Executive Summary / Key Takeaways

• Northpointe Bancshares, Inc. (NPB) is demonstrating robust financial and operational momentum, primarily driven by its distinctive Mortgage Purchase Program (MPP), which achieved a record $9.8 billion in funded loans in Q3 2025.
• The company has already surpassed its full-year 2025 growth targets for the MPP, indicating strong execution and a robust pipeline for continued expansion into 2026.
• NPB maintains strong asset quality, with virtually all lending programs backed by geographically dispersed 1-4 family residential real estate, characterized by high average FICO scores and low loan-to-value ratios.
• Strategic initiatives to optimize funding, including a new core custodial deposit relationship, are bolstering core deposits, while plans to replace preferred stock with subordinated debt aim to enhance capital efficiency and shareholder value.
• Management projects continued net interest margin stability and growth in key loan segments, supported by an improving loan mix and strategic capital deployment, despite anticipated Fed rate cuts in 2026.

A Differentiated Approach in a Dynamic Market

Northpointe Bancshares, Inc. (NASDAQ:NPB) operates as a regional bank in the United States, primarily focusing on residential lending, digital deposit banking, and its distinctive Mortgage Purchase Program (MPP). The company's overarching strategy centers on leveraging its specialized offerings and proprietary technology to drive accelerated growth and enhance shareholder value, even amidst evolving market dynamics. This approach has positioned NPB as a nimble and opportunistic player, capable of carving out a strong niche within the broader financial services industry.

At the heart of Northpointe's operational success is its Mortgage Purchase Program (MPP), a distinctive alternative to the traditional mortgage warehouse lending model. This program is powered by a proprietary, state-of-the-art technology stack that enables the company to offer a comprehensive purchase program to mortgage bankers nationwide. This technological differentiation provides tangible benefits, allowing NPB to efficiently process and fund a high volume of loans, thereby achieving significant scale and market penetration in this specialized segment. The technology facilitates seamless operations, contributing directly to the program's "tremendous success" and its ability to fund a record $9.8 billion in loans during the third quarter of 2025. This operational efficiency and technological backbone are critical components of NPB's competitive moat, enabling it to deliver specialized services that differentiate it from larger, more generalized banking institutions.

Operational Momentum and Financial Strength

Northpointe Bancshares has demonstrated compelling operational momentum, translating into strong financial performance. The MPP business, a cornerstone of its strategy, ended the third quarter of 2025 with $3.4 billion in balances, marking a substantial increase of $473 million from the prior quarter and a remarkable $1.7 billion year-over-year. This exceptional growth has allowed Northpointe to achieve its targeted full-year growth for 2025 within the first nine months, with a robust pipeline indicating continued success into 2026. To manage this rapid expansion and optimize revenue streams, the company has strategically begun utilizing participations in the MPP program with 12 partner financial institutions, a number it aims to expand.

Beyond MPP, the residential lending channel also exhibited solid performance, with a 23% annualized growth in the All-In-One (AIO) loan portfolio. Mortgage application and interest rate lock commitments increased, partly due to the success of newly added mortgage originating professionals. The company closed $636.6 million in mortgages in Q3 2025, selling approximately 86% of these loans, with 72% originating from purchased businesses. This consistent performance underscores Northpointe's ability to capture market share, even as industry-wide refinance activity saw a notable pickup in September 2025, reaching nearly 50% of overall volume.

Financially, Northpointe's net interest income increased by $3.8 million over the prior quarter, supported by growth in average balances and a 3-basis point improvement in net interest margin (NIM) to 2.47%. The yield on interest-earning assets improved by 2 basis points, driven by a favorable mix of higher-yielding MPP and AIO loans within the held-for-investment portfolio. While the cost of funds remained flat, the company anticipates a more pronounced impact from the September 17 Fed funds rate decrease in the fourth quarter. Noninterest income saw a $1.6 million increase, primarily from a higher gain on the sale of loans, which totaled $21.0 million for the quarter. This figure included fair value increases on the held-for-investment loan portfolio and a $1.2 million gain from the sale of non-AIO home equity loans.

Strategic Funding and Capital Optimization

A critical strategic priority for Northpointe is the expansion of its non-brokered deposit base. The company successfully onboarded a new core custodial deposit relationship in Q3 2025, which significantly increased interest-bearing demand deposits by approximately $300 million from the prior quarter. Total deposits reached $4.8 billion, up from $4.5 billion in Q2 2025, with custodial deposits forming a key part of its funding strategy. This diversification helps reduce reliance on wholesale funding, which stood at 67.6% at September 30, 2025, down from the prior quarter.

Looking ahead, Northpointe plans to fund future MPP loan growth through a combination of brokered CDs, retail deposits, and other non-brokered sources. The company also maintains strong regulatory capital ratios and intends to optimize its capital structure by calling its $77 million Series A perpetual preferred stock before year-end 2025. This preferred stock, which resets to a floating rate in December 2025, is expected to be replaced with subordinated debt. This strategy is designed to optimize the capital stack, support forecasted growth, and be accretive to earnings per share, despite an anticipated $3.2 million expense for unamortized deal issuance costs in Q4 2025.

Robust Asset Quality and Risk Management

Northpointe Bancshares emphasizes strong credit quality and diligent risk management practices. The company's lending programs are predominantly backed by 1-4 family residential real estate, which is geographically dispersed across the United States. Management explicitly states, "we are not seeing any systemic credit quality or borrower issues in any of our portfolios." Net charge-offs in Q3 2025 were $977,000, up from $488,000 in Q2, but still represent a low annualized net charge-off ratio of 7 basis points, well below historical averages. These charge-offs are attributed to isolated occurrences, with management noting that "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."

Further reinforcing its strong asset quality, total delinquent loans decreased by $4.6 million from the prior quarter. The allowance for credit losses stood at $12.3 million in Q3 2025, reflecting disciplined underwriting. The MPP portfolio, comprising 54% of all loans, has maintained "pristine credit quality." The residential mortgage portfolio is characterized by high quality, seasoning, and diversity, with an average FICO score of 747 and an average loan-to-value (LTV) of 72% (factoring in mortgage insurance) as of September 30, 2025.

Competitive Landscape and Strategic Positioning

Northpointe Bancshares operates within a highly competitive U.S. banking sector, facing off against both national giants and other regional players. While larger national banks like Bank of America (BAC), JPMorgan Chase (JPM), and Wells Fargo (WFC) benefit from extensive scale, diversified revenue streams, and advanced digital platforms, NPB strategically differentiates itself through its specialized focus and regional expertise. NPB's MPP, powered by its proprietary technology, provides a unique value proposition that allows it to compete effectively by offering a distinctive service model to mortgage bankers nationwide. This specialized focus enables NPB to maintain strong customer relationships and potentially achieve superior margins in its targeted segments.

Compared to its larger national counterparts, NPB's regional focus allows for greater agility and a more personalized customer experience, which can be a significant advantage in local markets. While NPB may not match the sheer technological breadth or market share of a JPMorgan Chase, its "state-of-the-art technology stack" for MPP demonstrates a targeted innovation that directly supports its core business model. However, NPB does face competitive pressures, particularly in mortgage origination, where "recent pricing pressures from other lenders in both agency and non-QM space" are noted. This could lead to a shift in gain on sale margins towards the middle or lower end of its guidance range. Despite these pressures, NPB's ability to attract and retain high-quality mortgage talent, coupled with its strong brand reputation, positions it to "take our share of the industry mortgage business" regardless of interest rate fluctuations.

Outlook and Guidance

Northpointe's management has provided clear guidance, reflecting confidence in its strategic direction. For the full year 2025, the net interest margin (NIM) is expected to remain in the 2.45% to 2.55% range, at the lower end. Looking into 2026, the NIM is projected to stay within the same range but trend towards the higher end, driven by a continued improvement in the mix of loans within the held-for-investment portfolio. This outlook incorporates the assumption of four 25-basis-point Fed funds rate cuts in 2026, one per quarter.

MPP loan balances are forecasted to increase to between $4.1 billion and $4.3 billion by year-end 2026, with an additional $300 million to $500 million on average participated out. AIO loan balances are expected to reach $740 million to $760 million by year-end 2025, growing to $900 million to $1.0 billion by year-end 2026. Conversely, the rest of the loan portfolio is expected to decline to $1.9 billion to $2.1 billion by year-end 2026. Saleable mortgage originations are projected at $2.1 billion to $2.3 billion for 2025 and $2.2 billion to $2.4 billion for 2026, with all-in margins of 2.75% to 3.25%. MPP fees are expected to increase to $9 million to $11 million for the full year 2026, and loan servicing fees are also projected to rise to the same range. Total noninterest expense for 2026 is guided to be between $140 million and $144 million. Net charge-offs are expected to remain within the range of the prior two quarters for the remainder of 2025 and throughout 2026.

Conclusion

Northpointe Bancshares, Inc. presents a compelling investment narrative rooted in its specialized and technologically advanced Mortgage Purchase Program. The company's ability to consistently deliver robust growth in its core lending segments, coupled with a disciplined approach to asset quality and strategic funding initiatives, underscores its operational effectiveness. While operating in a competitive banking landscape, NPB's differentiated business model and focus on high-quality, residential real estate-backed loans provide a strong foundation.

The clear financial guidance for 2026, including anticipated NIM expansion and continued growth in key loan portfolios, signals a positive trajectory. Investors should closely monitor the execution of its capital optimization strategy and the continued expansion of its non-brokered deposit base, as these factors are crucial for sustaining long-term growth and enhancing shareholder value. Northpointe's strategic positioning and commitment to leveraging its unique strengths suggest a resilient and growth-oriented future.