10-Q 1 gnbc-20150630x10q.htm 10-Q gnbc_Current_Folio_10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to

Commission File Number: 001-36580


Green Bancorp, Inc.

(Exact name of registrant as specified in its charter)


 

 

TEXAS

(State or other jurisdiction of incorporation or organization)

42-1631980

(I.R.S. Employer Identification No.)

 

4000 Greenbriar

Houston, Texas 77098

(Address of principal executive offices, including zip code)

(713) 275 - 8220

(Registrant’s telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer      

 

Accelerated filer                        

 

 

 

Non-accelerated filer        

(Do not check if a smaller reporting company)

Smaller reporting company       

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

 

As of August 12, 2015, there were 26,292,871 outstanding shares of the registrant’s Common Stock, par value $0.01 per share.

 

 

 


 

 

 

GREEN BANCORP, INC. AND SUBSIDIARY

INDEX TO FORM 10-Q

   

 

 

 

Special Cautionary Notice Regarding Forward-Looking Statements 

3

PART I—FINANCIAL INFORMATION 

 

Item 1. 

Interim Condensed Consolidated Financial Statements

5

 

Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 (Unaudited)

5

 

Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2015 and 2014 (Unaudited)

6

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014 (Unaudited)

7

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2015 and 2014 (Unaudited)

8

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 (Unaudited)

9

 

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

10

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

41

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

57

Item 4. 

Controls and Procedures

57

PART II—OTHER INFORMATION 

 

Item 1. 

Legal Proceedings

57

Item 1A. 

Risk Factors

58

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

58

Item 3. 

Defaults upon Senior Securities

58

Item 4. 

Mine Safety Disclosures

58

Item 5. 

Other Information

58

Item 6. 

Exhibits

58

Signatures 

59

 

 

 

2


 

Special Cautionary Notice Regarding Forward-Looking Statements

Statements and financial discussion and analysis contained in this quarterly report on Form 10-Q that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on various facts and derived utilizing numerous important assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  You should understand that the following important factors could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements:

·

risks related to the concentration of our business within our geographic areas of operation in Texas, including risks associated with downturns in the energy, technology and real estate sectors within these areas;

·

risks related to our energy reserve exposure and energy related service industry exposure of our total funded loans and the decline in oil prices;

·

our ability to execute on our growth strategy, including through the identification of acquisition candidates that will be accretive to our financial condition and results of operation;

·

risks related to the integration of any acquired businesses, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, the time and costs associated with integrating systems, technology platforms, procedures and personnel, the need for additional capital to finance such transactions, and possible failures in realizing the anticipated benefits from acquisitions;

·

our ability to comply with various governmental and regulatory requirements applicable to financial institutions;

·

market conditions and economic trends nationally, regionally and in our target markets, particularly in Texas and the geographic areas in which we operate;

·

our ability to attract and retain successful bankers that meet our expectations in terms of customer relationships and profitability;

·

risks related to our strategic focus on lending to small to medium-sized businesses;

·

risks associated with our commercial and industrial loan portfolio, including the risk for deterioration in value of the general business assets that generally secure such loans;

·

potential changes in the prices, values and sales volumes of commercial and residential real estate securing our real estate loans;

·

the sufficiency of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates;

·

risks associated with the relatively unseasoned nature of a significant portion of our loan portfolio;

·

risks related to our concentration of loans to a limited number of borrowers and in a limited geographic area;

·

our ability to maintain adequate liquidity and to raise necessary capital to fund our acquisition strategy, operations or to meet increased minimum regulatory capital levels;

·

changes in market interest rates that affect the pricing of our loans and deposits and our net interest income;

·

our ability to maintain an effective system of disclosure controls and procedures and internal controls over financial reporting;

·

the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;

·

potential fluctuations in the market value and liquidity of the securities we hold for sale;

·

potential impairment on the goodwill we may record in connection with business acquisitions;

·

risks associated with system failures or failures to prevent breaches of our network security;

·

a failure in or breach of operational or security systems of the Company’s infrastructure, or those of its third-party vendors and other service providers, including as a result of cyber attacks;

·

our ability to keep pace with technological change or difficulties when implementing new technologies;

3


 

·

risks associated with data processing system failures and errors;

·

risks associated with fraudulent and negligent acts by our customers, employees or vendors;

·

the institution and outcome of litigation and other legal proceeding against us or to which we become subject;

·

the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators, such as the Dodd-Frank Act;

·

governmental monetary and fiscal policies, including the policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve”);

·

the failure of the Company’s enterprise risk management framework to identify or address risks adequately;

·

our ability to comply with supervisory actions by federal banking agencies;

·

changes in the scope and cost of Federal Deposit Insurance Corporation (the “FDIC”) insurance and other coverages;

·

systemic risks associated with the soundness of other financial institutions;

·

acts of terrorism, an outbreak of hostilities or other international or domestic calamities, weather or other acts of God and other matters beyond the Company’s control; and

·

other risks and uncertainties listed from time to time in the Company’s reports and documents filed with the Securities and Exchange Commission.

Other factors not identified above, including those described in our Annual Report on Form 10-K for year ended December 31, 2014 under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and those described in the definitive joint proxy statement/prospectus on Form S-4 (Registration No. 333-205495) filed by the Company on August 12], 2015 may also cause actual results to differ materially from those described in our forward-looking statements. Most of these factors are difficult to anticipate and are generally beyond our control. You should consider these factors in connection with considering any forward-looking statements that may be made by us. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

 

 

 

4


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GREEN BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2015

 

2014

 

 

 

 

 

 

 

ASSETS

 

 

   

 

 

   

Cash and due from banks

    

$

12,363

    

$

13,963

Interest bearing deposits in financial institutions

 

 

156,053

 

 

54,960

Total cash and cash equivalents

 

 

168,416

 

 

68,923

 

 

 

 

 

 

 

Available-for-sale securities, at fair value

 

 

211,463

 

 

187,565

Held-to-maturity securities, at amortized cost (fair value of $47,344 and $50,725, respectively)

 

 

47,419

 

 

50,713

Federal Reserve Bank stock

 

 

7,193

 

 

7,173

Federal Home Loan Bank of Dallas stock

 

 

3,638

 

 

4,192

Total securities and other investments

 

 

269,713

 

 

249,643

 

 

 

 

 

 

 

Loans held for sale

 

 

1,287

 

 

573

Loans held for investment

 

 

1,894,742

 

 

1,799,155

Allowance for loan losses

 

 

(18,292)

 

 

(15,605)

Loans, net

 

 

1,877,737

 

 

1,784,123

 

 

 

 

 

 

 

Premises and equipment, net

 

 

24,773

 

 

25,200

Goodwill

 

 

30,129

 

 

30,129

Core deposit intangibles, net of accumulated amortization

 

 

3,852

 

 

4,148

Accrued interest receivable

 

 

5,253

 

 

4,916

Deferred tax asset, net

 

 

9,245

 

 

8,468

Real estate acquired by foreclosure

 

 

4,488

 

 

4,863

Bank owned life insurance

 

 

8,010

 

 

7,903

Other assets

 

 

7,335

 

 

7,819

TOTAL ASSETS

 

$

2,408,951

 

$

2,196,135

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

604,073

 

$

431,942

Interest-bearing transaction and savings

 

 

758,123

 

 

777,431

Certificates and other time deposits

 

 

662,335

 

 

636,340

Total deposits

 

 

2,024,531

 

 

1,845,713

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

 

9,858

 

 

4,605

Other borrowed funds

 

 

67,309

 

 

47,586

Accrued interest payable

 

 

808

 

 

767

Other liabilities

 

 

7,793

 

 

9,059

Total liabilities

 

 

2,110,299

 

 

1,907,730

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding

 

 

 -

 

 

 -

Common stock, $0.01 par value, 90,000,000 shares authorized, 26,269,900 and 26,175,949 shares issued and outstanding at June 30, 2015 and December 31, 2014

 

 

263

 

 

262

Capital surplus

 

 

253,769

 

 

252,421

Retained earnings

 

 

43,447

 

 

34,660

Accumulated other comprehensive income, net

 

 

1,173

 

 

1,062

Total shareholders’ equity

 

 

298,652

 

 

288,405

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

2,408,951

 

$

2,196,135

 

See notes to interim condensed consolidated financial statements.

5


 

 

GREEN BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST INCOME:

 

 

   

 

 

   

 

 

   

 

 

   

Loans, including fees

    

$

22,252

    

$

17,986

    

$

43,911

    

$

34,962

Securities

 

 

838

 

 

1,024

 

 

1,716

 

 

2,053

Other investments

 

 

113

 

 

81

 

 

223

 

 

159

Deposits in financial institutions

 

 

53

 

 

32

 

 

108

 

 

56

Total interest income

 

 

23,256

 

 

19,123

 

 

45,958

 

 

37,230

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

Transaction and savings deposits

 

 

695

 

 

621

 

 

1,377

 

 

1,198

Certificates and other time deposits

 

 

1,607

 

 

1,760

 

 

3,081

 

 

3,570

Other borrowed funds

 

 

31

 

 

36

 

 

61

 

 

80

Total interest expense

 

 

2,333

 

 

2,417

 

 

4,519

 

 

4,848

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INTEREST INCOME

 

 

20,923

 

 

16,706

 

 

41,439

 

 

32,382

PROVISION FOR LOAN LOSSES

 

 

805

 

 

 -

 

 

2,310

 

 

1,223

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

 

20,118

 

 

16,706

 

 

39,129

 

 

31,159

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

Customer service fees

 

 

917

 

 

634

 

 

1,780

 

 

1,165

Loan fees

 

 

671

 

 

462

 

 

1,042

 

 

1,012

Gain on sale of guaranteed portion of loans, net

 

 

960

 

 

793

 

 

1,605

 

 

1,223

Gain on sale of loans held for sale, net

 

 

157

 

 

 -

 

 

232

 

 

 -

Other

 

 

250

 

 

89

 

 

381

 

 

185

Total noninterest income

 

 

2,955

 

 

1,978

 

 

5,040

 

 

3,585

 

 

 

 

 

 

 

 

 

 

 

 

 

NONINTEREST EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

8,878

 

 

7,149

 

 

17,635

 

 

14,080

Occupancy

 

 

1,562

 

 

1,172

 

 

3,022

 

 

2,305

Professional and regulatory fees

 

 

3,605

 

 

1,767

 

 

5,072

 

 

2,547

Data processing

 

 

583

 

 

389

 

 

1,227

 

 

777

Software license and maintenance

 

 

392

 

 

341

 

 

754

 

 

656

Marketing

 

 

152

 

 

196

 

 

300

 

 

368

Loan related

 

 

263

 

 

85

 

 

372

 

 

202

Real estate acquired by foreclosure, net

 

 

382

 

 

62

 

 

395

 

 

231

Other

 

 

761

 

 

235

 

 

1,557

 

 

827

Total noninterest expense

 

 

16,578

 

 

11,396

 

 

30,334

 

 

21,993

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

6,495

 

 

7,288

 

 

13,835

 

 

12,751

PROVISION FOR INCOME TAXES

 

 

2,357

 

 

2,614

 

 

5,048

 

 

4,589

NET INCOME

 

$

4,138

 

$

4,674

 

$

8,787

 

$

8,162

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

$

0.22

 

$

0.34

 

$

0.39

Diluted

 

$

0.16

 

$

0.22

 

$

0.33

 

$

0.39

 

See notes to interim condensed consolidated financial statements.

 

 

 

6


 

GREEN BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

    

$

4,138

    

$

4,674

    

$

8,787

    

$

8,162

OTHER COMPREHENSIVE INCOME, BEFORE TAX:

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) on securities available-for-sale

 

 

(576)

 

 

663

 

 

170

 

 

1,846

Total other comprehensive income (loss) before tax

 

 

(576)

 

 

663

 

 

170

 

 

1,846

 

 

 

 

 

 

 

 

 

 

 

 

 

DEFERRED TAX EXPENSE (BENEFIT) RELATED TO OTHER COMPREHENSIVE INCOME (LOSS)

 

 

(202)

 

 

233

 

 

59

 

 

647

OTHER COMPREHENSIVE INCOME, NET OF TAX

 

 

(374)

 

 

430

 

 

111

 

 

1,199

COMPREHENSIVE INCOME

 

$

3,764

 

$

5,104

 

$

8,898

 

$

9,361

 

See notes to interim condensed consolidated financial statements.

 

 

7


 

GREEN BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Capital

 

Retained

 

Accumulated
Other
Comprehensive

 

 

 

 

    

Shares

    

Amount

    

Surplus

    

Earnings

    

Income (Loss)

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE — January 1, 2014

    

20,771

 

$

208

 

$

179,219

 

$

19,918

 

$

(127)

 

$

199,218

Net income

 

 -

 

 

 -

 

 

 -

 

 

8,162

 

 

 -

 

 

8,162

Net change in unrealized gains and losses on available-for-sale securities, net of taxes of $647 and reclassification adjustment

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

1,199

 

 

1,199

Issuance of common stock in connection with exercise of stock options

 

9

 

 

 -

 

 

76

 

 

 -

 

 

 -

 

 

76

Stock-based compensation expense

 

 -

 

 

 -

 

 

97

 

 

 -

 

 

 -

 

 

97

BALANCE — June 30, 2014

 

20,780

 

$

208

 

$

179,392

 

$

28,080

 

$

1,072

 

$

208,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE — January 1, 2015

 

26,176

 

$

262

 

$

252,421

 

$

34,660

 

$

1,062

 

$

288,405

Net income

 

 -

 

 

 -

 

 

 -

 

 

8,787

 

 

 -

 

 

8,787

Net change in unrealized gains and losses on available-for-sale securities, net of taxes of $59 and reclassification adjustment

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

111

 

 

111

Issuance of common stock in connection with exercise of stock options

 

94

 

 

1

 

 

887

 

 

 -

 

 

 -

 

 

888

Stock-based compensation expense

 

 -

 

 

 -

 

 

461

 

 

 -

 

 

 -

 

 

461

BALANCE — June 30, 2015

 

26,270

 

$

263

 

$

253,769

 

$

43,447

 

$

1,173

 

$

298,652

 

See notes to interim condensed consolidated financial statements.

 

 

 

8


 

GREEN BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

   

 

 

 

Net income

    

$

8,787

    

$

8,162

Adjustments to reconcile net income to net cash provided (used) by operating activities:

 

 

 

 

 

 

Amortization and accretion of premiums and discounts on securities, net

 

 

544

 

 

566

Accretion of loan discounts, net

 

 

(1,310)

 

 

(282)

Amortization of deposit premiums

 

 

(407)

 

 

(170)

Amortization of core deposit intangibles

 

 

296

 

 

122

Accretion of borrowing valuation allowance

 

 

(12)

 

 

 -

Provision for loan losses

 

 

2,310

 

 

1,223

Depreciation

 

 

820

 

 

707

Net gain on sale of real estate acquired by foreclosure

 

 

 -

 

 

(139)

Net gain on sale of mortgage loans held-for-sale

 

 

(232)

 

 

 -

Net gain on sale of guaranteed portion of loans

 

 

(1,605)

 

 

(1,223)

Originations of loans held-for-sale

 

 

(9,645)

 

 

 -

Proceeds from sales of and principal collected on loans held-for-sale

 

 

9,163

 

 

 -

Writedown of real estate acquired by foreclosure

 

 

375

 

 

141

Stock-based compensation expense

 

 

567

 

 

97

Increase in accrued interest receivable and other assets, net

 

 

(796)

 

 

(29)

Increase in accrued interest payable and other liabilities, net

 

 

(1,331)

 

 

(8)

Net cash provided by operating activities

 

 

7,524

 

 

9,167

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Proceeds from the maturities or calls and paydowns of available-for-sale securities

 

 

23,860

 

 

21,144

Purchases of available-for-sale securities

 

 

(48,036)

 

 

(20,080)

Proceeds from the maturities or calls and paydowns of held-to-maturity securities

 

 

4,986

 

 

4,511

Purchases of held-to-maturity securities

 

 

(1,788)

 

 

(1,988)

Proceeds from sales of guaranteed portion of loans

 

 

16,705

 

 

14,682

Proceeds from sales of real estate acquired by foreclosure

 

 

 -

 

 

1,825

Purchases of Federal Home Loan Bank of Dallas stock, net of redemptions

 

 

554

 

 

(1,131)

Purchases of Federal Reserve Bank stock

 

 

(20)

 

 

(4)

Net increase in loans held for investment

 

 

(109,000)

 

 

(89,343)

Investment in construction of premises and purchases of other fixed assets

 

 

(393)

 

 

(668)

Net cash provided by (used in) investing activities

 

 

(113,132)

 

 

(71,052)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Net increase in deposit accounts

 

 

179,225

 

 

87,370

Net increase in securities sold under agreements to repurchase

 

 

5,253

 

 

3,034

Net proceeds of other short-term borrowed funds

 

 

20,000

 

 

5,000

Repayment of other long-term borrowed funds

 

 

(265)

 

 

(23)

Proceeds from issuance of common stock due to exercise of stock options

 

 

888

 

 

76

Net cash provided by financing activities

 

 

205,101

 

 

95,457

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

$

99,493

 

$

33,572

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS:

 

 

 

 

 

 

Beginning of year

 

 

68,923

 

 

34,757

End of year

 

$

168,416

 

$

68,329

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

Interest paid

 

$

4,443

 

$

4,914

Income taxes paid

 

$

5,100

 

$

3,050

 

See notes to interim condensed consolidated financial statements.

 

 

9


 

Table of Contents

GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The interim condensed consolidated financial statements include the accounts of Green Bancorp, Inc. (“Green Bancorp”), together with Green Bank, N.A., its subsidiary bank, (the “Company”).  All intercompany transactions and balances have been eliminated. 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial information.  In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are of a normal recurring nature.  These financial statements and the accompanying notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or any other period. 

Organization—Green Bancorp is a Texas corporation that was incorporated on October 20, 2004. In 2006 Green Bancorp entered into an agreement and plan of merger with Redstone Bank, National Association (“Redstone Bank”), a national banking association located in Houston, Texas, for the purpose of acquiring all of the issued and outstanding stock of Redstone Bank. The acquisition was completed on December 31, 2006, and Green Bancorp became a bank holding company registered under the Bank Holding Company Act of 1956, as amended.

Green Bank, N.A. (the “Bank”) is a national banking association, which was chartered under the laws of the United States of America as a national bank on February 17, 1999, as Redstone Bank. On September 14, 2007, the name was changed to Green Bank, N.A. The Bank provides commercial and consumer banking services in the greater Houston, Dallas, Austin and Louisville metropolitan areas.

Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of available-for-sale securities, acquired assets and liabilities, goodwill, and fair value of financial instruments.

2. EARNINGS PER COMMON SHARE

Basic earnings per common share is computed as net income available to common shareholders divided by the weighted average number of common shares outstanding during the period.

Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method. Outstanding stock options issued by the Company represent the only dilutive effect reflected in diluted weighted average shares.

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Table of Contents

GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table illustrates the computation of basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  June 30,

 

Six Months Ended  June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

Amount

 

Per
Share
Amount

 

Amount

 

Per
Share
Amount

 

Amount

 

Per
Share
Amount

 

Amount

 

Per
Share
Amount

 

 

(Amounts in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

   

$

4,138

   

 

 

   

$

4,674

   

 

 

   

$

8,787

   

 

 

   

$

8,162

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

26,199

 

$

0.16

 

 

20,780

 

$

0.22

 

 

26,186

 

$

0.34

 

 

20,778

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add incremental shares for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities - options

 

 

319

 

 

 

 

 

155

 

 

 

 

 

298

 

 

 

 

 

143

 

 

 

Total

 

 

26,518

 

$

0.16

 

 

20,935

 

$

0.22

 

 

26,484

 

$

0.33

 

 

20,921

 

$

0.39

 

 

 

 

3. RECENT ACCOUNTING STANDARDS

Accounting Standards Updates (“ASU”)

FASB ASU No. 2014‑04—“Receivables—Troubled Debt Restructuring by Creditors (Subtopic 310‑40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure” clarifies when an in substance foreclosure occurs, that is, when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. This is the point when the consumer mortgage loan should be derecognized and the real property recognized.  ASU 2014-04 was effective for the Company on January 1, 2015 and did not have a significant impact on the Company’s financial statements.

FASB ASU No. 2014-09 — “Revenue from Contract with Customers (Topic 606)” supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and most industry-specific guidance throughout the Industry Topics of the Codification.  Additionally ASU 2014-09 supersedes some cost guidance included in Revenue Recognition—Construction-Type and Production-Type Contracts (Subtopic 605-35).  In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer are amended to be consistent with the guidance on recognition and measurement.  The core principal of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  On June 9, 2015, FASB deferred the effective date, therefor the adoption of this ASU becomes effective for the Company beginning after January 1, 2018, with retrospective application to each prior reporting period presented, and is not expected to have a significant impact on the Company’s financial statements.

FASB ASU No. 2014-11 — “Transfers and Servicing (Topic 860) – Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosure” changes the accounting for repurchase-to-maturity transactions to secured borrowing accounting.  It also requires separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting and disclosure for the repurchase agreement.  The adoption of this ASU becomes effective for the Company beginning after January 1, 2016 and is not expected to have a significant impact on the Company’s financial statements.

FASB ASU No. 2014-12 — “Compensation-Stock Compensation (Topic 718) – Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  The performance target should not be reflected in estimating the grant-date fair value of the award.  Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.  If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost

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Table of Contents

GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

should be recognized prospectively over the remaining requisite service period.  The total amount of the compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest.  The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved.  The adoption of this ASU becomes effective for the Company beginning after January 1, 2016 and is not expected to have a significant impact on the Company’s financial statements.

FASB ASU No. 2014-14 — “Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure” requires creditors to reclassify mortgage loans as another receivable that is separate from loans and to measure the receivable at the fixed or determinable amount expected to be received under the government guarantee if upon foreclosure the mortgage loans meet certain conditions.  ASU 2014-04 was effective for the Company on January 1, 2015 and did not have a significant impact on the Company’s financial statements.

FASB ASU No. 2015-01Income Statement - Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” ASU 2015-01 eliminates from U.S. GAAP the concept of extraordinary items, which, among other things, required an entity to segregate extraordinary items considered to be unusual and infrequent from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. ASU 2015-01 is effective for the Company beginning January 1, 2016, though early adoption is permitted. ASU 2015-01 is not expected to have a significant impact on the Company’s financial statements.

FASB ASU No. 2015-02“Consolidation (Topic 810) – Amendments to the Consolidation Analysis.” ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: 1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, 2) Eliminate the presumption that a general partner should consolidate a limited partnership, 3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, 4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2A-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for the Company beginning January 1, 2016. ASU 2015-02 is not expected to have a significant impact on the Company’s financial statements.

FASB ASU No. 2015-03Interest – Imputation of Interest (Subtopic 835-30)Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for the Company beginning January 1, 2017. ASU 2015-03 is not expected to have a significant impact on the Company’s financial statements.

FASB issued ASU No. 2015-05Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40)Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 provides a basis for evaluating whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, then the arrangement should be accounted for as a service contract. ASU 2015-05 is effective for the Company beginning January 1, 2016. ASU 2015-05 is not expected to have a significant impact on the Company’s financial statements.

4. ACQUISITIONS

Acquisitions are an integral part of the Company’s growth strategy. All acquisitions were accounted for using the acquisition method of accounting. Accordingly, the assets and liabilities of the acquired entities were recorded at their fair values at the acquisition date. The excess of the purchase price over the estimated fair value of the net assets for tax-free acquisitions is recorded as goodwill, none of which is deductible for tax purposes. The excess of the purchase price over the estimated fair value of the net assets for taxable acquisitions was recorded as goodwill, and is deductible for tax purposes. The identified core deposit intangibles for each acquisition are being amortized using a non-pro rata basis over an estimated life of six to sixteen years. The results of operations for each acquisition have been included in the Company’s consolidated financial results beginning on the respective acquisition date.

12


 

Table of Contents

GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The measurement period for the Company to determine the fair values of acquired identifiable assets and assumed liabilities will end at the earlier of (1) twelve months from the date of the acquisition or (2) as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. The Company is currently in the process of obtaining fair values for certain acquired assets and assumed liabilities and therefore the following estimates for the SharePlus acquisition are preliminary.

On October 17, 2014, the Company completed the acquisition of SP Bancorp, Inc. and its wholly owned subsidiary SharePlus Bank (collectively “SharePlus”). SharePlus Bank was a Texas chartered state bank headquartered in Plano, Texas, with four branches, two in Plano, Texas, one in Dallas, Texas and one in Louisville, Kentucky.  The expansion complements the Company’s Dallas area growth.  As of September 30, 2014, SharePlus, on a consolidated basis, had $348.7 million in total assets, $248.2 million in loans, $280.5 million in deposits and $33.7 million in stockholders’ equity. The acquisition was not considered significant to the Company’s financial statements and therefore pro forma financial data and related disclosures are not included. 

Pursuant to the terms of the acquisition agreement, the Company paid $46.4 million in cash for all outstanding shares of SP Bancorp capital stock, which resulted in goodwill of $14.5 million as of June 30, 2015.  Additionally, the Company recognized $3.5 million of core deposit intangibles as of June 30, 2015.  These goodwill, deferred tax asset and core deposit intangible balances as of June 30, 2015 do not include potential subsequent fair value adjustments that are still being finalized.

5. CASH AND CASH EQUIVALENTS

The Bank, as a correspondent of the Federal Reserve Bank, is required to maintain average reserve balances.  Interest-bearing deposits include restricted amounts of $51.0 million and $42.0 million at June 30, 2015 and December 31, 2014, respectively, as a result of this requirement.

6. SECURITIES

The amortized cost and fair value of securities as of the dates set forth were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

    

$

95,069

    

$

86

    

$

(29)

    

$

95,126

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

 

 

87,738

 

 

1,930

 

 

(64)

 

 

89,604

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

 

 

26,852

 

 

120

 

 

(239)

 

 

26,733

Total

 

$

209,659

 

$

2,136

 

$

(332)

 

$

211,463

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

 

$

16,919

 

$

401

 

$

(187)

 

$

17,133

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

 

 

30,500

 

 

62

 

 

(351)

 

 

30,211

Total

 

$

47,419

 

$

463

 

$

(538)

 

$

47,344

 

 

13


 

Table of Contents

GREEN BANCORP, INC. AND SUBSIDIARY

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of the U.S. Treasury and other U.S. government agencies or sponsored enterprises

    

$

57,108

    

$

21

    

$

(85)

    

$

57,044

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

 

 

100,002

 

 

2,022

 

 

(108)

 

 

101,916

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

 

 

28,821

 

 

74

 

 

(290)

 

 

28,605

Total

 

$

185,931

 

$

2,117

 

$

(483)

 

$

187,565

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

 

$

16,823

 

$

485

 

$

(123)

 

$

17,185

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

 

 

33,890

 

 

87

 

 

(437)

 

 

33,540

Total

 

$

50,713

 

$

572

 

$

(560)

 

$

50,725

 

Expected maturities of securities will differ from contractual maturities because the underlying borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The following table sets forth, as of the date indicated, contractual maturities of securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

Available-for-sale

 

Held-to-maturity

 

 

Amortized Cost

 

Fair Value

 

Amortized Cost

 

Fair Value

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

    

$

65,053

    

$

65,038

    

$

 -

    

$

 -

Due after one year through five years

 

 

30,016

 

 

30,088

 

 

 -

 

 

 -

Mortgage-backed securities issued by U.S. government agencies or sponsored enterprises

 

 

87,738

 

 

89,604

 

 

16,919

 

 

17,133

Collateralized mortgage obligations issued by U.S. government agencies or sponsored enterprises

 

 

26,852

 

 

26,733

 

 

30,500

 

 

30,211

Total

 

$

209,659

 

$

211,463

 

$

47,419

 

$

47,344

There were no sales of securities during the three or six months ended June 30, 2015 or 2014.

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The