Q3 2025 GBank Financial Holdings Inc Earnings Call

Speaker #2: Good morning everyone and welcome to the G Bank Financial Holdings , Inc. . Third quarter 2020 Earnings Conference Call . My name is Shawna Ferguson , and I'll be serving as the operator for today's call .

Shawna Ferguson: Good morning, everyone, and welcome to the GBank Financial Holdings Inc. Third Quarter 2025 Earnings Conference call. My name is Shawna Ferguson, and I'll be serving as the operator for today's call. All participants are currently in listen-only mode. Following our prepared remarks, we'll open the conference for questions. To ask a question, please use the raise hand feature, and I'll unmute your line when it's your turn to speak. As a reminder, this conference call is being recorded. We appreciate you joining our earnings conference call. With me here today are Edward M. Nigro, our Chairman and CEO, and Jeff Wicker, our Chief Financial Officer. The related Q3 earnings press release was filed with the U.S. Securities and Exchange Commission on Tuesday, October 28, 2025, and is available on the news and media section of our website, gbankfinancialholdings.com.

Speaker #2: All participants are currently in listen only mode . Following our prepared remarks , we'll open the conference for questions . To ask a question , please use the Raise Hand feature and I'll unmute your line when it's your turn to speak .

Speaker #2: As a reminder , this conference call is being recorded . We appreciate you joining our earnings conference call . With me here today are Ed Nigro , our chairman and CEO .

Speaker #2: And Jeff Wicker , our chief financial officer . The related Q3 earnings press release was filed with the US Securities and Exchange Commission on Tuesday , October 28th , 2025 , and is available on the news and Media section of our website , GBank Financial Holdings Inc. .

Speaker #2: Before we begin, I'd like to remind everyone that any forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated future results.

Shawna Ferguson: Before we begin, I'd like to remind everyone that any forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated future results. Please see our safe harbor statements in our earnings press release. All comments expressed or implied made during today's call are subject to those safe harbor statements. Any forward-looking statements made during this call are made only as of today's date, and we do not undertake any duty to update such forward-looking statements except as required by law. Additionally, during today's call, we may discuss certain non-GAAP financial measures, which we believe are useful in evaluating our performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release. I'll now turn the call over to Edward M. Nigro, our Chairman and Chief Executive Officer.

Speaker #2: Please see our Safe Harbor statements in our earnings press release. All comments expressed or implied during today's call are subject to the Safe Harbor statements.

Speaker #2: Any forward-looking statements made during this call are made only as of today's date, and we do not undertake any duty to update such forward-looking statements except as required by law.

Speaker #2: Additionally, during today's call, we may discuss certain non-GAAP financial measures, which we believe are useful in evaluating our performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can also be found in our earnings release.

Speaker #2: I'll now turn the call over to Edward M. Nigro, our Chairman and Chief Executive Officer.

Speaker #3: Well , good morning . I'm Ed Nigro , chairman and Chief executive officer of Bank Financial and Bank . And I'd like to welcome all of you , our shareholders , our employees , guests to our quarterly third quarter earnings call for GBank Financial Holdings Inc. and here today , Jeff is going to Jeff Wicker , who is our chief financial officer .

Edward M. Nigro: Good morning. I'm Edward M. Nigro, Chairman and Chief Executive Officer of GBank Financial Holdings Inc. and GBank. I'd like to welcome all of you, our shareholders, our employees, and guests to our importantly third quarter earnings call for GBank Financial Holdings Inc. Here today, Jeff Wicker, who is our Chief Financial Officer, and I will be giving you our verbal presentation. I wanted to advise you that we changed the format quite a bit for this particular call. Jeff's going to go through some salient numbers, but not just talk numbers, but give some of the rationale and reasons behind those numbers, how they were developed, why they occurred the way they did, in a more brief assessment rather than going through and repeating the earnings per share and everything that you've seen. We will also have questions on Jeff's comments later.

Speaker #3: And I will be giving you our verbal presentation. I wanted to advise you that we would change the format quite a bit for this particular call.

Speaker #3: Jeff's going to go through some salient numbers , but not just talk numbers , but give some of the rationale and reasons behind those numbers , how they were developed , why they occurred , the way they did in a more brief assessment , rather than going through and repeating the earnings per share and everything that you've seen .

Speaker #3: And but we will also have questions on Jeff's comments later . Then I will then take over from Jeff and talk about our operations and what we have been focusing on this last quarter , which is then probably one of our most interesting , decisive and challenging quarters in some time .

Edward M. Nigro: I will then take over from Jeff and talk about our operations and what we have been focusing on this last quarter, which has been probably one of our most interesting, decisive, and challenging quarters in some time, as you've probably seen, or as I'm sure you have seen from some of the unusual expenses that we've had. Right now, I'd like to turn it over to Jeff to discuss some of the more salient numbers that you have before you, Jeff.

Speaker #3: As you probably seen , otherwise , I'm sure you have seen from some of the unusual expenses that we've had . But so I right now I'd like to turn it over to Jeff to discuss some of the more salient numbers that you have before you .

Speaker #4: Thank you . And welcome , everyone . The company reported quarterly earnings of 4.3 million , or $0.30 per diluted share . That's an increase a decrease of 500,000 compared to the prior quarter earnings of 4.8 million .

Jeff Wicker: Thank you, Ed. Welcome, everyone. The company reported quarterly earnings of $4.3 million or $0.30 per diluted share. That's a decrease of $500,000 compared to the prior quarter earnings of $4.8 million. Now, included in these quarterly results are approximately $2 million or $0.14 per share in unusual operating expenses. There were four main items that are unusual in nature that explain the quarter-over-quarter increase in non-interest expense that would not be expected in core earnings going forward. These include $900,000 for the resolution of the contract related to the departure of the prior Chief Executive Officer, $728,000 related to the Spend to Get program on the direct mail marketing campaign that provides a cashback bonus for upfront spend on cards, $258,000 related to a DDoS cyberattack where multiple systems are used to flood the application system with an overwhelming amount of traffic.

Speaker #4: Now , included in these quarterly results are approximately 2 million , or $0.14 per share . In unusual operating expenses . There were four main items that are unusual in nature that explain the quarter over quarter increase in non-interest expense and would not be expected in core earnings going forward .

Speaker #4: These include $900,000 for the resolution of the contract related to the departure of the prior Chief Executive Officer, $728,000 related to the spend content program on the direct mail marketing campaign that provides a cash back bonus for upfront spend on cards, and $258,000 related to a DDoS cyber attack, where multiple systems are used to flood the application system with an overwhelming amount of traffic.

Speaker #4: The goal is to disrupt , disrupt normal operations , stretch current resources , and create vulnerabilities , and finally , 707,000 related to an attempt to create revolving balance accounts through direct mail campaigns , which were targeted by bad actors who were able to bypass the current detection systems and create accounts that went directly to charge off this type of marketing has been discontinued , and a more targeted marketing campaign has been developed to focus only on gaming customers going forward .

Jeff Wicker: The goal is to disrupt normal operations, stretch current resources, and create vulnerabilities. Finally, $707,000 related to an attempt to create revolving balance accounts through direct mail campaigns, which were targeted by bad actors who were able to bypass the current detection systems and create accounts that went directly to charge offs. This type of marketing has been discontinued, and a more targeted marketing campaign has been developed to focus only on gaming customers going forward. In response to these findings, the bank has executed several new processes to identify fraud activity and help reduce any impact in the future.

Speaker #4: In response to these findings, the bank has executed several new processes to identify fraud activity and help reduce any impact in the future.

Speaker #4: These include the following . Adoption of the Experian bust score , which looks to identify , detect and prevent Bustout cardholders , which is a form of first party fraud .

Jeff Wicker: These include the following: adoption of the Experian Bust Out Score, which looks to identify, detect, and prevent bust out cardholders, which is a form of first-party fraud where individuals build a strong credit profile and then intentionally default on multiple accounts; NeoID, which is a comprehensive digital identity management platform; Precise ID, which is a comprehensive identity verification and fraud detection platform designed to help authenticate identities, detect fraud, and comply with regulations; and Plaid Identification Verification, which verifies the identity of the applicant by comparing the applicant's ID to a live picture taken by the applicant. Additionally, the bank has implemented a two-to-four-day hold on ACH payments to prevent customers from running up credit card balances and paying down with unavailable funds. The bank is also in the process of implementing two-way SMS fraud alerts, allowing for cardholders to verify potential fraudulent activities in real time.

Speaker #4: Where individuals build a strong credit profile and then intentionally default on multiple accounts. Medialive, which is a comprehensive digital identity management platform.

Speaker #4: Precise ID, which is a comprehensive identity verification and fraud detection platform designed to help authenticate identities, detect fraud, and comply with regulations.

Speaker #4: And Plaid identification verification verifies the identity of the applicant by comparing the applicant's IDs to a live picture taken by the applicant.

Speaker #4: Additionally, the bank has implemented a 2 to 4-day hold on ACH payments to prevent customers from running up credit card balances and paying down with unavailable funds.

Speaker #4: The bank is also in the process of implementing two way SMS , allowing for cardholders to verify potential fraudulent activities in real time with the addition of the new application system and additional processes , we believe that the bank's fraud detection systems are now state of the art and will act to inhibit future losses going forward .

Jeff Wicker: With the addition of the new application system and additional processes, we believe that the bank's fraud detection systems are now state-of-the-art and will act to inhibit future losses going forward. This quarter, the bank did experience some significant highlights in the financials, and I would like to point those out. The most important is net revenue growth. The bank delivered solid operating leverage this quarter, with net revenue growing 13.5% to $20.2 million. This high level of growth in revenue quarter over quarter demonstrates how impactful the digital banking programs can be to our earnings going forward. Interest income increased 4.9% to $13 million due to the significant loan production and the additional day that's in the quarter. On-balance sheet guaranteed loan balances increased $22.9 million for the quarter to $260.5 million.

Speaker #4: This quarter , the Bank did experience some significant highlights on the financials , and I would like to point those out the most important is net revenue growth .

Speaker #4: The bank delivered solid operating leverage this quarter, with net revenue growing 13.5% to $20.2 million. This high level of growth in revenue, quarter over quarter, demonstrates how impactful the digital banking programs can be to our earnings going forward.

Speaker #4: Interest income increased 4.9% to 13 million due to the significant loan production and the additional day that's in the quarter . On balance sheet , guaranteed loan balances increased 22.9 million for the quarter to 260.5 million , net interest income was up 56.7% over the prior quarter , as credit card transaction volume started to rebound , with total transaction volume hitting 131 million , which was a 57% increase over the prior quarter .

Jeff Wicker: Net interchange income was up 56.7% over the prior quarter as credit card transaction volume started to rebound, with total transaction volume hitting $131 million, which was a 57% increase over the prior quarter. The company has recently launched the new online credit card application system, which includes the enhanced features for detecting bad actors and allows us to begin to increase the customer base, which will drive up future volumes. The gain on sale revenue increased 38.5% over the late quarter. SBA lending and commercial banking loans have continued their banner year, with record loan production in the quarter of $242 million, which is up $82 million over the prior quarter.

Speaker #4: The company has recently launched a new online credit card application system , which includes the enhanced features for detecting bad actors and allows us to begin to increase the customer base , which will drive up future volumes .

Speaker #4: The gain on sale revenue increased 38.5% over the linked quarter. SBA and commercial lending have continued their banner year, with record loan production in the quarter of $242 million, which is up $82 million over the prior quarter.

Speaker #4: The cap gain on sale pricing increased by 15 basis points in the quarter to 3.24%, compared to 3.09% in the linked quarter, with an 84 basis point increase in the month of September.

Jeff Wicker: The GAAP gain on sale pricing increased by 15 basis points in the quarter to 3.24% compared to 3.09% in the late quarter, with an 84 basis point increase in the month of September as pricing started to rebound and the bank implemented some cost containment measures to improve profitability. In addition, the bank has restructured the current incentive payment structure. The prior structure was built to enhance volume; however, this did not promote originating loans that would lead to a strong net income for the bank. The structure is now in place to align the originators with the interest of the organization and ensure that the bank receives a minimum 4% GAAP gain on sale going forward. As these measures take effect, we anticipate this income will continue to increase.

Speaker #4: As pricing started to rebound, the bank implemented some cost containment measures to improve profitability. In addition, the bank has restructured the current incentive payment structure.

Speaker #4: The prior structure was built to enhance volume. However, this did not promote originating loans that would lead to a strong net income for the bank.

Speaker #4: The structure is now in place to align the originators with the interests of the organization and ensure that the bank receives a minimum 4% cap gain on sale.

Speaker #4: Going forward . As these measures take effect , we anticipate this income will continue to increase . It's important to note that the government shutdown , if it continues to extend , has the potential to impact SBA's ability to approve loan origination and sales .

Jeff Wicker: It's important to note that the government shutdown, if it continues to extend, has the potential to impact SBA's ability to approve loan origination and sales. The bank was able to secure PLP numbers for 19 loans prior to the government shutdown, which has allowed the bank to produce $48 million in loans in October. Additional growth in sales is being delayed pending the opening of the federal government. Looking at the balance sheet, the company generated over $90 million in loan growth, while total assets increased by $69 million or 5.6% during the quarter. Total assets ended the quarter at over $1.3 billion for the first time in the company history, while shareholders' equity grew 4.2% to $158 million. Average earning assets increased $34 million over the late quarter as the bank continued to execute on its overall growth strategy.

Speaker #4: The bank was able to secure PLTP numbers for 19 loans prior to the government shutdown, which has allowed the bank to produce $48 million in loans.

Speaker #4: In October . But additional growth in sales are being delayed pending the opening of the federal government . Looking at the balance sheet , the company generated over $90 million in loan growth , while total assets increased by 69 million , or 5.6% , during the quarter .

Speaker #4: Total assets ended the quarter at over $1.3 billion . For the first time in the company history , while shareholders grew , equity grew 4.2% to 158 million , average earning assets increased 34 million over the linked quarter as the bank continues to execute on its overall growth strategy , Bank has been funding the significant growth over the last few quarters , mainly with time deposits and interest bearing money market accounts , which we have been able to successfully do and maintain an above average net interest margin of well over 4% .

Jeff Wicker: The bank has been funding the significant growth over the last few quarters mainly with time deposits and interest-bearing money market accounts, which we have been able to successfully do and maintain an above-average net interest margin of well over 4%. The bank monitors both the deposit market and our funding levels very closely, ensuring that we continue to support loan growth appropriately while also adjusting pricing to support margin aspirations and profitability. The bank anticipates being able to quickly reprice these deposits as the Federal Reserve lowers interest rates, as they are mostly short-term in nature. In addition, the bank plans to implement programs such as Bull Bets and Stablecoin initiatives that will bring in significant levels of lower cost funding and enhance margins going forward. Non-performing assets increased by $5.8 million to $10.4 million net of the guaranteed balances and now represent a manageable 0.8% of total assets.

Speaker #4: The bank monitors both the deposit market and our funding levels very closely, ensuring that we continue to support loan growth appropriately while also adjusting pricing to support margin aspirations and profitability.

Speaker #4: The Bank anticipates being able to quickly reprice these deposits as the Federal Reserve lowers interest rates, as they are mostly short-term in nature.

Speaker #4: In addition , the bank plans to implement programs such as Bold Bets and Stablecoin that will bring in significant levels of lower cost funding and enhanced margins going forward , non-performing assets increased by 5.8 million to 10.4 million , net of the guaranteed balances , and now represent a manageable 0.8% of total assets .

Speaker #4: Additionally , we charged off 836,000 in loans previously reserved for . While these increases can seem large by percentage , it's important to note that the bank has been coming off of an extended period of very low delinquencies , and that we are moving into a more normal range .

Jeff Wicker: Additionally, we charged out $836,000 in loans previously reserved for. While these increases can seem large by percentage, it's important to note that the bank has been coming off of an extended period of very low delinquencies and that we are moving into a more normal range. The bank is monitoring these credits very closely and is working them out as quickly as we can. The bulk of the increase in NPAs came from seven loans. Four of them are hotel loans and three of them are non-hospitality. All of these loans are diversified across the country and the bank has not recognized any significant trends that would imply additional risk to the portfolio at this time. The bank remains asset-sensitive related to the net interest income, with a 200 basis point change in short-term rates expected to impact net interest income by roughly 13 bps.

Speaker #4: The bank monitor , the bank's monitoring . These credits very closely and is working them out as quickly as we can . The bulk of the increase in and MPAs came from seven loans , four of them are hotel loans and three of them are non hospitality .

Speaker #4: All of these loans are diversified across the country, and the bank has not recognized any significant trends that would imply additional risks to the portfolio at this time.

Speaker #4: The bank remains asset-sensitive related to the net interest income with a 200 basis point change in short-term rates. This is expected to impact net interest income by roughly 13 basis points.

Speaker #4: However, the earnings portfolio is almost neutral for the overall earnings at risk and wrapped up scenarios, as SBA loan sales provide a natural hedge to the income in a rates-down scenario. The bank purchased $7 million in securities during the quarter, with an average yield of 4.9%.

Jeff Wicker: However, the earnings portfolio is almost neutral for the overall earnings at risk in ramped-up scenarios as SBA loan sales provide a natural hedge to the income in a rates-down scenario. The bank purchased $7 million in securities during the quarter with an average yield of 4.9%. The overall yield on the securities portfolio remains above 4.69% and is in the top decile of our peer group. In addition, recent changes in rates have resulted in the bank achieving a positive AOCI for the first time in almost a year. Liquidity continues to remain healthy with on-balance sheet liquidity of $253 million and borrowing capacity of $504 million. In total, the bank had replaced 70% of the on-balance sheet deposits in under 24 hours.

Speaker #4: The overall yield on the securities portfolio remains four points above 4.69% and is in the top decile of our peer group. In addition, recent changes in rates have resulted in the bank achieving a positive AOCI for the first time in almost a year.

Speaker #4: Liquidity continues to remain healthy , with on balance sheet liquidity of 253 million and borrowing capacity of 504 million . In total , the bank had replaced 70% of the on balance sheet deposits in under 24 hours .

Speaker #4: Capital levels remain strong, with the Tier 1 capital ratio coming in at 13.37%, down from 13.82% last quarter due to balance sheet growth, offset by current earnings.

Jeff Wicker: Capital levels remain strong with the Tier One capital ratio coming in at 13.37%, down from 13.82% last quarter due to balance sheet growth offset by current earnings. While we've experienced some hiccups along the way, the overall strategic plan for the bank is continuing to develop. As we continue to move into the digital world, we will continue to see revenues and earnings grow, which will enhance shareholder value. With that, I'll turn back over to you, Ed.

Speaker #4: So while we've experienced some hiccups along the way , the overall strategic plan for the bank is continuing to develop as we continue to move into the digital world , we will continue to see revenues and earnings growth , which will enhance shareholder value .

Speaker #4: With that, I will turn it back over to you, Editor.

Speaker #3: Thank you , Jeff . Well , Jeff focused on some of the anomalies to with respect to our numbers . The last quarter , as I said , has been a very involved one for us from a management standpoint , too , with the change in management in reorganization .

Edward M. Nigro: Thank you, Jeff. Jeff focused on some of the anomalies too with respect to our numbers. The last quarter, as I said, has been a very involved one for us from a management standpoint too, with the change in management and reorganization. It has been very important because, as I have said on the last two quarters of reports that we've given you verbally, our goal is to be a digital bank, increase our digital bank capabilities, that we are a digital bank and payments company. The digital bank, I would define it as one that utilizes technology-driven infrastructure that's built upon the cloud and API-based systems for the sole purpose of implementing our online operations. We are still a bricks-and-mortar bank and we will never stop being one. With our payments industry, in which we participate quite actively, it is really important that we enhance our digital capabilities.

Speaker #3: But it's been very important because as I as I have said on the last two quarters of reports that we've given you verbally that our goal is to be a digital bank , increase our digital bank capabilities , that we are a digital bank and payments company , and the digital bank really , I would define it as one that utilizes technology driven infrastructure .

Speaker #3: It's built upon a cloud and API based systems for the sole purpose of implementing our online operations . Now we are still a bricks and mortar bank , and we will never stop being one .

Speaker #3: But with our payments industry in which we participate quite actively , it is really important that we enhance our digital capabilities . And I'm going to explain a little of that as I talk to you this morning , because on payment side , it's our goal and mission to deliver instant transfers of , of an instant access 24/7 on payments .

Edward M. Nigro: I'm going to explain a little of that as I talk to you this morning. On the payment side, it's our goal and mission to deliver instant transfers and instant access 24/7 on payments. To do that involves many technologies and many payments platforms and much subject matter expertise. I also want to focus on the fact that, as Jeff mentioned, our SBA GAAP gain on sales was a very important measurement. One of the first things that we did these last 60 days is that we sat down with Jeff, with Nancy, and we redeveloped our entire payment system in our SBA operations. Our bonuses, our commissions, not our broker fees, those are pretty well set. The concept is that we were having SBA GAAP gain on sales as below 3% last July. This GAAP gain was down to 2.43% in July and 3.09% in August.

Speaker #3: And to do that involves many technologies and many payments platforms and much subject matter expertise . But I don't want to . I also want to focus on the fact that , as Jeff mentioned , our SBA GAAP gain on sales was a very important measurement , and one of the first things that we did this particular this last 60 days is that we sat down with Jeff , with Nancy , and we redeveloped our entire payments system in our SBA operations , our our bonuses , our commissions , not our broker fees .

Speaker #3: Those are pretty well set, but the concept is that we were having SBA GAAP gain on sales as below 3% last July.

Speaker #3: And this gap gain was down to 2.43% in July and 3.09% in August. But as Jeff mentioned, in September it was 3.93%.

Edward M. Nigro: As Jeff mentioned, in September it was 3.93% because of some adjustments that were made to our development officer's income, which while important for the last four months, is not something that's sustainable. We rebuilt the entire system based not just on volume, because when the system started, we had no volume. All our incentives were based upon increasing volume. As we matured, those incentives were very successful at increasing volume, but we started to see our GAAP gain decline, not necessarily because of the pricing, but because of our costs. As we looked at the process, we developed a system in which we were basing it upon a net income to the bank of 4% GAAP gain on sale, and then developing the system of payments to our staff and our rewards payments, our bonuses, our commissions on the available funds following that GAAP gain.

Speaker #3: Because of some adjustments that were made to our development officers' income, which, while important for the last four months, is not something that's sustainable.

Speaker #3: So what we did is we rebuilt the entire system based not just on volume, because when the system started, we had no volume.

Speaker #3: So all our incentives were based upon increasing volume . But as we matured , those incentives were very successful at increasing volume . But we started to see our gap gain decline , not necessarily because the pricing , but because of our costs .

Speaker #3: So as we looked at the process , we developed a system in which we were basing it upon a net income to the bank of for percent GAAP gain on sale , and then developing the system of payments to our staff and our rewards payments , our bonuses , our commissions on the available funds .

Speaker #3: Following that GAAP gain . But the available funds can be managed very interestingly . If you look at how you sell and you look at what you sell and you look at the spreads of what you sell , and you look at the relationship with the borrower and you look at the down payment .

Edward M. Nigro: The available funds can be managed very interestingly if you look at how you sell and you look at what you sell and you look at the spreads of what you sell and you look at the relationship with the borrower and you look at the down payment. We looked at the entire structure. We brought Credit into the picture, we brought our Producers into the picture, and we brought Finance into the analysis. We developed a system that is going to enable very strong rewards, very strong opportunities, but also continue to develop a GAAP gain for the bank that is going to be sustained. When you look at the results of this last month, we saw the GAAP gain jump almost to 4% and resulted in $3.6 million in earnings from our sales. That is going to take effect in January of next year.

Speaker #3: We looked at the entire structure . We bought credit into the picture . We brought our producers into the picture , and we brought finance and into the analysis .

Speaker #3: And we developed a system that is going to enable very strong rewards, very strong opportunities. But also continue to develop a gap gain for the bank.

Speaker #3: And that is going to be sustained, because when you look at just look at the results of this last month, we saw the gap gain jump almost to 4%.

Speaker #3: And it resulted in $3.6 million in earnings from our sales. So that's going to take effect in January of next year.

Speaker #3: But it was the concept of getting together , reorganizing it , restructuring it , simplifying it . Even I can understand it now that and it really works .

Edward M. Nigro: It was the concept of getting together, reorganizing it, restructuring it, simplifying it. Even I can understand it now, and it really works. Nancy took a very big leadership role in that, and so did Jeff, and I appreciate their hard work. Going on with our bank, there's another aspect that was published that we won't tolerate, and that was our CRA rating of needs improvement. It was published by the FDIC in September, I believe. That took us a little by surprise because we got this rating because our CRA loan qualified loans within our influence area, which is Clark County, had dropped way down and to a level that was not acceptable. We agreed with the FDIC it was not acceptable. We do a lot of CRA qualified loans across the country, but they're not in our specific area that we're required to, which is Clark County.

Speaker #3: And Nancy took a very big leadership role in that . And so did Jeff . And I appreciate their hard work and going on with our bank .

Speaker #3: There's another aspect that was published that we won't tolerate , and that was our KR rating of needs improvement , and it was published by the FDIC in September , I believe .

Speaker #3: Now , that took us a little by surprise because we got this rating , because our CRA loan qualified loans within our influence area , which is Clark County , had dropped way down and to a level that was not acceptable .

Speaker #3: And we agreed with the FDIC . It was not acceptable . Now , we do a lot of CRA qualified loans across the country , but they're not in our specific area that we're required to , which is Clark County .

Speaker #3: So in the last 60 days , we also put together a team to solve this issue . And that team involved our our chief compliance officer , our chief operating officer , and our chief credit officer .

Edward M. Nigro: In the last 60 days, we also put together a team to solve this issue. That team involved our Chief Compliance Officer, our Chief Operating Officer, and our Chief Credit Officer. I'm proud to say we've already quadrupled our loans in the last 60 days. We've already enhanced our service hours in our service area 10 times. As a matter of fact, our success at it is rapid and developing that we are going to develop an interim response letter to the FDIC to show them that we take this seriously. Now, with our CRA rating, it's not because we're in areas that could be slowed because of a bad rating, i.e., acquisitions and others. It's the fact that we will not have a rating like that in any of our operations. We're going to make sure that that never recurs. That was another important aspect.

Speaker #3: And I'm proud to say we've already quadrupled our loans in the last 60 days. We've already enhanced our service hours in our service area.

Speaker #3: Ten times . And as a matter of fact , our our success at it is rapid and developing that we are going to develop an interim response letter to the FDIC to show them that we take this seriously .

Speaker #3: Now , our C.r.a. rating . It's not because we're in areas that the that could be slowed because of a bad rating , i.e. acquisitions and others .

Speaker #3: It's a fact that we will not have a rating like that in any of our operations, and we're going to make sure that that never recurs. That was another important aspect.

Speaker #3: We believe, and I believe it's a reputational risk or a reputational matter. We will not be very good in a lot of other areas of regulatory performance.

Edward M. Nigro: We believe, and I believe, it's a reputational risk or it's a reputational matter. We will not be very good in a lot of other areas of regulatory performance except one bad area. Cannot do that. Further, we've had a major transformation in terms of how we're looking at payments in our digital bank. We know that we have had this full player accounts and our custodial accounts in the bank for some time. We even remember, for those of you who've been with us long enough, how we solved major issues for the state of Oregon with their sports betting app. The important thing that's happening right now is that that process, which you know the patents were developed for that custodial process and that prepaid access programs by BCS. Don't forget that the holding company owns 32.99% of BCS.

Speaker #3: And except for one bad area, we cannot do that further. We've had a major transformation in terms of how we're looking at payments in our digital bay now. We know that we have had these full player accounts in our custodial accounts in the bank for some time. And we even remember, for those of you who've been with us long enough, how we solved major issues for the state of Oregon with their sports betting app.

Speaker #3: But the important thing that's happening right now is that that process , which you know , we the patents were developed for that custodial process and that prepaid access programs by VCs and don't forget that we , the holding company , owns 32.99% of BCS that we are now putting in that process for the first time as we release opiates and both bets is an application process for us .

Edward M. Nigro: We are now putting in that process for the first time as we released Bull Bets. Bull Bets is an application process for transactions directly with slot machines on and off their application utilizing the PPA system so that the operator, the casino, no longer needs to accept the cash. The cash resides where? In the bank with us. You also saw that Bull Bets signed Parallels Gaming, which has a significant number of slot machines. They have an interesting pipeline because the application is being identified as one of the most unique standalone systems that anyone has seen. Why has this been a bit slow in launching? It's because of the processes it has had to go through with the Nevada Gaming Control Board. The interesting thing is Bull Bets doesn't touch the money. Money comes to the bank, but Bull Bets touches the casino management system.

Speaker #3: Transactions directly with slot machines on and off their application utilizing the PPA system . So that the the the operator that casino no longer needs to accept the cash .

Speaker #3: The cash resides where in the bank with us . And you also saw that both signed Terrible's gaming , which has a significant number of slot machines , and they have an interesting pipeline because the application is being is being .

Speaker #3: Identified as one of the most unique standalone systems that anyone is seeing. Now, why has this been a bit slow in launching?

Speaker #3: It's because of the processes it has had to go through with the Nevada Gaming Control Board. The interesting thing is it doesn't touch the money.

Speaker #3: The money comes to the bank, but both cut the casino management system. And if you touch the casino management system, the regulators want to know about it.

Edward M. Nigro: If you touch the casino management system, the regulators want to know about it. The regulators have awarded a license to Bull Bets that is a prepaid, it's called a prepaid access program license. They don't handle the money, but they do have access to the CMS. The bank owns the funds. Bets could be held in our PPA settlement accounts. Here's what is interesting to the state. The state now sees for the first time that here's a process, a gaming process in which the funds, the cash is actually held in the player's name in a bank, in a guaranteed FDIC account, and not at the casino. That was interesting for gaming to try to put their hands around and understand because they had never seen this before. Now the state of Nevada Gaming Control Board has applied a process license and approved it.

Speaker #3: And so the regulators have awarded a license to both bets. That is a prepaid called the Prepaid Access Program License. They don't handle the money, but they do have access to the CMS.

Speaker #3: The bank owes the funds. This could be held in our PPA settlement accounts. So, here's what is interesting to the state.

Speaker #3: The state now sees for the first time that here's a process , a gaming process in which the funds , the cash is actually held in the player's name in a bank , in a guaranteed FDIC account , and not at the casino .

Speaker #3: And that was interesting for gaming to try to put their hands around and understand, because they had never seen this before. But now the State of Nevada Gaming Control Board has applied a process license and approved it, where it is right now.

Edward M. Nigro: Where it is right now is it is in what they call product testing that has to go through. Product testing is put on by GLI, which is Gaming Laboratories International. They test any product that is involved in gaming. It has to go through extensive GLI testing. We consider that another plus because here you're going to have the observation and regulatory oversight of the state of Nevada, GLI testing approval, and a system that will work anywhere in the country. It will work with any gaming operator. We're very excited about it because it puts together our patented process of funding with the Bull Bets patented process of access for the consumer.

Speaker #3: Is it in? It's in what they call product testing that has to go through, and product testing is put on by Glee, which is Gaming Laboratories International.

Speaker #3: Test any product that is involved in gaming has to go through extensive GLEE testing, but we consider that another plus because here you're going to have, you know, the observation and regulatory oversight of the state of Nevada. GLEE testing approval and this that will work anywhere in the country.

Speaker #3: And it will work with any gaming operator. But we're very excited about it because it puts together our patented process of funding with the patented process of access for the consumer.

Speaker #3: And what it does that we're really enthusiastic about it and believe that these these fundings , these programs will start monetizing , you know , in the second half of 26 , we believe is sure , because the players really like the program , the gaming operator really likes the idea of not having to deal with cash .

Edward M. Nigro: What it does is that we're really enthusiastic about it and believe that these fundings, these programs will start monetizing in the second half of 2026, we believe for sure, because the players really like the program. The gaming operator really likes the idea of not having to deal with cash. We like it because we're going to obviously build some significant deposits. When you take about 2,500 slot machines, and these numbers you can look at, you can find in any public documents in the state of Nevada results for gaming operators. We put our take, their numbers, and assess it from a standpoint of the transactions we know we have had in the past. These are going to have the potential to put stress on our operational abilities to pay and handle the system. That's why we're already upgrading those significantly.

Speaker #3: And we like it because we're going to obviously deal with some significant . Deposits . Because when you take about 2500 slot machines and these numbers , you can look at , you can find in any public documents in the state of Nevada , results for gaming operators .

Speaker #3: We put our intake, their numbers, and assess it from a standpoint of the transactions we know we have had in the past.

Speaker #3: And these are going to have the potential to put stress on our operational abilities to pay and handle the system . That's why we're already upgrading those significantly because of program like this could have , you know , as we've estimated in the past , deposits , you know , for 2500 machines could be as we've estimated in the past , and discussed with you could be about 30 to $40 million .

Edward M. Nigro: A program like this could have, as we've estimated in the past, deposits for 2,500 machines could be, as we've estimated in the past and discussed with you, about $30 million, $40 million. The transactions every month would be about $200 million. You can see that we're going to get very busy. We are now upgrading significantly our internal technology capabilities to handle extremely large amounts of payments. Our credit card ops. Jeff mentioned, and I'm very proud to say that we now have operating our new application process. The final steps of that are going to be able to identify each influencer we have to make sure that their card members that are signing up as a result of their influencing are credited to them. This was really important because, once again, we had to shut down our application process during this quarter. We've just now reopened it yesterday.

Speaker #3: And the transactions every month would be about 200 million . So you can see that we're going to be at very busy . And we are now upgrading significantly our internal technology capabilities to handle extremely large amounts of payments .

Speaker #3: Our credit card ops , Jeff , mentioned , and I'm very proud to say that we now have operating our new application process and the final steps of that are going to be able to identify each influencer .

Speaker #3: We have to make sure that they're card members that are signing up as a result of their influencing our credited to them . This was really important because once again , we had to shut down our application process during this quarter , and we've just now reopened it .

Speaker #3: Yesterday . So consequently , our credit card growth , we had the slow again . We went from 82 million to 131 million in the third quarter .

Edward M. Nigro: Consequently, our credit card growth, we had to slow again. We went from $82 million to $131 million in the third quarter. The fourth quarter, we had anticipated significant growth to the $131 million. That may be delayed a quarter. We also had to be sure and certain that we could identify the cardholder. We could identify the source of their application. We could make sure it was legitimate and not a fraudulent application because it went viral with this other program. We were getting 10,000 applications a day, of which most of them were fraud. That's why we shut down the program of applications. We didn't shut down, and we have not shut down our credit card program. We're very excited about it.

Speaker #3: In the fourth quarter, we had anticipated significant growth to $131 million. That may be delayed by a quarter, but we also had to be sure.

Speaker #3: And certain that we could identify the cardholder. You could identify the source of their application. We could make sure it was legitimate and not a fraudulent application because it went viral with these other programs.

Speaker #3: We were receiving 10,000 applications a day, of which most of them were fraudulent. That's why we shut down the application program.

Speaker #3: But we didn't shut down . And we have not shut down our credit card program . And we're very excited about it . And seeing it's interesting to see that when we focus on our influencers , like we should , we have three influencers that are producing about 60% of our volume right now on our transactions .

Edward M. Nigro: I've seen, it's interesting to see that when we focus on our influencers like we should, we have three influencers that are producing about 60% of our volume right now on our transactions. We just announced a champion influencer, and Mike Tyson. We're going to be launching a campaign around Mike and all his social media sites in a couple of weeks. It'll be a video campaign. We're very enthusiastic about that. We know you will understand the hiccups along the way in the revenue process. At the same time, we believe the future is really bright for us. There are several other things that we're working on, and we've been really developing these last 60 days, and it is around payments. That is two other areas which we've formed task force on. We've had meetings on. We have engaged consultants on, and that's our acquiring.

Speaker #3: And we just announced a champion influencer, Mike Tyson, and we're going to be launching a campaign around Mike and all his social media sites in a couple of weeks.

Speaker #3: It will be a video campaign . So we're very enthusiastic about that . We know you will understand the hiccups along the way and the revenue process , but at the same time , we believe the future is really bright for us now .

Speaker #3: There are several other things that we're working on, and we've been really developing these last 60 days, and it is around payments.

Speaker #3: And those are two other areas on which we are forming a task force. We've had meetings on this, and we have engaged consultants on our efforts as an acquiring bank.

Edward M. Nigro: As an acquiring bank, we're an issuing bank on credit card. We want to be an acquiring bank on credit card, meaning that we can do all of the merchant transactions for the end user, the merchant. We hope to gain ground in the gaming area where we can take some substantial and others' gaming clients and be their merchant acquiring bank and handle all of their transactions, all of their credit card transactions and payment transactions as an acquiring bank, as a sponsor bank. Now, we're working with two of the largest acquirers in the world right now that we've worked with before, who know us, on and developing even some sponsor bank, potential sponsor bank relationships. It's in its infancy. We've engaged our consultants.

Speaker #3: We're issuing bank on credit cards. We want to be an acquiring bank on credit cards, meaning that we can handle all of the merchant transactions for the end user.

Speaker #3: The merchant , and we hope to gain ground in the gaming area where we can take some substantial and others gaming clients and be their merchant acquiring bank and handle all of their transactions , all of their credit card transactions and payment transactions .

Speaker #3: As an acquiring bank , as a sponsor bank , now we're working with two of the largest acquirers in the world right now that we've worked with before , who know us and developing even some sponsor bank , potential sponsor bank relationships .

Speaker #3: Now it's in its infancy . We've engaged in our consultants , but we are in fully intend to become an acquiring bank because it finishes off .

Edward M. Nigro: We fully intend to become an acquiring bank because it finishes off, if you will, the financial loop in credit cards for us as an institution to be able to be the issuing bank and the acquiring bank. There aren't many out there that do that. Of course, we continue to try to do things that not many people do. The other part and task force that we're working on is Stablecoin. You've been hearing a lot of Stablecoin. We're not. It's very important that we, as a payments bank, understand, know, and if appropriate, participate in Stablecoin. We're also measuring the strategies that we might have. We're in a steep learning curve on it, but we wanted you to know that we are investigating Stablecoin seriously for the future.

Speaker #3: If you will, the financial loop in credit cards for us as an institution, to be able to be the issuing bank and the acquiring bank, there aren't many out there that do that.

Speaker #3: Of course, we continue to try to do things that not many people do. The other part in the task force that we're working on is stablecoin.

Speaker #3: Now, you've been hearing a lot about stablecoins. We're not. And it's very important that we, as a payments bank, understand this.

Speaker #3: And if appropriate, we will participate in stablecoin. We are also measuring the strategies that we might have. We're in a steep learning curve on it, but we wanted you to know that we are investigating stablecoin.

Speaker #3: Seriously for the future . So now all of these payments processing the digital transformation , the credit card , the influencers , our pool player accounts , acquiring stablecoin , being able to do and launch RTP and RFP and being able to do tens upon tens of millions of dollars in ACH transactions a day is our objective to get there requires subject matter experts , and in the last 60 days , we have been doing that as well .

Edward M. Nigro: All of these payments processing, the digital transformation, the credit card, the influencers, our pool player accounts, acquiring, Stablecoin, being able to do and launch RTP and RFP, and being able to do tens upon tens of millions of dollars in ACH transactions a day is our objective. To get there requires subject matter experts. In the last 60 days, we have been doing that as well. Sitting in the room with us today is Hillary, and Hillary Sarnala is our new Chief Legal Officer. I would forgive the analogy, I chased her to get her, but I've known Hillary for a couple of years. She came from Greenberg Traurig, where she was the shareholder in the Finance Regulatory and Compliance Practice Groups, one of the most important practice groups of Greenberg Traurig. She advised domestic and foreign banks.

Speaker #3: Sitting in the room with us today is Hilary and Hilary Sledge . Sano is our new chief legal officer . Now , Hillary and I forgive the analogy .

Speaker #3: I chased her to get her , but I've known Hillary for a couple of years . She came from Greenberg Traurig , where she was the shareholder in the finance , regulatory and compliance practice groups .

Speaker #3: One of the most important practice groups of Greenberg Traurig advised domestic and foreign banks. She advised fintech and payments companies as well as digital asset firms on complex regulatory matters.

Edward M. Nigro: She advised fintech and payments companies and digital asset firms on complex regulatory matters. Imagine that, involved in all these compliance regulatory issues, involved in fintech, involved in payments, and having been involved with BCS in developing our pool player accounts. She knows a great deal about us already, too much. She is going to be an amazing asset with us. She's sitting in the room with us today, and I'm saying welcome to Hillary. She's a dynamo. The other very important acquisition that we just recently had is Olga Vassini. Olga Vassini is a subject matter expert in payments. She’s certified by the Payment Card Industry Professional Certification. She has a PCIP rating, which was issued by the Payment Card Industry Security Standards Council. It’s a very high rating, difficult to obtain. She’s also a certified anti-money laundering specialist, ACAMS, which is another very important certification.

Speaker #3: So, imagine that, involved in all these compliance regulatory issues in fintech, particularly related to payments, and having been involved with bases in developing their pool player accounts, she knows a great deal about us already.

Speaker #3: Too much, but she is going to be an amazing asset with us. She's sitting in the room with us today, and I'm saying welcome to Hillary.

Speaker #3: She's a dynamo. The other very important acquisition that we just recently had is Oleg. Olga, Olga and senior is a subject matter expert in payments.

Speaker #3: She's certified by the Payment Card Industry Professional Certification. She has a PCI rating, which was issued by the Payment Card Industry Security Standards Council.

Speaker #3: It's a very high rating , difficult to obtain . She's also a certified anti-money laundering specialist . Acams , which is a another very important certification .

Speaker #3: She's a currently she has been a payments and fraud director of payments and fraud prevention at a company called Jack entertainment in Cleveland .

Edward M. Nigro: She’s currently, she has been a payments and fraud director of payments and fraud prevention at a company called Jack Entertainment in Cleveland. Now, Jack not only has a very significant casino operation in Cleveland, but she developed for them and with them their online sportsbook program, which she’s just finished for Jack. Think of it. She has her master’s degree in IT engineering and economics. She can code, she can develop, she can build, and she’s remarkable. She’s joined us as a consultant and will be ultimately joining us as a Technology Officer now. Our mission with her is to improve our overall effectiveness by designing and implementing strategic technology-driven enhancements to every part of our operations: payments, ACH, credit card, credit writing, underwriting. We’re going to bring AI and technology in to assist our team.

Speaker #3: Now Jack not only has a very significant casino operation in Cleveland , but she developed for them . And with them , their online sportsbook program , which just finished for .

Speaker #3: So think of it . And she is has her master's degree in it engineering and economics . She codes she can develop . She can build , and she's remarkable .

Speaker #3: And she's joining us . She's joined us as a consultant and will be ultimately joining us as an technology officer . Now our mission with with her is to improve our overall effectiveness by designing and implementing strategic technology driven enhancements to every part of our operations .

Speaker #3: Payments ACH credit card credit rating , underwriting . We are going to bring AI and technology in to assist our team . I heard an interesting comment by a top level AI .

Edward M. Nigro: I heard an interesting comment by a top-level AI CEO who said, “People aren’t going to lose their job to robots or AI. They’re going to lose their job to people who use AI.” I’m telling our team, that isn’t going to be one of us because we’re going to be able to increase our capacity to do business with the team we have using AI. We fully intend to welcome Olga and to welcome Hillary. You can see we’re building a payments system that involves everything from compliance to anti-money laundering to fraud prevention to technology development to mass payment systems that we know we can put in place. You’ve now seen, and we’re proud to say we’re live with the development in just four short months of our new app program.

Speaker #3: CEO who said, "People aren't going to lose their jobs to robots or AI; they're going to lose their jobs to people who use AI."

Speaker #3: So, I'm telling our team that it is going to be one of us, because we're going to be able to increase our capacity to do business with the team.

Speaker #3: We have using AI , and we fully intend to welcome Olga and to welcome Hillary . So you can see we're building a payments system that involves everything from compliance to anti-money laundering to fraud prevention , to technology development , to mass mass payment systems that we know we can put in place .

Speaker #3: You've now seen, and we're proud to say we're live with the development, in just four short months, of our new app program. We're also in development, and soon to be in development of, many programs and API programs that will allow us to move massive amounts of funds in a very short order, very securely, and very safely.

Edward M. Nigro: We’re also in development and soon to be in development of many programs and API programs that will allow us to move massive amounts of funds in very short order, very securely, very safely. That is our important objective. Even our staff and our EVPs, we’ve been sitting together and we are developing new and appropriate authority lines. We have subject matter experts. We are going to let them make their key decisions. I am not going to make every decision in this institution. You can’t. We’re $1.3 billion on balance sheet. If you really look at us, we're a $2.2 billion bank. We have $1 billion off balance sheet now. As a matter of fact, I wanted to point out that our management of our loan portfolios now is over $2 billion because of the off balance sheet portion.

Speaker #3: And that is our important objective. So even our staff and our EV, we've been sitting together and we are developing new and appropriate authority lines.

Speaker #3: We have subject matter experts. We are going to let them make their key decisions. I am not going to make every decision in this institution.

Speaker #3: You can't. We're $1.3 billion on the balance sheet. And if you really look at us, we're at $22.2 billion bank.

Speaker #3: We have $1 billion off balance sheet now, as a matter of fact. I wanted to point out that our management of our loan portfolios is now over $2 billion because of the off balance sheet portion.

Speaker #3: So, we are looking, reorganizing, and arming and equipping all of our team with the tools they need, not only to be responsible, but to have the authority to execute.

Edward M. Nigro: We are looking at reorganizing and arming and equipping all of our team with the tools they need, not only the responsibility, but the authority to execute. That is really important as we grow. We have an excellent team here. We've also changed credit card management. We now have a new credit card manager in place. I am overseeing that directly with him for the time being. We are in a period of change, but we really believe that the change we're making is going to help us become a digital bank and payments company. I've talked about our influencers, our application tech, our organization, our payments. Jeff is focused on some of the issues. Going forward, we feel we've cleaned up our assets quite a bit. We look forward to a good fourth quarter. As I said, our credit card may be a little weak, but not weak weak.

Speaker #3: And that is really important as we grow, and we have an excellent team here. We've also changed credit card management. We now have a new credit card manager in place, and I am overseeing that directly with him for the time being.

Speaker #3: But we are in a period of change. We really believe that the change we're making is going to help us become a digital bank and payments company.

Speaker #3: Now , I've talked about our influencers , our application tech , our organization , our payments . Jeff is focused on some of the issues going forward .

Speaker #3: We feel we've , you cleaned up our assets quite a bit . We look forward to a good fourth quarter . As I said , our credit card may be a little weak , but not weak .

Speaker #3: Weak . You know , I have to learn how to do my forward looking statements a little more appropriately . But suffice it to say that we anticipate that current expectations will be met .

Edward M. Nigro: I have to learn how to do my forward-looking statements a little more appropriately. Suffice it to say that we anticipate that current expectations will be met. With that, I would like to turn it over to questions if we have any, Shawna.

Speaker #3: So with that, I would like to turn it over to questions. If we have any, Seana.

Speaker #2: As a reminder, to ask a question, please use the raise hand feature. I'll unmute your line when it's your turn to speak.

Jeff Wicker: As a reminder, to ask a question, please use the raise hand feature and I'll unmute your line once you return to speak. We'll take our next question from Tim Coffey. Tim, please go ahead.

Speaker #2: And we'll take our next question. Question from Tim Coffey. Tim, please go ahead.

Speaker #5: Thanks, Martin. And good morning, Jeff. How are you guys doing?

[Analyst 1]: Okay. Thanks. Morning, Ed. Morning, Jeff. How are you guys doing?

Speaker #3: Hey Tim, nice to hear from you.

Edward M. Nigro: Hey, Tim. Nice to hear you.

Speaker #5: Thank you. So I guess my first question has to do with the fraud and the credit card side. How long has that been taking place, and when did you detect it?

[Analyst 1]: Good. I guess my first question has to do with the fraud and the credit card side. How long has that been taking place, and when did you detect it?

Speaker #3: Well, this is a fraud that's been in place since the inception of the card. But this big fraud started in July.

Edward M. Nigro: This is a fraud that's been in place since the inception of the card. This big fraud started in July, where we started to see application fraud, and we were trying to patchwork, as I said in one of my last calls, our existing platform. What we did is we had to, and I reported, I think last time, that we had shut down the applications as well. When this large, there was a large marketing agreement executed back in early 2024 by Credit Card, which was to grow credit balances. There was a belief, and actually, the belief was contrary to our mission statement for the Credit Card, but there was a belief that we could grow the credit side of the credit card and make additional income, where the focus we have in gaming is on the payment side and the interchange side, not credit.

Speaker #3: We started to see application fraud, and as I said in one of my last calls, we were trying to patchwork our existing platform.

Speaker #3: So what we did is we had to, and I reported, I think last time that we had shut down the applications as well.

Speaker #3: But when this , this large , there was a large marketing agreement executed back in early 24 . By credit card , which was to grow .

Speaker #3: Credit balances . There was a belief . And actually the belief was contrary to our mission statement for the credit card . But there was a belief that we could grow the credit side of the credit card and make additional income where the focus we have in gaming is on the payment side and the interchange side , not credit .

Speaker #3: So when this this program was launched , it to the mailing to 700,000 people , a direct mail piece and that direct mail piece had created a lot of noise .

Edward M. Nigro: When this program was launched, it did a mailing to 700,000 people, a direct mail piece. That direct mail piece had created a lot of noise, and we started to see these apps come in because there was a $200 reward for your first $1,000 spend. There were those that were starting to try to have a heyday with that and acquire through AI identification enhancements and photo enhancements, get cards, quickly run up the $1,000 spend, grab the $200, and do it with another card. We detected that, started to detect that, and started to set limits on spend, and started to do all of the manual things we could do because we're not that big a credit card company.

Speaker #3: And we started to see these apps come in because there was a $200 reward for your first $1,000 spent, and there were those that were starting to try to have a heyday with that.

Speaker #3: And acquire through AI identity identification enhancements and photo enhancements. Get cards quickly, run up the thousand dollars spent, grab the $200, and do it with another card.

Speaker #3: So we detected that, started to detect that, and started to set limits on the spend and started to do all of the manual things we could do because we're not that big a credit card company.

Speaker #3: So when we saw this kind of swamping of of applications coming in , we knew that there was an issue . We knew they weren't coming from our influencers because our influencers , we had slowed down because we couldn't track their customers .

Edward M. Nigro: When we saw this kind of swamping of applications coming in, we knew that there was an issue where we knew they weren't coming from our influencers because our influencers, we had slowed down because we couldn't track their customers. Of course, if we can't track their customers, they can't get paid their fee from the interchange, their portion of the interchange fee. To answer your question, we started detecting it last summer. This has been going on for a while. We've opened and shut it down. We put up various barriers. They circumvented those barriers. We kept, we did spend shutdowns, and finally, we did a shutdown where if the merchant code wasn't immediately gaming because think of the fraudsters. The fraudsters weren't our gaming customers. The fraudsters don't want to load money onto a gaming app. They want to get money out of an ATM or merchandise.

Speaker #3: And of course , if we can't track their customers , they can't get paid . Their their fee from the from the interchange , their portion of the interchange fee .

Speaker #3: So, to answer your question, we started detecting it last summer. This has been going on for a while. We've opened and shut it down.

Speaker #3: We put up various barriers . They circumvented those barriers . We kept . We did spend shut downs . And finally we did a shutdown where if the merchant code wasn't immediately gaming because think of the fraudsters .

Speaker #3: The fraudsters weren't our gaming customers. The fraudsters don't want to load money onto a gaming app; they want to get money out of an ATM or merchandise.

Speaker #3: So we started tracking immediately . The spend and would shut them down immediately . When we saw this , it the first spin was was not the game .

Edward M. Nigro: We started tracking immediately the spend and would shut them down immediately when we saw that the first spend was not the gaming codes. We were able to control it that way, but not the way we should be able to control it, which Jeff mentioned. Now we are, in which you know Nicholas built through Royal Media. We built and developed our own application now that is pretty, it is very strong. I hope I answered your question. It is not that it is something that has been going on for a while. We shut down that whole program, everything.

Speaker #3: The codes . So we were able we were able to control it that way , but not the way we should be able to control it .

Speaker #3: Which Jeff mentioned . Now we are in which , you know , Nicholas built through Royal Media . We built a developed the the our own application .

Speaker #3: Now that is pretty . It very strong . So I hope I answered your question . So it's not it's something that's been going on for a while .

Speaker #3: And then we shut down that whole program. Everything.

Speaker #5: But still had good credit card volume this quarter . Still . Yeah . What's that ? Oh , but the volume and the credit card was still , you know , the transaction volume is still strong this quarter .

[Analyst 1]: We still had good credit card volume this quarter.

Edward M. Nigro: Yeah, what's that?

[Analyst 1]: The volume on the credit card was still, you know, the transaction volume is still strong this quarter because they shut it down.

Speaker #5: If they shut it down, yeah, we do.

Edward M. Nigro: Yeah, we do. Yeah, because our existing users, we know we have, and they're still using the card very well. It's the growth that we really, really slowed down, not that it's used by our gaming users.

Speaker #3: Yeah . Because our existing users , we know we have . And they're still using the card very well . It's the growth that we've really , really slowed down , not the use by our gaming users .

Speaker #4: That was the direct mail campaign that we issued that really exasperated the problem. Our gaming customers are still strong, and it's the same customers we've had for quite a while now.

[Analyst 1]: Yeah, it was the direct mail campaign that we issued that really exacerbated the problem. Our gaming customers are still strong, and it's the same customers we've had for quite a while now. Okay. Okay. I'm going to switch to the new non-accruals in the quarter. Were these relatively recently funded loans, or were they a bit older? None of them were recently funded, so they're older loans. Nothing less than 18 months. Okay. Jeff, I appreciate the color you gave on the SBA issues, right? I mean, that pipeline is essentially shut down right now, correct? SBA? With the government, right? Yeah. We've funded all the loans that we can fund, and we won't be able to do any more until we open it.

Speaker #4: So .

Speaker #5: Okay , okay . And then if you switch to the the new Non-accruals in the quarter , were these relatively recently funded loans or were they a bit older ?

Speaker #4: None of them are recently funded, so they're older loans.

Speaker #5: Okay .

Speaker #4: Nothing less than 18 months.

Speaker #5: Okay . And then and Jeff , I appreciate the color you gave on on the SBA issues . Right ? I mean , that that pipeline is essentially shut down right now .

Speaker #5: Correct ?

Speaker #4: SBA well , when the government yes , we we we've funded all the loans that we can fund and we won't be able to do any more .

Speaker #4: We .

Speaker #3: We we've written about , I think , 48 million in loans this month originated , but we can't issue them because we have to have approval of the SBA .

Edward M. Nigro: We've written about $48 million in loans this month originated, but we can't issue them because we have to have approval of the SBA. The other thing that's a challenge for us, we can't sell any loans right now. It's stretching our cash a little bit, but nothing we can't deal with. We have the whole quarter in which to sell the loans. We don't lose anything in terms of the sales. At the same time, this government's got to reopen because none of these loans are issued to these borrowers. They can't close their deals. As I said, we're building a significant inventory. Like Nancy, when I talked to her when the government was threatening to shut down a month ago, we went and got as many PLP numbers as we could. We got about 19 that we were able to process loans on right now.

Speaker #3: The other thing that's a challenge for us is that we can't sell any loans right now, so it's stretching our cash a little bit.

Speaker #3: But nothing we can't deal with. So, we have the whole quarter in which to sell the loans. We don't, you know, we don't lose anything in terms of the sales.

Speaker #3: But at the same time , this government's got to reopen because , no , none of these loans are issued to these , these borrowers .

Speaker #3: They can't close their deals . And we we have , as I said , we're building a significant inventory like Nancy , when when I talked to her , when the government was threatening to shut down a month ago , we went and got as many PLP numbers as we could .

Speaker #3: We have about 19 loans that we were able to process at this time. However, as I said, the final execution of those loans and the sale of those loans depend on the government.

Edward M. Nigro: As I said, the final execution of those loans and the sale of loans depends on the government being open.

Speaker #6: Open , right ?

Speaker #5: Because it's not just the funding alone; it's also the secondary market.

[Analyst 1]: Right, because it's not just the funding of the loans. It's also the secondary market.

Speaker #7: Exactly .

Edward M. Nigro: Exactly.

[Analyst 1]: Okay. Yeah.

Speaker #4: We are we are continuing to to approve loans internally . and get them lined up . So when the government opens , we will have a pipeline ready to go to the government .

Edward M. Nigro: We are continuing to approve loans internally and get them lined up so when the government opens, we will have a pipeline ready to go to the government.

Speaker #5: So okay . Okay , great . That's helpful . And then on the new incentive structure , are you seeing any turnover in employees ?

[Analyst 1]: Okay. Great. That's helpful. On the new incentive structure, are you seeing any turnover in employees?

Speaker #7: No .

Edward M. Nigro: No. Okay. We have only the ones that are designed turnovers that I've had to make some changes in. We'll be announcing the full scope of those. As I said, where we have made changes is in technology and in the credit card. Of course, our CEO.

Speaker #5: Okay .

Speaker #7: We have only the ones that are designed turnovers that I've had to make some changes in. And we'll be announcing the full scope of those.

Speaker #7: But, as I said, we have made changes in technology and in the credit card.

Speaker #3: And of .

Speaker #6: Course our CEO .

Speaker #4: And all the producers have committed to this change. Yeah. And are on board with us.

[Analyst 1]: Yeah, all the key producers have committed to this change.

Edward M. Nigro: Yeah.

[Analyst 1]: They are on board with us.

Speaker #6: So no , we .

Edward M. Nigro: No, we have had no. As a matter of fact, I am really pleased with our senior management team at all levels, EVPs, SVPs, AVPs, staff. They're incredible.

Speaker #3: We have had no as a matter of fact , I am really pleased with our senior management team at all levels for Ave staff .

Speaker #3: Their incredible .

Speaker #5: Great . That's positive . And then I've got one last check the box question for you Ed how how is the the CEO succession search going ?

[Analyst 1]: Great. Good. That's positive. I've got one last check-the-box question for you, Ed. How is the CEO succession search going?

Speaker #3: There is no search going on right now.

Edward M. Nigro: There is no search going on right now.

Speaker #8: All right .

[Analyst 1]: All right. Those are my questions. Thank you.

Speaker #5: Those are my questions. Thank you.

Speaker #2: Okay. We'll take our next question from Matthew Erdener. Please go ahead.

Jeff Wicker: Okay. We'll take our next question from Matthew Erdner. Please go ahead.

Speaker #9: Hey , guys . How's it going ? Thanks for taking the question . Yeah . Could you talk a little bit more about the the partnerships with the influencers and kind of how that transaction structure works ?

[Analyst 2]: Hey, guys. How's it going? Thanks for taking the question. Could you talk a little bit more about the partnerships with the influencers and kind of how that transaction structure works? For example, with Mike Tyson, are we going to need to kind of bake in any more expenses there?

Speaker #9: You know , for example , with Mike Tyson , are we going to need to kind of bake in any more expenses ? There ?

Speaker #3: Mike . Mike is amazing . And there was a big press release . You may have seen or not , but Mike is a partner in Neopets as well with with the Neopets company and he invested in both bets , and Mike is going to be one of our influencers .

Edward M. Nigro: Mike is amazing. There was a big press release, you may have seen or not. Mike is a partner in Bull Bets as well with the Bull Bets company. He invested in Bull Bets. Mike is going to be one of our influencers. I executed an agreement with him about two weeks ago. Here's how our influencers work, and they all work the same, including Mike. They receive, for each card that is identified as their player, a piece of the interchange fee. I don't want to reveal all of our internal operations and what we pay them because it's a competitive issue. We have an interchange that comes in from these transactions, and we have their participation. We pay nothing upfront. We pay no fees. We pay no promotion fees.

Speaker #3: And I executed an agreement with him about two weeks ago . Now , here's how our influencers work . And they all work the same , including .

Speaker #10: Mike, is there a receipt for each card that is identified?

Speaker #3: As their player , they receive a a piece of the interchange fee . Now , I don't want to reveal all of our internal , you know , operations and what we pay them because it's a competitive issue .

Speaker #3: So, what they do is that we have an interchange that comes in from these transactions, and we have them participate in their participation.

Speaker #3: We pay nothing up front. We pay no fees; we have no promotion fees. They get what they have; we have a couple of influencers.

Edward M. Nigro: We have a couple of influencers we do give a monthly fee to. There are a couple of very big ones we just signed that have a big history of success, but they're short-term so that we can see if indeed they're worth the initial payment. In no case do we pay any influencers anything that would be considered a substantial fee. You see some of the influencers, some of them that are paid by some of the big sports betting companies that pay them $5 million, $6 million, $7 million a year. We don't do any of that.

Speaker #3: We do give us a monthly fee to there's a couple of very big ones. We just signed that have a big history of success, but they're short term so that we can see if indeed there were the initial payment.

Speaker #3: But in pay no no case do we pay any influencers anything that would be considered a substantial fee , you know , like you see some of the influencers .

Speaker #3: Some of them are paid by some of the big sports betting companies that pay them $5 million, $6 million, or $7 million a year.

Speaker #3: We don't do any of.

Speaker #11: That .

Speaker #4: Yeah , we have we anticipate that the the marketing costs related to the influencers actually will be less than the marketing cost of the direct mail campaigns that we're working on .

[Analyst 1]: We anticipate that the marketing costs related to the influencers actually will be less than the marketing costs of the direct mail campaigns that we're working on as we change that strategy overall.

Speaker #4: As we change that strategy, so overall.

Speaker #9: That's that's helpful . And then , you know , based off of those influencers and I guess , you know , since you guys have kind of reopened , have you seen that acceleration in the transaction numbers ?

[Analyst 2]: That's helpful. Based off of those influencers, and I guess since you guys have kind of reopened, have you seen that acceleration in the transaction numbers? Just to kind of frame it, do you guys have any expectation of what these influencers can bring on and how many people they can direct to your card?

Speaker #9: And then , you know , just to kind of frame it , do you guys have any expectation of , you know what these influencers can bring on and how many people they can direct to your card ?

Speaker #12: Well, let me tell you right now, three influencers right now amount to $14 million, $6 million, $20 million, and $25 million a month in transactions.

Edward M. Nigro: Yeah, let me tell you right now, three influencers right now amount to $14 million, $6 million, is $20 million, $25 million a month in transactions. Just three. We've stopped them. They have not been expanding much at all in the last 60 days. We're releasing them now to expand. Do we feel, you know, that we can increase the number of cards out there relatively significantly? Yes, because our volume is pretty small still. We've seen the results on the influencers and what they do. In other words, when I talk about three influencers, when we're doing $30 million or $40 million a month in transactions, and you can see three of them are $20 million of it, you get the kind of the picture of how important they can be and they can grow.

Speaker #12: Just three . And and we've stopped them . They have not been expanding much at all in the last 60 days . So we're releasing them now to expand .

Speaker #12: So do we feel , you know , that we can increase the number of cards out there relatively . Significantly , yes . Because our volume is pretty small .

Speaker #12: Still. And we've seen the results on the influencers and what they do.

Speaker #3: Do . In other words , when when I talk about three , three influencers , we we do .

Speaker #11: When we're doing $30 million or $40 million a month in.

Speaker #3: Transactions , and you can see three of them are 20 million of it . You get the kind of the picture of how important they can be , and they can grow .

Speaker #9: Right . That's very helpful there and then in terms of expenses and you kind of mentioned the the subject matter hires , should we expect kind of those non-interest expenses to run a little bit higher going forward in line similar to this quarter .

[Analyst 2]: That's very helpful. In terms of expenses, you mentioned the subject matter hires. Should we expect those non-interest expenses to run a little bit higher going forward, in line similar to this quarter, or would they be more in the $10 to $11 million range similar to the first and second quarter?

Speaker #9: Or would they be more in the 10 to 11 million range, similar to the first and second quarters?

Speaker #4: So I would expect them to back up from this quarter to more of a normal range . Most of that was one time related or one time , but unusual expenses that we've experienced during the quarter .

[Analyst 1]: No, I would expect them to back up from this quarter to more of a normal range. Most of that was one-time related, or not one-time, but unusual expenses that we've experienced during the quarter.

Speaker #4: .

Speaker #9: Got it . And then last one , for me , just kind of , you know , looking at the second quarter of next year with the gaming deposit expectations and kind of the the growth that's going to come for that .

[Analyst 2]: Got it. Last one for me, just kind of looking at the second quarter of next year with the gaming deposit expectations and the growth that's going to come for that. Is there anything that you guys are going to need to do in terms of backend work to prepare for that? What is the expectation of slot machines and other partners to come on board to drive that growth and profitability there?

Speaker #9: Is there anything , you know , that you guys are going to need to do in terms of back end work ? You know , to prepare for that ?

Speaker #9: And then , you know , I guess , what is the expectation of , you know , slot machines and and I guess other partners to come on board to drive that growth and profitability .

Speaker #9: There .

Speaker #13: Well, I think I was trying to answer that question with respect to preparation and backend with the technology. The technology.

Edward M. Nigro: I was trying to answer that question with respect to preparation and backend with the technology, the technology experts and the subject matter experts we're bringing on board because, yes, what we intend to do is API development that will give us instant connectivity to our various clients, right to our digital online payment system for, you know, the pool player accounts. Yes, we're preparing to do many, many, we're a very high volume of transactions. We've been bringing the staff on board to do that, particularly the development staff. That's the interesting part of technology, you need a few very smart people in order to accomplish it. We're very excited about the enhancements we're making. What was the second part of your question?

Speaker #3: Experts in the subject matter experts , we're bringing on board because . Yes . And what we tend to do is API development .

Speaker #3: That will give us instant connectivity to our various clients . Right to our our digital online payment system for , you know , the pool player accounts .

Speaker #3: So yes, we're preparing to go to [specific event or location]. We have many, many transactions, and we're a very high volume in transactions. We've been bringing the staff on board to do that.

Speaker #3: And particularly the development staff , that's the interesting part of technology is that you don't you need a few very smart people in order to accomplish it .

Speaker #3: And we're very excited about the enhancements we're making. And what was the second part of your question?

Speaker #9: Just kind of the growth and influx that you're expecting as a part of the profitability drive?

[Analyst 2]: Just kind of the growth and influx that you're expecting as a part of the profitability drive.

Speaker #14: Let me explain something .

Edward M. Nigro: Let me explain something here that I think is important to understand. When we say that these slot companies have come on board, Bull Bets has brought in Distill and Terribles, and yes, there are some other very important clients I know of in the pipeline. It's a pipeline. The first important thing is to get Bull Bets live, and they're waiting on GLI to finish the product testing, which I'm told is going very well. Then to be live with the program. Once it's live, they've got to bring their customers in and get them on board the app. There's a process here of them marketing to their customers to get this app on their phones and to use them. That process takes some time to develop.

Speaker #3: Here, I think it is important to understand: when we...

Speaker #14: Say that these slot companies.

Speaker #3: I have come on board; both bets have brought in Distill and Terrible's. And yes, there are some other very important clients I know of in the pipeline, but it's a pipeline.

Speaker #3: The first important thing is to get both the and they're waiting on Glee to finish the product testing, which I'm told is going very well.

Speaker #3: And then to be live with the program now, once it's live, they have to bring their customers in and get them on board the app.

Speaker #3: So there's a process here of them marketing their marketing to their customers to get this app on their phones and to use them. That process takes some time to develop.

Speaker #3: So when we talk about the deposits we expect in the transactions , we expect we take a market share . You know , and we'll say that when it's mature , when it's fully mature , we'll say it's 50% of their customers .

Edward M. Nigro: When we talk about the deposits we expect or the transactions we expect, we take a market share, you know, and we'll say that when it's mature, when it's fully mature, we'll say it's 50% of their customers. That's what we've used right now. Our build period is from 0 to 50% so that we don't try to anticipate deposits at the highest level instantly. It takes time. We think it takes three to six months just for market penetration for their customers. That's why I'm talking about our deposits to really start being significant in the second quarter of next year.

Speaker #3: And that's what we've used right now . And then . So our build period is from 0 to 50% . So that we don't try to anticipate deposits .

Speaker #3: You know , at the highest level instantly . So it takes time . We think it takes 3 to 6 months , you know , for market penetration on for , you know , for their customers .

Speaker #3: And so that's why I'm talking about our deposits — to really start being significant in the second quarter of next year.

Speaker #9: Got it. That's very helpful. Thank you for the comments and time today.

[Analyst 2]: Got it. That's very helpful. Thank you for the comments and the time today, Ed.

Speaker #15: I .

Speaker #3: No you're welcome Matt .

Edward M. Nigro: No, you're welcome, Ed.

Speaker #2: Again , if you have any questions , please feel free to raise your hand . And it looks like we have no further questions from the participants at this time .

Jeff Wicker: Again, if you have any questions, please feel free to raise your hand. Ed, it looks like we have no further questions from the participants at this time.

Speaker #15: I want to thank everybody for your support. You're the best bunch of.

Edward M. Nigro: I want to thank everybody for your support. You're the best bunch of shareholders and employees that one could ask for. I've met so many of you one-on-one through all the conferences and all of the investment times. You know some of the challenges we've had, but you also have seen our resiliency in exercising our business plan. We think that it's more exciting than ever. Thank you.

Speaker #3: Shareholders and employees . That one could ask for and I met so many of you one on one through all the conferences and all of the investment times and you know , of some of the challenges we've had .

Speaker #3: But you also have seen our resiliency in exercising our business plan, and we think that it's more exciting than ever. So, thank you.

Jeff Wicker: This concludes the Q3 2025 earnings conference call for GBank Financial Holdings Inc. Thank you for your attendance. Goodbye.