GBank Financial Holdings Inc.
05/15/2026 | Press release | Distributed by Public on 05/15/2026 13:04
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following presents management's discussion and analysis of the financial condition and results of operations of GBank Financial Holdings Inc. (individually, "GBFH" and collectively with its subsidiaries including GBank, the "Company"). This discussion should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and with the Company's Annual Report on Form 10-K for the year ended December 31, 2025. Results of operations for the periods included in this quarterly report on Form 10-Q are not necessarily indicative of results to be obtained during any future period.
General
GBank Financial Holdings Inc. is a bank holding company headquartered in Las Vegas, Nevada and registered under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). Through our wholly owned bank subsidiary, GBank, we operate two full-service commercial branches in Las Vegas, Nevada to provide a broad range of business, commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and affluent individuals in Nevada, California, Utah, and Arizona. Our founding members, including our Executive Chairman of the Board, Edward M. Nigro, recognized a need in the greater Las Vegas area for a solutions-oriented, relationship bank focused on middle market companies and real estate entrepreneurs who generally require loans of $200 thousand to $20 million, a size often overlooked or deprioritized by larger financial institutions. GBank was established in 2007 with the goal of helping these underserved clients build and sustain wealth. By combining the relationship-based focus of a community bank with the extensive suite of financial products and services offered by our largest competitors, we believe that we are well-positioned to continue to capitalize on the significant growth opportunities available not only in the greater Las Vegas and Clark County area, but regionally and nationally through our SBA lending and Gaming Fintech initiatives. These activities, together with our two strategically located banking centers, generate a stable source of low-cost core deposits and a diverse loan portfolio with attractive risk-adjusted yields.
Available Information
The Company maintains an Internet web site at www.gbankfinancialholdings.com. The Company makes available, free of charge, on its web site (under www.gbankfinancialholdings.com/secfilings) the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC. The Company also makes available, free of charge, through its web site (under www.gbankfinancialholdings.com/corporate-governance) links to the Company's Code of Ethics Policy and the charters for its board committees. In addition, the SEC maintains an Internet site (at www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The Company routinely posts important information for investors on its web site (at www.gbankfinancialholdings.com and, more specifically, under the News & Media tab at www.gbankfinancialholdings.com/press-releases). The Company intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Company's web site, in addition to following the Company's press releases, SEC filings, public conference calls, presentations and webcasts.
The information contained on, or that may be accessed through, the Company's web site is not incorporated by reference into, and is not a part of, this Form 10-Q.
Nature of Operations
The Company generates the majority of its revenue through net interest income, calculated as the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is calculated as net interest income as a percentage of average interest-earning assets. The Company also generates revenue through gains on sales of assets, generally the guaranteed portion of SBA and USDA loans, net interchange fees earned on its credit card product, and fees earned on the various services and products offered to its customers. Offsetting these revenue sources are provisions for credit losses, non-interest expenses and income taxes.
The following table presents a summary of the Company's earnings and selected performance ratios for the three-month periods presented:
|
Three Months Ended March 31, |
|||||||
|
(Dollars in thousands, except per share data) |
2026 |
2025 |
|||||
|
Net Income |
$ |
1,315 |
$ |
4,470 |
|||
|
Diluted Earnings Per Share |
$ |
0.09 |
$ |
0.31 |
|||
|
Return on Average Assets |
0.39 |
% |
1.61 |
% |
|||
|
Return on Average Equity |
3.12 |
% |
12.59 |
% |
|||
|
Net Interest Margin (annualized) |
3.86 |
% |
4.47 |
% |
|||
|
Non-Performing Assets to Total Assets |
3.17 |
% |
1.71 |
% |
|||
|
Net Charge-Off (Recoveries) to Average Loans (annualized) |
0.57 |
% |
0.39 |
% |
|||
Financial highlights for the three months ended March 31, 2026 are presented below:
•
Net income of $1.3 million and diluted earnings per share of $0.09, compared to $4.5 million and diluted earnings per share of $0.31 for the first quarter of 2025.
•
Loan growth of 7% since December 31, 2025, resulting in $1.0 billion in on-balance sheet loans as of March 31, 2026, a milestone for the Company.
•
Principal balances of loans sold of $79.0 million compared to principal balances of loans sold of $68.7 million during the three months ended March 31, 2025.
•
Net interchange fees were $2.2 million and $2.0 million for the three months ended March 31, 2026 and 2025, respectively.
•
On-balance sheet guaranteed loans, including loans held for sale and loans held for investment, totaled $252.1 million as of March 31, 2026 compared to $229.7 million at December 31, 2025.
•
Non-performing assets of $44.1 million at March 31, 2026 representing 3.17% of total assets compared to $37.4 million of non-performing assets at December 31, 2025, representing 2.75% of total assets.
Critical Accounting Policies
The 2025 Annual Report on Form 10-K includes a summary of critical accounting estimates that the Company considers to be most important to the presentation of its financial condition and results of operations. These estimates require management's most difficult judgments as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Management considers the accounting judgments relating to the allowance for credit losses to be the accounting area that requires the most subjective and complex judgments.
There have been no material changes to the Company's critical accounting estimates as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2025.
Results of Operations
Net Interest Income and Net Interest Margin
Net interest income is calculated as the excess of interest earned from the Company's interest-bearing assets, such as loans and investments, and the interest expense incurred on interest-bearing liabilities, like deposits and borrowed funds. Net interest income represents the core earnings of the Company's primary activities of lending and investing, less the costs of obtaining funds.
Net interest margin is expressed as net interest income as a percentage of average earning assets and reflects the Company's ability to generate income from its interest-earning assets relative to the costs of funding those assets. Net interest income is affected by changes in interest rates, as well as composition and volume fluctuations in the average balances of interest-earning assets and interest-bearing liabilities.
Average balances, interest income or expense, and the interest yield or rate for the Company's interest-sensitive assets and liabilities are presented in the tables below for the three-month periods presented. Average balances are calculated on a daily basis. The Company had no tax equivalent adjustments for the three months ended March 31, 2026 and 2025.
|
For the Three Months Ended |
||||||||||||||||||||||||
|
March 31, 2026 |
March 31, 2025 |
|||||||||||||||||||||||
|
Average |
Yield/ |
Average |
Yield/ |
|||||||||||||||||||||
|
(Dollars in thousands) |
Balance |
Interest |
Rate(2) |
Balance |
Interest |
Rate(2) |
||||||||||||||||||
|
ASSETS: |
||||||||||||||||||||||||
|
Interest Bearing Deposits With Banks |
$ |
132,062 |
$ |
1,257 |
3.86 |
% |
$ |
102,628 |
$ |
1,192 |
4.71 |
% |
||||||||||||
|
Investment Securities: |
||||||||||||||||||||||||
|
Taxable |
101,725 |
1,102 |
4.39 |
% |
105,222 |
1,281 |
4.94 |
% |
||||||||||||||||
|
Loans, Net (1) |
1,041,831 |
18,958 |
7.38 |
% |
866,690 |
16,836 |
7.88 |
% |
||||||||||||||||
|
Federal Home Loan Bank Stock |
5,513 |
277 |
20.38 |
% |
4,652 |
100 |
8.72 |
% |
||||||||||||||||
|
Total Earning Assets |
1,281,131 |
21,594 |
6.84 |
% |
1,079,192 |
19,409 |
7.29 |
% |
||||||||||||||||
|
Cash and Due From Banks |
6,109 |
6,216 |
||||||||||||||||||||||
|
Other Assets |
68,980 |
39,177 |
||||||||||||||||||||||
|
Total Assets |
1,356,220 |
1,124,585 |
||||||||||||||||||||||
|
LIABILITIES & SHAREHOLDERS' EQUITY: |
||||||||||||||||||||||||
|
Deposits: |
||||||||||||||||||||||||
|
Interest-bearing Demand |
$ |
73,172 |
521 |
2.89 |
% |
$ |
65,693 |
355 |
2.19 |
% |
||||||||||||||
|
Money Market and Savings |
275,878 |
2,545 |
3.74 |
% |
264,085 |
2,411 |
3.70 |
% |
||||||||||||||||
|
Certificates of Deposit |
569,474 |
5,827 |
4.15 |
% |
385,704 |
4,464 |
4.69 |
% |
||||||||||||||||
|
Total Interest-Bearing Deposits |
918,524 |
8,893 |
3.93 |
% |
715,482 |
7,230 |
4.10 |
% |
||||||||||||||||
|
Short-Term Borrowings |
14 |
- |
0.00 |
% |
- |
- |
0.00 |
% |
||||||||||||||||
|
Subordinated Debt |
29,008 |
510 |
7.13 |
% |
26,095 |
285 |
4.43 |
% |
||||||||||||||||
|
Total Interest-Bearing Liabilities |
947,546 |
9,403 |
4.02 |
% |
741,577 |
7,515 |
4.11 |
% |
||||||||||||||||
|
Noninterest-bearing Deposits |
212,683 |
218,874 |
||||||||||||||||||||||
|
Other Liabilities |
25,099 |
20,139 |
||||||||||||||||||||||
|
Shareholders' Equity |
170,892 |
143,995 |
||||||||||||||||||||||
|
Total Liabilities & Shareholders' Equity |
$ |
1,356,220 |
$ |
1,124,585 |
||||||||||||||||||||
|
Net Interest Income |
$ |
12,191 |
$ |
11,894 |
||||||||||||||||||||
|
Total Yield on Earning Assets |
6.84 |
% |
7.29 |
% |
||||||||||||||||||||
|
Cost on Interest-Bearing Liabilities |
4.02 |
% |
4.11 |
% |
||||||||||||||||||||
|
Average Interest Spread |
2.81 |
% |
3.18 |
% |
||||||||||||||||||||
|
Net Interest Margin |
3.86 |
% |
4.47 |
% |
||||||||||||||||||||
(1)
For the three months ended March 31, 2026 and 2025, the average balance of loans, net includes average non-accrual loan balances of $36.7 million and $17.9 million, respectively.
(2)
Annualized on an actual/actual basis.
The following table presents the effects of changing rates and volumes on net interest income for the three-month periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.
|
Three Months Ended |
|||||||||||||
|
March 31, 2026 vs. March 31, 2025 |
|||||||||||||
|
Increase (Decrease) |
|||||||||||||
|
(Dollars in thousands) |
Volume |
Rate |
Net |
||||||||||
|
INTEREST INCOME: |
|||||||||||||
|
Interest Bearing Deposits With Banks |
$ |
342 |
$ |
(277 |
) |
$ |
65 |
||||||
|
Investment Securities: |
|||||||||||||
|
Taxable |
(43 |
) |
(136 |
) |
(179 |
) |
|||||||
|
Loans, Net |
3,402 |
(1,280 |
) |
2,122 |
|||||||||
|
Federal Home Loan Bank Stock |
19 |
158 |
177 |
||||||||||
|
Total Interest Income |
3,720 |
(1,535 |
) |
2,185 |
|||||||||
|
INTEREST EXPENSE: |
|||||||||||||
|
Interest Bearing Deposits: |
|||||||||||||
|
Interest-bearing Demand |
40 |
126 |
166 |
||||||||||
|
Money Market and Savings |
108 |
26 |
134 |
||||||||||
|
Certificates of Deposit |
2,127 |
(764 |
) |
1,363 |
|||||||||
|
Total Interest-Bearing Deposits |
2,275 |
(612 |
) |
1,663 |
|||||||||
|
Short-Term Borrowings |
- |
- |
- |
||||||||||
|
Subordinated Debt |
32 |
193 |
225 |
||||||||||
|
Total Interest Expense |
2,307 |
(419 |
) |
1,888 |
|||||||||
|
NET INTEREST INCOME |
$ |
1,413 |
$ |
(1,116 |
) |
$ |
297 |
||||||
For the three months ended March 31, 2026, interest income was $21.6 million, an increase of $2.2 million compared to $19.4 million for the three months ended March 31, 2025. The increases in interest income when comparing the three-month periods ended March 31, 2026 to the same period in 2025 is primarily due to increases in average interest-earning assets, partially offset by yield reductions on adjustable-rate loans, securities, and other liquid assets as a result of the cumulative 75 basis point reduction in the target federal funds rate on the Company's variable-rate loan portfolio over the preceding twelve months.
Interest expense was $9.4 million for the three months ended March 31, 2026, an increase of $1.9 million compared to $7.5 million for the three months ended March 31, 2025. The increase in interest expense when comparing the three months ended March 31, 2026 to the same period in 2025 was driven by increases in average interest-bearing liabilities to fund asset growth.
For the three months ended March 31, 2026, the Company's net interest margin decreased to 3.86%, compared to 4.47% for the three months ended March 31, 2025. The decrease in net interest margin for the three months ended March 31, 2026 when compared to the same period in 2025 is reflective of the lower market interest rate environment as explained in the above paragraphs.
Provision for Credit Losses
The provision for credit losses in each period is reflected as a reduction in earnings for that period and includes amounts related to funded loans and unfunded loan commitments. The provision is equal to the amount required to maintain the ACL at a level that is adequate to absorb estimated lifetime credit losses inherent in the loan portfolio based on remaining contractual maturity, adjusted for estimated prepayments as of each period end. The Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses. For the three months ended March 31, 2026, the Company recorded a provision for credit losses of $2.3 million. The provision for credit losses for the three months ended March 31, 2026 is primarily reflective of increases in specific reserves of $1.4 million on individually evaluated commercial real estate - owner occupied, commercial real estate - non-owner occupied, and commercial and industrial loans. Additionally, the increase includes $860 thousand related to non-guaranteed loan growth primarily within GBank's commercial real estate - non-owner occupied loan portfolio.
Noninterest Income
The following table presents the components of total noninterest income.
|
Three Months Ended March 31, |
||||||||||||||||
|
(Dollars in thousands) |
2026 |
2025 |
$ Change |
% Change |
||||||||||||
|
Gain on sale of loans |
$ |
3,790 |
$ |
2,537 |
$ |
1,253 |
49.4 |
|||||||||
|
Loan servicing income |
998 |
703 |
295 |
42.0 |
||||||||||||
|
Service charges and fees |
58 |
56 |
2 |
3.6 |
||||||||||||
|
Net interchange fees |
2,191 |
2,003 |
188 |
9.4 |
||||||||||||
|
Other income |
417 |
164 |
253 |
154.3 |
||||||||||||
|
Total noninterest income |
$ |
7,454 |
$ |
5,463 |
$ |
1,991 |
36.4 |
|||||||||
For the three months ended March 31, 2026, noninterest income totaled $7.5 million compared to noninterest income $5.5 million for the three months ended March 31, 2025.
Gain on sale of loans totaled $3.8 million for the first quarter of 2026 compared to $2.5 million for the first quarter of 2025. The increase in gain on sale of loans for the three-month period ended March 31, 2026 was due to higher volumes of loans sold and favorable secondary market pricing during the three months ended March 31, 2026 when compared to the same period of 2025.
Loan servicing income increased $295 thousand from $703 thousand for the three months ended March 31, 2025 to $998 thousand for the three months ended March 31, 2026. The increase in loan servicing income was the result of higher average balances of loans serviced by the Company during 2026.
Other income increased $253 thousand from $164 thousand for the three months ended March 31, 2025 to $417 thousand for the three months ended March 31, 2026 due to an increase in bank owned life insurance income of $304 thousand for the quarter ended March 31, 2026 resulting from a bank owned life insurance investment of $15.0 million during the third quarter of 2025.
Noninterest Expense
The following tables present the components of total noninterest expense.
|
Three Months Ended March 31, |
||||||||||||||||
|
(Dollars in thousands) |
2026 |
2025 |
$ Change |
% Change |
||||||||||||
|
Salaries and employee benefits |
$ |
6,750 |
$ |
6,400 |
$ |
350 |
5.5 |
|||||||||
|
Data processing |
1,889 |
1,405 |
484 |
34.4 |
||||||||||||
|
Occupancy expense |
410 |
392 |
18 |
4.6 |
||||||||||||
|
Legal and professional fees |
371 |
700 |
(329 |
) |
(47.0 |
) |
||||||||||
|
Loan related costs |
459 |
384 |
75 |
19.5 |
||||||||||||
|
Audits and exams |
198 |
497 |
(299 |
) |
(60.2 |
) |
||||||||||
|
Advertising and marketing |
830 |
364 |
466 |
128.0 |
||||||||||||
|
FDIC insurance |
156 |
122 |
34 |
27.9 |
||||||||||||
|
Credit card fraud loss |
4,213 |
- |
4,213 |
n/a |
||||||||||||
|
Other |
600 |
643 |
(43 |
) |
(6.7 |
) |
||||||||||
|
Total Noninterest Expense |
$ |
15,876 |
$ |
10,907 |
$ |
4,969 |
45.6 |
|||||||||
For the three months ended March 31, 2026, noninterest expense increased 45.6% to $15.9 million, compared to $10.9 million for the three months ended March 31, 2025.
Salaries and employee benefits expense totaled $6.8 million for the three months ended March 31, 2026, an increase of $350 thousand or 5.5% when compared to $6.4 million for the first quarter of 2025. The increase is attributable to (i) higher employee salaries and benefits expenses resulting from an increase in full-time equivalent employees from 175 at March 31, 2025 to 189 at March 31, 2026 and (ii) an increase in stock based compensation expense of $105 thousand quarter over quarter.
During the first quarter of 2026, the Company identified and charged off $4.2 million of third-party fraud credit card losses related to embedded bot fraud resulting from a direct mail retail credit card campaign undertaken during the second half of 2025. Similar losses did not occur during the three months ended March 31, 2025.
Data processing expense increased $484 thousand, or 34.4%, from $1.4 million for the three months ended March 31, 2025 to $1.9 million for the three months ended March 31, 2026. The year over year increase was due to higher costs from transactional-based charges given the volume increases in loans and deposits over the last twelve months.
Legal and professional fees totaled $371 thousand for the three months ended March 31, 2026, a decrease of $329 thousand or 47.0% when compared to $700 thousand for the three months ended March 31, 2025. Audits and exams expense totaled $198 thousand for the three months ended March 31, 2026, a decrease of $299 thousand when compared to $497 thousand for the first quarter of 2025. The decrease in legal and professional fees and audits and exams expense reflects extraordinary legal, professional, and audit fees associated with the preparation and filing of the registration statement with the Securities and Exchange Commission on Forms S-1 and S-1/A during the first quarter of 2025.
Advertising and marketing expense increased $466 thousand to $830 thousand during the first quarter of 2026, compared to $364 thousand during the first quarter of 2025. The increase in advertising and marketing expense was largely attributable marketing and advertising expenses related to the Company's credit card product.
Income Taxes
Income tax expense was $139 thousand for the three months ended March 31, 2026, a decrease of 88.6% or $1.1 million compared to $1.2 million for the three months ended March 31, 2025. The decrease in income tax expense during the three months ended March 31, 2026 was primarily due to lower pre-tax earnings, as well as the timing and volume of certain stock based compensation transactions resulting in tax benefits to the company.
The effective tax rate for the three months ended March 31, 2026 was 9.4% compared to 21.4% for the three months ended March 31, 2025. The fluctuations in the effective tax rate are largely driven by the timing and volume of certain stock-based compensation transactions resulting in tax benefits to the Company.
Comparison of Financial Condition - March 31, 2026 and December 31, 2025
Total Assets
Total assets were $1.4 billion for each of the periods ended March 31, 2026 and December 31, 2025.
Cash and Cash Equivalents
Cash and cash equivalents decreased 45% from $197.9 million at December 31, 2025 to $108.1 million at March 31, 2026 as cash outflows to fund loan growth and investment purchases more than offset cash inflows from deposit growth during the first three months of 2026.
Investments
The Company maintains an investment security portfolio to generate income through interest and potential sales, manage liquidity for funding needs, support interest rate risk management, and meet regulatory requirements for high-quality liquid assets.
The investment security portfolio is comprised of available for sale securities recorded at fair value which increased $40.3 million from $71.0 million at December 31, 2025 to $111.3 million at March 31, 2026 primarily due to the purchase of $44.0 million of available for sale residential mortgage-backed securities.
The following table presents the maturity composition and the weighted average yields of the investment portfolio as of March 31, 2026. Mortgage-backed security maturities are based on paydown trends in the most recent three-month period. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Weighted-average yield is calculated based on the amortized cost of each security.
|
Maturing |
||||||||||||||||||||||||||||||||
|
(Dollars in thousands) |
One Year |
After One Year |
After Five Years |
After |
||||||||||||||||||||||||||||
|
or Less |
Through Five Years |
Through Ten Years |
Ten Years |
|||||||||||||||||||||||||||||
|
Weighted |
Weighted |
Weighted |
Weighted |
|||||||||||||||||||||||||||||
|
Average |
Average |
Average |
Average |
|||||||||||||||||||||||||||||
|
As of March 31, 2026 |
Amount |
Yield |
Amount |
Yield |
Amount |
Yield |
Amount |
Yield |
||||||||||||||||||||||||
|
Available for sale securities, at fair value: |
||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
351 |
1.94 |
% |
$ |
19,056 |
4.37 |
% |
$ |
61,397 |
4.38 |
% |
$ |
30,516 |
4.01 |
% |
||||||||||||||||
Loans
Total loans, net of deferred loan costs and unamortized discounts, increased 7% to $1.0 billion at March 31, 2026, compared to $959.3 million at December 31, 2025. Loan originations, including government guaranteed and non-guaranteed commercial loans, totaled $208.1 million during the first three months of 2026, compared to $133.0 million for the same period in 2025.
The following table presents the ending balance of loans outstanding, by type, as of the dates indicated.
|
March 31, 2026 |
December 31, 2025 |
||||||||||||||||||
|
(Dollars in thousands) |
Percent of |
Percent of |
|||||||||||||||||
|
Balance |
Total Loans |
Balance |
Total Loans |
||||||||||||||||
|
Commercial and industrial |
$ |
81,623 |
8.0 |
% |
$ |
80,216 |
8.4 |
% |
|||||||||||
|
Commercial real estate - non-owner occupied |
823,966 |
80.4 |
750,565 |
78.2 |
|||||||||||||||
|
Commercial real estate - owner occupied |
91,578 |
8.9 |
94,576 |
9.9 |
|||||||||||||||
|
Construction and land development |
2,270 |
0.2 |
2,288 |
0.2 |
|||||||||||||||
|
Multifamily |
18,930 |
1.8 |
18,950 |
2.0 |
|||||||||||||||
|
Single Family Sr. Lien |
723 |
0.1 |
726 |
0.1 |
|||||||||||||||
|
Single Family Jr. Lien |
93 |
0.0 |
131 |
0.0 |
|||||||||||||||
|
Single Family HELOC |
459 |
0.0 |
459 |
0.0 |
|||||||||||||||
|
Consumer |
5,494 |
0.6 |
11,358 |
1.2 |
|||||||||||||||
|
Loans, net |
1,025,136 |
100.0 |
% |
959,269 |
100.0 |
% |
|||||||||||||
|
Allowance for credit losses |
(10,755 |
) |
(9,890 |
) |
|||||||||||||||
|
Loans, net of allowance |
$ |
1,014,381 |
$ |
949,379 |
|||||||||||||||
The Company's three largest loan segments are presented by borrower type in the table below for the periods presented.
|
March 31, 2026 |
December 31, 2025 |
||||||||||||||||||
|
(Dollars in thousands) |
Percent of |
Percent of |
|||||||||||||||||
|
Balance |
Total Loans |
Balance |
Total Loans |
||||||||||||||||
|
Commercial and industrial: |
|||||||||||||||||||
|
General business |
$ |
25,453 |
2.5 |
% |
$ |
24,996 |
2.6 |
% |
|||||||||||
|
Services |
16,313 |
1.6 |
16,107 |
1.7 |
|||||||||||||||
|
Social assistance |
14,628 |
1.4 |
14,797 |
1.5 |
|||||||||||||||
|
Manufacturing |
13,598 |
1.3 |
13,426 |
1.4 |
|||||||||||||||
|
Transportation |
8,048 |
0.8 |
6,439 |
0.7 |
|||||||||||||||
|
Retail |
3,583 |
0.3 |
4,451 |
0.5 |
|||||||||||||||
|
Total commercial and industrial |
$ |
81,623 |
8.0 |
$ |
80,216 |
8.4 |
|||||||||||||
|
Commercial real estate - non-owner occupied: |
- |
||||||||||||||||||
|
Hotel |
744,281 |
72.6 |
680,914 |
71.0 |
|||||||||||||||
|
Real Estate Rental |
65,813 |
6.4 |
67,944 |
7.1 |
|||||||||||||||
|
Food Processing |
12,185 |
1.2 |
- |
- |
|||||||||||||||
|
Other |
1,687 |
0.2 |
1,707 |
0.2 |
|||||||||||||||
|
Total commercial real estate - non-owner occupied |
$ |
823,966 |
80.4 |
$ |
750,565 |
78.2 |
|||||||||||||
|
Commercial real estate - owner occupied: |
- |
||||||||||||||||||
|
Retail |
33,854 |
3.3 |
31,932 |
3.3 |
|||||||||||||||
|
Hotel |
22,443 |
2.2 |
22,536 |
2.3 |
|||||||||||||||
|
Specialty Trade |
6,646 |
0.6 |
6,724 |
0.7 |
|||||||||||||||
|
Gas Station |
6,332 |
0.6 |
6,751 |
0.7 |
|||||||||||||||
|
Real Estate Rental |
5,705 |
0.6 |
4,635 |
0.5 |
|||||||||||||||
|
Services |
3,221 |
0.3 |
3,502 |
0.4 |
|||||||||||||||
|
Medical |
2,395 |
0.2 |
3,763 |
0.4 |
|||||||||||||||
|
Other |
10,982 |
1.1 |
14,733 |
1.5 |
|||||||||||||||
|
Total commercial real estate - owner occupied |
$ |
91,578 |
8.9 |
$ |
94,576 |
9.9 |
|||||||||||||
The Company continues to expand its national business lines for government guaranteed lending with a focus on the hospitality industry. For the year ended December 31, 2025, the Bank was a leading provider of SBA hotel financing and ranked among the nation's top originators of SBA 7(a) loans, placing #11 nationwide. The balance of guaranteed loans at March 31, 2026 was $252.1 million, representing 17.3% of loans. Comparatively, at December 31, 2025, the Company had $229.7 million of guaranteed loan balances representing 19.2% of loans.
Net deferred loan costs totaled $10.4 million at March 31, 2026 and $10.0 million at December 31, 2025. Net deferred loan costs represent the costs incurred to originate loans, net of fees paid by the borrower, which are measured and recorded at the date the loan is originated. Unamortized discount totaled $11.2 million at March 31, 2026 and $10.9 million at December 31, 2025. The unamortized discount relates to the retained portion of government guaranteed loans and is based on the relative fair value of the retained loan as calculated by an independent consulting firm. Loan costs and discount are amortized over the life of the loan and are recorded as an adjustment to interest income on the loan.
Loans held for sale totaled $74.5 million at March 31, 2026 and consisted of commercial real estate - non-owner occupied, commercial real estate - owner occupied, and commercial and industrial loans. Loans held for sale totaled $46.0 million at December 31, 2025 and consisted of commercial real estate - non-owner occupied, commercial real estate - owner occupied, and commercial and industrial loans. The balance of unguaranteed portions to be retained are reported as held for investment.
Credit Quality, Credit Risk, and Allowance for Credit Losses
In accordance with CECL guidance, the Company has grouped its loan portfolio into segments with similar risk characteristics based on factors such as loan type, credit risk profile, borrower characteristics, and other relevant attributes that influence the risk of default. By dividing loans into these segments, the Company can apply more tailored loss estimation techniques that reflect the specific credit risks associated with each segment.
Evaluations of the Company's loan portfolio, its segments, and individual credits are inherently subjective and require significant judgments dependent on the circumstances at the time of the evaluation. As such, current period results are not an indication of future performance, and future evaluations may result in substantial changes to the allowance for credit losses and related provision expense as a result of changing economic conditions, asset quality, or loan portfolio composition in future periods.
For more information on the Company's allowance for credit losses methodology, including the quantitative and qualitative factors used in the calculation, please see "Note 3 - Loans and Allowance for Credit Losses - Loans" within Notes to Consolidated Financial Statements.
The following table presents the allowance for credit loss as a percentage of total loans as of the dates indicated:
|
(In Thousands) |
||||||||||||||||||
|
As of March 31, 2026 |
Total ACL - Loans |
Total Loans |
% of Total Loans Outstanding |
Allowance as a % |
||||||||||||||
|
Commercial and industrial |
$ |
1,132 |
$ |
81,623 |
8.0 |
% |
1.4 |
% |
||||||||||
|
Commercial real estate - non-owner occupied |
8,556 |
823,966 |
80.4 |
1.0 |
||||||||||||||
|
Commercial real estate - owner occupied |
624 |
91,578 |
8.9 |
0.7 |
||||||||||||||
|
Construction and land development |
149 |
2,270 |
0.2 |
6.6 |
||||||||||||||
|
Multifamily |
36 |
18,930 |
1.8 |
0.2 |
||||||||||||||
|
Single Family Sr Lien |
2 |
723 |
0.1 |
0.3 |
||||||||||||||
|
Single Family Jr Lien |
- |
93 |
0.0 |
0.0 |
||||||||||||||
|
Single Family HELOC |
4 |
459 |
0.0 |
0.9 |
||||||||||||||
|
Consumer |
252 |
5,494 |
0.6 |
4.6 |
||||||||||||||
|
Total |
$ |
10,755 |
$ |
1,025,136 |
100.0 |
% |
1.0 |
% |
||||||||||
|
(In Thousands) |
||||||||||||||||||
|
As of December 31, 2025 |
Total ACL - Loans |
Total Loans |
% of Total Loans Outstanding |
Allowance as a % |
||||||||||||||
|
Commercial and industrial |
$ |
378 |
$ |
80,216 |
8.4 |
% |
0.5 |
% |
||||||||||
|
Commercial real estate - non-owner occupied |
7,214 |
750,565 |
78.2 |
1.0 |
||||||||||||||
|
Commercial real estate - owner occupied |
628 |
94,576 |
9.9 |
0.7 |
||||||||||||||
|
Construction and land development |
164 |
2,288 |
0.2 |
7.2 |
||||||||||||||
|
Multifamily |
42 |
18,950 |
2.0 |
0.2 |
||||||||||||||
|
Single Family Sr Lien |
2 |
726 |
0.1 |
0.3 |
||||||||||||||
|
Single Family Jr Lien |
1 |
131 |
0.0 |
0.8 |
||||||||||||||
|
Single Family HELOC |
4 |
459 |
0.0 |
0.9 |
||||||||||||||
|
Consumer |
1,457 |
11,358 |
1.2 |
12.8 |
||||||||||||||
|
Total |
$ |
9,890 |
$ |
959,269 |
100.0 |
% |
1.0 |
% |
||||||||||
The allowance for credit losses increased from $9.9 million at December 31, 2025 to $10.8 million at March 31, 2026. The allowance as a percentage of loan balances increased from 1.03% to 1.05%. The Company continues to closely monitor credit quality in light of the ongoing economic uncertainty caused by, among other factors, continued uncertainty regarding U.S. trade and tariff policy and the lingering inflationary pressures and the risk of the resurgence of elevated levels of inflation in the United States and our market areas. Accordingly, additional provisions for credit losses may be necessary in future periods.
The following table presents non-performing assets and related ratios as of the periods presented.
|
(Dollars in thousands) |
March 31, 2026 |
December 31, 2025 |
||||||
|
Non-performing assets: |
||||||||
|
Total nonaccrual loans |
$ |
39,736 |
$ |
32,141 |
||||
|
Loans 90 days past due and accruing |
- |
854 |
||||||
|
Total non-performing loans |
39,736 |
32,995 |
||||||
|
Other real estate owned |
4,401 |
4,401 |
||||||
|
Total non-performing assets |
$ |
44,137 |
$ |
37,396 |
||||
|
Non-performing loans to net loans |
4.31 |
% |
3.90 |
% |
||||
|
Nonaccrual loans to net loans |
3.88 |
% |
3.35 |
% |
||||
|
ACL to nonaccrual loans |
27.07 |
% |
30.77 |
% |
||||
|
ACL to gross loans |
1.05 |
% |
1.03 |
% |
||||
The Company had $39.7 million of non-performing loans as of March 31, 2026, compared to $33.0 of non-performing loans as of December 31, 2025. As of March 31, 2026, the balance of non-performing loans was comprised of certain commercial real estate - non-owner occupied, commercial real estate - owner occupied, and commercial and industrial loans, of which $30.9 million is guaranteed by the SBA. Included in the balance of non-performing loans as of March 31, 2026 are $27.5 million of individually evaluated loans with specific credit loss reserves of $2.6 million assigned. As of December 31, 2025, the balance of non-performing loans was comprised of certain commercial real estate - non-owner occupied, commercial real estate - owner occupied, commercial and industrial loans, and consumer loans totaling $33.0 million, of which $24.8 million is guaranteed by the SBA. Included in the balance of non-performing assets as of December 31, 2025 are $14.5 million of individually evaluated loans with specific credit loss reserves of $1.2 million assigned.
The Company held $4.4 million of other real estate owned as of both March 31, 2026 and December 31, 2025.
Premises and Equipment
Premises and equipment increased $144 thousand from $1.1 million at December 31, 2025 to $1.2 million at March 31, 2026 largely due purchases of $210 thousand net of depreciation of $66 thousand during the three months ended March 31, 2026.
Other Assets
Other assets totaled $27.6 million at March 31, 2026, a decrease of $10.2 million, or 27% when compared to $37.8 million at December 31, 2025, with this decrease largely attributable to the collection of $10.2 million of cash in-transit during the first three months of 2026 related to certain investment security sales executed during the fourth quarter of 2025.
Total Liabilities
The Company's total liabilities increased $32.5 million, or 3% from December 31, 2025 to March 31, 2026. The increase in total liabilities was primarily attributable to an increase in total deposits of $28.3 million with the largest increases within time deposits.
Deposits and Other Funding Sources
Total deposits increased 2% to $1.2 billion at March 31, 2026 compared to $1.1 billion at December 31, 2025. The year-to-date increases in non-interest bearing, interest bearing demand deposits, and time deposits were partially offset by decreases in savings deposits.
The following table presents the average balances of deposits by type and the related average interest rates for the three months ended March 31, 2026:
|
March 31, 2026 |
||||||||||
|
(Dollars in thousands) |
Balance |
Rate |
||||||||
|
Noninterest-bearing Deposits |
$ |
212,683 |
- |
% |
||||||
|
Interest-bearing Demand |
73,172 |
2.89 |
||||||||
|
Money Market and Savings |
275,878 |
3.74 |
||||||||
|
Certificates of Deposit |
569,474 |
4.15 |
||||||||
|
$ |
1,131,207 |
0.79 |
% |
|||||||
Federal Deposit Insurance Corporation ("FDIC") deposit insurance covers $250 thousand per depositor, per FDIC-insured bank, for each account ownership category. As of March 31, 2026, uninsured deposits were approximately $422.8 million, or 35.7% of total deposits, compared to $417.4 million, or 36.5% of total deposits, as of December 31, 2025.
As of March 31, 2026 the maturities of time deposits having balances over $250 thousand were as follows:
|
(Dollars in thousands) |
||||
|
2026 |
$ |
21,726 |
||
|
2027 |
12,493 |
|||
|
2028 |
5,835 |
|||
|
2029 |
- |
|||
|
2030 |
- |
|||
|
Maturing thereafter |
- |
|||
|
$ |
40,054 |
|||
Short-term Borrowings and Subordinated Debt
The Company had no short-term borrowings as of March 31, 2026 compared to $371 thousand for December 31, 2025.
Subordinated debt totaled $30.3 million as of March 31, 2026 compared to $26.2 million as of December 31, 2025. See "Note 7 - Subordinated Debt, Other Borrowings, and Available Lines of Credit", within the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Stockholders' Equity and Capital
Stockholders' equity increased 1% to $167.6 million at March 31, 2026 compared to $165.8 million at December 31, 2025 with this increase driven primarily by the net income generated during the first three months of 2026.
The sufficiency of a bank's capital to cover its risk exposures and absorb potential losses, and thus ensuring stability and solvency, is a key element of capital adequacy.
On September 17, 2019, the federal banking agencies jointly finalized a rule that became effective July 1, 2020 and was intended to provide for an optional, simplified measure of capital adequacy, the community bank leverage ratio ("CBLR") framework, for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rule was effective on January 1, 2020 and allows qualifying community banking organizations to calculate a leverage ratio to measure capital adequacy beginning with their March 31, 2020 Call Reports. The Company opted into the CBLR framework with its Call Report filed with the federal banking agencies for the quarter ended September 30, 2020.
Under the final rule, if a qualifying community banking organization opts into the CBLR framework and meets all requirements under the framework, it will be considered to have met the well-capitalized ratio requirements under the "prompt corrective action" regulations described above and will not be required to report or calculate risk-based capital.
The main components and requirements of the community bank leverage ratio framework are as follows:
•
Tier 1 Capital Leverage ratio greater than 9.00%;
•
Less than $10.0 billion in average total consolidated assets;
•
Off-balance-sheet exposures of 25% or less of total consolidated assets;
•
Trading assets plus trading liabilities of 5% or less of total consolidated assets; and
•
Not an advanced approaches banking organization.
As of March 31, 2026 and December 31, 2025, the Company and GBank were in compliance with the CBLR requirements.
The table below presents a summary of the main components and requirements of the CBLR as of the dates indicated:
|
(Dollars in thousands) |
March 31, 2026 |
December 31, 2025 |
||||||
|
Bank Tier 1 Capital Leverage Ratio |
13.39 |
% |
13.42 |
% |
||||
|
Average Total Consolidated Assets |
$ |
1,351,915 |
$ |
1,331,466 |
||||
|
Off-Balance-Sheet Exposures |
$ |
82,474 |
$ |
91,804 |
||||
|
Ratio of Off-Balance-Sheet Exposures to Total Assets |
5.93 |
% |
6.77 |
% |
||||
|
Trading Assets |
None |
None |
||||||
|
Advances Approaching Banking Organization |
No |
No |
||||||
The Company's common equity to assets ratio was 12.0% as of March 31, 2026 compared to 12.2% as of December 31, 2025. The Company's book value per share was $11.58 as of March 31, 2026, an increase from $11.52 as of December 31, 2025.
Liquidity
Liquidity management encompasses the Company's ability to meet its funding obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on the Company's ability to efficiently meet both expected and unexpected funding events without adversely affecting the daily operations or the financial condition of the Company.
The Company's primary sources of funding are deposits, proceeds from the sale or maturity of investment securities, payments received on loans and mortgage-backed securities, loan sales, and borrowing capacity available from various correspondent banks.
A summary of the Company's on-balance-sheet primary liquidity sources is presented in the table below as of the dates indicated:
|
(Dollars in thousands) |
March 31, 2026 |
December 31, 2025 |
||||||
|
Cash and due from banks |
$ |
4,960 |
$ |
5,326 |
||||
|
Interest-bearing deposits with other financial institutions |
103,134 |
192,538 |
||||||
|
Investment securities, available for sale |
111,320 |
71,038 |
||||||
|
Loans held for sale |
74,507 |
46,009 |
||||||
|
Total primary liquidity sources |
$ |
293,921 |
$ |
314,911 |
||||
The Company has a line of credit available from the FHLB. The unused borrowing capacity with the FHLB, as collateralized by qualifying securities and pledged loans, was approximately $126.1 million and $88.7 million, at March 31, 2026 and December 31, 2025, respectively. No draws were outstanding as of March 31, 2026. The balance on the line of credit with the FHLB of San Francisco was $100 thousand as of December 31, 2025.
GBank participates in the Federal Reserve Bank of San Francisco's BIC Program and, as of March 31, 2026 and December 31, 2025, the Company had pledged loans and investment securities with an approximate carrying value of $592.7 million and $633.1 million, respectively, to the BIC Program. Unused borrowing capacity at the Federal Reserve Bank of San Francisco totaled $314.4 million and $351.3 million as of March 31, 2026 and December 31, 2025, respectively.
The Company also has unsecured lines of credit with other correspondent banks totaling $40.0 million at March 31, 2026. No draws have been made on these lines of credit and no balances were outstanding as of March 31, 2026 and December 31, 2025.
The Company's Consolidated Statement of Cash Flows presents additional information regarding the sources and uses of cash for the three months ended March 31, 2026. Operating activities resulted in a net decrease in cash of $14.3 million, as cash inflows from loan sales were more than offset cash outflows for the origination of loans held for sale. Investing activities resulted in a net decrease in cash of $108.5 million primarily due to loans originated and held for investment, as well as purchases of available for sale securities. Financing activities resulted in a net increase to cash of $33.0 million, primarily due to a net increase in deposits during the three months ended March 31, 2026.
GBank Financial Holdings Inc. published this content on May 15, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 15, 2026 at 19:04 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]