GBank Financial (GBFH) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, Jan. 28, 2026, at 5 p.m. ET

CALL PARTICIPANTS

• Chairman and CEO — Edward Nigro
• Chief Credit Officer — Jeffery Whicker

TAKEAWAYS

• Net Income -- $7.4 million for the quarter, up $3.1 million versus the prior quarter's $4.3 million.
• EPS -- $0.52 per diluted share for the quarter; $1.66 for the year, compared to $1.37 for the prior year.
• Noninterest Income -- Interchange fees rose by $7 million year over year due to increased credit card activity.
• Net Interest Margin -- 4.33% for the year, above the cited industry average of approximately 3.7%.
• Credit Card Transaction Volumes -- $130 million in the second quarter, declining to approximately $99 million in the fourth quarter following fraud-mitigation actions and paused marketing.
• Credit Card Platform Controls -- Application process halted and re-engineered after fraud attempts, with new KYC and fraud prevention (Plaid, NeuroID, PreciseID) now implemented; CEO Nigro stated "not one fraud has gotten through" in the last sixty days.
• Credit Card Profitability -- Chief Credit Officer Whicker said, "the program is positively contributing to the bottom line of the bank on a consistent basis. This is very unusual for a program that's this young."
• Non-Performing Asset Reduction -- $3.6 million decline in non-performing assets following resolution in early 2026.
• Securities Portfolio Activity -- Sold $52 million in investment securities, including all held-to-maturity assets, with AOCI at $17,000 as of December 31.
• Subordinated Debt Actions -- $6.5 million in notes redeemed that would have repriced over 8% in January; new $11 million subordinated debt issued at 7.25% fixed for five years, ten-year maturity.
• SBA Originations and Sales -- $118 million in SBA loan originations in the fourth quarter, down from over $200 million in the third quarter; gain on sale margin increased from 3.24% to 3.98% from the third to fourth quarter.
• Credit Card Annual Volume -- $400 million in transaction volume for the year, compared to approximately $73 million the previous year.
• Bold Bets PPA Launch -- Associated equipment provider license secured and initial deployments with Distilled Taverns underway; pipeline of additional operators and state lottery clients referenced.
• Personnel and Tech Investments -- Hires include a new general counsel, chief technology officer, and payments technology director; organizational changes in credit card operations completed within the last four months.

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RISKS

• CEO Nigro described, "we had these enormous fraud applications, we really shut down all applications to our credit card," leading to a deliberate decline in transaction volumes and paused growth initiatives.
• SBA originations dropped sharply to $118 million in the quarter from over $200 million in the third quarter, attributed to government shutdown impacts and customer hesitancy to apply for loans while the shutdown persisted.
• Noninterest expenses may see significant increases due to investments in personnel and variable costs tied to growth in credit card transaction volume, as discussed by both executives.

SUMMARY

The call revealed multiple operational resets across GBank Financial’s (GBFH 5.72%) fintech and core banking units, directly influencing quarterly performance and future growth expectations. Notable reductions in non-performing assets and a positive contribution from the nascent credit card business were achieved despite temporary marketing shutdowns and operational pauses driven by fraud mitigation. Management executed a portfolio shift in investment securities and refinanced subordinated debt to mitigate future interest expense risk. The Bold Bets PPA remains in early-stage deployment, with licenses obtained and client onboarding underway across additional gaming operators and state lottery programs, though ramp timing was described as uncertain. Executives highlighted structural and personnel investments intended to support both digital expansion and balance sheet scalability.

• Management emphasized disciplined incentive realignment for SBA production and targeted higher spreads, translating to an improved gain on sale margin and anticipated continuation of this trend in 2026.
• Revised ACH processes and enhanced loyalty programs were introduced as key enablers for transaction growth and customer retention in credit card operations following the reinstatement of marketing.
• Deposit mix improvement and increasing noninterest-bearing deposits were positioned as future levers to sustain net interest margin should rate cuts materialize in 2026.
• Executives noted that personnel and technology investments had resulted in a reorganization of operational units and strengthened internal risk controls, aiming to deliver scalable growth within regulatory and fraud parameters.

INDUSTRY GLOSSARY

• BOPIS: Banking term in the call referencing 'Bold Bets,' a mobile-based financial product for the gaming sector, not the retail 'buy online, pick up in store' usage.
• PPA: Pool Player Account, a patented pooled account system for gaming operator funds settlement, referenced as central to GBank's slot machine fintech platform.
• AOCI: Accumulated Other Comprehensive Income, representing unrealized gains or losses on securities that do not flow through earnings.
• ODFI: Originating Depository Financial Institution, the bank that initiates ACH transactions on behalf of clients.
• SBA: Refers throughout to the U.S. Small Business Administration loan programs (primarily 7(a)).
• Pari Passu Loan: Lending structure where two or more lenders share seniority and risk on a single loan facility, sometimes splitting SBA-guaranteed and conventional portions.
• KYC: Know Your Customer, a set of fraud-prevention and identity-verification standards for banks and fintech firms.

Full Conference Call Transcript

Edward Nigro: Well, welcome, everybody. I'm Edward Nigro, and it's a pleasure to have the fourth quarter and some year-end numbers for you today for GBank Financial Holdings Inc. I almost feel like I have to do some disclosures like, I'm live. This is not prerecorded. I'm not a bot. And I'm capable of making all kinds of mistakes. However, I hope today to avoid all of that and give you some insights into what has been going on in our world at GBank. Jeffery Whicker is going to follow me with some more specifics and details, but I'm going to take us through some initial discussions, particularly in our gaming fintech arena and some of our core banking processes, particularly SBA.

But I want to focus today very much on what's been going on in gaming fintech. And my first comments are going to be focused around the credit card because it seems to be drawing the most attention and it has had the most fluctuation in the last several quarters. I wanted to give you some insight and things that we've already listed or discussed at some length, but maybe not to the depth I want to go in today so we can have a good understanding of what we're doing and where we believe that we are headed. First, I had reported that we had stopped our application process. We had two major events going on.

We had an application automated product that wasn't working well. And that, actually, our users were getting lost in the process. And applications were being dropped. And then we had another direct mail piece massive application process going on from a contract that I've always said in the past should have not been entered into, but it was. And this was a direct mail piece that went out to 700,000 recipients. Well, between the two, the f not work and all of a sudden, these massive applications coming in. primary gaming user. That were not designed or geared towards our We were underwater very quickly. With our entire app process. We shut it down, actually.

And had to do what I call a redesign, development, engineering, and execution. And that took us until almost the October in the fourth quarter. And then we were able to gradually open up our application for real applicants. Naturally, this stopped all of our marketing. So we had to, you know, accelerated up around a 130,000,000 in transactions for the second quarter. And then the third quarter and the fourth excuse me. The third quarter But we stopped it because we were we were accelerating quickly, but not with the controls we wanted in place. The fourth quarter, you've just seen settled in around 99,000,000 transactions, but that was to be expected. It was to be by us anyway.

And I know we may not have given guidance that it was going to decline some, But when we had these enormous fraud applications, we really shut down all applications to our credit card. We then relaunched it, and we relaunched it with some amazing KYC and fraud prevention metrics in place. We when we engage Plaid, we now do fraud prevention with NeuroID and PreciseID, and multiple verifications of cable of who you are to avoid fraud, We also learned interestingly that in the application process, bots are now becoming very active in loading these apps. But there's a way to determine the difference between a bot and a human.

I suppose one day that's gonna become more important than many other things But in credit card, it's become a big issue. As an example, over memorial over, excuse me, the Martin Luther King holidays, we got it done bombarded with about 10,000 applications just over the weekend. Six were approved. And all the others were fraud. Not one fraud has gotten through. Not one fraud has got has penetrated our app process in the last sixty days. So that is an accomplishment.

We also found the use by our customers to be problematic in the sense that we had high volume users We had an ACH payment process, which was how most of our credit card players were paying off their card. They were paying it off with ACH. And for those of you who may be exposed to ACH, there's a delay. Sometimes up to three business days and ACH clear There are also consumer rights on ACH that extend often out to as much as sixty days in terms of was that an authorized transaction. Well, RACH, when it was launched for our credit card, was launched with a vendor through our processor, I two c.

We determined very quickly that this ACH process must be brought inside g bank. We do ACH processing for our commercial clients, but to do it through a processor like I two c, with our with the with our ledger process and the batch processing and also to be the ODFI for this process became a significant undertaking. However, we brought on the technology and pain experts in order to implement it, and we are very close to launching our own ACH transactions for our credit card. Players.

Why this is important is that when you're doing a 100,000,000 a month or more, in transactions, there are a lot of times the credit card is paid off multiple times through the month. And they're paid off by ACH. Question. Do we give that client instant credit for the payment of the ACH? Do we have that client wait three days Do we put a seven day wait on that client? We have experienced some very valued clients that are deserving of instant credit for ACH and others who are not.

Well, when we saw some fraud, penetrating ACH, and we knew we had to get control of our ACH payments we also, in the fourth quarters, for a period of time, stopped and reduced transactions significantly. And waited and watched ACH clearance patterns without giving more instant credit to some of our better users. Well, this caused a decline in our transactions and we knew it would, but it was more important to verify our client base verify that no fraud users had penetrated our user base and we did. But it took time to do that. We re we have since relaunched and, of course, as I said, we're gonna soon have the ODFI for all of our consumers.

Own our credit card. And we are ready to relaunch right now again our marketing, which we stopped as well. It was very important that we do this right. We have high volume users, but that has the potential to use seen the growth patterns that we can have. And those growth patterns can, we be we believe, be reinstituted but they are going to be reinstituted with our new KYC, our new fraud prevention, and our new payment systems. And we feel that we really have very good and very direct involvement with our customers. We've even started new host style loyalty programs, meaning we look at our higher users and treat them with special premium offers.

We contact them We make sure their account's being managed properly. We make sure that they're getting the results they want when they want their card paid off. We have direct contact And this is very important. As well. And we have also, you know, instituted our own AI system, for answering calls, and we moved all calls away from a processor to ourselves. And this has been a transition process. It's indeed for us. But it's working. And we're getting closer to our customers. And our customers know us. And we think that, and not only think, but we believe that we have a strong foundation now that we can scale. And we can begin to rescale.

And I think you'll be seeing that in the not too distant future. There have been another couple of headwinds in the credit card business, Some of you may have noticed that DraftKings about sixty days ago, or so stopped all credit cards. And FanDuel just announced they're gonna stop all credit card, direct loads with credit cards, because both of them have realized, or have situations where some states do are about seven states right now that do not allow credit cards to direct credit cards to load these sports betting apps. And we know DraftKings got a fairly substantial fine from Massachusetts.

And we know we've read that FanDuel also got a vine, I believe, from the state of Iowa, So rather than face these, they're deciding to not do credit cards. Well, that's their decision. But we know that there are at least 20 we have about 28 apps sports betting, legal sports betting apps across country. Our customers use 20 of them right now. And when FanDuel announced they're gonna stop credit cards in the month of March, most of our players have already moved off of the They wanna use a credit card. So credit card people will find a place to use a credit card.

For loading these apps because it is it is a legal process in almost all the states, and it is a very successful way of moving funds. I think that there's interesting note here. And we knew this some time ago, but I had to refresh my memory Credit clients right now today abound for about 30% of all our payments in this country in The United States. Is about $6,000,000,000,000 a year, It is by far the single most in payments systems in the country alone. Now that's excluding ACH because ACH is towards everybody. But I'm talking about a payments method, and it's growing. So it's not to be ignored if you want an interesting market share.

And we know that there will always be competition for market share, and those that will be able to follow the law and make sure they don't compromise and develop loans in certain states, Our customers are very smart, and they know how to move their apps and join different apps and take advantage of apps that will accept. Our credit card. And, of course, that's direct credit card. Now there's indirect credit card acceptance too, which, of course, debit card. Someone says if you use a debit card, but you can load a debit card with a credit card. Can load many payment systems with a credit card. So it's it's a system that is widely used.

Some of the direct applications, of course, change from time to time, and our players and our customers know where to go and know where their welcome. And we have not seen while we saw when draft kings did it abruptly, caught many of our players off guard, and it took them a week or two to realign with other apps and set up their accounts. They did. And we saw the resultant volume pick right back up. From those customs.

So I wanted to give you that insight on where we had been with the credit card because you saw rapid growth, then you saw slow, and then you saw a decline, and now we feel very comfortable with where we're heading. We're gonna re we're gonna relaunch our marketing. And as a matter of fact, you haven't seen Mike Tyson yet. We did an announcement on that, but he will be soon. I'd like to move on and talk next a bit about our BOPIS in our PPA. It's a very important part of our gaming fintech operations. Both bets got licensed on 11/21/2025 they had received two approvals.

The first one was for both bats the second one from gaming was for distilled taverns authorizing them to use boat bets. The interesting thing is the boat bets license from gaming their license estimates, what's called an associated equipment provider. It's interesting because it's described as a software solution that allows players create and fund a Wagering account via a mobile app. And that's what was licensed. That's how they were licensed. As an associated equipment provider. The second part the license was required by the gaming operator to use both bets.

So they you could distill that traverts had applied and this will become a more routine application for other gaming operators any system they wanna use that touches any of their gaming platforms, they have to tell gaming about it and get their acknowledgement and approval that it's it's an okay process. And, of course, this will be an okay process for whoever applies because BOPIS has associated equipment provider license. The Distilled Tavern's license was interesting because the license went on say how they are approved to use boat beds. And it went on further to say, in directly that g bank will be holding all the funds and not distill.

And as such, a reserve account is not necessary. And this is quite, I think, remarkable in that gaming understands that all the funds that are used to play slot machines go to the wagering account to be used to connect to Konami's casino management system are being held by GBAY. And that is held by our pool player account, which is a patented system that ECS developed that is under agreement utilized by T Bay. Also, as you know, Chibang Financial Holdings owns 32.99% of BCS. But having said that, what those funds do in T Bank T Bank now read those funds go to a subledger account at GBANK, and GBANK reconciles them settles them, and distributes them.

So all the transactions that would have taken place at the gaming operator now take place at the bank. So no longer must a gaming operator with slot machines face the issue of managing cash. Because the bank will just pay them weekly all their weddings. So it's a very, very it's actually a very good system for the gaming operators because the gaming operators, the bricks and mortar operators are unlike sports betting apps. Gaming operators have always paid a lot of money to have their cash managed. Because cash is something that is a necessary evil. But here, whether for the first time, they're not gonna have to manage cash and slot machines.

You know, there's a history here that I thought was pretty interesting. And why we as a they have many people one of them, that understand gaming. But I was involved in gaming when the system had machines was coin in, coin out. It was a very simple system. Machines are mechanical. You put your coins in. You hit a jackpot. And the coins came clanging into the tray. You know? A matter of fact, a little side story. I remember when Steve Winn opened the Golden Nugget downtown, he put the coin noises over the loudspeakers. So when he walked in the casino, everybody would think everyone was winning. Because the coins were dropping into the trays.

Pretty good marketing. But then, in the and then it changed when suddenly digital machines, and they were first the poker machines grouped out by ITT, international gaming technology, which was founded by Cyren, And Cy started this put also on his machines, these receptacles that took cash. Now you put a $5 bill on $20 bill on, and it would accept and give you credits on the machine. And when you were done playing, gave you a slip. And you took that slip to the casino cage, and you cashed it in. You and that was the process that existed for some time until the early nineties. And then another thing came to change. The world. It's called Tito.

Ticket in, ticket out. And Tito was actually created by NGIN. And MGM sold it to IGT. A lot of money. Because IGT saw it and said, this is gonna change the world. Instead of getting just a receipt to go to the cage, and then to get cash and then you went and took that cash to go to a different machine, give you a ticket. But that ticket, you can go to the machine next to it and put it in and get instant credit for whatever on that ticket. So was gone. Tick it out. And you can play all the time as long as you had credits on that ticket.

And then when you were done, you went and cashed it out. At one of the kiosks or at the cage. To $19.90, said, we're gonna change the Everyone's gonna have Tito, and everyone laughed at them. My name is Tito with cash. People love cash. People are gonna get away from cash. Well, Tito still involves cash, but only cash in and not cash out. And lo and behold, Tito over the whole world. Tito is everywhere. Ticket in, ticket out. Well, now comes bold bits in our PPA. No longer this cash flow routine, cash goes to the bank. No longer does the casino even touch the cash, it goes to the bank. And now everyone is licensed.

The app is licensed. The gaming operator's licensed, and the bank needs no license. We're a bank. A federally insured state chartered bank. And we have a system to manage billions of transactions which we will be capable quite capable of doing. And holding imagine holding all of the funds that are currently in slot machines, which will distribute them weekly because the gaming operator will want their funds. The player will be able to move funds instantly, and there is a management, the settlement distribution that'll be at the bank. And that's why we're excited. We think that this is one of those moments It was coin in, coin out. It was cash in and slip out.

It was Tito. And now there's T Bank. Pretty interesting in both bets in the PPA system. So I wanted to give you that little bit of background on where we think what is happening with them because right now, we know that our second operator and then distill, the operations were just launched, and they've gotta launch it at all distills. Which is that been done yet, but on its way. Each distill has to be trained Stats have to be trained. By the way, the app is approved by gaming where it even has a process where you can tip the bartender. Right from the app. Pretty amazing.

And that's important for a lot of taverns where the slot machines are built into the bar. And we know that Terrible's has had we've had meetings in the to start their process. And believes that they'll be launching in the second quarter, and they're making their application to the gaming control board as distilled in to be able to use the BowBets app. So that is all in process. Now this is a process. And it's going to take integration with the players, and there's a pipeline of users that we'll be announcing in the future. But remember, the state of Nevada has 150,000 machines.

So that's a big industry for us to tackle a little bit at a time. With this process. But across the country, there's another 800,000 licensed slot machines. Amongst when we start looking at all of the tribal gaming casinos and all of the other casinos and all the other states. Now we are talking about bricks and mortar casinos not digital casinos, or apps This is real slot machines and across the country, and we think it's gonna be a great market. And we're we are anxious to see this process grow. So I covered a bit about both of this and hopefully brought you up this speed, and I'll be able to answer questions on both of them.

And I wanna close with some of my comments on our core banking. And our gain on sale and our noninterest income. Because you're just gonna see our noninterest income, that's where our interchange fees drop, and you'll see where they went up about 7,000,000 this last year alone. Just from the interchange. Activity of the credit card. But you're also gonna notice our SBA gain on sales this year in particular, because we've changed an entire process there. Where before when we sold guaranteed portions, The guaranteed portions were sold to the market, and the market would pay based on the spread.

Well, our spread wasn't something that was being focused on the basis of the incentive plans for our BDOs, our business development officers, and we changed that. We said, Hey, we have to focus on the fact that the bank sometimes, this last year, our gap gain on sale, which means the gross price we were offered versus the price we realized after expensing loan cost, dropping below 3%. And that's quickly becoming a place where the value in selling the loan is questionable. 4% is where we like to live.

So we've now we changed our entire incentivization program where the spread is critical, and we sell loans at above 1%, at least a one and a quarter percent spread to prime, the gap gain is much larger. So we also took in and put an incentive program in that started in January where we were going to reward, the rewards would depend on the spread. And the commissions would depend on the spread. But we wanted the spread to be at least one and a quarter or higher, we didn't want these 75 basis points or 100 basis point spread Now I wanna share something with you a little forward looking. It's not forward looking.

It's actuals in January, which can tell you today. Because we're on the call. We sold 12 loans in January for about $32,000,000, 12 of the 12 loans eight were at one and a quarter spread or higher. Our gap gain has jumped significantly. And it will be a minimum or more than 4%. Every month now, and not dropping below 3%. So that's a significant I think, occurrence. But one other thing came up that I wanna share with you when we're talking about SBA. We put in our report after the quarter closed, we closed on a sub debt of 11,000,000.

And we did that because we wanted to pay off a $6,000,000 debt that was due in January, and the rates were gonna go very high. So we raised 11,000,000 to pay off that 6. And have a little leftover, but one of the important things that came up when some of the other banks were us about our sub debt, our ability to repay. We said, you have the hotel industry. And I would respond on several calls, yes, if we love it. Oh, you do? And I said, yes. I said, let me give you a little risk analysis we did for you. We were getting this question. So we went back to let's see.

We went back to June 2015. We did our first SBA seven loan. Since June 2015, through the third quarter, I have the guidance. I just didn't update my numbers for the fourth quarter. But for the third quarter, of twenty five, we originated 2,473,000,000.000 in dollars in hotel loans. Seven a hotel loans. We love them because of the collateral. The total number of loans we did since announcement since commencement, was 1,002 loans.

The total hotel loans in default since the beginning, now default remember, I said to him, one other investor call that when we have a loan that looks as if we're going to have to foreclose on it We buy back the guaranteed portion That's why our NPAs tend to jump up because we buy back, the loan immediately goes to four times the value that's been on our books. So we buy back that so we can sell the asset and handle the closure. We have a great division within our SBA division to handle these. Well, of all the 1,002, we had a total default 12 loans. Since our history began that we've resold.

We've re bought back and resold. Of those 12 loans, total charge off after an sale and payment of all the guaranteed portions since inception has been $2,800,000. That's right. 2,800,000.0. So when we were asked about our concentration and why we don't mind it, it's because of the collateral and the way we have in our broker assistance in liquidating collateral that sometimes we have to. Repossess. Currently, as of the third quarter last year, we had 592 active hotel loans, We had 1,622,000,000.000 current principal balance on and off balance sheet. We have 860,000,000 hotel loans off balance We have over a billion dollars in loans off balance sheet that we manage right now.

So I guess we're really in $2,400,000,000 thing. But right? So today, we have 761,600,000.0 of current principal balance on balance sheet of which $243,000,000 is guaranteed. And also, we have 10,500,000.0 reserve for the loan loss reserve for those hotels. For the loans, we've had 2,800,000.0 in losses since inception. I just thought I'd give a little color on that because some people ask us about our hotel business, and I love it. It's the seven a business with collateral. And we're going to see, you know, our participation in that grow.

We're staying within our risk profiles very well with our capital And I just wanted to give you that update because the things we're doing in are gaming fintech. The things we're looking to replace with deposits I want to replace as soon as we can, 400,000,000 in deposits that we pay for. And 400,000,000 in at no cost is a big change, but then we convert that to the more SBA originations and more guaranteed loan sales. And a portfolio that operates this strong? We think we have and we also look at our CRE and our own bank individual loans, and we just the other day, this is a little forward this isn't forward looking.

We just approved it, and I can tell you that we increased our individual power to 70% of our legal limit for the bank, which now goes to 32,000,000 to any one borrower. So we're moving. And we're moving in anticipation of the kind of growth we believe we can have the way we can manifest it in our core With that, I want Jeffery Whicker our chief credit officer. Oh, and there's just one last point. Jeffery. Excuse me. Since this isn't recorded, I told you I would mess up. We have been investing a great deal in people and reorganization. We've reorganized in the last four months our entire credit card. Operations.

New leadership, and of course, I spend a great deal of time on We also engaged our new general counsel and corporate secretary and she has joined us, and we had a press release about Hillary. We also have engaged the new chief technology officer. We had a press release regarding Jason. We could also have engaged a new payments technology director to help us get through this payments Remember the ACH I was talking about? She's leading that effort. But she's very talented and rated in ACAM and PCI ratings as well or accreditations. Is very important to us.

Think you're going to see that the manner in which we're moving and the way we wanna grow our tech capabilities, and the way we want to accomplish our internal payments processes, the way we want to grow our deposits and grow our gaming fintech, Our plate is full, but we love it. We're working diligently towards those objectives. And, Jeffery, fill us in on more of the specifics.

Jeffery Whicker: Alright. Thank you, Edward, and good afternoon, everyone. Company reported record quarterly earnings of 7,400,000.0 or $0.52 per diluted share. This is an increase of $3,100,000 compared to the prior quarter earnings of 4,300,000.0 This includes record levels of net revenue, and $247,000 in net one time expenses. One time items include the tail end of the marketing campaign for the credit card that began in the third quarter which have now all been satisfied and the program has been closed out. That of the unusual and one time items the bank would have produced a diluted earnings per share of $1.66 for the year, up from $1.37 in the prior year.

The bet continues to grow with a compound average growth rate of 28.3% over the last eight years while maintaining top tier earnings. In addition, as described by Edward, the company continues to develop the digital bank and payments products that will allow us to drive higher future revenue anticipate that one of the largest drivers of this will be related to the Bold Bets PPA product that is now launched and beginning to gather steam We anticipate that this will significantly grow our non interest bearing deposits. Resulting in an improved net interest margin which was 4.33% for 2025 compared to an industry average of approximately 3.7%.

ISBA had a record year for production, which wasn't easy given the recent government shutdown, and we continue to see strong year over year growth in low production, and have a healthy pipeline going into the new year. In addition, the company has implemented several changes that it addressed that will lead to improved gate on sale income in the future. Currently seeing the impacts of these changes as the gap gain on sale increased from 324% to 3.98% in the fourth quarter And as Edward alluded to, we anticipate that to trend up above 4% in 2026. The credit card program is continuing to develop as most of the systems system changes are now implemented.

Transaction volume for the last two quarters has been relatively flat, while we had a work two correct identified weaknesses in the system, and we are seeing much better results related to onboarding customers as these new systems have been able to withstand all of the recent fraud attacks that continue to plague the industry. The most interesting thing about the credit card program is that despite the issues have had related to credit and fraud in the last couple of quarters, the program is positively contributing to the bottom line of the bank on a consistent basis. This is very unusual for a program that's this young.

You can see that the provision expense came down during the current quarter. As discussed in our previous calls, we have seen a pressing inlet on performing assets over the quarter and have been able to make significant progress in working through the existing accounts.

Including the resolution of one of the non performing assets in the first weeks of 2026, reducing the total balance by 3,600,000.0 In addition to the work that special assets is doing to resolve credit issues, recent rate reductions by the Federal Reserve Bank have allowed our cost with variable rate loans to see some relief from the unusual upward swing in rates that occurred from June 2022 to July 2023 And this results in improved credit quality overall, The bank sold off about $52,000,000 in investment securities during the quarter. Which included both available for sale and held to maturity investments.

Recent interest rate changes have tightened the spreads and impacted the long term impacts of these securities on the bank's asset sensitivity and management determined that it is in the best interest of the organization to move into securities, it will better protect the organization in the rates down environment. As a note, all of the held to maturity investments were included in the sale including no on balance sheet adjustments to AOCI related to their remaining securities. The AOCI was $17,000 as of December 31. Subsequent to year end, the bank did announce a redemption of 6,500,000 subordinated notes as Edward talked about, that we would have repriced from fixed to variable rate in January.

This would have led to a rate increase of three fifty basis points on the debt. Resulting in a cost of over 8%. In addition, the bank issued 11,000,000 of additional support in his debt, with a ten year life and a fixed rate for the first five years of 7.25%. This provided additional potential capital for the bank while reducing cost. As the bank continues to work to develop new lines of business, the core bank continues to be one of the top performing organizations in its peer group. The balance sheet remains strong and above with above average liquidity and capital.

And this provides the needed support to fund our growth initiatives as we move further into the digital bank and payments industry While we've experienced a few hurdles along the way, Bang continues to be a top performer while we develop the new products and services to enhance shareholder value in the future. And with that, I will turn it back over to you, Edward.

Edward Nigro: Well, you, and believe we've covered everything that we wish to on the call, and we'll take questions at this time.

Operator: At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. We will wait one moment to allow the queue to form. Our first question will come from Brett Rabatin with Hub D. You may now unmute your line and ask your question.

Brett Rabatin: Hey, guys. Good afternoon. Can you hear me? Yeah, Brett. We can. Hi. It's Edward. Hey, Edward. Thanks for all the detail between yourself and Jeffery Whicker with, what's going on with the company. Can you can we maybe just start you know, and it might not be fair just given the I'll call it the fits and starts of the programs. That have meaningful potential. But I know we've talked about some fairly big numbers around credit card and what that platform could look like, you know, in four to six quarters. Can you maybe give us, you know, an idea?

And I guess this would presume that the fraud all of the fraud detection and all the stuff around fraud might be in the rearview mirror, which is was my understanding from your conversation. But know, can we talk about credit card and what the potential for interchange might be this year in volumes? As you see it. And if you don't wanna give specific guidance, that's fine. But just you know, directionally and volume wise as you see the year developing.

Edward Nigro: Well, I think that when we look at the year over year growth that we just had, even with all of the breaks we've had in place, By brakes, I mean, the stoppages we can have We went up to 400,000,000 this year from about well, my numbers last year, I had So it's well, 73,000,000. So you can see that's what, 500% growth. But I'm not placing 500% growth on 400,000,000.

But you know we feel that and while I'm not gonna be giving too much forward guidance today in any specific numbers, But if I were trying to put some projections on it, I think that we would probably I think we could at least We would if we don't same If we don't double it, I mean, I think we would not be doing it justice, but that's that's but when you talk about going from 400,000,000 to 800,000,000, you know, in originations a year, to where we that means by the end of the year, we've gotta be doing you know, 60,000,000, 40 or $5,060,000,000 a month we see some good growth.

We had we know we now have the capability to handle that kind of growth. So and we don't see that as an unreasonable number, you know, cars to expand to get there. As long as we have and don't have the process of user fraud or user abuse and we've managed to eliminate that. So we think there's quite a pathway here. Now the other side is, you know, some of the big platforms like FanDuel and DraftKings, accepting any credit cards. It'll be remained to see because some of the others have we know, have seen significant increase in credit card use.

So is that volume they want and the volume that is worth getting, we look at their public announcements and it's pretty significant. So we think there is opportunity for some substantial growth And, of course, the interchange fees will be very important to us. I hope I've answered your question without sounding too evasive. No. You got it some good color too. You know, kind of what the year might look like, so I appreciate all that.

Brett Rabatin: And then, you know, the other thing is we think about SBA. Maybe an easier business to forecast you know, given that's a much more mature piece of your platform, you know, and some of this will depend on the market. But would you anticipate trying to grow volumes from here? And then I know last quarter, you did what we'll call it a revitalization or reorganization of that platform you know, should we expect continued improvement in gain on sale margins, etcetera, from that platform from here? Well, I think you'll love this because we've incentivized our team more with stock options than we have. Than with than with some cash bonuses.

And because we want the materialization of a higher gap gain on sale for the bank, and the materialization that will selling a higher spread be more difficult? Well, it's always more difficult to sell a higher but there are other factors involved. We have the most amazing broker network on earth, I believe, because our key brokers are all significant shareholders of ours. And reside in Chicago, New York, North Carolina, and Florida. I mean, they're amazing. So, yeah, we expect our growth pattern to continue with what it's been in the past. So, you know, you can sort of project that out. It's but we really believe that we can sustain that kind of continued growth.

With the lower interest rates, we think you're gonna see more hotel deals out there.

Brett Rabatin: Okay. And if I could just ask one last quick one just around provisioning for the fourth quarter. You know, you had a little a little higher non guaranteed NPAs, charge offs were lower. The negative reserve, you know, was there any change in the in the q factor for the ACL or anything else that drove that negative provision? And then you know, is there is there anything that you see kinda changing with know, the criticized asset list?

Jeffery Whicker: Yeah. This is Jeffery. There actually was a little bit of change in that analysis that we did on the SBA loans. So for the beginning of the SBA program, we've always kept a little higher reserve on SBA because of the cost of concentration. And we call it concentration risk. But with the analysis that we did, on the SBA program from the beginning of time, It doesn't really support us holding additional reserves on that portfolio anymore, so we did have some adjustments to the two factors that did impact that number in the quarter.

Edward Nigro: Yeah, think you saw the reserve I mentioned was so high based on our historical analysis Remember the old days when we did our reserves only on the historical analysis? CECL kind of changed some of that, but think this is it's one of the demonstrations of how different it would have been.

Brett Rabatin: Okay. Alright. Well, for all the color. I'll hear the guys ask about BoldVets, but I'm sure that'll be addressed too. Thanks, guys. Thank you.

Operator: Our next question will come from Matthew Erdner with Jones Trading. You may now unmute your line and ask your question.

Matthew Erdner: Hey. Good afternoon, guys. Can you hear me alright? You know, man, you're doing great.

Matthew Erdner: Awesome. Thanks for the comments earlier. I appreciate it. So I'd I'd like to kinda touch on the slot opportunity, you know, and kinda rehash some things from the prior quarter just to see if they stack up you know, in today's environment. So previously, per, you know, 100 slot machines are about 2 and a half million in deposits. Is that still jive with what you guys are seeing as you start to onboard? Some of the clients?

Edward Nigro: The danger in that and let me express that's a mature that's that's about 50% penetration of a mature market. So what that means is in order to generate those numbers, the customer base has to be there for the particular gaming operator. So let me give you an example. Let's suppose you're a gaming operator with a with a 100 slot machines. Okay? In your customer base, the that utilizes those 100 slot machines, you have a customer base of about 10 or 15,000 people, players that come more than, you know, once a month to play your slot machines.

So if you do have that customer base, this analyzes your total drop, and then it analyzes your customer base. It analyzes a 50% penetration in your customer base. And then comes up with a number. So that means that of their customer base, half of them have to be users of the app. How long it's gonna take us we what we didn't give you was okay, how long is it gonna take from the time we sign up a gaming operator till that deposit is realized? And that's how long does it take the gaming operator to onboard his customers? That's an unknown. And it's not gonna be instant.

Like, right now, with and it's particularly right now with, as an example, distill, this is brand new. And they have trained their clients. They have trained their employees. They have to train their bartenders. They have to train, you know, and then they have to sign up and use it. The interesting thing that I didn't say is that you know, we hope that one of the preferred lows and because the marketing it right with it, it's gonna be our credit card. So we're that's moving side by side with some of this. So what I can't tell you is how fast it ramps up to that.

So we'll be having more and more information as quarters go by, and we have some history under our belt. But it's gonna take some time. Remember I told you about Tito? It took time. It wasn't something that was done overnight. I talked I talked with somebody the other the other day when I was saying to someone, you know, when Thomas Edison invented the light bulb, I wonder who the analyst who asked him, well, how many light bulbs are gonna sell next quarter? So I think it's it's analogous in the sense that this has never been done before. It is new.

The apps that are out there just don't work, and many customers have just said, I'm not banned. I those apps don't work. So you gotta reeducate some, and you gotta spread it. But what we do know is this works amazingly. And then once they get on it, we've seen amazing feedback already They love it. So I guess as we get a few quarters of our belt, we'll be able to tell you more about how the growth is going. But for right now, the number of machines are relatively small, The transition is gonna take place. But the market is dramatic.

I said, you know, in our state, we have a 154,000 slot machines, and across the country, there's another 800,000 Matt, that are legal machines. In the primary providers of that machines, Konami, who is one who has 300,000 machines alone, Excuse me. A 140,000 machines alone. Several of the others that we, you know, that are going to be seeing this app have a lot more. So we know there's a good market out there. It's up to the gaming operator as well as the slot manufacturer, you know, and everyone to participate to get their players to use the app but we think that the app is gonna be very convenient for the player. A very convenient wallet.

Matthew Erdner: Yeah. I know that's great. I appreciate the color there. And I guess as a as a follow-up to that, you know, around the current deposit mix and net interest margin, you know, would we expect to kinda be an inflection point you know, on that net interest margin, you know, as these slots are started to, you know, more frequently get onboarded and really drive you know, that increase in the noninterest bearing.

Edward Nigro: Well, I think the slots is a is a great opportunity and a great path, and we're starting to see the pipeline of some very interesting players. But remember, our bank has 16 other PPA clients onboarded right now. And many of them are startups, and many of them have new programs. And some of them deal with the sports apps, but others deal with we're dealing with one that's dealing with two big state lotteries. So there's there are other avenues for our PPA as well. And, of course, sports betting is we still believe that one day is sports betting app will say, we don't wanna hold the cash anymore.

That we do wanna see we do and would appreciate a system where we get the cash this liability off our balance sheet. Right now, as they start to make more money, the cash management is gonna become more of a headache. When everybody was a start up, everybody wanted to hold all the cash. Because they liked the float. They liked it. You know, in their operational accounts. But will that change? And if that changes, we have the solution for We have a solution if with the first sport app that goes under and costs the consumer some money, they're gonna be looking at us because we protect the consumer.

When no matter what happens to the app, no matter what happens in bankruptcy, or anything else, our consumers' money is protected. Because it's guaranteed by the FDIC, and we hold it, not the app. It can't be mixed with their funds, It can't be mixed with oh, we don't know where that money is. Believe me. If there's one thing that banks are pretty good at, it's knowing where the money is.

Matthew Erdner: Right. Right. Right. Yeah. That's helpful there. And then one last quick one, and then I'll I'll step out. It relates to the SBA business, what impact did the government shutdown have on your fourth quarter origination numbers? And then, you know, as we're kinda staring down another government shutdown, what impact do you think that's gonna have for the first quarter of this year until that's resolved?

Edward Nigro: Let me tell you. That's a great question because it was a little insidious for our SBA division because we saw the big closing coming, so we went and got as many PLPs as we could get preapproved as possible. So we spent all our effort, you know, getting our loans in front of them for our POPs. Or applications. And then once they reopened, we did our entire number of sales in the fourth quarter in December that we did. So our sales for the fourth quarter were, what, nine But we Nine. Our originations for the April dropped way down. And why the originations dropped way down, and I talked to our brokers directly.

Is because of the unknowns out there and the customers who are not sure whether to even apply for a loan. Because they knew the government was shut down. They knew they couldn't get it approved. They said, well, we'll just wait and see. So deals didn't get done. And when deals don't get done, originations go down, and our originations went 200,000,000 plus the third quarter to less than 100,000,000 in the fourth quarter. Alright. 100 and what?

Jeffery Whicker: 118,000,000. 118,000,000. And our sales for the first time in our history in the fourth quarter, our gain on sales were less than the third quarter. It had never been that way before. So we figured that with it, there was probably a couple of million dollars left on the table in gain on sales. But I believe that this we're already courting, if you will, POPs on the prospect of another shutdown, and the news we received from our association, which is Nagel, which is the National Association of Guaranteed Government Lenders, they believe the shutdown is going to happen.

Jeffery Whicker: So if you think about the year as a whole, government shutdown I mean, come out the wash because if somebody in the somebody's working on a loan today, they're not gonna knock you the loan at some So even if volume were to go down a little bit in the first quarter, they would Oh, this Yeah. Second

Edward Nigro: We'll we'll catch it. This year. It was the fourth quarter last year. We had no catch up. We could do that. No time. If you catch up.

Matthew Erdner: Got it. Yeah. That's helpful there. Yeah. I just wanted to get that across and get your guys' thoughts, but I appreciate all the comments, guys. Thank you.

Operator: Last question will come from Tim Coffey with Janney Montgomery Scott. You may now unmute your line and ask your question.

Tim Coffey: Afternoon, gentlemen. Hey, Tom. Nice to hear your voice. Yeah. Good to hear yours too, Edward. So I guess my first question has to do with the SBA. Let's follow-up with the last one. So you sold more SBA originations in 4Q than you had pretty much all year. Was that a function of the government shutdown or the change in incentives for originators?

Edward Nigro: We wait a minute. We had our most originations last year in Q3, which was 02/2007? No. You

Tim Coffey: oh, so the fourth quarter, you sold about, you know, three to three out of every four loans you originated in SBA. The previous three quarters is about, say, one in two. So I'm trying to figure out was the increase in the selling of your originations related to government shutdown. And the market being closed, or was it the change in incentives? For the originators? I don't understand the question or the numbers.

Jeffery Whicker: Well, they yeah. So what you're talking about is that we had we sold one and two loans in the fourth quarter, and we are a little more than that in the fourth quarter. Weren't that high in the previous quarter. Is that what you're talking about as a percentage? Yeah. Your loans sold as a percentage of your originations were about 73%. In the fourth quarter. Let Previous three are closer to fifty. Yeah. That's the government shutdown because we could continue to originate loans in the third quarter during the government shutdown. I mean, during the government shutdown, but we couldn't sell any loan.

Edward Nigro: Well, we couldn't we couldn't afford the loans, so we couldn't execute the loans because even though the loans when we say originating, let's let's let's understand that as a defined term. When we talk about originating, we talk about executed drones on our that we have in place here. And approved by the SBA. Approved. They have to be approved by the SBA to be boarded. Then they have to be approved by the SBA to be sold. So when we say originations, I don't mean a pipeline out in the field. I mean ones that are that have been underwritten and processed and signed and executed with a deposit. And ready for the SBA approval and then funding.

Once that's why after our originations, the time between our originations and sales is very short. We don't have and overwhelms a long time that are ready to sell. But there is also something to consider in our SBA originations because our originations include parapassu loans. Okay? Now a parent pursue loan is an SBA loan of 5,000,000 plus the remaining part of the loan. Let's say it's a $10,000,000 loan. It's a good example for parapasu, We count the 10 we count the parapassu We count the entire loan as an SBA origination. That whole 10,000,000. Now of that whole 10,000,000, we can only sell 3,000,000 of it or whatever the 75% of 5,000,000 is.

The rest becomes the non guaranteed portion and just a strict and they've the balance over the 5,000,000 is just a straight CRE commercial loan with us. That's on our books. So when we look at loan originations, if you did figure that 75% of them are guaranteed, it's a wrong calculation. It's not that way. If you wanna run some average statistics, we sell about 64% of our total originations at us. Selling. Okay? Because some of them are parapasu, and we're doing we do what, 65 making in parapassu last year. And we're gonna do more this year. We like the parapasu levels.

They're in a higher end hotel and they're usually a total of around 8 to $10,000,000 loan. Well, SBA loans only go up to 5,000,000. And then only 75% of that can be sold. So for every you gotta reduce out all the parapasu loans from our origination. And then also in our originations, we have some other loans that have 90% guarantees or 80% guarantees. Some of the smaller ones. So it's a it's a slippery slope, Tim, but I think that when you're looking at the relationship of the loans sold to the to the loans unoriginated. And it depends upon the day of the month that the loans were originated.

If had a high volume of the last week of the month, it over a quarter, it could distort the quarter. So

Jeffery Whicker: Yeah. To that point, September had a whole lot of things go in our favor, and it actually was a very big origination month for us. That's huge. And all those originations would have gotten sold in the fourth So the so that relationship got a little skewed because of that. One relationship. Again great growth throughout the year but September had this unusual That's you know, growth that was just every all the line I mean, all our cylinders hit that month, and we were

Edward Nigro: That's true. That timing was really weird because I remember that last week in September, we were bombarded. And then October 1, the government was shut down. So it really skewed a lot of things, Tim.

Jeffery Whicker: And it might have been just people prepping for the government to get shut down and push everything through. So

Edward Nigro: No. That's what that's exactly what it was. We had all those originations because they wanted their loan approved before the government shutdown. So while we got the loan approved, we couldn't get the sale approved.

Tim Coffey: Okay. Got it. Thanks. Switching over to the credit card, The You bank did about $330,000,000 in transaction volume in the third quarter. How long do you think it takes you to get back to those levels?

Edward Nigro: We think we can happen rather quickly. Once we get our marketing started again. Because remember what I told you, we also reduced the ability of our players to pay off their credit card on a on a fast basis because they don't want any debt on the credit card. You know what? It's interesting, Tim, is that we did 400 some million in transactions in the entire credit card balance is averaging around, what, 9,000,000? 10,000,000. 10,000,000. So you can see that everyone wants to pay it off. No one wants a balance And of the 10,000,000, there were some cards that are, you know, nongaming cards.

So when you when we talk about increasing our volume, it's strictly adding the players and most of our players have come through certain influencers and we just we just have to turn the switch on, and we will start to gain players again.

Tim Coffey: Okay. And then on non interest expenses, Jeffery, what's kind of the starting point for 1Q? I mean, you've been a lot of noise the last couple quarters. So what's kind of the you think the starting point might be for that Oh, that's a good question. And I am not sure I can give you an absolute number, but I would say that you know, we probably be looking pretty similar to this quarter. I don't see a lot of increases in the first quarter. Right now, and I think some of the onetime items will offset a little bit of the salaries increase that we're probably see.

So I would say very similar to what we saw last quarter.

Tim Coffey: Okay. And just kinda listening to the things you been talking about, Edward, I would think that your kind of expense growth rate for this year might not be that different than the twenty five. Is that reasonable?

Edward Nigro: I didn't hear the question.

Tim Coffey: Oh, just the current growth rates for this year. Oh, anticipated growth rate.

Edward Nigro: Well, yeah, I think that you know, when we look at our non interest expenses, that it if you know our yeah, when we look at our noninterest expenses, we see some significant increase there because we're investing in our growth. But a lot of them are relative to our growth. And Okay. I believe, you know, there's

Jeffery Whicker: there's a significant amount of expenses that are variable based on transactions So is the transaction volume. Yeah. Goes up with our credit cards. And also the number of accounts that we hold gonna see a lot of those variable rate variable Seats. Go up I wouldn't say there would be an increase. Through the year.

Edward Nigro: On expenses. Yeah. We can't we can't we can't stay flat when our credit card if our credit card growth we talked about doubling as an example. It went from $4.40 to 8 or something like that. Every transaction in and every has a class to it. It has an influencer cost of so many basis points It has, you know, transaction cost, inner fees that we pay to the to the Visa. It's just that while our direct cost in the office for staff may not increase as dramatically, those direct costs transactions are something we all have.

Jeffery Whicker: Right. Yep. Yep. I remember yeah. I remember talking about that last quarter. So thanks for reminding me. And then what Jeffery, what's kind of the margin outlook if we get two rate cuts this year? Question is what kind of volume are we gonna be able to do in non interest bearing deposits? Depending on where you forecast that, I would say that the margin should that offset should decrease I mean, should offset the increase should offset the Fed decreases. Yeah. You know? So I would I would say that we should at least see a very similar net interest margin this year that we saw last year. And we're anticipating couple of great and decreasing by now.

Forecast. Yeah.

Tim Coffey: Okay. Alright. Those are my questions. Thank you very much, gentlemen.

Edward Nigro: Thanks, Tim.

Operator: This completes the allotted time for questions. I will now turn the call back over to Edward Nigro, Chairman and CEO, for any closing remarks.

Edward Nigro: Okay. Well, thank you. I just wanted to thank everyone for their questions. We're looking forward to an exciting year of growth, and we'll talk to you in another if not before, if I don't see you at a conference, I think I'm going to the Janney conference in Arizona February. So I may see quite a few of you there, and Tim will have a chance to sit and go to the some stuff as well. But thank you for the calls, and I don't talk to you sooner, we'll talk to you in April.

Operator: Thank you for joining the GBank Financial Holdings Inc. Q4 2025 Earnings call. You may now disconnect.