Northpointe Bancshares Stock

Greetings, and welcome to Northpointe Bancshares Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brad Howes, Executive Vice President and CFO. Thank you. You may begin.

Good morning, and welcome to Northpointe's Second Quarter 2026 Earnings Call. My name is Brad Howes, and I'm the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO; and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on Northpointe's Investor Relations website, ir.northpointe.com.

As a reminder, during today's call, we may make forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings.

We will also reference non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides. The agenda for today's call will include prepared remarks, followed by a question-and-answer session. With that, I'll turn the call over to Chuck.

Thank you, Brad. Good morning, everyone, and thank you for joining. As I reflect on the progress we have made over the past year, I'm extremely proud of our leadership team and dedicated employees for all they've accomplished so far. As an organization, we have executed on our strategic priorities and position Northpoint for continued success in 2026 and beyond.

Over the last 12 months, we have increased our year-to-date diluted earnings per share by 21%. We've grown our tangible book value by over $2.25 per share. We've generated strong new business with new loans and deposits each growing by 17% -- we've added new funding sources to bolster core deposits and lower our wholesale funding ratio from 71% to 63%.

For the second quarter, we earned $0.60 per diluted share and have earned $1.22 per diluted share on a year-to-date basis. This quarter's return on average assets was 1.18% and return on average tangible common equity was 14.69%. Factoring in the impact of dividends paid, our tangible book value per share increased by 15% annualized over the prior quarter.

From my seat, the economy seems to be pretty resilient despite the current geopolitical and macroeconomic risks. Consumer spending remains healthy. Credit quality is stable, and we continue to see good loan demand across our footprint.

Before I turn the call over to Kevin and Brad, let me walk through a few highlights of our mortgage purchase program or MPP business, which remains one of the largest catalysts of our strong financial performance. MPP balances ended the quarter at $3.9 billion, which increased by over $1 billion or 36% from the second quarter of last year.

Total loans funded through the channel continues to increase with $12.8 billion for the quarter, which is up $11.2 billion in the prior quarter and $9 billion from the second quarter of 2025. Demand within the channel remains strong with a healthy pipeline of additional business.

As such, we began to utilize higher levels of participations in the program, which helps us manage our balance sheet within our existing capital framework while optimizing our revenue streams. We began a strategy several quarters ago to expand and add additional partner financial institutions so that we could continue to grow the business and meet additional demand.

That initiative has gone well so far as we have added several new partners this quarter. We have a healthy pipeline of others who are interested in the participation program. Turning to the residential lending channel. We remain focused on increasing mortgage origination productivity and attracting and retaining high-quality talented lenders.

We continue to make investments in technology and people to cultivate and grow this business while remaining nimble in managing overhead efficiently to remain profitable in any rate cycle. Regardless of what happens to the mortgage volumes going forward, we continue to take our fair share of the business, and we're well positioned to quickly capitalize on additional mortgage volume should rates decrease.

I'd like to turn the call over to Kevin to provide more details on our business lines.

Thanks, Chuck. Good morning, everyone. Let's start with our MPP business on Slide 6. Compared to the prior quarter, period ending MPP balances increased by $77.3 million, but average balances increased by $477.5 million, which helped drive a nice increase in interest income.

Let me break down the second quarter 2026 growth a bit further. First, we brought in 11 new clients, which totaled $380 million in additional capacity. Second, we increased facility size for 6 existing clients, which totaled $265 million in additional capacity.

And third, the overall utilization of our existing clients remained strong during the quarter, averaging 61%, which is up from 57% in the prior quarter. As discussed on prior calls, our MPP balances are net of any balances that we have participated out -- at June 30, 2026, we had participated $489.0 million to our partner banks, which is up from $412.7 million at March 31, 2026.

Average NPP yields were 6.35% and fee adjusted yields were 6.59% during the second quarter of 2026. The average yield was down 24 basis points from the prior quarter, reflecting a decrease in SOFR over the same period, along with tighter spreads in the business.

Margins this quarter were impacted by competitive pricing within the industry, especially with larger mortgage originators, better pricing on new deals and a higher proportional mix of larger clients with lower risk-adjusted pricing relative to the prior quarter.

Turning now to Retail Banking on Slide 7. I'd like to highlight the results of the 3 main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we closed $670.6 million in mortgages during the second quarter, which is down slightly from $693.7 million in the prior quarter.

During the second quarter of 2026, saleable volume was $572.5 million, down from $626.6 million in the prior quarter. During the first quarter of 2026, we saw a temporary drop in mortgage rates, which spurred additional refinance activity for the period.

Refinance activity made up 27% of the total saleable volume in the second quarter of 2026, down from 59% in the first quarter of 2026. While refinances were down, purchase volume increased by 61% over the prior quarter level, driven by the performance in our traditional retail channel.

Approximately 81% of the salable mortgage originations were in the traditional retail channel and 19% were in our consumer direct channel this quarter. This compares to 61% of the salable mortgages originations coming from the traditional retail channel and 39% from the consumer direct channel in the first quarter of 2026.

We sold approximately 61% of total salable mortgages on a service release basis during the quarter -- second quarter of 2026, which is down from 68% in the prior quarter. As Chuck highlighted, we continue to look for opportunities to hire new talented lenders within this channel.

During the second quarter, we hired 4 new mortgage professionals in existing markets to help us continue to grow the channel. In the middle of Slide 7, we highlight our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite.

We ended the fourth quarter with $5.2 billion in total deposits, an increase from the prior quarter. The breakout of these deposits is detailed in the appendix on Slide 13. The majority of our deposit growth compared to prior quarter was driven by broker deposits.

However, over the last year, we've been successful in adding new funding partner relationships to help bolster core deposits and fund our planned growth. Noninterest-bearing demand deposits have increased by 30%, interest-bearing demand deposits have increased by 81% and savings and money market deposits have increased by 45% compared to the second quarter of 2025.

On the right side of Slide 7, we highlight our specialty mortgage servicing channel, where we focus on servicing first lien home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans, over the past year, we have increased our specialty servicing portfolio by 35%.

Excluding the adjustment for the change in fair value of MSRs, we earned $2.4 million in loan servicing fees for Q2 and which is up from the prior quarter. Including loans we outsource to a subservicer, we serviced 16,200 loans for others with a total UPB of $5.5 billion as of the second quarter of 2026.

Turning lastly to asset quality. We had net charge-offs of $528,000 in the second quarter of 2026. This represents an annual net charge-off ratio to average loans of 3 basis points, which is remaining well below long-term historical averages. As Chuck indicated, credit quality remains stable, and we are not seeing any systemic borrower issues in any of our portfolios.

All of our key asset metric qualities are outlined on Slide 8. Now I'd like to turn the call over to Brad to cover the financials.

All right. Thanks, Kevin. As I go through today's slide presentation, I will be incorporating full year 2026 guidance into my commentary. Let's start on Slide 9. As a reminder, our non-GAAP reconciliation on Slide 15 provides additional details of the calculations and a reconciliation to the comparable GAAP measure for all non-GAAP metrics.

For the second quarter 2026, we had net income to common stockholders of $21.3 million or $0.60 per diluted share. Our performance and profitability metrics, which are laid out on Slide 5, remain strong. Net interest income increased by $1.1 million from the prior quarter, reflecting an increase in average interest-earning assets of $389.5 million over the prior quarter level, partially offset by a 9 basis point decrease in our net interest margin.

Our yield on average interest-earning assets was down 8 basis points from the prior quarter, driven primarily by a decrease in loan yields. The largest driver of this decrease was from tighter yields on our MPP facilities, as Kevin outlined. This was partially offset by higher average yields on our AIO loans, which are mostly tied to the 1-year CMT rate.

Our cost of funds was flat this quarter at 4.01%. We have begun to see somewhat lower rates on new brokered CD issuances in the early part of 2026, but those have since risen back up, and I expect them to remain close to the level they're at today.

As discussed on previous calls, we've continued to add new funding relationships to help bolster coal deposits and lower our wholesale funding ratio. Oftentimes, these carry higher rates than brokered funding. We see the overall P&L benefit through lower FDIC insurance premiums, but that is partially offset by higher funding costs.

We saw that play out to a small extent this quarter and expect that to continue as we utilize more of these types of funding partners. Our second quarter net interest margin was 2.33%, and year-to-date 2026 was 2.37% based on the tightening of NPP yields and no significant forecasted changes to the mix or rates paid on liabilities, I'm expecting a net interest margin range of 2.3% to 2.4% for full year 2026.

My guidance assumes continued increase in yields based on the mix of loans within the held for investment portfolio and that funding cost will remain at or near current levels. I'm also assuming that we do not see any additional Fed funds rate movements in the remainder of the year.

Turning to loan growth guidance. For 2026, I expect NTP balances to remain between $4.1 billion and $4.3 billion by year-end. I'm also still expecting $300 million to $500 million on average will be participated out throughout 2026. I'd also expect period-end the AIO balances to increase between $900 million and $1.0 billion by year-end.

Excluding NTP and AIO loans, I'd expect the rest of the loan portfolio to decline to between $1.9 billion and $2.1 billion by year-end 2026. This includes loans held for sale, which tend to vary based on the timing of loan sales. Some of the loan growth expectations have changed from the guidance I provided last quarter.

Kevin provided details on our asset quality trends this quarter, which remains stable with the low level of chart offs and the decrease in nonperforming assets, along with the continued runoff of non-AIO and MPP loans, we had a total provision expense of $210,000 in the second quarter of 2026.

I now expect total provision expense in the range between $2 million and $3 million for 2026 which would be driven by the replenishment of net charge-offs and growth in our MPT and AIO loans. Any additional provision expense or benefit related to credit migration trends, changes in the economic forecast or other changes to the credit models are not front of my items.

Noninterest income decreased slightly from the prior quarter and includes the impact from 3 of our fair value assets. On the top of Slide 14, we break out those 3 assets and their associated quarterly increases or decreases in fair value. As a reminder, these tend to move up or down with interest rates and are not part of my revenue guidance each quarter.

On the bottom of Slide 14 and in our earnings release tables, we provide further details on the components of net gain on sale of loans. As you can see on the chart, second quarter net gain on sale of loans included a $0.7 million increase in fair value of loans held for investment and the lender risk account with the Federal Home Loan Bank.

Excluding these items, net gain on the sale of loans would have been $16.4 million, which is down from $17.8 million on a comparable basis in the prior quarter. This decrease was driven by a lower saleable volume Kevin highlighted during his commentary, partially offset by higher gain on sale margins.

For 2026, I am maintaining total salable mortgage originations of $2.2 billion to $2.4 billion, with all-in margins of 2.75% to 3.25% on those originations. Our margin guidance is a blend of margins from our traditional retail and consumer direct channels.

The consumer direct channel has lower margins with an offsetting lower variable mortgage expense. These estimates do not assume any significant changes in mortgage rates nor do they assume any changes to the current level of mortgage originators within the bank. I'd expect MPP fees to range between $9 million and $11 million for full year 2026.

This is based on the expected participation balances and continued growth in loans funded over the remainder of the year. Excluding MSR fair value changes, loan servicing fees were $2.4 million for the quarter, up from the prior quarter level. I'd expect that quarterly run rate to continue to increase in 2026 with full year revenue between $9 million and $11 million.

Noninterest expense was up $0.8 million from the prior quarter. This was driven primarily by higher salaries and benefits, mostly related to variable compensation on mortgage production, reflecting a higher mix of traditional retail volume during the quarter.

For full year 2016, I'd expect total noninterest expense to remain in the range of $138 million to $142 million, no change from my prior guidance. Turning to the balance sheet on Slide 10. Total assets increased to $7.5 billion at June 30, 2026, based on the growth in NPP and AIO balances during the quarter.

Our wholesale funding ratio was 63.09% at June 30, 2026, up slightly from the prior quarter. Looking forward, we expect to continue to fund FEP and AIO growth through a combination of brokered CDs retail deposits and other sources of nonbrokered deposits where possible.

Our effective tax rate was 24.72% for the second quarter of 2026, flat from the prior quarter level. We are currently exploring opportunities to purchase investment tax credits, which could help lower our overall effective tax rate for 2026.

I plan to provide additional details on that initiative on the next earnings call. Lastly, on Slide 11, we outline our regulatory capital ratios, which are estimates pending completion of regulatory reports. Looking forward, I'd expect we will continue to leverage additional capital generated through retained earnings to grow NPP and AIO loan balances.

With that, we are happy to now take questions. Rob, please open the line for Q&A.

[Operator Instructions] My first question comes from Crispin Love with Piper Sandler.

Just on the net interest margin in the second quarter, can you discuss some of the dynamics there? You did call out the lower yields on MVP balances and tighter spreads, given competition. Was that driven by the overall kind of softer mortgage environment? And is that something that could persist in the second half if rates do remain elevated? And then the competitors that you mentioned, are those ones that you typically don't see in the warehouse business?

Thanks, Crispin. Yes, I can start, and Chad and Kevin should certainly chime in. As far as the quarter-over-quarter change in margin from a high level, we talked about the MPP yields, and I'll get to that in a second. I think cost of funds was overall relatively flat. We see that pretty constant going forward, absent any significant changes in rates, AIO yields did increase based on their they're being tied to the CMT rate, which went up a little bit quarter-over-quarter.

So the biggest driver, I'd say, would be MPP yields, and we pointed to the competition I don't know that it was a change in anything we did, just increased competitive pressures throughout the industry. Warehouse clients typically have a lot of capacity right now.

And I think going forward, as we see it, yes, there could be some competition remaining that was kind of baked into our margin guidance. We'll see how things shake out. We don't think anything is going to change from a rate perspective, but that could obviously change things a lot too.

Yes. I think we're -- as our growth continues, which is -- as you can see from the numbers, has been pretty impressive the last year. we are seeing some competitive pressures. There's no doubt out there with lower volumes. I would say that overall plan continues to remain the same. There's a little tightening. We've had to make some adjustments here and there, but no wholesale changes and our margins are still greater than the industry itself, which we pride ourselves on.

So I think, yes, it's just a function of there's more entrants into the space. There's competitive pressures from a limited, I should say, not expanding volumes in the space. while we continue to grow pretty substantially. So a combination of all those factors has put some tightening on it. But -- our -- we're looking forward to continued growth in the channel. We have some capacity, the tech stack, the funding.

And so we're really optimistic. We know it was the compression on the margin was troubling in the second quarter. We're not hiding from that. But the growth and the metrics and everything in the business remain very strong.

Great. Just following up on that last point on the growth on the MPV side, growth really strong here, a little bit softer on a sequential basis in the second quarter, but still positive and real saw year-on-year. You take the guide here. Can you just discuss some of the sources of that growth as you look forward kind of how you break out between existing clients expanding versus adding new clients in the area?

Yes. So what would we look at the growth, Chris, the period-ending growth, as you pointed out, was a little softer than last quarter. That's really driven on our capital constraints, right? And where we sit from a capital perspective, we're now what, 5 or 6 quarters since we raised capital. So we watch those capital almost very closely.

The period end is the one that matters. What we really look at though is average balance growth, right? So we can hold those a little higher. That's what drives interest income, and that's what drives our net income in the channel. And we actually did grow average balances by $300 million or $400 million over the prior quarter level, which is really good.

But as you pointed out, growth is going to slow as we bought up against our limitations on the capital side. As far as -- could you repeat the second part of your question?

Just the sources of the growth going forward as you look from existing clients expanding versus adding new clients in the area.

Yes. So Crispin, this is Kevin. So a couple of things on the growth side still. So we do continue to have a pipeline of new clients coming into the program. So that is probably more active now than historical increases. So by talking points earlier, we did have increases in existing clients during the quarter also.

But more of it is the pipeline of new clients coming on board will probably drive the most growth. And we also mentioned a couple of times during our prepared remarks about the participation program and we have the capacity there beyond our own balance sheet size, as we've talked about previously, to continue the growth of the program and really optimize our balance sheet with the average assets in the program to Brad's point earlier.

So we've got multiple levers that we're in the process of executing Kinston that side.

Our next question comes from Damon DelMonte with KBW. -

Brad, I think in your prepared comments that included the guidance, you had said that the all-in margin on the mortgage origination business is expected to be $275 million to $325 million. What was this quarter's margin again?

This quarter, we were probably, I would say, towards the midpoint or upper end of the range. It depends on how you look at it, right? We look at margin on a salable lock volume basis because that's really where the revenue is generated from a fair value perspective.

If you look at it on closed volume, you tend to get some variability in when the loan closes versus when it's locked and when the revenue isn't put on to the income statement. So if I'm looking at saleable volume and we take a lock factor of this just say, 80% for easy math, you come up with a margin probably in the middle to top end of that range, which a lot of it has been driven by the performance of our capital markets units.

I'd say overall margins have remained pretty competitive, especially in the agency space, salable mortgage originations. We do a nice piece of non-QM business, which had some higher margins. We can do other loans that get pooled and that smaller loan dollars that have some nicer margins.

But overall, we probably see margins within that range. And then anything we can do above that is based on how well we execute from a capital markets perspective and outperform.

Got it. Okay. Great. Appreciate that color. And then the commentary on the provision outlook. I think you reiterated a $2 million to $3 million for the full year. I mean if you look at the first half of the year, there was a slight release in reserves. So are you expecting there to really be something on that middle point of that range?

Or I guess, basically, I'm trying to say like based on the strong first half to kind of have that much for the full year implies kind of a lift from where I think we were expecting in the back half of the year. Is there -- am I reading into that too much?

No, you're not. You've got it accurate. I'd say we'd be at the -- based on where we're trending today and if we just look at expected charge-off replenishment and any provisions related to new growth, we'd be probably at the bottom end of the range. to know what's going to happen, right?

I don't give any color on what I think are going to happen to home prices or a shift in the mix of the quality of the portfolio or anything like that. Those are going to be larger drivers of the provision. They're tough to predict and who knows what will happen in the next couple of quarters, something we see right now.

So yes, everything based on what you're saying and what I've guided to should point to kind of the bottom end of that range if we think about a normalized level for Q3, Q4.

Okay. Great. That makes a lot of sense. And then I guess just lastly, could you just talk a little bit about the ongoing strategy to kind of win over the core deposit customers and kind of some of the opportunities that you see in the back half of this year?

Yes. So this is Kevin. So yes, we continue to hit that hard as a company strategy perspective. Nothing concrete to report here today on the topic, but definitely, we're still looking for the same type of relationships that we've talked about previously and have been successful over the last 12 months bringing on.

To Brad's point, we can bring on some of these types of funds. We get some relief on FDIC insurance and pay similar or lower cost to proper funds. That's still what we're shooting to do. And we keep having those conversations, and hopefully, we'll have something to report as we move forward.

Our next question comes from Christopher Marinac with Brean Capital.

I want to leverage off a last question on core deposits. Do you see with the improvement on the wholesale funding ratio incrementally, does that help you on your FDIC costs or any other kind of liquidity measures. Does that help you grind margin up from that angle?

I would say not the margin, Chris, but it does help on the FDIC insurance costs. A lot of times, those -- we bring in those types of relationships that Kevin just highlighted, they'd be at a similar cost if we can get them a little less than brokered, obviously, that will help the margin, but they're pretty much comparable or even a little above if we see them.

And if we do, we see -- there's a, call it, 15 to 20 basis point improvement in our FDIC insurance related to lower sale funding ratio. So that is one of the big drivers of our FDIC insurance costs.

And if you look last quarter to this quarter, that kind of played out a little bit in the P&L, we were down I want to say, $200,000 or $300,000 quarter-over-quarter, really driven by the fact that we had a lower wholesale funding ratio that looks back over the last 4 quarters. It's not always a point in time snapshot -- so as we continue to do these, I think we'll see P&L benefit, nice decreases in that expense and with a similar or possibly even a lower funding cost if we can get it.

And you mentioned at the beginning of the call about the sort of mix change, I think, larger customers that helps that is impacting some of the narrower spreads. Do you have a goal for how that those customer mix look looking out several quarters?

I don't know if we have any specific goals. We continue to explore business on any avenue. So I don't think that we have any specific -- we have to add this big customer, that big customer. So that's really Yes. We explore all avenues for new business. So I don't think there's any particular goal on large or small clients.

So the mix will be what it will be every quarter and year, and we'll just...

Yes, I wouldn't suspect it's going to change much. For every large client that we add, we had 5 or 6 midsize or smaller ones. So that's always been our strategy for 15 years. So I don't see a major shift in that strategy at all.

And then, Chuck, I wanted to ask about sort of this time of the cycle, would you anticipate any competitors leaving? Or is that not what should be anticipated?

Yes, that's a good question. Right now, I think just everybody is looking for volume. We've had some -- obviously, the success that we had in 2024. We had a couple of larger funders leave because of liquidity. So absent a liquidity event, I think in the banking industry, I don't sense that there is anybody leaving to the contrary, there's some other entrants.

But we're still very confident in our system and our -- as I mentioned, our crew is continuing to develop business and grow in a very challenging environment as far as that goes. It's -- nobody is leaving and we're continue to see pressure. But our growth continues, and we've had to adjust some things, as I've mentioned, with the client but there's no wholesale and we let you know.

There's no wholesale issues at this point. So I gave a little more color. But no, we don't -- I don't see -- like unless there's an industry -- banking industry, I'm talking about something happening on liquidity. I don't see anybody leaving at this point.

And Chuck, your relative size is an advantage also?

Yes, absolutely. The in the metrics, and it's obviously we minis, but the metrics and what we talk about and what's going on inside of our walls are good stuff. So can't hide from the numbers. But I think some things that we kind of gloss over is asset quality remains excellent, it improved a little over the first quarter.

And as Brad said, we don't have a crystal ball on what's going to happen, but we've got a really seasoned portfolio, and we're just not seeing any pressure there, which is a great thing for our institution. And so yes. We're -- again, we're really confident about what -- where we're going and what we're doing.

And we continue to say we can operate in any interest rate environment. Should interest rates ease a little bit, which I don't anticipate with everything going on in the economy. But if they were, we're going to be able to pounce on that as well. But in the meantime, we're just going to keep growing and cruising along with what we're doing.

[Operator Instructions] There are no further questions at this time. This concludes today's conference. You may disconnect your lines time, and we thank you for your participation.

Good afternoon. My name is Chuck Williams, and I'm the Chairman and Chief Executive Officer of Northpointe Bancshares, Inc. I will be presiding over today's virtual annual meeting. On behalf of our company, I would like to welcome you to the 2026 Annual Meeting of Stockholders of Northpointe Bancshares, Inc.

In fairness to all stockholders in attendance and in the interest of an orderly meeting, we ask that you honor the following rules of conduct. Only shareholders of record of March 19, 2026, or their proxy holders may participate in the meeting. All questions should be raised when we open the lines for questions. Each attendee is limited to a total of no more than 2 questions or comments, no more than one of which may be on a single topic. Questions or comments must not exceed 2 minutes in length.

No nomination of directors or presentation of new business will be accepted from the floor. The question-and-answer period for each proposal will be limited to a maximum of 15 minutes. Please do not speak while somebody else is speaking. Please keep your line on mute while you are not speaking. The views and comments of all shareholders are welcome. However, the purpose of the annual meeting will be observed, and we will not address questions that are irrelevant to the business of the company or the conduct of its operations, derogatory references that are not in good taste, unduly prolonged longer than 1 minute, substantially repetitive statements made by other shareholders or discussions related to personal grievances.

As the meeting is by phone, I will take a formal roll call. Let's begin by introducing the directors of the company in attendance. With us today are Board members, Carrie L. Boer, Raj Chaudhary, Robert W. De Vlieger, Jeff Dean, Bruce Edger, John Eggemeyer, Rodney Hood, David Hooker, David Lawrence, John Tuttle. Also present with us today are the following executive officers of the company; Kevin Comps, our President; Brad Howes, our CFO; David Crystal, our President of Mortgage Warehouse Lending; Amy Butler, our EVP of National Sales. Additionally, Bryan Barker will be serving as the Inspector of Elections at this annual meeting.

Finally, we are remotely present -- we have remotely present with us today, Pat Molloy and Brynn McMullan of RSM US LLP, our independent auditors.

At this time, I would like to call the annual meeting to order. I will serve as Chairman of today's meeting, and Kevin Comps will act as Secretary of the meeting. We will conduct the business portion of the meeting first, during which our stockholders will vote upon the matters listed in the previous distributed proxy materials. Following the formal portion of the meeting, there will be an opportunity to discuss the company's affairs with management. This brings us to the determination of a quorum. Our bylaws provide that the present in person or by proxy of the majority of shares of stock issued and outstanding on the record date constitutes a quorum.

As previously noted, all stockholders of record as of March 19, 2026, are entitled to vote at this annual meeting. As of March 19, 2026, there are 34,494,116 shares entitled to vote at this meeting. Bryan Barker has been appointed as the Inspector of Election for this meeting. In his possession is a certified list of the stockholders as of March 19, 2026, the record date of this meeting. This list, along with an affidavit of the mailing of the notice of the meeting and the accompanying proxy materials and annual report are available for any interested stockholder. Mr. Barker, do we have a quorum?

Yes, we do. The preliminary tabulation shows that more than a majority of our outstanding shares entitled to vote are represented in person or by proxy as of the record date, March 19, 2026. Therefore, a quorum is deemed to be present.

Thank you, Bryan. The meeting is now open for the transaction of business. We will proceed with voting on the matters described in the proxy statement to be acted upon in this meeting. All stockholders entitled to vote at this meeting have the ability to do this via telephone conference after the presentation of all proposals. If you are a stockholder entitled to vote and have not voted or you would like to change your previously cast vote, please do so when we open the line for voting. I will call each stockholder by the control number to solicit your vote if the stockholder indicated their intent to vote at the meeting, which we do not believe we have any.

We will then allow any stockholder in attendance who previously voted by proxy the opportunity to change his or her vote. Please remember that if you have already voted by proxy, it is not necessary to vote again. After voting has been completed on all matters on the agenda, we will close the polls and provide a preliminary report. The business has come before the meeting to be considered the 2 proposals in the proxy statement. The first proposal is to elect 8 directors to serve until 2027 Annual Meeting of Stockholders and until their successors have been duly elected and qualified. The nominees are as follows; Charles A. Williams, Carrie L. Boer, Raj Chaudhary, Robert W. De Vlieger, Rodney E. Hood, David S. Hooker, David F. Lawrence, and John Tuttle.

This is Proposal 1 in the proxy statement. Director nominees are elected by a plurality of the votes cast. The Board recommends a vote for each of these directors. The second proposal is to ratify the appointment of RSM US LLP as the company's independent registered public accounting firm for the year ending December 31, 2026. This is a proposal 2 in the proxy statement. The Board recommends you vote for RSM to serve as the company's independent registered public accounting firm for the year ending December 31, 2026.

We will now open the floor to questions from shareholders regarding the proposals. Please limit your comments and questions to the 2 proposals discussed. We remind you to please be respectful and follow the rules of conduct from the beginning of the meeting, including civility and limiting your questions to no more than 1 per topic and 2 in total. If you violate the rules of conduct, we may mute your line or mute you from the meeting.

First, are there any questions or comments on Proposal 1?

Hearing none, we will move on to discussing the next proposal.

Is there any questions or comments on Proposal 2?

Hearing none, we will move on to voting.

[Voting]

We will now provide a moment to collect votes from any stockholder who wishes to vote today. Any stockholder who hasn't yet voted or wishes to change their vote may do so when called upon. Stockholders who have sent in proxies or voted via proxy and do not want to change their vote do not need to take any further action. I will call each stockholder by the control number to solicit your vote if the stockholder indicated their intent to vote at this meeting, which we do not believe that we have any. I will open the floor to allow anyone who previously submitted a proxy a chance to change his or her vote.

For Proposal 1, election of the directors, please reply for or withhold and indicate any proposed director from whom you would like to withhold your vote.

For Proposal 2, please reply for or against or abstain.

If there is anyone else, I have not called upon who either has or not yet voted or wishes to cast a vote. The polls will close shortly. So if you have not voted, please speak up now. Since everyone has had the opportunity to vote, it is now 1:10 p.m., and the polls are closed. At this time, we will pause to permit the secretary to tabulate the votes with respect to the proposals.

Thank you, Chuck. I offer the following report. With respect to Proposal 1, the proposal to elect 8 directors to serve on the Board of Directors until 2027 Annual Meeting of Stockholders. I am pleased to report that each director received a plurality of the votes cast, and therefore, the proposal is considered approved.

With respect to Proposal 2, the proposal to ratify the appointment of RSM US LLP as the independent registered public accounting firm of the company for the fiscal year ending December 31, 2026, I am pleased to report the proposal received the affirmative vote of a majority of the shares cast in person or represented by proxy, and therefore, the proposal to ratify this appointment is considered approved. This concludes my report on the tabulation of the votes for this stockholder meeting.

Thank you. I declare the proposal to elect 8 directors to serve on the Board of Directors until 2027 Annual Meeting of Stockholders and the proposal to ratify the appointment of RSM US LLP as the company's independent registered public accounting firm for the fiscal year 2026, have each been approved. The specific voting results for each of the proposals will be available from us after this meeting. Thank you all very much for your participation.

With that, I will now -- I will also adjourn the formal business portion of the meeting. I will now open the floor to questions. Please remember to follow the rules of conduct, especially regarding the time limit.

Okay. Hearing none, thank you for attending the 2026 Annual Meeting of Stockholders and for your support for the company. There being no further business, I declare the meeting adjourned.

Greetings. Welcome to Northpointe Bancshares, Inc. First Quarter 2026 Earnings Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to Brad Howes, Executive Vice President and Chief Financial Officer. Thank you. You may begin.

Good morning, and welcome to Northpointe's First Quarter 2026 Earnings Call. My name is Brad Howes,, and I'm the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO; and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on Northpointe's Investor Relations website, ir.northpointe.com.

As a reminder, during today's call, we may make forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings.

We will also reference non-GAAP financial measures. I encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides. The agenda for today's call will include prepared remarks, followed by a question-and-answer session.

With that, I'll turn the call over to Chuck.

Thank you, Brad. Good morning, everyone, and thank you for joining. With 1 quarter completed, we're off to a very good start in 2026. Despite the macroeconomic uncertainty, our business model remains resilient, and our exceptional team members continue to perform well. For the quarter, we earned $0.62 per diluted share and with a return on average assets of 1.28% and a return on average tangible common equity of 15.71%. Factoring in the impact of dividends paid, our tangible book value per share increased by over 16% annualized over the prior period.

Our first quarter results were anchored by a robust growth and continued market share gains in our mortgage purchase program or MPP business, strong performance in our residential lending channel, a modest reduction in our wholesale funding ratio and an improvement in overall asset quality. We've added a new slide, which is on Page 4 of our earnings call presentation, which I think really tells the story well.

We're proud to be one of the only entirely mortgage-focused banks in the country, while certain aspects of our financial performance are naturally sensitive to mortgage rates, our diversification across the mortgage space has historically insulated us from dramatic income statement volatility typically associated with the mortgage industry. As outlined in the charts, we've continued to deliver consistent financial performance and grow tangible book value despite a challenging and volatile interest rate environment.

One of the biggest drivers of our performance is the success we've achieved in our MPP business. Let me walk through a few highlights. MPP balances ended the quarter at $3.9 billion, an impressive growth rate of 51% annualized over the prior period. Total loans funded through the channel was $11.2 billion for the quarter which is very strong considering the first quarter is typically slower due to normal seasonality in the mortgage business.

By comparison, total loans funded was $6.7 billion for the first quarter of 2025. We have funded $4.6 billion in total loans during March, which is our highest volume month on record. I believe our first quarter results, combined with the momentum we have gained set us up nicely to meet or exceed our 2026 growth plan.

I'd like to now turn the call over to Kevin to provide more details on our business lines.

Thanks, Chuck, and good morning, everyone. Let's start with our MPP business on Slide 6. Compared to the prior quarter, period ending MPP balances increased by $435.7 million and average balances increased by $59.3 million, with most of the balance growth occurring towards the end of the quarter. As I've discussed on prior calls, these are net of any MPP balances participated up. At March 31, 2026, we had participated $412.7 million to our partner banks, down slightly from the level at December 31, 2025.

Let me break down our first quarter 2026 growth a bit further. First, we brought in 8 new clients, which totaled $205 million in additional capacity; second, we increased facility size for 11 existing clients, which totaled $465 million in additional capacity; and third, the overall utilization of our existing clients remained strong during the quarter, averaging 57%. Average MPP yields were 6.59%, and fee adjusted yields were 6.82% during the first quarter of 2026. Our average yield was down 39 basis points from the prior quarter which is consistent with the decrease in SOFR over that same time period.

Turning now to Retail Banking on Slide 7. I'd like to highlight the results of the 3 main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we closed $693.7 million in mortgages during the first quarter which is down from $762.0 million in the prior quarter. During the first quarter of 2026, saleable volume was $626.6 million. Of that, 39% was in the Consumer Direct channel and 61% was in the traditional retail channel. This compares to $671.3 million in saleable volume during the fourth quarter of 2025 and with 35% of the volume in the consumer direct channel and 65% in traditional retail channel.

Refinance activity made up 59% of the total saleable volume in the first quarter of 2026 and up from 51% in the fourth quarter of 2025. In both periods, we saw a drop in mortgage rates, which spurred additional refinance activity. As we've discussed previously, it only takes a 25 to 50 basis point decline in mortgage rates to drive additional refinance activity, and we were able to take advantage of the temporary drop in both of the last 2 quarters. The additional refinance activity helped maintain strong volumes and revenues in what is typically a slower buying season.

Mortgage rate lock commitments increased by 12% over the prior quarter, driven by an increase in refinance activity with purchase activity down modestly from the prior quarter. We sold approximately 68% of the saleable mortgage service released in the first quarter of 2026, and which is down from 79% in the prior quarter. We continue to look for opportunities to create additional efficiencies, using technology and hire new talented lenders within the channel. During the first quarter, we hired 7 new mortgage professionals in 2 new markets to help us continue to grow the channel.

In the middle of Slide 7, we highlight our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite. We ended the fourth quarter with $5.1 billion in total deposits, an increase from the prior quarter. The breakout of these deposits is detailed in the appendix on Slide 13. The majority of our deposit growth compared to the prior quarter was driven by normal seasonality in our custodial deposit balances as well as higher levels of brokered network deposits, which had more attractive rates than brokered CDs.

On the right side of Slide 7, we highlight our specialty mortgage servicing channel where we focus on servicing first lien home equity loans tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans. Excluding the adjustment for the change in fair value of MSRs, we earned $2.2 million in loan servicing fees for Q1, which is flat from the prior quarter. Including loans we outsource to a subservicer, we serviced 15,900 loans for others with a total UPB of $5.2 billion as of the first quarter of 2026.

Turning lastly to Slide 8. We saw a nice improvement in our overall asset quality metrics during the quarter. Consistent with prior quarters, we are not seeing any systemic credit quality or borrower issues in any of our portfolios. We had net charge-offs of $266,000 in the first quarter of 2026 and which is down from $1.2 million in the prior quarter. First quarter charge-offs represented an annualized net charge-off ratio to average loans of 2 basis points, which remains well below long-term historical averages.

Let me provide some additional details on our asset quality metrics this quarter. First, total nonperforming assets decreased by $2.0 million from the prior quarter, Second, early-stage delinquent loans improved this quarter was past due loans 31 to 89 days, decreasing by $6.5 million from the fourth quarter of 2025 level. Third, at March 31, 2026, MPP represented 58% of all loans, and we've continued to experience pristine credit quality in that portfolio.

Fourth, virtually all of our loan portfolio is backed by residential real estate, which typically carries much lower average loss rates than other asset classes. And fifth, our residential mortgage portfolio is high quality, seasoned and geographically diverse. And March 31, 2026, our average FICO was 752, and our average LTV when you factor in mortgage insurance was 72%. Additionally, our average debt-to-income ratio was 35%.

Now I'd like to turn the call over to Brad to cover the financials.

All right. Thanks, Kevin. As I go through today's slide presentation, I will be incorporating full year 2026 guidance into my commentary. Let's start on Slide 9. As a reminder, our non-GAAP reconciliation on Slide 15 provides details of the calculations and a reconciliation to the comparable GAAP measure are all non-GAAP metrics.

For the first quarter of 2026, we had net income to common stockholders of $21.7 million or $0.62 per diluted share. Our performance and profitability metrics, which are laid out on Slide 5, remains strong. Net interest income decreased by $2.21 million from the prior quarter, reflecting a 9 basis point decrease in net interest margin partially offset by growth in average interest nearing assets of $47.6 million. Our yield on average interest-earning assets was down 17 basis points from the prior quarter, driven primarily by a decrease in loan yields.

A significant portion of our MPP facilities are tied to the SOFR index, which was down almost 40 basis points on average on a linked-quarter basis. Our cost of funds decreased by 13 basis points, reflecting a federal funds rate cut of 25 basis points in December of 2025. For full year 2026, I am lowering our expected NIM range slightly to $2.35 to $2.50. My guidance assumes a continued improvement in the mix of loans within the held for investment portfolio and that sulfur and funding costs will remain at or near current levels. I'm also assuming that we do not have any additional Fed funds rate cuts in 2026.

Turning to loan growth guidance. For 2026, I expect MPP balances to increase to between $4.1 million and $4.3 billion by year-end. I'm also still expecting $300 million to $500 million on average will be participated out throughout 2026. As we've reiterated on prior calls, participations remain an important component of our overall MPP strategy which allows us to manage the balance sheet and optimize capital ratios while driving higher fee income. We will continue to look for opportunities to add and expand participation partners to help drive further growth in the business.

I'd also still expect period-ending AIO balances to increase to between $900 million and $1.0 billion by year-end. Excluding MPP and AIO loans, I'd expect the rest of the loan portfolio to continue to decrease to between $1.9 billion and $2.1 billion by year-end 2026. This includes loans held for sale, which tends to vary based on the timing of loan sales. None of my loan growth guidance has changed from the prior quarter guidance that I provided.

Kevin provided details on the improvement in asset quality trends this quarter with the lower level of charge-offs the decrease in nonperforming and early-stage delinquent loans and continued runoff of non-AIO and MPP loans, we had a total benefit for credit losses of $445,000 in the first quarter of 2026. With the provision benefit this quarter, I now expect total provision expense of between $2 million and $3 million for 2026, which would be driven by the replenishment of net charge-offs and growth in our MPP and AIO loans.

Any additional provision expense or benefit related to the credit migration trends, changes in the economic forecast or other changes to the credit models would not be part of my guidance. Noninterest income increased slightly from the prior quarter, reflecting higher gain on sale revenue, partially offset by larger adjustments to our fair value assets.

On the top of Slide 14, we break out 3 of our fair value assets and their associated quarterly increases or decreases. These assets tend to move up or down with interest rates and are not part of my revenue guidance each quarter. On the bottom of Slide 14 and in our earnings release tables, we provide further details on the components of net gain on sale of loans. As you can see on that chart, first quarter net gain on sale of loans included a $1.2 million decrease in fair value of loans held for investment and lender risk account with the Federal Home Loan Bank. Excluding these items, net gain on the sale of loans would have been $17.8 million, which is up from $16.6 million on a comparable basis in the prior quarter.

For 2026, I am forecasting total salable mortgage originations of $2.2 billion to $2.4 billion, with all-in margins of 2.75% to 3.25% on those mortgage originations. We margin guidance is a blend of margins from our traditional retail and consumer direct channels. As a reminder, the consumer direct channel has lower margins with an offsetting lower mortgage variable comp expense. These estimates do not assume any significant decrease in mortgage rates nor do they assume any change to the current level of mortgage originators within the bank.

I'd expect MPP fees to range between $9 million and $11 million for the full year 2026 based on the expected participation balances and continued growth in loans funded. Excluding fair value changes in the MSR, loan servicing fees were $2.2 million for the quarter, flat from the prior quarter. I'd expect that quarterly run rate to continue to increase in 2026 and with full year revenue between $9 million and $11 million. Noninterest expense was up $658,000 from the prior quarter, driven primarily by salaries and benefits, mostly related to bonus and incentive compensation, which is tied to company performance.

For the full year 2026, I'd expect total noninterest expense to be in the range of $138 million to $142 million, no change from my prior guidance. The expected increase in noninterest expense is more than offset by growth in total revenue based on the positive operating leverage we are able to generate.

Turning to the balance sheet on Slide 10. Total assets increased to $7.4 billion at March 31, 2026, based on the strong growth in MPP balances during the quarter. Our wholesale funding ratio was 62.94% at March 31, 2026, which is down from 64.60% in the prior quarter based on the deposit growth Kevin highlighted.

Looking forward, we'd expect to continue to fund MPP and AIO growth through a combination of brokered CDs, retail deposits and other sources of non-brokered deposits where possible. Our effective tax rate was 24.72% for the first quarter of 2026, reflecting additional income tax expense related to nondeductible tax rules for publicly traded companies. I'd expect the 2026 run rate to be in line with that.

Lastly, on Slide 11, we outline our regulatory capital ratios, which are estimates pending completion of regulatory reports. Looking forward, I'd expect we will continue to leverage additional capital generated through retained earnings to grow MPP and AIO balances. We previously announced the completion of a private placement of $20 million in aggregate principal amount of fixed to floating rate subordinated notes. We believe this additional capital provides us with flexibility should we see stronger growth throughout 2026 and with respect to our $25 million in Series B preferred stock that we anticipate calling prior to year-end.

With that, we are now happy to take questions. Sherry, please open the lines for Q&A.

[Operator Instructions] Our first question is from Crispin Love with Piper Sandler.

First, just on the net interest margin trajectory. I heard your update on the guide I think 2.35% to 2.5% for the year, did 2.42% in the most recent quarter. But can you just discuss the ramp you would expect throughout the remaining 3 quarters of the year to just fit and fit within that range. I mean if any pecan takes there?

Sure. Crispin, this is Brad. What I'd say about the guidance is that we think about rates, we don't have anything significant changing in our models today where we stand with interest rates. So for funding rates and all that remain relatively flat, no Fed fund cuts. So really, the benefit that comes over the remaining quarters would come from the continued improvement in the mix of loans. If you look at AIO loans, which are driving the growth in the balance sheet today.

As we grow those and as we run off legacy assets, which have lower average yields based on when they were generated. We will see a little bit of a continued improvement in the mix of loans, which drive up margin. That's really the only put and take. I'd say that's embedded in our guidance. We do have a small amount of borrowings that are coming due, $50 million this year. But for the most part, most of the funding cost should remain pretty flat absent any changes in rates.

Okay. Great. That makes sense. And then I just 2 related questions on MVP. Just first on the loan balances for 2026. Did you reaffirm that, that $4.1 billion to $4.3 billion guide? I just might have missed that.

We did, Crispin. Yes, no change from prior guidance.

Okay. Perfect. Okay. That's what I just wanted to make sure. And then just broadly on MPP balances, they've continued to grow meaningfully. They did on a sequential basis in the first quarter. So can you just discuss some of the drivers of that growth and sustainability of that? And I assume with that guidance, I would think that some of the sequential increase should decelerate a bit in the coming quarters, but just curious on that MVP balance growth that you continue to generate.

This is Kevin. I can start with that, Crispin. So part of the growth as was in the commentary was some of it is coming from existing clients expanding their facilities still that is reasonably expected to continue as we get into the busier cycle of the year, which is typically the summer buying season, that could be a reasonable place also. And then as usual, we do have a pipeline of clients that could potentially come on board additionally. We haven't any 1 added during Q1 also. We'd expect to add some new ones moving forward.

The pace of growth of new clients, to your point, would probably not be the same as when we came out of the gate with the IPO a year ago and had a very long backlog of new clients coming on board. Both of those things will still represent growth within the channel going forward, though.

Our next question is from Damon DelMonte with KBW.

I hope everybody is doing well. appreciate all the commentary and detail in the prepared remarks. Just curious on the commentary on capital and the potential for the $25 million of preferred to be called. Is that something that you could do with kind of cash on hand? Or is that something that might require another sub debt issuance?

No. We believe we can do that now looking at our models with what we have today. That was kind of part of the purpose of the sub debt offering that we did twofold 1 to be able to generate higher growth throughout the year, should we see it? And then two, to sort of bring that money in now so that we had the funding towards the end of the year, they'll need to raise any additional capital and take any variability in what could happen in the markets out of play and back that money.

Got it. And can you remind us kind of what your targets are for capital levels? I think total capital was 11.4%. What is your comfort zone in that ratio?

Yes. So we look at if there's 4 regulatory ratios. We look at each of those regulatory ratios at the bank and the holding company. We have a capital plan that has trigger levels that are with a buffer to well capitalized based on what we're comfortable with. Today, as we sit, our most binding capital ratio would be total risk-based at the bank. And we still have, call it, good room from there to we even get to the trigger levels.

So as we look out to our growth, we continue to lever additional retained earnings to grow our balances and grow our capital levels, and then I would expect those to continue to be consistent throughout the level of 2026.

Got it. Okay. Great. And then on the mortgage banking, I think you reaffirmed your expectation for origination activity for the year. What was the gain on sale this quarter?

So the dollar or the margins?

The margin, I think you gave a range of, what, $2.75 to $3.25. So what was the quarter shake out this year -- this quarter?

Yes. I'd say this quarter, the margin as a percentage was probably closer to the bottom end or a little off the bottom end or a little above the bottom end of that range. We've talked about in prior quarters, we are seeing competitive pressures on the conforming business and more entrants into the non-QM space, which is you have typically higher margins. So I'd expect our guidance is predicated on that. depending on what happens throughout the year, we'll still continue to earn in that range that we outlined, but it's probably close closer this quarter towards the bottom end of that range.

[Operator Instructions] Our next question is from Christopher Marinac with Bain Capital Research.

I wanted to talk about the progress in the wholesale funding ratio and that reliance inching down. Is the all-in-one progress this year and the further growth itself going to contribute to that and the other kind of goals for that ratio going forward?

Yes, this is Kevin. I'll start with the only 1 piece of this. So the All-in-One product is tied to real-time sweep features from a checking account. But those checking accounts are 0-dollar balance checking accounts with real-time suite features to pay down the loan. So that is not driving the decrease in the wholesale funding ratio normal swings in our custodial funds related to our servicing MSRs that we own and the other servicing relationships we have on the stevia front, the normal seasonality of those accounts was the main driver of the reduction in the wholesale funding ratio.

And then we're always looking for additional opportunities on the non-brokered side of the house. no material items to speak of for this quarter as we sit, but we always are looking to do something additional there.

Understood. That background. I appreciate it. And as you are -- have been very productive in the digital channel for a while with the business plan, are those customers behaving any differently when you have a modest backup in rates like we've seen since the end of February, or does that create any headwind for you in the upcoming quarters?

Are you talking from like a beta perspective, [ Crispin ]?

Correct. Exactly.

Yes. I'd say no. If you look at our cost of interest-bearing -- or sorry, our cost of deposits this quarter was down 22 basis points from the prior quarter. We had the Fed funds cut in December. So we behaved I think from a beta perspective, very well, 22% up to 25% would be in the deposit side. Where you see, obviously, the funding mix more stable is on the borrowing side, where we -- we have match funded some of our longer-term assets with longer-term liabilities. So we've locked those in over time to maintain a big margin. But when you look at net funds rate cuts, obviously, those are -- those remain flat, but we do see a nice benefit from the rate cut, and we really were able to pass along most of that beta in this last great hike and haven't seen anything to the contrary so far this quarter.

Sounds good. And a final question for me, just as you continue to build the asset side and kind of pledgeable assets as the balance sheet grows, does that extra liquidity give you any difference in terms of whether it's managing capital like the preferred decision or just sort of how you pursue other initiatives.

Could you repeat that? You cut out for a second there, Crispin -- sorry, Chris.

That's okay. I was asking about the growth of the balance sheet and how that impacts liquidity as you have more assets you can pledge for further borrowings in the future and how that impacts sort of the profit build out for the farm.

Yes. No, we have a pretty good amount of excess capacity as we stand today. That will slowly grow as we grow the balance sheet. You're absolutely right. With being legible to Federal Home Loan Bank. That's 1 of our largest sources of liquidity. That will continue to grow over time. We haven't had to tap a lot of it as we have sort of a growth path in funding in a growth basin asset that matches each other, and we've maintained that level of liquidity we like to have it just in case. So -- but you're right, that will continue to grow nominally over the course of 2026.

So if the environment were to change and become more favorable or margins changed to what you wanted to take advantage of grow faster you could, and that was really just channel check.

Yes. from liquidity would not be the constraining factor that would be more based on our capital ratios. And our growth path kind of has us leveraging all the capital we generate. What I mentioned in our comments, though, and what Chuck and Kevin have reiterated on prior calls is that we would use participations and continue to grow that program, if we should see opportunities for further growth this year. That is a vehicle that we could utilize to manage our balance sheet and to grow faster or higher than we originally thought.

Great. I follow and thanks for explaining and reiterating.

There are no further questions at this time. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Greetings. Welcome to the Northpointe Bancshares Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions]. Please note that this conference is being recorded. At this time, I'll turn the conference over to Brad Howes, CFO. Brad, you may begin.

All right. Thank you. Good morning. Welcome to Northpointe's Fourth Quarter 2025 Earnings Call. My name is Brad Howes, and I'm the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO; and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on Northpointe's Investor Relations website, ir.northpointe.com. [Audio Gap] Non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides. The agenda for today's call will include prepared remarks, followed by a question-and-answer session and then closing remarks.

With that, I'll turn the call over to Chuck.

Thank you, Brad. Good morning, everyone, and thank you for joining. As we report today's results, I can't help but reflect on an incredible journey since we went public early in 2025. Prior to the IPO, we ended 2024 with total assets at $5.2 billion. Today, I'm proud to report that we've grown to over $7 billion in total assets, driven by tremendous growth in our Mortgage Purchase Program or MPP business. For 2024, we earned $1.83 per diluted share with a return on average assets of 1.08%. And and a return on average tangible common equity of 13.94%. For 2025, we increased our earnings per diluted share by 15% to $2.11.

We also improved our profitability metrics significantly with the return on average assets of 1.33% and a return on average tangible common equity of 14.43%. The improvement in performance drove an increase in tangible book value per share over the prior year. When you add back the impact of the dividends paid, our tangible book value per share increased by 13.9% on an annual basis. During the IPO, we laid out our vision for Northpointe with an ambitious plan to grow the bank, generate positive operating leverage and strong shareholder returns. Fast forward 1 year, I'm pleased to report that we did exactly what we said we would do, and I'm proud of how well our team has executed on Northpointe's strategic direction. We've delivered robust balance sheet growth and consistent earnings throughout 2025. This was driven by sustained momentum and strengthened results across each of our key business lines, while maintaining a strong credit and compliance culture, building out key roles in our leadership team and investing in new technologies to streamline efficiencies and lay a foundation for scalable future growth.

Before I turn the call over to Kevin and Brad to dive into the details, I'd like to take a moment to share a few highlights. During 2025, our loan growth was very strong. MPP balances increased by over $1.7 billion from the prior year. We also increased participation in that business, which helps drive additional fee income. Our first-lien home equity lines, which are tied seamlessly to a demand deposit sweep account, which we call All In One loans increased by $121 million from the prior year, which is a 20% annual growth rate. We also made good progress on the funding side of the balance sheet, adding new relationships to help bolster core deposits and lower our wholesale funding ratio.

Noninterest income increased by $18 million from 2024, driven by solid performance in our residential lending channel. Residential mortgage originations increased by 20% to $2.5 billion for 2025, which is above industry results. This increase was largely attributable to the success of our mortgage originating professionals, including the new lenders that we've added over the past year in our retail channel. It's also attributable to higher refinance activity, specifically within our consumer direct channel, which occurred later in the year as mortgage rates declined slightly. I'd like to turn the call over now to Kevin to provide more details on our business lines.

Thanks, Chuck, and good morning, everyone. On Slide 5, we highlight our MPP business, which is our version of mortgage warehouse lending. We utilize our proprietary state-of-the-art technology stack to offer purchase program to mortgage bankers nationwide. As Chuck highlighted, we have experienced tremendous success over the course of 2025 in that channel. Average balances increased by over $410.2 million from the prior quarter. Period ending balances increased by $60.1 million over the prior quarter, which is in line with our guidance. Keep in mind, these balances are net of any MPP balances participated out.

As we've reiterated on prior calls, participations remain an important component of our overall strategy, allowing us to manage the balance sheet and expand net interest margin while driving higher fee income. At December 31, 2025, we had participated $457.0 million in MPP balances to our partner banks. That is up from $37.5 million at September 30, 2025. Let me break down our growth a bit further. First, in the fourth quarter, we increased facility size for 3 existing clients, which totaled $50 million in additional capacity, bringing total increases for 2025 to 28 clients for $1.2 billion. Second, we brought in 4 new clients during the fourth quarter, which totaled $45 million in additional capacity, bringing total new deals for 2025 to 29 clients or $1.8 million.

And third, our overall utilization of our existing clients remained strong in the fourth quarter, averaging slightly over 60%. We continue to generate strong returns on the MPP business, with average yields of 6.98 during the quarter. If you include fees, these yields increased to 7.22%. Average yields were down 12 basis points from the prior quarter as about 40% of the MPP portfolio reprices immediately and the remainder reprices on the 15th of each month. Turning now to Retail Banking on Slide 6. I'd like to highlight the results of the 3 main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we continue to perform well and take our share of industry volume.

We closed $762.0 million in mortgages during the fourth quarter, which is up from $636.6 million in the prior quarter. Mortgage rate lock commitments and applications both decreased slightly from the prior quarter driven by normal seasonality in the purchase business, offset by an increase in refinance activity. During the fourth quarter, we sold $665.6 million which represents approximately 87% of total loans closed in the quarter, in line with prior quarters. Of that saleable production, 65% was in our traditional retail channel and 35% was in consumer direct. The volume increase within the consumer direct channel was attributable to the increase in refinance activity, which started in late third quarter and continued into fourth quarter.

We sold approximately 79% of the salable mortgages servicing released in the fourth quarter, which is consistent with the prior quarter level. Additionally, 48% of our overall production was purchase business in the fourth quarter, which is down from 72% in the third quarter and reflects the increase in refinance activity, which began in September. We continue to look for opportunities to create additional efficiencies, using technology and hire new talent lenders within the channel. Over the course of 2025, we hired 34 new mortgage professionals to help us continue to grow the channel. In the middle of Slide 6, we highlight our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite.

We ended the fourth quarter with $4.9 billion in total deposits, up from $4.8 billion in the third quarter. The breakout of these deposits is detailed in the appendix on Slide 12. As Chuck mentioned, during 2025, we added 2 new relationships to help bolster core deposits and fund our planned growth. The deposits from these relationships can ebb and flow a bit during the year, but an aggregate total over $500 million in new core deposits. The majority of our deposit growth compared to the prior quarter was from a new digital deposit relationship completed during the quarter. This drove $234.2 million increase in savings and money market deposits over the prior quarter.

As we've highlighted on past calls, we will continue to explore similar additional sources of non-broker deposits going forward. On right side of Slide 6, we highlight our specialty mortgage servicing channel, where we focus on servicing first-lien home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans. Excluding the negative adjustment on the change in fair value of the MSR, we earned $2.2 million in loan servicing fees for Q4, which is up from $2.0 million in the prior quarter. Including loans we outsource to a subservicer, we serviced 15,200 loans for others with a total UPB of $4.9 billion as of the fourth quarter 2025. During 2025, we began specialized servicing for 5 new relationships and 2 additional securitizations.

Lastly, turning to asset quality on Slide 7, which remains one of the largest risks for any bank. We monitor this risk very closely and spend a great deal of time analyzing our held for investment loan portfolio. Consistent with prior quarters, we are not seeing any systemic credit quality or borrower issues in any of our portfolios. What we are seeing is the normal migration of [ pit ] trends on the seasoned loan portfolio. Residential mortgage, construction, other consumer and home equity loans make up $1.8 billion or about 30% of our loans held for investment portfolio. This will continue to decline as we are not materially adding any new loans to these categories.

Of these, approximately 88% were originated in 2022 or earlier. We had net charge-offs of $1.2 million in the fourth quarter, which is up from $977,000 in the prior quarter. Fourth quarter charge-offs represented an annualized net charge-off ratio to average loans of 8 basis points, which remains well below long-term historical averages. The charge-offs we took in the fourth quarter, similar to prior quarters, came from isolated occurrences. There are a handful of larger mortgage [indiscernible] construction loan charge-offs this quarter, which totaled about $1.1 million. And the vast majority of these instances where we're dealing with a nonperforming loan, there is sufficient collateral to cover the unpaid principal balance, which usually leads to little or no loss.

We saw that trend continue in the majority of loans added to nonperforming status this quarter. Let me provide some additional details on our asset quality metrics this quarter. First, total nonperforming assets increased by $7.4 million for the prior quarter. Again, this represents normal seasoning and migration of our loans held for investment portfolio. Second, early-stage [indiscernible] loans improved this quarter with loans past due 31 to 89 days, decreasing by $1.9 million from the third quarter level. Third, at December 31, 2025, MPP represented 54% of all loans, and we've continued to experience pristine credit quality in that portfolio. Fourth, virtually all our loan portfolio is backed by residential real estate, which typically carries much lower average loss rates than other asset classes.

Fifth, our residential mortgage portfolio is also high quality, seasoned and geographically diverse. At December 31, 2025, our average FICO was 747, and our average LTV on new factory in mortgage insurance was 71%. Additionally, our average debt-to-income ratio was 35%. I'd like to now turn the call over to Brad to cover the financials.

Thanks, Kevin. Last quarter, I provided preliminary 2026 guidance for many of our key drivers. As I go through today's slide presentation, that will be incorporating full year 2026 guidance into my commentary. Let's start on Slide 8. As a reminder, our non-GAAP reconciliation on Slide 14 provide the details of the calculations and a reconciliation to the comparable GAAP measure for all non-GAAP metrics. For the fourth quarter of 2025, we had net income to common stockholders of $18.4 million or $0.52 per diluted share. During the last quarterly call, I provided an update on our strategy to replace a significant portion of our preferred stock with subordinated debt.

That was completed during the fourth quarter, which helps optimize our capital stack and realize material annual cost savings in 2026. With that, we had $3.2 million or $0.09 per share in additional expense from the unamortized field issuance costs, which was included in the preferred stock dividend line and there is no tax impact on the expense. Excluding this expense, earnings per diluted share would have been $0.61 for the fourth quarter of 2025 and $2.20 for the full year 2025, which is in line with our expectations during the IPO process. Net interest income increased by $3.2 million over the prior quarter. This reflected growth in average interest-earning assets of $393.2 million, along with the [Audio Gap] per basis point improvement in net interest margin from the prior quarter.

Our yield on average interest-earning assets decreased by 11 basis points from the prior quarter, but was outpaced by a 16 basis point decrease in our cost of funds. We benefited from a steeper yield curve with MPP yields only coming down about half the level of the 225 basis point Fed cuts in the fourth quarter. The decrease in our cost of funds was primarily driven by a 20 basis point reduction in the cost of interest-bearing deposits from the prior quarter. Our net interest margin was 2.51% for the fourth quarter and 2.45% for the full year 2025. For full year 2026, I'm expecting a similar range of 2.45% to 2.55%. My guidance assumes continued improvement in the mix of loans within the held for investment portfolio as well as 2 additional 25 basis point Fed funds rate cuts in 2026.

MPP balances increased by $60.1 million over the third quarter level but were net of $457 million in participations. As Kevin mentioned, we utilized participations to manage the balance sheet within our existing capital framework. For 2026, I'd expect our MPP loan balances to increase between $4.1 billion and $4.3 billion by year-end. I'm also expecting an additional $300 million to $500 million on average will be participated out throughout 2026. AIO loan balances increased by $31 million over the third quarter level. For 2026, I'd expect period-ending AIO balances to increase between $900 million and $1.0 billion by year-end. Excluding MPP and AIO loans, I'd expect the rest of the loan portfolio to continue to decrease to between $1.9 billion and $2.1 billion by year-end 2026.

This includes loans held for sale, which tends to vary based on the timing of loan sales. Kevin provided additional details on the higher level of net charge-offs this quarter. We had a total benefit for credit losses of $608,000 in the fourth quarter of 2025. This was driven primarily by an improvement in the economic forecast used in our credit model, most notably higher forecasted home prices over the next 5 years. We continue to experience a relatively low [indiscernible] of charge-offs compared to long-term historical averages. Our annualized charge on ratio was 8 basis points in the fourth quarter of 2025 and 5 basis points for the full year 2025.

I'd expect total [indiscernible] expense of between $3 million and $4 million for 2026 related to the replenishment of net charge-offs and growth in our MPP and AIO loans. Any additional provision expense or benefit related to credit migration trends, changes in the economic forecast or other changes to the credit models would not be part of my guidance. Noninterest income decreased by $2.4 million from the prior quarter, reflecting a decrease in gain on sale revenue, partially offset by higher MPP and loan servicing fees. On the top of Slide 13, we pick out our 3 fair value assets and their associated quarterly increases or decreases.

These assets tend to move up or down with interest rates and are not part of my revenue guidance each quarter. On the bottom of Slide 13 and in our earnings release tables, we provide further details on the components of net gain on sale of loans. As you can see, the fourth quarter net gain on sale of loans included a $1.7 million increase in fair value for loan self-investment and the lender risk account with the Federal Home Loan Bank. Excluding these items, net gain on the sale of loans would have been $16.6 million, which is down slightly from the third quarter level on a comparable basis.

For 2026, I am forecasting total sale of our mortgage [indiscernible] guidance is a blend of margins from our retail and consumer direct channels. The consumer direct channel has lower margins but then offsetting lower variable mortgage expense. For the year, consumer direct made up 24% of total saleable volume driven mostly by refinance volume. My guidance assumes a similar volume mix for 2026. Keep in mind that these estimates do not assume any significant decrease in mortgage rates nor do they assume any changes to the current level of mortgage originators within the bank. I expect MPP fees to continue to increase from their current run rate to between $9 million and $11 million for full year 2026 based on the expected participation balances and continued growth in loans funded.

Excluding fair value decreases, loan servicing fees were $2.2 million for the quarter up from $2.0 million in the prior quarter based on the new servicing relationships and increase in loan service as Kevin highlighted. I'd expect that quarterly run rate to continue to increase in 2026 with full year revenue between $9 million and $11 million. Noninterest expense was down $581,000 from the prior quarter, driven primarily by lower salaries and benefits, specifically bonus and incentive compensation. For 2025, total net interest expense was $129.2 million. For the full year 2026, I'd expect total noninterest expense to be in the range of $138 million to $142 million.

This increase in noninterest expense is more than offset by the growth in total revenue based on the positive operating leverage we have been able to generate. By 2026, expense guidance assumes approximately $1.0 million and additional salaries and benefits expense from new roles in addition to the usual cost of living adjustment to base salaries. We also saw increased medical benefits expense in 2025, which we believe will somewhat abate in 2026. Turning to the balance sheet on Slide 9. Total assets increased to $7.0 billion at December 31, 2025. Kevin provided details on our funding and deposits this quarter.

Our wholesale funding ratio was 64.6% at December 31, 2025, down from the prior quarter level due to the new core deposit relationship, which drove an increase in savings and money market balances. Looking forward, we'd expect to continue to fund MPP growth through a combination of brokered CDs, retail deposits and other sources of non-brokered deposits where possible. Our effective tax rate increased to 26.04% for the fourth quarter of 2025. This was driven by $500,000 of additional income tax expense related to the nondeductible tax rules for publicly traded companies. The effective tax rate for 2025 was 24.44%, and I would expect a similar level for 2026.

Lastly, on Slide 10, we outline our regulatory capital ratios, which are estimates pending completion of regulatory reports. Looking forward, I'd expect we will continue to leverage additional capital generated through retained earnings to grow MPP and AIO balances. With that, we're now happy to take questions. Rob, please open the line for Q&A.

[Operator Instructions]

And our first question will be from the line of Crispin Love with Piper Sandler.

So just first, it's very fluid mortgage environment right now. But can you just discuss how the last several weeks impacted your guidance for 2026, if at all, mortgage rates down at their lowest level in 7 years -- several years, seems like the administration is supportive. So curious on just how the recent landscape has impacted your 2026 or at least near term for salable mortgage originations and MPP loan balances? And again, that's it for the first question.

Sure. Crispin, this is Brad. I'll start and then Kevin and Chuck can certainly add to my comments. But I would say, pretty minimal impact from the last couple of weeks. When we do our forecasting, we're always looking at kind of a blend of all of the economic forecasts out there. If you look at Fannie, [indiscernible] or Moody's, they do have rates coming down towards the tail end of next year to sub-6, I think. We were very encouraged, I think, to see the decline in rates, although it could be short-lived. We don't know what's going to happen in the next few weeks. Kevin highlighted kind of volume trends, and we saw a nice pickup starting in September in refinancing activity that helped drive some higher volume for us, and we were encouraged by that.

But I'd say where we sit right now today, we need to see kind of a more sustained decline to really see a significant benefit to our P&L.

Yes. I'd say just we always have the normal seasonality within our mortgage origination platform. Also, when you think about year-over-year, Q1 of 26, volume-wise, all else being equal, should be higher than Q1 2025 based on the current rate environment.

Got it. That makes a ton of sense. And then just for full year '26, what are you assuming for mortgage rates?

Yes. So kind of coming down to -- again, this is predicated on sort of the consensus economic forecast from any of the kind of the 3 major sources we have for mortgage, but rates dipping to below 6% towards the end of the year, but sort of a slow drift over the course of the year with what would be kind of built into our base economic forecast. So really, I'd say, not a ton of significant benefit from our guidance embedded in what we may see a optimism from rates. So that would be upside if we do see additional decline to it. It works further than we think or that our estimates are assuming. There'll be benefit or upside to our origination forecast.

Okay. Perfect. I appreciate that. Then just on your guide for the net interest margin here for '26, I believe, $2.45 to $2.55. But can you discuss what's implied in your guide for the trajectory throughout 2026, just as you move through the year, big picture just based on the current rate outlook and your expectations?

Yes. So we had a $2.51 margin in the quarter, in the fourth quarter of 2025. Guidance, I wouldn't think would be, as you look at the trajectory, you'll see a little bit of continued improvement in margin based on the shift of mix in the loans rate as we amortize off residential mortgages and other loans that have lower yields, and we replaced those with MPP and AIO loans, which carry higher average yields. So you'll see a little bit of benefit as we go out throughout the year on that. But then we have 2 rate cuts that get embedded in the middle part of the year where we see a little bit of a decline that kind of offset some of that improvement. So net-net, I don't think there's going to be a ton of change from a trajectory standpoint as we look out to 2026.

It will obviously depend on deposit betas and the rate environment and where the yield curve kind of plays out with some of the middle part of the curve. But just, I think from a trajectory standpoint, should be pretty consistent across the year.

Our next questions are from the line of Damon DelMonte with KBW.

Just wanted to start off with the outlook on the provision. I think, Brad, you had said that it would be kind of in the $3 million to $4 million range for the year. And when you kind of factor in growth, it doesn't really move the reserve much. So just I was wondering if you could provide a little color around your comfort with the reserve level kind of slowly declining during the course of 2025 and kind of where you feel like a good targeted level is for you guys?

Yes. I have to start there and Chuck and Kevin could join too. When I think about the provision guidance, that's going to be just nominal growth in MPP and AIO loans. So as you indicated, not a ton of extra provisions was there. But if you look at the last couple of quarters of charge-offs, we've seen a little bit of elevation although still well below long-term historical averages. So my guidance was just based on some higher charge-offs that may or may not come through next year, but that's just for conservatism. That's kind of what we're seeing right now. What I'd say about the decline in reserve, if you look throughout the course of the year, so a lot of different things that go into that reserve. We have a very granular allowance methodology when we're running all of our loans at a loan level, forecasting out a lot of different economic scenarios, a lot of different model assumptions that go into it.

What I'd say is, if you look at our reserve, if you exclude MPP, which is pristine credit quality and you take out our fair value loans, we're probably about 37 basis points of coverage to the HFI book. When you think about our book, keep in mind, as Kevin indicated, it's a very seasoned book. Most of it was originated in 2022 or earlier. We're continuing to improve the mix with growth in MVP and AIO loans, which are much stronger asset quality than the remainder of the portfolio carry much lower outage loss rates. So that improves the overall mix, and it reduces the allowance as we go forward. The biggest decrease this quarter, I'd say, would be from our economic forecast.

As we look out, and this tends to change quarter-to-quarter, [indiscernible] the economic forecasts are updated in Moody's. But when you see an improvement in economic forecast and really HPI will be the big one. Our allowance can change up or down based on that. Last quarter, we had the opposite, in fact, where oil prices were expected to come down relative to the prior forecast. So that tends to ebb and flow throughout the year. I'd also say when you look at our nonperforming loans, as Kevin indicated, the majority of the loans that we see go into the nonperforming bucket, we have little or no loss because there's sufficient collateral coverage.

We have a 71% average LTV on our portfolio, a decent [indiscernible] MI if it's above 80% and 99% of it is backed by residential real estate collateral. So I think our actual losses, even at this quarter and the last quarter have been below what the model would indicate for charge-offs. So we're not seeing any detrimental updates, the loss rates really think our allowance model, I think it gives us a lot of comfort with where we stand today from an allowance to loan tell investment perspective.

Great color. I appreciate that. And then with respect to the expense guide, I think you said $138 million to $142 million for the full year. Kind of drilling in here a little bit. The taxes and insurance line has kind of gone up in the back half of the year and hit like $2.6 million, I think it was here in the fourth quarter. Do you expect that to continue to rise? Is like is that just kind of part of being a public company? Or were there some unique items here in the fourth quarter, which will kind of come out and it will go back to maybe where it was for the first half of the year?

No, I'd expect the former, that would continue to go up. We expect it to increase as part of the expense guidance, right? We'll see an increase in the other taxes and insurance. That's really driven by our FDIC insurance charges. And 2 items really impact that. I think the capital levels are one as we lever capital throughout the course of '25, and we've grown our balance sheet, that capital charge goes up. And then the wholesale brokered or as a percentage of your funding is another big driver of that FDIC assessment charges where we've continued to use a sizable portion of our funding is wholesale brokerage related.

That's why it's important that we continue to get our deposit initiatives and look for sources of nonbrokered deposits that help drive that down.

Got it. Okay. And then just lastly, can you provide any update on your strategy for adding retail hires? I think you said there was about 34 or something this year that you added? Kind of just what the prospect is to add more producers as the year progresses?

Yes. So we're always continuing on the recruiting front. We actually have a formalized recruiting strategy that we implemented in late Q4 around retail loan officers throughout the country. And so there is a pipeline we're working of new originators. It's a simple answer, I guess.

[Operator Instructions]. The next question is from the line of Christopher Marinac with Janney Montgomery Scott.

Could you elaborate a little bit more on the digital deposit relationship that you mentioned in the press release? And how many more opportunities like that are out there for this new year?

Yes, this is Kevin. So we did partner with an online platform where we gather these digital deposits, direct to the customer through that platform. As I said, it's a little over $230 million that we brought in in the past quarter. We're continuing to look for opportunities like that. As we've mentioned on a couple of these calls, we've had some decent sized relationships we were able to acquire during 2025. Nothing specific additionally to add for 2026 at this point, but we continue to explore all those different sources.

Are these more attractive today just given the fact that broad interest rates have edged down? And is there any sort of risk of these leaving once you have them onboarded?

So there is -- they are real sensitive customers like a lot of our funding are. However, we continue to stay competitive on a national scale. These are savings money markets, deposits, which we do pay competitive rates and launch that very closely with competitors in this online space. We can control that through rates and pricing.

Got it. And then just looking at kind of where you were 6 months ago on the custodial deposits within the specialized mortgage servicing, I mean how significant to you is it that you've built that a lot these last 6 months?

Yes. So that's an important part of our funding strategy also. A couple of different things there. So the deposits that we have, [indiscernible] funds related to the mortgage servicing rights that we own, all those custodial accounts are [ loudest ] here Also, as we've outsourced the agency subservicing to a counterparty. We retain all those deposits here as part of that relationship also. In addition to the larger custodial fund relationship outside of the MSRs that we own, we brought on during 2025 also. So we continue to explore additional custodial type relationships to bring to the bank in addition to the one we have today.

They definitely will continue to add as we retain more MRSs. In the future, all those custodial funds will remain here also.

Okay. So is it fair to say that there's a scenario where you get to the upper end of the margin range primarily -- or not primarily, but just part of it is because you could get these new deposit and impact the mix, therefore, drive a higher margin. Is that still part of this year plus the ability to do higher over time?

I would say we don't have a lot of those kinds of deposits embedded in the margin guidance. So that would be upside to that. What I would say would drive the needle though is deposit beta is coming in better than we thought, which if you look at the last 2 quarters, we've had almost 100% deposit betas on the ones that we can control, we do have some deposits, obviously, CDs right or year out and some other ones that are smaller. But for the ones that we have control over, we've been very happy with the beta. If that continues, that could be incremental benefit to keep us at the top end of that range above where our model would say our beta should be.

Okay. Great. And then just one quick question on the gain on sale. I know there's a wide range of $275 million to $325 million. But could you just remind us on what could be -- what could happen to be at the upper end of that gain on the sale range this year?

Yes. I'll start, Chris. I'd say it's really going to be driven on competition, right, and just spreads from 2025, we were able to price I think a little better based on the less competition than we expect for these kinds of loans and that will be both in our conforming business and across our 9 QM. So we do expect that competition to heat up a little bit there, which is why you see a little bit lower guide on the overall margins. So that's one. And I'd say, obviously, the mix of loans impacts that, too. I mentioned in my commentary, consumer direct has a lower margin and a lower expense structure.

So net-net profitability is the same. But when you look at the all-in margin, if consumer direct comes in at a lower percentage, that will drive up the margin guidance a little bit. It comes in at a higher percentage, that will take it down. I'd say those 2 items...

Great. Thank you for walking me through these points today. And I appreciate all the disclosure.

This now concludes our question-and-answer session. I'd like to turn the floor back over to Chuck Williams for closing remarks.

Thank you. I want to, again, thank everyone for joining today's call. Our success over the last year is directly attributable to a talented team who work hard every day to make Northpointe the Best Bank in America. I'm proud of all we've achieved in 2025, and I look forward to remaining nimble and opportunistic and further driving long-term shareholder value in 2026. We appreciate all the trust and support for Northpointe. And with that, have a great day, everyone.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines, and have a wonderful day.

Greetings. Welcome to Northpointe Bancshares, Inc. Third Quarter 2025 Earnings Call.

[Operator Instructions]

Please note, this conference is being recorded. I will now turn the conference over to Brad Howes, CFO. Thank you. You may begin.

Thank you. Good morning, and welcome to Northpointe's Third Quarter 2025 Earnings Call. My name is Brad Howes, and I'm the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO; and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on Northpointe's Investor Relations website, ir.northpointe.com. As a reminder, during today's call, we may make forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides.

The agenda for today's call will include prepared remarks followed by a question-and-answer session and then closing remarks. With that, I'll turn the call over to Chuck.

Thank you, Brad. Good morning, everyone, and thank you for joining. Before I begin, I'd like to thank our Northpointe team for their incredible dedication and for their unwavering commitment to our clients and customers. The momentum that we have built across our business lines drove strong financial performance in the third quarter. That was highlighted by another quarter of very robust growth in our Mortgage Purchase Program, or MPP, channel which is our distinctive alternative to the traditional mortgage warehouse lending model. We also experienced solid performance in our residential lending channel, including increased mortgage lock and application activity and a 23% annualized growth in our all-in-one loan portfolio.

On the funding side, we benefited from a new core custodial deposit relationship that we announced to you at the last earnings call. That drove approximately $300 million increase in interest-bearing demand deposits from the prior quarter, helping to bolster our core deposits. We continue to explore new opportunities to grow our non-brokered deposit base. This remains one of the bank's most important strategic priorities.

Before I turn the call over to Kevin and Brad to dive into the details, I'd like to take a moment and share some highlights of our financial and operating performance. On Slide 4, we lay out our performance for the third quarter of 2025. For the quarter, we earned $20.1 million or $0.57 per diluted share. As you can see, we had a very strong performance ratios in the third quarter, highlighted by a 1.34% return on assets and 15.41% return on average tangible common equity.

Let me start with an update on MPP. We saw another quarter of exceptional performance in the MPP business, ending the quarter at $3.4 billion in balances. This represents a balanced growth of $473 million from the prior quarter and a remarkable $1.7 billion from the third quarter of last year. We funded $9.8 billion in loans through the channel in the third quarter, which is the highest quarterly level ever for Northpointe. Overall, we remain very pleased with the success and growth trajectory of the MPP business. I'm excited to report that through the first 9 months of the year, we've already achieved our targeted full year growth for 2025 that we outlined during the IPO.

Importantly, we still have a robust pipeline, which positions us nicely for continued success for the remainder of 2025 and into 2026. With the success of the program I just outlined, we have now begun to utilize participations in the MPP program with partner financial institutions. We used this strategy in the past helping to manage our balance sheet within our existing capital framework, while optimizing our revenue streams. We currently have 12 participants in the program today, and we're looking to expand and add additional partner financial institutions going forward. Brad will provide additional guidance on the 2026 NPP growth, including participations during his remarks. Our first lien home equity loan business, which are tied seamlessly to demand sweep experienced strong growth as well. For the quarter, these loans increased by $38.8 million, which is an annualized growth rate of 23%. Residential mortgage application and interest rate lock commitments both increased during the third quarter.

This was largely attributable to the success of our mortgage originating professionals including the new lenders that we have added over the past year. We also saw a nice pickup in refinance activity in September, which Kevin will discuss further. Our brand and reputation in the mortgage space allows us to continue to attract and retain the highest quality talent and to invest in Northpointe's future. This quarter, we continue to add new mortgage originating professionals to help us continue our growth in that business as well. Regardless of what happens with rates going forward, we will continue to take our share of the industry mortgage business and we are well positioned to quickly capitalize on mortgage volumes should rates continue to decrease.

Asset quality has been a hot topic in this quarter in the banking sector. Let me emphasize that virtually all of our lending programs are backed by 1 to 4 family residential real estate, which is geographically dispersed throughout the United States. Our credit quality and risk management practices remain strong. Kevin will discuss more on this topic in his remarks. Our tangible book value increased by $0.56 per share over the prior quarter. When you add back the impact of dividends paid, our tangible book value per share increased by 15.8% annualized.

I'd like to turn the call over now to Kevin to talk about our business lines.

Thanks, Chuck, and good morning, everyone. On Slide 5, we highlight our MPP business, which is our version of mortgage warehouse lending. We utilize our proprietary state-of-the-art technology stack to offer a purchase program to mortgage bankers nationwide. As Chuck highlighted, we experienced tremendous success in that business, carrying the strong momentum we've built in the third quarter. Period ending balances increased by $473.2 million or 65% annualized and average balances increased by over $400 million from the prior quarter.

Let me break that down this quarter's growth a bit further. First, we increased facility size for 6 existing clients, which totaled $225 million in additional capacity. Second, there were 9 new clients brought in, which totaled $345 million in additional capacity. And third, the overall utilization of our existing clients remain strong. During the third quarter, we had average MPP participations of $8.7 million. As we've reiterated on prior calls, participation remain an important component of our overall strategy allowing us to manage the balance sheet and expand net interest margin while driving higher fee income. We continue to generate very strong returns on the MPP business with average yields of 7.10% during the quarter.

If you include fees, these yields increased to 7.30%. These are both up from the prior quarter levels of 7.07% and 7.23%, respectively. About 40% of the MPP portfolio reprices immediately and the remainder reprices on the 15th of each month, a 25 basis point Fed funds rate decrease took place on September 17. So we will not see the complete impact on yields until the fourth quarter.

Now turning to Retail Banking on Slide 6. I'd like to highlight the results of the 3 main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we continue to perform well and take our share of industry volume. We closed $636.6 million in mortgages during the third quarter, which is down slightly from $665.5 million in the prior quarter.

Mortgage rate lock commitments and applications both increased from the prior quarter, bolstered by an increase in refinance volume in September. During the third quarter, we sold $547.9 million, which represents approximately 86% of the total loans closed in the quarter, in line with prior quarters. Of that saleable production, 82% was in our traditional retail channel and 18% was in Consumer Direct. We sold approximately 79% of the saleable mortgage service released in the third quarter, which is consistent with second quarter. Additionally, 72% of our overall production was purchased business in the third quarter, which is flat from second quarter level. With the decrease in mortgage rates that occurred during the third quarter of 2025, we saw an increase in overall refinance activity in that period. That increase came towards the later end of the quarter with September monthly refinance activity closer to 50% of the overall volume. For the quarter, we earned $21.0 million in net sale of loans. That amount includes fair value increases on held for investment loan portfolio and a lender risk account as well as gains or losses on portfolio loan sales.

If you exclude those items, net gain on sale of loans was flat to the prior quarter level, which Brad will cover in more detail. We continue to look for opportunities to create additional efficiencies using technology and hire new talent lenders within the channel. In the third quarter, we continued to hire new mortgage professionals to help us continue to grow, bringing our total to 129 at quarter end. In the middle of Slide 6, we highlight our additional deposit banking channel, where we feature a direct-to-customer platform and competitive product suite. Our funding strategy and deposit franchise are much different than those of a typical community bank and we believe our strategy is quite simple but very effective.

We ended the third quarter with $4.8 billion in total deposits, up from $4.5 billion in the second quarter. The breakout of these deposits is detailed in the appendix on Slide 12. The majority of our deposit growth compared to the prior quarter was from the new custodial deposit relationship we onboarded during the third quarter. This drove a $306.9 million increase in interest-bearing demand deposits from the prior quarter. Custodial deposit balances remain a critical piece of our overall funding strategy and a key benefit of the servicing business.

As Chuck mentioned, we will continue to explore additional sources of non-brokered deposits. We also saw a $34.3 million increase in noninterest-bearing demand deposits. which helped offset some of the runoff and the other deposit balances.

On the right side of Slide 6, we highlighted our specialty mortgage servicing channel, where we focus on servicing first lien home equity lines tied seamlessly to demand deposit sweep accounts. including what we commonly referred to as AIO loans. We continue to realize the savings from our strategy to private label outsourced, the nonspecialized mortgage servicing to a scale subservicer. While at the same time, expanding the amount of loans we service and increasing loan servicing fees.

Excluding $910,000 negative adjustment on the change in fair value of the MSR we earned $2.0 million in loan servicing fees for Q3, which is up from $1.8 million in the prior quarter. Including loans we outsource to subservicer, we service 14,200 loans for others with a total UPB of $4.5 billion as of the end of the quarter.

Turning lastly to asset quality on Slide 7. This remains one of the largest risk for any bank and one we continue to monitor very closely, especially in light of what we are seeing reported from other banks this quarter. Let me start by saying we are not seeing any systemic credit quality or borrower issues in any of our portfolios. We had net charge-offs of $977,000 in the third quarter, which is up from $488,000 in the prior quarter. That represents an annualized net charge-off ratio to average loans of 7 basis points, which is still very strong and well below historical long-term averages. The charge-offs we took in the third quarter, similar to prior quarters, came from isolated occurrences. There were 2 larger mortgage charge-offs this quarter, totaling close to $500,000. Both of those charge-offs stemmed from unique circumstances. In the vast majority of instances, where we are dealing with a nonperforming loan, there is sufficient collateral to cover the unpaid principal balance, which usually leads to little or no loss. Outside of the higher level of charge-offs, our overall level of delinquent loans decreased and our asset quality metrics improved from the prior quarter.

Let me provide some additional details on this. First, total delinquent loans, including both loans past due 31 to 89 days and nonperforming loans decreased by $4.6 million from the second quarter levels. Second, we have a very sophisticated and granular CECL process, and we spent a great deal of time analyzing the various risks. Our allowance for credit losses was $12.3 million for the third quarter of 2025, which reflects our disciplined underwriting, diligent risk control and low levels of loss history.

Third, at September 30, 2025, MPP represented 54% of all loans and we continue to experience pristine credit quality in that portfolio. Fourth, virtually all our loan portfolio is backed by residential real estate, which typically carries much lower average loss rates than other asset classes. And fifth, our residential mortgage portfolio is also high quality, seasoned and geographically diverse. At September 30, 2025, our average FICO was 747 and our average LTV when we factor in mortgage insurance was 72%.

Now I'd like to turn the call over to Brad to cover the financials.

Thanks, Kevin. One important note, as I go through today's slide presentation, I will be incorporating the remaining quarter of 2025 and full year 2026 guidance into my commentary. I'll begin on Slide 8. As a reminder, our non-GAAP reconciliation on Slide 14 provides details of the calculations and the reconciliation to the comparable GAAP measure for all our non-GAAP metrics. Net interest income increased by $3.8 million over the prior quarter. This reflected the growth in average balances along with a 3 basis point improvement in net interest margin from the prior quarter. Our yield on interest-earning assets benefited from the continued improvement in the mix of loans within the health for investment portfolio, up 2 basis points from the prior quarter.

We continue to experience strong growth in MPP and AIO loans, both of which carry higher average yields than the remainder of the loan portfolio. Our cost of funds was flat from the prior quarter. The slight decrease in our cost of interest-bearing deposits was offset by a slight increase in the cost of borrowings for the quarter. I'd expect to see more of an impact from the 25 basis point Fed funds rate decrease in the fourth quarter, which happened on September 17. Our net interest margin was 2.47% for the third quarter. I'd expect us to stay at a 2.45% to 2.55% range for the full year 2025, but at the lower end of the range. For the full year 2026, I'm expecting the same 2.45% to 2.55% range, but that we would come in towards the higher end of that range.

My guidance assumed a continued improvement in the mix of loans within the HFI portfolio as well as 425 basis point Fed funds rate cuts in 2026, 1 per quarter. Average interest-earning assets increased by $465.6 million from the prior quarter, given the strong growth in MPP and AIO balances, partially offset by continued runoff in the residential mortgage portfolio and lower average balances of loans held for sale.

MPP balances ended the third quarter at $3.36 billion as we have almost achieved our full year 2025 guidance by forecasting period ending balances to increase another $50 million to $100 million by year-end. Any additional growth above that, we would utilize participations for. For 2026, I'd expect our MPP loan balances to increase to between $4.1 billion and $4.3 billion by year-end. I'm also expecting an additional $300 million to $500 million on average will be participated out throughout 2026. I am increasing the AIO loan balance guidance based on the strong growth in 2025. I'd expect period-ending loan balances of between $740 million and $760 million by year-end 2025, increasing to between $900 million and $1.0 billion by year-end 2026. Excluding MPP and AIO loans, I expect the rest of the loan portfolio to continue to decrease, ending 2025 between $2.2 billion and $2.3 billion and the decreasing to between $1.9 billion and $2.1 billion by year-end 2026.

Kevin provided additional details on the higher level of net charge-offs this quarter with total provisions for credit losses and unfunded commitments of $828,000 in the third quarter 2025, which is up from $583,000 in the prior quarter. We continue to experience a relatively low level of charge-offs relative to long-term historical averages. I'd expect that trend to continue with any additional provisions being driven by loan growth, credit migration trends and changes in the economic forecast.

For the remaining quarter of 2025 and each quarter in 2026, I'd expect net charge-offs to be somewhere in the range of the prior 2 quarters. Noninterest income increased by $1.6 million from the prior quarter, which was driven primarily by higher gain on sale of loans. On the top of Slide 13, we break out 3 fair value assets and the associated quarterly increases or decreases. These assets tend to move up or down with interest rates and are not part of my revenue guidance each quarter. Net gain on the sale of loans was $21.0 million for the third quarter and includes the capitalization of new MSRs, changes in fair value of loans, gains or losses on the sale of portfolio loans and gain on the sale of loans.

On the bottom of Slide 13 and in our earnings release tables, we have added a new chart which helps further detail the components of our net game and loan sale item. As you can see, third quarter net gain on the sale of loans included the $2.2 million increase in the fair value of loans held for investment and lender risk account with the Federal Home Loan Bank.

It also included $1.2 million gain from the sale of non-AIO home equity loans disclosed last quarter. Excluding these items, net gain on the sale of loans would have been $17.5 million, which is flat to the second quarter level on a comparable basis. For 2025, I am forecasting total salable mortgage originations of $2.1 billion to $2.3 billion, with all-in margins of 2.75% to 3.25% on those mortgage originations. No change to my prior estimates. We've been closer to the top end of the range for the margin guidance in 2025, which should continue.

For 2026, I am forecasting total saleable mortgage originations of $2.2 billion to $2.4 billion, with all-in margins of 2.75% to 3.25% on those mortgage originations. That estimate does not assume any significant decrease in mortgage rates nor does it include any changes in the current level of mortgage originators. I expect the gain on sale margins will shift to the middle or lower end of the range of the margin guidance, given the recent pricing pressures from other lenders in both agency and IQM space. I'd expect MPP fees to continue to increase from their current run rate and come in between $5 million and $6 million for the full year 2025.

For 2026, I'd expect MPP fees to increase to between $9 million and $11 million for the full year based on the expected participation balances and the continued growth in loans funded. Loan servicing fees were $1.1 million for the third quarter of 2025 and included a fair value decrease of $900,000 on the MSR asset. Excluding the fair value decrease, loan servicing fees were $2 million for the quarter. I'd expect that quarterly run rate to increase slightly in the fourth quarter of 2025 and that increased between $9 million and $11 million for the full year of 2026. Noninterest expense was up $2.6 million from the prior quarter, driven primarily by higher salaries and benefits and higher FDIC premiums.

Salaries and benefits expense was up $2.1 million over the prior quarter, mostly in bonus and [indiscernible] comp. That line includes expenses related to our legacy stock appreciation rights plan, which is driven by increases or decreases in the stock price. In the third quarter, we had an expense of $935,000 from the increase in stock price relative to the second quarter level. The remainder of the higher bonus and incentive compensation expense was attributable to the improvement in business activity over the same period.

For the fourth quarter of 2025, I expect total net interest expense to be similar to the level in the third quarter of 2025. For the full year 2026, I'd expect total noninterest expense to be in the range of $140 million to $144 million.

Turning to the balance sheet on Slide 9. Total assets increased to $6.8 billion for the third quarter of 2025. This was driven primarily by the increase in MPP and AIO loans partially offset by runoff from the remainder of the loan portfolio. Kevin provided details on our funding and deposits this quarter. Our wholesale funding ratio was 67.6% at September 30, 2025, down from the prior quarter level due to the new custodial deposit relationship.

Looking forward, we'd expect to continue to fund MPP loan growth through a combination of brokered CDs, retail deposits and other sources of non-broker deposits where possible. Lastly, on Slide 10, we outlined our regulatory capital ratios, which are estimates pending completion of regulatory reports. Our capital levels remain strong, both at the bank and the consolidated entity level. We currently have $77 million in Series A perpetual preferred stock, which resets to a floating rate in December 2025. We anticipate calling that preferred stock prior to year-end. If called, our goal would be to replace a significant portion of that preferred stock with subordinated debt. We believe this strategy would optimize our capital stack, allowing us to continue our forecasted growth path while realizing significant annual cost savings at being accretive to earnings per share. We currently have $3.2 million of unamortized deal issuance costs, which we expensed in the fourth quarter of 2025, if we call the Series A preferred stock.

So with that, we're happy to take questions. Sherry, can you please open the line for Q&A?

[Operator Instructions]

Our first question is from Crispin Love with Piper Sandler.

Just drilling a little bit deeper on the NIM trajectory. I heard you on the guide for '25 and '26, the $2.45 to $2.55 level, low end and the high end. But when you look near term and into the beginning of 2026, can you talk a little bit about how you'd expect the NIM to trend off of the 2.47% level in 3Q, just as you think about a big picture given the repricing dynamics and then expected Fed rate cuts?

Sure. So based on what we've seen, I kind of outlined the September rate cut. We're still looking at the impact of that, which we'll see in the fourth quarter. I'll reiterate, we are mostly asset neutral as most of our assets and liabilities reprice within 30 days. There is a little bit of a negative effect in the short term from -- I would say, a 25 basis point rate cut, but it's nothing significant. So my guidance as we look from the margin from today out into 2026. I think we'll see continued improvement in the mix based on the fact that loans in our legacy portfolio were our first mortgages have lower average yields between 4% or 5%. As those roll off, we replace them with loans that are yielding today 7% or so with MPP or AIO. So we have a continued improvement in the mix. That will trend out throughout the course of 2026. So we see kind of small improvements to get us to the average of $2.45 to $2.55, but sort of at the top end of the range.

When we see the rate cuts, there's always a lag on MPP loans as those don't reprice predominantly until the 15th. So we were able to pick up a little bit of benefit from margin on that. But I think those are kind of the puts and takes into the guidance in 2026.

Great. And then just with the recent move in mortgage rates. Can you just discuss what you're seeing in the residential lending channel with volumes? And then what you might expect to see in the AIO product if mortgage rates continue to come down, how those volumes can trend just with that product, all floating rate and the rate sensitivities there?

Sure. So I can start with how the lower rates are impacting our refinance production. So in September, we saw almost a increase in closed refinance volume versus the prior month alone. And then September locks were 50% refi, which is more than double the prior month level. And then specifically on AIO, the rate environment can affect AIO production, but the right borrowers, as we talked about previously, as far as that product is really geared towards. We'll still be drawn towards that product, regardless of a small decrease in the rate environment.

And Chris, if I can just add something on the 2026 forecast. So when I gave you the sale of the mortgage origination volume and the balance sheet growth. Those were all predicated on for short-term rate increases or decreases, I should say. But that mortgage rates don't come down very significantly. I think 30 to 40 basis points, which would be consistent with any of the industry expectations as we sit today.

[Operator Instructions]

Our next question is from Damon DelMonte with KBW.

Hope you're all doing well today. So just first question on the servicing portfolio. It looks like the UPB on loan service for others was up around $500 million this quarter. Any color on kind of what drove the increase?

So yes, we continue to ramp up our subservicing the AIO like products for various and investors. So we actually have added some additional new end investors with similar products over the last quarter. So we continue to ramp up that product specifically and then we continue to retain some of our MSRs as we sell our own production into the market. So we'll slowly continue to build that, as Brad mentioned in his forecast.

Got it. And then with regards to the outlook for on deposit growth and adding more custodial accounts, obviously, a very sizable 1 came out in the third quarter. Do you think future relationships that you add would be of similar size? Or is this kind of a larger 1 that was out there and they'll be on a much smaller scale going forward?

Yes, Damon. So that was probably an outsized 1 to start with, but we definitely continue to look for additional sources of nonbrokered funding, both with custodial and noncustodial sources of on brokered funds.

Okay. Great. And then just lastly, on the expense guide, Brad, can you just go over your commentary on that? I didn't quite get all that.

Sure. So for the last quarter -- for the fourth quarter this year, I'd expect our expected guidance to be similar to the third quarter level or total noninterest expense. For 2026, my guidance is $140 million to $144 million for the full year. The key drivers are going to be, I'd say, higher mortgage volume, you're going to have higher variable comp on that business, but the increase that we projected in saleable mortgage originations and AIO growth. We have improvement in business activity, which drives higher bonus and incentive comp. We always have a cost of living adjustment, which occurs March, April from annual merits. And then we have just continue to build out and strengthen our team and continue to develop our status as a public company and making sure our risk management practices are solid.

This will conclude our question-and-answer session. I would like to turn the floor back over to Chuck Williams for closing remarks.

I want to thank everybody for joining today's call. Our results this quarter demonstrate the momentum we've gained as we continue to execute on our strategic plan. We remain nimble and opportunistic, focusing on delivering strong growth and long-term shareholder value while remaining diligent in our overall risk management. We appreciate all the trust and support for Northpointe. And with that, everyone, have a great day. Thanks again.

Thank you. This does conclude today's conference. You may disconnect at this time. Thank you for your participation.