10-Q 1 a930201510-qgrbk.htm 9.30.2015 10-Q GRBK
TABLE OF CONTENTS
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 September 30, 2015
or

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

For the transition period from to
Commission file number: 001-33530

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, TX 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 ¨ Non-accelerated filer ¨ Smaller reporting company ý
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 November 6, 2015 was 48,813,889.

TABLE OF CONTENTS
TABLE OF CONTENTS

PART I | FINANCIAL INFORMATION |
| Item 1. | Financial Statements (Unaudited) | 1
|  | Consolidated Balance Sheets, September 30, 2015 and December 31, 2014 | 1
|  | Consolidated Statements of Income for the three and nine months ended September 30, 2015 and 2014 | 2
|  | Consolidated Statements of Cash Flow for the nine months ended September 30, 2015 and 2014 | 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 | 33
| Item 4. | Controls and Procedures | 34
PART II | OTHER INFORMATION |
| Item 1. | Legal Proceedings | 35
| Item1A. | Risk Factors | 35
| Item 6. | Exhibits | 36
|  | Signatures | 37

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREEN BRICK PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

| September 30, 2015 |  | December 31, 2014
Assets
Cash and cash equivalents | $ | 14,405 |  |  | $ | 21,267 |
Restricted cash | 2,297 |  |  | 1,709 |
Accounts receivable | 726 |  |  | 749 |
Inventory | 318,027 |  |  | 274,303 |
Investment in direct financing leases | — |  |  | 2,768 |
Property and equipment, net | 1,922 |  |  | 1,629 |
Earnest money deposits | 16,641 |  |  | 6,676 |
Deferred income tax assets, net | 83,446 |  |  | 89,197 |
Other assets | 2,666 |  |  | 2,027 |
Total assets | $ | 440,130 |  |  | $ | 400,325 |
Liabilities and stockholders' equity
Accounts payable | $ | 14,303 |  |  | $ | 13,551 |
Accrued expenses | 7,807 |  |  | 11,299 |
Customer and builder deposits | 8,393 |  |  | 9,752 |
Obligations related to land not owned under option agreements | 20,169 |  |  | 7,914 |
Borrowings on lines of credit | 13,960 |  |  | 14,061 |
Notes payable | 11,458 |  |  | 12,151 |
Term loan facility | — |  |  | 150,000 |
Total liabilities | 76,090 |  |  | 218,728 |
Commitments and contingencies (Note 11) | — |  |  | — |
Stockholders’ equity |  |  |
Green Brick Partners, Inc. stockholders’ equity |  |  |
Common shares, $0.01 par value: 100,000,000 shares authorized; 48,813,889 and 31,346,084 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | 488 |  |  | 313 |
Additional paid-in capital | 271,752 |  |  | 101,626 |
Retained earnings | 80,551 |  |  | 69,919 |
Total Green Brick Partners, Inc. stockholders’ equity | 352,791 |  |  | 171,858 |
Noncontrolling interests | 11,249 |  |  | 9,739 |
Total stockholders’ equity | 364,040 |  |  | 181,597 |
Total liabilities and stockholders’ equity | $ | 440,130 |  |  | $ | 400,325 |

The accompanying notes are an integral part of these consolidated financial statements.
1

TABLE OF CONTENTS
GREEN BRICK PARTNERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Sale of residential units | $ | 69,165 |  |  | $ | 39,901 |  |  | $ | 179,195 |  |  | $ | 144,586 |
Sale of land and lots | 6,033 |  |  | 9,775 |  |  | 26,442 |  |  | 33,942 |
Total revenues | 75,198 |  |  | 49,676 |  |  | 205,637 |  |  | 178,528 |
Cost of residential units | 55,173 |  |  | 27,232 |  |  | 137,095 |  |  | 105,844 |
Cost of land and lots | 4,217 |  |  | 7,420 |  |  | 19,095 |  |  | 25,329 |
Total cost of sales | 59,390 |  |  | 34,652 |  |  | 156,190 |  |  | 131,173 |
Total gross profit | 15,808 |  |  | 15,024 |  |  | 49,447 |  |  | 47,355 |
Salary expense | (5,062 | ) |  | (3,631 | ) |  | (14,571 | ) |  | (9,608 | )
Management fees expense – related party | — |  |  | (390 | ) |  | — |  |  | (1,160 | )
Selling, general and administrative expense | (3,385 | ) |  | (4,639 | ) |  | (9,700 | ) |  | (9,412 | )
Operating profit | 7,361 |  |  | 6,364 |  |  | 25,176 |  |  | 27,175 |
Interest expense | — |  |  | (308 | ) |  | (281 | ) |  | (1,016 | )
Depreciation and amortization expense | (621 | ) |  | (168 | ) |  | (1,209 | ) |  | (415 | )
Interest and fees income | — |  |  | 44 |  |  | — |  |  | 295 |
Interest on direct financing leases income | — |  |  | 139 |  |  | 13 |  |  | 568 |
Other income (expense), net | 402 |  |  | (8 | ) |  | 1,008 |  |  | 474 |
Income before provision for income taxes | 7,142 |  |  | 6,063 |  |  | 24,707 |  |  | 27,081 |
Income tax provision | 1,856 |  |  | — |  |  | 6,229 |  |  | 338 |
Net income | 5,286 |  |  | 6,063 |  |  | 18,478 |  |  | 26,743 |
Less: net income attributable to noncontrolling interests | 2,460 |  |  | 2,369 |  |  | 7,846 |  |  | 8,290 |
Net income attributable to Green Brick Partners, Inc. | $ | 2,826 |  |  | $ | 3,694 |  |  | $ | 10,632 |  |  | $ | 18,453 |
Net income attributable to Green Brick Partners, Inc. per common share: |  |  |  |  |  |  |
Basic | $0.06 |  | $0.33 |  | $0.29 |  | $1.66
Diluted | $0.06 |  | $0.33 |  | $0.29 |  | $1.66
Weighted average common shares used in the calculation of net income attributable to Green Brick Partners, Inc. per common share: |  |  |  |  |  |  |
Basic | 48,495 |  |  | 11,109 |  |  | 37,125 |  |  | 11,109 |
Diluted | 48,595 |  |  | 11,109 |  |  | 37,161 |  |  | 11,109 |

The accompanying notes are an integral part of these consolidated financial statements.
2

TABLE OF CONTENTS
GREEN BRICK PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

| Nine Months Ended September 30,
| 2015 |  | 2014
Cash flows from operating activities: |  |  |
Net income | $ | 18,478 |  |  | $ | 26,743 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |  |  |  |
Depreciation and amortization expense | 1,209 |  |  | 415 |
Share-based compensation | 318 |  |  | — |
Deferred income taxes, net | 5,751 |  |  | — |
Changes in operating assets and liabilities |  |  |  |  |
Increase in restricted cash | (588 | ) |  | (604 | )
Decrease in accounts receivable | 22 |  |  | 364 |
Increase in inventory | (31,470 | ) |  | (27,657 | )
Increase in earnest money deposits | (9,965 | ) |  | (3,891 | )
Increase in other assets | (1,143 | ) |  | (536 | )
Increase in accounts payable | 752 |  |  | 5,420 |
(Decrease) increase in accrued expenses | (3,492 | ) |  | 3,861 |
(Decrease) increase in customer and builder deposits | (1,358 | ) |  | 624 |
Net cash (used in) provided by operating activities | (21,486 | ) |  | 4,739 |
Cash flows from investing activities |  |  |
Proceeds from sale of investment in direct financing leases | 2,768 |  |  | 2,420 |
Issuance of notes receivable | — |  |  | (1,905 | )
Repayments of notes receivable | — |  |  | 9,461 |
Acquisition of property and equipment | (998 | ) |  | (1,217 | )
Net cash provided by investing activities | 1,770 |  |  | 8,759 |
Cash flows from financing activities |  |  |
Borrowings from lines of credit | 42,460 |  |  | 9,500 |
Proceeds from notes payable | 3,206 |  |  | 5,741 |
Repayments of lines of credit | (42,561 | ) |  | (1,364 | )
Repayments of notes payable | (3,898 | ) |  | (19,984 | )
Repayment of term loan facility | (150,000 | ) |  | — |
Proceeds from equity offering, net of issuance costs | 169,983 |  |  | — |
Contributions from noncontrolling interests | 87 |  |  | 592 |
Distributions to controlling interests | — |  |  | (5,782 | )
Distributions to noncontrolling interests | (6,423 | ) |  | (11,439 | )
Net cash provided by (used in) financing activities | 12,854 |  |  | (22,736 | )
Net decrease in cash and cash equivalents | (6,862 | ) |  | (9,238 | )
Cash and cash equivalents at beginning of period | 21,267 |  |  | 16,683 |
Cash and cash equivalents at end of period | $ | 14,405 |  |  | $ | 7,445 |
Supplemental disclosure of cash flow information: |  |  |
Cash paid for interest, net of capitalized interest | $ | 9,168 |  |  | $ | 1,053 |
Cash paid for taxes | $ | 1,143 |  |  | $ | 383 |
Supplemental disclosure of noncash investing and financing activities: |  |  |
Increase in land not owned under option agreements | $ | (12,255 | ) |  | $ | — |

The accompanying notes are an integral part of these consolidated financial statements.
3

TABLE OF CONTENTS
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”).
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.
4

TABLE OF CONTENTS
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, 2014, included in our Annual Report on Form 10-K filed with the SEC on March 31, 2015. Our operating results for the three months ended September 30, 2015 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.
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 either the full retrospective approach or the modified retrospective approach. The
5

TABLE OF CONTENTS
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. The standard is effective for the Company beginning on January 1, 2016. Early adoption is permitted. 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 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. The standard is effective for the Company beginning on January 1, 2016. Early adoption is permitted for financial statements that have not been previously issued. This standard is to be applied on a retrospective basis and represents a change in accounting principle. 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 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 clarifies the treatment of debt issuance costs from line-of-credit arrangements after the adoption of ASU No. 2015-03. The standard clarifies 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. 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 September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, as part of its simplification initiative. Under the standard, adjustments to provisional amounts identified during the measurement period should be recognized in the reporting period in which the adjustments are determined. The portion of the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustment to the provisional amounts were recognized at the acquisition date should be presented separately, by line item, on the face of the income statement or disclosed in the notes. The standard is effective for the Company beginning on January 1, 2016. The Company does not believe that the adoption of this standard will have a material effect on its consolidated financial statements and related disclosures.
2. NET INCOME ATTRIBUTABLE TO GREEN BRICK PARTNERS, INC. PER SHARE
Our 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.
6

TABLE OF CONTENTS
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 September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Basic net income attributable to Green Brick Partners, Inc. per share |  |  |  |  |  |  |
Net income attributable to Green Brick Partners, Inc. —basic | $ | 2,826 |  |  | $ | 3,694 |  |  | $ | 10,632 |  |  | $ | 18,453 |
Weighted-average number of shares outstanding —basic | 48,495 |  |  | 11,109 |  |  | 37,125 |  |  | 11,109 |
Basic net income attributable to Green Brick Partners, Inc. per share | $ | 0.06 |  |  | $ | 0.33 |  |  | $ | 0.29 |  |  | $ | 1.66 |
Diluted net income attributable to Green Brick Partners, Inc. per share |  |  |  |  |  |  |
Net income attributable to Green Brick Partners, Inc. —diluted | $ | 2,826 |  |  | $ | 3,694 |  |  | $ | 10,632 |  |  | $ | 18,453 |
Weighted-average number of shares used to compute basic net income attributable to Green Brick Partners, Inc. | 48,495 |  |  | 11,109 |  |  | 37,125 |  |  | 11,109 |
Dilutive effect of stock options and restricted stock awards | 100 |  |  | — |  |  | 36 |  |  | — |
Weighted-average number of shares outstanding —diluted | 48,595 |  |  | 11,109 |  |  | 37,161 |  |  | 11,109 |
Diluted net income attributable to Green Brick Partners, Inc. per share | $ | 0.06 |  |  | $ | 0.33 |  |  | $ | 0.29 |  |  | $ | 1.66 |

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 September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Antidilutive options to purchase common stock | — |  |  | — |  |  | 67 |  |  | — |

3. REVERSE RECAPITALIZATION
The authorized common stock of the Company consists of 100,000,000 shares with a $0.01 par value.
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 was completed on October 27, 2014. 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.
After giving effect to the Transaction, there were 31,346,084 shares of our common stock outstanding. Prior to the Transaction, we were a non-operating public shell company with nominal operations and assets consisting of cash, deferred tax assets, and nominal other nonoperating assets.
For accounting purposes, this transaction is being accounted for as a reverse recapitalization and has been treated as a recapitalization of JBGL, the accounting acquirer. JBGL's financial statements became the financial statements of the registrant The Company did not recognize goodwill or any intangible assets in connection with the transaction. The historical financial consolidated statements of the Company are those of JBGL. From the date of the Transaction and subsequent, the consolidated financial statements include the results of the consolidated entities of the Company.
For financial reporting purposes, the 11,108,500 shares issued by BioFuel in conjunction with the Transaction have been presented as outstanding for all periods prior to the Transaction. All share and per share amounts have been retroactively restated to the earliest periods presented to reflect the transaction. The contributions from and distributions to equity holders
7

TABLE OF CONTENTS
during the historical periods presented were contributed from and distributed to equity holders whom were members of JBGL pre-Transaction.
The following table summarizes the net identifiable liabilities of BioFuel retained on the Transaction Date (in thousands):

Cash | $ | 31,916 |
Deferred tax assets | 65,020 |
Deferred tax assets valuation allowance | (1,161 | )
Other assets | 591 |
Debt | (150,000 | )
Other liabilities | (312 | )
Net liabilities acquired | $ | (53,946 | )

BioFuel incurred acquisition costs of approximately $3.2 million included in additional paid-in-capital on our consolidated balance sheets for the year ended December 31, 2014. Since the transaction was considered a reverse recapitalization, the presentation of pro-forma financial information was not required.
4. INVENTORY
Inventory consists primarily of land in the process of development, undeveloped land, developed lots, completed homes, and raw land scheduled for development, primarily 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.
A summary of inventory is as follows (in thousands):

| September 30, 2015 |  | December 31, 2014
Completed home inventory and residential lots held for sale | $ | 80,181 |  |  | $ | 47,048 |
Work in process | 213,849 |  |  | 203,756 |
Undeveloped land | 6,193 |  |  | 16,220 |
Land not owned under option agreements | 17,804 |  |  | 7,279 |
Total Inventory | $ | 318,027 |  |  | $ | 274,303 |

We capitalize 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 September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
Interest capitalized at beginning of period | $ | 9,854 |  |  | $ | 1,082 |  |  | $ | 3,713 |  |  | $ | 1,065 |
Interest incurred | 1,890 |  |  | 308 |  |  | 9,238 |  |  | 1,138 |
Interest charged to cost of sales | (1,389 | ) |  | — |  |  | (2,315 | ) |  | (105 | )
Interest charged to interest expense | — |  |  | (308 | ) |  | (281 | ) |  | (1,016 | )
Interest capitalized at end of period | $ | 10,355 |  |  | $ | 1,082 |  |  | $ | 10,355 |  |  | $ | 1,082 |

8

TABLE OF CONTENTS
5. DEBT
Term Loan Facility
Term loan facility outstanding consists of the following (in thousands):

| September 30, 2015 |  | December 31, 2014
Term Loan Facility | $ | — |  |  | $ | 150,000 |

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 49.9% 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 (the “Term Loan Facility”). Certain 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. The Company had a one-time right to elect to pay up to four consecutive quarters’ interest in kind. The Term Loan Facility was subject to mandatory prepayment with 100% of the net cash proceeds received from the incurrence of certain debt by the Company or the issuance of certain equity securities. Voluntary prepayments of the Term Loan Facility were permitted at any time. All prepayments made prior to October 27, 2016 were subject to a 1.0% prepayment premium.
The Term Loan Facility was secured by a first priority lien on substantially all of our assets and substantially all of the assets, subject to certain exceptions, of each of the Company’s subsidiaries.
The costs associated with the issuance of the Term Loan Facility of $0.4 million were deferred and are included in other assets in our consolidated balance sheet at December 31, 2014. We amortized these debt issuance costs to interest expense over the term of the Term Loan Facility using the effective interest method.
On July 1, 2015 we used approximately $154.9 million of the net proceeds from the Equity Offering, as defined in Note 6, 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. In connection with the termination of the Term Loan Facility, we wrote-off the remaining unamortized debt issuance costs of $0.4 million, which is included in depreciation and amortization expense in our consolidated statement of income for the three and nine months ended September 30, 2015. See Note 6 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion on the Equity Offering.
Lines of Credit
Lines of credit outstanding at September 30, 2015 and December 31, 2014 consist of the following (in thousands):

| September 30, 2015 |  | December 31, 2014
Promissory note to Inwood National Bank (“Inwood”): |  |  |
Direct finance leases A(1) | $ | — |  |  | $ | 662 |
Direct finance leases B(2) | — |  |  | 899 |
John’s Creek(3) | — |  |  | 12,500 |
Revolving credit facility(4) | 13,960 |  |  | — |
Total lines of credit | $ | 13,960 |  |  | $ | 14,061 |

(1) | During 2012, a subsidiary of JBGL opened a line of credit (“LOC”) issued by Inwood in the amount of $4.8 million maturing on April 13, 2014, bearing a minimum interest rate of 4.0%, which was in effect during the three months ended March 31, 2015, and collateralized by the leased assets. The LOC was renewed during 2014 until April 13, 2015. This LOC was paid off as of March 31, 2015.

(2) | During 2012, a subsidiary of JBGL opened a LOC issued by Inwood in the amount of $3.0 million maturing on September 15, 2014, bearing a minimum interest rate of 4.0%, which was in effect during the three months ended March 31, 2015, and collateralized by the leased assets. The LOC was renewed until April 13, 2015. This LOC was paid off as of March 31, 2015.

9

TABLE OF CONTENTS

(3) | During 2012, a subsidiary of JBGL opened a LOC with Inwood in the amount of $8.0 million. On October 13, 2013, the JBGL subsidiary extended this revolving credit facility and increased the size from $8.0 million to $25.0 million maturing on October 13, 2014. Interest accrued and was payable monthly at a rate of 4.0%. The credit facility was renewed until October 13, 2015 and was secured by land owned in John’s Creek, Georgia. This LOC was replaced with a new revolving credit facility in July 2015.

(4) | 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, TX, and Carrollton, TX. 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 effective interest 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.
In addition to the financial covenants described in footnote (4) to the table above, the new revolving credit facility with Inwood requires the Company 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 covenants as of September 30, 2015.
Notes Payable
Notes payable outstanding at September 30, 2015 and December 31, 2014 consist of the following (in thousands):

| September 30, 2015 |  | December 31, 2014
Note payable to unrelated third party: |  |  |
Briar Ridge Investments, LTD(1) | $ | 9,000 |  |  | $ | 9,000 |
Lakeside DFW Land, LTD(2) | — |  |  | 1,824 |
Lyons Equities, Inc. Trustee(3) | 988 |  |  | — |
Centennial Park Richardson, LTD.(4) | 304 |  |  | — |
Subordinated Lot Notes(5) | 1,166 |  |  | 1,327 |
Total notes payable | $ | 11,458 |  |  | $ | 12,151 |

(1) | On December 13, 2013, a subsidiary of JBGL signed a promissory note for $9 million maturing at December 13, 2017, bearing interest at 6.0% per annum and collateralized by land purchased in Allen, Texas. Accrued interest at September 30, 2015 was $0.

(2) | On April 15, 2013, a subsidiary of JBGL signed a promissory note for $3.5 million maturing on January 22, 2014, bearing interest at 6.0% per annum and collateralized by land located in Denton, Texas. This note was paid in full during 2014. On April 16, 2014, a new promissory note was signed for $3.3 million maturing on April 30, 2015 bearing interest at 5.0% collateralized by land located in Denton, Texas. $1.5 million of this note was repaid in July 2014. This note was paid in full during the three months ended March 31, 2015.

(3) | 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, TX.

10

TABLE OF CONTENTS

(4) | On July 20, 2015, a subsidiary of JBGL signed a promissory note for $0.3 million maturing on April 20, 2016, bearing interest at 0.0% per annum collateralized by land located in Richardson, TX. This note was paid in full in October 2015.

(5) | Subsidiaries of the Company purchased lots under various agreements from unrelated third parties. The sellers of these lots have 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 will release their lien upon payment of principle plus accrued interest at the closing of each individual home to a third party buyer.

6. 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 |
Balance at December 31, 2013 | 11,108,500 |  |  | $ | 111 |  |  | $ | 155,985 |  |  | $ | 33,014 |  |  | $ | 189,110 |  |  | $ | 9,709 |  |  | $ | 198,819 |
Contributions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 592 |  |  | 592 |
Distributions | — |  |  | — |  |  | — |  |  | (5,782 | ) |  | (5,782 | ) |  | (11,439 | ) |  | (17,221 | )
Net income | — |  |  | — |  |  | — |  |  | 18,453 |  |  | 18,453 |  |  | 8,290 |  |  | 26,743 |
Balance at September 30, 2014 | 11,108,500 |  |  | $ | 111 |  |  | $ | 155,985 |  |  | $ | 45,685 |  |  | $ | 201,781 |  |  | $ | 7,152 |  |  | $ | 208,933 |
Balance at December 31, 2014 | 31,346,084 |  |  | $ | 313 |  |  | $ | 101,626 |  |  | $ | 69,919 |  |  | $ | 171,858 |  |  | $ | 9,739 |  |  | $ | 181,597 |
Share-based compensation | — |  |  | — |  |  | 227 |  |  | — |  |  | 227 |  |  | — |  |  | 227 |
Issuance of common stock under 2014 Equity Plan | 22,908 |  |  | — |  |  | 91 |  |  | — |  |  | 91 |  |  | — |  |  | 91 |
Issuance of common stock in connection with secondary offering, net of issuance costs | 17,444,897 |  |  | 175 |  |  | 169,808 |  |  | — |  |  | 169,983 |  |  | — |  |  | 169,983 |
Contributions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 87 |  |  | 87 |
Distributions | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,423 | ) |  | (6,423 | )
Net income | — |  |  | — |  |  | — |  |  | 10,632 |  |  | 10,632 |  |  | 7,846 |  |  | 18,478 |
Balance at September 30, 2015 | 48,813,889 |  |  | $ | 488 |  |  | $ | 271,752 |  |  | $ | 80,551 |  |  | $ | 352,791 |  |  | $ | 11,249 |  |  | $ | 364,040 |

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. Effective upon receipt of such payment, 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.
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
11

TABLE OF CONTENTS
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.
In April 2015, the Company granted 22,908 restricted stock awards (“RSAs”) to certain non-employee Board of Directors, pursuant to the 2014 Equity Plan. The RSAs will become fully vested in April 2016. The RSAs have a weighted average grant-date fair value of $8.73 share. The fair value of the outstanding shares of restricted stock awards will be recorded as share-based compensation expense over the vesting period.
Share-Based Award Activity
A summary of restricted stock awards activity during the nine months ended September 30, 2015 is as follows:

| Number of Shares (in thousands) |  | Weighted Average Grant Date Fair Value per Share
Nonvested, December 31, 2014 | — |  |  | $ | — |
Granted | 23 |  |  | $ | 8.73 |
Vested | — |  |  | $ | — |
Forfeited | — |  |  | $ | — |
Nonvested, September 30, 2015 | 23 |  |  | $ | 8.73 |

A summary of stock option activity during the nine months ended September 30, 2015 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, 2014 | 500 |  |  | $ | 7.49 |  |  |  |  |
Granted | — |  |  | — |  |  |  |  |
Exercised | — |  |  | — |  |  |  |  |
Forfeited | — |  |  | — |  |  |  |  |
Options outstanding, September 30, 2015 | 500 |  |  | $ | 7.49 |  |  | 9.63 |  |  | $ | 397 |
Options exercisable, September 30, 2015 | — |  |  | $ | — |  |  | — |  |  | $ | — |

A summary of our unvested stock options during the nine months ended September 30, 2015 is as follows:

| Number of Shares (in thousands) |  | Weighted Average Per Share Grant Date Fair Value
Unvested, December 31, 2014 | 500 |  |  | $ | 2.88 |
Granted | — |  |  | $ | — |
Vested | — |  |  | $ | — |
Forfeited | — |  |  | $ | — |
Unvested, September 30, 2015 | 500 |  |  | $ | 2.88 |

Valuation of Share-Based Awards
The weighted average per share grant date fair value of restricted stock awards granted during the nine months ended September 30, 2015 was $8.73, determined based on the market price of our common stock on the date of grant, which approximates the intrinsic value.
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 nine months ended September 30, 2015 and September 30, 2014.
Share-Based Compensation Expense
Share-based compensation expense was $0.1 million and $0.3 million for the three and nine months ended September 30, 2015, respectively. There were no share-based awards issued prior to October 27, 2014. At September 30, 2015, the estimated
12

TABLE OF CONTENTS
total remaining unamortized share-based compensation expense related to unvested restricted stock awards and stock options, net of forfeitures, was $1.3 million which is expected to be recognized over a weighted-average period of 3.7 years.
8. INCOME TAXES
We recorded an income tax provision of $1.9 million and $6.2 million for the three and nine months ended September 30, 2015, respectively, as compared to $0.0 million and $0.3 million for the three and nine months ended September 30, 2014, respectively. The effective tax rate for the three and nine months ended September 30, 2015 was 26.0% and 25.2%, respectively, as compared to 0.0% and 1.2% for the three and nine months ended September 30, 2014, respectively. The effective tax rate for the three and nine months ended September 30, 2015 is driven by the statutory tax rate benefit related to non-controlled earnings and state income taxes. The effective tax rate for the nine months ended September 30, 2014 is driven by 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 September 30, 2015, we had deferred tax assets of $83.4 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 nine months ended September 30, 2015 from December 31, 2014.
As of December 31, 2014, we had $178.8 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 September 30, 2015 and December 31, 2014, 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 and nine months ended September 30, 2015 and 2014, the Company had related party transactions through the normal course of business. These transactions include the following:
Through November 2014, the Company leased its Dallas, Texas headquarters on a month-to-month basis from family members of the Company's Chief Executive Officer. The Company terminated this lease during the fourth quarter of 2014. During the three and nine months ended September 30, 2014, the Company paid rent of $1,016 and $13,913, respectively, under this agreement which is included in selling, general and administrative expense in the consolidated statements of income.
Through the Transaction Date, the Company paid a quarterly management fee to an executive calculated at .375% of cumulative capital contributions of certain members of Builder Finance at the end of each quarter. During the three and nine months ended September 30, 2014, the Company incurred $0.4 million and $1.2 million, respectively, of expenses from this arrangement which are included as management fees in the consolidated statements of income.
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 49.9% 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 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 an 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.
13

TABLE OF CONTENTS
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 and nine months ended September 30, 2015. The noncontrolling interest attributable to Centre Living was $0.3 million as of September 30, 2015.
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 September 30, 2015 and December 31, 2014. 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 nine months ended September 30, 2015 and the year ended December 31, 2014, 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 between $250 and $800 per home closed for future 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
14

TABLE OF CONTENTS
of losses or a statement that such loss is not reasonably estimable. The Company has no litigation outstanding as of September 30, 2015. At September 30, 2015 and December 31, 2014, 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 September 30, |  | Nine Months Ended September 30,
(in thousands) | 2015 |  | 2014 |  | 2015 |  | 2014
Revenues: |  |  |  |  |  |  |
Builder Operations |  |  |  |  |  |  |  |
Texas | $ | 26,438 |  |  | $ | 19,042 |  |  | $ | 89,585 |  |  | $ | 54,035 |
Georgia | 42,727 |  |  | 20,859 |  |  | 89,610 |  |  | 90,551 |
Land Development | 6,033 |  |  | 9,775 |  |  | 26,442 |  |  | 33,942 |
| $ | 75,198 |  |  | $ | 49,676 |  |  | $ | 205,637 |  |  | $ | 178,528 |
Gross profit: |  |  |  |  |  |  |
Builder Operations |  |  |  |  |  |  |
Texas | $ | 7,054 |  |  | $ | 6,655 |  |  | $ | 22,744 |  |  | $ | 14,497 |
Georgia | 6,938 |  |  | 6,014 |  |  | 19,356 |  |  | 24,245 |
Land Development | 1,816 |  |  | 2,355 |  |  | 7,347 |  |  | 8,613 |
| $ | 15,808 |  |  | $ | 15,024 |  |  | $ | 49,447 |  |  | $ | 47,355 |
| September 30, 2015 |  | December 31, 2014 |  |  |  |
Inventory: |  |  |  |  |  |  |
Builder Operations |  |  |  |  |  |  |
Texas | $ | 57,679 |  |  | $ | 44,771 |  |  |  |  |
Georgia | 159,216 |  |  | 129,361 |  |  |  |  |
Land Development | 101,132 |  |  | 100,171 |  |  |  |  |
| $ | 318,027 |  |  | $ | 274,303 |  |  |  |  |

15

TABLE OF CONTENTS
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;

16

TABLE OF CONTENTS

• | 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;

• | 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, 2014

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 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.
17

TABLE OF CONTENTS
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, 2014 filed with the Securities and Exchange Commission (“SEC”) on March 31, 2015. 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, the Company 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.
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”).
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 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.
18

TABLE OF CONTENTS
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 loan agreement with certain funds and accounts managed by Greenlight, our largest shareholder, which provided for a five year term loan facility in an aggregate principal amount of $150.0 million which funded part of the Transaction (the “Term Loan Facility”). Effective upon receipt of such payment, 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 4,100 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.
19

TABLE OF CONTENTS
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 |  | $225,000 to $575,000
Single family | $275,000 to $1.3 million
Luxury homes | $700,000 to $2.0 million
CB JENI Homes DFW LLC (“CB JENI”) |  | 2012 |  | Dallas |  | Townhomes |  | $200,000 to $350,000
Single family | $275,000 to $600,000
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 commenced limited operations during the nine months ended September 30, 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 September 30, 2015 as compared to the three months ended September 30, 2014: home deliveries increased by 17.6%, home sales revenue increased by 73.3%, average selling prices increased by 47.5%, backlog units value increased by 20.8%, average sales price of homes in backlog increased by 24.4%, and net new home orders increased by 5.3%.
The following are our key operating metrics for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014: home deliveries increased by 9.0%, home sales revenue increased by 23.9%, and net new home orders increased by 0.8%.
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.
According to the S&P/Case-Shiller Home Price Indices, from July 2014 to July 2015 homes in the Dallas and Atlanta markets appreciated by 8.7% and 5.8%, respectively (Source: S&P Dow Jones Indices and CoreLogic, September 2015). During the nine months ended September 30, 2015, 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 July 2014 to July 2015 (Source: US Bureau of Labor Statistics, July 2015). 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, August 2015). We believe that increasing demand and supply constraints in our target markets create favorable conditions for our future growth.
20

TABLE OF CONTENTS
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 September 30, 2015 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.
Results of Operations
Land Development
During the three months ended September 30, 2015, our land development segment revenue decreased $3.7 million, or 38.3%, from $9.8 million for the three months ended September 30, 2014 to $6.0 million for the three months ended September 30, 2015. The decrease was comprised of $4.5 million due to a 46.0% decrease in finished inventory lots delivered from 100 for the three months ended September 30, 2014 to 54 for the three months ended September 30, 2015, partially offset by an increase of $0.8 million related to an increase in the average sales price per lot of $111,716 per lot for the three months ended September 30, 2015 from $97,752 per lot for the three months ended September 30, 2014.
During the nine months ended September 30, 2015, our land development segment revenue decreased $7.5 million, or 22.1%, from $33.9 million for the nine months ended September 30, 2014 to $26.4 million for the nine months ended September 30, 2015. The decrease was comprised of $10.2 million due to a 30.1% decrease in finished inventory lots delivered from 342 for the nine months ended September 30, 2014 to 239 for the nine months ended September 30, 2015, partially offset by an increase of $2.7 million related to an increase in the average sales price per lot of $110,635 per lot for the nine months ended September 30, 2015 from $99,247 per lot for the nine months ended September 30, 2014.
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 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 builders and improve overall margins.
Builder Operations
During the three months ended September 30, 2015, our builder operations segment delivered 154 homes, with an average sales price of $449,123, compared to 131 homes, with an average sales price of $304,583, during the same period in 2014. During the same period, our builder operations segment generated approximately $69.2 million in revenue compared to $39.9 million during the same period in 2014. For the three months ended September 30, 2015, net new home orders totaled 140, a 5.3% increase from the same period in 2014. At September 30, 2015, our builder operations segment had a backlog of 235 sold but unclosed homes, a 2.9% decrease from the same period in 2014, with a total value of approximately $98.3 million, an increase of $16.9 million, or 20.8%, from September 30, 2014. The increase in value of backlog units reflects an increase in the average sales price of homes in backlog.
During the nine months ended September 30, 2015, our builder operations segment delivered 461 homes, with an average sales price of $388,709, compared to 423 homes, with an average sales price of $341,810, during the same period in 2014. During the same period, our builder operations segment generated approximately $179.2 million in revenue compared to $144.6 million during the same period in 2014. For the nine months ended September 30, 2015, net new home orders totaled 487, a 0.8% increase from the same period in 2014.
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 builders, (b) making first lien construction loans to our 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.
21

TABLE OF CONTENTS
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. Costs incurred in connection with developed lots and completed homes are charged to earnings when incurred.
Salary Expense and Management Fees Expense - Related Party
Salary expense and management fees expense represent salaries, benefits, related party management fees and share-based compensation, and are recorded in the period incurred.
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.
Interest and Fees Income
Interest and fees income consists primarily of interest earned and loan origination fees from outstanding third-party notes receivable.
Other (Expense) Income, Net
Other (expense) income, net consists of 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.
22

TABLE OF CONTENTS
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 September 30, 2015, 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.
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.
As described in Note 3 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, BioFuel acquired JBGL on October 27, 2014. The accounting treatment of the Transaction is reflected as a “reverse recapitalization,” whereby JBGL is the surviving accounting entity for financial reporting purposes. Therefore, our historical results for periods prior to the Transaction are the same as JBGL's historical results.

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
| (in thousands, except per share data)
Sale of residential units | $ | 69,165 |  |  | $ | 39,901 |  |  | $ | 179,195 |  |  | $ | 144,586 |
Sale of land and lots | 6,033 |  |  | 9,775 |  |  | 26,442 |  |  | 33,942 |
Total revenues | 75,198 |  |  | 49,676 |  |  | 205,637 |  |  | 178,528 |
Cost of residential units | 55,173 |  |  | 27,232 |  |  | 137,095 |  |  | 105,844 |
Cost of land and lots | 4,217 |  |  | 7,420 |  |  | 19,095 |  |  | 25,329 |
Total cost of sales | 59,390 |  |  | 34,652 |  |  | 156,190 |  |  | 131,173 |
Total gross profit | 15,808 |  |  | 15,024 |  |  | 49,447 |  |  | 47,355 |
Salary expense | (5,062 | ) |  | (3,631 | ) |  | (14,571 | ) |  | (9,608 | )
Management fees expense – related party | — |  |  | (390 | ) |  | — |  |  | (1,160 | )
Selling, general and administrative expense | (3,385 | ) |  | (4,639 | ) |  | (9,700 | ) |  | (9,412 | )
Operating profit | 7,361 |  |  | 6,364 |  |  | 25,176 |  |  | 27,175 |
Interest expense | — |  |  | (308 | ) |  | (281 | ) |  | (1,016 | )
Interest and fees income | — |  |  | 44 |  |  | — |  |  | 295 |
Other (expense) income, net | (219 | ) |  | (37 | ) |  | (188 | ) |  | 627 |
Income before provision for income taxes | 7,142 |  |  | 6,063 |  |  | 24,707 |  |  | 27,081 |
Income tax provision | 1,856 |  |  | — |  |  | 6,229 |  |  | 338 |
Net income | 5,286 |  |  | 6,063 |  |  | 18,478 |  |  | 26,743 |
Less: net income attributable to noncontrolling interests | 2,460 |  |  | 2,369 |  |  | 7,846 |  |  | 8,290 |
Net income attributable to Green Brick Partners, Inc. | $ | 2,826 |  |  | $ | 3,694 |  |  | $ | 10,632 |  |  | $ | 18,453 |
Net income attributable to Green Brick Partners, Inc. per common share: |  |  |  |  |  |  |
Basic | $0.06 |  | $0.33 |  | $0.29 |  | $1.66
Diluted | $0.06 |  | $0.33 |  | $0.29 |  | $1.66
Weighted average common shares used in the calculation of net income attributable to Green Brick Partners, Inc. per common share: |  |  |  |  |  |  |
Basic | 48,495 |  |  | 11,109 |  |  | 37,125 |  |  | 11,109 |
Diluted | 48,595 |  |  | 11,109 |  |  | 37,161 |  |  | 11,109 |

23

TABLE OF CONTENTS
Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014
Net New Home Orders and Backlog
The table below represents new home orders and backlog related to our builder operations segment.

|  | Three Months Ended September 30, |  | Increase (Decrease)
New Home Orders & Backlog |  | 2015 |  | 2014 |  | Change |  | %
Net new home orders |  | 140 |  |  | 133 |  |  | 7 |  |  | 5.3%
Number of cancellations |  | 27 |  |  | 17 |  |  | 10 |  |  | 58.8%
Cancellation rate |  | 16.2 | % |  | 11.3 | % |  | 4.9 | % |  | 43.4%
Average selling communities |  | 43 |  |  | 29 |  |  | 14 |  |  | 48.3%
Selling communities at end of period |  | 42 |  |  | 29 |  |  | 13 |  |  | 44.8%
Backlog ($ in thousands) |  | $ | 98,267 |  |  | $ | 81,336 |  |  | $ | 16,931 |  |  | 20.8%
Backlog (units) |  | 235 |  |  | 242 |  |  | (7 | ) |  | (2.9)%
Average sales price of backlog |  | $ | 418,157 |  |  | $ | 336,097 |  |  | $ | 82,060 |  |  | 24.4%

Net new home orders for the three months ended September 30, 2015 increased by 7 homes, or 5.3%, to 140 from 133 for the three months ended September 30, 2014. Overall absorption rate for the three months ended September 30, 2015 was an average of 3.3 per selling community (1.1 monthly), compared to an average of 4.6 per selling community (1.5 monthly) for the three months ended September 30, 2014. Our monthly absorption rate decreased in part due to the timing of the opening of new communities and the closing out of existing communities.
Our cancellation rate was approximately 16.2% for the three months ended September 30, 2015, compared to 11.3% for the three months ended September 30, 2014. Management believes that the cancellation rate for the three months ended September 30, 2014 was atypically low. Management believes a cancellation rate in the range of 15% to 20% is representative of an industry average cancellation rate. 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 decreased by 7 homes, or 2.9%, from 242 as of September 30, 2014 to 235 as of September 30, 2015. The dollar value of backlog units increased $16.9 million, or 20.8%, to $98.3 million as of September 30, 2015 from $81.3 million as of September 30, 2014. The increase in value of backlog units reflects an increase in the average sales price of homes in backlog. Our average sales price of homes in backlog increased $82,060, or 24.4%, to $418,157 for the three months ended September 30, 2015, compared to $336,097 for the three months ended September 30, 2014. 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 September 30, |  | Increase (Decrease)
New Homes Delivered and Home Sales Revenue |  | 2015 |  | 2014 |  | Change |  | %
New homes delivered |  | 154 |  |  | 131 |  |  | 23 |  |  | 17.6%
Home sales revenue ($ in thousands) |  | $ | 69,165 |  |  | $ | 39,901 |  |  | $ | 29,264 |  |  | 73.3%
Average sales price of home delivered |  | $ | 449,123 |  |  | $ | 304,583 |  |  | $ | 144,540 |  |  | 47.5%

New home deliveries (excluding existing completed homes sold, but not yet closed) for the three months ended September 30, 2015 for our builder operations segment was 154, compared to new home deliveries of 131 for the three months ended September 30, 2014, resulting in an increase of 23 homes, or 17.6%. The increase in new home deliveries was primarily attributable to a 48.3% increase in new communities to 43 from 29.
Home sales revenue increased $29.3 million, or 73.3%, to $69.2 million for the three months ended September 30, 2015, from $39.9 million for the three months ended September 30, 2014. The increase in revenue was comprised of (a) a $22.3 million increase in revenues resulting from an increase in average sales price of $144,540 per home to $449,123 for the three
24

TABLE OF CONTENTS
months ended September 30, 2015 from $304,583 for the three months ended September 30, 2014, and (b) a $7.0 million increase in revenues driven by a 17.6% increase in homes delivered to 154 for the three months ended September 30, 2015, from 131 for the three months ended September 30, 2014. 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 September 30,
Homebuilding ($ in thousands) |  | 2015 |  | % |  | 2014 |  | %
Home sales revenue |  | $ | 69,165 |  |  | 100.0 | % |  | $ | 39,901 |  |  | 100.0 | %
Cost of home sales |  | $ | 55,173 |  |  | 79.8 | % |  | $ | 27,232 |  |  | 68.2 | %
Homebuilding gross margin |  | $ | 13,992 |  |  | 20.2 | % |  | $ | 12,669 |  |  | 31.8 | %

Cost of home sales for the three months ended September 30, 2015 for builder operations was $55.2 million, compared to cost of home sales of $27.2 million for the three months ended September 30, 2014, resulting in an increase of $27.9 million, or 102.6%. Homebuilding gross margin percentage for the three months ended September 30, 2015 for builder operations was 20.2%, compared to a gross margin percentage of 31.8% for the three months ended September 30, 2014. The increase in homebuilding gross margin is largely due to the opening of new communities during the three months ended September 30, 2015. 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 September 30, 2014, a substantial number of home closings in existing communities being closed out during the three months ended September 30, 2015, and the amortization of capitalized interest during the three months ended September 30, 2015.
Salary Expense and Management Fees Expense - Related Party
The table below represents salary expense and management fees, related to our land development and builder operations segments.

($ in thousands) |  | Three Months Ended September 30, |  | As Percentage of Related Revenue
2015 |  | 2014 |  | 2015 |  | 2014
Land development |  | $ | 137 |  |  | $ | 270 |  |  | 2.3 | % |  | 2.8 | %
Builder operations |  | $ | 4,925 |  |  | $ | 3,751 |  |  | 7.1 | % |  | 9.4 | %

Land Development
Salary expense and management fees expense for the three months ended September 30, 2015 for land development was $0.1 million compared to $0.3 million for the three months ended September 30, 2014, a decrease of 49.3%. The decrease is primarily the result of a decrease in employee headcount of 1.
Builder Operations
Salary expense and management fees expense for the three months ended September 30, 2015 for builder operations was $4.9 million, compared to $3.8 million for the three months ended September 30, 2014, an increase of 31.3%. The increase was primarily the result of an increase in salaries driven by JBGL going from a privately-held company to a public company, the associated costs of benefits to support the growth in our builder operations segment, and an increase in employee headcount of 16 as our average selling community count increased to 43 for the three months ended September 30, 2015 compared to 29 for the three months ended September 30, 2014.
25

TABLE OF CONTENTS
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 September 30, |  | As Percentage of Related Revenue
2015 |  | 2014 |  | 2015 |  | 2014
Land development |  | $ | 308 |  |  | $ | 519 |  |  | 5.1 | % |  | 5.3 | %
Builder operations |  | $ | 3,077 |  |  | $ | 4,120 |  |  | 4.4 | % |  | 10.3 | %

Land Development
Selling, general and administrative expense for the three months ended September 30, 2015 for land development was $0.3 million compared to $0.5 million for the three months ended September 30, 2014, a decrease of 40.7%. The decrease was primarily attributable to costs incurred in connection with the Transaction during the three months ended September 30, 2014.
Builder Operations
Selling, general and administrative expense for the three months ended September 30, 2015 for builder operations was $3.1 million, compared to $4.1 million for the three months ended September 30, 2014, a decrease of 25.3%. Selling, general and administrative expense as a percentage of revenue decreased 57.3%. The decrease was primarily attributable to higher costs incurred during the three months ended September 30, 2014 related to the Transaction and front end expenses incurred on new communities under development in 2014 that did not produce any revenues during the three months ended September 30, 2014 and did not open until 2015.
Interest Expense
Interest expense decreased $0.3 million, or 100.0%, to $0.0 million for the three months ended September 30, 2015, from $0.3 million for the three months ended September 30, 2014. The decrease was due primarily to an increase in the amount of capitalized interest during three months ended September 30, 2015.
Interest and Fees Income
Interest and fees income was $0.0 million for the three months ended September 30, 2015 due to no notes receivable outstanding during the three months ended September 30, 2015.
Other (Expense) Income, Net
Other expense, net, increased $0.2 million, or 491.9%, to $0.2 million for the three months ended September 30, 2015. The increase in other expense, net was primarily due to an increase in amortization expense of approximately $0.4 million due to the write-off of the remaining unamortized debt issuance costs on the Term Loan Facility, partially offset by an increase in various other (expense) income.
Income Tax Provision
Income tax expense increased $1.9 million, or 100.0%, for the three months ended September 30, 2015, from an expense of $0.0 million for the three months ended September 30, 2014. The increase in income tax expense is due primarily to the change in income tax status of the JBGL entities, from pass through entities to taxable entities, relating primarily to the tax attributes that arose from the Transaction.
Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014
Net New Home Orders and Backlog
The table below represents new home orders and backlog related to our builder operations segment.

|  | Nine Months Ended September 30, |  | Increase (Decrease)
New Home Orders & Backlog |  | 2015 |  | 2014 |  | Change |  | %
Net new home orders |  | 487 |  |  | 483 |  |  | 4 |  |  | 0.8%
Number of cancellations |  | 87 |  |  | 67 |  |  | 20 |  |  | 29.9%
Cancellation rate |  | 15.2 | % |  | 12.2 | % |  | 3.0 | % |  | 24.6%
Average selling communities |  | 41 |  |  | 29 |  |  | 12 |  |  | 41.4%

26

TABLE OF CONTENTS
Net new home orders for the nine months ended September 30, 2015 increased by 4 homes, or 0.8%, to 487 from 483 for the nine months ended September 30, 2014. Overall absorption rate for the nine months ended September 30, 2015 was an average of 12.0 per selling community (1.3 monthly), compared to an average of 16.7 per selling community (1.9 monthly) for the nine months ended September 30, 2014. Our monthly absorption rate decreased in part due to the timing of the opening of new communities and the closing out of existing communities.
Our cancellation rate was approximately 15.2% for the nine months ended September 30, 2015, compared to 12.2% for the nine months ended September 30, 2014. Management believes a cancellation rate in the range of 15% to 20% is representative of an industry average cancellation rate and that our low cancellation rate for the nine months ended September 30, 2014 was atypical. 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.
New Homes Delivered and Home Sales Revenue
The table below represents home sales revenue and new homes delivered related to our builder operations segment.

|  | Nine Months Ended September 30, |  | Increase (Decrease)
New Homes Delivered and Home Sales Revenue |  | 2015 |  | 2014 |  | Change |  | %
New homes delivered |  | 461 |  |  | 423 |  |  | 38 |  |  | 9.0%
Home sales revenue ($ in thousands) |  | $ | 179,195 |  |  | $ | 144,586 |  |  | $ | 34,609 |  |  | 23.9%
Average sales price of home delivered |  | $ | 388,709 |  |  | $ | 341,810 |  |  | $ | 46,899 |  |  | 13.7%

New home deliveries (excluding existing completed homes sold, but not yet closed) for the nine months ended September 30, 2015 for our builder operations segment was 461, compared to new home deliveries of 423 for the nine months ended September 30, 2014, resulting in an increase of 38 homes, or 9.0%. The increase in new home deliveries was primarily attributable to a 41.4% increase in new communities to 41 from 29.
Home sales revenue increased $34.6 million, or 23.9%, to $179.2 million for the nine months ended September 30, 2015, from $144.6 million for the nine months ended September 30, 2014. The increase in revenue is due to (a) a $21.6 million increase in revenues resulting from an increase in average sales price of $46,899 per home to $388,709 for the nine months ended September 30, 2015 from $341,810 for the nine months ended September 30, 2014, and (b) a $13.0 million increase in revenues driven by a 9.0% increase in homes delivered to 461 for the nine months ended September 30, 2015, from 423 for the nine months ended September 30, 2014.
Homebuilding
The table below represents cost of home sales and gross margin related to our builder operations segment.

|  | Nine Months Ended September 30,
Homebuilding ($ in thousands) |  | 2015 |  | % |  | 2014 |  | %
Home sales revenue |  | $ | 179,195 |  |  | 100.0 | % |  | $ | 144,586 |  |  | 100.0 | %
Cost of home sales |  | $ | 137,095 |  |  | 76.5 | % |  | $ | 105,844 |  |  | 73.2 | %
Homebuilding gross margin |  | $ | 42,100 |  |  | 23.5 | % |  | $ | 38,742 |  |  | 26.8 | %

Cost of home sales for the nine months ended September 30, 2015 for builder operations was $137.1 million, compared to cost of home sales of $105.8 million for the nine months ended September 30, 2014, resulting in an increase of $31.3 million, or 29.5%. Homebuilding gross margin percentage for the nine months ended September 30, 2015 for builder operations was 23.5%, compared to a gross margin percentage of 26.8% for the nine months ended September 30, 2014. The increase in homebuilding gross margin is largely due to the opening of new communities during the nine months ended September 30, 2015. 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 September 30, 2014, a substantial number of home closings in existing communities being closed out during the three months ended September 30, 2015, and the amortization of capitalized interest during the nine months ended September 30, 2015.
Salary Expense and Management Fees Expense - Related Party
The table below represents salary expense and management fees, related to our land development and builder operations segments.
27

TABLE OF CONTENTS

($ in thousands) |  | Nine Months Ended September 30, |  | As Percentage of Related Revenue
2015 |  | 2014 |  | 2015 |  | 2014
Land development |  | $ | 675 |  |  | $ | 718 |  |  | 2.6 | % |  | 2.1 | %
Builder operations |  | $ | 13,896 |  |  | $ | 10,050 |  |  | 7.8 | % |  | 7.0 | %

Land Development
Salary expense and management fees expense for the nine months ended September 30, 2015 for land development remained flat at $0.7 million.
Builder Operations
Salary expense and management fees expense for the nine months ended September 30, 2015 for builder operations was $13.9 million, compared to $10.1 million for the nine months ended September 30, 2014, an increase of 38.3%. The increase was primarily the result of an increase in salaries driven by JBGL going from a privately-held company to a public company, the associated costs of benefits to support the growth in our builder operations segment, and an increase in employee headcount of 51. The average selling community count is 41 for the nine months ended September 30, 2015 compared to 29 for the nine months ended September 30, 2014.
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) |  | Nine Months Ended September 30, |  | As Percentage of Related Revenue
2015 |  | 2014 |  | 2015 |  | 2014
Land development |  | $ | 1,039 |  |  | $ | 1,702 |  |  | 3.9 | % |  | 5.0 | %
Builder operations |  | $ | 8,661 |  |  | $ | 7,710 |  |  | 4.8 | % |  | 5.3 | %

Land Development
Selling, general and administrative expense for the nine months ended September 30, 2015 for land development was $1.0 million compared to $1.7 million for the nine months ended September 30, 2014, a decrease of 39.0%. The decrease was primarily attributable to a one time nonrecurring charge during the nine months ended September 30, 2014.
Builder Operations
Selling, general and administrative expense for the nine months ended September 30, 2015 for builder operations was $8.7 million, compared to $7.7 million for the nine months ended September 30, 2014, an increase of 12.3%. The increase was primarily attributable to increases in expenditures to support builder operations in anticipation of future growth in our business, and additional costs of JBGL going from a privately-held company to a public company. Builder operations expenditures include community costs, such as, non-capitalized property taxes, rent expenses, professional fees, and advertising and marketing expenses. The average selling community count is 41 for the nine months ended September 30, 2015 compared to 29 for the nine months ended September 30, 2014. Selling, general and administrative expense as a percentage of revenue decreased 9.4% due to costs incurred related to the Transaction during 2014 and front end expenses incurred on new communities under development in 2014 that did not produce any revenues during the nine months ended September 30, 2014 and did not open until 2015.
Interest Expense
Interest expense decreased $0.7 million, or 72.3%, to $0.3 million for the nine months ended September 30, 2015, from $1.0 million for the nine months ended September 30, 2014. The decrease was due primarily to an increase in the amount of capitalized interest during nine months ended September 30, 2015.
Interest and Fees Income
Interest and fees income was $0.0 million due to no notes receivable outstanding during the nine months ended September 30, 2015.
28

TABLE OF CONTENTS
Other (Expense) Income, Net
Other (expense) income, net, decreased $0.8 million, or 130.0%, to other expense, net of $0.2 million for the nine months ended September 30, 2015, from other income, net of $0.6 million for the nine months ended September 30, 2014. The decrease was due to a $0.8 million increase in depreciation and amortization expense and a $0.6 million decrease in interest on direct financing leases income, partially offset by a increase in various other (expense) income.
Income Tax Provision
Income tax expense increased $5.9 million, or 1,742.9%, for the nine months ended September 30, 2015, from an expense of $0.3 million for the nine months ended September 30, 2014. The increase in income tax expense is due primarily to the change in income tax status of the JBGL entities, from pass through entities to taxable entities, relating primarily to the tax attributes that arose from the Transaction.
As of December 31, 2014, we had federal net operating loss carryforwards of approximately $178.8 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 September 30, 2015, 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 nine months ended September 30, 2015 from December 31, 2014.
As of September 30, 2015, we had deferred tax assets of $83.4 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 September 30, 2015, 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.
Lots Owned and Controlled
The table below represents lots owned and controlled (including land option agreements) as of September 30, 2015 and December 31, 2014. Owned lots are those to which the Company holds title, while controlled lots are those that the Company has the contractual right to acquire title but does not currently own.

| September 30, 2015 |  | December 31, 2014
Lots Owned(1) |  |  |
Texas | 1,958 |  |  | 2,105 |
Georgia | 931 |  |  | 1,211 |
Total | 2,889 |  |  | 3,316 |
Lots Controlled(1)(2) |  |  |
Texas | 353 |  |  | 279 |
Georgia | 879 |  |  | 561 |
Total | 1,232 |  |  | 840 |
Total Lots Owned and Controlled(1) | 4,121 |  |  | 4,156 |

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

(2) | Lots controlled excludes homes under construction.

29

TABLE OF CONTENTS
Liquidity and Capital Resources Overview
As of September 30, 2015 and December 31, 2014, we had $14.4 million and $21.3 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.
Our principal uses of capital for the three months ended September 30, 2015 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, TX, and Carrollton, TX. The maturity date for the new revolving credit facility is July 30, 2017. See Note 5 and Note 6 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.
As a result of the Equity Offering, the repayment of the Term Loan Facility and the $50.0 million replacement line of credit with Inwood, our debt to total capitalization ratio was less than 7% as of September 30, 2015. 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 40%, which we expect will provide us with significant additional growth capital.
Term Loan Facility
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. The Term Loan Facility was secured by a first priority lien on substantially all of our assets and substantially all of the assets, subject to certain exceptions, of each of our subsidiaries. Certain of our subsidiaries guaranteed obligations under the Term Loan Facility pursuant to the guaranty. In connection with the termination of the Term Loan Facility, we wrote-off the remaining unamortized debt issuance costs of $0.4 million, which is included in depreciation and amortization expense in our consolidated statement of income for the three and nine months ended September 30, 2015.
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. We had a one-time right to elect to pay up to four consecutive quarters’ interest-in-kind. The Term Loan Facility was subject to mandatory prepayment with 100% of the net cash proceeds received from the incurrence of certain debt by us or the issuance of certain equity securities. Voluntary prepayments of the Term Loan Facility were permitted at any time. All prepayments made prior to October 27, 2016 were subject to a 1.0% prepayment premium.
30

TABLE OF CONTENTS
Revolving Credit Facility
As of September 30, 2015, we had the following lines of credit (“LOC”):
During 2012, a subsidiary of JBGL opened a LOC issued by Inwood in the amount of $4.8 million maturing on April 13, 2014, bearing a minimum interest rate of 4.0% per annum, which was in effect during the three months ended March 31, 2015, and collateralized by certain leased assets. The LOC was renewed during 2014 until April 13, 2015. This LOC was paid off as of March 31, 2015.
During 2012, a subsidiary of JBGL opened a LOC issued by Inwood in the amount of $3.0 million maturing on September 15, 2014, bearing a minimum interest rate of 4.0% per annum, which was in effect during the three months ended March 31, 2015, and collateralized by certain leased assets. The LOC was renewed until April 13, 2015. This LOC was paid off as of March 31, 2015.
During 2012, a subsidiary of JBGL opened a LOC with Inwood in the amount of $8.0 million. On October 13, 2013, the JBGL subsidiary extended this revolving credit facility and increased the size from $8.0 million to $25.0 million maturing on October 13, 2014. Interest accrued and was payable monthly at a rate of 4.0%. The credit facility was renewed until October 13, 2015 and was secured by land owned in John’s Creek, Georgia. This LOC was replaced with a new revolving credit facility in July 2015.
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 effective interest 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, 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. Note 5 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.
In addition to the financial covenants described above under the new revolving credit agreement, the new revolving credit agreement require us to maintain minimum multiples of net worth in excess of the outstanding new revolving credit facility balance, minimum interest coverage and maximum leverage. We were in compliance with these covenants as of September 30, 2015.
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.
On April 15, 2013, a subsidiary of JBGL signed a promissory note for $3.5 million maturing on January 22, 2014, bearing interest at 6.0% per annum and collateralized by land located in Denton, Texas. The note was paid in full during 2014. On April 16, 2014, a new promissory note was signed for $3.3 million maturing on April 30, 2015 bearing interest at 5.0% per annum collateralized by land located in Denton, Texas. $1.5 million of this note was repaid in July, 2014. This note was paid in full during the three months ended March 31, 2015.
31

TABLE OF CONTENTS
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 and collateralized by land located in Allen, TX.
On July 20, 2015, a subsidiary of JBGL signed a promissory note with Centennial Park Richardson, LTD. for $0.3 million maturing on April 20, 2016, bearing interest at 0.0% per annum collateralized by land located in Richardson, TX. This note was paid in full in October 2015.
Our subsidiaries purchased lots under various agreements from unrelated third parties. The sellers of these lots have subordinated a percentage of the lot purchase price to various construction loans of our subsidiary. Notes were signed in relation to the subordination bearing interest at between eight and fourteen percent per annum, collateralized by liens on the homes built by us on each lot. The sellers will release their lien upon repayment of principal plus accrued interest at the closing of each individual home to a third party buyer.
Cash Flows
The following summarizes our primary sources and uses of cash for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014:

• | Operating activities. Net cash used in operating activities for the nine months ended September 30, 2015 was $21.5 million, compared to net cash provided of $4.7 million during the nine months ended September 30, 2014. The change was primarily attributable to (a) a decrease in net income of approximately $8.3 million primarily related to (i) an increase in salary expense and management fees expense - related party of $3.8 million due to increase in associated costs of benefits to support the growth in our business and an increase in employee headcount and (ii) an increase in various other income and expenses, and (b) changes in working capital associated with earnest money deposits, as earnest money deposits increased by 149.3% for the nine months ended September 30, 2015 compared to an increase in earnest money deposits of 118.2% during the nine months ended September 30, 2014.

• | Investing activities. Net cash provided by investing activities for the nine months ended September 30, 2015 was $1.8 million, compared to net cash provided of $8.8 million during the nine months ended September 30, 2014. The change was primarily due to a decrease in notes receivable payments of $9.5 million, partially offset by a decrease in issuance of notes receivable of $1.9 million and an increase in proceeds from investment in direct financing leases of $0.3 million for the nine months ended September 30, 2015.

• | Financing activities. Net cash provided by financing activities for the nine months ended September 30, 2015 was $12.9 million, compared to net cash used of $22.7 million during the nine months ended September 30, 2014. The change was primarily due to (i) proceeds from the Equity Offering, net of issuance costs of $170.0 million (ii) an increase in line of credit borrowings of $33.0 million, and (iii) a decrease in net distributions to and contributions from controlling and noncontrolling interests members of $10.3 million, partially offset by (a) a increase in repayments of the Term Loan Facility and (ii) an increase in repayments of notes payable and line of credit of $25.1 million during the nine months ended September 30, 2015.

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.
32

TABLE OF CONTENTS
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 highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it typically takes four to six 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, 2014 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, 2014 filed with the SEC on March 31, 2015. There have been no significant changes in our critical accounting policies and estimates during the three months ended September 30, 2015.
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 September 30, 2015, we had $14.0 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.”
33

TABLE OF CONTENTS
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 September 30, 2015, 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, 2014. For a discussion of the actions that we have undertaken and are currently undertaking to remediate these material weaknesses, which have not been remediated as of September 30, 2015, see our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 31, 2015.
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 third quarter ended September 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
34

TABLE OF CONTENTS
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, 2014 filed with the Securities and Exchange Commission on March 31, 2015.
35

TABLE OF CONTENTS
ITEM 6. EXHIBITS INDEX

Number |  | Description
4.1 |  | Amendment No. 1, dated as of August 12, 2015, to Section 382 Rights Agreement, between Green Brick Partners, Inc. and Broadridge Corporate Issuer Solutions, Inc., as Rights Agent (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed August 14, 2015).
10.1 |  | Loan Agreement, dated as of July 30, 2015, by and among Green Brick Partners, Inc., Inwood National Bank, JBGL Mustang, LLC, JBGL Exchange, LLC, JBGL Chateau, LLC, Johns Creek 206, LLC and JBGL Builder Finance, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed August 5, 2015).
10.2 |  | Revolving Line of Credit Note, dated as of July 30, 2015, issued by Green Brick Partners, Inc. in favor of Inwood National Bank (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed August 5, 2015).
10.3 |  | Guaranty Agreement, dated as of July 30, 2015, by and among JBGL Mustang, LLC, JBGL Chateau, LLC, JBGL Exchange, LLC, JBGL Builder Finance, LLC, and Johns Creek 206, LLC (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed August 5, 2015).
10.4 |  | Deed of Trust and Security Agreement, dated as of July 30, 2015, by JBGL Mustang, LLC, as grantor, to Gary L. Tipton, as trustee, for the benefit of Inwood National Bank (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K filed August 5, 2015).
10.5 |  | Deed of Trust and Security Agreement, dated as of July 30, 2015, by JBGL Exchange, LLC, as grantor, to Gary L. Tipton, as trustee, for the benefit of Inwood National Bank (incorporated by reference to Exhibit 10.5 of the Company’s Form 8-K filed August 5, 2015).
10.6 |  | Deed of Trust and Security Agreement, dated as of July 30, 2015, by JBGL Chateau, LLC, as grantor, to Gary L. Tipton, as trustee, for the benefit of Inwood National Bank (incorporated by reference to Exhibit 10.6 of the Company’s Form 8-K filed August 5, 2015).
10.7 |  | Deed to Secure Debt, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated as of July 30, 2015, by Johns Creek 206, LLC, as grantor, to Inwood National Bank, as grantee (incorporated by reference to Exhibit 10.7 of the Company’s Form 8-K filed August 5, 2015).
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
36

TABLE OF CONTENTS
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: November 12, 2015
37