GBank Financial Holdings Inc.

Hello, and welcome to the GBank Financial Holdings Inc. Q1 2026 Earnings Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you'll be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. We appreciate you joining our Earnings Conference Call. With me here today are Ed Nigro, Executive Chairman and CEO, Todd Nigro, Vice Chairman, and Olivia Cayley, SVP Financial Reporting Director. Jeff Whitaker is on medical leave. The related Q1 earnings press release was filed for the U.S. Securities and Exchange Commission today and is available on the news and media section of our website, gbankfinancialholdings.com. Before we begin, I'd like to remind everyone that any forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those anticipated future results. Please see our safe harbor statements in our earnings press release. All comments, expressed or implied, made during today's call are subject to those safe harbor statements. Any forward-looking statements made during this call are made only as of today's date. and we do not undertake any duty to update such forward-looking statements except as required by law. Additionally, during today's call, we may discuss certain non-GAAP financial measures which we believe are useful in evaluating our performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release. I'll now like to pass it over to Ed Nigro, Chairman and CEO.

Thank you. It is with great regret that we issue our earnings release today with a $0.22 per share charge-off for third-party credit card fraud, fraud that was contained in a retail card program that was launched last year that we canceled. This program was antithetical to the G-Bank gaming credit card program. We were in the business of issuing a transactional card, not a retail card to pay merchandise that built credit balances. Beyond the pursuit of retail cardholders, the two direct mailings totaling $900,000 to pre-qualified recipients exposed the bank to various types of creative and illicit fraud. This type of fraud was new and subjected an entire industry to AI-generated bot fraud. Fortunately, the new system we developed and launched on November 17th of last year is very robust. It's state-of-the-art, and we've seen no additional substantive fraud issues prospectively. New fraud is being well contained. I am disappointed to have to even discuss this, but as a shareholder like you, I wanted to explain the issue and identify the solutions. We've attached an exhibit to the earnings release that details the credit card enhancements. I would like to address our core banking operations, including our gaming fintech developments, which are extensive. I believe that it's imperative that this fraud event does not mask the continued remarkable growth and accomplishments of G-Bay. First, loan originations. Our loan originations exceeded $208 million for the first quarter of 2026. a 56% increase when compared to the first quarter of 2025, and a 65% increase when compared to the fourth quarter of 2025. SBA originations totaled $190 million, an impressive fee giving the lingering effects of the government shutdown of the fourth quarter. For the first time in G-Bank history, we've exceeded $1 billion in on-balance sheet loans. Including our off-balance sheet loans, our total assets under management were $2.5 billion as of March 31, 2026. Of course, when we talk about loans, we also talk about our allowance for credit loss provision expense. which this time was $2.3 million for the quarter, comprised of $860,000 related to loan growth and $1.4 million increase in specific reserves on non-performing loans and updated collateral balances of existing NPAs. The balance of at-risk non-performing loans increased from $12.5 million in December 31, 2025, to $13.2 million as of March 31, 2026. Our net interest margin. The bank experienced a lower net interest income and some net interest margin compression when we compared to our fourth quarter of 2025. The 50 basis point decrease in market rates enacted in the fourth quarter impacted our loan portfolio effective January 1st of 2026. as approximately 65% of our loan portfolio re-prices quarterly. That's approximately $686 million. Our funding costs, on the other hand, remain stubbornly high as deposit market prices lag Federal Reserve actions, and we did not adjust our deposit pricing in the first quarter to remain competitive, although we are currently implementing several measures to lower deposit costs. Additionally, interest income was affected by the sale of $52 million in investment securities, securities we sold during the fourth quarter. We redeployed $44 million in the first quarter. However, these investments were spread throughout the quarter. The full interest impact of these purchases will be reflected in the second quarter. The bank-only net interest margin of 4.02% is still amongst the highest of our peers. Now I would like to discuss our SBA operations. Our efforts in the fourth quarter of last year to restructure our gain-on-sale pricing has resulted in gain-on-sale margin of 4.79% for the first quarter, exceeding our budget expectations of 4%. The bank sold 79 million of government-guaranteed loans during the first quarter, generating a net gain-on-sale of 3.8 million. Loans held for sale were $74 million as of March 31, 2026, and to date, April sales volumes are exceeding expectations as we've sold $39.5 million in loan balances month to date at a gain on sale of $2 million. The earnings power of our core bank remains resilient and strong. As we continue our FinTech operations, I again wish to discuss credit card because we faced restrictions by several of the major sports books on our credit card acceptance. These restrictions resulted in a decrease of spending from our lower limit customer base for the quarter. However, we still grew our quarter by 10 million in transactions over the previous quarter. This was accomplished with a new gaming credit card program targeting our high-demand, high-limit customer base, creating a secured card account system at the bank, enabling these preferred customers to move larger sums of funds frequently with limited credit risk to G-Bank. We expect this steady performance of our credit card, especially with these high-limit players, to continue throughout the year and subsequent growth commencing with the advent of bull bets and bankroll adoption. ACH. We had discussed ACH processing, and now we are live with our own ACH processing of our credit cards. which gives us in-depth viewing of immediate cash transactions and enables us to track our customers much more efficiently. We shall also grow as an ODFI, the Originating Depository Financial Institution, as we have a pipeline of customers for ACH processing. This becomes even more important as we grow bulk bets and bankroll. ACH is a principal form of payments. Additional prepaid card program? We're announcing that G-Bank is launching a new Visa prepaid debit card. Actually, it's our third prepaid card we're issuing, so issuing prepaid cards is not a new event for G-Bank. This particular card, however, is designed for our gaming app customers, designed to create access for them to all wagering platforms, including sports apps that limit credit cards. We've developed unique funding processes for this prepaid card, and these funding processes will enable ease of payments to our high-profile customers while providing a new source of non-interest deposits for the bank. And lastly, technology, and I will probably understate our technology efforts, but we are growing technology capabilities significantly. Our chief technology officer and his team are developing our in-house platforms, which include our own AI. Her name is Gigi. She's going to be very smart. She's going to know every policy, procedure, application, regulation that affects G-Bank, and she's going to provide invaluable guidance for productivity of our operations and help us plan, organize, direct, and protect G-Bank. I'm really looking forward to knowing her better. And I think our operations staff are enthusiastic about Gigi. Well, this concludes my comments on our operations. Now, Todd, our vice chairman, shall discuss BoltBets and our new venture bankroll.

Thank you, Ed. As mentioned in the AK, BoltBets launched version 2 of its app this month. V2, now available for download on both Android and Apple devices, has been under development for the past six months and was created to onboard multiple gaming operators and maximize payments and rewards functionality while staying in compliance with all gaming and banking regulatory frameworks. The approval by the Nevada Gaming Control Board's Technology Division will allow for faster licensure in other states as the Nevada Gaming Control Board is considered the gold standard of national and international gaming regulatory bodies. DeSille Taverns submitted and received GCB approval to utilize the V2 BoltBets wallet technology, provided that G-Bank is a sponsor bank. Again, we expect other states' regulatory bodies to acknowledge the bank's role in ensuring player funds are protected while using the platform, resulting in shortened timelines to launch. We believe the significance of successfully creating banking and financial technology that simultaneously satisfies gaming and banking regulatory requirements is an important achievement and places BoltBets and GBank in a unique position with proprietary, scalable solutions. BoltBets combines both payments and loyalty solutions that provide the necessary components for player adoption and engagement, which are the ultimate indicators of success. Also mentioned in the 8K, BoltBets and BCS have signed a binding term sheet establishing bank rule, Bankroll focuses on the digital wallet or payments layer of the BoltBest technology platform. It specifically allows for other gaming payments providers who may be directly or indirectly in competition with BoltBest to quickly and efficiently access the BCS and G-Bank proprietary systems and provide the state-of-the-art payment solution to their gaming clients. In our view, this product increases the total addressable market to include casino management systems and other third-party cage and credit payments providers. Bolpets becomes an example of the possibilities of integrating this platform into their own systems. Both Bolpets and Bankroll have active and developing pipelines with ongoing negotiations across gaming and payments operators. We look forward to sharing further updates as these discussions mature.