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Green Bancorp, Inc. Reports First Quarter 2017 Financial Results

2017 First Quarter Highlights

  • First quarter 2017 net income totaled $7.2 million, or $0.19 per diluted common share
  • Return on average assets was 0.73% for Q1 2017, an increase from 0.25% in Q4 2016, and pre-tax pre-provision return on average assets was 1.75% for Q1 2017, an increase from 1.36% in Q4 2016
  • Efficiency ratio of 54.64% for Q1 2017, an improvement of 10.4% from Q4 2016
  • Nonperforming assets were reduced by $18.7 million, or 17.7%, during Q1 2017
  • Total deposits increased $41.4 million in Q1 2017, with the growth bringing noninterest-bearing deposits to 20.7% of total deposits
  • Tangible book value per common share increased to $9.25

HOUSTON, April 27, 2017 (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 first quarter ended March 31, 2017. The Company reported net income for the quarter of $7.2 million, or $0.19 per diluted common share.

Manny Mehos, Chairman and Chief Executive Officer of Green Bancorp, said, "The MARS initiative is behind us and we can now turn our focus to growing the earnings power of the bank, clear signs of which can be seen in our first quarter results. Our credit quality showed strong improvement in the quarter, provision expense is quickly returning to more normalized levels, and we are poised to return to loan growth through the remainder of the year. We are finally back to the business of banking.”

Geoff Greenwade, President of Green Bancorp and Chief Executive Officer of Green Bank, commented, “I am very pleased with our first quarter results and the outlook for the balance of 2017. The Houston economy has weathered the oil downturn well, while the Dallas economy has remained robust and is a focus for growth as we look to balance our business between these two major markets. Additionally, we have had strong success growing our noninterest income which has been a priority of the bank.”

Results of Operations - Quarter Ended March 31, 2017 compared with Quarter Ended December 31, 2016

Net income for the quarter ended March 31, 2017 was $7.2 million, an increase of $4.7 million, or 183.5%, compared with $2.5 million for the quarter ended December 31, 2016. Net income per diluted common share was $0.19 for the quarter ended March 31, 2017, compared with $0.07 for the fourth quarter of 2016. Returns on average assets and average common equity, each on an annualized basis, for the three months ended March 31, 2017 were 0.73% and 6.71%, respectively. Green Bancorp’s efficiency ratio, which represents noninterest expense divided by the sum of net interest income and noninterest income, was 54.64% for the three months ended March 31, 2017. The Company recorded a provision for loan losses of $6.1 million, which included $6.0 million in reserves on the energy portfolio.

Net interest income before provision for loan losses for the quarter ended March 31, 2017 increased 1.4%, or $459 thousand, to $32.6 million, compared with $32.2 million for the quarter ended December 31, 2016. The increase in net interest income was primarily due to the full quarter impact of the December 2016 rate increase, an increase of $1.4 million, or 124.4%, in interest earned on securities due to a $255.7 million, or 80.8%, increase in the average balance and a 0.38% increase in the average yield, offset by an increase of $585 thousand in interest expense on subordinated debentures and notes due to the full quarter of expense for the debt issued on December 8, 2016 and two fewer days in the quarter ended March 31, 2017 compared to the quarter ended December 31, 2016. The net interest margin for the quarter ended March 31, 2017 of 3.47% increased from 3.40% for the quarter ended December 31, 2016. The improvement in net interest margin was due to the factors discussed above.

Noninterest income for the quarter ended March 31, 2017 was $5.5 million, an increase of $3.3 million, or 153.5%, from $2.2 million for the quarter ended December 31, 2016. The increase was primarily due to a $1.5 million increase in gain on sale of guaranteed portion of loans due to timing of loan sales, a $1.3 million decrease in loss on sale of held for sale loans and a $511 thousand increase in customer service fees due to continued growth in treasury management service fees.

Noninterest expense for the quarter ended March 31, 2017 was $20.8 million, a decrease of $114 thousand, or 0.5%, from $21.0 million for the quarter ended December 31, 2016. The decrease was primarily due to a decrease in loan-related expenses of $864 thousand and a decrease in ORE expenses of $90 thousand due to the reduction in nonperforming assets, offset by an increase in salaries and employee benefits.

The pre-tax earnings impact in the quarter ended March 31, 2017 related to the managed asset reduction strategies was $560 thousand, which included a $138 thousand loss on the sale of energy loans held for sale and $422 thousand in expenses related to ORE and legal, administrative and other loan expenses. This amount is reduced from $2.9 million during the quarter ended December 31, 2016, which included a $1.4 million loss on the sale of energy loans held for sale and $1.5 million in loan and ORE expenses.

Loans held for investment at March 31, 2017 were $3.0 billion, a decrease of $85.9 million, or 2.8%, when compared with December 31, 2016 and average loans held for investment decreased $27.7 million, or 0.9%, from the prior period. The decrease is primarily due to a $47.8 million decrease in construction, land and land development loans, a $19.1 million decrease in energy loans, $16.8 million in reductions of mortgage warehouse balances and a $14.7 million reduction in commercial real estate loans. During the first quarter of 2017, the Company resolved $25.7 million in energy-related loans, which included $6.6 million in loans held for sale. At March 31, 2017, energy loans totaled $76.3 million, or 2.5% of total loans, excluding loans held for sale.

Loans held for sale at March 31, 2017 were $17.4 million, a decrease of $6.6 million, or 27.7%, compared with $24.0 million at December 31, 2016. The loans held for sale are energy loans and the reduction from the prior quarter is due to sales during the quarter ended March 31, 2017.

During the quarter ended March 31, 2017, securities increased $279.3 million, or 90.1%, due to the purchase of $298.4 million in securities, which utilized excess cash. Premises and equipment increased $4.9 million, or 19.2%, primarily due to the March 2017 receipt of title by Green Bank for an office building that is being held for future use as an operations center.

Deposits at March 31, 2017 were $3.4 billion, an increase of $41.4 million, or 1.2%, compared with December 31, 2016, comprised of increases of $55.4 million in noninterest-bearing deposits and $45.8 million in interest-bearing transaction and savings deposits, offset by a $59.8 million decrease in time deposits. Average deposits increased $2.3 million, or 0.1%, for the quarter ended March 31, 2017, compared with the prior quarter.

Asset Quality - Quarter Ended March 31, 2017 compared with Quarter Ended December 31, 2016

Nonperforming assets totaled $87.5 million, or 2.15% of period end total assets, at March 31, 2017, a decrease of $18.8 million compared to $106.3 million, or 2.64% of period end total assets, at December 31, 2016, primarily due to the resolution of $7.3 million in nonaccrual loans and the sale of $6.6 million in nonperforming energy loans held for sale. Accruing loans classified as troubled debt restructures and included in the nonperforming asset totals were $11.1 million at March 31, 2017, compared with $16.5 million at December 31, 2016. Real estate acquired through foreclosure totaled $1.4 million at March 31, 2017, a decrease of $3.9 million, or 74.0%, compared with December 31, 2016.

The allowance for loan losses was 1.06% of total loans at March 31, 2017, compared with 0.85% of total loans at December 31, 2016. The increase in the allowance for loan losses as a percentage of total loans when compared to the prior period was due primarily to a $6.3 million increase in specific reserves, primarily related to the remaining energy portfolio. At March 31, 2017, the Company’s allowance for loans losses to total loans, excluding acquired loans that are accounted for under ASC 310-20 and ASC 310-30 and their related allowance, was 1.28%. Further, the allowance for loan losses plus acquired loan net discount to total loans adjusted for acquired loan net discount was 1.30% as of March 31, 2017.

The Company recorded a provision for loan losses of $6.1 million for the quarter ended March 31, 2017 down from the $9.5 million provision for the loan losses recorded for the quarter ended December 31, 2016. The first quarter of 2017 provision includes $6.0 million in reserves related to energy loans, as compared to the fourth quarter, which included $8.6 million in reserves related to energy loans.

Net charge-offs were $573 thousand, or 0.02% of total loans, for the quarter ended March 31, 2017, compared with net charge-offs of $19.0 million, or 0.63% of total loans, for the quarter ended December 31, 2016, which included $16.4 million in partial charge-offs related to energy loans.

Results of operations - Quarter Ended March 31, 2017 compared with Quarter Ended March 31, 2016

Net income for the quarter ended March 31, 2017 was $7.2 million, compared with net income of $1.8 million for the same period in 2016. Net income per diluted common share was $0.19 for the quarter ended March 31, 2017, compared with net income per diluted common share of $0.05 for the same period in 2016. The Company recorded a provision for loan losses of $6.1 million, which includes $6.0 million in reserves on the energy portfolio. The provision decreased $9.9 million from the same period in 2016.

Net interest income before provision for loan losses for the quarter ended March 31, 2017 was $32.6 million, a decrease of $1.6 million, or 4.6%, compared with $34.2 million during the same period in 2016. The decrease was primarily due to an increase in interest expense on deposits of $1.7 million, or 42.7%, a $974 thousand, or 2.6%, decrease in the interest earned on loans, and an $804 thousand increase in expense on subordinated notes and debentures, offset by a $1.5 million increase in interest income on securities. The net interest margin for the quarter ended March 31, 2017 was 3.47%, compared with 3.87% for the same period in 2016.

Noninterest income for the quarter ended March 31, 2017 was $5.5 million, an increase of $1.3 million, or 32.3%, compared with $4.2 million for the same period in 2016. This increase was primarily due to an $862 thousand increase in customer service fees and a $789 thousand increase in gain on sale of guaranteed portion of loans, offset by a $179 thousand decrease in gain/loss on sale of held for sale loans.

Noninterest expense for the quarter ended March 31, 2017 was $20.8 million, an increase of $1.4 million, or 6.9%, compared with $19.5 million for the same period in 2016. The increase was primarily due to a $475 thousand increase in professional and regulatory fees, a $427 thousand increase in salaries and employee benefits and a $357 thousand increase in loan-related expenses.

Loans held for investment at March 31, 2017 were $3.0 billion, a decrease of $155.9 million, or 4.9%, compared with $3.2 billion at March 31, 2016, primarily due to the resolution of nonperforming loans offset by new loan production. Average loans held for investment decreased $110.7 million to $3.0 billion for the quarter ended March 31, 2017, compared with $3.1 billion for the same period in 2016.

Loans held for sale at March 31, 2017 were $17.4 million, comprised of energy loans transferred to held for sale during 2016.

Total energy loans have been reduced to $93.7 million, comprised of $76.3 million in loans held for investment and $17.4 million in loans held for sale, at March 31, 2017 from $292.6 million at December 31, 2015.

Deposits at March 31, 2017 were $3.4 billion, an increase of $359.1 million, or 11.7%, compared with March 31, 2016, primarily due to continued opportunities for our portfolio bankers to generate deposit growth within our target markets. Average deposits increased 11.2%, or $338.4 million, to $3.4 billion for the quarter ended March 31, 2017, compared with the same period of 2016. Average noninterest-bearing deposits for the quarter ended March 31, 2017 were $644.2 million, an increase of $40.0 million, or 6.6%, compared with the same period in 2016.

Asset Quality - Quarter Ended March 31, 2017 compared with Quarter Ended March 31, 2016

Nonperforming assets totaled $87.5 million, or 2.15% of period end total assets, at March 31, 2017, an increase of $10.0 million compared to $77.5 million, or 2.01% of period end total assets, at March 31, 2016. The increase was primarily due to energy-related loan migration to nonperforming, the nonperforming loans that were acquired through the Patriot acquisition and subsequent migration in the acquired portfolio. Accruing loans classified as troubled debt restructures and included in the nonperforming asset totals were $11.1 million at March 31, 2017, compared with $5.6 million at March 31, 2016. Real estate acquired through foreclosure totaled $1.4 million at March 31, 2017, a decrease of $7.9 million, or 85.3%, compared with March 31, 2016.

The allowance for loan losses was 1.06% of total loans at March 31, 2017, compared with 1.25% of total loans at March 31, 2016. The decrease in the allowance for loan losses as a percentage of total loans when compared with March 31, 2016 was due primarily to a decrease in specific reserves, as a result of charge-offs in the energy portfolio.

The Company recorded a provision for loan losses of $6.1 million for the quarter ended March 31, 2017 down from the $16.0 million provision for loan losses recorded for the quarter ended March 31, 2016.

Net charge-offs were $573 thousand for the quarter ended March 31, 2017, compared with net charge-offs of $9.2 million for the quarter ended March 31, 2016, which was primarily due to charge-offs related to energy loans.

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 excluding acquired loans, allowance for loan losses plus acquired loans net discount to total loans adjusted for acquired loan net discount, and pre-tax, pre-provision return on average assets. 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

As previously announced, Green Bancorp will hold a conference call today, April 27, 2017, to discuss its first quarter 2017 results at 5:00 p.m. (Eastern Time). The conference call can be accessed live over the phone by dialing 1-877-407-0789, or for international callers, 1-201-689-8562 and requesting to be joined to the Green Bancorp First Quarter 2017 Earnings Conference Call. A replay will be available starting at 8:00 p.m. (Eastern Time) on April 27, 2017 and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the replay is 13659233. The replay will be available until 11:59 p.m. (Eastern Time) on May 4, 2017.

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

To learn more about Green Bancorp, please visit the Company's 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: difficulties and delays in integrating the Green Bancorp and Patriot businesses or fully realizing cost savings and other benefits; business disruption following the merger; 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.

Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016
(Dollars in thousands)
Period End Balance Sheet Data:
Cash and cash equivalents $ 255,581 $ 389,007 $ 313,366 $ 199,950 $ 171,421
Securities 589,468 310,124 318,289 237,029 302,838
Other investments 19,057 18,649 18,621 18,586 24,744
Loans held for sale 17,350 23,989 38,934 6,253 -
Loans held for investment 3,012,275 3,098,220 3,047,618 3,189,436 3,168,183
Allowance for loan losses (31,936) (26,364) (35,911) (47,420) (39,714)
Goodwill 85,291 85,291 85,291 85,291 85,291
Core deposit intangibles, net 9,595 9,975 10,356 10,758 11,160
Real estate acquired through foreclosure 1,356 5,220 2,801 6,216 9,230
Premises and equipment, net 30,604 25,674 26,164 26,706 27,252
Other assets 83,359 85,037 104,307 94,642 89,004
Total assets $ 4,072,000 $ 4,024,822 $ 3,929,836 $ 3,827,447 $ 3,849,409
Noninterest-bearing deposits $ 705,480 $ 650,064 $ 618,408 $ 583,347 $ 592,690
Interest-bearing transaction and savings deposits 1,404,988 1,359,187 1,304,547 1,208,960 1,069,931
Certificates and other time deposits 1,305,670 1,365,449 1,392,944 1,414,954 1,394,398
Total deposits 3,416,138 3,374,700 3,315,899 3,207,261 3,057,019
Securities sold under agreements to repurchase 4,316 3,493 2,855 3,227 3,544
Other borrowed funds 150,000 150,000 150,000 150,000 328,968
Subordinated debentures and subordinated notes 47,304 47,492 13,502 13,397 13,292
Other liabilities 16,954 18,655 21,365 18,621 15,676
Total liabilities 3,634,712 3,594,340 3,503,621 3,392,506 3,418,499
Shareholders' equity 437,288 430,482 426,215 434,941 430,910
Total liabilities and equity $ 4,072,000 $ 4,024,822 $ 3,929,836 $ 3,827,447 $ 3,849,409


For the Quarter Ended
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
(Dollars in thousands)
Income Statement Data:
Interest income:
Loans, including fees $ 36,371 $ 36,469 $ 37,897 $ 37,711 $ 37,345
Securities 2,583 1,151 989 988 1,081
Other investments 188 184 199 205 173
Federal funds sold 1 - 1 1 1
Deposits in financial institutions 408 522 346 157 124
Total interest income 39,551 38,326 39,432 39,062 38,724
Interest expense:
Transaction and savings deposits 1,978 1,750 1,537 1,312 1,150
Certificates and other time deposits 3,607 3,766 3,791 3,702 2,763
Subordinated debentures and subordinated notes 1,041 456 246 243 237
Other borrowed funds 282 170 183 264 346
Total interest expense 6,908 6,142 5,757 5,521 4,496
Net interest income 32,643 32,184 33,675 33,541 34,228
Provision for loan losses 6,145 9,500 28,200 11,000 16,000
Net interest income after provision for loan losses 26,498 22,684 5,475 22,541 18,228
Noninterest income:
Customer service fees 2,266 1,755 1,523 1,447 1,404
Loan fees 834 750 806 719 699
Gain (loss) on sale of held for sale loans, net (138) (1,445) - - 41
Gain on sale of guaranteed portion of loans, net 1,927 379 968 858 1,138
Other 606 729 794 758 873
Total noninterest income 5,495 2,168 4,091 3,782 4,155
Noninterest expense:
Salaries and employee benefits 12,406 11,804 11,925 11,461 11,979
Occupancy 1,997 2,060 2,194 2,035 2,030
Professional and regulatory fees 2,397 2,421 2,180 2,435 1,922
Data processing 908 1,023 921 945 970
Software license and maintenance 489 571 580 528 476
Marketing 199 232 283 301 298
Loan related 600 1,464 1,287 801 243
Real estate acquired by foreclosure, net 292 382 2,105 381 300
Other 1,551 996 1,908 1,788 1,269
Total noninterest expense 20,839 20,953 23,383 20,675 19,487
Income (loss) before income taxes 11,154 3,899 (13,817) 5,648 2,896
Provision (benefit) for income taxes 3,942 1,355 (4,831) 2,017 1,057
Net income (loss) $ 7,212 $ 2,544 $ (8,986) $ 3,631 $ 1,839


As of and For the Quarter Ended
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
(Dollars in thousands, except per share data)
Per Share Data (Common Stock):
Basic earnings (loss) per common share $ 0.19 $ 0.07 $ (0.25) $ 0.10 $ 0.05
Diluted earnings (loss) per share 0.19 0.07 (0.25) 0.10 0.05
Book value per common share 11.81 11.64 11.62 11.88 11.77
Tangible book value per common share (1) 9.25 9.06 9.01 9.25 9.14
Common Stock Data:
Shares outstanding at period end 37,015 36,988 36,683 36,620 36,610
Weighted average basic shares outstanding for the period 36,990 36,731 36,657 36,613 36,706
Weighted average diluted shares outstanding for the period 37,238 36,937 36,657 36,613 36,709
Selected Performance Metrics:
Return on average assets(2) 0.73% 0.25% (0.92)% 0.38% 0.20%
Pre-tax, pre-provision return on average assets(1)(2) 1.75 1.36 1.49 1.74 1.99
Return on average equity(2) 6.71 2.37 (8.23) 3.35 1.68
Return on average tangible common equity(1)(2) 8.88 3.38 (10.36) 4.57 2.43
Efficiency ratio 54.64 60.99 61.92 55.39 50.77
Loans to deposits ratio 88.18 91.81 91.91 99.44 103.64
Noninterest expense to average assets(2) 2.10 2.10 2.39 2.19 2.08
Green Bancorp Capital Ratios:
Average shareholders’ equity to average total assets 10.8% 10.8% 11.2 % 11.4% 11.7%
Tier 1 capital to average assets (leverage) 9.1 9.1 9.1 9.6 9.5
Common equity tier 1 capital 10.0 9.7 9.5 9.5 9.4
Tier 1 capital to risk-weighted assets 10.4 10.1 9.8 9.8 9.7
Total capital to risk-weighted assets 12.3 11.8 10.9 11.1 10.8
Tangible common equity to tangible assets (1) 8.6 8.5 8.6 9.1 8.9
Green Bank Capital Ratios:
Tier 1 capital to average assets (leverage) 9.1% 9.0% 9.0 % 9.4% 9.4%
Common equity tier 1 capital 10.4 10.0 9.7 9.6 9.5
Tier 1 capital to risk-weighted assets 10.4 10.0 9.7 9.6 9.5
Total capital to risk-weighted assets 11.2 10.8 10.7 10.9 10.6

_______________________________________
(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.

For the Quarter Ended
March 31, 2017 December 31, 2016 March 31, 2016
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 $ 3,035,146 $ 36,371 4.86% $ 3,077,242 $ 36,469 4.71% $ 3,124,711 $ 37,345 4.81%
Securities 571,875 2,583 1.83 316,223 1,151 1.45 312,861 1,081 1.39
Other investments 18,908 188 4.03 18,627 184 3.93 22,498 173 3.09
Federal funds sold 424 1 0.96 967 - - 2,507 1 0.16
Interest earning deposits in financial institutions 185,994 408 0.89 355,400 522 0.58 94,902 124 0.53
Total interest-earning assets 3,812,347 39,551 4.21% 3,768,459 38,326 4.05% 3,557,479 38,724 4.38%
Allowance for loan losses (27,669) (34,994) (33,080)
Noninterest-earning assets 232,066 240,779 245,025
Total assets $ 4,016,744 $ 3,974,244 $ 3,769,424
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand and savings deposits $ 1,382,680 $ 1,978 0.58% $ 1,330,734 $ 1,750 0.52% $ 1,066,999 $ 1,150 0.43%
Certificates and other time deposits 1,325,329 3,607 1.10 1,382,930 3,766 1.08 1,342,562 2,763 0.83
Securities sold under agreements to repurchase 3,494 1 0.12 3,469 - - 4,121 2 0.20
Other borrowed funds 160,778 281 0.71 150,000 170 0.45 280,838 344 0.49
Subordinated debentures and subordinated notes 47,550 1,041 8.88 22,400 456 8.10 13,244 237 7.20
Total interest-bearing liabilities 2,919,831 6,908 0.96% 2,889,533 6,142 0.85% 2,707,764 4,496 0.67%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits 644,212 636,218 604,261
Other liabilities 17,006 20,943 16,654
Total liabilities 3,581,049 3,546,694 3,328,679
Shareholders’ equity 435,695 427,550 440,745
Total liabilities and shareholders’ equity $ 4,016,744 $ 3,974,244 $ 3,769,424
Net interest rate spread 3.25% 3.20% 3.71%
Net interest income and margin(1) $ 32,643 3.47% $ 32,184 3.40% $ 34,228 3.87%

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

Yield Trend

For the Quarter Ended
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Average yield on interest-earning assets:
Loans, including fees 4.86% 4.71% 4.77% 4.76% 4.81%
Securities 1.83 1.45 1.58 1.49 1.39
Other investments 4.03 3.93 4.26 3.36 3.09
Federal funds sold 0.96 - 0.51 0.34 0.16
Interest-earning deposits in financial institutions 0.89 0.58 0.51 0.52 0.53
Total interest-earning assets 4.21% 4.05% 4.24% 4.36% 4.38%
Average rate on interest-bearing liabilities:
Interest bearing transaction and savings 0.58% 0.52% 0.49% 0.46% 0.43%
Certificates and other time deposits 1.10 1.08 1.07 1.05 0.83
Other borrowed funds 0.70 0.44 0.48 0.63 0.49
Subordinated debentures 8.88 8.10 7.28 7.32 7.20
Total interest-bearing liabilities 0.96% 0.85% 0.81% 0.80% 0.67%
Net interest rate spread 3.25% 3.20% 3.43% 3.56% 3.71%
Net interest margin (1) 3.47% 3.40% 3.62% 3.74% 3.87%

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

Supplemental Yield Trend

For the Quarter Ended
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Average yield on loans, excluding fees (2) 4.42% 4.29% 4.20% 4.29% 4.29%
Average cost of interest-bearing deposits 0.84 0.81 0.80 0.78 0.65
Average cost of total deposits, including noninterest-bearing 0.68 0.66 0.65 0.64 0.52

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

Portfolio Composition

Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016
(Dollars in thousands)
Period End Balances
Commercial & industrial $ 1,012,982 33.6% $ 1,053,925 34.0% $ 1,004,414 33.0% $ 1,128,541 35.4% $ 1,130,710 35.7%
Real Estate:
Owner occupied commercial 415,595 13.8 394,210 12.7 387,032 12.7 366,587 11.5 367,507 11.6
Commercial 1,129,031 37.5 1,143,751 36.9 1,109,642 36.4 1,078,434 33.8 1,020,399 32.2
Construction, land & land development 201,946 6.7 249,704 8.1 278,323 9.1 334,925 10.5 356,207 11.2
Residential mortgage 241,839 8.0 245,191 7.9 256,840 8.4 270,337 8.5 280,236 8.9
Consumer and Other 10,882 0.4 11,439 0.4 11,367 0.4 10,612 0.3 13,124 0.4
Total loans held for investment $ 3,012,275 100.0% $ 3,098,220 100.0% $ 3,047,618 100.0% $ 3,189,436 100.0% $ 3,168,183 100.0%
Deposits:
Noninterest-bearing $ 705,480 20.7% $ 650,064 19.3% $ 618,408 18.6% $ 583,347 18.2% $ 592,690 19.4%
Interest-bearing transaction 208,213 6.1 168,994 5.0 171,457 5.2 164,584 5.1 178,470 5.8
Money market 1,089,699 31.9 1,084,350 32.1 1,019,901 30.8 926,159 28.9 760,992 24.9
Savings 107,076 3.1 105,843 3.1 113,189 3.4 118,217 3.7 130,469 4.3
Certificates and other time deposits 1,305,670 38.2 1,365,449 40.5 1,392,944 42.0 1,414,954 44.1 1,394,398 45.6
Total deposits $ 3,416,138 100.0% $ 3,374,700 100.0% $ 3,315,899 100.0% $ 3,207,261 100.0% $ 3,057,019 100.0%
Loan to Deposit Ratio 88.2% 91.8% 91.9% 99.4% 103.6%

Asset Quality

As of and for the Quarter Ended
Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
(Dollars in thousands)
Nonperforming Assets:
Nonaccrual loans $ 59,338 $ 66,673 $ 84,491 $ 66,628 $ 49,264
Accruing loans 90 or more days past due 5,500 1,169 3,664 14,320 12,147
Restructured loans—nonaccrual 10,276 10,133 8,961 853 1,270
Restructured loans—accrual 11,068 16,518 5,378 5,469 5,616
Total nonperforming loans 86,182 94,493 102,494 87,270 68,297
Nonperforming loans held for sale - 6,598 24,773 - -
Real estate acquired through foreclosure 1,356 5,220 2,801 6,216 9,230
Total nonperforming assets $ 87,538 $ 106,311 $ 130,068 $ 93,486 $ 77,527
Charge-offs:
Commercial and industrial $ (1,312) $ (17,378) $ (37,789) $ (3,336) $ (9,880)
Owner occupied commercial real estate - (250) (978) (177) -
Commercial real estate - - (492) - -
Construction, land & land development (95) (1,631) - - -
Residential mortgage - (30) (512) - (6)
Other consumer (8) (15) (54) (37) (20)
Total charge-offs (1,415) (19,304) (39,825) (3,550) (9,906)
Recoveries:
Commercial and industrial $ 585 $ 206 $ 37 $ 175 $ 582
Owner occupied commercial real estate 4 - 17 - -
Commercial real estate - - - - -
Construction, land & land development 74 5 6 47 26
Residential mortgage 57 33 45 20 57
Other consumer 122 13 11 14 8
Total recoveries 842 257 116 256 673
Net (charge-offs) recoveries $ (573) $ (19,047) $ (39,709) $ (3,294) $ (9,233)
Allowance for loan losses at end of period $ 31,936 $ 26,364 $ 35,911 $ 47,420 $ 39,714
Asset Quality Ratios:
Nonperforming assets to total assets 2.15 % 2.64 % 3.31 % 2.44 % 2.01 %
Nonperforming loans to total loans 2.86 3.05 3.36 2.74 2.16
Total classified assets to total regulatory capital 38.00 39.09 54.12 49.03 50.93
Allowance for loan losses to total loans 1.06 0.85 1.18 1.49 1.25
Net charge-offs (recoveries) to average loans outstanding 0.02 0.63 1.26 0.10 0.30

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:

Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016
(Dollars in thousands, except per share data)
Tangible Common Equity
Total shareholders’ equity $ 437,288 $ 430,482 $ 426,215 $ 434,941 $ 430,910
Adjustments:
Goodwill 85,291 85,291 85,291 85,291 85,291
Core deposit intangibles 9,595 9,975 10,356 10,758 11,160
Tangible common equity $ 342,402 $ 335,216 $ 330,568 $ 338,892 $ 334,459
Common shares outstanding (1) 37,015 36,988 36,683 36,620 36,610
Book value per common share (1) $ 11.81 $ 11.64 $ 11.62 $ 11.88 $ 11.77
Tangible book value per common share (1) $ 9.25 $ 9.06 $ 9.01 $ 9.25 $ 9.14

_______________________________________
(1)
Excludes the dilutive effect of common stock issuable upon exercise of outstanding stock options. The number of exercisable options outstanding was 472,653 as of Mar 31, 2017; 493,241 as of Dec 31, 2016; 792,619 as of Sep 30, 2016; 785,352 as of Jun 30, 2016; and 874,466 as of Mar 31, 2016.

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:

Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016
(Dollars in thousands)
Tangible Common Equity
Total shareholders’ equity $ 437,288 $ 430,482 $ 426,215 $ 434,941 $ 430,910
Adjustments:
Goodwill 85,291 85,291 85,291 85,291 85,291
Core deposit intangibles 9,595 9,975 10,356 10,758 11,160
Tangible common equity $ 342,402 $ 335,216 $ 330,568 $ 338,892 $ 334,459
Tangible Assets
Total assets $ 4,072,000 $ 4,024,822 $ 3,929,836 $ 3,827,447 $ 3,849,409
Adjustments:
Goodwill 85,291 85,291 85,291 85,291 85,291
Core deposit intangibles 9,595 9,975 10,356 10,758 11,160
Tangible assets $ 3,977,114 $ 3,929,556 $ 3,834,189 $ 3,731,398 $ 3,752,958
Tangible Common Equity to Tangible Assets 8.61% 8.53% 8.62% 9.08% 8.91%

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:

Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016
(Dollars in thousands)
Net income (loss) adjusted for amortization of core deposit intangibles
Net income (loss) $ 7,212 $ 2,544 $ (8,986) $ 3,631 $ 1,839
Adjustments:
Plus: Amortization of core deposit intangibles 380 382 402 402 402
Less: Tax benefit at the statutory rate 133 134 141 141 141
Net income (loss) adjusted for amortization of core deposit intangibles $ 7,459 $ 2,792 $ (8,725) $ 3,892 $ 2,100
Average Tangible Common Equity
Total average shareholders’ equity $ 435,695 $ 427,550 $ 434,620 $ 435,459 $ 440,745
Adjustments:
Average goodwill 85,291 85,291 85,291 85,291 85,288
Average core deposit intangibles 9,844 10,223 10,618 11,020 11,420
Average tangible common equity $ 340,560 $ 332,036 $ 338,711 $ 339,148 $ 344,037
Return on Average Tangible Common Equity 8.88% 3.38% (10.36)% 4.57% 2.43%

Allowance for Loan Losses less Allowance for Loan Losses on Acquired Loans to Total Loans excluding Acquired Loans. The allowance for loan losses less allowance for loan losses on acquired loans to total loans excluding acquired loans is a non‑GAAP measure used by management to evaluate the Company’s financial condition. Due to the application of purchase accounting, we use this non-GAAP ratio that excludes that impact of these items to evaluate our allowance for loan losses to total loans. We calculate: (a) total 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 excluding acquired loans as total loans 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 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 excluding acquired loans (as calculated in clause (b)). For allowance for loan losses less allowance for loan losses on acquired loans 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 less allowance for loan losses on acquired loans to total loans excluding acquired loans. The acquired loans may have a premium or discount associated with them that includes a potential credit loss component with similar characteristics to the allowance for loan losses. This measure reports the allowance for loan loss coverage to only those loans not accounted for pursuant to ASC topics 310-20 and 310-30 which may assist the investor in evaluating the allowance coverage of loans excluding acquired loans.

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

Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
(Dollars in thousands)
Allowance for loan losses less allowance for loan losses on acquired loans
Allowance for loan losses $ 31,936 $ 26,364 $ 35,911 $ 47,420 $ 39,714
Less: Allowance for loan losses on acquired loans 2,825 2,509 5,235 3,219 1,638
Total allowance for loan losses less allowance for loan losses on acquired loans $ 29,111 $ 23,855 $ 30,676 $ 44,201 $ 38,076
Total loans excluding acquired loans
Total loans $ 3,012,275 $ 3,098,220 $ 3,047,618 $ 3,189,436 $ 3,168,183
Less: Carrying value of acquired loans accounted for under ASC Topics 310-20 and 310-30 730,064 796,292 895,559 974,372 1,092,635
Total loans excluding acquired loans $ 2,282,211 $ 2,301,928 $ 2,152,059 $ 2,215,064 $ 2,075,548
Allowance for loan losses less allowance for loan losses on acquired loans to total loans excluding acquired loans 1.28% 1.04% 1.43% 2.00% 1.83%

Allowance for Loan Losses plus Acquired Loan Net Discount to Total Loans adjusted for Acquired Loan Net Discount. Allowance for loan losses plus acquired loan net discount to total loans adjusted for acquired loan net discount is a non‑GAAP measure used by management to evaluate the Company’s financial condition. We calculate: (a) allowance for loan losses plus acquired loan net discount as allowance for loan losses plus acquired loan net discount, net of accumulated amortization; (b) total loans adjusted for acquired loan net discount as total loans plus acquired loan net discount, net of accumulated amortization; and (c) allowance for loan losses plus acquired loan net discount to total loans adjusted for acquired loan net discount as allowance for loan losses plus acquired loan net discount (as calculated in clause (a)) divided by total loans adjusted for acquired loan net discount (as calculated in clause (b)). 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 adjusted for the acquired loan net discount. This measure reports the combined allowance for loan loss and acquired loan net discount (or premium) as a percentage of loans inclusive of the acquired loan net discount (or premium) which may assist the investor in evaluating allowance coverage on loans inclusive of additional discount or premium resulting from purchase accounting adjustments.

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

Mar 31,
2017
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
(Dollars in thousands)
Allowance for loan losses plus acquired loan net discount
Allowance for loan losses at end of period $ 31,936 $ 26,364 $ 35,911 $ 47,420 $ 39,714
Plus: Net discount on acquired loans 7,314 9,937 13,698 20,412 22,871
Total allowance plus acquired loan net discount $ 39,250 $ 36,301 $ 49,609 $ 67,832 $ 62,585
Total loans adjusted for acquired loan net discount
Total loans $ 3,012,275 $ 3,098,220 $ 3,047,618 $ 3,189,436 $ 3,168,183
Plus: Net discount on acquired loans 7,314 9,937 13,698 20,412 22,871
Total loans adjusted for acquired loan net discount $ 3,019,589 $ 3,108,157 $ 3,061,316 $ 3,209,848 $ 3,191,054
Allowance for loan losses plus acquired loan net discount loans to total loans adjusted for acquired loan net discount 1.30% 1.17% 1.62% 2.11% 1.96%

Pre-tax, Pre-provision Return on Average Assets. Pre-tax, pre-provision return on average assets is a non‑GAAP measure used by management to evaluate the Company’s financial performance. We calculate: (a) pre-tax, pre-provision net income as net income (loss) plus provision (benefit) for income taxes, plus provision for loan losses and (b) return (as described in clause (a)) divided by total average assets. For pre-tax, pre-provision net income, the most directly comparable financial measure calculated in accordance with GAAP is net income and for pre-tax, pre-provision return on average assets is return on average assets.

We believe that this measure is important to many investors in the marketplace who are interested in understanding the operating performance of the company before provision for loan losses, which can vary from quarter to quarter, and income taxes.

The following table reconciles, as of the dates set forth below, pre-tax, pre-provision return on average assets:

For the Quarter Ended
Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016
(Dollars in thousands)
Pre-Tax, Pre-Provision Net Income
Net Income (loss) $ 7,212 $ 2,544 $ (8,986) $ 3,631 $ 1,839
Plus: Provision (benefit) for income taxes 3,942 1,355 (4,831) 2,017 1,057
Plus: Provision for loan losses 6,145 9,500 28,200 11,000 16,000
Total pre-tax, pre-provision net income $ 17,299 $ 13,399 $ 14,383 $ 16,648 $ 18,896
Total Average Assets $ 4,016,744 $ 3,974,244 $ 3,894,127 $ 3,803,832 $ 3,769,424
Pre-Tax, Pre-Provision Return on Average Assets 1.75% 1.36% 1.49 % 1.74% 1.99%

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

Source:Green Bancorp, Inc.