Northpointe Bancshares, Inc. 2026 Q3 Earnings Call

Please go ahead, sir. Good morning, and welcome to Northpointe's third 2026 earnings call.

My name is Brad Howse, 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. 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. This quarter was an important one for Northpointe and marks a significant step in the continued evolution of our business model. Last night, we announced that we are entering into a non-binding letter of intent with CMG Financial and its affiliates to sell the distributed retail and consumer direct mortgage origination channels. This decision was not a reflection of the management or supporting teams in the residential lending division, which has helped contribute to Northpointe's success over the years. But with today's economic and operating headwinds and with the continued evolution of mortgage distribution channels, we have reached an inflection point that no longer made the business channel viable. Because of this, management and the board have made the difficult strategic decision to sell the channels.

This allows us to refocus our strategic priorities towards businesses where we believe Northpointe has the strongest competitive advantage and the greatest opportunity to create sustained long-term growth and sustainable franchise value for all stakeholders. We have built a unique national platform that combines specialty finance and relationship-based banking across a broad mortgage ecosystem. As we evaluated the opportunities available across the franchise, it became increasingly clear that our greatest opportunities lie in expanding our MPP and specialty finance capabilities, deepening client relationships, growing relationship-based deposits, and generating attractive portfolio assets in a more efficient manner. Importantly, we remain committed to the mortgage banking industry, and we will continue to be a growth-oriented and customer-centric banking franchise serving clients and communities across our national footprint. While the mortgage industry remains very challenging, we continue to take market share and demonstrate strong growth in our Mortgage Purchase Program or MPP business.

We've increased total MPP balances by $2.5 billion from the end of 2024, and we believe our program remains an attractive alternative to traditional warehouse lending. Brad will cover the financial projections on this transaction and the current period results in more detail. For the third quarter, we earned $13.9 million or $0.39 per diluted share. We have three significant fair value assets which in aggregate move up or down based on a movement in long-term interest rates. Our results this quarter included a combined decrease in fair value of $4.3 million for those three assets based on the significant rate movements during the quarter. In addition, we had a $3.1 million operational loss related to an isolated external deposit fraud incident within our retail banking center, which we promptly addressed through strengthening procedures and additional controls.

As we look ahead, our vision is clear. Northpointe's future is centered on MPP specialty finance through strategic asset generation, relationship-driven banking, and deposit growth and specialty servicing. As we focus resources on the businesses where we are most differentiated, we believe we can expand client relationships and generate a more robust and stable earnings profile. I'd like to turn the call over to Kevin to provide more details on our business lines.

Thanks, Chuck, and good morning, everyone. Let's start with the MPP business on slide seven. Compared to the prior quarter, period-ending MPP balances increased by $262.7 million, and average balances increased by $237.2 million, resulting in $3.7 million quarterly increase in interest income within the channel. Let me break down the third quarter 2026 growth a bit further. First, we brought in four new clients, which totaled $185 million in additional capacity. Second, we increased facility size for three existing clients, which totaled $100 million in additional capacity. Third, the overall utilization of our existing clients remains strong, averaging 58% in the third quarter. As discussed on prior calls, our MPP balances are net of any balances that we have participated out.

At September 30, 2026, we have participated $368.3 million to our partner banks, which is down from $489.0 million at June 30, 2026 as we continue to optimize the balance sheet within our existing capital framework. Average MPP yields were 6.27%, and fee-adjusted yields were 6.49% during the third quarter of 2026. The quarterly decrease in average yield continues to reflect competitive pricing within the industry, especially with larger mortgage originators. Also, keep in mind that our yields and our MPP business reprice at a one-month lag, so the benefit from the increase in SOFR is not reflected in our third quarter results. Turning now to retail banking on slide 8, I'd like to highlight the results of the businesses within that segment.

With the increase in mortgage rates, total residential mortgage originations decreased by 26% from the prior quarter level, and we saw a similar decline in locks and application volume. Gain-on-sale margins are also tightening given the competition for volume across the industry. In the middle of slide 8, we highlight our Digital Deposit Banking channel, where we feature our direct-to-customer platform and competitive product suite. We ended the third quarter with $5.4 billion in total deposits, an increase of $210.4 million from the prior quarter. The breakout of these deposits is detailed in the appendix on slide 14. During the quarter, we saw a nice increase in non-interest-bearing demand deposits, along with higher interest-bearing demand deposits driven by normal seasonality and our custodial deposit balances.

These were partially offset by lower time and savings and money market deposits as we intentionally let some balances run down in favor of more attractive brokered and FHLB funding sources. Over the last year and a half, we've been successful in adding new funding partner relationships to help bolster core deposits and fund our planned growth. We have similar smaller relationships in the pipeline and will continue to look for more of these types of omnibus accounts. On the right side of slide 8, 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 adjustment for the change in fair value of MSRs, we earned $2.6 million in loan servicing fees for Q3, up from the prior quarter.

Including loans we outsourced to a sub-servicer, we serviced 17,400 loans for others with a total UPB of $6.0 billion as of the third quarter 2026, both up from the prior quarter level. With the planned sale of our residential lending mortgage origination channels, we will no longer be capitalizing new MSRs for our own balance sheet. We've had success adding new specialty servicing relationships and increased their portfolio over the past year, and that will remain our strategic focus. Turning lastly to asset quality on slide 9, net charge-off decreased slightly to $429,000 in the third quarter of 2026. This represents an annualized net charge-off ratio to average loan of 2 basis points, remaining well below long-term historical averages. Non-performing assets increased by $8.9 million from the prior quarter, of which over half was from two borrowers, which we do not expect to incur any material losses on.

Early-stage delinquent loans improved, with loans past due 31 to 89 days down $5.7 million from the prior quarter level. I would like to now turn the call over to Brad to cover the financials.