Gbank Finl Hldgs Inc

to our very first call as a NASDAQ traded company. It started this morning. I'm sure you all know that. We've been on an adventure with the SEC and the NASDAQ application with the whole goal to get to become trading as of the 30th of April so that we would also be eligible for the Russell 2000 reorganization. So without one day to spare, we were live this morning. And so it was very, we had board meetings yesterday and we celebrated together because it is a very big step for us. So we have a new birthday of GBain Financial Holdings of April 30th, yeah, April 30th, 2025. But I want to welcome you this morning. We're going to change our format a bit from our prior calls. And then Ryan, and I have been going to be doing about 15 minutes or so of presentations and then we're going to open it up for questions and answers. We're not going to reread our report that we sent out. And Jeff Wicker, our chief financial officer is also here in the room to answer questions as well. And I'm going to start off. Because we will be talking about our company, our growth company. We're a banking and payments company, but we do and have been a growth company for some time. And our growth right now, if we focus on our report that we just submitted, we have really seen growth in other income. And our other income has always been led by our SBA gain on sales. Ryan and I were talking about the time where our gap gain was well over 10% in our gain on sales. And if someone told us that several years from now, the gap gain would be in the threes or 3.8 or 9%, we would have been very concerned. But it has done that, and yet we've been able to maintain our growth. Yes, we've increased our volume in SBA, and Ryan's going to talk about that. But I want to focus on our payments. Because if we looked year over year and seen that our other income has doubled, more than doubled, in year over year the same quarter. But let's even look at it sequentially. Because if we look sequentially in the fourth quarter, we had 5.7 million in, and I'm gonna round, my numbers are rounded, please. We had 5.7 million of other income, non-interest bearing income. And in the first quarter we had 5.4. The interesting anomaly there is that we had 5.4 with our gain on sale decreasing by one and a half million dollars. Because our gain on sale in the first quarter is always lighter and always has been lighter because of the generations in the fourth quarter have usually been a bit less than our normal. And this year, I think when you see that the gain on sale declined that much, but yet we were still almost matched the non-interest income of the prior quarter. And the reason, of course, is interchange. Our interchange went from 1M contribution in the 4th quarter to 2M contribution in quarter 1 from our transactions on our credit card. So that when we look at it from the standpoint of growth, there's another issue. If you look at other expenses, we had unusual expenses, other expenses in our financials you'll see where our other total non-interest expenses went to 10.9 million and you'll see the various breakouts but other expenses in particular went from up to 4.1 million in the quarter but we have a and again i'll round the numbers of 800 000 of that is unusual expenses for accounting and finance and legal for our applications to the nasdaq also there was a there's about 200 000 that was an additional billing from fis that they said that you know that we owed in additional funds that they didn't bill us for so we had a million dollars in one-time expenses in that quarter as well so if you add that and you look at and even equate our gain on sales if you would for a moment you see the kind of growth we are really experiencing I mean, we add these numbers in and the, the. And if we also look at the fact that we now have 14.5 million shares and last year we had 13.2 million shares. Well, 1.3 million, excuse me, 1.3 million shares more to spread our earnings over. But at the same time, these earnings we think would be, are going to manifest themselves, especially as we continue forward. Now, on a little bit of a forward-looking basis for the second quarter, you know, we have seen our credit card and our interchange growing significantly. And we have deliberately kept the program in a manageable level from the standpoint of our marketing and how many the consumers and the consumer Participation that we have, because we have a system internal system that is as we think needs improve. Because as we've done with everything else that G bank. Accomplishes we do it ourselves. And that way we know that it's done well, so we want our. She bank app in our credit card division of that app to be self sustaining where we have our own landing page to process our own applications. basis, and that we have a consumer and customer service that really performs well. Now to do this, we do have a remarkable IT division, and we are already well under our way to form this app. But we want to, if you will, pause our marketing until we have this app completely tested and developed. And we've been working on it for some time now. And we believe it's gonna take about 30 to 60 days to do that. So we may see some slowdown in our growth in our credit cards for the next quarters, but we anticipate that we're going to be able to handle a much, much higher volume of applications. We are also looking in terms of our customer service where we will have a very effective and efficient customer service that will work well for our consumers. So we want to take this little window of opportunity to do that. So to make sure we're ready, because we are planning in a major marketing efforts. Because we have a great deal going on and we have a very, very high interest in this card, in this credit card for gaming. Now, finally, when we're looking at growth, we cannot, and we are looking at new amortization, excuse me, new monetization of our gaming fintech division. We have to also talk a bit about our slot program. When I talk about our slot program, I mean, our primary, one of our primary customers' bulk debts is prepared to launch live with their slot program once the final regulatory approvals are done in the state of Nevada for their gaming operator to implement it, which should be forthcoming in this quarter. And Bold Bets has developed with the Konami casino management system A system that uses that identifies all the banking requirements, the payments requirements, the gaming requirements. It uses our pool player account for all of their consumers. So that opens funds are not the consumer funds are not held by both bets. They're held by the bank. We've implemented RTP and RFP for moving money instantly on and off his app. We also have done, he has gotten credit card approval from Visa and we will have an app direct for our credit card. on this program as well, and it's also tied to his rewards program. It's an amazing program that has tested really well, is live on his machines, but not live for use by the consumer until they get the final nod from gaming control. Not both beds, but until the gaming operator does. There is, and there are other programs that are also being groomed by us that are going to increase, I think, our activity and our deposit schedules for our gaming fintech division. Many exciting things, including the application we recently filed for a secured card, and it's an extension of our current Visa signature card, and that's an application with Visa. So there's a great deal going on from the growth standpoint, and you're going to see it manifested in other income. And I think once we look at taking out some of these anomalies, you'll see that that earnings per share could have easily achieved, you know, much higher numbers. And I'll let you do the math. than around there if we added $2 million to other income. With that, I'm going to turn it over to Ryan.

Well, thank you, everybody. And thank you, Ed. Just to start off also celebrating the developments of the company and SEC registration and our first day on the NASDAQ capital markets. Specifically, I'd like to take a moment just to acknowledge the incredible efforts required to achieve this outcome, especially on the timeframe that we did. So I just can't say thank you enough to all of our employees, our advisors, our stakeholders, our customers, without you, it just would not have been possible. Thank you so much. So as stated, we're pleased to report an income of 4.5 million or 31 cents per diluted share in a quarter that included altogether nearly a million in extraordinary expenses, the 800,000 approximately related to the SEC uplift and the other 200,000 in technology projects on work that was done in prior periods. Net revenue continues to be strong for the quarter, 17.4 million. It was down about approximately 196,000 on a link quarter basis. However, year over year, it was actually up by 4.2 million or an annual increase of more than 31%. As we think about the different components of our top line, specifically net interest income was up $105,000 compared to Q4, mainly due to our growing balance sheet. Year over year, net interest income is up approximately $1.1 million or more than 10%, again, on a much larger balance sheet. NIM was down somewhat quarter over quarter to 4.47, and there's a good breakdown of that in the release. Specifically, lower loan yields as the 50 basis point and rate reductions that occurred in Q4 went into effect for our variable rate SBA loans as of January 1st. That was offset by lower funding costs and also higher investment yields. Investment yield and investment portfolios performing nicely with a quarterly yield of 4.94%. Overall, we're quite pleased with the NIM and how it's held up. On a bank-peer comparison, we expect to remain in the top decile for mid-interest margin. As Ed mentioned, a big component of our top line is non-interest income, which totaled $5.5 million for the quarter. That was down approximately $300,000 compared to Q4, but year-over-year was actually up by $3.1 million, or a year-over-year increase of 127%. The two largest components of that, as mentioned, gain on sale of SBA loans was down approximately 1.5M compared to Q4 due to both Q4 sales being strong and Q1 being historically a little weaker due to seasonality and the year-end holidays. Year-over-year gain on sale of loans was actually up by 454,000 or an increase of 22%. Net interchange on credit cards was right at $2 million, and that's on spend volume of over $105 million for the quarter. And that compares to revenue of $1.1 million on spend of approximately $52 million in Q4 and $20,000 in revenue on volume of only $1.1 million in Q1 of last year when we were still really ramping up the program. Shifting to non-interest expenses, first on a length quarter basis, non-interest expenses were up by approximately 1.2 million compared to Q4. This was due to, again, the SEC uplift expenses, as well as increased compensation on higher loan origination volume during the quarter compared to Q4. We also had an increase in employee count and continued growth in technology development costs. As that alluded to, a significant portion of these costs are being driven towards improvements, enhancements, and growth within credit card. Next, on a year-over-year basis, non-interest expenses were up by approximately $2.5 million, again, driven by increases in compensation and other operating expenses, which were up year-over-year by $1.1 and nearly $1.5 million, respectively. Compensation specifically, you can see that FTEs increased year-over-year from $150 at march 31st 2024 to the most recent quarter at 175 that comprised approximately 850 000 of that year-over-year increase and then also year-over-year our stock-based compensation increased q1 compared to q1 by nearly 250 000. it's been great to see the stock price goes up uh and as that happens we get to recast those non-cash expenses From other operating standpoint, again, the SEC expenses on the accounting and legal really fall into this line primarily. In addition to that, there was over 500,000 in year-over-year increases in data processing on increased credit card volumes and technology improvements and projects. Moving on to the balance sheet, total assets were at 1.19B, that's up 24% over the prior year. Total loans were at $843M, which is up 15% year over year. The loan loss reserve stayed right around the $9M mark, and that equates to 1.41% of at-risk loans or loans excluding the guarantees. Deposits were at $996 million, so just shy of the $1 billion mark. That's up 6.5% sequentially. Total equity now stands at $147 million for the company. That is up 43% compared to a year ago. The book value per share also broke the $10 mark and is now at $10.27. That's up by more than 28% compared to March 31st of 2024. I'll also note that we did complete the downstream of $15 million from the parent to the bank. That actually happened during the quarter. That relates to the private offering that was completed in October of last year. We did do that downstream of $15 million in Q1. That translated to an increase in the bank's Tier 1 leverage ratio, which at the end of the quarter was 14.3%. and well in the upper decile for our bank peer group in total asset size. Speaking a little bit about asset quality, we recorded a provision for the quarter of 710,000 or 721,000 if you include the off-balance sheet portion. Net charge-offs for the quarter were approximately 828,000. These were all partial charge-offs on loans that were previously identified as non-accrual and actually had specific reserves recorded last year in 2024. Total non-performing loans were up by 6.2 million to 20.4 million, of which 14.7 million of that was guaranteed by the SBA. A majority of the quarterly increase in total non-performing translated to one repurchase of an SBA loan of previously sold guaranteed balances, which was identified as not accrual at the end of the year, but the repurchase actually took place in Q1, and that translated to approximately 3.6 million of that quarterly increase. With net at-risk non-performing loans of $5.7 million, that represents only 3.7% of the company's capital plus reserves. So we're very comfortable and pleased with the continued performance of the loan portfolio. And we are encouraged by the fact that specifically our SBA loan performance continues to outperform our SBA peers. As we think about the future, we're certainly happy to be in the position that we're in with nearly 25% of our loan portfolio being guaranteed by the SBA and USDA. And specifically, as we look ahead in SBA and commercial, we still see some positive sentiment really remaining within that group and our customers. Specifically, the SBA and commercial pipeline remains quite strong at an expanded pipeline of more than 300 million. So altogether, a really strong quarter. We have a lot of great things that are happening. And what's that? Ed, did you have any other comments?

No, we'll open it up for questions.

Okay. Hey, guys, it's Tim Coffey from Janney. How are you doing? Hey, Tim. Hi, Tim. Good morning. Hey, congratulations on a very active quarter. Speaking of which, Ryan, a couple times in the press release, you discussed that SEC uplift costs were, I think, $1.1 million to date. Are you expecting more in the second quarter?

Yes, there will be some. And I think that, you know, so just to break that down, it was, like I said, about the $800,000 in Q1. It was approximately $300,000 in Q4. And I believe we have, what do we have slated for Q2? We have a million in the budget for Q2, but I don't know that we'll get quite that much. Yeah, so we've got a million in our forecast, but right now we're looking at maybe being a little bit less than that.

Okay, great. That's helpful. And then, Ed, a lot of stuff to talk about on the credit card. This is next quarter. How should I be thinking about the daily transaction volume in that card for the second quarter?

Well, I think that we're going to, when I mentioned a pause, I think that our transaction binding will stay while we're in this process, since we're not going to be growing our card other than through our institutions. I think we can look at our transactions. And remember, the part about the second quarter, we've been doing this for a long time. As you knew, we had a million accounts with Play Plus on prepaid cards. The second quarter always sees a decline in sports betting and activity that we've seen every year in terms of our load factors. So given all that, we think it's going to stay probably flat for a quarter until we start picking up our momentum again in the third quarter.

Okay. And then in terms of kind of the expansion of the product overall, obviously you went into detail on the marketing side. Are you planning any enhanced offerings associated with the card, bigger credit lines, things like that?

Yeah, the credit line, I think, depends greatly on the customer and the customer's application. Because we do have credit lines, I think, that go as high as... 50,000, we approved that at the board level as our max credit line level. I did mention the potential for a secured card, which we've applied for the BINS for, where the applicant, in lieu of his credit rating, provides the capital upfront for his credit card operation. But that is an interesting program that would open up to gig workers and other part time workers that just don't get certainly have the wherewithal and would class. Would qualify for the card, but cannot because of their. The way they have their work status. Okay, okay.

Hey, Dave, yeah, and are these things that, obviously the credit line's already in place, the other parts of it, is that something you plan on having in place later this year?

Yes, yeah, so we're working on all of that right now, and that's part of what we're talking about in terms of Q2 leading into the second half of the year, is our expectation is, you know, the application flow enhancements, the customer service enhancements, and the secured card should be in the market going into Q3.

Okay. Are these investments that you'll be making already in the expense run, right?

Largely, yes. Yes. Although there will be some technology expenses, particularly in Q2 and Q3 for some of those enhancements. But they won't be significant.

Ryan already mentioned sort of a $200,000 technology expense in the first quarter, which was above our normal.

Okay, that's what that was. Okay, great. And then, Ed, on the slot program, do you have visibility on to when you might start to see deposits from that product?

We believe the program is going to launch in this quarter, the second quarter. And like all launches, it will walk before it runs. So I think you'll start to see, you know, the deposits increase in the third quarter. and of course this will be the first launch will be uh with one of the with uh the distill as a gaming operator and uh it's going to be very controlled but uh we have some very active players that are going to participating and the beauty of that app is that it's going to use all of our bank platforms. So by that, I mean the pool player accounts, our RTP, and it also very importantly is going to, we think, be a very important resource for the credit card because the credit card really fits the pattern of behavior for a slot player where they can load the app with the credit card participate in their gaming activity because most of the time today's world, the slot players go to ATM machines to get their cash or they go to these cash advance machines to get their cash. So they're paying a lot of money in order to play. And with our credit card, they won't be. So it's going to be very interesting, I think, on all fronts. And this program is being watched very carefully by other of our clients. So it's going to be, we think, a very, very important launch. And we've been talking about it for some time. I know, Tim, we... chatted with you about it but there was one part in Nevada that was very important is that the gaming operator whenever they utilize a software process Even in the payments app side, where they're not handling any wagers, they're just moving money. And in reality, they're not even moving the money. The bank is moving the money. Gaming Control gets involved to make sure the application is not interrupting any of the licensed gaming apps like Konami's system. And that process of review is, we believe she'll be completed very shortly. And it's not on both bets as I said, that's on the gaming operator. Yeah. Right. So that was another little time consuming process, but at the same time, everybody in the state of Nevada has to go through it. And that's not the case for, you know, gaming operators in other states. They don't, we don't have the same rules everywhere, and particularly for tribal casinos that are very important, very, very important customers in this arena.

Great. Thanks. That's a great detail. And then Ryan, on the SBA business, did I catch that at the end of your prepared comments that the pipeline was 300 million?

Yeah, so right now our expanded pipeline is slightly above 300 million. That's both SBA and commercial. If I was to break SBA out, Tim, it's running around, it's a majority of it. It's nearly 250 million.

Okay. How is that product behaving right now? Are the demand for loans in that product right now, given the uncertainty?

Yeah, it's behaving pretty well, I would say. I mean, overall, we've obviously had some migrations. Very happy to have our collateral backstop on our SBA loans. That's very helpful in addition to the guarantee. But we're working through that in an orderly basis in terms of demand. Demand still seems pretty strong. And on an anecdotal basis, we're getting you know, feedback from our referral sources. And they think that, you know, barring, you know, some notable contraction that the next two quarters are going to continue to have, you know, strong demand.

Great. Great. And then is it too soon to ask you what you think premiums might look like this year?

That's a $10 million question. You know, we were hoping that they'd start to strengthen. That hasn't happened so far. You know, they kind of remain where they've been in terms of soft levels. You know, for us, you know, we had forecasted some improvements in the second half of the year. For that to happen, it's, you know, I think there's going to be, you know, a little bit more certification. need to be a little bit more certainty on rates and prepayments, which we're not seeing yet. But to be clear, we don't expect GAAP gain to return to 10% anytime soon. It's tying into its... comment on our prior conversation um you know we do think that uh you know over time that the gap gain for hospitality in particular will you know get back to a long-term average which we think is probably close to you know high fours and five percent but that might take a little bit of time yeah no makes sense all right well i'll stop there and i'll step back i appreciate the time thank you thank you too Any other questions?

Well, I think that if there are none, we'll be closing this call down, our first official call as a NASDAQ company and on the NASDAQ exchange, which we're obviously very excited to be. And we look forward to working with all of you and continuing the journey. Thank you. Thank you, everyone. The recording has stopped.