GBank Financial Holdings Inc(GBFH) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2025, showing growth in total assets, loans, and deposits, with net income increasing for the six-month period compared to the prior year Consolidated Balance Sheets (Unaudited) As of June 30, 2025, total assets increased to $1.23 billion from $1.12 billion at year-end 2024, driven by growth in net loans and cash equivalents, while total liabilities rose to $1.08 billion, primarily due to a $97.4 million increase in deposits, and total stockholders' equity grew to $151.7 million from $140.7 million | (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,232,424 | $1,122,364 | | Total cash and cash equivalents | $143,229 | $124,122 | | Loans, net | $862,425 | $806,844 | | Total Liabilities | $1,080,675 | $981,664 | | Total deposits | $1,032,464 | $935,080 | | Total Stockholders' Equity | $151,749 | $140,700 | Consolidated Statements of Income (Unaudited) For the second quarter of 2025, net income was $4.76 million, a slight increase from $4.68 million in Q2 2024, and for the six months ended June 30, 2025, net income rose to $9.23 million from $8.38 million year-over-year, supported by a significant increase in noninterest income, particularly from net interchange fees, which helped offset higher provisions for credit losses and increased noninterest expenses | (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $12,388 | $11,348 | $24,282 | $22,151 | | Provision for credit losses | $1,092 | $295 | $1,813 | $315 | | Total noninterest income | $5,384 | $4,166 | $10,847 | $6,571 | | Total noninterest expense | $10,396 | $9,132 | $21,303 | $17,508 | | Net Income | $4,755 | $4,676 | $9,225 | $8,376 | | Diluted EPS | $0.33 | $0.36 | $0.63 | $0.65 | Consolidated Statements of Comprehensive Income (Unaudited) Comprehensive income for Q2 2025 was $4.56 million, a decrease from $4.74 million in Q2 2024, primarily due to unrealized losses on available-for-sale securities, while for the six-month period, comprehensive income increased to $9.33 million from $8.43 million in the prior year | (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $4,755 | $4,676 | $9,225 | $8,376 | | Other comprehensive income (loss), net of tax | ($196) | $59 | $104 | $53 | | Comprehensive income | $4,559 | $4,735 | $9,329 | $8,429 | Consolidated Statements of Stockholders' Equity (Unaudited) Total stockholders' equity increased from $140.7 million at December 31, 2024, to $151.7 million at June 30, 2025, primarily driven by net income of $9.2 million earned during the first six months of 2025 - Stockholders' equity grew by $11.0 million in the first six months of 2025, reaching $151.7 million, mainly due to retained earnings from net income[19] Consolidated Statements of Cash Flows (Unaudited) For the first six months of 2025, cash and cash equivalents increased by $19.1 million, primarily due to $98.0 million in net cash from financing activities, largely from deposit growth, which more than offset the $74.0 million used in investing activities for loan growth and securities purchases, and $4.8 million used in operating activities | (Dollars in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($4,823) | $669 | | Net cash used in investing activities | ($74,026) | ($87,218) | | Net cash provided by financing activities | $97,956 | $76,774 | | Net increase (decrease) in cash and cash equivalents | $19,107 | ($9,775) | Notes to Consolidated Financial Statements (Unaudited) This section provides detailed disclosures on accounting policies and specific financial statement items, covering investment securities, loans, allowance for credit losses, deposits, subordinated debt, credit lines, and regulatory capital, offering deeper insight into the company's financial health and operations - The company's lending operations are concentrated in its local market (Nevada, California, Utah, Arizona) and nationwide through SBA and USDA loan programs[28] - The company operates as a single reportable segment, with the Chief Operating Decision Maker evaluating performance on a consolidated basis[25][117] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance and condition, highlighting loan and deposit growth as key drivers, noting a decrease in net interest margin offset by strong growth in noninterest income, particularly from credit card interchange fees, while also covering credit quality, an increase in non-performing assets, and confirming strong liquidity and capital positions Results of Operations For the first six months of 2025, net income increased to $9.2 million from $8.4 million year-over-year, driven by a 65.1% surge in noninterest income, primarily from a significant increase in net interchange fees, despite a decline in net interest margin to 4.39% from 4.83% due to a lower interest rate environment, and a 21.7% rise in noninterest expenses reflecting increased staffing, data processing, and SEC registration costs | Performance Ratios | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Return on Average Assets | 1.60% | 1.75% | | Return on Average Equity | 12.61% | 16.17% | | Net Interest Margin (annualized) | 4.39% | 4.83% | - Noninterest income for the six months ended June 30, 2025, increased by 65.1% year-over-year, primarily driven by a 2,018.6% increase in net interchange fees from the company's Visa Signature® Card product[153][154] - Noninterest expense for the six months ended June 30, 2025, rose by 21.7% compared to the same period in 2024, attributed to higher salaries from increased headcount, increased data processing costs, and non-recurring fees associated with SEC registration[158][159][160][161] Comparison of Financial Condition Total assets grew by 10% to $1.23 billion at June 30, 2025, from year-end 2024, driven by a 7% increase in net loans to $871.6 million and a 10% increase in total deposits to $1.03 billion, while non-performing loans increased to $18.4 million, representing 2.11% of net loans, up from $14.2 million at year-end, and the allowance for credit losses remained stable at 1.1% of total loans - Total assets increased by 10% to $1.23 billion at June 30, 2025, compared to $1.12 billion at December 31, 2024[165] - Total loans increased by 7% to $871.6 million, and total deposits increased by 10% to $1.03 billion since December 31, 2024[171][191] | (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total non-performing loans | $18,373 | $14,168 | | Non-performing loans to net loans | 2.11% | 1.74% | | ACL to gross loans | 1.06% | 1.12% | Liquidity and Capital Resources The company maintains a strong liquidity position with $271.4 million in primary on-balance-sheet sources and substantial unused borrowing capacity, including $100.1 million from the FHLB and $380.1 million from the Federal Reserve's BIC Program, with robust capital levels, including the bank's Tier 1 Capital Leverage Ratio at 13.82%, significantly exceeding the 9.00% regulatory requirement under the CBLR framework - The company has significant available liquidity, with unused borrowing capacity of $100.1 million from the FHLB and $380.1 million from the Federal Reserve's BIC Program as of June 30, 2025[204][205] - The company is well-capitalized and operates under the Community Bank Leverage Ratio (CBLR) framework, with a Bank Tier 1 Capital Leverage Ratio of 13.82% as of June 30, 2025, well above the 9.00% requirement[199][201] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, GBank Financial Holdings Inc. is not required to provide the information for this item - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[208] Controls and Procedures Management, including the Principal Executive Officer and Principal Financial Officer, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to the company's internal control over financial reporting during the quarter - Based on an evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[209] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[210] PART II. OTHER INFORMATION Legal Proceedings The company is not involved in any pending legal proceedings other than routine matters occurring in the ordinary course of business, which are not expected to have a material adverse effect on its financial condition or operations - The company reports no material pending legal proceedings outside of the ordinary course of business[212] Risk Factors There have been no material changes to the risk factors previously disclosed by the company in its Registration Statement on Form S-1 - No material changes in risk factors have occurred since the company's Registration Statement on Form S-1[213] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[214] Other Information 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 during the quarter ended June 30, 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[217] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer - The report includes required certifications from the Principal Executive Officer and Principal Financial Officer as exhibits[219]