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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, 2018compared 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 %
                                           

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Source: Green Bancorp, Inc.