Green Bancorp and Chief Executive Officer of Green Bank, commented, “I am pleased with our results this quarter as we improved the asset quality of the Bank, delivered strong loan growth, and experienced solid margin expansion despite increasing competition. Of note, nonperforming assets decreased to 1.36% of period end total assets in the second quarter as compared with 2.00% in the first quarter. The decrease was broad based as we experienced reductions in all categories of nonperforming loans. Total loans grew 10.6% annualized from the first quarter as we continue to benefit from the robust economic growth in our primary markets of Houston, Dallas-Fort Worth, and Austin as well as a return to growth of our Commercial Real Estate portfolio which we believe is sustainable. Lastly, our net interest margin increased 7 basis points to 3.94% as compared to the first quarter.” 

Results of Operations - Quarter Ended June 30, 2018 compared with Quarter Ended March 31, 2018 

Net income for the quarter ended June 30, 2018 was $16.4 million, an increase of $7.1 million, or 75.4%, compared with $9.4 million for the quarter ended March 31, 2018. Net income per diluted common share was $0.44 for the quarter ended June 30, 2018, compared with $0.25 for the quarter ended March 31, 2018.  The increase in net income for the quarter ended June 30, 2018 is primarily due to the decrease in provision for loan losses compared to the prior quarter.  During the quarter ended June 30, 2018, provision for loan losses decreased $7.8 million.  Provision for income taxes increased during the current quarter due to higher income before income taxes compared to the prior quarter.  Returns on average assets and average common equity, each on an annualized basis, for the three months ended June 30, 2018 were 1.54% and 13.96%, respectively. Green Bancorp’s efficiency ratio, which represents noninterest expense divided by the sum of net interest income and noninterest income, was 50.05% for the three months ended June 30, 2018. 

Net interest income before provision for loan losses for the quarter ended June 30, 2018 increased $1.5 million, or 4.0%, to $39.8 million, compared with $38.2 million for the quarter ended March 31, 2018.  The increase in net interest income was comprised of a $3.1 million, or 6.5%, increase in interest income, offset by a $1.5 million, or 17.3%, increase in interest expense.  Net interest margin for the quarter ended June 30, 2018 was 3.94%, compared with 3.87% for the quarter ended March 31, 2018. 

Noninterest income for the quarter ended June 30, 2018 was $5.5 million, an increase of $327 thousand, or 6.3%, from $5.2 million for the quarter ended March 31, 2018.  The increase was primarily due to increases of  $183 thousand in customer service fees, $171 thousand in gain on sale of guaranteed portion of loans, $163 thousand in loan fees and $66 thousand in gain on sale of available-for-sale securities, offset by a $426 thousand decrease in derivative income. 

Noninterest expense for the quarter ended June 30, 2018 was $22.6 million, an increase of $592 thousand, or 2.7%, from $22.1 million for the quarter ended March 31, 2018.  The increase was primarily due to a $420 thousand increase in loan related expenses and a $186 thousand increase in occupancy expenses, in addition to smaller change in other noninterest expense categories. 

Total loans, which includes loans held for investment and loans held for sale, at June 30, 2018 were $3.2 billion, an increase of $83.3 million, or 2.6%, when compared with March 31, 2018.  The increase was primarily due to increases of $58.2 million in mortgage warehouse loans, $31.7 million in commercial and industrial loans and $23.2 million in commercial real estate loans, offset by reductions of $18.2 million in construction and land loans, $7.3 million in residential mortgage and $2.6 million in consumer and other loans.  At June 30, 2018, energy loans totaled $40.1 million, or 1.2%, of total loans.  SBA loans comprise the balance of loans held for sale at June 30, 2018. 

Deposits at June 30, 2018 were $3.4 billion, a decrease of $27.7 million, or 0.8%, compared with March 31, 2018.  The net decrease is comprised of decreases of a $56.7 million or, 4.2%, in interest-bearing transaction and savings deposits and $24.5 million, or 2.9%, in noninterest-bearing deposits, offset by an increase of $53.6 million, or 4.2% in time deposits.  Noninterest-bearing deposits totaled 24.1% of total deposits at June 30, 2018.  Average deposits increased $46.3 million, or 1.4%, for the quarter ended June 30, 2018, compared with the prior quarter. 

Asset Quality - Quarter Ended June 30, 2018 compared with Quarter Ended March 31, 2018 

Nonperforming assets totaled $59.6 million, or 1.36% of period end total assets, at June 30, 2018, a decrease of $25.1 million, compared with $84.7 million, or 2.00% of period end total assets, at March 31, 2018.  The decrease was due to reductions in all categories of nonperforming loans.  Accruing loans classified as troubled debt restructures and included in the nonperforming asset totals were $3.1 million at June 30, 2018, compared with $13.6 million at March 31, 2018.  Real estate acquired through foreclosure totaled $802 thousand at June 30, 2018. 

The allowance for loan losses was 1.09% of total loans held for investment at June 30, 2018, compared with 1.22% of total loans held for investment at March 31, 2018.  At June 30, 2018, the Company’s allowance for loan losses to total loans held for investment, excluding acquired loans that are accounted for under ASC 310-20 and ASC 310-30 and their related allowance, was 1.19%.  Further, the allowance for loan losses plus acquired loan net discount to total loans held for investment adjusted for acquired loan net discount was 1.14% as of June 30, 2018. 

The Company recorded a provision for loan losses of $1.9 million for the quarter ended June 30, 2018, down from the $9.7 million provision for loan losses recorded for the quarter ended March 31, 2018.  The second quarter of 2018 provision was primarily due to the addition of general reserves due primarily to loan growth and $956 thousand related to energy loans in comparison to the prior quarter's provision that included specific reserves, with $3.8 million related to energy loans and $5.9 million to a syndicated healthcare credit. 

Net charge-offs were $5.0 million, or 0.16% of average loans, for the quarter ended June 30, 2018, compared with net charge-offs of $2.7 million, or 0.08% of average loans, for the quarter ended March 31, 2018.  Net charge-offs included partial charge-offs of $3.8 million in energy loans during the quarter ended June 30, 2018, an increase from $2.7 million for the quarter ended March 31, 2018. 

Results of Operations – Six Months Ended June 30, 2018 compared with Six Months Ended June 30, 2017 

Net income for the six months ended June 30, 2018 was $25.8 million, compared with net income of $20.1 million for the six months ended June 30, 2017. Net income per diluted common share was $0.69 for the six months ended June 30, 2018, compared with net income per diluted common share of $0.54 for the six months ended June 30, 2017.  The Company recorded a provision for loan losses of $11.6 million, which included $4.7 million in reserves on the energy portfolio and $5.9 million to a syndicated healthcare credit.  The provision for loan losses was $7.7 million for the same period in 2017, which included $7.5 million related to the energy portfolio.  Net charge-offs were $7.7 million for the six months ended June 30, 2018, which included $6.5 million of energy loans, compared with net charge-offs of $2.0 million for the six months ended June 30, 2017. 

Net interest income before provision for loan losses for the six months ended June 30, 2018 was $78.0 million, an increase of $10.1 million, or 14.8%, compared with $67.9 million during the six months ended June 30, 2017.  The increase in net interest income was comprised of a $14.9 million, or 18.0%, increase in interest income, offset by a $4.8 million, or 33.2%, increase in interest expense.  The increase in interest income was primarily due to a $11.4 million increase in loan income, driven by a $89.1 million, or 2.9%, increase in average balance and a 60 basis point increase in yield, and a $2.8 million increase in securities income due to a $91.1 million, or a 14.6%, increase in average balance and a 51 basis point increase in yield.  The increase in interest expense was comprised of increases of $2.1 million in other borrowed funds, due to a $122.9 million increase in average balance, and a 98 basis point increase in rate, $1.4 million in time deposits due to a 26 basis point increase in rate on an average balance that decreased by $39.4 million and $1.3 million in interest-bearing demand and savings deposits, due to a 23 basis point increase in rate on an average balance that decreased by $76.3 million.  Net interest margin for the six months ended June 30, 2018 was 3.91%, compared with 3.55% for the six months ended June 30, 2017. 

Noninterest income for the six months ended June 30, 2018 was $10.6 million, a decrease of $551 thousand, or 4.9%, compared with $11.2 million for the six months ended June 30, 2017.  This decrease was primarily due to a $752 thousand  decrease in gain on sale of guaranteed portion of loans, $228 thousand decrease in gain on sale of available for sale securities and $111 thousand decrease in loan fees, offset by a $508 thousand increase in customer service fees. 

Noninterest expense for the six months ended June 30, 2018 was $44.7 million, an increase of $4.2 million, or 10.5%, compared with $40.5 million for the six months ended June 30, 2017.  The increase was primarily due to $2.2 million increase in salaries and employee benefits and $1.6 million increase in the reserve for unfunded commitments. 

Total loans, which includes loans held for investment and loans held for sale, at June 30, 2018 were $3.2 billion, an increase of $85.7 million, or 2.7%, compared with $3.1 billion at June 30, 2017.  The increase was primarily due to increases of $139.6 million in commercial and industrial loans, $30.5 million in mortgage warehouse loans and $28.8 million in owner occupied commercial loans, offset by loan reductions of $71.5 million in construction and land loans, $17.2 million in commercial real estate loans, $6.9 million in consumer and other and $4.6 million in residential mortgage loans. 

Deposits at June 30, 2018 were $3.4 billion, an increase of $65.6 million, or 2.0%, compared with June 30, 2017.  Noninterest-bearing demand deposits increased $141.1 million, or 20.6%, and interest-bearing transactions accounts increased $27.5 million, or 13.3%, during the six months ended June 30, 2018, which more than offset decreases of $70.6 million in money market and savings deposits and $32.4 million in time deposits.  Average deposits increased $15.6 million, or 0.5%, to $3.4 billion for the six months ended June 30, 2018, compared with the same period of 2017.  Average noninterest-bearing deposits for the six months ended June 30, 2018 were $799.7 million, an increase of $131.3 million, or 19.6%, compared with the same period in 2017. 

Dividend Information 

On July 23, 2018, Green Bancorp’s Board of Directors declared a regular quarterly cash dividend of $0.10 per share on its outstanding shares of common stock, payable on August 23, 2018 to shareholders of record as of August 9, 2018. 

Non-GAAP Financial Measures 

Green Bancorp’s management uses certain non−GAAP (generally accepted accounting principles) financial measures to evaluate its performance.  Specifically, Green Bancorp reviews tangible book value per common share, the tangible common equity to tangible assets ratio, the return on average tangible common equity ratio, allowance for loan losses less allowance for loan losses on acquired loans to total loans held for investment excluding acquired loans, allowance for loan losses plus acquired loans net discount to total loans held for investment adjusted for acquired loan net discount, operating earnings, pre-tax, pre-provision operating earnings, diluted operating earnings per share, operating return on average assets, operating return on average tangible common equity and operating efficiency ratio.  Green Bancorp has included in this Earnings Release information related to these non-GAAP financial measures for the applicable periods presented.  Please refer to the “Notes to Financial Highlights” at the end of this Earnings Release for a reconciliation of these non-GAAP financial measures. 

Conference Call 

Green Bancorp and Veritex will hold a joint conference call to discuss the transaction on Tuesday, July 24, 2018 at 8:30 a.m. Central Time. This call will be held in lieu of our quarterly earnings call scheduled for July 26, 2018.  Participants may pre-register for the call by visiting https://edge.media-server.com/m6/p/4biserkz and will receive a unique pin number, which can be used when dialing in for the call. This will allow attendees to enter the call immediately. Alternatively, participants may call toll-free at 1-877-703-9880. 

The call and corresponding presentation slides will be webcast live on the home page of Veritex’s website, www.veritexbank.com, and Green’s website, investors.greenbank.com. An audio replay will be available one hour after the conclusion of the call at 1-855-859-2056, Conference #4594759. This replay, as well as the webcast, will be available until July 31, 2018. 

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

About Green Bancorp, Inc. 

Headquartered in Houston, Texas, Green Bancorp is a bank holding company that operates Green Bank in the Houston and Dallas metropolitan areas and Austin, Louisville and Honey Grove.  Commercial-focused, Green Bank is a nationally chartered bank regulated by the Office of the Comptroller of the Currency, a division of the Department of the Treasury of the United States. 

Forward Looking Statement 

The information presented herein and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 giving Green Bancorp’s expectations or predictions of future financial or business performance or conditions.  Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could” or “may”, or by variations of such words or by similar expressions.  These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. Forward-looking statements speak only as of the date they are made and we assume no duty to update forward-looking statements. 

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made.  These statements may relate to future financial performance, strategic plans or objectives, revenues or earnings projections, or other financial information.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements. 

Statements about the expected timing, completion and effects of the proposed transactions and all other statements in this release other than historical facts constitute forward-looking statements. 

In addition to factors previously disclosed in Green Bancorp’s reports filed with the SEC and those identified elsewhere in this communication, the following factors among others, could cause actual results to differ materially from forward-looking statements: changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. 

Media & Investor Relations Contacts: 

Geoff Greenwade Terry Earley
President Chief Financial Officer
713-275-8203 713-316-3672
ggreenwade@greenbank.com tearley@greenbank.com


 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
 
  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
 
  (Dollars in thousands)
Period End Balance Sheet Data:
Cash and cash equivalents $231,251  $142,144  $140,681  $179,463  $134,995 
Securities 699,863  729,146  718,814  707,989  718,750 
Other investments 42,962  38,157  27,283  22,443  26,002 
           
Loans held for sale 4,992  7,461  7,156  17,673  18,030 
Loans held for investment 3,222,108  3,136,336  3,190,485  3,071,761  3,123,355 
Total Loans 3,227,100  3,143,797  3,197,641  3,089,434  3,141,385 
Allowance for loan losses (35,086) (38,233) (31,220) (33,480) (31,991)
Goodwill 85,291  85,291  85,291  85,291  85,291 
Core deposit intangibles, net 7,881  8,187  8,503  8,835  9,215 
Real estate acquired through foreclosure 802  802  802  802  921 
Premises and equipment, net 29,178  23,694  24,002  29,733  30,108 
Bank owned life insurance 56,066  55,682  55,302  35,053  34,827 
Other assets 46,369  36,580  34,817  35,362  36,194 
Total assets $4,391,677  $4,225,247  $4,261,916  $4,160,925  $4,185,697 
           
Noninterest-bearing deposits $824,753  $849,297  $803,210  $684,329  $683,656 
Interest-bearing transaction and savings deposits 1,281,255  1,337,973  1,331,601  1,383,514  1,324,307 
Certificates and other time deposits 1,320,042  1,266,457  1,262,332  1,340,410  1,352,459 
Total deposits 3,426,050  3,453,727  3,397,143  3,408,253  3,360,422 
Securities sold under agreements to repurchase 4,141  4,948  5,173  5,867  5,221 
Other borrowed funds 412,000  230,000  325,000  215,000  305,000 
Subordinated debentures and subordinated notes 48,019  47,878  47,737  47,596  47,454 
Other liabilities 21,974  19,816  23,068  21,898  15,859 
Total liabilities 3,912,184  3,756,369  3,798,121  3,698,614  3,733,956 
Shareholders' equity 479,493  468,878  463,795  462,311  451,741 
Total liabilities and equity $4,391,677  $4,225,247  $4,261,916  $4,160,925  $4,185,697 
                     


 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
 
   For the Quarter Ended   For the Six Months Ended 
   Jun 30,
2018
   Mar 31,
2018
   Sep 30,
2017
   Dec 31,
2017
   Jun 30,
2017
   Jun 30,
2018
   Jun 30,
2017
 
 
 (Dollars in thousands)
Income Statement Data:                            
Interest income:                            
Loans, including fees $44,479  $41,799  $39,870  $39,549  $38,476  $86,278  $74,847 
Securities 4,734  4,558  4,446  4,337  3,928  9,292  6,511 
Other investments 341  300  241  221  197  641  385 
Deposits in financial institutions and fed funds sold 659  493  671  432  331  1,152  740 
Total interest income 50,213  47,150  45,228  44,539  42,932  97,363  82,483 
Interest expense:              
Transaction and savings deposits 3,023  2,464  2,588  2,502  2,230  5,487  4,208 
Certificates and other time deposits 4,712  4,071  4,017  4,042  3,786  8,783  7,393 
Subordinated debentures and subordinated notes 1,109  1,079  1,065  1,059  1,051  2,188  2,092 
Other borrowed funds 1,608  1,294  738  657  560  2,902  842 
Total interest expense 10,452  8,908  8,408  8,260  7,627  19,360  14,535 
Net interest income 39,761  38,242  36,820  36,279  35,305  78,003  67,948 
Provision for loan losses 1,897  9,663  4,405  2,300  1,510  11,560  7,655 
Net interest income after provision for loan losses 37,864  28,579  32,415  33,979  33,795  66,443  60,293 
Noninterest income:              
Customer service fees 2,578  2,395  2,273  2,365  2,199  4,973  4,465 
Loan fees 996  833  704  871  1,106  1,829  1,940 
Gain (loss) on sale of available-for-sale securities, net 66      (332) 294  66  294 
(Loss) gain on held for sale loans, net     (1,098) (1,294) 222    84 
Gain on sale of guaranteed portion of loans, net 1,112  941  1,648  1,302  878  2,053  2,805 
Other 733  989  401  478  1,000  1,722  1,606 
Total noninterest income 5,485  5,158  3,928  3,390  5,699  10,643  11,194 
Noninterest expense:              
Salaries and employee benefits 13,640  13,601  14,996  12,487  12,653  27,241  25,059 
Occupancy 2,263  2,077  2,069  2,080  2,048  4,340  4,045 
Professional and regulatory fees 2,172  2,261  2,241  2,331  1,899  4,433  4,296 
Data processing 1,029  972  981  924  995  2,001  1,903 
Software license and maintenance 703  716  636  464  438  1,419  927 
Marketing 257  176  259  154  163  433  362 
Loan related 467  47  632  271  301  514  901 
Real estate acquired by foreclosure, net 4  12  30  159  223  16  515 
Other 2,110  2,191  1,738  1,197  891  4,301  2,442 
Total noninterest expense 22,645  22,053  23,582  20,067  19,611  44,698  40,450 
Income before income taxes 20,704  11,684  12,761  17,302  19,883  32,388  31,037 
Provision for income taxes 4,283  2,322  10,142  5,895  6,985  6,605  10,927 
Net income $16,421  $9,362  $2,619  $11,407  $12,898  $25,783  $20,110 
                             


 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
 
  For the Quarter Ended For the Six Months Ended
  Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Jun 30,
2018
 Jun 30,
2017
 
 (Dollars in thousands)
Per Share Data (Common Stock):              
Basic earnings per common share $0.44  $0.25  $0.07  $0.31  $0.35  $0.69  $0.54 
Diluted earnings per share 0.44  0.25  0.07  0.31  0.35  0.69  0.54 
Book value per common share 12.86  12.62  12.50  12.46  12.20  12.86  12.20 
Tangible book value per common share (1) 10.36  10.10  9.97  9.93  9.65  10.36  9.65 
               
Common Stock Data:              
Shares outstanding at period end 37,289  37,163  37,103  37,096  37,035  37,289  37,035 
Weighted average basic shares outstanding for the period 37,274  37,341  37,103  37,056  37,023  37,219  37,007 
Weighted average diluted shares outstanding for the period 37,646  37,586  37,393  37,332  37,264  37,613  37,234 
               
Selected Performance Metrics:              
Return on average assets(2) 1.54% 0.90% 0.25% 1.10% 1.26% 1.23% 1.00%
Pre-tax, pre-provision operating return on average assets(1)(2) 2.15  2.10  2.01  2.04  2.04  2.12  1.90 
Return on average equity(2) 13.96  8.15  2.23  9.90  11.62  11.09  9.21 
Return on average tangible common equity(1)(2) 17.65  10.47  3.02  12.74  15.04  14.11  12.02 
Efficiency ratio 50.05  50.81  57.87  50.59  47.83  50.42  51.11 
Loans to deposits ratio 94.05  90.81  93.92  90.13  92.95  94.05  92.95 
Net interest margin 3.94  3.87  3.64  3.65  3.63  3.91  3.55 
Noninterest expense to average assets(2) 2.13  2.13  2.23  1.93  1.92  2.13  2.01 
               
Selected Performance Metrics - Operating:(1)              
Diluted operating earnings per share $0.44  $0.26  $0.14  $0.33  $0.34  $0.70  $0.53 
Operating return on average assets (2) 1.56% 0.93% 0.50% 1.20% 1.23% 1.25% 0.99%
Operating return on average tangible common equity(2) 17.88  10.81  5.90  13.89  14.66  14.39  11.88 
Operating efficiency ratio 49.45  49.90  47.69  46.49  49.09  49.67  51.59 
                      

(1)      Refer to “Notes to Financial Highlights” at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure.
(2)      Annualized ratio. 

 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
     
  For the Quarter Ended For the Six Months Ended
  Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Jun 30,
2018
 Jun 30,
2017
               
  (Dollars in thousands)    
Green Bancorp Capital Ratios:              
Average shareholders’ equity to average total assets 11.1% 11.1% 11.1% 11.1% 10.9% 11.1% 10.9%
Tier 1 capital to average assets (leverage) 10.0  9.8  9.5  9.5  9.3  10.0  9.3 
Common equity tier 1 capital 10.9  10.9  10.5  10.6  10.1  10.9  10.1 
Tier 1 capital to risk-weighted assets 11.3  11.2  10.9  11.0  10.5  11.3  10.5 
Total capital to risk-weighted assets 13.2  13.3  12.7  12.9  12.4  13.2  12.4 
Tangible common equity to tangible assets(1) 9.0  9.1  8.9  9.1  8.7  9.0  8.7 
               
Green Bank Capital Ratios:              
Tier 1 capital to average assets (leverage) 10.6% 10.4% 10.1% 10.1% 9.6% 10.6% 9.6%
Common equity tier 1 capital 12.0  12.0  11.6  11.8  10.9  12.0  10.9 
Tier 1 capital to risk-weighted assets 12.0  12.0  11.6  11.8  10.9  12.0  10.9 
Total capital to risk-weighted assets 13.0  13.0  12.4  12.6  11.7  13.0  11.7 
                      

 (1)       Refer to “Notes to Financial Highlights” at the end of this Earnings Release for a reconciliation of this non-GAAP financial measure. 

 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
                                  
  For the Quarter Ended
  June 30, 2018 March 31, 2018 June 30, 2017
   Average
Outstanding
Balance
   Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
   Average
Outstanding
Balance
   Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
   Average
Outstanding
Balance
   Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
 
 
 (Dollars in thousands)
Assets                                 
Interest-Earning Assets:                                 
Loans $3,157,297  $44,479  5.65% $3,128,803  $41,799  5.42% $3,072,674  $38,476  5.02%
Securities 713,707  4,734  2.66  719,843  4,558  2.57  678,886  3,928  2.32 
Other investments 39,660  341  3.45  32,191  300  3.78  22,932  197  3.45 
Interest earning deposits in financial institutions and federal funds sold 138,916  659  1.90  124,487  493  1.61  124,663  331  1.06 
Total interest-earning assets 4,049,580  50,213  4.97% 4,005,324  47,150  4.77% 3,899,155  42,932  4.42%
Allowance for loan losses (36,863)     (32,234)     (32,036)    
Noninterest-earning assets 240,640      231,110      229,267     
Total assets $4,253,357      $4,204,200      $4,096,386     
                   
Liabilities and Shareholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing demand and savings deposits $1,290,065  $3,023  0.94% $1,301,898  $2,464  0.77% $1,361,929  $2,230  0.66%
Certificates and other time deposits 1,293,055  4,712  1.46  1,262,644  4,071  1.31  1,309,477  3,786  1.16 
Securities sold under agreements to repurchase 4,941  2  0.16  5,200  2  0.16  4,457  2  0.18 
Other borrowed funds 310,022  1,606  2.08  314,833  1,292  1.66  217,896  558  1.03 
Subordinated debentures and subordinated notes 47,956  1,109  9.28  47,814  1,079  9.15  47,376  1,051  8.90 
Total interest-bearing liabilities 2,946,039  10,452  1.42% 2,932,389  8,908  1.23% 2,941,135  7,627  1.04%
                   
Noninterest-bearing liabilities:                  
Noninterest-bearing demand deposits 813,512      785,784      692,379     
Other liabilities 21,848      20,012      17,538     
Total liabilities 3,781,399      3,738,185      3,651,052     
Shareholders’ equity 471,958      466,015      445,334     
Total liabilities and shareholders’ equity $4,253,357      $4,204,200      $4,096,386     
                   
Net interest rate spread     3.55%     3.54%     3.38%
Net interest income and margin(1)   $39,761  3.94%   $38,242  3.87%   $35,305  3.63%
                            

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

 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
 
  For the Six Months Ended June 30,
  2018
 2017
   Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Earned/
Interest
Paid
  Average
Yield/
Rate
             
  (Dollars in thousands)
Assets
Interest-Earning Assets:            
Loans $3,143,129  $86,278  5.54% $3,054,013  $74,847  4.94%
Securities 716,757  9,292  2.61  625,676  6,511  2.10 
Other investments 35,948  641  3.60  20,930  385  3.71 
Interest earning deposits in financial institutions and federal funds sold 131,741  1,152  1.76  155,371  740  0.96 
Total interest-earning assets 4,027,575  97,363  4.87% 3,855,990  82,483  4.31%
Allowance for loan losses (34,561)     (29,865)    
Noninterest-earning assets 235,898      230,659     
Total assets $4,228,912      $4,056,784     
             
Liabilities and Shareholders’ Equity            
Interest-bearing liabilities:            
Interest-bearing demand and savings deposits $1,295,948  $5,487  0.85% $1,372,247  $4,208  0.62%
Certificates and other time deposits 1,277,934  8,783  1.39  1,317,359  7,393  1.13 
Securities sold under agreements to repurchase 5,070  4  0.16  3,978  3  0.15 
Other borrowed funds 312,414  2,898  1.87  189,494  839  0.89 
Subordinated debentures 47,885  2,188  9.21  47,463  2,092  8.89 
Total interest-bearing liabilities 2,939,251  19,360  1.33% 2,930,541  14,535  1.00%
             
Noninterest-bearing liabilities:            
Noninterest-bearing demand deposits 799,725      668,429     
Other liabilities 20,935      17,273     
Total liabilities 3,759,911      3,616,243     
Shareholders’ equity 469,001      440,541     
Total liabilities and shareholders’ equity $4,228,912      $4,056,784     
             
Net interest rate spread     3.54%     3.31%
Net interest income and margin(1)   $78,003  3.91%   $67,948  3.55%
                   

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

 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
 
Yield Trend 
 
  For the Quarter Ended
  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
Average yield on interest-earning assets:          
Loans, including fees 5.65% 5.42% 5.13% 5.11% 5.02%
Securities 2.66  2.57  2.47  2.42  2.32 
Other investments 3.45  3.78  4.09  3.37  3.45 
Interest-earning deposits in financial institutions and federal funds sold 1.90  1.61  1.35  1.27  1.06 
Total interest-earning assets 4.97% 4.77% 4.47% 4.48% 4.42%
           
Average rate on interest-bearing liabilities:          
Interest-bearing transaction and savings 0.94% 0.77% 0.74% 0.74% 0.66%
Certificates and other time deposits 1.46  1.31  1.24  1.19  1.16 
Other borrowed funds 2.05  1.64  1.20  1.11  1.01 
Subordinated debentures 9.28  9.15  8.86  8.84  8.90 
Total interest-bearing liabilities 1.42% 1.23% 1.12% 1.10% 1.04%
           
Net interest rate spread 3.55% 3.54% 3.35% 3.38% 3.38%
Net interest margin(1) 3.94% 3.87% 3.64% 3.65% 3.63%
                

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

   
Supplemental Yield Trend  
   
  For the Quarter Ended
  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
Average yield on loans, excluding fees and discounts(2) 5.12% 4.94% 4.74% 4.69% 4.59%
Average cost of interest-bearing deposits 1.20  1.03  0.98  0.96  0.90 
Average cost of total deposits, including noninterest-bearing 0.91  0.79  0.77  0.77  0.72 

 (2)       Average yield on loans, excluding fees and discounts, is equal to loan interest income divided by average loan principal.  

 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
 
Portfolio Composition
           
  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
 
 (Dollars in thousands)
Period End Balances                    
Loans held for investment:                    
Commercial & industrial $1,070,420  33.2% $1,038,715  33.1% $1,066,266  33.4% $926,382  30.2% $930,793  29.8%
Mortgage warehouse 244,041  7.6  185,849  5.9  220,230  6.9  222,468  7.2  213,539  6.8 
Real Estate:                    
Owner occupied commercial 436,153  13.5  435,366  13.9  415,230  13.0  408,398  13.3  407,317  13.0 
Commercial 1,092,036  33.9  1,068,832  34.2  1,067,779  33.5  1,068,742  34.8  1,109,237  35.5 
Construction, land & land development 130,533  4.1  148,732  4.7  164,952  5.2  193,856  6.3  201,992  6.5 
Residential mortgage 235,192  7.3  242,529  7.7  238,580  7.5  235,089  7.7  239,834  7.7 
Consumer and Other 13,733  0.4  16,313  0.5  17,448  0.5  16,826  0.5  20,643  0.7 
Total loans held for investment $3,222,108  100.0% $3,136,336  100.0% $3,190,485  100.0% $3,071,761  100.0% $3,123,355  100.0%
                     
Deposits:                    
Noninterest-bearing $824,753  24.1% $849,297  24.6% $803,210  23.6% $684,329  20.1% $683,656  20.3%
Interest-bearing transaction 234,653  6.8  248,680  7.2  200,769  5.9  201,860  5.9  207,106  6.2 
Money market 969,606  28.4  1,004,174  29.0  1,041,954  30.7  1,085,433  31.9  1,016,453  30.3 
Savings 76,996  2.2  85,119  2.5  88,878  2.6  96,221  2.8  100,748  3.0 
Certificates and other time deposits 1,320,042  38.5  1,266,457  36.7  1,262,332  37.2  1,340,410  39.3  1,352,459  40.2 
Total deposits $3,426,050  100.0% $3,453,727  100.0% $3,397,143  100.0% $3,408,253  100.0% $3,360,422  100.0%
                     
Loan to Deposit Ratio 94.0%   90.8%   93.9%   90.1%   92.9%  
                          


 
Green Bancorp, Inc.
Financial Highlights
(Unaudited)
 
Asset Quality
 
  As of and for the Quarter Ended
 For the Six Months
Ended

  Jun 30,
2018
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Jun 30,
2018
 Jun 30,
2017
 
 (Dollars in thousands)
Nonperforming Assets:              
Nonaccrual loans $52,885  $55,565  $47,892  $43,656  $43,257  $52,885  $43,257 
Accruing loans 90 or more days past due 907  5,412  375  4,828  2,651  907  2,651 
Restructured loans—nonaccrual 1,944  9,298  9,446  10,555  19,362  1,944  19,362 
Restructured loans—accrual 3,055  13,623  13,093  18,251  7,637  3,055  7,637 
Total nonperforming loans held for investment 58,791  83,898  70,806  77,290  72,907  58,791  72,907 
Nonperforming loans held for sale       14,552  1,700    1,700 
Real estate acquired through foreclosure 802  802  802  802  921  802  921 
Total nonperforming assets $59,593  $84,700  $71,608  $92,644  $75,528  $59,593  $75,528
 
Charge-offs:              
Commercial and industrial $(5,300) $(2,699) $(6,447) $(840) $(466) $(7,999) $(1,778)
Owner occupied commercial real estate     (126)   (961)   (961)
Construction, land & land development             (95)
Residential mortgage     (19)        
Other consumer (52) (24) (112) (10) (126) (76) (134)
Total charge-offs (5,352) (2,723) (6,704) (850) (1,553) (8,075) (2,968)
               
Recoveries:              
Commercial and industrial $4  $8  $6  $12  $73  $12  $658 
Owner occupied commercial real estate             4 
Commercial real estate 5  2  1  4  3  7  3 
Construction, land & land development     2  1      74 
Residential mortgage 290  15  27  21  16  305  73 
Other consumer 9  48  3  1  6  57  128 
Total recoveries 308  73  39  39  98  381  940 
               
Net charge-offs $(5,044) $(2,650) $(6,665) $(811) $(1,455) $(7,694) $(2,028)
               
Allowance for loan losses at end of period $35,086  $38,233  $31,220  $33,480  $31,991  $35,086  $31,991 
               
Asset Quality Ratios:              
Nonperforming assets to total assets 1.36% 2.00% 1.68% 2.23% 1.80% 1.36% 1.80%
Nonperforming loans to total loans held for investment 1.82  2.68  2.22  2.52  2.33  1.82  2.33 
Total classified assets to total regulatory capital 26.04  27.99  28.61  32.21  28.70  26.04  28.70 
Allowance for loan losses to total loans held for investment 1.09  1.22  0.98  1.09  1.02  1.09  1.02 
Net charge-offs to average loans outstanding 0.16  0.08  0.22  0.03  0.05  0.25  0.07 
                      

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

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

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

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

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

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

  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
 
  (Dollars in thousands, except per share data)
Tangible Common Equity
Total shareholders’ equity $479,493  $468,878  $463,795  $462,311  $451,741 
Adjustments:          
Goodwill 85,291  85,291  85,291  85,291  85,291 
Core deposit intangibles 7,881  8,187  8,503  8,835  9,215 
Tangible common equity $386,321  $375,400  $370,001  $368,185  $357,235 
Common shares outstanding(1) 37,289  37,163  37,103  37,096  37,035 
Book value per common share(1) $12.86  $12.62  $12.50  $12.46  $12.20 
Tangible book value per common share(1) $10.36  $10.10  $9.97  $9.93  $9.65 
                     

 (1)       Excludes the dilutive effect of common stock issuable upon exercise of outstanding stock options.  The number of exercisable options outstanding was 626,923 as of Jun 30, 2018; 627,059 as of Mar 31, 2018; 754,110 as of Dec 31, 2017; 467,257 as of Sep 30, 2017; and 465,281 as of Jun 30, 2017. 

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

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

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

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

           
  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
 
  (Dollars in thousands)
Tangible Common Equity
Total shareholders’ equity $479,493  $468,878  $463,795  $462,311  $451,741 
Adjustments:          
Goodwill 85,291  85,291  85,291  85,291  85,291 
Core deposit intangibles 7,881  8,187  8,503  8,835  9,215 
Tangible common equity $386,321  $375,400  $370,001  $368,185  $357,235 
Tangible Assets          
Total assets $4,391,677  $4,225,247  $4,261,916  $4,160,925  $4,185,697 
Adjustments:          
Goodwill 85,291  85,291  85,291  85,291  85,291 
Core deposit intangibles 7,881  8,187  8,503  8,835  9,215 
Tangible assets $4,298,505  $4,131,769  $4,168,122  $4,066,799  $4,091,191 
Tangible Common Equity to Tangible Assets 8.99% 9.09% 8.88% 9.05% 8.73%
                

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

Return on Average Tangible Common Equity.  Return on average tangible common equity is a non‑GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) average tangible common equity as average shareholders’ equity less average goodwill and average core deposit intangibles, net of accumulated amortization; (b) net income less the effect of intangible assets as net income plus amortization of core deposit intangibles, net of taxes; and (c) return (as described in clause (a)) divided by average tangible common equity (as described in clause (b)). For return on average tangible common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity. 

We believe that this measure is important to many investors in the marketplace who are interested in the return on common equity, exclusive of the impact of intangible assets.  Goodwill and other intangible assets, including core deposit intangibles, have the effect of increasing total shareholders’ equity, while not increasing our tangible common equity.  This measure is particularly relevant to acquisitive institutions who may have higher balances in goodwill and other intangible assets than non-acquisitive institutions. 

The following table reconciles, as of the dates set forth below, average tangible common equity to average common equity and net income excluding amortization of core deposit intangibles, net of tax to net income and presents our return on average tangible common equity: 

     
   As of and for the Quarter Ended   For the Six Months
Ended 
   Jun 30,
2018 
  Mar 31,
2018 
  Dec 31,
2017 
  Sep 30,
2017 
  Jun 30,
2017 
  Jun 30,
2018 
  Jun 30,
2017 
 
 (Dollars in thousands)
 Net income adjusted for amortization of core deposit intangibles                            
Net income $16,421  $9,362  $2,619  $11,407  $12,898  $25,783  $20,110 
Adjustments:              
Plus: Amortization of core deposit intangibles 306  316  330  380  380  622  760 
Less: Tax benefit at the statutory rate 64  66  116  133  133  130  266 
Net income (loss) adjusted for amortization of core deposit intangibles $16,663  $9,612  $2,833  $11,654  $13,145  $26,275  $20,604 
               
Average Tangible Common Equity              
Total average shareholders’ equity $471,958  $466,015  $465,859  $457,303  $445,334  $469,001  $440,541 
Adjustments:              
Average goodwill 85,291  85,291  85,291  85,291  85,291  85,291  85,291 
Average core deposit intangibles 8,029  8,343  8,661  9,065  9,461  8,185  9,652 
Average tangible common equity $378,638  $372,381  $371,907  $362,947  $350,582  $375,525  $345,598 
Return on Average Tangible Common Equity (Annualized) 17.65% 10.47% 3.02% 12.74% 15.04% 14.11% 12.02%
                      

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

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

We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in the allowance for loan losses less allowance for loan losses on acquired loans to total loans held for investment excluding acquired loans.  The acquired loans may have a premium or discount associated with them that includes a potential credit loss component with similar characteristics to the allowance for loan losses.  This measure reports the allowance for loan loss coverage to only those loans not accounted for pursuant to ASC topics 310-20 and 310-30 which may assist the investor in evaluating the allowance coverage of loans excluding acquired loans. 

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

  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
 
  (Dollars in thousands)
Allowance for loan losses less allowance for loan losses on acquired loans
Allowance for loan losses $35,086  $38,233  $31,220  $33,480  $31,991 
Less: Allowance for loan losses on acquired loans 934  1,698  1,242  1,326  1,462 
Total allowance for loan losses less allowance for loan losses on acquired loans $34,152  $36,535  $29,978  $32,154  $30,529 
           
Total loans held for investment excluding acquired loans          
Total loans held for investment $3,222,108  $3,136,336  $3,190,485  $3,071,761  $3,123,355 
Less: Carrying value of acquired loans accounted for under ASC Topics 310-20 and 310-30 343,144  451,609  513,994  586,522  646,601 
Total loans held for investment excluding acquired loans $2,878,964  $2,684,727  $2,676,491  $2,485,239  $2,476,754 
Allowance for loan losses less allowance for loan losses on acquired loans to total loans held for investment excluding acquired loans 1.19% 1.36% 1.12% 1.29% 1.23%
                

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

Allowance for Loan Losses plus Acquired Loan Net Discount to Total Loans Held for Investment adjusted for Acquired Loan Net Discount.  Allowance for loan losses plus acquired loan net discount to total loans held of investment adjusted for acquired loan net discount is a non‑GAAP measure used by management to evaluate the Company’s financial condition. We calculate: (a) allowance for loan losses plus acquired loan net discount as allowance for loan losses plus acquired loan net discount, net of accumulated amortization; (b) total loans held for investment adjusted for acquired loan net discount as total loans held for investment plus acquired loan net discount, net of accumulated amortization; and (c) allowance for loan losses plus acquired loan net discount to total loans held for investment adjusted for acquired loan net discount as allowance for loan losses plus acquired loan net discount (as calculated in clause (a)) divided by total loans held for investment adjusted for acquired loan net discount (as calculated in clause (b)).  For allowance for loan losses to total loans excluding acquired loans, the most directly comparable financial measure calculated in accordance with GAAP is allowance for loan losses to total loans. 

We believe that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in the allowance for loan losses plus the acquired loan net discount to total loans held for investment adjusted for the acquired loan net discount.  This measure reports the combined allowance for loan loss and acquired loan net discount (or premium) as a percentage of loans held for investment inclusive of the acquired loan net discount (or premium) which may assist the investor in evaluating allowance coverage on loans inclusive of additional discount or premium resulting from purchase accounting adjustments. 

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

  Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
 
  (Dollars in thousands)
Allowance for loan losses plus acquired loan net discount
Allowance for loan losses at end of period $35,086  $38,233  $31,220  $33,480  $31,991 
Plus: Net discount on acquired loans 1,627  3,495  4,371  5,112  6,240 
Total allowance plus acquired loan net discount $36,713  $41,728  $35,591  $38,592  $38,231 
           
Total loans held for investment adjusted for acquired loan net discount          
Total loans held for investment $3,222,108  $3,136,336  $3,190,485  $3,071,761  $3,123,355 
Plus: Net discount on acquired loans 1,627  3,495  4,371  5,112  6,240 
Total loans held for investment adjusted for acquired loan net discount $3,223,735  $3,139,831  $3,194,856  $3,076,873  $3,129,595 
Allowance for loan losses plus acquired loan net discount loans to total loans held for investment adjusted for acquired loan net discount 1.14% 1.33% 1.11% 1.25% 1.22%
                

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

Operating Earnings, Pre-tax, Pre-provision Operating Earnings and performance metrics calculated using Operating Earnings and Pre-tax, Pre-provision Operating Earnings, including Diluted Operating Earnings per Share, Operating Return on Average Assets, Operating Return on Average Tangible Common Equity and Operating Efficiency Ratio.  Operating earnings and pre-tax, pre-provision operating earnings are non GAAP measures used by management to evaluate the Company’s financial performance.  We calculate (a) operating earnings as net income (loss) plus loss (gain) on sale of securities available-for-sale, net, plus loss (gain) on held for sale loans, net, plus stock based compensation expense for performance option vesting, plus shelf and secondary offering expenses.  We calculate (b) pre-tax, pre-provision operating earnings as (a) operating earnings plus provision (benefit) for income taxes, plus provision for loan losses. 

We believe that these measures and the operating metrics calculated utilizing these measures are important to management and many investors in the marketplace who are interested in understanding the ongoing operating performance of the company and provide meaningful comparisons to its peers. 

The following tables reconcile, as of the dates set forth below, operating earnings and pre-tax, pre-provision operating earnings and related metrics: 

                           
  As of and for the Quarter Ended For the Six Months
Ended
  Jun 30,
2018 
 Mar 31,
2018
 Dec 31,
2017
 Sep 30,
2017
 Jun 30,
2017
 Jun 30,
2018
 Jun 30,
2017
 
 (Dollars in thousands)
Operating Earnings                          
Net Income (loss) $16,421  $9,362  $2,619  $11,407  $12,898  25,783  20,110 
Plus: Loss (gain) on sale of securities available-for-sale, net (66)     332  (294) (66) (294)
Plus: Loss (gain) on held for sale loans, net     1,098  1,294  (222)   (84)
Plus: Stock based compensation expense for performance option vesting     3,051         
Plus: Shelf and secondary offering expenses 337  397        734   
Less: Tax benefit at the statutory rate 57  83  $1,452  569  (181) $140  $(132)
Net operating earnings $16,635  $9,676  $5,316  $12,464  $12,563  $26,311  $19,864 
               
Weighted average diluted shares outstanding 37,646  37,586  37,393  37,332  37,264  37,613  37,234 
Diluted earnings per share $0.44  $0.25  $0.07  $0.31  $0.35  0.69  0.54 
Diluted operating earnings per share 0.44  0.26  0.14  0.33  0.34  0.70  0.53 
               
Pre-Tax, Pre-Provision Operating Earnings              
Net Income (loss) $16,421  $9,362  $2,619  $11,407  $12,898  $25,783  $20,110 
Plus: Provision (benefit) for income taxes 4,283  2,322  10,142  5,895  6,985  6,605  10,927 
Plus: Provision for loan losses 1,897  9,663  4,405  2,300  1,510  11,560  7,655 
Plus: Loss (gain) on sale of securities available-for-sale, net (66)     332  (294) (66) (294)
Plus: Loss (gain) on held for sale loans, net     1,098  1,294  (222)   (84)
Plus: Stock based compensation expense for performance option vesting     3,051         
Plus: Shelf and secondary offering expenses 337  397        734   
Net pre-tax, pre-provision operating earnings $22,872  $21,744  $21,315  $21,228  $20,877  $44,616  $38,314 
               
Total average assets $4,253,357  $4,204,200  $4,204,105  $4,131,706  $4,096,386  $4,228,912  $4,056,784 
Pre-tax, pre-provision operating return on average assets (annualized) 2.15% 2.10% 2.01% 2.04% 2.04% 2.12% 1.90%
                      

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

                           
  As of and for the Quarter Ended For the Six Months
Ended
   Jun 30, 2018   Mar 31, 2018   Dec 31, 2017   Sep 30, 2017   Jun 30, 2017  Jun 30, 2018  Jun 30, 2017 
 
 (Dollars in thousands)
Average Total Assets $4,253,357  $4,204,200  $4,204,105  $4,131,706  $4,096,386  4,228,912  4,056,784 
Return on average assets 1.54% 0.90% 0.25% 1.10% 1.26% 1.23% 1.00%
Operating return on average assets (annualized) 1.56% 0.93% 0.50% 1.20% 1.23% 1.25% 0.99%
               
Operating earnings adjusted for amortization of core deposit intangibles              
Operating earnings $16,635  $9,676  $5,316  $12,464  $12,563  $26,311  $19,864 
Adjustments:              
Plus: Amortization of core deposit intangibles 306  316  330  380  380  622  760 
Less: Tax benefit at the statutory rate 64  66  116  133  133  130  266 
Operating earnings adjusted for amortization of core deposit intangibles $16,877  $9,926  $5,530  $12,711  $12,810  $26,803  $20,358 
               
Average Tangible Common Equity              
Total average shareholders’ equity $471,958  $466,015  $465,859  $457,303  $445,334  469,001  440,541 
Adjustments:              
Average goodwill 85,291  85,291  85,291  85,291  85,291  85,291  85,291 
Average core deposit intangibles 8,029  8,343  8,661  9,065  9,461  8,185  9,652 
Average tangible common equity $378,638  $372,381  $371,907  $362,947  $350,582  $375,525  $345,598 
Operating return on average tangible common equity (Annualized), operating earnings 17.88% 10.81% 5.90% 13.89% 14.66% 14.39% 11.88%
               
Efficiency ratio 50.05% 50.81% 57.87% 50.59% 47.83% 50.42% 51.11%
Operating efficiency ratio 49.45% 49.90% 47.69% 46.49% 49.09% 49.67% 51.59%