July 2019 Investor Letter REVIEW OF 2nd QUARTER PERFORMANCE RESEARCH SPOTLIGHT – SLM CORPORATION The Fund lagged the Financials sector benchmark Sallie Mae is an attractive stock at the current price. We and the overall market, but continues to understand the reasons Sallie Mae’s stock is cheap and think other outperform our benchmarks on a year-to-date investors should not be concerned about them. basis. The Fund gained 3.85% in the 2nd quarter. Dear Gator Financial Partner: We are providing you with Gator Financial Partners, LLC’s (the “Fund” or “GFP”) Q2 2019 investor letter. This letter reviews the Fund’s investment performance for the second quarter of 2019, discusses the current upside opportunity we see in our portfolio, analyses our investment in SLM Corp., and discusses the Fund’s current net exposure and positioning by sub-sector. 2nd QUARTER PERFORMANCE For the 2nd quarter of 2019, we lagged the Financials sector benchmark and the overall market, but we continue to outperform our benchmarks on a year-to-date basis. The Fund gained 3.85% in the second quarter. Fannie Mae preferred stock, Blackstone, Carlyle Group, and Ally Financial were top contributors to performance. The largest detractors were Kingstone Companies, Ambac, BBX Capital, and Barclays. We did not sell any positions of note. We added a new position in Goldman Sachs. We forwarded our investment thesis on Goldman to you in late June. Total Return Since Annualized Return Since Q2 2019 YTD 2019 Inception¹ Gator’s Inception¹ Gator Financial Partners, LLC² 3.85% 24.39% 760.95% 21.62% S&P 500 Total Return Index³ 4.30% 18.54% 190.84% 10.09% S&P 1500 Financials Index³ 7.84% 17.18% 120.17% 7.44% Source: Gator Capital Management & Bloomberg The Fund’s portfolio had a positive return in Q2. The private equity firms were strong during Q2. As we anticipated, Blackstone announced that it would convert from a publicly-traded partnership to a C Corporation as of July 1, 2019. The announcement of the C Corp conversion led to an increase in Blackstone’s stock price in anticipation of increased demand from an expanded universe of potential investors and likely demand from index funds as Blackstone’s shares are added to various stock market indicies. 1The Fund’s inception date was July 1, 2008. 2Performance presented assumes reinvestment of dividends, is net of fees, brokerage and other commissions, and other expenses an investor in the Fund would have paid. Past performance is not indicative of future results. Please see General Disclaimer on page 10. 3Performance presented assumes reinvestment of dividends. No fees or other expenses have been deducted. Gator Financial Partners July 2019 Investor Letter Among the detractors during the quarter was our position in Kingstone Companies, which we wrote about in April 2017. Kingstone is a homeowner’s insurance company based in New York. We purchased the position as the company grew quickly on Long Island as State Farm and Allstate pulled back after Super Storm Sandy. Since then, Kingstone has continued to grow quickly and profitably. Recently, the company expanded into additional states in the Mid-Atlantic and New England regions. Earlier this year, the company added to its loss reserves after reviewing its claims. We think the stock has overreacted and represents a good value. CURRENT UPSIDE OPPORTUNITY We believe the stocks in our portfolio have significant upside. We are selective when we tell you in these letters that we feel strongly about the potential upside in the portfolio. The last time we made this statement was in our September 2016 letter in the section titled “Low Multiples within Portfolio.” While we did not predict how stocks in the Financials sector would respond to the 2016 election, we know “good things tend to happen to cheap stocks.” We have a similar view of the current environment. Even though the broader stock market averages are making record highs, we believe stocks in the Financials sector remain generally inexpensive, and stocks in our portfolio, in particular, are very attractively priced. The S&P 1500 Financials Index is still 5% below where it was 18 months ago. During this time, the companies have generally been growing earnings and using their excess capital to buyback shares. 1.) VALUE VS. GROWTH Growth stocks have been outperforming Value stocks since late 2016. If we compare the price-to-earnings ratio (“P/E ratio”) of the S&P 500 Growth Index to the P/E ratio of the S&P 500 Value Index, the disparity is currently at a level not seen since 2002. We believe in reversion to the mean and think we are at an unsustainable point. A reversion to the mean in the earnings multiple of Value stocks versus Growth stocks is not guaranteed. The big tech companies are great businesses with seemingly endless growth, business models with great economics, and strong competitive positions. However, we think at this point the low multiples on Value stocks are compressed enough to favor a near-term reversal. As you know, market participants divide the market between Value stocks and Growth stocks. As investors in the Financials sector, most of the sector is defined as Value stocks. For example, Financials stocks make up only about 3% of the Russell 1000 Growth Index, but they make up almost 24% of the Russell 1000 Value Index. 2.) FINANCIALS VS. MARKET Over time, the Financials sector has traded at 80% of the broader market’s price-to-earnings (“P/E”) multiple. Right now, the Financials sector trades at 68% of the broader market’s P/E multiple. The Financials sector would have to outperform the broader market by 18% to bring this ratio back to its historical average. 2 Gator Financial Partners July 2019 Investor Letter 3.) OUR INDIVIDUAL STOCK ARE INEXPENSIVE 56% of our portfolio has a P/E ratio of 10x or less. 13% of the portfolio holdings trade at less than 8x. As for the remainder of the portfolio, 21% trades below tangible book value and are asset plays rather than earnings stories. So, a full 77% of our portfolio trades below 10x earnings multiple or below tangible book value. The final 23% of our portfolio is composed of growth-at-a-reasonable price (“GARP”) companies which we do not believe are expensive by any measure. Price/Tangible 2021 Street EPS Ticker Symbol 2020 Price/Earning Book Growth Expectation ALLY 8.2 1.02 11% AMP 8.4 NA 10% This table shows the 77% of our portfolio that have P/E ratios below 10x CG 9.3 4.31 10% or price-to-tangible book (“P/TB”) ratios COWN 4.7 1.00 13% below 1x. As you can see, the Street CS 8.0 0.79 13% expects growth around 10% for these GS 8.8 1.08 7% companies in 2021, therefore we do not believe these firms are impaired or KINS 7.1 1.09 NA decaying businesses. We admit these MS 8.5 1.21 11% businesses are pro-cyclical, so their NMIH 9.5 2.50 17% 2021 earnings will depend on the OMF 5.9 2.02 9% economy two years from now. But, we believe these businesses will grow and SLM 7.2 1.65 14% maintain their market positions five and SYCRF NA 0.77 NA ten years from now. UBS 8.6 0.96 12% VCTR 4.8 NA 4% ZION 9.7 1.27 10% 4.) WE EXPECT CONTINUED ECONOMIC GROWTH One potential argument to justify the low valuations in our portfolio is the risk of a recession. We do not believe that we are poised to have a recession in the near term. Even if there was a pullback in economic growth, we believe the pause or downturn would be short and shallow. In the 2001-2002 recession, stocks in the Financials sector outperformed through the recession because the downturn was focused on the Technology sector rather than the Banking or Real Estate industries. We believe the bank regulators have kept close tabs on bank lending during this economic expansion, forcing banks to pause or retrench in several areas, such as apartment lending and leveraged lending. We do not see evidence of any area of the banking sector where overheated lending is an issue. We have mild concerns about peer-to-peer lending, private credit funds, and collateralized loan obligations, but for the most part, these loans are not made directly by the banking system. 3 Gator Financial Partners July 2019 Investor Letter 5.) THE UPCOMING RATE CUT COULD BE A CATALYST FOR THE FINANCIALS SECTOR In 1995, the Federal Reserve cut rates after deciding they had raised rates too far in 1994. Stocks in the Financials sector performed very well in the 1995-1997 period. One key similarity that we see between 1995 and the current environment was the Fed rate cut was a reversal of tightening too much in the prior cycle rather than cutting rates after a recession has already started. SLM CORPORATION SLM Corporation (“SLM” or “Sallie Mae”) is the holding company for Sallie Mae, the largest lender in the private student loan market. We have owned Sallie Mae for three years and wrote to you about it in our Q2 2016 letter when we reviewed our investment theses on several consumer finance stocks. We believe Sallie Mae is an attractive stock at the current price. We understand the reasons Sallie Mae’s stock is cheap and think other investors should not be concerned about them. Also, we believe the market is missing a free option in Sallie Mae if the federal government decides to end or privatize its Direct Student Loan program.