GBank Financial Holdings Inc. Q2 FY2026 earnings call

Leadership Transition and Organizational Changes

• New President and CEO Jeff Newgard joined the firm on June 8, 2026, following a smooth leadership transition that has strong alignment between new leadership and Executive Chairman Ed Nigro.
• The former Chief Operations Officer retired, and the COO position will not be replaced at this time to maintain organizational efficiency, with the CEO retaining direct oversight of operations.
• The former CFO, who was on medical leave, will not return to the firm; an experienced interim CFO consultant has been engaged to maintain continuity while a permanent replacement is recruited.
• An internal promotion filled the new Director of Operations role, and the firm's compliance department is identified as a core strength with a strong framework to meet evolving regulatory expectations.

Technology and Risk Management

• An experienced independent IT consultant (with prior banking cybersecurity experience) conducted a full review of the firm's technology infrastructure and cybersecurity risk profile.
• The review confirmed the firm's existing cybersecurity posture is already strong and secure; recommendations focus on improving reporting efficiency and core banking infrastructure reliability, which are already being implemented.
• The firm abandoned costly in-house development of its core API and AI systems, opting to acquire and implement pre-built third-party solutions to accelerate deployment and reduce long-term costs.

SBA Lending and Credit Quality

• SBA lending production remains strong, with 321 million in originations through the first half of 2026, up from prior year periods, and the origination pipeline is stronger than ever.
• The firm reports higher non-performing assets (NPAs) due to its unique SBA lending accounting: when a loan defaults, the firm repurchases the guaranteed portion and reports the full loan balance as an NPA, unlike peers that only report the unguaranteed portion. Actual economic risk is mitigated by 75-90% SBA guarantees and collateral backing, with expected losses on the current $60 million in NPAs estimated at just $4.5 million.
• The Special Assets Group has been realigned under the Chief Credit Officer with targeted staffing investments to accelerate workout and resolution of problem assets, with 20-30 million of the current $60 million in NPAs expected to be resolved by the end of Q3 2026. The firm holds $12.7 million in credit loss reserves, which management views as more than sufficient to cover expected losses.
• Proprietary credit analytics focused on geographic location, borrower capitalization, and management quality have been developed to improve future underwriting.

Gaming Fintech Strategic Initiatives

• The firm announced a new strategic partnership with Axis AI, a leading cloud-native gaming management platform serving 67 gaming operators across 12 U.S. states, under which Bankroll will act as the white-labeled payment infrastructure for an Axis-branded enterprise digital wallet.
• This partnership is highly scalable: every new operator added to the Axis platform generates new non-interest-bearing patron deposits for G-Bank without additional direct business development effort from the firm. Axis already holds ~20% of the U.S. distributed gaming machine market, representing millions of total potential patrons.
• Terribles Gaming received regulatory approval from the Nevada Gaming Control Board to deploy the BoltBets direct-to-operator gaming platform within 60 days of application, with the reserve requirement waived because patron funds are held by G-Bank rather than the operator. Technical integration is underway, with a targeted initial rollout at select grocery stores in late 2026.
• The Distilled Taverns BoltBets deployment saw a fourfold increase in user sign-ups after a V2 platform update; early data shows far lower user resistance to mandatory identity verification for compliance than industry expectations.
• The G-Bank Visa prepaid gaming card is currently in testing, with a commercial launch expected in Q4 2026. The card will be integrated directly with G-Bank's full player accounts, offering unique functionality not available from competing prepaid products.

Balance Sheet Performance

• Net interest margin (NIM) declined 8 basis points quarter over quarter to 3.78%, driven by a 7 basis point drop in loan portfolio yields from non-accrual write-offs and a lower special dividend from the Federal Home Loan Bank. Excluding these one-time impacts, NIM would have been 3.91%.
• Higher-cost certificates of deposit are maturing and being replaced with lower-cost funding sources including money market deposit accounts and targeted FHLB advances, leading to a 7 basis point drop in overall cost of funds quarter over quarter. The firm has engaged Darling Consulting Group to help develop strategies to optimize net interest margin while maintaining prudent risk management.

1. Traditional Lending Segment (SBA and Conventional Loans): Generated $131.4 million in SBA loan originations in Q2, with $61.3 million retained on-balance sheet at an 8.01% average yield. Conventional loan portfolio grew by $855,000, with $324,000 retained at an 8.53% average yield. Gain-on-sale income for the first six months of 2026 increased to $9.3 million, up from $5.1 million in the same period of 2025. Total managed loan portfolio across the segment is approximately $2.3-2.4 billion, with reported non-performing assets totaling $60 million (4.2% of on-balance sheet total assets). This segment contributed ~80% of the firm's total gross revenue, with SBA operations alone generating approximately $90 million in annual gross revenue. 2. Gaming Fintech Segment: Gaming credit card transaction volume declined to $84.2 million in Q2, after major sports betting operators restricted/eliminated credit card use for gaming transactions. An additional $771,000 in Q2 loan loss provisions was added for elevated delinquencies among retail-only cardholders. Current gaming-related deposits on the balance sheet average $35-50 million, with ~$2 million expected from the Distilled Taverns deployment by year-end. This segment currently contributes ~20% of total gross revenue, with expected growth to accelerate in 2027.

• The firm does not expect material revenue contribution from the new Axis AI Bankroll partnership in 2026; most growth from this initiative is expected to occur in 2027, with only a small lift to gaming deposits expected in Q4 2026.
• Credit card transaction volume is expected to continue contracting through Q4 2026, with recovery of the segment expected to begin in Q1 2027 as the new prepaid card launches and the firm integrates into new gaming operator platforms.
• The allowance for credit losses is expected to remain near current levels in the near term, as SBA loan production remains strong and the portfolio continues growing, consistent with the firm's commitment to prudent risk management.
• Net interest margin is expected to remain under mild near-term pressure, but management does not forecast a large additional decline, as active funding mix optimization will offset ongoing pressures.
• SBA loan origination production is expected to increase over 2025 full year levels, with no planned slowdown in originations; the firm will only adjust underwriting criteria to focus on lower-risk geographies and borrower profiles to manage credit risk.
• Non-interest expenses will remain slightly elevated in the near term due to consultancy spend for IT review, CFO transition, and balance sheet optimization, but management does not expect disproportionate growth relative to current levels and targets gradual declines as organizational changes are completed.

• Elevated non-performing assets in the maturing SBA loan portfolio, concentrated particularly in the hotel sector, which has faced ongoing industry pressures post-pandemic.
• SBA loan accounting conventions result in higher reported NPA levels than peer lenders, which may distort market and analyst perceptions of the firm's actual credit risk.
• Gaming credit card interchange income has declined sharply after major sports betting operators restricted credit card use for gaming transactions, creating a material near-term hit to segment earnings.
• Elevated delinquency levels among existing retail-only gaming credit cardholders have required additional loan loss provisions in Q2 2026.
• The firm operates in a high interest rate, elevated funding cost environment, which has compressed net interest margin and creates ongoing pressure on net interest income.
• Integration of the new Axis AI platform requires custom development work to connect Axis' existing system to G-Bank's banking infrastructure, which could lead to unexpected delays or cost overruns.
• Abandoning in-house IT development and shifting to third-party solutions creates short-term transition costs and integration risk, although it reduces long-term cost and deployment timelines.

Q: What is the expected financial impact and timeline for the new Axis AI Bankroll partnership, and when will investors see contributions to earnings and deposits? / A: The partnership was just signed one week before the call, so integration work is just beginning. Axis has 67 operators across 12 states, representing ~20% of the entire U.S. distributed gaming market, with the first scheduled operator larger than Terribles Gaming. The partnership generates revenue via platform fees and new non-interest-bearing patron deposits, but full rollout of all Axis operators will take time as each must be integrated independently. No material financial impact is expected in 2026, with most growth coming in 2027.

Q: How much in gaming deposits are currently on the balance sheet, and what is a realistic year-end target? / A: Current gaming-related deposits average $35-50 million. The small Distilled Taverns deployment is expected to add ~$2 million in deposits by year-end, and the initial Terribles rollout will only start in late 2026. While the market opportunity is very large (total annual gaming transactions across current partner portfolios are in the billions), significant deposit growth is not expected until 2027, as user adoption of the new cashless platforms occurs gradually.

Q: How should investors understand G-Bank's elevated reported NPA level of 4.2%, and what is the actual expected credit loss? / A: The full $60 million in NPAs is reported on-balance sheet because G-Bank repurchases the guaranteed portion of defaulted SBA loans, unlike peers that only report the unguaranteed portion. Of the $60 million, management expects a 70% recovery from collateral sales, leaving $18 million in net loss, 75% of which is covered by SBA guarantees. This leaves only $4.5 million in total expected loss, against which G-Bank holds $12.7 million in reserves. 20-30 million of the current NPAs are expected to be fully resolved by the end of Q3 2026, so the elevated NPA level is not representative of long-term portfolio risk.

Q: What should we expect for net interest margin going forward, and will the firm slow SBA loan production to reduce credit risk? / A: The 8 basis point Q2 NIM decline was driven by two one-time factors: $369,000 in accrued interest write-offs for newly non-accrual loans and a cut to the FHLB special dividend. Excluding these, NIM would have stayed near 3.91%. There will be mild ongoing NIM pressure, but no large further decline is expected, as the firm is actively replacing maturing high-cost CDs with lower-cost funding. There are no plans to slow SBA origination, which is tracking ahead of last year's pace; the firm will only adjust underwriting to avoid higher-risk geographies (like over-concentrated hotel markets) to keep credit risk in check.