GBank Financial Holdings Inc.

Hello and welcome to the G-Bank Financial Holdings Inc. Q3 2026 earnings call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will 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. Joining us this afternoon are Jeff Newgard, President and CEO of G-Bank Financial Holdings and G-Bank, and Ed Nigro, Todd Nigro, both Directors of G-Bank Financial Holdings. The related Q3 earnings press release was filed with 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 risks 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. Thank you, and good afternoon, everyone. Thank you for joining us. I'm Ed Nigro.

The engagement of Jeff Newgard in May of 2026 as President and CEO of G-Bank was the first phase of the G-Bank Financial Holdings Succession Plan. Recognizing Jeff's banking experience, we accelerated Phase 2, appointing Jeff as G-Bank Financial Holdings President and CEO, as well as Chairman of the Board of G-Bank. Now with Phase 2 completed, I decided that I would be more productive in my role as CEO of Bank Card Services. So Jeff, I pass on to you the leadership of the bank I founded 20 years ago. But I really look forward to working with you to grow the bank's gaming fintech business. Now to Jeff.

Thank you, Ed. Ed founded GBank. and played a central role in building it into the company it is today, including the development of its national SBA lending franchise and its gaming and payment strategy. On behalf of the board, I want to thank Ed for his vision, his years of service, and the drive he brought to building this company. We look forward to his continued service as a director and a partner as CEO of Bank Card Services. I'm honored that the board has asked me to lead G-Bank Financial Holdings as well as the bank. I've spent more than 20 years growing banks. I led Bank of Idaho's growth from $250 million to $1.3 billion in assets before it sailed the Glacier Bancorp. I'm excited to bring that experience to G-Bank and build on the strong foundation already in place. Today, I'll start with our third quarter results, then share some observations from my first five months with the company and the priorities that will guide our efforts going forward. Rather than rehash all the puts and takes in the quarter, I want to highlight what I think is important for shareholders and the analyst community. First, the earnings power of the bank can be clearly seen in the adjusted numbers which are supported by higher net interest income and improving net NIM and the beginnings of solid expense management. While non-interest income is clearly lower than we would all like, the sequential reduction in gain-on-sale income is simply a timing issue. The 5.57% gain-on-sale margin is a taste The decline in interchange income, though disappointing, was outside of our control, resulting from the decision by several online sports betting operators to disallow credit cards as a payment source. That change had a significant effect on third quarter results. Credit costs have also weighed on earnings this year across our commercial, SBA, and credit card portfolios. We are confident those costs will move back toward more normalized levels as they move into 2027. While the reported numbers are much lower than expectations, I want to emphasize, and our results show, that several areas of the bank are in fact performing well. Further, after detailed review of our loan portfolio and operations, I can assure you that I am comfortable with our processes and approach to underwriting, monitoring, and problem credit resolution. While the last several quarters have been difficult for the bank and shareholders, I believe that GBank is now headed in the right direction. I'm building my team and many of the challenges negatively impacting the bank should be fully addressed by year-end. With that, I'd really like to spend some time discussing my vision for the bank and how our gaming fintech payments initiatives play a crucial role in that vision. Since joining GBank in June, I've spent a lot of time getting to know our team, our customers, and reviewing our operations and loan portfolios. What I found is a franchise with three distinct growth engines. An established commercial bank in Las Vegas, a national SBA lending platform, and a payments business serving the gaming industry. As the largest independent bank headquartered in Las Vegas, we're part of a growing and increasingly diverse commercial market that we know well. Our national SBA business takes that reach well beyond our local markets. We are one of the largest SBA lenders in the country and the number one SBA lender in hospitality. Across our SBA and commercial banking businesses, we originated $171.7 million in loans this quarter. We also service $1.2 billion of loans we sold. allowing us to maintain customer relationships and generate reoccurring servicing income long after the loans are sold. Our payment business is still in its early stages and will take time to develop, but it gives us a third avenue for growth alongside commercial banking and SBA lending. Together, these businesses provide multiple sources of revenue. Specialized expertise and attractive opportunities for growth. With that foundation in place, I have identified four priorities that will guide how we'll build the company going forward. First, and most important, is growing the core bank. That means deepening our presence in the markets we already serve, adding experienced bankers where it makes sense, and continuing to build relationships in customer segments where we see attractive opportunities, including legal, healthcare, construction and real estate, professional services, manufacturing and distribution. It also means doing more for the customers we already have through lending, treasury management and deposit services. Our SBA franchise will remain an important part of that growth through net interest income, gain on loan sales, and reoccurring servicing fees. We will protect our established hotel lending strength while expanding selectively into additional industries and using our broader banking capabilities to deepen customer relationships. We'll do all of this with discipline. and a focus on relationships. In markets where we know how to manage the risk, the goal is a broader, more durable franchise and a deeper customer relationship and more diverse mix of customers and industries. Second is credit. Non-performing assets remain higher than we want them to be and resolving them is a priority. Since I joined G-Bank, we've increased the resources dedicated to credit administration and special assets, strengthened coordination across our credit, servicing, and workout teams, and become more proactive in identifying and addressing problem credits. Those efforts enabled us to bring down early-stage delinquencies by more than $10 million from the end of the second quarter. While there's still work to do, I believe these efforts position us to improve portfolio performance and maximize recoveries over time. Third is growing our payments business. We're excited about that opportunity, and G-Bank is committed to building it for the long term. We are currently using Bank Card Services LLC's patented payment technology to function as the sponsor bank for 19 gaming and fintech clients. Average daily deposits for these relationships in Q3 were $31.2 million. GBank's role is to provide the regulated banking foundation for secure, compliant, and efficient funds flow across the gaming ecosystem. As a sponsor bank, GBank supplies the banking infrastructure, account framework, Payment Relativity and Regulatory Oversight, while technology and gaming partners deliver the patron-facing experience in operator integrations. In an industry where funding, settlement, and cashless wagering often remains fragmented, G-Bank's infrastructure helps us streamline the movement of funds, supporting a better experience for patrons, greater efficiency for gaming operators, and a scalable source of deposits. New FinTech programs should be viewed as multi-stage bank-enabled businesses rather than near-term financial contributors. After a client signs, each program progresses through a deliberate launch process. Technical integration, applicable regulatory approvals, G-Bank compliance review and onboarding, a gaming operator pre-launch audit, accounting setup, marketing, and promotional planning Staff Training, and, ultimately, Go Live. The process is not always linear, but each completed milestone reduces execution risk and brings the program closer to meaningful adoption, deposit growth, and payment volumes for the bank. That opportunity is beginning to take shape through specific customer and partner milestones Distill, a group of neighborhood taverns with gaming machines, formally launched the BoltVest application at all nine of its Las Vegas locations in September, following a limited launch in Q1, and early returns have been positive. Terribles, a Nevada-based gaming operator with 3,000 gaming machines statewide, will go live with the BoltVest application in early November. The integration of the Axis casino management system and the bankroll payments infrastructure is also underway. Once the technical integration is complete and the first Axis gaming operator signs, the launch process described above will begin for that operator. Each subsequent Axis operator will be signed, integrated, and launched separately and will provide updates and material milestones as they are achieved. Not every part of the business is progressing at the same pace. The Lucky Loads prepaid card is taking longer than anticipated and is expected to launch in the second quarter of next year. I cannot express how important gaming and payments are to our long-term strategy. While we do not expect the developing programs to contribute materially to our results in the near term, Gbank already supports a broader portfolio of gaming and fintech clients through its relationship with Bank Card Services, providing an established base of deposits and payment activity as the developing programs move towards scale. We'll continue to report deposits, credit card transactions, and net interchange fee income each quarter. In addition, we'll focus on concrete milestones Such as regulatory approvals, completed integrations, customer launches and adoption. Once those programs are large enough to have a meaningful effect on GBank's results, we'll add revenue measures and metrics that provide insight into the success of each. We remain confident that this business can be a meaningful source of low-cost deposits and fee income over time. Fourth is running the company well. As GBank continues to grow, our processes and operating discipline must keep pace. Our independent IT and cybersecurity audits were completed last quarter with a satisfactory rating, the highest possible rating, and zero high or moderate risk findings. We are implementing the remaining low and best practice recommendations none of which require additional spending. We have also established an enterprise-wide AI governance framework with policies and guardrails governing the use of AI. AI is already being deployed and integrated into G-Bank business processes, and we're accelerating and expanding its use as we identify additional applications, strengthening our leadership team as part of this. We continue to make progress in our search for a Chief Financial Officer and look forward to providing an update when appropriate. We will also continue to build out our broader team with an emphasis on talent that can deepen relationships in existing markets and selectively expand our reach where we see attractive opportunities. I want to assure all shareholders that we will operate this company as efficiently as possible and based on my relatively short time here, I'm confident there are ground to be gained on the expense front. Turning to capital, organic growth remains our top priority. We have a strong capital position and the priority is putting it to work in the core bank and the businesses we've talked about today to enhance shareholder value. That's the plan. Now it's on us to deliver it and I'm looking forward to getting to know all of our analysts and shareholders better over the coming months. I'll be clear about priorities, candid about our progress, and we'll hold ourselves accountable for delivering consistent results over time. With that, we'll open the call up to your questions.