GBank Financial Holdings (GBFH) Q2 FY26 earnings call: the analyst Q&A

What are the financial implications for GBank from the AXES partnership, and when can investors expect to see contributions?

The partnership, signed recently, involves Bankroll powering AXES' digital wallet. While complex due to AXES' scale (67 operators, 11 states, 10x machines vs. current partners), it will generate fees and deposits for GBank. The first operator, with over 3,000 slot machines, is being integrated. Monetization will come from fees and deposits, with the primary goal of replacing expensive deposits with noninterest-bearing gaming funds. Significant financial impact is expected in FY27 as operators are rolled out.

“Every new operator AXES brings on to their platform is a new source of patron accounts held at GBank without requiring additional direct effort on our part. This is what makes Bankroll highly scalable.”

asked by Joe Yanchunis · answered by Todd Nigro

What is the current level of gaming-related deposits, and what is a realistic year-end target, considering the Terribles rollout?

Current gaming-related deposits average $35 million to $50 million. Due to prior delays in regulatory approvals, significant growth is not expected this year, with some lift in Q4 FY26. FY27 is anticipated to be the year for substantial growth as the transformation to cashless gaming occurs and player adoption is understood. The market potential is vast, with transactions in the billions.

“So I really expect with the launching -- remember, the Taverns are small, relatively small, and we have projected at the most, about $2 million in deposits from that activity. And we're starting to see that grow now slowly, but surely.”

asked by Joe Yanchunis · answered by Edward Nigro

What were the key findings from the IT site review, and how will recommended fixes impact the expense run rate?

The IT review, led by Jeff Newgard's former CIO, confirmed strong cybersecurity. Recommendations focus on improving reporting and infrastructure for efficiency. The previous internal IT development plan was deemed too expensive and slow. The new approach leverages external expertise to integrate payment rails and APIs more effectively. While some IT expenses will be elevated, they are not expected to grow disproportionately.

“The good news is we are secure on the cybersecurity side. He found that to be in good shape. So we are secure there. The recommendations are really centered around reporting and infrastructure areas that we can be more efficient and effective and just operate better.”

asked by Joe Yanchunis · answered by Jeff Newgard

Can you explain the accounting for NPAs and CECL, especially with the elevated 4.2% level?

The 4.2% NPA level (currently $60 million) is high due to the collateral-based SBA 7(a) lending model, where the guaranteed portion is repurchased and the entire loan is reported as NPA. However, actual economic loss is mitigated by collateral and SBA guarantees (75%-90%). Historically, 70% recovery is expected from liquidated collateral. For the current $60 million NPAs, an anticipated loss of $4.5 million is projected, against which the bank holds $12.7 million in reserves. Management expects to resolve $20 million to $30 million of these NPAs by end of September.

“We take that $60 million. It goes in our special assets division... we know that we're going to recover or we believe, based on our historical analysis that 70% recovery of that $60 million will happen in special assets, meaning when we liquidate the collateral.”

asked by Matthew Erdner · answered by Edward Nigro

How is the bank feeling about the credit card's future given recent declines, and will the prepaid card offset lost transactions?

Credit card transactions dropped to $84.2 million in Q2 due to sports betting operators restricting use, down from a prior month's $40 million. While a significant miss, the concept is proven with $622 million in transactions since 2024. The upcoming Visa prepaid card, launching in Q4 FY26, is expected to be a key funding source, integrated with pool player accounts and offering unique functionality. It will create new deposits and transactional fees, potentially offsetting credit card declines, especially in bricks-and-mortar gaming.

“We've proven the concept. We've done $622 million in transactions since we launched our credit card in 2024. We've proven the concept that players like to use the credit card because of the way they're able to use and pay it off and the way we've set up even secured accounts.”

asked by Matthew Erdner · answered by Edward Nigro

How should investors think about NIM going forward, and will the loan portfolio review necessitate a slowdown in production?

NIM declined from 3.86% to 3.78% QoQ, driven by a 7 bps drop in loan yield (due to non-accrual interest write-off) and reduced FHLB dividends. Cost of funds favorably decreased. Management is doubling down on special assets and optimizing funding mix with consultants. While the funding environment remains challenging, a huge dip in NIM is not expected. Loan production will not slow down; instead, it's expected to increase over last year, with smarter origination focusing on geographic and asset quality.

“So the good news on that is we had a favorable decrease in cost of funds because of matured CDs that rolled off, and we were able to replace those at a lower cost. So that went down from 3.93% to 3.86%.”

asked by Timothy Coffey · answered by Jeff Newgard