UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-42621
GBANK FINANCIAL HOLDINGS INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada
82-3869786
( State or other jurisdiction of
incorporation or organization)
(I.R.S. EmployerIdentification No.)
9115 W. Russell Rd., Ste. 110
Las Vegas, Nevada
89148
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (702) 851-4200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value
GBFH
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 5, 2025, the registrant had 14,279,776 shares of common stock, $0.0001 par value per share, outstanding.
Table of Contents
Page
PART I.
FINANCIAL INFORMATION
1
Item 1.
Financial Statements
Consolidated Balance Sheets (Unaudited)
Consolidated Statements of Income (Unaudited)
2
Consolidated Statements of Comprehensive Income (Unaudited)
3
Consolidated Statements of Stockholders’ Equity (Unaudited)
4
Consolidated Statements of Cash Flows (Unaudited)
5
Notes to Consolidated Financial Statements (Unaudited)
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
40
Item 4.
Controls and Procedures
PART II.
OTHER INFORMATION
41
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
42
Signatures
43
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the three and six months ended June 30, 2025 (this “Form 10-Q”) may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which may be identified by the use of such words as “may,” “believe,” “expect,” “anticipate,” “consider,” “should,” “plan,” “estimate,” “predict,” “continue,” “probable,” and “potential” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of GBank Financial Holdings Inc. (the “Company”) and its wholly-owned subsidiary GBank (the “Bank”), and the Company’s strategies, plans, objectives, expectations and intentions, and other statements contained in this Form 10-Q that are not historical facts. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that are difficult to predict and are generally beyond our control and that may cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Factors that may cause actual results to differ from those results expressed or implied include those factors listed under the heading “Risk Factors” in the Company’s prospectus dated April 24, 2025, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on April 25, 2025, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (File No. 333-285750) and in this Form 10-Q. In addition, these factors include but are not limited to:
ii
The Company’s ability to predict results or the actual effects of its plans or strategies is inherently uncertain. As such, forward-looking statements can be affected by inaccurate assumptions made, or by known or unknown risks and uncertainties. Because of these risks and other uncertainties, our actual future results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this Form 10-Q. In addition, our past results of operations are not necessarily indicative of our future results. Consequently, no forward-looking statement can be guaranteed. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect conditions only as of the date of this filing. Forward-looking statements speak only as of the date of this document. The Company undertakes no obligation (and expressly disclaims any obligation) to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements, except as required by applicable law.
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
GBank Financial Holdings Inc. and Subsidiary
(Dollars in thousands, except per share data)
ASSETS
June 30, 2025
December 31, 2024
Cash and due from banks
$
11,877
9,262
Interest-bearing deposits with other financial institutions
131,352
114,860
Total cash and cash equivalents
143,229
124,122
Investment securities:
Available for sale, at fair value (amortized cost of $84,450 at June 30, 2025 and $67,308 at December 31, 2024)
82,886
65,609
Held to maturity, at amortized cost (fair value of $39,642 at June 30, 2025 and $40,392 at December 31, 2024)
39,515
40,569
Loans held for sale
45,242
32,649
Loans, net of deferred fees and costs
871,630
815,958
Less: Allowance for credit losses
(9,205
)
(9,114
Loans, net
862,425
806,844
Premises and equipment, net
770
835
Operating lease right-of-use asset
5,736
4,518
Bank-owned life insurance
14,446
14,236
Loan servicing assets, net
9,736
8,976
Federal Home Loan Bank stock, at cost
5,513
4,652
Other assets
22,926
19,354
Total Assets
1,232,424
1,122,364
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand
228,913
239,672
Interest-bearing demand
57,254
68,132
Savings
309,559
256,724
Time
436,738
370,552
Total deposits
1,032,464
935,080
Subordinated debt
26,126
26,088
Operating lease liability
6,121
4,839
Other liabilities
15,964
15,657
Total liabilities
1,080,675
981,664
Commitments and Contingencies (Note 10)
Stockholders' Equity:
Common stock, par value $0.0001; 50,000,000 shares authorized; 14,273,519 shares issued and outstanding at June 30, 2025 and 14,252,435 shares issued and outstanding at December 31, 2024
Additional paid-in capital
79,291
77,571
Retained earnings
73,662
64,437
Accumulated other comprehensive loss
(1,205
(1,309
Total Stockholders' Equity
151,749
140,700
Total Liabilities and Stockholders' Equity
See Notes to Consolidated Financial Statements (Unaudited).
Three Months Ended June 30,
Six Months Ended June 30,
INTEREST INCOME
2025
2024
Interest and fees on loans
17,659
16,360
34,495
31,690
Interest on deposits with other financial institutions
1,365
1,165
2,557
2,137
Taxable interest on investment securities
1,414
868
2,695
1,882
Other interest bearing balances
117
96
217
170
Total interest income
20,555
18,489
39,964
35,879
INTEREST EXPENSE
Interest on deposits
7,905
6,848
15,135
13,046
Interest on short-term borrowings
-
7
111
Interest on subordinated debt
262
286
547
571
Total interest expense
8,167
7,141
15,682
13,728
Net interest income
12,388
11,348
24,282
22,151
PROVISION FOR CREDIT LOSSES
1,092
295
1,813
315
Net interest income after provision for credit losses
11,296
11,053
22,469
21,836
NONINTEREST INCOME
Gain on sale of loans
2,593
3,163
5,130
5,246
Loan servicing income
750
534
1,453
594
Service charges and fees
54
82
Net interchange fees
1,535
146
3,538
167
Other income
452
282
615
482
Total noninterest income
5,384
4,166
10,847
6,571
NONINTEREST EXPENSE
Salaries and employee benefits
6,235
5,752
12,635
11,042
Data processing
1,333
706
2,738
1,540
Occupancy expense
400
417
792
865
Legal and professional fees
1,271
1,147
Loan related costs
330
434
714
836
Audits and exams
397
153
894
238
Advertising and marketing
371
84
735
213
FDIC insurance
129
108
251
226
Other
630
728
1,273
1,401
Total noninterest expense
10,396
9,132
21,303
17,508
INCOME BEFORE PROVISION FOR INCOME TAXES
6,284
6,087
12,013
10,899
Provision for income taxes
1,486
1,411
2,710
2,523
NET INCOME BEFORE EQUITY INVESTMENT LOSS
4,798
4,676
9,303
8,376
Net loss attributable to equity investment
(43
(78
NET INCOME
4,755
9,225
PER COMMON SHARE DATA
Basic earnings per common share
0.33
0.36
0.65
Diluted earnings per common share
0.63
(Dollars in thousands)
Net income
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities available for sale
(255
77
135
69
Income tax benefit (expense) related to unrealized
losses on securities available for sale
59
(18
(31
(16
Total other comprehensive income (loss), net of tax
(196
104
53
Comprehensive income
4,559
4,735
9,329
8,429
Accumulated
Additional
Common Stock
Paid-In
Retained
Comprehensive
Shares
Amount
Capital
Earnings
Income (Loss)
Total
Balance, December 31, 2023
12,746,649
52,877
45,801
(252
98,427
3,701
Other comprehensive loss, net of tax
(6
Exercise of stock options
70,375
106
Director Compensation Plan
6,526
98
Other stock-based compensation
240
Balance, March 31, 2024
12,823,550
53,321
49,502
(258
102,566
Other comprehensive income, net of tax
Common stock issued to BCS
231,508
3,299
6,185
103
242
Balance, June 30, 2024
13,061,243
56,965
54,178
(199
110,945
Balance, December 31, 2024
14,252,435
4,470
300
16,000
24
2,477
91
483
Stock option loan activity
548
Balance, March 31, 2025
14,270,912
78,717
68,907
(1,009
146,616
2,607
490
Balance, June 30, 2025
14,273,519
Six Months Ended
June 30, 2024
Cash flows from operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Provision for credit losses
Depreciation
116
134
Amortization and writeoff of loan servicing assets
2,640
2,471
Amortization of operating lease right of use assets
436
384
Amortization of subordinated debt issuance costs
38
Investment securities amortization and accretion, net
(368
(159
Stock compensation expense
1,148
684
(5,130
(5,246
Gross originations of loans held for sale
(171,804
(156,788
Proceeds from sale of loans held for sale
160,941
156,713
Income from bank owned life insurance
(210
Net change in deferred income taxes
32
Increase in accrued interest receivable
(422
(962
Increase in other assets
(3,213
(6,845
Net change in operating lease liability
(372
(276
Increase in accrued interest payable and other liabilities
307
2,026
Net cash (used in) provided by operating activities
(4,823
669
Cash flows from investing activities:
Purchases of premises and equipment
(51
(70
Purchase of securities available for sale
(21,903
Maturities and repayments of investment securities available for sale
5,152
401
Maturities and repayments of investment securities held to maturity
1,031
41,360
Purchase of FHLB stock
(861
(1,429
Purchased loans
(44,184
Net change in loans
(57,394
(83,296
Net cash used in investing activities
(74,026
(87,218
Cash flows from financing activities:
Net increase in deposits
97,384
94,668
Net change in short-term borrowings
(18,000
Proceeds from repayment of stock option loans
Net proceeds from issuance of common stock
Net cash provided by financing activities
97,956
76,774
Net increase (decrease) in cash and cash equivalents
19,107
(9,775
Cash and cash equivalents beginning of period
97,933
Cash and cash equivalents end of period
88,158
Supplemental disclosures of cash flow information:
Cash payments for interest
15,796
17,552
Cash payments for income tax
1,543
2,270
Supplemental schedule of noncash investing and financing activities
Right of use asset and lease liabilities
1,654
Capitalized mortgage servicing rights
3,400
3,116
Loans held for sale transferred to held for investment
53,292
Investment in BCS
GBank Financial Holdings Inc.
Notes to Unaudited Consolidated Financial Statements
Note 1 - Nature of Business
Basis of Presentation
These unaudited interim financial statements are prepared on a consolidated basis for GBank Financial Holdings Inc. (“GBFH”) and its wholly owned subsidiary, GBank (the “Bank”). References herein to the “Company” refer to the consolidated entity and its financial statements. The Company has prepared these unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, SEC rules that permit reduced disclosure for interim periods, and Rule 8-03 of Regulation S-X. In the opinion of management, all adjustments (all of which are of a normal recurring nature) that are necessary for a fair statement are reflected in the unaudited consolidated financial statements. There have been no material changes to the Company's significant accounting policies for the three and six months ended June 30, 2025. The December 31, 2024 consolidated balance sheet information contained in this Quarterly Report on Form 10-Q was derived from the Company's 2024 audited consolidated financial statements. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024, including the notes thereto, included in the Company’s Registration Statement on Forms S-1 and S-1/A. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. All significant intercompany transactions and accounts have been eliminated.
The Company has one reportable segment. The Company’s chief operating decision maker (“CODM”) evaluates the operations of the Company using consolidated information for purposes of allocating resources and assessing performance. See Note 12 - Segment Reporting for more information.
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, “Subsequent Events,” the Company’s management has evaluated subsequent events for potential recognition or disclosure through the date of the issuance of these consolidated financial statements. No subsequent events were identified that would have required a change to the consolidated financial statements or disclosure in the notes to the consolidated financial statements.
To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.
Nature of Operations
GBFH is a registered bank holding company whose wholly-owned banking subsidiary, GBank, provides banking services to commercial and consumer customers. GBank’s business is concentrated in the Las Vegas, Nevada area and is subject to the general economic conditions of that area. GBank’s primary market for deposit customers is in Las Vegas and Clark County, Nevada, although GBank accepts deposits from deposit listing services as needed to support its funding needs. GBank’s lending operations are carried out in both (i) its local market area, comprised of Nevada, California, Utah, and Arizona, and (ii) across the United States primarily through the origination, sale, and servicing of U.S. Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) loans.
Recent Accounting Pronouncements Adopted
The following reflect accounting pronouncements adopted by the Company:
ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”), was issued in December 2023 to enhance income tax disclosures primarily through the disaggregation of the rate reconciliation and disclosure of income taxes paid to each federal and state jurisdiction (net of refunds). The amendments in this update are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, and may be applied on a prospective or retrospective basis. As the amendments in this update relate entirely to enhanced disclosure requirements, adoption of this guidance will not have an impact on the Company's financial position or results of operations. The Company expects to provide these enhanced income tax disclosures beginning with its annual report on Form 10-K filing for the year ending December 31, 2025.
Recent Accounting Pronouncements Pending Adoption
The following reflect accounting pronouncements pending adoption by the Company:
ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) – Disaggregation of Income Statement Expenses (“ASU 2024-03”) was issued in November 2024 and requires additional disclosure about specified categories of expenses included in relevant expense captions presented on the face of the consolidated statements of income. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively to consolidated financial statements issued for reporting periods after the effective date of ASU 2024-03, or retrospectively to all prior periods presented in the consolidated financial statements. The Company is currently evaluating the impact that ASU 2024-03 will have on its disclosures.
Note 2. Investment Securities
The amortized cost, unrealized gains and losses, allowance for credit losses, and estimated fair values of investment securities are summarized as follows as of the dates indicated:
Amortized
Unrealized
Allowance for
Fair
Cost
Gains
Losses
Credit Losses
Value
Available for sale securities:
Residential mortgage-backed securities
84,450
105
1,669
Held to maturity securities:
155
28
39,642
67,308
1,699
46
223
40,392
Accrued interest receivable is excluded from the estimate of credit losses for available for sale and held to maturity securities. At June 30, 2025, accrued interest receivable totaled $245 thousand for available for sale securities and $161 thousand for held to maturity securities, and was reported in other assets on the Company’s consolidated balance sheets. At December 31, 2024, accrued interest receivable totaled $194 thousand for available for sale securities and $170 thousand for held to maturity securities, and was reported in accrued interest receivable on the Company’s consolidated balance sheets.
There were no gross realized gains or losses from the sale of available for sale securities during each of the three- and six-month periods ended June 30, 2025 or 2024.
The fair value of investment securities pledged as collateral for potential borrowing purposes (see Note 7) totaled $98.1 million at June 30, 2025 and $79.7 million at December 31, 2024.
The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of June 30, 2025:
Available for Sale
Held to Maturity
Amortized Cost
Fair Value
Due in one year or less
Due after one but within five years
Due after five years but within ten years
Due after ten years
The actual maturities of mortgage-backed securities may differ from their contractual maturities because the loans underlying the securities may be repaid without any penalties. Therefore, maturity schedules are not presented for mortgage-backed securities.
The following tables present gross unrealized losses and fair value of debt security investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates indicated.
Less Than 12 Months
12 Months or More
Number of Securities
Gross Unrealized Losses
17
63,322
1,415
2,043
254
23
65,365
Total temporarily impaired available for sale securities
4,190
16
15,528
12
19,718
Total temporarily impaired held to maturity securities
63,474
1,445
2,135
22
Management believes the unrealized losses related to available for sale securities as of June 30, 2025 relate primarily to a continuation of the elevated market interest rate environment. In analyzing an issuer’s financial condition, Management considers whether the securities are issued by the federal government or its agencies and whether downgrades by bond rating agencies have occurred, and various industry analysis reports. There were no Company securities downgraded during each of the three- and six-month periods ended June 30, 2025 or 2024. Management currently has no near-term intentions to sell the available for sale securities in an unrealized loss position, and management believes the unrealized losses are due to non-credit-related factors, including changes in market interest rates and other market factors, and therefore no allowance for credit losses was recorded related to available for sale securities as of June 30, 2025 or December 31, 2024.
Held to maturity Investment Grade CMO securities are evaluated for credit losses using the probability of default/loss model, and as of June 30, 2025 and December 31, 2024, no credit loss allowance was warranted related to these securities.
8
Note 3. Loans and Allowance for Credit Losses - Loans
Loans Held for Sale
Loans held for sale consisted of commercial real estate and commercial and industrial loans as of both June 30, 2025 and December 31, 2024. The balance of unguaranteed held for sale loans to be retained are reported as held for investment. The principal balances of loans held for sale are listed below as of the dates indicated:
Gross loan balances
65,654
41,752
Less: Unguaranteed portions to be retained
20,412
9,103
Amounts held for sale, net
Loans Held for Investment
The amortized cost of loans held for investment are listed below. In accordance with ASC 326, GBank has segregated its held for investment loan portfolio into segments characterized by similar risk characteristics, primarily the collateral supporting the loan, as reflected in the table below as of the dates indicated.
Commercial and industrial
59,021
64,000
Commercial real estate - non-owner occupied
682,021
630,551
Commercial real estate - owner occupied
96,526
88,802
Construction and land development
4,371
2,934
Multifamily
18,987
17,374
Single Family Sr. Lien
3,023
5,992
Single Family Jr. Lien
3,369
3,203
Single Family HELOC
418
1,389
Consumer
3,894
1,713
Allowance for credit losses
Loans, net of allowance
Accrued interest receivable is not included in the amortized cost basis of the Company’s loans. Accrued interest receivable for loans totaled $6.9 million and $6.7 million as of June 30, 2025 and December 31, 2024, respectively, and was reported in other assets on the Company’s consolidated balance sheets.
Beginning in the third quarter of 2023, and continuing into the first quarter 2024, the Company repurchased previously sold guaranteed SBA loans by initiating a change in loan terms with certain borrowers, at the borrowers’ option, to convert variable loans to five-year fixed loans at lower then-current interest rates. This activity resulted in the repurchase of $44.2 million of government guaranteed loan balances within the commercial and industrial and commercial real estate segments during the three months ended March 31, 2024.
Deferred loan costs of $9.5 million and $8.2 million are included in the balance of net loans as of June 30, 2025 and December 31, 2024, respectively. Loan costs represent the costs incurred to originate the loans, net of fees paid by the borrower, which are measured and recorded at the date the loan is originated. Loan discount of $9.6 million and $8.9 million are included in the balance of net loans as of June 30, 2025 and December 31, 2024, respectively. The discount represents the discount on the retained portion of the government guaranteed loans and is measured at the date the guaranteed portion of the loan is sold, based on the relative fair value of the retained loan as calculated by an independent consulting firm. Loan costs and discount are amortized over the life of the loan and are recorded as an adjustment to interest income on the loan.
As of June 30, 2025 and December 31, 2024, Company loans with a carrying value of $651.6 million and $598.3 million, respectively, were pledged as collateral for potential borrowing purposes (see Note 7).
The portion of loans guaranteed by the U.S. government and held for investment totaled $192.3 million and $201.3 million as of June 30, 2025 and December 31, 2024, respectively, and are included in the commercial and industrial, commercial real estate - non-owner occupied, and commercial real estate - owner occupied loan segments.
9
Past Due and Non-accrual Loans
The performance and credit quality of the loan portfolio is monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. A loan’s past due or delinquent status is based on the contractual term specified in each loan agreement. The segments of the loan portfolio summarized by the past due status are summarized as follows as of the dates indicated:
Past Due 90
30-59 Days
60-89 Days
Days or More
Past Due and
Past Due
and Accruing
Nonaccrual
Current
624
58,397
4,070
4,034
17,122
25,226
656,795
481
96,045
57
21
224
3,670
4,127
4,055
18,227
26,555
845,075
787
63,213
11,795
13,341
25,136
605,415
18
15
73
1,640
11,813
14,128
25,996
789,962
There were no residential loans for which formal foreclosure proceedings were in place at June 30, 2025 or December 31, 2024.
Loans are placed on nonaccrual status when management determines that the full repayment of principal and collection of interest according to contractual terms is no longer likely, generally when the loan becomes 90 days or more past due. No interest income was recognized on nonaccrual loans during the three or six months ended June 30, 2025 or 2024.
Credit Quality Indicators
Management reviews the Company’s loan portfolio at least monthly to determine whether any assets require classification in accordance with the Company’s policy and applicable regulations. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements. The Company’s internal credit risk-grading system is based on experiences with similarly graded loans.
The Company’s internally assigned grades are as follows:
10
The following tables present the amortized cost of loans receivable, by year of origination (for term loans) and by risk grade within each portfolio segment as of June 30, 2025 and December 31, 2024. Current period originations may include modifications, extensions and renewals.
As of and for the six months ended June 30, 2025
Term Loans Amortized Cost Basis by Origination Year
Revolving Loans
2023
2022
2021
Prior
Amortized Cost Basis
Risk rating
Pass
8,952
11,278
7,233
7,311
479
2,224
20,919
58,396
Special mention
Substandard
349
276
625
Doubtful
Loss
7,582
7,587
Current period gross charge offs
162
71,874
170,469
149,987
90,713
58,004
106,920
647,967
383
261
4,515
5,159
3,111
7,541
10,182
8,061
28,895
153,098
98,637
68,447
119,496
474
442
620
1,536
24,430
4,647
9,470
13,562
21,979
18,772
92,860
3,185
347
4,994
12,789
602
3,380
389
Single family Sr. Lien
2,464
559
Single family Jr. Lien
2,499
699
171
Single family HELOC
79
Total Loans
105,858
189,774
166,690
114,474
80,462
150,066
25,961
833,285
8,344
3,594
7,817
30,001
190,121
173,469
122,674
90,905
162,642
11
As of December 31, 2024
2020
12,799
7,856
8,098
653
2,378
297
31,132
465
322
8,321
8,420
169,036
156,213
92,786
68,676
39,739
80,413
606,863
4,256
3,904
8,160
3,220
7,486
4,822
96,006
80,418
89,139
5,985
13,526
20,585
27,111
3,883
17,712
2,545
7,266
10,108
828
1,820
2,879
700
190,365
178,812
123,968
98,260
53,266
112,109
34,703
791,483
3,542
16,315
179,277
127,510
110,002
120,835
The Company had gross loan charge offs of $1.8 million during the six months ended June 30, 2025, comprised of (i) $163 thousand of commercial and industrial loans charged off, (ii) $1.5 million of commercial real estate - non-owner occupied loans charged off, and (iii) $79 thousand of revolving consumer loans charged off. The Company had gross loan charge offs of $29 thousand attributable to revolving consumer loans during the six months ended June 30, 2024.
Collateral Dependent Loans
The Company has elected to apply the practical expedient under ASC 326 which permits an entity to estimate credit losses based on the fair value of collateral when either applies: (i) the borrower is experiencing financial difficulty, or (ii) repayment is expected to be provided substantially through the sale or operating of the collateral. Fair value estimates for collateral dependent loans are generally based on the current market value or the “as is” value of the collateral derived from recently received and reviewed appraisals from third-party providers. If repayment is dependent on the sale of the collateral, then the fair value used to measure the allowance for credit losses is adjusted for the costs to sell.
The following tables present the amortized cost basis of collateral-dependent loans by collateral type as of the dates indicated:
Types of Collateral
Retail
Shopping
Business
Hotel / Motel
Center
Assets
17,016
17,121
17,150
696
12,955
386
The following tables present the amortized cost basis of collateral-dependent loans by loan portfolio segment and the related allowance assigned as of the dates indicated:
With a Related
Without a Related
Related
Allowance
6,019
11,102
144
11,752
1,589
1,283
Allowance for Credit Losses
The level of the allowance for credit losses reflects management’s continuing evaluation of product and industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions, and unidentified losses expected in the current loan portfolio. Portions of the allowance for credit losses may be allocated for specific credits; however, the entire allowance for credit losses is available for any credit that, in management’s judgment, should be charged off.
13
The following tables present, by portfolio segment, the changes in the allowance for credit losses for the three- and six-month periods indicated:
Balance,
April 1
Provision for
Amounts
June 30,
Charged Off
Recovered
343
365
7,806
(912
7,701
503
175
678
48
52
100
62
(2
60
(11
205
119
(38
8,997
1,079
(950
9,205
January 1
496
(163
7,837
1,320
(1,535
537
141
49
51
39
33
(29
14
(7
267
(79
9,114
1,789
(1,777
257
36
293
5,781
237
6,018
790
(5
785
55
87
76
7,088
283
7,342
5,681
337
877
(92
102
(47
(12
65
Modifications to Borrowers Experiencing Financial Difficulty
The Company may modify certain loans when a borrower is experiencing financial difficulties and the Company grants concessions to the borrower that it would not otherwise consider. These concessions may include rate reductions, principal forgiveness, extension of maturity date and other actions intended to minimize potential losses.
The following table presents the amortized cost basis of loans held for investment that were modified during the period for borrowers experiencing financial difficulty by loan portfolio segment:
Amortized Cost Basis at June 30, 2025
% of Total Class
Term
Interest Rate
Payment
of Financing
Extension
Reduction
Delay
Receivable
3,334
0.5
%
There were no modifications to borrowers experiencing financial difficulty for each of the three- and six-month periods ended June 30, 2024.
The performance of these modified loans is monitored for twelve months following the modification. As of June 30, 2025, all modified loans were on nonaccrual status. No modified loans were outstanding as of December 31, 2024.
Note 4. Operating Leases
The Company leases real estate for its main office and two branch offices, as well as office space for operations departments under various operating lease agreements. The lease agreements have maturity dates ranging from September 2030 to October 2032, some of which include options to renew at the Company's discretion. At lease inception, if the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the measurement of the right-of-use asset and lease liability.
The lease liability is equal to the present value of the future lease payments, discounted using the rate implicit in the lease (or if that rate cannot be readily determined, the lessee’s incremental borrowing rate). Given that the rate implicit in the lease is rarely available, lease liability amounts were calculated using the Company’s incremental borrowing rate at lease inception, on a collateralized basis, for a similar term.
Operating lease right-of-use assets, as well as operating lease liabilities, are presented as separate line items on the consolidated balance sheets. The Company has elected not to report short-term leases (i.e., leases with initial terms of twelve months or less) on the consolidated balance sheets.
There were no sale and leaseback transactions or leveraged leases as of June 30, 2025 or December 31, 2024. There were no leases that had not commenced as of June 30, 2025. The Company entered into amendments for two leased locations during the six months ended June 30, 2025 to extend the lease terms by five years.
Below is a summary of the operating lease right-of-use asset and related lease liability, as well as the weighted average lease term (in years), weighted average discount rate and total rent expense as of the dates and periods indicated.
Right-of-use asset
Lease liability
Weighted average remaining lease term (in years)
6.7
7.4
Weighted average discount rate (annualized)
4.63
4.40
Three Months Ended
Rent expense
220
216
Cash paid for operating lease liabilities
263
260
520
525
At June 30, 2025, future minimum payments for operating leases are payable as follows:
Years ending December 31:
500
2026
1,007
2027
1,037
2028
1,118
2029
1,129
2030
1,038
Thereafter
1,318
Total lease payments
7,147
Less: imputed interest
(1,026
Present value of lease liability
Note 5. Loan Servicing Assets
The Company’s servicing assets consist primarily of the right to service the guaranteed portion of government guaranteed loans sold to others. The fair value of the servicing asset is essentially a valuation of the net future income stream, which is based on the rate of the fee, the estimated repayment speed of the loan and the estimated cost to service the loan.
The amount allocated to the loan servicing rights is recorded at fair value at the time of sale, as calculated by a third-party consulting firm specializing in government guaranteed loan matters.
The loan servicing asset is being amortized over the period of estimated servicing income, generally five to seven years, with the amortization recorded against loan servicing fee income.
The balance of loans owned by third parties that are being serviced by the Company was $888.4 million and $779.1 million as of June 30, 2025 and December 31, 2024, respectively.
The following table presents a reconciliation of loan servicing rights as of the periods indicated:
Six Months Ended June 30, 2025
Year Ended December 31, 2024
Balance, beginning of period
7,053
Additions - servicing rights related to loans sold
6,771
Reductions - write-off of servicing assets
(401
Reductions - amortization and early payoff
(2,640
(4,447
Balance, end of period
In the event of an early repayment of a serviced loan, the unamortized balance of the loan servicing asset for that loan is charged off against loan servicing fee income.
The loan servicing asset was impacted by the write-off of certain servicing assets totaling $401 thousand relating to the repurchase of the guaranteed portions of previously sold SBA loans during the six months ended June 30, 2024.
The aggregate balance of loan servicing rights is evaluated for impairment to ensure that the recorded balance is at the lower of amortized cost or fair value. There was no allowance for impairment recorded as of June 30, 2025 or December 31, 2024.
Note 6. Deposits
At June 30, 2025 and December 31, 2024, time deposits amounted to $436.7 million and $370.6 million, respectively. Interest expense on time deposits amounted to $2.9 million and $2.1 million for the three months ended June 30, 2025 and 2024, respectively. Interest expense on time deposit amounted to $9.1 million and $8.4 million for the six months ended June 30, 2025 and 2024, respectively.
The scheduled maturities of time deposits at June 30, 2025, are as follows:
Time Deposit Maturities
Less Than$250,000
$250,000or more
162,180
29,410
170,314
15,668
18,053
18,463
13,239
3,144
Maturing thereafter
6,017
250
Total time deposits
388,266
48,472
GBank had $87.3 million of brokered certificates of deposit as of June 30, 2025, having terms between eighteen months and five years. Comparatively, GBank had $79.3 million of brokered certificates of deposit as of December 31, 2024, having terms between thirteen months and five years.
The aggregate amount of demand deposit overdrafts that were reclassified as loans was $7 thousand at June 30, 2025, compared to $34 thousand as of December 31, 2024.
Note 7. Subordinated Debt, Other Borrowings, and Available Lines of Credit
Subordinated Debt Issued 2021
On December 15, 2021, the Company completed a $20.0 million private placement of 3.875% fixed-to-floating rate subordinated notes due 2031 (the “2021 Notes”). The 2021 Notes are subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company whether now outstanding or subsequently created, assumed, guaranteed, or incurred (collectively, “Senior Indebtedness”). The 2021 Notes are not secured by any assets of the Company or its sole subsidiary, GBank.
The 2021 Notes have a maturity date of December 15, 2031 and carry a fixed interest rate of 3.875% for the first five years through December 15, 2026, and thereafter is payable in arrears quarterly. Thereafter, the 2021 Notes will pay interest at a quarterly adjustable rate equal to the then-current three-month term Secured Overnight Financing Rate (“SOFR”) as published by the Federal Reserve Bank of New York, plus two hundred and eighty-nine (289) basis points.
Interest on the 2021 Notes is payable in arrears semiannually on December 15 and June 15 through December 15, 2026. The 2021 Notes are redeemable by the Company in whole or in part on any interest payment date beginning with the interest payment date of December 15, 2026. The net proceeds of the 2021 Notes were $19.6 million which includes $558 thousand of debt issuance costs that are being amortized over the expected life of the 2021 Notes.
The 2021 Notes are intended to qualify as Tier 2 capital for the Company for regulatory capital purposes. At the closing of the private placement, the Company invested $18.0 million into the Company’s wholly owned subsidiary, GBank. The funds invested into GBank are intended to qualify as Tier 1 capital of GBank.
Subordinated Debt Issued 2020
On December 30, 2020, the Company completed a $6.5 million private placement of 4.50% fixed-to-floating rate subordinated notes due 2031 (the “2020 Notes”). The 2020 Notes are subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company whether now outstanding or subsequently created, assumed, guaranteed, or incurred (collectively, “Senior Indebtedness”). The 2020 Notes are not secured by any assets of the Company or its sole subsidiary, GBank.
The 2020 Notes have a maturity date of January 15, 2031 and carry a fixed interest rate of 4.50% for the first five years through January 14, 2026. Thereafter, the 2021 Notes will pay interest at a quarterly adjustable rate equal to the then-current three-month term SOFR as published by the Federal Reserve Bank of New York, plus four hundred twenty-three (423) basis points.
Interest on the 2020 Notes is payable in arrears semiannually on January and July 15 until January 15, 2026, and thereafter is payable in arrears quarterly. The 2020 Notes are redeemable by the Company in whole or in part on any interest payment date beginning with the interest payment date of January 15, 2026. The net proceeds of the 2020 Notes were $6.3 million which includes $207 thousand of debt issuance costs that are being amortized over the expected life of the 2020 Notes.
The 2020 Notes are intended to qualify as Tier 2 capital for the Company for regulatory capital purposes. At the closing of the private placement, the Company invested $6.0 million into the Company’s wholly owned subsidiary, GBank. The funds invested into GBank are intended to qualify as Tier 1 capital of GBank.
The Company recorded interest expense on subordinated debt issuances totaling $262 thousand and $286 thousand during the three months ended June 30, 2025 and 2024, respectively, of which $166 thousand was accrued as of June 30, 2025, compared to $192 thousand accrued as of December 31, 2024. During the six months ended June 30, 2025 and 2024 the Company recorded interest expense on subordinated debt issuances totaling $547 thousand and $571 thousand, respectively.
Lines of Credit
The Company has a line of credit available from the Federal Home Loan Bank of San Francisco (the “FHLB”). Pursuant to collateral agreements with the FHLB, the arrangement is collateralized by qualifying securities having a fair value of $71.6 million and pledged loans having a carrying value of $28.5 million at June 30, 2025. Comparatively, the arrangement was collateralized by qualifying securities having a fair value of $42.5 million and pledged loans having a carrying value of $41.0 million at December 31, 2024.
The unused borrowing capacity at June 30, 2025 and December 31, 2024 with the FHLB, as collateralized by qualifying securities and pledged loans, was $100.1 million and $85.0 million, respectively. No draws have been made on the line, and the balance was zero at each of June 30, 2025 and December 31, 2024.
The Company also has unsecured lines of credit with other correspondent banks totaling $40.0 million at June 30, 2025. No draws have been made on these lines of credit and no balances were outstanding as of June 30, 2025 and December 31, 2024.
Other Borrowing Arrangements
GBank is approved to pledge loans as collateral under the Federal Reserve Bank of San Francisco’s Borrower-In-Custody (“BIC”) Program. As of June 30, 2025, the Company had pledged loans and investment securities with an approximate carrying value of $645.8 million to the BIC Program and had unused borrowing capacity of $380.1 million. Comparatively, the Company had pledged loans and investment securities with an approximate carrying value of $590.5 million to the BIC Program and had unused borrowing capacity of $362.6 million at December 31, 2024.
The Company had no short-term borrowings outstanding at each of June 30, 2025 or December 31, 2024.
Note 8. Stockholders' Equity and Earnings Per Share
Authorized Shares
The Company is authorized to issue three classes of shares: preferred stock, voting common stock, and nonvoting common stock. The Company had no preferred shares outstanding as of June 30, 2025 or December 31, 2024. The Company’s non-voting common stock and voting common stock share equally in dividends and residual net assets on a per share basis, and have identical rights and privileges, with the exception of voting rights. As of June 30, 2025 and December 31, 2024, the Company had 231,508 shares of nonvoting common stock issued and outstanding relating to the acquisition of a nonvoting equity interest in BankCard Services LLC ("BCS") during the second quarter of 2024. Earnings per share amounts, as well as the balance of common stock issued and outstanding on the consolidated balance sheets, reflect both voting and nonvoting common shares.
Stock Option Loans
During the year ended December 31, 2022, the Company approved a stock option loan program (the "Program") under which the Company made secured loans to option holders with proceeds used to pay the exercise price of the stock options. The collateral for the loans was the shares obtained upon exercise of the option using the loan proceeds. All loans under the Program were repaid in full during the first quarter of 2025.
Earnings Per Share
Basic earnings per share are computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each of the years presented. Diluted earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding plus common shares that would have been outstanding if dilutive potential common shares, consisting of unvested restricted stock and outstanding stock options, had been issued.
The computation of earnings per share is provided in the table below for the three- and six-month periods indicated.
Net income available to common shareholders
Weighted average shares outstanding (basic)
14,273,433
12,844,795
14,264,794
12,812,088
Effect of dilutive stock options
120,483
44,926
119,810
44,667
Effect of dilutive restricted stock
157,207
73,869
151,287
67,208
Weighted average shares outstanding (diluted)
14,551,123
12,963,590
14,535,891
12,923,963
Basic earnings per share
Diluted earnings per share
Anti-dilutive stock options excluded from
the computation of earnings per share
40,000
19
Note 9. Regulatory Capital Requirements
The Company is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.
On September 17, 2019, the federal banking agencies jointly finalized a rule that became effective July 1, 2020 and was intended to provide for an optional, simplified measure of capital adequacy, the community bank leverage ratio (“CBLR”) framework, for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The final rule was effective on January 1, 2020 and allows qualifying community banking organizations to calculate a leverage ratio to measure capital adequacy beginning with their March 31, 2020 Call Reports. . The Company opted into the CBLR framework with its Call Report filed with the federal banking agencies for the quarter ended September 30, 2020.
Under the final rule, if a qualifying community banking organization opts into the CBLR framework and meets all requirements under the framework, it will be considered to have met the well-capitalized ratio requirements under the “prompt corrective action” regulations described above and will not be required to report or calculate risk-based capital.
The main components and requirements of the community bank leverage ratio framework are as follows:
As of June 30, 2025 and December 31, 2024, the Company and GBank were in compliance with the CBLR requirements. The table below presents a summary of the main components and requirements of the CBLR:
Bank Tier 1 Capital Leverage Ratio
13.82
12.90
Average Total Consolidated Assets
1,198,069
1,076,785
Off-Balance-Sheet Exposures
45,517
38,762
Ratio of Off-Balance-Sheet Exposures to Total Assets
3.71
3.47
Trading Assets
None
Advances Approaching Banking Organization
No
Actual and required capital amounts and ratios for GBank, on a bank-only basis, are presented in the table below as of the dates indicated.
Actual
Required for Capital Adequacy Purposes
Ratio
Community Bank Leverage Ratio
165,603
107,826
9.00
138,941
96,911
Additionally, State of Nevada banking regulations restrict distribution of the net assets of the Company. These regulations require the sum of the Company’s stockholders’ equity and allowance for credit losses to be at least six percent of the average of the Company’s total daily deposit liabilities for the preceding sixty days. As a result of these regulations, $60.5 million and $53.9 million of the Company’s stockholders’ equity was restricted as of June 30, 2025 and December 31, 2024, respectively.
20
Note 10. Commitments and Contingencies
Financial Instruments with Off-Balance-Sheet Risk
The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the consolidated balance sheets.
The Company’s exposure to credit loss in the event of nonperformance by the other parties to the financial instruments for these commitments is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
A summary of the contractual amounts of the Company’s exposure to off-balance-sheet risk is as follows as of the dates indicated:
Commitments to extend credit (1)
120,550
75,637
Standby letters of credit (2)
797
121,347
76,434
Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee since many of the commitments are expected to expire without being drawn upon. The total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based upon management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable; inventory; property, plant and equipment; income-producing commercial properties; and land loans.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral held varies as specified above and is required as the Company deems necessary.
GBank calculates estimated credit losses for off-balance-sheet credit exposures which are not unconditionally cancellable on a collective (pool) basis, with these pools mirroring the segments used for the calculation of the allowance for credit losses for loans, as these unfunded commitments share similar risk characteristics with the loan portfolio segments. The allowance for credit losses related to off-balance-sheet commitments was $97 thousand and $73 thousand as of June 30, 2025 and December 31, 2024, respectively, and is recorded in other liabilities on the consolidated balance sheets. The provision for credit losses related to off-balance-sheet commitments was $13 thousand and $12 thousand for the three months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025 and 2024, the provision for credit losses related to off-balance-sheet commitments was $24 and $32 thousand, respectively. The provision for credit losses related to off-balance-sheet commitments is recorded within the provision for credit losses on the consolidated statements of income.
Financial Instruments with Concentrations of Credit Risk
The Company’s loan portfolio is concentrated in commercial real estate loans. Substantially all of these loans are secured by first liens with an initial loan to value ratio of generally not more than 80%. Commercial real estate loans accounted for 89% and 88% of total loans at June 30, 2025 and December 31, 2024, respectively. No other loan classification exceeded 10% of the loan portfolio at June 30, 2025 or December 31, 2024.
The Company makes commercial, commercial real estate, residential real estate and consumer loans to customers in its local market area of Nevada, California, Utah, and Arizona, and to customers located throughout the United States through the Company’s nationwide government guaranteed loan programs.
The Company’s loans are expected to be repaid from cash flow or from proceeds from the sale of selected assets of the borrowers. Unsecured loans accounted for less than 1% of total gross loans at June 30, 2025 and December 31, 2024.
At June 30, 2025, the Company’s loan portfolio included loans and loan commitments in forty states. The following table sets forth the dispersion of loan principal balances and related commitments (undisbursed loan proceeds) for the states having at least five percent of the total loan principal balances and commitments outstanding:
Percentage
225,009
22.78
North Carolina
154,313
15.62
Ohio
83,767
8.48
California
59,563
6.03
Illinois
61,535
6.23
Indiana
51,450
5.21
352,158
35.65
Total Loan Commitments
987,795
100.00
Legal Contingencies
The Company is a party to various legal actions normally associated with collections of loans and other business activities of financial institutions, the aggregate effect of which, in management’s opinion, would not have a material adverse effect on the Company’s financial statements. In the opinion of management, such proceedings are substantially covered by insurance, and the ultimate disposition of such proceedings are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
Executive Agreements
The Company has entered into agreements with its key employees stating that, in the event the Company terminates the employment of these officers without cause or upon change in control of the Company, the Company may be liable for the employees’ salary for a period of time as outlined in the agreements.
Other Commitments
During the second quarter of 2022, the Company entered into a Limited Partnership Agreement with a venture capital fund under which the Company has committed up to $2.0 million in capital contributions to the partnership. The Company is a limited partner of the partnership with no controlling financial interests. Capital contributions are expected to be made through 2027. The Company had made capital contributions to the venture capital fund totaling $760 thousand and $660 thousand as of June 30, 2025 and December 31, 2024, respectively, with this balance included in other assets on the consolidated balance sheets.
Note 11. Fair Value Measurements
The Company uses a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1: Valuations for assets and liabilities traded in active exchange markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.
Level 3: Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer or broker-traded transactions. Level 3 valuations incorporate certain unobservable assumptions and projections in determining the fair value assigned to such assets.
There were no transfers between Levels 1, 2, and 3 during the six months ended June 30, 2025 or the year ended December 31, 2024.
Assets Measured at Fair Value on a Recurring Basis
Securities Available for Sale - The fair value of investment securities classified as available for sale is measured using information from a third-party pricing service. The pricing service uses quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique, used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.
The table below presents the balance of financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as of the dates indicated:
Fair Value Measurements at June 30, 2025 Using:
Quoted Prices In
Significant Other
Significant
CarryingValue at
ActiveMarkets
ObservableInputs
UnobservableInputs
(Level 1)
(Level 2)
(Level 3)
Assets:
Available for sale debt securities:
Fair Value Measurements at December 31, 2024 Using:
Assets Measured at Fair Value on a Nonrecurring Basis
Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).
Individually Evaluated Loans, Net of Allowance for Credit Losses - Individually evaluated loans, net of allowance for credit losses, are valued based on the fair value of the loan’s collateral, generally determined based upon independent third-party appraisals of the properties. These loans are included as Level 3 fair values, based on the lowest level of input that is significant to the fair value measurements. As of June 30, 2025, the balance of individually evaluated loans, net of allowance for credit losses of $6.0 million was comprised of commercial and industrial, commercial real estate - non-owner occupied, and commercial real estate - owner occupied loans. As of December 31, 2024, the balance of individually evaluated loans, net of allowance for credit losses of $11.1 million was comprised of commercial and industrial loans and commercial real estate - non-owner occupied loans.
The table below presents the balance of financial assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of the dates indicated:
Individually evaluated loans
The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine the fair value as of the dates indicated.
Quantitative Information About Level 3 Fair Value Measurements
Valuation
Unobservable
Weighted
Estimate
Technique
Input
Range
Average
Appraisal (1)
Appraisal adjustments (2)
34%-45%
39%
21%-59%
43%
Carrying amounts and estimated fair values of financial instruments were as follows as of the dates indicated:
Fair ValueHierarchy
Carrying
Estimated
Level
Financial instruments - assets
Investment securities available for sale
Investment securities held to maturity
46,644
33,930
867,422
812,674
Loan servicing assets
16,862
15,546
Federal Home Loan Bank stock
Accrued interest receivable
7,606
7,184
Financial instruments - liabilities
Deposits
995,888
899,360
25,604
24,830
Accrued interest payable
2,361
3,063
Note 12. Segment Reporting
Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the Company’s CODM in deciding how to allocate resources and assess performance. GBank’s CODM is Edward M. Nigro, Executive Chairman. The Company’s CODM monitors the revenue streams and significant expenses of its various products and services, as well as budget to actual results, in assessing the Company’s segments. The evaluation of significant expenses include salaries and employee benefits, data processing, occupancy, and legal and professional fees. Overall, operations are managed, and financial performance is evaluated, on a Company-wide basis using the Company’s consolidated net income to monitor actual results versus budget, in competitive analyses by benchmarking to the Company’s peers, and in decision making pertaining to executive compensation levels, new product decisions, expansion plans, and capital expenditure spending. Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable segment.
The following table presents certain information reviewed by management for the three- and six-month periods presented:
Noninterest income
Noninterest expense
1,009,354
Other Segment Information
Revenue Composition: GBFH generates revenue primarily from net interest income and non-interest income, including gain on sales of loans, net interchange income, and loan servicing income.
Capital Allocation & Performance Metrics: The CODM assesses performance based on key financial metrics, including net interest margin, return on average assets, return on average equity and the Company's efficiency ratio.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following presents management’s discussion and analysis of the financial condition and results of operations of GBank Financial Holdings Inc. (individually, “GBFH” and collectively with its subsidiaries including GBank, the “Company”). This discussion should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and with the Company's Registration Statement on Form S-1 and S-1/A. Results of operations for the periods included in this quarterly report on Form 10-Q are not necessarily indicative of results to be obtained during any future period.
General
GBank Financial Holdings Inc. is a bank holding company headquartered in Las Vegas, Nevada and registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). Through our wholly owned bank subsidiary, GBank, we operate two full-service commercial branches in Las Vegas, Nevada to provide a broad range of business, commercial and retail banking products and services to small businesses, middle-market enterprises, public entities and affluent individuals in Nevada, California, Utah, and Arizona. Our founding members, including our Executive Chairman of the Board, Edward M. Nigro, recognized a need in the greater Las Vegas area for a solutions-oriented, relationship bank focused on middle market companies and real estate entrepreneurs who generally require loans of $200 thousand to $20 million, a size often overlooked or deprioritized by larger financial institutions. GBank was established in 2007 with the goal of helping these underserved clients build and sustain wealth. By combining the relationship-based focus of a community bank with the extensive suite of financial products and services offered by our largest competitors, we believe that we are well-positioned to continue to capitalize on the significant growth opportunities available not only in the greater Las Vegas and Clark County area, but regionally and nationally through our SBA lending, Gaming Fintech, and credit card initiatives. These activities, together with our two strategically located banking centers, generate a stable source of low-cost core deposits and a diverse loan portfolio with attractive risk-adjusted yields.
Recent Events
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law by President Trump, which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act of 2017 and expanding certain incentives from the Inflation Reduction Act of 2022 while accelerating the phase-out of others. The Company continues to evaluate the OBBBA but does not anticipate that the OBBBA will have a material impact on the Company’s Consolidated Financial Statements. As the legislation was signed into law after the close of the second quarter of 2025, the impacts are not included in the Company’s operating results for the three and six months ended June 30, 2025.
Available Information
The Company maintains an Internet web site at www.gbankfinancialholdings.com. The Company makes available, free of charge, on its web site (under www.gbankfinancialholdings.com/secfilings) the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC. The Company also makes available, free of charge, through its web site (under www.gbankfinancialholdings.com/corporate-governance) links to the Company’s Code of Ethics Policy and the charters for its board committees. In addition, the SEC maintains an Internet site (at www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The Company routinely posts important information for investors on its web site (at www.gbankfinancialholdings.com and, more specifically, under the News & Media tab at www.gbankfinancialholdings.com/press-releases). The Company intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Company’s web site, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.
The information contained on, or that may be accessed through, the Company’s web site is not incorporated by reference into, and is not a part of, this Form 10-Q.
The Company generates the majority of its revenue through net interest income, calculated as the difference between interest earned on loans and investments and interest paid on deposits and borrowings. Growth in net interest income is dependent upon balance sheet growth and maintaining or increasing the net interest margin, which is calculated as net interest income as a percentage of average interest-earning assets. The Company also generates revenue through gains on sales of assets, generally the guaranteed portion of SBA and USDA loans, net interchange fees earned on its credit card product, and fees earned on the various services and products offered to its customers. Offsetting these revenue sources are provisions for credit losses, non-interest expenses and income taxes.
The following table presents a summary of the Company's earnings and selected performance ratios for the three- and six-month periods presented:
Net Income
Diluted Earnings Per Share
Return on Average Assets
1.59
1.90
1.60
1.75
Return on Average Equity
12.62
17.59
12.61
16.17
Net Interest Margin (annualized)
4.31
4.82
4.39
4.83
Non-Performing Assets to Total Assets
1.49
0.75
Net Charge-Off to Average Loans (annualized)
0.38
0.01
0.39
Financial highlights for the three months ended June 30, 2025 are presented below:
Critical Accounting Policies
In preparing the Company’s Consolidated Financial Statements, accounting policies are applied that require significant judgment and estimates, which can materially impact the Company’s financial position and results of operations. The following are the critical accounting policies that have the most significant impact on the Company’s financial statements because they require significant judgments and assumptions about highly complex and inherently uncertain matters. The use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition.
The allowance for credit losses reflects management’s best estimate of credit losses over the remaining life of the loan portfolio and is presented as a valuation account deducted from the loan portfolio’s amortized cost basis to present the net amount expected to be collected on the loans.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. GBank has segregated its held-for-investment loan portfolio into segments based on federal call report codes which classify loans based on the primary collateral supporting the loan. The segments are reviewed by management no less than annually to ensure instruments are properly segregated into groups having similar risk characteristics and new segments may be required as the Company offers new loan products.
The Company’s loan portfolio includes certain loans which are partially guaranteed by the U.S. Small Business Administration. The Current Expected Credit Losses (“CECL”) model does not require an entity to measure expected credit losses on an instrument, or pool of instruments, if historical information adjusted for current conditions and reasonable and supportable forecasts result in zero expected credit losses in all scenarios. The guaranteed portion of the loan pools range from 75 percent to 90 percent. For purposes of the assessment of credit losses, Company management ascertains the guaranteed portion of these loans has zero repayment risk due to the full guarantee of the U.S. government.
The Company measures the allowance for credit losses using the average charge-off method and calculates an estimate of expected credit losses based on actual losses incurred during a historic look-back period. The Company has chosen to use the historic losses of similarly insured institutions for each of its loan segments with the exception of commercial real estate loans for which Company management has defined a custom peer group of institutions having a large focus on government guaranteed lending.
27
To account for the model’s quantitative limitations when estimating credit losses, management also considers certain qualitative adjustments, including considerations of:
GBank considers financial assets on an individual basis when the financial asset has unusual risk characteristics not matching an existing segment and may assign a specific reserve to the financial asset having unusual risk characteristics. The specific reserve component is calculated as the Company's evaluation of credit loss on individually evaluated loans based on the fair value of the collateral less estimated selling costs if collateral dependent or based on the present value of expected future cash flows discounted at the loan's initial effective interest rate if not collateral dependent. The majority of the Company's loans subject to individual evaluation are considered collateral dependent. The Company uses the practical expedient as permitted under ASC 326 to measure individually evaluated loans as collateral dependent and/or when repayment is expected to be provided substantially through the operation or sale of the collateral. Expected credit losses are based on the fair value at the reporting date, adjusted for selling costs as appropriate. For collateral dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.
Emerging Growth Company
Pursuant to the JOBS Act, an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by the Financial Accounting Standards Board (“FASB”) or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We have elected to use the extended transition period for complying with new or revised accounting standards affecting public companies, which means that our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis.
We may take advantage of some of the reduced regulatory and reporting requirements that are available to it so long as we qualify as an emerging growth company, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.
Net Interest Income and Net Interest Margin
Net interest income is calculated as the excess of interest earned from the Company’s interest-bearing assets, such as loans and investments, and the interest expense incurred on interest-bearing liabilities, like deposits and borrowed funds. Net interest income represents the core earnings of the Company’s primary activities of lending and investing, less the costs of obtaining funds.
Net interest margin is expressed as net interest income as a percentage of average earning assets and reflects the Company's ability to generate income from its interest-earning assets relative to the costs of funding those assets. Net interest income is affected by changes in interest rates, as well as composition and volume fluctuations in the average balances of interest-earning assets and interest-bearing liabilities.
Average balances, interest income or expense, and the interest yield or rate for the Company’s interest-sensitive assets and liabilities are presented in the tables below for the three- and six-month periods presented. Average balances are calculated on a daily basis. The Company had no tax equivalent adjustments for the three and six months ended June 30, 2025 and 2024.
For the Three Months Ended
Yield/
Balance
Interest
Rate(2)
ASSETS:
Interest Bearing Deposits With Banks
115,974
4.72
80,062
5.85
Investment Securities:
Taxable
119,880
4.73
73,696
4.74
Loans, Net (1)
911,028
7.77
789,516
8.33
Federal Home Loan Bank Stock
5,362
8.75
4,400
8.78
Total Earning Assets
1,152,244
7.16
947,674
7.85
Cash and Due From Banks
6,782
6,302
Other Assets
41,894
33,607
1,200,920
987,583
LIABILITIES & SHAREHOLDERS' EQUITY:
Interest-bearing Demand
60,320
316
2.10
67,038
395
2.37
Money Market and Savings
303,814
2,929
3.87
217,081
3.96
Certificates of Deposit
413,940
4,660
4.52
330,271
4,316
5.26
Total Interest-Bearing Deposits
778,074
4.08
614,390
4.48
Short-Term Borrowings
0.00
517
5.45
Subordinated Debentures
26,113
4.02
26,040
4.42
Total Interest-Bearing Liabilities
804,187
4.07
640,947
Noninterest-bearing Deposits
223,201
220,842
Other Liabilities
22,404
18,849
Shareholders' Equity
151,128
106,945
Total Liabilities & Shareholders' Equity
Net Interest Income
Total Yield on Earning Assets
Cost on Interest-Bearing Liabilities
Average Interest Spread
3.08
3.37
Net Interest Margin
29
For the Six Months Ended
109,338
73,081
5.88
112,591
85,890
4.41
Loans, Net(1)
888,982
7.82
758,651
8.40
5,009
8.74
3,811
8.97
1,115,920
7.22
921,433
7.83
6,501
6,119
40,543
33,604
1,162,964
961,156
62,992
672
2.15
66,170
788
2.39
284,060
5,340
3.79
201,727
3,897
3.88
399,899
9,123
4.60
319,746
8,361
746,951
4.09
587,643
4.46
4,049
5.51
26,104
4.23
26,031
773,055
617,723
4.47
221,050
220,804
21,278
18,427
147,581
104,202
3.13
3.35
30
The following table presents the effects of changing rates and volumes on net interest income for the three- and six-month periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.
June 30, 2025 vs. June 30, 2024
Increase (Decrease)
Volume
Rate
Net
INTEREST INCOME:
523
(323
200
1,060
(640
420
544
546
585
228
813
Loans, Net
2,518
(1,219
1,299
5,444
(2,639
2,805
47
Total Interest Income
3,606
(1,540
2,066
7,142
(3,057
4,085
INTEREST EXPENSE:
Interest Bearing Deposits:
(40
(39
(116
854
(62
1,591
(148
1,443
1,093
(749
344
2,096
(1,334
762
1,907
(850
1,057
3,649
(1,560
2,089
(111
(25
(24
(26
Total Interest Expense
1,901
(875
1,026
3,540
(1,586
1,954
NET INTEREST INCOME
1,705
(665
1,040
3,602
(1,471
2,131
For the six months ended June 30, 2025, interest income was $40.0 million, an increase of $4.1 million compared to $35.9 million for the six months ended June 30, 2024. For the three months ended June 30, 2025, interest income was $20.6 million, an increase of $2.1 million compared to $18.5 million for the three months ended June 30, 2024. The increases in interest income when comparing the three- and six-month periods ended June 30, 2025 to the same periods in 2024 are primarily due to increases in average interest-earning assets, partially offset by yield reductions on adjustable-rate loans, securities, and other liquid assets as a result of the 100 basis point decrease in the target federal funds rate by the Federal Reserve during the second half of 2024.
Interest expense was $15.7 million for the six months ended June 30, 2025, an increase of $2.0 million compared to $13.7 million for the six months ended June 30, 2024. Interest expense was $8.2 million for the three months ended June 30, 2025, an increase of $1.1 million compared to $7.1 million for the three months ended June 30, 2024. The increase in interest expense when comparing the three and six months ended June 30, 2025 to the same periods in 2024 was driven by increases in average interest-bearing liabilities to fund asset growth.
For the second quarter of 2025, the Company’s net interest margin decreased to 4.31%, compared to 4.82% for the second quarter of 2024. For the six months ended June 30, 2025, the Company's net interest margin decreased to 4.39%, compared to 4.83% for the six months ended June 30, 2024. The decrease in net interest margin for the three and six months ended June 30, 2025 when compared to the same periods in 2024 is reflective of the lower market interest rate environment as explained in the above paragraphs.
31
Provision for Credit Losses
The provision for credit losses in each period is reflected as a reduction in earnings for that period and includes amounts related to funded loans and unfunded loan commitments. The provision is equal to the amount required to maintain the ACL at a level that is adequate to absorb estimated lifetime credit losses inherent in the loan portfolio based on remaining contractual maturity, adjusted for estimated prepayments as of each period end. The Company's CECL models incorporate historical experience, current conditions, and reasonable and supportable forecasts in measuring expected credit losses. For the three and six months ended June 30, 2025, the Company recorded a provision for credit losses of $1.1 million and $1.8 million, respectively, compared to $295 thousand and $315 thousand for the three and six months ended June 30, 2024, respectively. The provision for credit losses for the three and six months ended June 30, 2025 is primarily reflective of net charge-offs of $870 thousand and $1.7 million, respectively, and loan growth.
Noninterest Income
The following table presents the components of total noninterest income.
$ Change
% Change
(570
(18.0
40.4
31.7
951.4
60.3
Total Noninterest Income
1,218
29.2
(2.2
859
144.6
35.4
3,371
2,018.6
133
27.6
4,276
65.1
For the three months ended June 30, 2025, noninterest income totaled $5.4 million compared to noninterest income $4.2 million for the three months ended June 30, 2024. For the six months ended June 30, 2025, noninterest income totaled $10.8 million compared to noninterest income $6.6 million for the six months ended June 30, 2024.
Net interchange fees totaled $1.5 million for the three months ended June 30, 2025 compared to $146 thousand for the three months ended June 30, 2024. Net interchange fees totaled $3.5 million for the six months ended June 30, 2025, compared to $167 thousand for the same period in 2024. The increase in net interchange fees when comparing the three months and six months ended June 30, 2025 to the same periods in 2024 was attributable to transaction volume growth within GBank’s Visa Signature® Card product.
Loan servicing income increased $216 thousand from $534 thousand for the three months ended June 30, 2024 to $750 thousand for the three months ended June 30, 2025. Loan servicing income increased $859 thousand from $594 thousand for the six months ended June 30, 2025 to $1.5 million for the six months ended June 30, 2025. The increase in loan servicing income when comparing the three and six months ended June 30, 2025 to the same periods in 2024 was the result of both (i) higher average balances of loans serviced by GBank during 2025, and (ii) the first quarter of 2024 reflecting loan servicing asset writeoffs of $401 thousand due to the repurchase of the guaranteed portion of previously sold SBA loans.
Gain on sale of loans totaled $2.6 million for the second quarter of 2025 compared to $3.2 million for the second quarter of 2024. Gain on sale of loans totaled $5.1 million for the six months ended June 30, 2025 compared to $5.2 million for the same period in 2024. The decrease in gain on sale of loans for the three- and six-month periods ended June 30, 2025 was due to less favorable secondary market pricing during the six months ended June 30, 2025 compared to the same period of 2024.
Noninterest Expense
The following tables present the components of total noninterest expense.
8.4
627
88.8
(17
(4.1
(179
(23.9
(104
(24.0
244
159.5
287
341.7
19.4
(98
(13.5
Total Noninterest Expense
1,264
13.8
1,593
14.4
1,198
77.8
(73
(8.4
124
10.8
(122
(14.6
656
275.6
522
245.1
11.1
(128
(9.1
3,795
21.7
For the three months ended June 30, 2025, noninterest expense increased 14% to $10.4 million, compared to $9.1 million for the three months ended June 30, 2024. For the six months ended June 30, 2025, noninterest expense increased 22% to $21.3 million, compared to $17.5 million for the six months ended June 30, 2024.
Salaries and employee benefits expense totaled $6.2 million for the three months ended June 30, 2025, an increase of $483 thousand or 8% when compared to $5.7 million for the second quarter of 2024. Salaries and benefits expense totaled $12.6 million for the six months ended June 30, 2025, an increase of $1.6 million or 14% when compared to $11.0 million for the six months ended June 30, 2024. These increases are attributable to both (i) increases in employee salaries and benefits expenses resulting from an increase in full-time equivalent employees from 155 at June 30, 2024 to 188 at June 30, 2025, and (ii) higher stock-based compensation expense due to increases in grant date fair value of recent stock awards.
Data processing expense increased $627 thousand, or 89%, from $706 thousand for the three months ended June 30, 2024 to $1.3 million for the three months ended June 30, 2025. Data processing expense increased $1.2 million, or 78%, from $1.5 million for the six months ended June 30, 2024 to $2.7 million for the six months ended June 30, 2025. The year over year increases were due to both (i) higher costs from transactional-based charges given the volume increases in loans and deposits over the last twelve months, and (ii) investments to enhance data management and security capabilities responsive to both the larger company profile and the increasing complexity of information technology management.
Audits and exams expense totaled $397 thousand for the three months ended June 30, 2025, an increase of $244 thousand when compared to $153 thousand for the second quarter of 2024. Audits and exams expense totaled $894 thousand for the six months ended June 30, 2025, an increase of $656 thousand when compared to $238 thousand during the same period of 2024. The increases in audits and exams expense reflects certain non-recurring professional, legal and audit fees associated with the preparation of filings made with the U.S. Securities and Exchange Commission for the registration of its shares of common stock and listing on the Nasdaq Capital Market, which totaled $290 thousand and $1.0 million for the three and six months ended June 30, 2025, respectively.
Advertising and marketing expense increased $287 thousand to $371 thousand during the second quarter of 2025, compared to $84 thousand during the second quarter of 2025. Advertising and marketing expense increased $522 thousand to $735 thousand during the six months ended June 30, 2025, compared to $213 thousand during the same period in 2024. The increase in advertising and marketing expense was largely attributable to advertising, marketing, and referral campaigns associated with the credit card program.
Income Taxes
Income tax expense was $1.5 million for the three months ended June 30, 2025, an increase of 5% or $75 thousand compared to $1.4 million for the three months ended June 30, 2024. Income tax expense was $2.7 million for the six months ended June 30, 2025, an increase of 7% or $187 thousand compared to $2.5 million for the six months ended June 30, 2024. The increase in income tax expense during the three and six months ended June 30, 2025 was primarily due to higher pre-tax earnings.
The effective tax rate for the three and six months ended June 30, 2025 was 23.6% and 22.6%, respectively compared to 23.2% and 23.1% for the three and six months ended June 30, 2024, respectively. The fluctuations in the effective tax rate are largely driven by the timing and volume of certain stock-based compensation transactions resulting in tax benefits to the Company, as well as the timing and volume of state tax adjustments.
Comparison of Financial Condition – June 30, 2025 and December 31, 2024
Total assets increased 10% to $1.23 billion at June 30, 2025 compared to $1.12 billion at December 31, 2024, primarily due to increases in net loans of $55.7 million as well as cash and equivalents of $19.1 million.
Cash and Cash Equivalents
Cash and cash equivalents increased 15% from $124.1 million at December 31, 2024 to $143.2 million at June 30, 2025 as cash inflows from deposit growth more than offset cash outflows to fund loan growth during the first six months of 2025.
Investments
The Company maintains an investment security portfolio to generate income through interest and potential sales, manage liquidity for funding needs, support interest rate risk management, and meet regulatory requirements for high-quality liquid assets.
The investment security portfolio is comprised of held to maturity securities recorded at amortized cost and available for sale securities recorded at fair value. Held to maturity securities decreased by $1.1 million to $39.5 million as of June 30, 2025, as compared to $40.6 million as of December 31, 2024. Available for sale securities increased $17.3 million from $65.6 million at December 31, 2024 to $82.9 million at June 30, 2025.
The following table presents the maturity composition and the weighted average yields of the investment portfolio as of June 30, 2025. Mortgage-backed security maturities are based on paydown trends in the most recent three-month period. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Weighted-average yield is calculated based on the amortized cost of each security.
Maturing
One Year
After One Year
After Five Years
After
or Less
Through Five Years
Through Ten Years
Ten Years
As of June 30, 2025
Yield
Available for sale securities, at fair value:
3,737
1.78
21,626
5.25
45,574
11,949
Held to maturity securities, at amortized cost:
1,045
7.69
2,377
5.14
36,093
4.81
Loans
Total loans, net of deferred loan costs and unamortized discounts, increased 7% to $871.6 million at June 30, 2025, compared to $816.0 million at December 31, 2024. Loan originations, including government guaranteed and non-guaranteed commercial loans, totaled $293.5 million during the first six months of 2025, compared to $263.6 million for the same period in 2024.
34
The following table presents the ending balance of loans outstanding, by type, as of the dates indicated.
Percent of
6.8
7.8
78.2
77.3
10.9
0.4
2.2
2.1
0.3
0.7
0.0
0.2
100.0
Beginning in the third quarter of 2023, and continuing into the first quarter 2024, the Company repurchased previously sold guaranteed SBA loans by initiating a change in loan terms with certain borrowers, at the borrowers’ option, to convert variable loans to five-year fixed rate loans at lower current interest rates. The repurchase program was initiated in response to a rapid rise in the Wall Street Journal Prime Rate which has the potential to significantly impact our borrowers, the majority of whom are in variable rate loans. The Prime Rate increased from 3.25% to 8.50% between March 2022 and July 2023, an increase of 525 basis points. The Company received requests from borrowers due to the higher payments affecting borrowers’ cash flow and operations. Given the predicted economic outlook and anticipated interest rate reductions likely being delayed until late 2024, the Company decided to evaluate converting the variable rate structure to a fixed-rate based on a current credit evaluation. In response, GBank reached out to request annual tax returns and updated financial information from borrowers. The Company began to repurchase previously sold guaranteed SBA loans by initiating a change in loan terms with certain borrowers, at the borrowers’ option, to convert variable loans to five-year fixed rate loans at the current market terms.
The process for evaluating, approving, and submitting repurchase packages to the SBA was consistent with SOP 50 57 (3) and Section 7.6 of the Secondary Participation Guaranty Agreement. Updated financials from each borrower were reviewed to assess the viability of the business before preparing an interest rate modification document. Once the interest rate modification was approved internally, GBank sought approval for modifications, and submitted requests to the SBA to repurchase these SBA loans. According to the SOP, SBA shall review the repurchase request package, and based on the financial and other information provided determine whether an emergency repurchase of the SBA loan is appropriate for that specific borrower. This activity resulted in the repurchase of $106.1 million of United States government guaranteed loan balances within the commercial and industrial and commercial real estate segments during the year ended December 31, 2023. This program continued through the end of the first quarter of 2024, during which $44.2 million of the guaranteed portion of previously sold loans were repurchased. The balance of guaranteed loans at June 30, 2025 was $237.6 million, representing 22.1% of loans. Comparatively, at December 31, 2024, the Company had $233.9 million of guaranteed loan balances representing 24.7% of loans. Given the stabilization of the interest rate environment the Company is not anticipating any material repurchases in the foreseeable future.
Net deferred loan costs totaled $9.5 million at June 30, 2025 and $8.2 million at December 31, 2024. Net deferred loan costs represent the costs incurred to originate loans, net of fees paid by the borrower, which are measured and recorded at the date the loan is originated. Unamortized discount totaled $9.6 million at June 30, 2025 and $8.9 million at December 31, 2024. The unamortized discount relates to the retained portion of government guaranteed loans and is based on the relative fair value of the retained loan as calculated by an independent consulting firm. Loan costs and discount are amortized over the life of the loan and are recorded as an adjustment to interest income on the loan.
Loans held for sale totaled $45.2 million at June 30, 2025 and consisted of commercial real estate – non-owner occupied, commercial real estate – owner occupied, and commercial and industrial loans. Loans held for sale totaled $32.6 million at December 31, 2024 and consisted of commercial real estate – non-owner occupied, commercial real estate – owner occupied, and commercial and industrial loans. The balance of unguaranteed portions to be retained are reported as held for investment.
35
The following table sets forth the dispersion of loan principal balances with amounts and the percentage of the total balances in the states with five percent of total loans as of June 30, 2025:
193,090
22.15
146,357
16.79
61,829
7.09
54,372
6.24
47,446
5.44
368,536
42.28
Credit Quality, Credit Risk, and Allowance for Credit Losses
In accordance with CECL guidance, the Company has grouped its loan portfolio into segments with similar risk characteristics based on factors such as loan type, credit risk profile, borrower characteristics, and other relevant attributes that influence the risk of default. By dividing loans into these segments, the Company can apply more tailored loss estimation techniques that reflect the specific credit risks associated with each segment.
Evaluations of the Company’s loan portfolio, its segments, and individual credits are inherently subjective and require significant judgments dependent on the circumstances at the time of the evaluation. As such, current period results are not an indication of future performance, and future evaluations may result in substantial changes to the allowance for credit losses and related provision expense as a result of changing economic conditions, asset quality, or loan portfolio composition in future periods.
For more information on the Company’s allowance for credit losses methodology, including the quantitative and qualitative factors used in the calculation, please see "Note 3 – Loans and Allowance for Credit Losses – Loans" within Notes to Consolidated Financial Statements.
The following table presents the allowance for credit loss as a percentage of total loans as of the dates indicated:
(In Thousands)
Total ACL - Loans
% of Total Loans Outstanding
Allowance as a %of Loan Category
0.6
1.1
2.3
Single Family Sr Lien
0.1
Single Family Jr Lien
1.0
7.3
0.8
1.2
1.7
5.7
The allowance for credit losses increased from $9.1 million at December 31, 2024 to $9.2 million at June 30, 2025. The allowance as a percentage of loan balances decreased from 1.12% at December 31, 2024 to 1.06% at June 30, 2025. The Company continues to closely monitor credit quality in light of the ongoing economic uncertainty caused by, among other factors, the prolonged elevated interest rate environment, stronger than expected employment data in recent periods, continued uncertainty regarding U.S. trade and tariff policy and the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas. Accordingly, additional provisions for credit losses may be necessary in future periods.
The following table presents non-performing assets and related ratios as of the periods presented.
Non-performing assets:
Total nonaccrual loans
Loans 90 days past due and accruing
Total non-performing loans
18,373
14,168
Other real estate owned
Total non-performing assets
Non-performing loans to net loans
2.11
1.74
Nonaccrual loans to net loans
2.09
1.73
ACL to nonaccrual loans
50.50
64.51
ACL to gross loans
1.06
1.12
The Company had $18.4 million of non-performing loans as of June 30, 2025, compared to $14.2 million of non-performing loans as of December 31, 2024. As of June 30, 2025, the balance of non-performing loans was comprised of certain commercial real estate – non-owner occupied, commercial real estate – owner occupied, commercial and industrial loans, and consumer loans, of which $13.8 million is guaranteed by the SBA. Included in the balance of non-performing assets as of June 30, 2025 are $6.8 million of individually evaluated loans with specific credit loss reserves of $784 thousand assigned. As of December 31, 2024, the balance of non-performing loans was comprised of certain commercial real estate – non-owner occupied, commercial real estate – owner occupied, commercial and industrial loans, and consumer loans totaling $14.2 million, of which $9.3 million is guaranteed by the SBA. Included in the balance of non-performing assets as of December 31, 2024 are $12.5 million of individually evaluated loans with specific credit loss reserves of $1.4 million assigned.
The Company had no other real estate owned as of June 30, 2025 or December 31, 2024.
Operating Lease Right of Use Asset
The operating lease right of use asset increased $1.2 million from $4.5 million at December 31, 2024 to $5.7 million at June 30, 2025, due to the modification of two leased locations during the first quarter of 2025 resulting in a five year extensions of the lease terms.
Loan Servicing Assets
Loan servicing assets increased $760 thousand from $9.0 million at December 31, 2024 to $9.7 million at June 30, 2025, primarily due the addition of servicing rights of $3.4 million relating to loans sold during the six months ended June 30, 2025. This increase was partially offset by loan servicing asset amortization of $2.6 million during the quarter.
Federal Home Loan Bank Stock, At Cost
FHLB stock increased $861 thousand from $4.7 million at December 31, 2024 to $5.5 million at June 30, 2025. As a member of the FHLB, GBank is required to hold capital stock with this balance dependent upon GBank’s borrowing capacity with the FHLB.
Other assets totaled $22.9 million at June 30, 2025, an increase of $3.6 million, or 18%, when compared to $19.4 million at December 31, 2024, with this increase largely attributable to growth of the organization driving increases in other miscellaneous receivables.
37
Total Liabilities
The Company’s total liabilities increased $99.0 million, or 10%, to $1.08 billion at June 30, 2025 compared to $981.7 million at December 31, 2024. The increase in total liabilities was primarily attributable to an increase in total deposits of $97.4 million with the largest increases within time deposits and savings accounts.
Deposits and Other Funding Sources
Total deposits increased 10% to $1.03 billion at June 30, 2025, compared to $935.1 million at December 31, 2024. The year-to-date decreases in non-interest bearing and interest bearing demand deposits were offset by increases in time deposits and savings deposits. Contributing to the increase in time deposits was a net increase of $8.0 million of brokered deposits since December 31, 2024.
The following table presents the average balances of deposits by type and the related average interest rates for the three months ended June 30, 2025 and 2024:
1,001,275
0.79
835,232
0.82
Federal Deposit Insurance Corporation (“FDIC”) deposit insurance covers $250 thousand per depositor, per FDIC-insured bank, for each account ownership category. As of June 30, 2025, uninsured deposits were approximately $402.3 million, or 38.9% of total deposits, compared to $385.7 million, or 41.2% of total deposits, as of December 31, 2024.
As of June 30, 2025 the maturities of time deposits having balances over $250 thousand were as follows:
Short-term Borrowings and Subordinated Debt
The Company had no short-term borrowings as of June 30, 2025 or December 31, 2024.
Subordinated debt totaled $26.1 million as of both June 30, 2025 and December 31, 2024. See "Note 7 - Subordinated Debt, Other Borrowings, and Available Lines of Credit", within Notes to Consolidated Financial Statements.
Operating Lease Liability
Operating lease liability increased $1.3 million, from $4.8 million at December 31, 2024 to $6.1 million at June 30, 2025 reflecting the modification of two leased locations during the first quarter of 2025 resulting in five year extensions of the lease terms.
Other liabilities totaled $16.0 million at June 30, 2025, an increase of $307 thousand, or 2%, when compared to $15.7 million at December 31, 2024. This decrease was driven by a reduction in accrued interest payable due to an overall decline in the cost of interest-bearing deposits during the first six months of 2025.
Stockholders’ Equity and Capital
Stockholders' equity increased 8% to $151.7 million at June 30, 2025 compared to $140.7 million at December 31, 2024 with this increase driven primarily by the net income generated during the six months of 2025.
The sufficiency of a bank's capital to cover its risk exposures and absorb potential losses, and thus ensuring stability and solvency, is a key element of capital adequacy. Regulatory frameworks set minimum capital requirements that are typically expressed as a percentage of the bank's risk-weighted assets and include common equity tier 1, tier 1, and total capital ratios. These minimum capital requirements have been established so that banks maintain a buffer of capital to protect against financial shocks, sustain operations during economic downturns, and safeguard depositors and the financial system as a whole.
As of June 30, 2025 and December 31, 2024, the Company and GBank were in compliance with the CBLR requirements.
The table below presents a summary of the main components and requirements of the CBLR as of the dates indicated:
The Company's common equity to assets ratio was 12.3% as of June 30, 2025, compared to 12.5% as of December 31, 2024. The Company's book value per share was $10.63 as of June 30, 2025, an increase of 8% from $9.87 as of December 31, 2024.
Liquidity
Liquidity management encompasses the Company’s ability to meet its funding obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on the Company’s ability to efficiently meet both expected and unexpected funding events without adversely affecting the daily operations or the financial condition of the Company.
The Company’s primary sources of funding are deposits, proceeds from the sale or maturity of investment securities, payments received on loans and mortgage-backed securities, loan sales, and borrowing capacity available from various correspondent banks.
A summary of the Company's on-balance-sheet primary liquidity sources is presented in the table below as of the dates indicated:
Investment securities, available for sale
Total primary liquidity sources
271,357
222,380
The Company has a line of credit available from the FHLB. The unused borrowing capacity with the FHLB, as collateralized by qualifying securities and pledged loans, was approximately $100.1 million and $85.0 million, at June 30, 2025 and December 31, 2024, respectively. No draws have been made on the line and no balances were outstanding as of June 30, 2025 and December 31, 2024.
GBank participates in the Federal Reserve Bank of San Francisco’s BIC Program and, as of June 30, 2025 and December 31, 2024, the Company had pledged loans and investment securities with an approximate carrying value of $645.8 million and $590.5 million, respectively, to the BIC Program. Unused borrowing capacity at the Federal Reserve Bank of San Francisco totaled $380.1 million and $362.6 million as of June 30, 2025 and December 31, 2024, respectively.
The Company’s Consolidated Statement of Cash Flows presents additional information regarding the sources and uses of cash for the six months ended June 30, 2025. Operating activities resulted in a net decrease in cash of $4.8 million, as cash inflows from loan sales were more than offset cash outflows for the origination of loans held for sale. Investing activities resulted in a net decrease in cash of $74.0 million primarily due to loans originated and held for investment, as well as purchases of available for sale securities. Financing activities resulted in a net increase to cash of $98.0 million, primarily due to a net increase in deposits during the six months ended June 30, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), we are not required to provide the information called for by this Item 3.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) were effective as of the end of the period covered by this Form 10-Q.
Changes in Internal Controls
There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2025 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
At June 30, 2025, the Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed to be immaterial to the financial condition and operating results of the Company.
Item 1A. Risk Factors.
In evaluating an investment in any of our securities, investors should consider carefully, among other things, information under the heading “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q and the risk factors previously disclosed under the heading “Risk Factors” in our Registration Statement on Form S-1 filed with the SEC on March 12, 2025 pursuant to Rule 424(b) of the Securities Act, in connection with the registration of our common stock. There have been no material changes in the risk factors disclosed by the Company in its Registration Statement on Form S-1.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
During the quarter ended June 30, 2025, no director or officer of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits.
Exhibit
Number
Description
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 12, 2025) (File No. 333-285750).
3.2.1
Bylaws (incorporated by reference to Exhibit 3.2.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 12, 2025) (File No. 333-285750).
3.2.2
First Amendment to Bylaws (incorporated by reference to Exhibit 3.2.2 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 12, 2025) (File No. 333-285750).
3.2.3
Second Amendment to Bylaws (incorporated by reference to Exhibit 3.2.3 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 12, 2025) (File No. 333-285750).
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32†
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed with this Quarterly Report on Form 10-Q.
†The certifications attached as Exhibit 32 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the SEC and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 12, 2025
By:
/s/ Edward M. Nigro
Edward M. Nigro
Executive Chairman
/s/ Jeffery E. Whicker
Jeffery E. Whicker
Chief Financial Officer and Treasurer