Green Brick Partners, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - Green Brick Partners, Inc.	exhibit311certificationofc.htm
EX-32.1 - EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 - Green Brick Partners, Inc.	exhibit321certificationofc.htm
EX-32.2 - EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 - Green Brick Partners, Inc.	exhibit322certificationofc.htm
EX-31.2 - EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 - Green Brick Partners, Inc.	exhibit312certificationofc.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________

FORM 10-Q

___________________



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

For the quarterly period ended March 31, 2016



¨	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: 001-33530

Green Brick Partners, Inc.

(Exact name of registrant as specified in its charter)



Delaware		20-5952523
(State or other jurisdiction of incorporation)		(IRS Employer Identification Number)
2805 Dallas Pkwy, Ste 400 Plano, Texas 75093		(469) 573-6755
(Address of principal executive offices, including Zip Code)		(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 ý 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 ý 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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ý Non-accelerated filer ¨ Smaller reporting company ¨

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

The number of shares of the Registrant's common stock outstanding as of May 4, 2016 was 48,899,198.

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PART I		FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited)	1
		Consolidated Balance Sheets, March 31, 2016 and December 31, 2015	1
		Consolidated Statements of Income for the three months ended March 31, 2016 and 2015	2
		Consolidated Statements of Cash Flow for the three months ended March 31, 2016 and 2015	3
		Notes to Consolidated Financial Statements	4
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
	Item 4.	Controls and Procedures	31
PART II		OTHER INFORMATION
	Item 1.	Legal Proceedings	33
	Item1A.	Risk Factors	33
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
	Item 6.	Exhibits	34
		Signatures	35

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GREEN BRICK PARTNERS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



	March 31, 2016		December 31, 2015
Assets
Cash and cash equivalents	$	24,457	$	21,207
Restricted cash	955		94
Accounts receivable	4,126		3,314
Inventory	376,050		344,132
Property and equipment, net	753		802
Earnest money deposits	14,852		17,845
Deferred income tax assets, net	79,234		80,663
Other assets	5,101		5,819
Total assets	$	505,528	$	473,876
Liabilities and stockholders' equity
Accounts payable	$	16,815	$	13,530
Accrued expenses	7,241		5,719
Customer and builder deposits	9,071		6,938
Obligations related to land not owned under option agreements	17,595		18,176
Borrowings on lines of credit	67,500		47,500
Notes payable	9,988		10,158
Total liabilities	128,210		102,021
Commitments and contingencies (Note 11)	—		—
Stockholders’ equity
Green Brick Partners, Inc. stockholders’ equity
Common shares, $0.01 par value: 100,000,000 shares authorized; 48,833,323 issued and outstanding	488		488
Additional paid-in capital	272,112		271,867
Retained earnings	90,271		87,177
Total Green Brick Partners, Inc. stockholders’ equity	362,871		359,532
Noncontrolling interests	14,447		12,323
Total stockholders’ equity	377,318		371,855
Total liabilities and stockholders’ equity	$	505,528	$	473,876

The accompanying notes are an integral part of these consolidated financial statements.

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GREEN BRICK PARTNERS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)



	Three Months Ended March 31,
	2016			2015
Sale of residential units	$	66,628		$	49,661
Sale of land and lots	3,330			8,791
Total revenues	69,958			58,452
Cost of residential units	51,929			35,964
Cost of land and lots	2,340			6,278
Total cost of sales	54,269			42,242
Total gross profit	15,689			16,210
Salary expense	(6,174		)	(4,862		)
Selling, general and administrative expense	(4,032		)	(2,939		)
Operating profit	5,483			8,409
Interest expense	—			(281		)
Depreciation and amortization expense	(56		)	(77		)
Interest on direct financing leases income	—			13
Other income, net	516			331
Income before provision for income taxes	5,943			8,395
Income tax provision	1,453			2,207
Net income	4,490			6,188
Less: net income attributable to noncontrolling interests	1,396			2,170
Net income attributable to Green Brick Partners, Inc.	$	3,094		$	4,018

Net income attributable to Green Brick Partners, Inc. per common share:
Basic	$0.06			$0.13
Diluted	$0.06			$0.13
Weighted average common shares used in the calculation of net income attributable to Green Brick Partners, Inc. per common share:
Basic	48,814			31,346
Diluted	48,814			31,346

The accompanying notes are an integral part of these consolidated financial statements.

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GREEN BRICK PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net income	$	4,490		$	6,188
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization expense	56			77
Share-based compensation	245			83
Deferred income taxes, net	1,429			2,001
Changes in operating assets and liabilities
Increase in restricted cash	(861		)	(1		)
Increase in accounts receivable	(812		)	(177		)
Increase in inventory	(32,499		)	(15,429		)
Decrease (increase) in earnest money deposits	2,993			(1,858		)
Decrease (increase) in other assets	718			(61		)
Increase (decrease) in accounts payable	3,285			(2,222		)
Increase in accrued expenses	1,522			1,084
Increase in customer and builder deposits	2,133			255
Net cash used in operating activities	(17,301		)	(10,060		)
Cash flows from investing activities
Proceeds from sale of investment in direct financing leases	—			2,768
Acquisition of property and equipment	(7		)	(211		)
Net cash (used in) provided by investing activities	(7		)	2,557
Cash flows from financing activities
Borrowings from lines of credit	30,000			7,000
Proceeds from notes payable	—			1,009
Repayments of lines of credit	(10,000		)	(1,561		)
Repayments of notes payable	(170		)	(2,410		)
Contributions from noncontrolling interests	2,228			45
Distributions to noncontrolling interests	(1,500		)	(300		)
Net cash provided by financing activities	20,558			3,783
Net increase (decrease) in cash and cash equivalents	3,250			(3,720		)
Cash and cash equivalents at beginning of period	21,207			22,651
Cash and cash equivalents at end of period	$	24,457		$	18,931
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest	$	—		$	453
Cash paid for taxes	$	160		$	273
Supplemental disclosure of noncash investing and financing activities:
Decrease in land not owned under option agreements	$	1,032		$	473
Out-of-period equity adjustment	$	—		$	1,933

The accompanying notes are an integral part of these consolidated financial statements.

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GREEN BRICK PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

When used in these notes, references to the “Company”, “Green Brick”, “we”, “us” or “our” refer to the combined company, which has been renamed Green Brick Partners, Inc. and its subsidiaries, resulting from the acquisition by BioFuel Energy Corp. and its then consolidated subsidiaries (“BioFuel”) of JBGL Builder Finance LLC and its consolidated subsidiaries and affiliated companies (collectively, “Builder Finance”), and JBGL Capital Companies (“Capital”), a combined group of commonly managed limited liability companies and partnerships (collectively with Builder Finance, “JBGL”) by means of a reverse recapitalization transaction on October 27, 2014.

Green Brick Partners, Inc. (formerly named BioFuel Energy Corp.) was incorporated as a Delaware corporation on April 11, 2006, to invest solely in BioFuel Energy, LLC, a limited liability company organized on January 25, 2006, to build and operate ethanol production facilities in the Midwestern United States. On November 22, 2013, the Company disposed of its ethanol plants and all related assets. Following the disposition of these production facilities, we were a public shell company with no substantial operations.

On June 10, 2014, the Company entered into a definitive transaction agreement with the owners of JBGL, which provided that we would acquire JBGL for $275 million, payable in cash and shares of our common stock (the “Transaction”). JBGL is a real estate operator involved in the purchase and development of land for residential use, construction lending and home building operations. The Transaction was completed on October 27, 2014 (the “Transaction Date”). Pursuant to the terms of the Transaction, we paid the $275 million purchase price with approximately $191.8 million in cash and the remainder in 11,108,500 shares of our common stock valued at approximately $7.49 per share.

The cash portion of the purchase price was primarily funded from the proceeds of a $70.0 million rights offering conducted by the Company (the $70.0 million includes proceeds from purchases of shares of common stock by certain funds and accounts managed by Greenlight Capital, Inc. and its affiliates (“Greenlight”) and Third Point LLC and its affiliates (“Third Point”)) and $150.0 million of debt financing provided by Greenlight pursuant to a loan agreement, with the lenders from time to time party thereto (the “Loan Agreement”), which provided for a five year term loan facility (the “Term Loan Facility”). In 2015, the Loan Agreement was repaid in full.

The $70.0 million rights offering included a registered offering by the Company of transferable rights to the public holders of its common stock, as of September 15, 2014 (the “Rights Offering”) to purchase additional shares of common stock. Each right permitted the holder to purchase, at a rights price ultimately equal to $5.00 per share of common stock, 2.2445 shares of common stock. 4,843,384 shares of common stock were purchased in the public Rights Offering for aggregate gross proceeds of approximately $24.2 million.

In addition to the Rights Offering, Greenlight and Third Point participated in a private rights offering to purchase additional shares of common stock pursuant to commitment letters. Pursuant to its commitment letter, Third Point agreed to participate in the private rights offering for its full basic subscription privilege in the Rights Offering and to purchase, simultaneously with the consummation of the Rights Offering to the public, all of the available shares not otherwise sold in the Rights Offering following the exercise of all other public holders’ basic subscription privileges. Pursuant to such commitment letters, Greenlight purchased 4,957,618 shares of common stock for aggregate gross proceeds of approximately $24.8 million and Third Point purchased 4,198,998 shares of common stock for aggregate gross proceeds of approximately $21.0 million.

At the time the Transaction was completed, BioFuel was a non-operating public shell corporation with nominal operations and assets consisting of cash, deferred tax assets, and nominal other nonoperating assets. As a result of the Transaction the owners and management of JBGL gained effective operating control of the combined company. As of the Transaction Date, BioFuel did not meet the definition of a business for accounting purposes.

Accordingly, for financial reporting purposes, the Transaction was deemed to be a capital transaction in substance and recorded as a reverse recapitalization of JBGL whereby JBGL is deemed to be the continuing, surviving entity for accounting purposes, but through reorganization, has deemed to have adopted the capital structure of BioFuel. Because the acquisition was considered a reverse recapitalization for accounting purposes, the combined historical financial statements of JBGL became our historical financial statements and from the completion of the acquisition on October 27, 2014, the financial statements have been prepared on a consolidated basis. The assets and liabilities of BioFuel have been brought forward at their book value and no goodwill has been recognized in connection with the Transaction.

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As a result of the Transaction, Green Brick changed its business direction and is now in the real estate industry. We are a uniquely structured company that combines residential land development and homebuilding. We acquire and develop land, provide land and construction financing to our controlled builders and participate in the profits of our controlled builders. Our core markets are in the high growth U.S. metropolitan areas of Dallas, Texas and Atlanta, Georgia. We are engaged in all aspects of the homebuilding process, including land acquisition and development, entitlements, design, construction, marketing and sales and the creation of brand images at our residential neighborhoods and master planned communities.

The consolidated financial statements set forth in this Quarterly Report on Form 10-Q consist of JBGL and BioFuel Energy, LLC. The consolidated financial statements for all periods prior to the reverse recapitalization are the historical financial statements of JBGL, and have been retroactively restated to give effect to the Transaction.

Basis of Presentation and Principles of Consolidation

The unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and applicable regulations of the Securities and Exchange Commission (“SEC”), but do not include all of the information and footnotes required for complete financial statements. In the opinion of management, the accompanying consolidated financial statements for the periods presented reflect all adjustments, of a normal, recurring nature, necessary to fairly state our financial position, results of operations and cash flows. These consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2015, included in our Annual Report on Form 10-K filed with the SEC on March 30, 2016. Our operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for any future periods.

The consolidated financial statements include the historic accounts of JBGL and are consolidated with Green Brick beginning October 27, 2014. All intercompany balances and transactions have been eliminated in consolidation. Investments in which the Company directly or indirectly has an interest of more than 50 percent and/or is able to exercise control over the operations have been fully consolidated and noncontrolling interests are stated separately in the consolidated financial statements as required under the provisions of FASB ASC 810, Consolidations.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, including the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Noncontrolling Interests

We own 50% controlling interests in several builders. The financial statements of these builders are consolidated in our consolidated financial statements. The noncontrolling interests attributable to the 50% minority interests not owned by us are included as part of noncontrolling interests on the consolidated balance sheets.

Segment Information

The Company’s operations are organized into two reportable segments: builder operations and land development. Builder operations consist of two operating segments: Texas and Georgia. In accordance with ASC 280, Segment Reporting, in determining the most appropriate reportable segments, we considered similar economic and other characteristics, geography including product types, production processes, average selling prices, gross profits, suppliers, land acquisition results, and underlying demand and supply.

Reclassifications

Depreciation of model home furnishings for the three months ended March 31, 2015 has been reclassified from depreciation and amortization expense in the accompanying consolidated statements of income to cost of residential units to conform to the current period presentation.

Cash related to refundable customer deposits, which are not held in escrow, has been reclassified from restricted cash in the accompanying consolidated balance sheets as of December 31, 2015 and the accompanying consolidated statements of cash flows for the three months ended March 31, 2015 to cash and cash equivalents to conform to the current period presentation.

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Out-of-Period Adjustment

During the fourth quarter ended December 31, 2015, the Company recorded an out-of-period adjustment associated with a $1.9 million overaccrual of distributions payable recorded during the fourth quarter ended December 31, 2014. As a result, as of December 31, 2014, accrued expenses was overstated and retained earnings was understated by $1.9 million. After evaluating the quantitative and qualitative aspects of the out-of-period adjustment, management has determined that the adjustment is not material to any prior period financial statements.

Recent Accounting Pronouncements

In May 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of ASU No. 2014-09 by one year. ASU No. 2014-09 is effective for the Company beginning on January 1, 2018. Early adoption is permitted for reporting periods beginning after December 15, 2016. The standard permits the use of either the full retrospective approach or the modified retrospective approach. The Company has not yet selected a transition method and is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which amends the consolidation requirements in ASC 810, primarily related to limited partnerships and VIEs. This standard was effective for the Company beginning on January 1, 2016. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which 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. This standard was effective for the Company beginning on January 1, 2016. In August 2015, the FASB issued ASU No. 2015-15, Interest — Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements — Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, which clarified that the SEC staff would not object to an entity deferring and presenting debt issuance costs related to a line-of-credit arrangement as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of such arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. As permitted, the Company is deferring and presenting debt issuance costs related to its lines of credit as assets and subsequently amortizing the costs straight line over the term of the lines of credit.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, as part of its simplification initiative. The standard amends the existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet, and eliminates the prior guidance which required an entity to separate deferred tax liabilities and assets into a current amount and a noncurrent amount in a classified balance sheet. The standard is effective for the Company beginning on January 1, 2017. Early adoption is permitted as of the beginning of an interim or annual period. Additionally, the new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not believe that the adoption of this standard will have a material effect on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires an entity that leases assets to classify the leases as either finance or operating leases and to record assets and liabilities for the rights and obligations created by long-term leases, regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight line basis over the term of the lease. This standard is effective for the Company beginning on January 1, 2019 and must be adopted using a modified retrospective approach. The Company does not believe that the adoption of this standard will have a material effect on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and whether an entity reports revenue on a gross or net basis. This standard does not change the core principle of the guidance stated in ASU 2014-09. This

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standard is effective for the Company beginning on January 1, 2018. The Company has not yet selected a transition method and is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects related to the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. This standard is effective for the Company beginning on January 1, 2017. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.

2. NET INCOME ATTRIBUTABLE TO GREEN BRICK PARTNERS, INC. PER SHARE

The Company's restricted stock awards have the right to receive forfeitable dividends on an equal basis with common stock and therefore are not considered participating securities that must be included in the calculation of net income per share using the two-class method. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during each period, adjusted for non-vested shares of restricted stock awards during each period. Diluted earnings per share is calculated using the treasury stock method and includes the effect of all dilutive securities, including stock options and restricted stock awards.

The computation of basic and diluted net income attributable to Green Brick Partners, Inc. per share using the treasury stock method is as follows (in thousands, except per share amounts):



	Three Months Ended March 31,
	2016		2015
Basic net income attributable to Green Brick Partners, Inc. per share
Net income attributable to Green Brick Partners, Inc. —basic	$	3,094	$	4,018
Weighted-average number of shares outstanding —basic	48,814		31,346
Basic net income attributable to Green Brick Partners, Inc. per share	$	0.06	$	0.13
Diluted net income attributable to Green Brick Partners, Inc. per share
Net income attributable to Green Brick Partners, Inc. —diluted	$	3,094	$	4,018
Weighted-average number of shares used to compute basic net income attributable to Green Brick Partners, Inc.	48,814		31,346
Dilutive effect of stock options and restricted stock awards	—		—
Weighted-average number of shares outstanding —diluted	48,814		31,346
Diluted net income attributable to Green Brick Partners, Inc. per share	$	0.06	$	0.13

The following securities that could potentially dilute earnings per share in the future are not included in the determination of diluted net income attributable to Green Brick Partners, Inc. per common share (in thousands):



	Three Months Ended March 31,
	2016	2015
Antidilutive options to purchase common stock and restricted stock awards	296	158

3. INVENTORY

Inventory consists of land in the process of development, undeveloped land, developed lots, completed homes, raw land scheduled for development, and land not owned under option agreements in Texas and Georgia. Inventory is valued at cost unless the carrying value is determined to be not recoverable in which case the affected inventory is written down to fair value. Cost includes any related pre-acquisition costs that are directly identifiable with a specific property so long as those pre-acquisition costs are recoverable at the sale of the property.

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A summary of inventory is as follows (in thousands):



	March 31, 2016		December 31, 2015
Completed home inventory and residential lots held for sale	$	112,567	$	85,342
Work in process	242,428		236,383
Undeveloped land	5,873		6,193
Land not owned under option agreements	15,182		16,214
Total Inventory	$	376,050	$	344,132

The Company capitalizes interest costs incurred to inventory during active development and other qualifying activities. Interest capitalized as cost of inventory is charged to cost of sales as related homes, land and/or lots are closed. Interest incurred on undeveloped land is directly expensed and included in interest expense in our consolidated statements of income.

Interest costs incurred, capitalized and expensed were as follows (in thousands):



	Three Months Ended March 31,
	2016			2015
Interest capitalized at beginning of period	$	9,085		$	3,713
Interest incurred	708			3,800
Interest charged to cost of sales	(1,002		)	(14		)
Interest charged to interest expense	—			(281		)
Interest capitalized at end of period	$	8,791		$	7,218

4. DEBT

Lines of Credit

Lines of credit outstanding at March 31, 2016 and December 31, 2015 consist of the following (in thousands):



	March 31, 2016		December 31, 2015
Promissory note to Inwood National Bank (“Inwood”):
Revolving credit facility⁽¹⁾	27,500		17,500
Unsecured revolving credit facility⁽²⁾	40,000		30,000
Total lines of credit	$	67,500	$	47,500

(1)

On July 30, 2015, the Company replaced its John's Creek credit facility with a new revolving credit facility with Inwood, which provides for up to $50.0 million and is secured by land owned in John’s Creek, Georgia, Allen, Texas, and Carrollton, Texas. The maturity date for the new revolving credit facility is July 30, 2017. The costs associated with the new revolving credit facility of $0.4 million were deferred and are included in other assets in our consolidated balance sheets. The Company is amortizing these debt issuance costs to interest expense over the term of the new revolving credit facility using the straight line method. Amounts outstanding under the new revolving credit facility is secured by mortgages on real property and security interests in certain personal property (to the extent that such personal property is connected with the use and enjoyment of the real property) that is owned by certain of the Company's subsidiaries, including land owned in John’s Creek, Georgia, Allen, Texas, and Carrollton, Texas. The amounts outstanding under the new revolving credit facility are also guaranteed by certain of the Company's subsidiaries.

The new revolving credit facility is subject to a borrowing base limitation equal to the sum of 50% of the total value of land and 60% of the total value of lots owned by certain of the Company's subsidiaries, each as determined by an independent appraiser, with the value of land being restricted from being more than 50% of the borrowing base. Outstanding borrowings under the new revolving credit facility bear interest at a floating rate per annum equal to the rate announced by Bank of America, N.A., from time to time, as its “Prime Rate” (the “Index”) with such adjustments to the interest rate being made on the effective date of any change in the Index. Notwithstanding the foregoing, the interest may not, at any time, be less than 4% per annum or more than the lesser amount of 18% and the highest maximum rate allowed by applicable law. Beginning on August 30, 2015 and continuing on the 30th day of each consecutive month thereafter until the revolving credit facility matures on July 30, 2017, the Company must pay interest on the unpaid principal amount. The entire unpaid principal balance and any accrued but unpaid interest is due and payable on the maturity date.

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On May 3, 2016, the Company amended the new revolving credit facility. The amended revolving credit facility is subject to a borrowing base limitation equal to the sum of 50% of the total value of land and 65% of the total value of lots owned by certain of the Company's subsidiaries, each as determined by an independent appraiser, with the value of land being restricted from being more than 65% of the borrowing base. Beginning on August 1, 2017, a non-usage fee equal to 0.25% of the average unfunded amount of the $50.0 million commitment amount over a trailing 12 month period is due on or before August 1st of each year during the term of the amended revolving credit facility. The maturity date has been extended to May 1, 2019.

Under the terms of the new revolving credit facility, the Company is required, among other things, to maintain minimum multiples of net worth in excess of the outstanding new revolving credit facility balance, minimum interest coverage and maximum leverage. The Company was in compliance with these financial covenants under the revolving credit facility as of March 31, 2016.

(2)

On December 15, 2015, the Company entered into a credit agreement with the lenders named therein, and Citibank, N.A., as administrative agent, providing for a senior, unsecured revolving credit facility with aggregate lending commitments of up to $40.0 million (“Unsecured Revolving Credit Facility”). Subject to certain terms and conditions, the Company may, at its option, prior to the termination date, increase the amount of the revolving credit facility up to a maximum aggregate amount of $75.0 million. Commitments under the Unsecured Revolving Credit Facility will be available until the period ending December 14, 2018, which period may be extended for additional one year periods, subject to the consent of the lenders and the satisfaction of certain other terms and conditions. Citibank, N.A. and Credit Suisse AG, Cayman Islands Branch have initially committed to provide $25.0 million and $15.0 million, respectively.

The costs associated with the Unsecured Revolving Credit Facility of $0.5 million were deferred and are included in other assets in our consolidated balance sheets. The Company is amortizing these debt issuance costs to interest expense over the term of the Unsecured Revolving Credit Facility using the straight line method.

The Unsecured Revolving Credit Facility provides for interest rate options on advances at rates equal to either: (x) in the case of base rate advances, the highest of (i) Citibank’s base rate, (ii) the federal funds rate plus 0.5%, and (iii) the one-month LIBOR plus 1.0%, in each case plus 1.5%; or (y) in the case of Eurodollar rate advances, the reserve adjusted LIBOR plus 2.5%. Interest on amounts borrowed under the Unsecured Revolving Credit Facility is payable in arrears quarterly on the last day of each March, June, September and December during such periods. At March 31, 2016, the interest rate on outstanding borrowings under the Credit Facility was 2.9% per annum.

The Company will pay the lenders a commitment fee on the amount of the unused commitments on a quarterly basis at a rate per annum equal to 0.45%.

Outstanding borrowings under the Unsecured Revolving Credit Facility are subject to, among other things, a borrowing base. The borrowing base limitation is equal to the sum of: 100% of unrestricted cash (in excess of $15.0 million); 85% of the book value of model homes, construction in progress homes, sold completed homes, and speculative homes (subject to certain limitations on the age and number of speculative homes and model homes); 65% of the book value of finished lots and land under development; and 50% of the book value of entitled land (subject to certain limitations on the value of entitled land and land under development as a percentage of the borrowing base).

Additionally, under the terms of the Unsecured Revolving Credit Facility, the Company is required, among other things, to maintain compliance with various covenants, including financial covenants relating to a maximum Leverage Ratio, a minimum Interest Coverage Ratio, and a minimum Consolidated Tangible Net Worth, each as defined therein. The Company's compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Unsecured Revolving Credit Facility. The Company was in compliance with these covenants as of March 31, 2016.

Notes Payable

Notes payable outstanding at March 31, 2016 and December 31, 2015 consist of the following (in thousands):



	March 31, 2016		December 31, 2015
Note payable to unrelated third party:
Briar Ridge Investments, LTD⁽¹⁾	$	9,000	$	9,000
Lyons Equities, Inc. Trustee⁽²⁾	988		988
Subordinated Lot Notes⁽³⁾	—		170
Total notes payable	$	9,988	$	10,158

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(1)	On December 13, 2013, a subsidiary of JBGL signed a promissory note for $9.0 million maturing at December 13, 2017, bearing interest at 6.0% per annum and collateralized by land purchased in Allen, Texas. Accrued interest at March 31, 2016 was $0.


(2)	On May 22, 2015, a subsidiary of JBGL signed a promissory note for $1.0 million maturing on May 22, 2016, bearing interest at 3.5% per annum collateralized by land located in Allen, Texas. Management plans to payoff the note on the maturity date.

(3)

Subsidiaries of the Company purchased lots under various agreements from unrelated third parties. The sellers of these lots had subordinated a percentage of the lot purchase price to various construction loans of subsidiaries of the Company’s construction loans. Notes were signed in relation to the subordination bearing interest at between 8.0% and 14.0%, collateralized by liens on the homes built on each lot. The sellers released their lien upon payment of principle plus accrued interest at the closing of each individual home to a third party buyer. The subordinated lot notes were paid off as of March 31, 2016.

5. STOCKHOLDERS’ EQUITY

A summary of changes in stockholders’ equity is presented below (dollars in thousands):



	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Green Brick Partners, Inc. Stockholders’ Equity		Noncontrolling Interests			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-in Capital		Retained Earnings		Total Green Brick Partners, Inc. Stockholders’ Equity		Noncontrolling Interests			Total Stockholders’ Equity
Balance at December 31, 2014	31,346,084	$	313	$	101,626	$	69,919	$	171,858	$	9,739		$	181,597
Share-based compensation	—	—		83		—		83		—			83
Contributions	—	—		—		—		—		45			45
Distributions	—	—		—		—		—		(300		)	(300		)
Out of period adjustment	—	—		—		1,933		1,933		—			1,933
Net income	—	—		—		4,018		4,018		2,170			6,188
Balance at March 31, 2015	31,346,084	$	313	$	101,709	$	75,870	$	177,892	$	11,654		$	189,546

Balance at December 31, 2015	48,833,323	$	488	$	271,867	$	87,177	$	359,532	$	12,323		$	371,855
Share-based compensation	—	—		245		—		245		—			245
Contributions	—	—		—		—		—		2,228			2,228
Distributions	—	—		—		—		—		(1,500		)	(1,500		)
Net income	—	—		—		3,094		3,094		1,396			4,490
Balance at March 31, 2016	48,833,323	$	488	$	272,112	$	90,271	$	362,871	$	14,447		$	377,318

Equity Offering

On July 1, 2015, the Company completed an underwritten public offering of 17,000,000 shares of its common stock at a price to the public of $10.00 per share and granted to the underwriters a 30-day option to purchase up to an aggregate of 841,500 additional shares of common stock to cover over-allotments (the “Equity Offering”). On July 23, 2015, the underwriters exercised the option and purchased 444,897 additional shares. All of the shares were sold by the Company pursuant to an effective shelf registration statement previously filed with the SEC.

The Equity Offering resulted in net proceeds to Green Brick of approximately $170.0 million, after deducting underwriting discounts and offering expenses. On July 1, 2015, Green Brick used approximately $154.9 million of the net proceeds from the Equity Offering to repay all of the outstanding principal, interest and a prepayment premium under the Term Loan Facility. Upon repayment, the Term Loan Facility was terminated and all security interests in, and all liens held by Greenlight with respect to, the assets of Green Brick securing the amounts owed under the Term Loan Facility were terminated and released. Green Brick used the remaining net proceeds for working capital and general corporate purposes.

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6. SHARE REPURCHASE PROGRAM

In March 2016, the Company's Board of Directors authorized a share repurchase program of up to 1,000,000 shares of its common stock through 2017. The timing, volume and nature of share repurchases will be at the discretion of management and dependent on market conditions, corporate and regulatory requirements and other factors, and may be suspended or discontinued at any time. The authorized repurchases will be made from time to time in the open market, through block trades or in privately negotiated transactions. No assurance can be given that any particular amount of common stock will be repurchased. All or part of the repurchases may be implemented under a Rule 10b5-1 trading plan, which would allow repurchases under pre-set terms at times when we might otherwise be prevented from doing so under insider trading laws or because of self-imposed blackout periods. This repurchase program may be modified, extended or terminated at the discretion of our Board of Directors at any time. We intend to finance the repurchases with available cash. No shares were repurchased during the three months ended March 31, 2016.

7. SHARE-BASED COMPENSATION

We measure and account for share-based awards in accordance with ASC Topic 718, “Compensation - Stock Compensation”. Share-based compensation expense associated with stock options with vesting contingent upon the achievement of service conditions is recognized on a straight-line basis, net of estimated forfeitures of unvested stock options, over the requisite service period the awards are expected to vest. We estimate the aggregate intrinsic value of stock options with vesting contingent upon the achievement of service conditions as of the date the award was granted using the Black-Scholes option pricing model. The Black-Scholes option-pricing model requires the use of certain input variables, such as expected volatility, risk-free interest rate and expected award life.

Share-Based Award Activity

A summary of restricted stock awards activity during the three months ended March 31, 2016 is as follows:



	Number of Shares (in thousands)	Weighted Average Grant Date Fair Value per Share
Nonvested, December 31, 2015	23	$	8.73
Granted	—	$	—
Vested	—	$	—
Forfeited	—	$	—
Nonvested, March 31, 2016	23	$	8.73

A summary of stock option activity during the three months ended March 31, 2016 is as follows:



	Number of Shares (in thousands)	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding, December 31, 2015	500	$	7.49
Granted	—	—
Exercised	—	—
Forfeited	—	—
Options outstanding, March 31, 2016	500	$	7.49	8.62	$	50
Options exercisable, March 31, 2016	100	$	7.49	8.62	$	10

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A summary of our unvested stock options during the three months ended March 31, 2016 is as follows:



	Number of Shares (in thousands)	Weighted Average Per Share Grant Date Fair Value
Unvested, December 31, 2015	400	$	2.88
Granted	—	$	—
Vested	—	$	—
Forfeited	—	$	—
Unvested, March 31, 2016	400	$	2.88

Valuation of Share-Based Awards

We utilize the Black-Scholes option pricing model for estimating the grant date fair value of stock options. There were no stock options issued during the three months ended March 31, 2016 and March 31, 2015.

Share-Based Compensation Expense

Share-based compensation expense was $0.2 million and $0.1 million for the three months ended March 31, 2016 and March 31, 2015, respectively. At March 31, 2016, the estimated total remaining unamortized share-based compensation expense related to unvested restricted stock awards and stock options, net of forfeitures, was $1.0 million which is expected to be recognized over a weighted-average period of 3.2 years.

8. INCOME TAXES

We recorded an income tax provision of $1.5 million and $2.2 million for the three months ended March 31, 2016 and March 31, 2015, respectively. The effective tax rate for the three months ended March 31, 2016 and March 31, 2015 was 24.4% and 26.3%, respectively. The effective tax rate for the three months ended March 31, 2016 and March 31, 2015 is driven by the statutory tax rate benefit related to non-controlled earnings and state income taxes.

In accordance with ASC Topic 740, “Income Taxes” (“ASC 740”), the Company assesses the recoverability of deferred tax assets and the need for a valuation allowance on an ongoing basis. In making this assessment, management considers all available positive and negative evidence and available income tax planning to determine whether it is more-likely-than-not that some portion or all of the deferred tax assets will be realized in future periods. This assessment requires significant judgment and estimates involving current and deferred income taxes, tax attributes relating to the interpretation of various tax laws, historical bases of tax attributes associated with certain assets and limitations surrounding the realization of deferred tax assets.

As of March 31, 2016, we had deferred tax assets of $79.2 million, which was net of a valuation allowance in the amount of $1.2 million relating to state loss carryforwards. Our deferred tax asset valuation allowance remained unchanged during the three months ended March 31, 2016 from December 31, 2015.

As of December 31, 2015, we had $158.9 million of federal net operating loss carryforwards that will expire beginning with the year ending December 31, 2029. We also have approximately $21.6 million of state net operating loss carryforwards that have varying dates of expiration. We believe it is more-likely-than-not that the state loss carryforwards will expire prior to their utilization. As a result, a valuation allowance in the amount of $21.6 million is recorded against the state loss carryforwards in full.

At March 31, 2016 and December 31, 2015, the Company had no unrecognized tax benefit. Our policy is to accrue interest and penalties on unrecognized tax benefits and include them in federal income tax expense.

9. RELATED PARTY TRANSACTIONS

During the three months ended March 31, 2016 and 2015, the Company had related party transactions through the normal course of business. These transactions include the following:

On October 27, 2014, in connection with the Transaction, the Company entered into the Loan Agreement, a guaranty and a pledge and security agreement with certain funds and accounts managed by Greenlight, our largest shareholder. Greenlight beneficially owns approximately 49.4% of the voting power of the Company. The Loan Agreement provided for a five year Term Loan Facility in an aggregate principal amount of $150.0 million which funded part of the Transaction. Certain

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subsidiaries of the Company guaranteed obligations under the Term Loan Facility pursuant to the guaranty. The Term Loan Facility bore interest at 9.0% per annum, payable quarterly, from October 27, 2014 through the first anniversary thereof and 10.0% per annum thereafter. On July 1, 2015 we used approximately $154.9 million of the net proceeds from the Equity Offering to repay all of the outstanding principal, interest and a prepayment premium under the Term Loan Facility. See Note 5 for further discussion of this repayment.

In 2012, we formed Centre Living Homes, LLC (“Centre Living”), a builder that focuses on a limited number of homes and luxury townhomes each year in the Dallas, Texas market. Trevor Brickman, the son of Green Brick's Chief Executive Officer, is the President of Centre Living. Effective as of January 1, 2015, Centre Living's operating agreement was amended and restated to the same general terms as with our other builders, such that Green Brick's ownership interest in Centre Living is 50% and Trevor Brickman's ownership interest is 50% for future operations beginning January 1, 2015. Subsequent to this amendment, Green Brick has 51% voting control over the operations of Centre Living. As such, 100% of Centre Living's operations are included within our consolidated financial statements for the three months ended March 31, 2016. The noncontrolling interest attributable to Centre Living was $0.1 million and $0.3 million as of March 31, 2016 and December 31, 2015.

In November 2015, the Company purchased 12 lots from an entity affiliated with the president of TPG, one of its controlled builders. The lots are part of a 92-townhome community, Glens at Sugarloaf in Atlanta. No deposits were paid by the Company in contracting for the lots. The total paid for the lots in 2015 was $1.0 million. During March 2016, the Company purchased the remaining 80 townhome lots within the community at a price of $4.8 million from the affiliated entity.

During March 2016, the Company purchased undeveloped land for an eventual 83 lot community, Academy Street in Atlanta. Simultaneously, the Company entered into a partnership agreement with an entity affiliated with the president of TPG to develop the community for sale of the lots to TPG. Contributions, voting percentages, and profits will be 80% for the Company and 20% for the affiliated entity. Total capital contributions are estimated at $12.0 million.

During March 2016, the Company purchased undeveloped land for an eventual 73-townhome community, Suwanee Station in Atlanta. Simultaneously, the Company entered into a partnership agreement with an entity affiliated with the president of TPG to develop the community for sale of the lots to TPG. Contributions, voting percentages, and profits will be 50% for the Company and 50% for the affiliated entity. Total capital contributions are estimated at $2.0 million.

10. FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The Company’s financial instruments, none of which are held for trading purposes, include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, investment in direct financing lease, earnest money deposits, other assets, accounts payable, accrued liabilities, customer and builder deposits, obligations related to land not owned under option agreements, borrowings on lines of credit, and notes payable. The Company estimates that due to the short term nature of underlying instruments or the proximity of the underlying transaction to the applicable reporting date that the fair value of all financial instruments does not differ materially from the aggregate carrying values recorded in the consolidated financial statements at March 31, 2016 and December 31, 2015. Per the fair value hierarchy, level 1 financial instruments include: cash and cash equivalents, restricted cash, earnest money deposits, and customer and builder deposits. All other instruments are deemed to be level 3.

Fair Value of Nonfinancial Instruments

Nonfinancial assets and liabilities include items such as inventory and long lived assets that are measured at cost unless the carrying value is determined to be not recoverable in which case the affected instrument is written down to fair value. During the three months ended March 31, 2016 and the year ended December 31, 2015, the Company did not record any fair value adjustments to those financial and nonfinancial assets and liabilities measured at fair value on a nonrecurring basis.

11. COMMITMENTS AND CONTINGENCIES

Warranties

The Company accrues an estimate of its exposure to warranty claims based on both current and historical home sales data and warranty costs incurred. The Company offers homeowners a comprehensive third party warranty on each home. Homes are generally covered by a ten year warranty for qualified and defined structural defects, one year for defects and products used, and two years for electrical, mechanical and plumbing systems. The Company accrues up to $1,500 per home closed for future

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warranty claims, and evaluates the adequacy of the reserve annually. Warranty accruals are included within accrued expenses in the consolidated balance sheets.

Commitments

The Company has leases associated with office space in Georgia and Texas which are classified as operating leases. Rent expense under these leases are included in the selling, general and administrative expense in the consolidated statements of income.

Legal Matters

Lawsuits, claims and proceedings may be instituted or asserted against us in the normal course of business. The Company is also subject to local, state and federal laws and regulations related to land development activities, house construction standards, sales practices, employment practices and environmental protection. As a result, the Company may be subject to periodic examinations or inquiry by agencies administering these laws and regulations.

The Company records a reserve for potential legal claims and regulatory matters when they are probable of occurring and a potential loss is reasonably estimable. The Company accrues for these matters based on facts and circumstances specific to each matter and revises these estimates when necessary.

In view of the inherent difficulty of predicting outcomes of legal claims and related contingencies, the Company generally cannot predict their ultimate resolution, related timing or eventual loss. If evaluations indicate loss contingencies that could be material are not probable, but are reasonably possible, the Company will disclose their nature with an estimate of possible range of losses or a statement that such loss is not reasonably estimable. The Company has no litigation outstanding as of March 31, 2016. At March 31, 2016 and December 31, 2015, the Company did not have any accruals for asserted or unasserted matters.

12. SEGMENT INFORMATION

Financial information relating to the Company’s reportable segments is as follows. Operational results of each reportable segment are not necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented.



	Three Months Ended March 31,
(in thousands)	2016		2015
Revenues:
Builder Operations
Texas	$	33,581	$	29,088
Georgia	33,047		20,573
Land Development	3,330		8,791
	$	69,958	$	58,452
Gross profit:
Builder Operations
Texas	$	8,761	$	7,721
Georgia	5,938		5,976
Land Development	990		2,513
	$	15,689	$	16,210

	March 31, 2016		December 31, 2015
Inventory:
Builder Operations
Texas	$	71,513	$	60,768
Georgia	179,492		158,623
Land Development	125,045		124,741
	$	376,050	$	344,132

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13. SUBSEQUENT EVENT

On May 3, 2016, the Company amended its Inwood revolving credit facility. The amended revolving credit facility is subject to a borrowing base limitation equal to the sum of 50% of the total value of land and 65% of the total value of lots owned by certain of the Company's subsidiaries, each as determined by an independent appraiser, with the value of land being restricted from being more than 65% of the borrowing base. Beginning on August 1, 2017, a non-usage fee equal to 0.25% of the average unfunded amount of the $50.0 million commitment amount over a trailing 12 month period is due on or before August 1st of each year during the term of the amended revolving credit facility. The maturity date has been extended to May 1, 2019.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes statements and information that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.” Statements that are “forward-looking statements” include any projections of earnings, revenue or other financial items, any statements of the plans, strategies or objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, any statements concerning potential acquisitions, and any statements of assumptions underlying any of the foregoing. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “outlook,” “strategy,” “positioned,” “intends,” “plans,” “believes,” “projects,” “estimates” and similar expressions, as well as statements in the future tense, identify forward-looking statements.

These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business. In addition, even if results are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results may not be indicative of results or developments in subsequent periods. Furthermore, industry forecasts are likely to be inaccurate, especially over long periods of time and in industries particularly sensitive to market conditions such as homebuilding and builder finance.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:


•	cyclicality in the homebuilding industry and adverse changes in general economic conditions;


•	fluctuations and cycles in value of, and demand for, real estate investments;


•	significant inflation or deflation;


•	the unavailability of subcontractors;


•	labor and raw material shortages and price fluctuations;


•	the failure to recruit, retain and develop highly skilled and competent employees;


•	an inability to acquire undeveloped land, partially-finished developed lots and finished lots suitable for residential homebuilding at reasonable prices;


•	an inability to develop communities successfully or within expected timeframes;


•	an inability to sell properties in response to changing economic, financial and investment conditions;


•	risks related to participating in the homebuilding business through controlled homebuilding subsidiaries;


•	risks relating to buy-sell provisions in the operating agreements governing two builder subsidiaries;


•	risks related to geographic concentration;


•	risks related to government regulation;


•	the interpretation of or changes to tax, labor and environmental laws;


•	the timing of receipt of regulatory approvals and of the opening of projects;


•	fluctuations in the market value of land, building lots and housing inventories;


•	volatility of mortgage interest rates;


•	the unavailability of mortgage financing;

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•	the number of foreclosures in our markets;


•	interest rate increases or adverse changes in federal lending programs;


•	increases in unemployment or underemployment;


•	any limitation on, or reduction or elimination of, tax benefits associated with owning a home;


•	the occurrence of severe weather or natural disasters;


•	high cancellation rates;


•	competition in the homebuilding, land development and financial services industries;


•	risks related to future growth through strategic investments, joint ventures, partnerships and/or acquisitions;


•	the inability to obtain suitable bonding for the development of housing projects;


•	difficulty in obtaining sufficient capital;


•	risks related to environmental laws and regulations;


•	the occurrence of a major health and safety incident;


•	poor relations with the residents of our communities;


•	information technology failures and data security breaches;


•	product liability claims, litigation and warranty claims;


•	the seasonality of the homebuilding industry;


•	utility and resource shortages or rate fluctuations;


•	the failure of employees or other representatives to comply with applicable regulations and guidelines;


•	future litigation, arbitration or other claims;


•	uninsured losses or losses in excess of insurance limits;


•	cost and availability of insurance and surety bonds;


•	volatility and uncertainty in the credit markets and broader financial markets;


•	availability, terms and deployment of capital including with respect to the timing and size of share repurchases, acquisitions, joint ventures and other strategic actions;


•	our debt and related service obligations;


•	required accounting changes;


•	an inability to maintain effective internal control over financial reporting; and


•	other risks and uncertainties inherent in our business including those described Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Should one or more of the risks or uncertainties described above or elsewhere in this Quarterly Report on Form 10-Q occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Except as required by law, we disclaim all responsibility to publicly update any information contained in a forward-looking statement

All forward-looking statements attributable to us or to persons acting on our behalf, including any such forward-looking statements made subsequent to the publication of this Quarterly Report on Form 10-Q, are expressly qualified in their entirety by this cautionary statement.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on March 30, 2016. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results discussed in or implied by any of the forward-looking statements as a result of various factors, including those listed elsewhere in this Quarterly Report on Form 10-Q. See “Forward-Looking Statements” above and “Risk Factors” below.

Reverse Recapitalization

On June 10, 2014, we entered into a definitive transaction agreement with the owners of JBGL Builder Finance LLC and its consolidated subsidiaries and affiliated companies (collectively, “Builder Finance”), and JBGL Capital Companies (“Capital”), a combined group of commonly managed limited liability companies and partnerships (collectively with Builder Finance, “JBGL”), which provided that we would acquire JBGL for $275 million, payable in cash and shares of our common stock (the “Transaction”). JBGL is a real estate operator involved in the purchase and development of land for residential use, construction lending and homebuilding operations. The Transaction was completed on October 27, 2014 (“Transaction Date”). Pursuant to the terms of the Transaction, we paid the $275 million purchase price with approximately $191.8 million in cash and the remainder in 11,108,500 shares of our common stock valued at approximately $7.49 per share.

At the time the Transaction was completed, BioFuel Energy Corp. (“BioFuel”) was a non-operating public shell corporation with nominal operations and assets consisting of cash, deferred tax assets, and nominal other nonoperating assets. As a result of the Transaction the owners and management of JBGL gained effective operating control of the combined company.

Accordingly, for financial reporting purposes, the Transaction was deemed to be a capital transaction in substance and recorded as a reverse recapitalization of JBGL whereby JBGL is deemed to be the continuing, surviving entity for accounting purposes, but through reorganization, has deemed to have adopted the capital structure of BioFuel. Because the acquisition was considered a reverse recapitalization for accounting purposes, the combined historical financial statements of JBGL became our historical financial statements and, from the completion of the acquisition on October 27, 2014, the financial statements have been prepared on a consolidated basis. The assets and liabilities of BioFuel have been brought forward at their book value and no goodwill has been recognized in connection with the Transaction.

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As a result of the Transaction, Green Brick changed its business direction and is now in the real estate industry. The financial statements set forth in this Quarterly Report on Form 10-Q for all periods prior to the reverse recapitalization are the historical financial statements of JBGL and have been retroactively restated to give effect to the Transaction.

Equity Offering

On July 1, 2015, we completed an underwritten public offering of 17,000,000 shares of our common stock at a price to the public of $10.00 per share and granted to the underwriters a 30-day option to purchase up to an aggregate of 841,500 additional shares of common stock to cover over-allotments (the “Equity Offering”). On July 23, 2015, the underwriters exercised the option and purchased 444,897 additional shares. All of the shares were sold by us pursuant to an effective shelf registration statement previously filed with the SEC.

The Equity Offering resulted in net proceeds to us of approximately $170.0 million, after deducting underwriting discounts and offering expenses. On July 1, 2015, we used approximately $154.9 million of the net proceeds from the Equity Offering to repay all of the outstanding principal, interest and a prepayment premium under the Term Loan Facility. Upon repayment, the Term Loan Facility was terminated, and all security interests in, and all liens held by Greenlight with respect to, the assets of Green Brick securing the amounts owed under the Term Loan Facility were terminated and released. We used the remaining net proceeds for working capital and general corporate purposes.

Overview of the Business

We are a uniquely structured company that combines residential land development and homebuilding. We acquire and develop land, provide land and construction financing to our controlled builders and participate in the profits of our controlled builders. Our core markets are in the high growth U.S. metropolitan areas of Dallas, Texas and Atlanta, Georgia. We are engaged in all aspects of the homebuilding process, including land acquisition and the development, entitlements, design, construction, marketing and sales and the creation of brand images at our residential neighborhoods and master planned communities. We believe we offer higher quality homes with more distinctive designs and floor plans than those built by our competitors at comparable prices. Our communities are located in premium locations in our core markets and we seek to enhance homebuyer satisfaction by utilizing high-quality materials, offering a broad range of customization options and building well-crafted energy-efficient homes. We seek to maximize value over the long term and operate our business to mitigate risks in the event of a downturn by controlling costs and quickly reacting to regional and local market trends.

We are a leading lot developer in the Dallas and Atlanta markets and believe that our strict operating discipline provides us with a competitive advantage in seeking to maximize returns while minimizing risk. We currently own or control over 4,700 home sites in premium locations in the Dallas and Atlanta markets. We consider premium locations to be lot supply constrained with high housing demand and where much of the surrounding land has already been developed. We are strategically positioned to either build new homes on our lots through our controlled builders or to sell finished lots to large unaffiliated homebuilders.

We sell finished lots or option lots from third-party developers to our controlled builders for their homebuilding operations and provide them with construction financing and strategic planning. Our controlled builders provide us with their local knowledge and relationships. We support our controlled builders by financing their purchases of land from us at an unlevered internal rate of return (“IRR”) of at least 20% and by providing construction financing at approximately a 13.8% interest rate. Our income is further enhanced by our 50% equity interest in the profits of our controlled builders. In addition, the land we sell to third-party homebuilders also typically generates an unlevered IRR of 20% or greater.

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References to our “controlled builders” refer to our homebuilding subsidiaries in which we own at least a 50% controlling interest.



Our Controlled Builders	Year Formed	Market	Products Offered	Prices Ranges
The Providence Group of Georgia L.L.C. (“TPG”)	2011	Atlanta	Townhomes	$260,000 to $590,000
			Single family	$315,000 to $1.4 million
			Luxury homes	$770,000 to $3.0 million
CB JENI Homes DFW LLC (“CB JENI”)	2012	Dallas	Townhomes	$210,000 to $390,000
			Single family	$280,000 to $700,000
Centre Living Homes, LLC (“Centre Living”)	2012	Dallas	Townhomes	$500,000 to more than $1 million
			Contractor on luxury homes	Up to $2.5 million
Southgate Homes DFW LLC (“Southgate”)	2013	Dallas	Luxury homes	$600,000 and above

During the first quarter of 2015, we formed Green Brick Title, LLC (“Green Brick Title”), our wholly-owned title company. Green Brick Title's core business includes title insurance, and closing and settlement services for our homebuyers. Green Brick Title had minimal operations during the three months ended March 31, 2016 and 2015.

Definitions

In the following discussion, “backlog” refers to homes under sales contracts that have not yet closed at the end of the relevant period, “cancellation rate” refers to sales contracts canceled divided by sales contracts executed during the relevant period, “net new home orders” refers to new home sales contracts reduced by the number of sales contracts canceled during the relevant period, and “overall absorption rate” refers to the rate at which net new home orders are contracted per selling community during the relevant period. Sales contracts relating to homes in backlog may be canceled by the prospective purchaser for a number of reasons, such as the prospective purchaser’s inability to obtain suitable mortgage financing. Upon a cancellation, the escrow deposit may be returned to the prospective purchaser (other than with respect to certain design-related deposits, which we retain). Accordingly, backlog may not be indicative of our future revenue.

Overview and Outlook

The following are our key operating metrics for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015: home deliveries increased by 11.0%, home sales revenue increased by 34.2%, average selling prices increased by 20.8%, backlog units increased by 15.7%, backlog units value increased by 39.3%, average sales price of homes in backlog increased by 20.4%, and net new home orders increased by 29.0%.

The increase in the average sales price of homes in backlog is the result of changes in product mix of homes contracted for sale during the period and local market appreciation. From January 2015 to January 2016 homes in the Dallas and Atlanta markets appreciated by 9.2% and 5.7%, respectively (Source: S&P/Case-Shiller 20-City Composite Home Price Index, January 2016). During the three months ended March 31, 2016, the housing market continued to show signs of improvement, which we believe is driven by rising consumer confidence, lower interest rates, high affordability metrics, and a reduction in home inventory levels.

Our two primary markets, Dallas and Atlanta, have shown significant housing market recovery. We believe the housing market recovery is sustainable, and that we operate in two of the most desirable housing markets in the nation. Among the 12 largest metropolitan areas in the country, the Dallas metropolitan area ranked first in the rate of job growth and third in the number of jobs added from March 2015 to March 2016 (Source: US Bureau of Labor Statistics, April 2016). The Atlanta metropolitan area has recorded employment gains each month, as compared to the same month in the prior year, since July 2010 (Source: US Bureau of Labor Statistics, April 2016). We believe that increasing demand and supply constraints in our target markets create favorable conditions for our future growth.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) and applicable regulations of the SEC. Our operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for any future periods.

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The consolidated financial statements and notes thereto include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Results of Operations

Land Development

During the three months ended March 31, 2016, our land development segment revenue decreased $5.5 million, or 62.1%, from $8.8 million for the three months ended March 31, 2015 to $3.3 million for the three months ended March 31, 2016. The decrease was comprised of $5.4 million due to a 61.1% decrease in finished inventory of lots delivered from 72 for the three months ended March 31, 2015 to 28 for the three months ended March 31, 2016, and a decrease of $0.1 million related to a decrease in the average sales price per lot from $122,094 per lot for the three months ended March 31, 2015 to $118,944 per lot for the three months ended March 31, 2016.

The decrease in finished inventory lots delivered is a result of a decrease in third party lot sales driven by an increase in intercompany lot sales to our controlled builders where revenue is not recognized until the home closes. While there is a time lag in when we can recognize intercompany lot sales, we believe this is best for the Company as we are able to further invest in our controlled builders and improve overall margins.

Builder Operations

During the three months ended March 31, 2016, our builder operations segment delivered 161 homes, with an average sales price of $413,839, compared to 145 homes, with an average sales price of $342,490, during the same period in 2015. During the three months ended March 31, 2016, our builder operations segment generated approximately $66.6 million in revenue compared to $49.7 million during the same period in 2015. For the three months ended March 31, 2016, net new home orders totaled 240, a 29.0% increase from the same period in 2015. At March 31, 2016, our builder operations segment had a backlog of 280 sold but unclosed homes, a 15.7% increase from the same period in 2015, with a total value of approximately $129.2 million, an increase of $36.4 million, or 39.3%, from March 31, 2015. The increase in value of backlog units reflects an increase in the number of homes in backlog and an increase in the average sales price of homes in backlog.

The increase in the average sales price of homes in backlog is the result of changes in product mix related to higher priced single family homes over lower priced townhomes closed during the period and local market appreciation. The average sales price of homes may increase or decrease depending on the mix of typical homes delivered and sold during such period and local market conditions. These changes in the average sales price of homes are part of our natural business cycle.

Revenues

We primarily generate revenue through (a) the sale of lots from our land development segment to public builders, large private builders and our controlled builders, (b) making first lien construction loans to our controlled builders, and (c) the closing and delivery of homes through our builder operations segment. We recognize revenue on homes and lots when completed and title to, and possession of, the property have been transferred to the purchaser.

All customer deposits are treated as liabilities. We also serve as the general contractor for certain custom homes where the customers, and not our company, own the underlying land and improvements. We recognize revenue for these contracts either on a percentage of completion method or cost plus method.

Expenses

Lot acquisition, materials, other direct costs, interest and other indirect costs related to the acquisition, development, and construction of lots and homes are capitalized until the homes are complete, after which they are expensed. Direct and indirect costs of developing residential lots are allocated based on the relative sales price of the lots. Capitalized costs of residential lots are charged to earnings when the related revenue is recognized.

Salary Expense

Salary expense represent salaries, benefits and share-based compensation, and are recorded in the period incurred.

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Selling, General and Administrative Expense

Selling, general and administrative expenses represent property taxes, advertising and marketing, rent and lease expenses, and other administrative items, and are recorded in the period incurred.

Interest Expense

Interest expense consists primarily of interest costs incurred on our debt that is not capitalized and amortization of related debt issuance costs. We capitalize interest costs incurred to inventory during active development and other qualifying activities.

Other Income, Net

Other income, net consists of net revenue from contracts where we are the general contractor and where our customers own the land, interest on direct financing leases income, profit participation on notes receivable, costs incurred for business acquisitions, depreciation, amortization, income from rental property and forfeited deposits.

Income Tax Provision

Prior to the Transaction, JBGL consisted of entities that filed individual partnership tax returns for federal income tax purposes. Several of the underlying entities were wholly-owned limited liability companies (“LLC’s”), and thus disregarded for federal income tax purposes, while several other entities had non-controlled interests, causing these LLC entities to be treated as regarded entities that filed partnership tax returns for federal income tax purposes. The Transaction resulted in the ownership of JBGL by Green Brick, a corporate entity. Effectively, during the fourth quarter of calendar year 2014, JBGL and its wholly-owned LLC interests became disregarded for federal income tax purposes, taxable as a branch of the corporate entity. As such, the Transaction resulted in a change in tax status of the partnerships. The income tax effect of the change in tax status was recorded as an income tax benefit during the fourth quarter of the year ended December 31, 2014.

We account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We regularly review historical and anticipated future pre-tax results of operations to determine whether we will be able to realize the benefit of deferred tax assets. A valuation allowance is required to reduce the deferred tax asset when it is more-likely-than-not that all or some portion of the deferred tax asset will not be realized due to the lack of sufficient taxable income.

We establish reserves for uncertain tax positions that reflect our best estimate of deductions and credits that may not be sustained on a more-likely-than-not basis. In accordance with ASC 740, Income Taxes, the Company recognizes the effect of income tax positions only if those positions have a more-likely-than-not chance of being sustained by the Company. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

As of March 31, 2016, in consideration of all available positive and negative evidence, including tax planning, management concluded that it was more-likely-than-not that all of our net deferred tax assets will be realized in accordance with U.S. GAAP, except for state income tax net operating loss carryforwards, for which a valuation allowance in the amount of $1.2 million has been recorded.

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Consolidated Financial Data

The consolidated historical financial data presented below reflect our land development and builder operations segments, and are not necessarily indicative of the results to be expected for any future period.



	Three Months Ended March 31,
	2016			2015
	(in thousands, except per share data)
Sale of residential units	$	66,628		$	49,661
Sale of land and lots	3,330			8,791
Total revenues	69,958			58,452
Cost of residential units	51,929			35,964
Cost of land and lots	2,340			6,278
Total cost of sales	54,269			42,242
Total gross profit	15,689			16,210
Salary expense	(6,174		)	(4,862		)
Selling, general and administrative expense	(4,032		)	(2,939		)
Operating profit	5,483			8,409
Interest expense	—			(281		)
Other income, net	460			267
Income before provision for income taxes	5,943			8,395
Income tax provision	1,453			2,207
Net income	4,490			6,188
Less: net income attributable to noncontrolling interests	1,396			2,170
Net income attributable to Green Brick Partners, Inc.	$	3,094		$	4,018

Net income attributable to Green Brick Partners, Inc. per common share:
Basic	$0.06			$0.13
Diluted	$0.06			$0.13

Weighted average common shares used in the calculation of net income attributable to Green Brick Partners, Inc. per common share:
Basic	48,814			31,346
Diluted	48,814			31,346

Reclassifications

Depreciation of model home furnishings for the three months ended March 31, 2015 has been reclassified from depreciation and amortization expense, which is included in other income, net in the consolidated financial data above, to cost of residential units to conform to the current period presentation.

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Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

Net New Home Orders and Backlog

The table below represents new home orders and backlog related to our builder operations segment.



	Three Months Ended March 31,						Increase (Decrease)
New Home Orders & Backlog	2016			2015			Change			%
Net new home orders	240			186			54			29.0%
Number of cancellations	27			26			1			3.8%
Cancellation rate	10.1		%	12.3		%	(2.2		)%	(17.9)%
Average selling communities	44			36			8			22.2%
Selling communities at end of period	44			37			7			18.9%
Backlog ($ in thousands)	$	129,190		$	92,754		$	36,436		39.3%
Backlog (units)	280			242			38			15.7%
Average sales price of backlog	$	461,393		$	383,281		$	78,112		20.4%

Net new home orders for the three months ended March 31, 2016 increased by 54 homes, or 29.0%, to 240 from 186 for the three months ended March 31, 2015. Overall absorption rate for the three months ended March 31, 2016 was an average of 5.5 per selling community (1.8 monthly), compared to an average of 5.2 per selling community (1.7 monthly) for the three months ended March 31, 2015.

Our cancellation rate was approximately 10.1% for the three months ended March 31, 2016, compared to 12.3% for the three months ended March 31, 2015. Management believes a cancellation rate in the range of 15% to 20% is representative of an industry average cancellation rate. Nevertheless, on average, our cancellation rate is on the lower end of the industry average, which we believe is due to our target buyer demographics, which generally does not include first time homebuyers.

Backlog units increased by 38 homes, or 15.7%, to 280 as of March 31, 2016 from 242 as of March 31, 2015. The dollar value of backlog units increased $36.4 million, or 39.3%, to $129.2 million as of March 31, 2016 from $92.8 million as of March 31, 2015. The increase in value of backlog units reflects an increase in the number of homes in backlog and an increase in the average sales price of homes in backlog. Our average sales price of homes in backlog increased $78,112, or 20.4%, to $461,393 for the three months ended March 31, 2016, compared to $383,281 for the three months ended March 31, 2015. The increase in the average sales price of homes in backlog is the result of changes in product mix related to higher priced single family homes over lower priced townhomes contracted for sale during the period and local market appreciation. The average sales price of homes may fluctuate depending on the mix of typical homes delivered and sold during a period. The change in the average sales price of homes is part of our natural business cycle.

New Homes Delivered and Home Sales Revenue

The table below represents home sales revenue and new homes delivered related to our builder operations segment.



	Three Months Ended March 31,				Increase (Decrease)
New Homes Delivered and Home Sales Revenue	2016		2015		Change		%
New homes delivered	161		145		16		11.0%
Home sales revenue ($ in thousands)	$	66,628	$	49,661	$	16,967	34.2%
Average sales price of home delivered	$	413,839	$	342,490	$	71,349	20.8%

New home deliveries (excluding existing completed homes sold, but not yet closed) for the three months ended March 31, 2016 for our builder operations segment was 161, compared to new home deliveries of 145 for the three months ended March 31, 2015, resulting in an increase of 16 homes, or 11.0%. The increase in new home deliveries was primarily attributable to a 22.2% increase in new communities to 44 from 36.

Home sales revenue increased $17.0 million, or 34.2%, to $66.6 million for the three months ended March 31, 2016, from $49.7 million for the three months ended March 31, 2015. The increase in revenue was comprised of (a) a $11.6 million increase in revenues resulting from an increase in average sales price of $71,349 per home to $413,839 for the three months ended March 31, 2016 from $342,490 for the three months ended March 31, 2015, and (b) a $5.4 million increase in revenues driven by a 11.0% increase in homes delivered to 161 for the three months ended March 31, 2016, from 145 for the three

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months ended March 31, 2015. The increase in the average sales price of homes was the result of changes to the mix of homes delivered resulting in an increase in the number of single family homes delivered at higher price points compared to townhomes and local market appreciation.

Homebuilding

The table below represents cost of home sales and gross margin related to our builder operations segment.



	Three Months Ended March 31,
Homebuilding ($ in thousands)	2016		%		2015		%
Home sales revenue	$	66,628	100.0	%	$	49,661	100.0	%
Cost of home sales	$	51,929	77.9	%	$	35,964	72.4	%
Homebuilding gross margin	$	14,699	22.1	%	$	13,697	27.6	%

Cost of home sales for the three months ended March 31, 2016 for builder operations was $51.9 million, compared to cost of home sales of $36.0 million for the three months ended March 31, 2015, resulting in an increase of $16.0 million, or 44.4%, primarily due to the 11.0% increase in the number of homes delivered. Homebuilding gross margin percentage for the three months ended March 31, 2016 for builder operations was 22.1%, compared to a gross margin percentage of 27.6% for the three months ended March 31, 2015. The increase in homebuilding gross margin is largely due to the opening of new communities during the three months ended March 31, 2016. The decrease in gross margin percentage is due to the unusually large number of home closings in several high margin communities during the three months ended March 31, 2015 and the amortization of capitalized interest during the three months ended March 31, 2016.

Salary Expense

The table below represents salary expense related to our land development and builder operations segments.



($ in thousands)	Three Months Ended March 31,				As Percentage of Related Revenue
($ in thousands)	2016		2015		2016		2015
Land development	$	55	$	324	1.7	%	3.7	%
Builder operations	$	6,119	$	4,538	9.2	%	9.1	%

Land Development

Salary expense for the three months ended March 31, 2016 for land development was $0.1 million compared to $0.3 million for the three months ended March 31, 2015, a decrease of 83.0%. The decrease is primarily the result of a decrease in employee headcount of 3.

Builder Operations

Salary expense for the three months ended March 31, 2016 for builder operations was $6.1 million, compared to $4.5 million for the three months ended March 31, 2015, an increase of 34.8%. The increase was primarily the result of an increase in salaries driven by an increase in employee headcount of 51 and the associated costs of benefits to support the growth in our builder operations segment.

Selling, General and Administrative Expense

The table below represents selling, general and administrative expenses related to our land development and builder operations segments.



($ in thousands)	Three Months Ended March 31,				As Percentage of Related Revenue
($ in thousands)	2016		2015		2016		2015
Land development	$	227	$	260	6.8	%	3.0	%
Builder operations	$	3,805	$	2,679	5.7	%	5.4	%

Land Development

Selling, general and administrative expense for the three months ended March 31, 2016 for land development remained relatively flat at $0.2 million.

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Builder Operations

Selling, general and administrative expense for the three months ended March 31, 2016 for builder operations was $3.8 million, compared to $2.7 million for the three months ended March 31, 2015, an increase of 42.0%. The increase was primarily attributable to increases in expenditures to support builder operations in anticipation of future growth in our business. The average selling community count is 44 for the three months ended March 31, 2016 compared to 36 for the three months ended March 31, 2015.

Interest Expense

Interest expense decreased $0.3 million, or 100.0%, to $0.0 million for the three months ended March 31, 2016, from $0.3 million for the three months ended March 31, 2015. The decrease was due to an increase in the amount of capitalized interest during three months ended March 31, 2016.

Other Income, Net

Other income, net, remained increased $0.2 million, or 72.3%, to $0.5 million for the three months ended March 31, 2016, from $0.3 million for the three months ended March 31, 2015. The increase was due to an increase in various other income and a decrease in various other expense.

Income Tax Provision

Income tax expense decreased $0.8 million, or 34.2%, for the three months ended March 31, 2016, from an expense of $2.2 million for the three months ended March 31, 2015. The decrease in income tax expense is due primarily to a decrease in pre-tax book income and discrete tax benefits.

As of December 31, 2015, we had federal net operating loss carryforwards of approximately $158.9 million, which will begin to expire beginning with the year ending December 31, 2029. Our ability to utilize our net operating loss carryforwards depends on the amount of taxable income we generate in future periods. Based on our historical taxable income results through March 31, 2016, as well as forecasted income, management expects that the Company will generate sufficient taxable income to utilize all of the federal net operating loss carryforwards before they expire. The Company also has approximately $21.6 million of gross state net operating loss carryforwards having varying periods of expiration which the Company believes on a more-likely-than-not basis, will not be utilized. The Company maintains a deferred income tax asset in the amount of $1.2 million for the state loss carryforwards and a related valuation allowance in the amount of $1.2 million. In the Company’s assessment of the need for a valuation allowance, both positive and negative information was considered, including any available income tax planning. Our deferred tax asset valuation allowance remained unchanged during the three months ended March 31, 2016 from December 31, 2015.

As of March 31, 2016, we had deferred tax assets of $79.2 million, which was net of a valuation allowance in the amount of $1.2 million relating to state loss carryforwards. The deferred tax assets are primarily related to federal net operating loss carryforwards and basis in partnerships. We evaluate the appropriateness of a valuation allowance based on the consideration of all available positive and negative evidence, including the generation of taxable income, historical operating results, economic factors and general risk factors, using the more-likely-than-not standard. A valuation allowance is required to reduce our deferred tax assets if it is determined that it is more-likely-than-not that all or some portion of such assets will not be realized in consideration of all available positive and negative information. As of March 31, 2016, management concluded that it was more-likely-than-not that the net deferred tax assets, except for the state loss carryforwards noted above, will be realized in accordance with U.S. GAAP principles.

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Lots Owned and Controlled

The table below represents lots owned and controlled (including land option agreements) as of March 31, 2016 and December 31, 2015. Owned lots are those to which the Company holds title, while controlled lots are those that we have the contractual right to acquire title but does not currently own.



	March 31, 2016	December 31, 2015
Lots Owned⁽¹⁾
Texas	2,533	2,659
Georgia	1,203	991
Total	3,736	3,650
Lots Controlled⁽¹⁾⁽²⁾
Texas	384	326
Georgia	552	758
Total	936	1,084

Total Lots Owned and Controlled⁽¹⁾	4,672	4,734


(1)	The land use assumptions used in the above table may change over time.


(2)	Lots controlled excludes homes under construction.

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Liquidity and Capital Resources Overview

As of March 31, 2016 and December 31, 2015, we had $24.5 million and $21.2 million of cash and cash equivalents, respectively. Management believes that we have a prudent cash management strategy, including with respect to cash outlays for land and inventory acquisition and development. We intend to generate cash from the sale of inventory, and intend to redeploy the net cash generated from the sale of inventory to acquire and develop lots that represent opportunities to generate desired margins. We may also use cash to make share repurchases or additional investments in acquisitions, joint ventures, or other strategic activities.

Our principal uses of capital for the three months ended March 31, 2016 were operating expenses, land purchases, land development, home construction and the payment of routine liabilities. We used funds generated by operations and available borrowings to meet our short-term working capital requirements. We remain focused on generating positive margins in our builder operations segment and acquiring desirable land positions in order to maintain a strong balance sheet and remain poised for growth.

Cash flows for each of our communities depend on their stage in the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, and construction of model homes, roads, utilities, general landscaping and other amenities. Because these costs are a component of our inventory and are not recognized in our statement of income until a home closes, we incur significant cash outlays prior to recognition of earnings. In the later stages of community development, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. We are actively acquiring and developing lots in our primary markets in order to maintain and grow our lot supply.

On July 1, 2015, we completed the Equity Offering of 17,000,000 shares of our common stock at a price to the public of $10.00 per share. On July 23, 2015, the underwriters purchased 444,897 additional shares pursuant to their 30-day option to purchase up to an aggregate of 841,500 additional shares of common stock to cover over-allotments. The Equity Offering resulted in net proceeds of approximately $170.0 million, after deducting underwriting discounts and offering expenses, which we used to repay the Term Loan Facility and for working capital and general corporate purposes. On July 30, 2015, we replaced our $25.0 million revolving credit facility with a new revolving credit facility with Inwood National Bank (“Inwood”), which provides for up to $50.0 million and is secured by land owned in John’s Creek, Georgia, Allen, Texas, and Carrollton, Texas. The maturity date for the new revolving credit facility is July 30, 2017. See Note 5 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.

It is our intent to prudently employ leverage to continue to invest in our land acquisition, development and homebuilding businesses. We intend to target a debt to total capitalization ratio of approximately 35% to 40%, which we expect will provide us with significant additional growth capital. Our debt to total capitalization ratio was less than 18% as of March 31, 2016.

Revolving Credit Facility

As of March 31, 2016, we had the following lines of credit (“LOC”):

On July 30, 2015, we replaced our $25.0 million revolving credit facility with a new revolving credit facility with Inwood, which provides for up to $50.0 million. The maturity date for the new revolving credit facility is July 30, 2017. The costs associated with the new revolving credit facility of $0.4 million were deferred and are included in other assets in our consolidated balance sheets. We are amortizing these debt issuance costs to interest expense over the term of the new revolving credit facility using the straight line method. Amounts outstanding under the new revolving credit facility is secured by mortgages on real property and security interests in certain personal property (to the extent that such personal property is connected with the use and enjoyment of the real property) that is owned by certain of our subsidiaries, including land owned in John’s Creek, Georgia, Allen, Texas, and Carrollton, Texas. The amounts outstanding under the new revolving credit facility are also guaranteed by certain of our subsidiaries.

The new revolving credit facility is subject to a borrowing base limitation equal to the sum of 50% of the total value of land and 60% of the total value of lots owned by certain of our subsidiaries, each as determined by an independent appraiser, with the value of land being restricted from being more than 50% of the borrowing base. Outstanding borrowings under the new revolving credit facility bear interest at a floating rate per annum equal to the rate announced by Bank of America, N.A., from time to time, as its “Prime Rate” (the “Index”) with such adjustments to the interest rate being made on the effective date of any change in the Index. Notwithstanding the foregoing, the interest may not, at any time, be less than 4% per annum or more than the lesser amount of 18% and the highest maximum rate allowed by applicable law. Beginning on August 30, 2015 and continuing on the 30th day of each consecutive month thereafter until the revolving credit facility matures on July 30,

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2017, we must pay interest on the unpaid principal amount. The entire unpaid principal balance and any accrued but unpaid interest is due and payable on the maturity date.

On May 3, 2016, we amended the new revolving credit facility. The amended revolving credit facility is subject to a borrowing base limitation equal to the sum of 50% of the total value of land and 65% of the total value of lots owned by certain of our subsidiaries, each as determined by an independent appraiser, with the value of land being restricted from being more than 65% of the borrowing base. Beginning on August 1, 2017, a non-usage fee equal to 0.25% of the average unfunded amount of the $50.0 million commitment amount over a trailing 12 month period is due on or before August 1st of each year during the term of the amended revolving credit facility. The maturity date has been extended to May 1, 2019. See Note 5 and Note 13 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.

Under the terms of the new revolving credit facility, we are required, among other things, to maintain minimum multiples of net worth in excess of the outstanding new revolving credit facility balance, minimum interest coverage and maximum leverage.

On December 15, 2015, we entered into a credit agreement with the lenders named therein, and Citibank, N.A., as administrative agent, providing for a senior, unsecured revolving credit facility with aggregate lending commitments of up to $40.0 million (“Unsecured Revolving Credit Facility”). Subject to certain terms and conditions, we may, at its option, prior to the termination date, increase the amount of the revolving credit facility up to a maximum aggregate amount of $75.0 million. Commitments under the Unsecured Revolving Credit Facility will be available until the period ending December 14, 2018, which period may be extended for additional one year periods, subject to the consent of the lenders and the satisfaction of certain other terms and conditions. Citibank, N.A. and Credit Suisse AG, Cayman Islands Branch have initially committed to provide $25.0 million and $15.0 million, respectively.

The costs associated with the Unsecured Revolving Credit Facility of $0.5 million were deferred and are included in other assets in our consolidated balance sheets. We are amortizing these debt issuance costs to interest expense over the term of the Unsecured Revolving Credit Facility using the straight line method.

We will pay the lenders a commitment fee on the amount of the unused commitments on a quarterly basis at a rate per annum equal to 0.45%.

Additionally, under the terms of the Unsecured Revolving Credit Facility, we are required, among other things, to maintain compliance with various covenants, including financial covenants relating to a maximum Leverage Ratio, a minimum Interest Coverage Ratio, and a minimum Consolidated Tangible Net Worth, each as defined therein. Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Unsecured Revolving Credit Facility.

We were in compliance with the covenants under the LOC agreements described above as of March 31, 2016.

Notes Payable

On December 13, 2013, a subsidiary of JBGL signed a promissory note with Briar Ridge Investments, LTD for $9.0 million maturing at December 13, 2017, bearing interest at 6.0% per annum and collateralized by land purchased in Allen, Texas.

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On May 22, 2015, a subsidiary of JBGL signed a promissory note with Lyons Equities, Inc. Trustee for $1.0 million maturing on May 22, 2016, bearing interest at 3.5% per annum collateralized by land located in Allen, Texas.

Cash Flows

The following summarizes our primary sources and uses of cash for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015:

•

Operating activities. Net cash used in operating activities for the three months ended March 31, 2016 was $17.3 million, compared to net cash used of $10.1 million during the three months ended March 31, 2015. The change was primarily attributable to (a) changes in working capital associated with inventory, as inventory increased by 9.3% for the three months ended March 31, 2016 compared to a 5.5% increase in inventory for the three months ended March 31, 2015, partially offset by (b) changes in working capital associated with (i) accounts payable, as accounts payable increased by 24.3% for the three months ended March 31, 2016 compared to a decrease of 16.4% during the three months ended March 31, 2015, (ii) earnest money deposits, as earnest money deposits decreased by 16.8% for the three months ended March 31, 2016 compared to an increase of 27.8% during the three months ended March 31, 2015, and (iii) customer and builder deposits, as customer and builder deposits increased 30.7% for the three months ended March 31, 2016 compared to an increase of 2.6% during the three months ended March 31, 2015.


•	Investing activities. Net cash used in investing activities for the three months ended March 31, 2016 was $7,000, compared to net cash provided of $2.6 million during the three months ended March 31, 2015. The change was primarily due to a decrease in proceeds from investment in direct financing leases for the three months ended March 31, 2016.

•

Financing activities. Net cash provided by financing activities for the three months ended March 31, 2016 was $20.6 million, compared to net cash provided of $3.8 million during the three months ended March 31, 2015. The change was primarily due to an increase in line of credit borrowings of $23.0 million, partially offset by an increase in repayments of notes payable and line of credit of $6.2 million during the three months ended March 31, 2016.

Off-Balance Sheet Arrangements and Contractual Obligations

In the ordinary course of business, we enter into land purchase contracts with third party developers in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. These purchase contracts typically require a cash deposit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements, including obtaining applicable property and development entitlement. We also utilize option contracts with land sellers as a method of acquiring land in staged takedowns, which are the schedules that dictate when lots must be purchased to help manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require us to pay a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices. We generally have the right at our discretion to terminate our obligations under both purchase contracts and option contracts by forfeiting the cash deposit with no further financial responsibility to the land seller.

Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into these arrangements, the availability of capital to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

Inflation

Homebuilding operations can be adversely impacted by inflation, primarily from higher land prices, and increased costs of financing, labor, materials and construction. In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers. While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we may be unable to offset cost increases with higher selling prices.

Seasonality

Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity in spring and summer, although this activity is also

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highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it typically takes five to eight months to construct a new home, we deliver more homes in the second half of the year as spring and summer home orders lead to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occurs during the second half of the year. We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry.

Critical Accounting Policies

Our consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of costs and expenses during the reporting period. On an ongoing basis, management evaluates estimates and judgments, including those which impact our most critical accounting policies. Management bases estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from estimates under different assumptions or conditions.

Our significant accounting policies, which may be affected by our estimates and assumptions, are more fully described in Note 2 to our audited consolidated financial statements for the year ended December 31, 2015 and our critical accounting policies are more fully described in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each of which are included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 30, 2016. There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2016.

Recent Accounting Pronouncements

See Note 1 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recent accounting pronouncements.

Related Party Transactions

See Note 9 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of our transactions with related parties.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our operations are interest rate sensitive. Because overall housing demand is adversely affected by increases in interest rates, a significant increase in mortgage interest rates may negatively affect the ability of homebuyers to secure adequate financing. Higher interest rates could adversely affect our revenues, gross margins and net income.

Our lines of credit have variable interest rates. An increase in interest rates could cause the cost of those lines to increase. As of March 31, 2016, we had $67.5 million outstanding on these lines of credit. However, the lines of credit are subject to minimum interest rates which we are currently being charged.

We do not enter into, or intend to enter into, swaps, forward or option contracts on interest rates or commodities or other types of derivative financial instruments for trading, hedging or speculative purposes.

Many of the statements contained in this section are forward looking and should be read in conjunction with the disclosures under the heading “Forward-Looking Statements.”

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were ineffective as of March 31, 2016, due to the material weaknesses in our internal control over financial reporting as discussed in Part II, Item 9A, “Controls and Procedures,” in our Annual Report on Form 10-K for the year ended December 31, 2015. For a discussion of the actions that we are currently undertaking to remediate these material weaknesses, which have not

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been remediated as of March 31, 2016, see our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 30, 2016.

Changes in Internal Controls Over Financial Reporting

As described above, during the period covered by this Quarterly Report on Form 10-Q we have taken and are taking remedial actions intended to correct material weaknesses in our system of internal controls over financial reporting. Except for those remedial actions, there was no change in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the first quarter ended March 31, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against the Company. For more information regarding how we account for legal proceedings, see Note 11 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 30, 2016.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to purchases by the Company of shares of our common stock during the three months ended March 31, 2016 (in thousands, except per share amounts):



	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs⁽¹⁾
January 1 - January 31, 2016	—	$	—	—	—
February 1 - February 29, 2016	—	$	—	—	—
March 1 - March 31, 2016	—	$	—	—	1,000
Total	—	$	—	—	1,000


(1)	Our share repurchase program was approved by our Board of Directors in March 2016 and allows us to repurchase up to 1,000,000 shares of our common stock through 2017 or a determination by the Board to discontinue the repurchase program. The share repurchase program does not obligate us to acquire any specific number of shares.

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ITEM 6. EXHIBITS INDEX



Number		Description
31.1*		Certification of the Company’s Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
31.2*		Certification of the Company’s Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
32.1*		Certification of the Company’s Chief Executive Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
32.2*		Certification of the Company’s Chief Financial Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
101.INS*		XBRL Instance Document.
101.SCH*		XBRL Taxonomy Extension Schema Document.
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed with this Form 10-Q

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



GREEN BRICK PARTNERS, INC.
/s/ James R. Brickman
By: James R. Brickman
Its: Chief Executive Officer

/s/ Richard A. Costello
By: Richard A. Costello
Its: Chief Financial Officer

Date: May 9, 2016

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