GBank Financial Holdings Inc.

Well, good morning for those of you on the West Coast, and good afternoon for those on the East Coast. This is Ed Nigro. I'm Executive Chairman of G-Bank Financial Holdings at G-Bank, and I have in the room with me Ryan Sullivan, our Chief Executive Officer and President, and also Jeff Wicker, our Chief Financial Officer. And both will be presenting today with me. And I'd like to kick it off by... an introductory paragraph or rather statement that's important, and we'll set the tone for this call. On January 10th of 2025, GBFH filed on a confidential basis a selling shareholder re-offer of securities on an SEC form S-1. In other words, we filed a registration statement. for the 1,081,081 shares that we sold in a private placement offering in October, which I believe we concluded in October of 2024. Now, we filed for the registration of those shares as we had indicated we would in the offering document. This is also a filing to become a registered SEC company. Now, we must carefully control our communications, especially through this registration process. Even though we have no shares for sale, we're not doing an IPO, we are subject to many of the same application procedures and SEC rules and regulations. And most important among those are forward-looking statements and offerings during this period of registration from which we need to refrain. You will notice, and we will not have as many forward-looking statements in order to comply with SEC regulations. We are in the 30-day period for response from the SEC, and it is a confidential filing, so none of the application or the responses are public information at this time. And that is also the reason for a lot of the requisites that are placed upon us for our statements. Having said that, we can comment as we do in a normal business call on what actually we are doing today and what we have accomplished in 2024. And I'm very pleased, as you can imagine, to announce our net income of $18.6 million or $1.37 per diluted share for the year 2024, especially since it was a 70.6% increase compared to our earnings of 2023. I'm particularly pleased, as we all are, on the fact that we achieved over $500 million in originations in our SBA program, and Ryan will be digging more into that. That's $500 million in one year and over $2 billion since our origination in the SBA business. I'll also be talking about our gaming fintech divisions. But particularly, we noticed that the credit card transactions of 51.7 million in the fourth quarter compared to 13.9 million in the third quarter. And you will also recall 1 million in the first quarter. So it is showing particularly strong growth. And we also have achieved an interesting one-day growth. Margin of when I say margin, we had a one day transactions of 1.5 million recently. So it is being very well accepted and we'll be getting into more of those details. And so I will turn it over now to Ryan Sullivan.

Thank you, Ed, and welcome everyone on the call. We're happy to celebrate a number of events during the quarter, and really it's the culmination of what has constituted a standout and breakout year for the company and bank. As Ed mentioned, total earnings for the year at $18.6 million. That's a 71% year-over-year increase. As we all get ready for a big football game with a team that's looking to three-peat, we're celebrating our own three-peats here with the company and the bank specifically. Q4 was our third consecutive quarter of both record-breaking earnings and net revenue, earnings for the quarter of $5.2 million. And then also many of you may have seen for the third consecutive year that the company was recognized with the OTCQX Best 50 for the company's stock performance. Really pleased with continued performance and operating metrics of the company. As indicated, record low in origination for the year. Our SBA operations surpassed 500 million for 2024, as mentioned, and 2 billion cumulative since we launched. in 2015. A big driver of our revenue and earnings for the quarter obviously was the gain on sale of loans, which was $4 million for the quarter on increased volume of nearly $99 million. We continue to see, you know, small improvements on the pricing there as we sell the guaranteed loans, and you can see in the quarter in the low 4% gap gain percentage. As Ed mentioned, we're particularly excited about credit card development and seeing very strong utilization growth there, over $51 million in credit card spend during the quarter. And also on a subsequent basis, we are celebrating $100 million in total credit card transactions, and that was the threshold that we surpassed in January after year end. So that's very exciting as well. You'll note on the income statement that we broke out interchange specifically, as we see very high transaction and utilization rates, as we mentioned, within our credit card customers. We've seen significant growth in that line item. That line item is, we think, pretty interesting today and will be interesting to track as time goes on. You know, as we think about credit card and its overall contribution, you know, specifically in 2024, you know, our credit card activities generated approximately a $1.1 million pre-tax loss. As mentioned, we did reach break-even during the quarter. And as we, you know, expect future growth into 2025, we think that, you know, that there will be a significant swing in generated earnings from that line specifically. You'll also note we did have some net interest margin compaction or compression in the quarter. Now, part of that was shoring up, getting ready for really stabilizing them into 2025. As noted, approximately $170,000 in accelerated interest costs. And what that allowed us to do was to call approximately 20 million in callable CDs during the quarter and put us in good shape for calling an additional 20 million in the current quarter, Q1. We do expect to see some significant repricing down in the CD books specifically. You know, we were going into Q4 with approximately 64 million in maturing CDs. By and large, we were able to replace those on average between 50 and in some cases as much as 100 basis points lower as they matured and were replaced or renewed. And as we look into Q1, we have the $20 million in brokered CDs that are callable that we expect to call during the quarter and another $100 million almost in CDs that will mature that will be re-pricing down on that portion of our funding mix as well. So another item just to highlight, and then I'll kick it over to Jeff. We, you know, happy to celebrate, you know, 2024 really on the credit side was very benign. You know, we've had very low non-performing assets. And then also net charge-offs for the quarter of the year were $157,000 and $164,000 respectively. I think for the entire year that's less than two basis points on average loans. We did, unfortunately, have some loans that migrated to non-accrual status, several of which ride at year-end. So total NPIs at year end were $14.2 million. Now included in that is approximately $9.3 million in SBA guarantees. So our at-risk non-performing assets and loans at year end are $4.8 million. As you'd expect, and with that guarantee balance, most of those are SBA loans. There's 11 loans outside of the small, about $40,000 in credit cards. that balance was comprised by 11 loans, 10 of which were SBA, eight of which were SBA hospitality. You know, very confident in our ability to work through that group as we look kind of for possible trends and anything that would highlight, you know, kind of future or growing problems. Not really seeing anything there, as you might expect. We've been in very, kind of elevated contact and communication with our borrowers through Q4, particularly in the East Coast with some of the storms and hurricanes, and then more recently with the fires in the L.A. area. You know, happy to report that we haven't seen really collateral issues or notable, you know, issues of damage there. I will say, you know, in some cases maybe more of an impact on business conditions, particularly with some of the northern states that always have a little bit of slow time or slow period during the winter months. But on a relative basis, that $4.8 million, 0.4% of total assets or 3.2% of total equity capital plus reserves. So, you know, we have a really good track record working through those NPAs. We don't expect that to change, particularly on the SBA side. you know, specifically in 2024. Really two notable dispositions, as we mentioned before, both of them were SBA hospitality. One involved zero loss, and then the losses, as you see in Q4, was relating to an approximate $3.6 million loan, and our total charge loss on that one came in at less than $200,000. So, overall, a very good quarter. We think we're in really good shape, you know, as we head into 2025. Very excited about our business lines and anticipated growth there. And with that, I'll turn it over to Jeff for his detailed comments.

Thank you, Ryan, and good morning, everyone. As Evan and Ryan have discussed, 2024 has been a banner year for the bank, driven by strong growth and record earnings. The company reported earnings of $5.2 million or $0.36 per diluted share for the fourth quarter of 2024, which is a $200,000 increase over the prior quarter, earnings of $5 million. For the year, the company reported earnings of $18.6 million, which is a 71% increase over the prior year earnings of $10.9 billion or $1.37 per diluted share. Net margins decreased quarter over quarter to 4.53% from 5%. In the linked quarter, this decrease included a $341,000 reversal of interest and fees on non-accrual loans and $170,000 of accelerated amortization on callable brokered CDs, as Ryan talked about. We anticipate continued pressure and margins in the first quarter as the additional 50 basis point Fed rate decrease will impact the variable rate loans as of January 1st and will be offset by 97 million of higher rate CD maturities that will be replaced at 40 to 80 basis points lower than their current costs. The bank's asset sensitivity is held steady as testing continues to show a 10% impact to net interest income with a 200 basis point change in rates either direction. And the company has made great progress in bringing down this asset sensitivity during the prior year. As Ryan mentioned, we are encouraged by the results of the SBA credit card activity for the quarter. SBA commercial lending activity has remained strong with the bank producing $120 million in loans during the quarter. SBA had a banner year producing a record $500 million in new loans through the year and crossing over $2 billion in total production since the inception of the program. SBA loan sales increased 38% to $98.5 million during the quarter, increasing the gain on sale income by $1.2 million. Sale pricing continues to trend up, providing an earnings hedge as we see reduced net interest margins related to recent rate decreases. Credit card has found a solid footing and continues to build on each quarter. Transaction volume increased 272% for the quarter to $51.7 million as had talked about from $13.9 million in the linked quarter. Additionally, the program is now showing a positive contribution margin and is expected to be a meaningful contributor to income in the upcoming year. SBA and credit card activity has led to a 49.1% increase in non-interest income quarter over quarter. Total net non-interest income of $5.8 million was driven by the increased gain on sale income and a $700,000 increase on net interchange income on the credit card portfolio. Non-interest expense increased approximately $700,000 during the quarter, primarily due to the $367,000 stock compensation expense related to a one-time employee stock grant. In addition, the company incurred approximately $300,000 in expenses related to the filing of the S-1 and registration of the shares from the 2024 offerings. The efficiency ratio favorably decreased to 55.4% for Q4 2024 from 55.9% in the linked quarter and improved to 58.1% from 68.1% year over year as the bank has been able to continue to execute on the technology initiatives that were launched in 2022 and 2023. Taxes decreased quarter over quarter by $273,000, due mainly to the additional tax write-off the company can record on vesting stock-based compensation due to the recent increase in stock price. The bank continues to grow the balance sheet, increasing assets by 7.1% in the quarter and 22.4% for the year. Assets closed the year over $1.1 billion, and shareholders saw and shareholders' equity saw a 42.9% growth year-over-year related mainly to earnings and the $20 million private placement that was in October of 2024. The bank continues to fund the loan growth with a mixture of deposits, effectively growing deposits in all categories year-over-year. Loan growth has mainly been focused in the CRE and CNI portfolios as SBA lending continues to grow the lending pipeline. In addition, the bank purchased $29 million in fixed-rate government-guaranteed securities during the quarter, with an average yield of 5.1%. This brings the overall book yield on the securities portfolio to 4.78%. 100% government-guaranteed loan balances were $231 million. The decrease of $36 million from the prior quarter is mainly due to a decrease in loans held for sales. The loans held for investment guaranteed balances only decreased $1.5 million due to normal paydowns. The bank recorded $1.3 million of provision expense during the fourth quarter, approximately $800,000 of which was due to an increase of reserves on at-risk non-accrual loans, while the remaining $500,000 was due to the portfolio growth. Total non-accrual loans increased $8.7 billion quarter over quarter. While the increase in non-accrual loans for the quarter was higher than we had seen in the prior quarters, the bank continues to show better-than-anticipated losses portfolio-wide year to date. Given the workout history of the Special Assets Department of the bank, we anticipate being able to quickly work through the troubled assets and have provision recorded for anticipated losses. The overall allowance for credit loss was 1.07% of gross loans and 1.47% of at-risk loans. which is net of the government guaranteed balances. Capital levels remain strong with the bank's Tier 1 capital ratio at 12.9%. In addition, as discussed, the holding company has raised $20 million in new capital during the month of October and will look to inject some of the capital down to the bank to provide for future growth expectations. The bank continues to focus on liquidity with on-balance sheet liquidity increasing $44.9 million quarter over quarter. Total liquidity of $738 million as of the year end was 76.9% of total deposits, which included $475 million in untapped borrowing capacity. This year has been a record-breaking year for the bank, and we look forward to continuing to execute on the current initiatives to strengthen and grow the organization and continue to return strong earnings to the shareholders. With that, I'll turn it back over to you, Ed. Thank you.