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Edited Transcript of GNBC earnings conference call or presentation 27-Apr-17 9:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Green Bancorp Inc Earnings Call

HOUSTON May 1, 2017 (Thomson StreetEvents) -- Edited Transcript of Green Bancorp Inc earnings conference call or presentation Thursday, April 27, 2017 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Donald S. Perschbacher

Green Bancorp, Inc. - Corporate Chief Credit Officer, EVP, Corporate Chief Credit Officer of Green Bank NA and Senior EVP of Green Bank NA

* Geoffrey D. Greenwade

Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA

* Manuel J. Mehos

Green Bancorp, Inc. - Chairman, CEO and Chairman of Green Bank NA

* Terry S. Earley

Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA

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Conference Call Participants

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* Bradley Jason Milsaps

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research

* Brady Gailey

Keefe, Bruyette, & Woods, Inc., Research Division - MD

* Brett D. Rabatin

Piper Jaffray Companies, Research Division - Senior Research Analyst

* Kevin Patrick Fitzsimmons

Hovde Group, LLC, Research Division - Co-Head of Research

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Presentation

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Operator [1]

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Greetings, and welcome to Green Bancorp's First Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Mr. Terry Earley, Chief Financial Officer of Green Bancorp. Please go ahead.

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [2]

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Thank you, operator, and good afternoon, everyone. We appreciate your participation on our first quarter 2017 earnings call. With me today are Manny Mehos, Chairman of the Board and Chief Executive Officer of the company; Geoff Greenwade, President of the company and Chief Executive Officer of the bank; Donald Perschbacher, Corporate Chief Credit Officer of the company and the bank.

As a reminder, a replay of this call be available from -- through 11:59 p.m. Eastern Time on May 4, 2017. A slide deck to complement our discussion is available on our website at investors.greenbank.com.

Before we begin, I want to remind you that many of our remarks today contain certain forward-looking statements based on current expectations. Actual results may differ materially from those projected as a result of certain risks and uncertainties. Please refer to Slide 3 of our earnings slide deck as well as our first quarter 2017 earnings press release and our other public filings, including the risk factors in our 10-K, where you will find factors that could cause actual results to differ materially from these forward-looking statements.

Now I'll turn the call over to Manny.

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Manuel J. Mehos, Green Bancorp, Inc. - Chairman, CEO and Chairman of Green Bank NA [3]

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Thank you, Terry, and good afternoon, everyone. I would like to start by welcoming Terry to the company and introducing him to those of you who do not already know him. Terry is an accomplished CFO, who brings over 25 years of banking experience to his role at Green Bancorp. I'm thrilled that Terry has joined our team, as he will be a true asset as we optimize the company's earnings growth and drive shareholder value.

A year ago, we announced the MARS initiative to substantially reduce our energy exposure, improve the credit quality of the company and reduce the uncertainty in our financial results, which was proving to be a substantial headwind to growth. We've expected the initiative to take 4 quarters to execute and envisioned of minor level of energy exposure to remain at the plan's conclusion. It was executed according to plan, and I am pleased to announce that the MARS initiative is behind us. We have now shifted our mindset as we work through the low level of remaining energy loans, and we'll be opportunistic as we focus on preserving shareholder value.

Importantly, we can now turn our focus to growing the earnings power of the bank. Clear signs of which can be seen in the broad financial improvement that we delivered in the quarter. Credit quality was strong as virtually all credit metrics improved in the quarter. Additionally, our margins have also began to expand, and we see further opportunities for margin expansion as we continue to optimize our balance sheet. All of this has contributed to significant improvement in capital levels and tangible book value growth.

Turning to Slide 4. We delivered first quarter earnings of $0.19 per diluted common share, an increase of 171% compared with the $0.07 per share that we reported in the fourth quarter of 2016.

Turning to Slide 5. Pretax pre-provision net income was $17.3 million for the first quarter, which was impacted by approximately $560,000 of energy-related expenses. Excluding these expenses, pretax pre-provision net income would have been $17.9 million, representing an increase of 10% from the $16.3 million that we reported in the fourth quarter of 2016.

Importantly, our markets are healthy, which supports our confident outlook. The Houston economy has weathered the oil downturn well, having shown strong population growth and modest job growth, which clearly demonstrates the diversity in the economy relative to the past downturns. Meanwhile, Dallas has remained robust and is a focus for growth as we look to balance our business between these 2 major markets. We are now in a position to get back to the business of banking, which Geoff will now discuss in more detail.

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Geoffrey D. Greenwade, Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA [4]

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Thank you, Manny, and good afternoon, everyone. I am very pleased with our first quarter results and the outlook for the balance of 2017.

Turning to Slide 6. Deposits grew $41.4 million to $3.4 billion, up 4.9% annualized from the prior quarter. This growth was predominantly a noninterest-bearing deposits, and demand deposits represented more than 20% of total deposits at quarter end. At the end of the first quarter, our loan-to-deposit ratio stood at 88.2%, down from 104% at the end of the first quarter of 2016.

Turning to Slide 7. Loans decreased by $86 million to $3 billion from December 31, 2016. There were 3 primary drivers to the decline this quarter, all of which we consider to be transitory in nature. The first is our emphasis on reducing our CRE exposure to 300% of regulatory capital through paydowns and earnings. In the quarter, we experienced $75 million of paydowns, which reduced our CRE exposure to 345% of regulatory capital from 373% at December 31, 2016. Importantly, we expect the level of paydowns to abate in the second quarter. Additionally, we plan to downstream capital from the holding company to the bank as we resolve our remaining energy loans. Therefore, we expect to have reduced our CRE concentration to within the regulatory threshold at some point during the fourth quarter of this year.

The second driver to the decline in loans this quarter was $75 million of seasonal C&I paydowns from several large customers, which we expect to fund back up through the balance of the year.

The third driver was a further reduction in our energy portfolio of $19 million. Taken together, this represented a $170 million headwind to loan growth. As these headwinds ease, we expect loan growth to resume in the second quarter and accelerate in the second half of this year. Additionally, our bankers have ample capacity for growth.

Turning to noninterest income growth. This remains a key initiative, and I am pleased with the progress that our bankers are making. The investments that we have made can clearly be seen in the acceleration of our results and accordingly, have increased our goal to $5 million per quarter from $4 million. Of note, we doubled our SBA banking team through the second half of last year, and they're really beginning to ramp up their production, which bodes well for SBA growth through the year. We have also had success with our treasury management business, which is driving growth in customer service fees.

I would now like to turn the call over to Donald.

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Donald S. Perschbacher, Green Bancorp, Inc. - Corporate Chief Credit Officer, EVP, Corporate Chief Credit Officer of Green Bank NA and Senior EVP of Green Bank NA [5]

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Thank you, Geoff. Good afternoon, everyone. As Manny discussed, we are pleased that our MARS program is now complete and the risk profile of our loan portfolio has improved. On a consolidated basis, classified assets had a small decline to $161.5 million during the quarter or 38% of total holding company regulatory capital as of March 31, 2017.

From Slide 8, nonperforming assets decreased to $87.5 million or 2.15% of period end total assets at March 31, 2017, compared with $106.3 million or 2.64% of period end total assets at December 31, 2016.

In the first quarter, we resolved $25.7 million of energy-related loans, which included $6 million of nonaccrual loans and the sale of $6.6 million of nonperforming energy loans held for sale. ORE was reduced by $3.9 million.

From Slide 9, our energy loans today stand at just 3.1% of the portfolio. Following the closing of the loans in held-for-sale status, E&P loans represent just a half of a percent of the total portfolio and energy loans represent just 2.5% of the portfolio. We expect this decline to continue.

During the first quarter, we recognized net charge-offs of just $573,000 or 2 basis points of total loans, all of which was related to partial charge-offs of energy loans. This compares favorably to the quarter ended December 31, 2016, where we recognized net charge-offs of $19 million or 0.63% of total loans, which included $16.4 million in partial charge-offs related to energy loans.

For the quarter ended March 31, 2017, we recorded provision for loan losses of $6.1 million, which includes the aforementioned net charge-offs in addition to $4.9 million in reserve related to energy loans. This also compares favorably to the quarter ended December 31, 2016, where we recognized provision for loan losses of $9.5 million, which included $8.6 million in reserves related to partial charge-offs of energy loans. For the balance of the year, we expect provision expense to be $8 million to $10 million.

Our 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. At March 31, 2017, our allowance for loan losses plus the acquired loan net discount to total loans adjusted for the acquired loan net discount was 1.30%. The increase in the reserve percentage was largely due to the addition of specific reserves on energy loans. The remaining total reserve on our energy loan book, including general and specific reserves, was $6 million or 7.8% of total energy loans held for investment as of March 31, 2017.

I will now turn the call over to Terry.

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [6]

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Thank you, Donald. As this is my first earnings call with the company, I would like to take a moment to thank the rest of the senior management team as well as the Board of Directors for the opportunity to join this organization, especially at such a pivotal point in the company's history. I'm excited to be here, and I look forward to working with all my colleagues as well as our analysts and investors as we focus on growth and driving value for our current and prospective shareholders.

With that, I'll now turn to Slide 10. One of the things that I'd like to emphasize is the importance of metrics that best reflect our company's performance on an operating basis. We want to be as accountable as possible when it comes to executing on our growth strategy, and we think that focusing on operating metrics will help our analysts and investors to view our core profitability more clearly. To that end, we were very pleased that the company's return on average tangible common equity increased from 3.38% in Q4 2016 to 8.88% for the quarter ended March 31, 2017. A reconciliation for this non-GAAP metric has been added to Page 15 of our earnings press release.

Turning to Slide 11. Net interest income for the quarter was $32.6 million and our net interest margin increased 7 basis points to 3.47%. This compares to $32.2 million and 3.4% in the fourth quarter. Our net interest margin was positively impacted by 2 things. First, the Fed's December rate increase added 10 basis points to our NIM. Second, we invested excess liquidity during the quarter into the securities portfolio, which also added 10 basis points to our NIM. These positive effects were partially offset by 6 basis points due to a full quarter of interest on the sub-debt we issued in the fourth quarter and by 7 basis points due to lower purchase accounting accretion and a less favorable earning asset mix. Finally, in the second quarter, we further optimized our balance sheet and we are also benefiting from the Fed's rate increase, which occurred in March.

We continue to believe that our net interest margin should run between 3.65% and 3.75%, and net interest income should run between $130 million and $140 million on an annualized basis through the balance of the year and into next year.

Turning to Slide 12. For the quarter ended March 31, 2017, noninterest income totaled $5.5 million, which represents a nice improvement compared to the prior quarter and reflects a strong growth in our SBA and treasury management businesses, which Geoff highlighted earlier. As you think about our Q1 results and noninterest income, please remember to compare it to the $3.6 million in Q4, which excludes the loss on the sale of -- for the sale of held for sale loans. Going forward, I would expect our SBA gain on sale income to run at approximately $1.5 million per quarter.

Turning to Slide 13. Noninterest expense totaled $20.8 million for the first quarter, which represents a slight decrease compared to the fourth quarter. The decrease was mostly driven by lower loan-related data processing and ORE expenses, offset by other expense line returning to more normal levels. Looking forward, we believe noninterest expense will run at approximately $20 million to $21 million per quarter through the remainder of 2017.

From Slide 14. we remain in a strong capital position, well positioned to resume organic growth initiatives.

Lastly, a key strategy for the company has been to remain asset sensitive, to take advantage of a normalization of interest rates as approximately 80% of our loans are floating rate. We currently estimate that 100 basis points static increase in the Fed funds rate will drive a 7.7% increase to our net interest income on an annualized basis.

As Manny mentioned, we're very pleased with the company's performance this quarter and are excited about our trajectory for the remainder of the year.

With that, let me turn the presentation back to Manny for concluding remarks.

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Manuel J. Mehos, Green Bancorp, Inc. - Chairman, CEO and Chairman of Green Bank NA [7]

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Thank you, Terry. This is an exciting time with the company. MARS is behind us. Our credit quality has shown strong improvement. Provision expense is quickly returning to more normalized levels, and we are poised to return to normalized loan growth during the remainder of the year. We are finally back to the business of banking.

Thank you again for your time today. Operator, please open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from the line of Brady Gailey with KBW.

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Brady Gailey, Keefe, Bruyette, & Woods, Inc., Research Division - MD [2]

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So maybe just to start with the remaining energy. How much of that is left up at the holding company level? And were any energy assets at the holding company sold in 1Q?

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Donald S. Perschbacher, Green Bancorp, Inc. - Corporate Chief Credit Officer, EVP, Corporate Chief Credit Officer of Green Bank NA and Senior EVP of Green Bank NA [3]

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Brady, this is Donald. The -- first quarter, we did sell 1 E&P loan out of the holding company, a little over $6 million, $6.5 million roughly. The balance of what's there -- hang on, I'll give you the exact numbers, probably...

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Geoffrey D. Greenwade, Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA [4]

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6?

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Donald S. Perschbacher, Green Bancorp, Inc. - Corporate Chief Credit Officer, EVP, Corporate Chief Credit Officer of Green Bank NA and Senior EVP of Green Bank NA [5]

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Well, but not all at energy, Geoff. I think it's probably 20 to 21 at the holding company's energy. And only -- and probably 14, 15 to that is E&P and the balance is oilfield service.

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Brady Gailey, Keefe, Bruyette, & Woods, Inc., Research Division - MD [6]

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Okay. All right, and then -- so for the remaining energy that is still within the company, you have the $6 million reserve against it. Have you also taken charge-offs in addition to that $6 million reserve? Or is the $6 million reserve pretty much it?

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Donald S. Perschbacher, Green Bancorp, Inc. - Corporate Chief Credit Officer, EVP, Corporate Chief Credit Officer of Green Bank NA and Senior EVP of Green Bank NA [7]

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Well, we had -- we did exit an energy loan in the first quarter, an oilfield service loan that we took a charge down of about $1.4 million that went into a provision expense. But that $6 million of reserves that's up is what's against the balance of the energy loan during -- in the portfolio.

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [8]

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But I think we took a mark when we moved them up.

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Donald S. Perschbacher, Green Bancorp, Inc. - Corporate Chief Credit Officer, EVP, Corporate Chief Credit Officer of Green Bank NA and Senior EVP of Green Bank NA [9]

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Well, we -- at year-end.

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [10]

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Yes, that's what I think. So Brady, I think your -- in terms of comparing it to face value, there was a mark taken at 12/31 when they were moved to the holdco. And on top of that, now there's additional reserves that's been put up since May.

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Geoffrey D. Greenwade, Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA [11]

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But the ones at our bank -- with the ones at the bank, Brady, there is no charge down or mark on just any reserves.

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Brady Gailey, Keefe, Bruyette, & Woods, Inc., Research Division - MD [12]

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Okay. And then finally for me, Terry, you mentioned the margin was benefited by 10 basis points with this last hike. Is that the right way to think about future interest rate hikes, roughly a 10 basis point benefit to the margin?

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [13]

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Brady, it's a great question. I think we benefited to a great deal on our ability to hold rates on those -- on the liability side pretty constant. We see that as a cost to fund, it only went up 2 bps. So we haven't felt a lot of rate pressure there, and we've had the exceptions we dealt with. And so I think it's a pretty good -- with 80% of the loan book floating tied to prime and LIBOR, I think it's a pretty good estimate. As I think about Q2, I'm certainly factoring that in.

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Operator [14]

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Our next question is from the line of Brett Rabatin with Piper Jaffray.

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Brett D. Rabatin, Piper Jaffray Companies, Research Division - Senior Research Analyst [15]

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I wanted to first ask the growth in 1Q was, obviously, aided by a couple of things. Can you give us -- and you're obviously still reducing commercial real estate. Can you give us maybe an outlook for what you think net loan growth might be in the next few quarters and like how you get there, how much is C&I and what kind of level of growth you might be hoping for?

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Geoffrey D. Greenwade, Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA [16]

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Yes, I think what you're going to see, Brett, is kind of a slow ramping up each quarter. I expect the fourth quarter to be a normal annualized growth quarter of 8% to 10% a year. I would expect the second quarter to be smaller growth than that and then somewhere in between on the third quarter. And I think that's really a part of the CRE portfolio. What we have made the decision to do is let the paydowns plus earnings added to capital put us back into the CRE 300% ratio, and we made a pretty nice decrease from 373% to 345% the first quarter. So I think it's a matter of sometime in the early second half of the year when we're there and then it's a matter of just going through the normal ramping up your pipeline and starting, making those loans again. So I think you can see the -- a very clear path to getting there and getting back to our normal 8% to 10% annualized quarterly run rate at that point.

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Brett D. Rabatin, Piper Jaffray Companies, Research Division - Senior Research Analyst [17]

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Okay. And then the other thing on ASC, just around the provision. I think you said $8 million to $10 million for the remainder of the year, is that correct? And then what are you assuming within that for energy, if anything?

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Donald S. Perschbacher, Green Bancorp, Inc. - Corporate Chief Credit Officer, EVP, Corporate Chief Credit Officer of Green Bank NA and Senior EVP of Green Bank NA [18]

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Well, this is Donald. I think the $8 million to $10 million, if you think about -- we've revised our provision estimate for the year downward, and I think that reflects our ending of the MARS initiative and really focusing rather on expediency of exiting energy loans to just working them out and managing them in the ordinary course of how we handle any other sort of portion of our exit strategy portfolio. And so the balance of the provision really is there's going to be some need for growth. As Geoff has said, we do anticipate loan growth resuming. We had a good quarter, first quarter in terms of net charge-offs, but we're forecasting sort of a more normalized number in terms of that -- is in that. And then the balance would be where we expect to continue to potentially have some needs working through the rest of the portfolio. If we had specific numbers today, we would be taking them. But just knowing our strategy and how working out, we think it's a good estimate based upon -- just continue to work through these for the balance of the year.

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Operator [19]

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Our next question is from the line of Brad Milsaps with Sandler O'Neill.

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [20]

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Terry, just wanted to follow-up on some of the margin guidance. Obviously, you guys bought a lot of bonds at the beginning of the first quarter. You still -- it looks like you're sitting on a fair amount of cash. Just kind of curious what your thoughts are around putting that, some of that liquidity to work, maybe in more bonds. Do you think really all of that marked for the loan growth that you got coming down the pipe ?

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [21]

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Brad, that's good question. And early in Q2, we did put some of that to work, also did a little bit of repositioning of the portfolio as it stood at January -- I mean at March 31. So I'm looking optimistically at how the portfolio is going to perform. The yield is up. We've kept the effective duration even after the initial investment, mindful of our asset sensitivity. So we've kept the effective duration inside of 4 years, and it's got a lot of cash flow. We took no credit risk in anything we've done, and so -- and it's primarily in mortgage-related structure. So it's spitting out a good bit of cash flow that will help us as our loan results and loan growth get back to more normalized levels.

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [22]

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Okay. So the stuff you did personally would be kind of north of that all-in yield of 183 in the first quarter?

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [23]

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Definitely.

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [24]

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Okay. And then were -- was the loan yield this quarter at all impacted by loan fees? I know you had a fair number of payoffs in the CRE book. Just kind of curious, is that -- what would effect it may have had, if any?

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Geoffrey D. Greenwade, Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA [25]

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Yes, I think it was more of a normal payoff even though we shrank it by $75 million. That's fairly normal just based on the kind of 3- to 3.5-year churn rate. So any accretion from early payoff from loan fees were very normalized versus the last number of quarters we had. There weren't any higher nor lower than normal.

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [26]

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Brad, it's Terry. On top of that, we did have lower purchase accounting accretion, too. So we had things going on in the contractual side as well as the purchase accounting, accelerated accretion, if you will.

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Bradley Jason Milsaps, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research [27]

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Okay, great. And Terry, remind me with your 365 to 375 guidance, are you assuming any additional help from the Fed or is that we think Green can kind of do on its own?

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Terry S. Earley, Green Bancorp, Inc. - CFO, EVP, Chief Credit Officer of Green Bank NA and EVP of Green Bank NA [28]

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I think it hinges on where in that range we're going to fall. If we don't get any more help, I think we're going to be at the low end of the range. If we do get help from the Fed and certainly the market has got a probability that there's going to be one in June, then I think we'll be more towards the higher end of that range.

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Operator [29]

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(Operator Instructions) The next question is from the line of Kevin Fitzsimmons with Hovde Group.

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Kevin Patrick Fitzsimmons, Hovde Group, LLC, Research Division - Co-Head of Research [30]

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Just when -- just to drill into that guide -- the outlook for fee revenues, is that -- does that assume on SBA that we stay at this kind of run rate? Or is that ramp even higher from here, just given the expanded team you guys have?

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Geoffrey D. Greenwade, Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA [31]

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Yes, so that first quarter was a little higher than we expect. I think we kind of planned the averaging of about $1.5 million. We had a little bit of carryover from December to January. We had some loans ready to sell in December. December is usually not a great time to sell because the premiums aren't as good so we held them back, and that was about $200,000 to $300,000 of that $1.9 million. But I think you can pretty well count on what about $1.5 million on average on each quarter.

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Kevin Patrick Fitzsimmons, Hovde Group, LLC, Research Division - Co-Head of Research [32]

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Okay, great. That's helpful. One question just on the expense space within personnel cost. We -- there's definitely been a transition where you guys had been -- not a big focus, but you had a focus on energy, and that's obviously not there and we're kind of deemphasizing commercial real estate right now. Do you have the amount of loan officers you need to really focus on C&I the way you guys want to? Or do you need planned hirings going forward?

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Geoffrey D. Greenwade, Green Bancorp, Inc. - President, CEO of Green Bank NA, President of Green Bank NA and Director of Green Bank NA [33]

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No, we have the right number of bodies. We've actually -- between getting out of energy and slowing down real estate, well, have decreased a couple of loan officers over the first 4 months of the year and don't anticipate having to replace them obviously, you don't need another energy lender. And so I think the number of people that we have doing C&I will be able to get us along with when we turn back on commercial real estate. I think we feel very comfortable with a normalized 8% to 10% annual growth a year based on our typical C&I and CRE of contributions.

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Kevin Patrick Fitzsimmons, Hovde Group, LLC, Research Division - Co-Head of Research [34]

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Great. Just one final one. Manny, I know the big theme here is returning to the business of banking. As you look further out, where do you see Green participating in acquisitions? Do you feel you've got of put a certain number of quarters up of just getting back to normal organic growth and get more of a multiple? Or is it something you think you can get back into even sooner?

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Manuel J. Mehos, Green Bancorp, Inc. - Chairman, CEO and Chairman of Green Bank NA [35]

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No, you described it correctly. It will take us a few quarters to get back to the run rate we feel like we can achieve. Ironically, we -- probably the second or third quarter, we'll be right back at the pretax pre-provision run rate. We expected and we're at right after the Patriot acquisition. So now that we've gone through MARS and taken care of that, we're back there, but much stronger balance sheet and growth prospects. So into your question, couple of quarters to get the machine back up and running at the same pace. Our currency is not at the level it needs to be for it to compete in the acquisition market right now, but we think that run rate that we're going to get in the second and third quarter and then 2018 prospects should take our currency up to our peer levels, and then we can compete in that market. So the answer -- you answered your own question, I'm just elaborating on it.

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Operator [36]

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At this time, I will turn the floor right to Mr. Mehos for concluding remarks.

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Manuel J. Mehos, Green Bancorp, Inc. - Chairman, CEO and Chairman of Green Bank NA [37]

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Thank you, operator. And the speech I just made is pretty much what I'm going to say now. I mean, MARS is now the fourth planet from the sun to us. It's no longer a project anymore. We are back to the business of banking, I'm repeating that for the third time. It's exciting for us. We're having fun again, and we really believe that by the time we get into the second half of the year, loan growth is going to be back where it used to be. We've always -- we're going to be back at the balance we need to be at for -- as a CRE as a percentage of capital, and I'm very excited about what we're looking at for the next 3 quarters and into 2018.

Thanks for your patience over the last year, those of you who've been with us. Those of you who just joined us as investors, you'll see what we can do now. So stay tuned, and we'll see you next quarter. Thank you.

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Operator [38]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.