# Northpointe Bancshares Inc: Form 10-Q for the period ended Mar 31, 2025

- Company: [Northpointe Bancshares Inc](/companies/npb.md) (CIK 1336706)
- Form: 10-Q
- Filed: 2025-05-15
- Accepted by EDGAR: May 15, 2025, 16:28 ET
- Period: 2025-03-31
- Accession: 0001628280-25-025977
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1336706/000162828025025977/npb-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1336706/000162828025025977/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $5.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $17.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.50 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 30,448,848 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $54.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $322.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $641.0k | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2025-03-31 | $321.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2025-03-31 | $5.86bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $5.27bn | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $586.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 69,958 characters.

*The purpose of this discussion and analysis is to focus on significant changes in the financial condition of Northpointe Bancshares, Inc. and our wholly owned subsidiary, Northpointe Bank, from December 31, 2024 through March 31, 2025 and on our results of operations for the three months ended March 31, 2025 and 2024. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q, may cause actual results to differ materially from those projected in the forward looking statements. We assume no obligation to update any of these forward-looking statements.*

*Unless otherwise stated, all information in this document gives effect to a ten-for-one stock split, whereby each holder of our common stock received nine additional shares of common stock for each share owned as of the record date of December 19, 2024, which was distributed on December 30, 2024. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this document.*

### Business Overview

The Company is a bank holding company that is headquartered in Grand Rapids, Michigan. Through our wholly-owned subsidiary, Northpointe Bank, we focus on providing independent mortgage banking platforms nationwide with an alternative to traditional mortgage warehouse lending (we refer to this business as our Mortgage Purchase Program, or “MPP”), as well as residential mortgage and digital banking services to retail customers nationwide. Our residential lending business provides a comprehensive range of financing options nationwide through two main channels: consumer direct and traditional retail. These channels combine the convenience of on-line, self-service platforms with the personalized service of an experienced residential mortgage loan officer. Both residential mortgage loan origination channels are supported by our proprietary point-of-service digital platform that streamlines the loan application and closing processes. Our consumer direct and traditional retail channels primarily originate mortgage loans which are saleable through an end investor. In addition, our traditional retail channel selectively originates first-lien home equity lines which are tied seamlessly to a demand deposit sweep account (we refer to the loans we originate as “All-in-One” or “AIO” loans). We have one bank branch located in Grand Rapids, Michigan and loan production offices located in 23 cities in 15 states across the country, which are supported by our centralized operations and back-office support teams based in Grand Rapids, Michigan.

Our results of operations are driven by a combination of net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities, as well as fee income from a variety of sources. Key components of noninterest income include gains from the sale of newly originated loans, loan servicing fees, MPP fees, service charges from our deposit services, and other fees. Our principal operating expense, aside from interest expense, consists of salaries and employee benefits, including commissions paid to loan originators, occupancy and equipment costs, data processing expense, professional fees, and provisions for credit losses. Our income is affected by regulatory, economic, and competitive factors that influence interest rates, residential loan demand and deposits costs. In addition, we are subject to interest rate risk to the degree that our interest-earnings assets mature or reprice at different times or at different speeds than our interest-bearing liabilities.

### Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions and complex judgements that affect amounts presented in our consolidated financial statements. These estimates, assumptions and judgements are based on information available as of the date of the financial statements; accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions, and judgements. Our critical accounting policies are described in detail in our 2024 Form 10-K.

Our accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. Accounting and reporting policies for the allowance for credit losses (“ACL”), lender risk account and capitalized mortgage loan servicing rights are deemed critical since they involve the use of estimates and require significant management judgments. Application of assumptions different than those that we have used could result in material changes in our financial position or results of operations.

Our methodology for determining the ACL and related provision for credit losses is described later in this section under “Provision for Credit Losses” and “Loan Portfolio”. In particular, this area of accounting requires a significant amount of judgment because a multitude of factors can influence the ultimate collection of a loan or other type of credit. It is extremely difficult to precisely measure the amount of expected credit losses in our loan portfolio. We use a rigorous process to attempt to accurately quantify the necessary ACL and related provision for credit losses, but there can be no assurance that our modeling process will successfully identify all of the expected credit losses in our loan portfolio. The assumptions around establishing reasonable and supportable economic forecasts are particularly subjective. As a result, we could record future provisions for credit losses that may be significantly different than the levels that we recorded in prior periods.

A Lender Risk Account (“LRA”) has been established for loans we have sold to the Federal Home Loan Bank of Indianapolis (“FHLB”). The LRA is funded and maintained by the FHLB at 1.20% of the loan balance and is used to offset credit losses over the life of the loans sold to the FHLB. If the LRA has not been depleted by losses, funds are returned to the Company over time, beginning after five years and continuing through 25 years. We carry the asset at estimated fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, and other factors. These assumptions are particularly subjective and can have a material effect on the estimated LRA balance and income. We believe the assumptions that we utilize in estimating fair value are reasonable based upon accepted industry practices and represent neither the most conservative nor aggressive assumptions.

We establish mortgage servicing right (“MSR”) assets when we sell loans with servicing retained and when we purchase mortgage servicing. The fair value of our mortgage loan servicing rights has been determined based on a valuation model used by an independent third party. There are several critical assumptions involved in establishing the value of this asset including estimated future prepayment speeds on the underlying mortgage loans, the interest rate used to discount the net cash flows from the mortgage loan servicing, the estimated amount of ancillary income that will be received in the future (such as late fees) and the estimated cost to service the mortgage loans. We believe the assumptions that we utilize in our valuation are reasonable based upon accepted industry practices for valuing mortgage loan servicing rights and represent neither the most conservative nor aggressive assumptions.

### Emerging Growth Company

Pursuant to the JOBS Act, as an emerging growth company, we can elect to opt out of the extended transition period for adopting any new or revised accounting standards. We have elected to take advantage of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we may adopt the standard on the application date for private companies. We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company.

### Highlights of the First Quarter of 2025

- Net income available to common stockholders was $15.0 million for the three months ended March 31, 2025, an increase of $5.2 million, or 52.9%, from $9.8 million for the three months ended March 31, 2024.
- Earnings per diluted common share was $0.49 for the three months ended March 31, 2025, as compared to $0.38 for the three months ended March 31, 2024.
- Net interest income before provision for credit losses was $30.4 million for the three months ended March 31, 2025, an increase of $3.2 million from the three months ended March 31, 2024, reflecting strong growth in MPP and AIO loans and a 3 basis point decrease in net interest margin.
- Noninterest income was $22.9 million for the three months ended March 31, 2025, an increase of $6.2 million from the three months ended March 31, 2024, driven primarily by higher gain on sale of loans, partially offset by lower loan servicing fees.
- Noninterest expense was $29.4 million for the three months ended March 31, 2025, an increase of $1.4 million from the three months ended March 31 2024, driven primarily by higher compensation expense attributable to higher bonus and incentive compensation attributable to our IPO and improvement in net income in the first quarter of 2025, partially offset by decreases in other expense categories from our proactive measures to manage mortgage-related back-office expenses.
- Loans held for investment (“HFI”) were $5.15 billion at March 31, 2025, an increase of $719.4 million from March 31, 2024, reflecting increases of $757.4 million in MPP balances and $31.1 million in AIO loans. Both of these increases reflect strong new customer acquisition and market share gains, as well as a slight increase in overall industry mortgage originations.
- MPP loans increased to 46.1% of total gross loans at March 31, 2025 from 36.8% at December 31, 2024, and residential mortgage loans decreased to 35.5% of total gross loans at March 31, 2025 from 41.9% at December 31, 2024.
- Liquidity remained stable, with total cash and cash equivalents of $321.5 million at March 31, 2025 as compared to $376.3 million at December 31, 2024.
- As of March 31, 2025, our capital ratios were above all regulatory requirements to be considered well-capitalized.

### Results of Operations

### Net Interest Income

The following table presents average balance sheet information, interest income, interest expense and the corresponding average yield earned and rates paid for the three months ended March 31, 2025 and 2024:

*(Dollars in thousands)*

| 2025 Average Balance Interest-Earning Assets | For the Three Months Ended March 31, Interest Inc/Exp | Average Yield/Rate | Average Balance | 2024 Interest Inc/Exp | Average Yield/Rate |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans(1)(2) | $4,672,435 | $72,071 | 6.26% | $4,074,556 | $64,897 | 6.41% |
| Securities, AFS(3) | 9,909 | 154 | 6.30% | 10,519 | 165 | 6.31% |
| Securities, FHLB Stock | 69,574 | 1,629 | 9.49% | 68,244 | 1,499 | 8.84% |
| Interest Bearing Deposits | 487,180 | 5,296 | 4.41% | 444,465 | 6,021 | 5.45% |
| Total earning assets | 5,239,098 | 79,150 | 6.13% | 4,597,784 | 72,582 | 6.35% |
| Noninterest earning assets(4) | 108,804 |  |  | 185,297 |  |  |
| Total assets | $5,347,902 |  |  | $4,783,081 |  |  |
| **Interest-Bearing Liabilities** |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |
| Transaction Accounts | $739,709 | $7,990 | 4.38% | $412,616 | $5,157 | 5.03% |
| Money market & savings | 337,124 | 3,250 | 3.91% | 359,977 | 3,777 | 4.22% |
| Time | 2,254,388 | 25,070 | 4.51% | 1,890,792 | 24,597 | 5.23% |
| Total interest-bearing deposits | 3,331,221 | 36,310 | 4.42% | 2,663,385 | 33,531 | 5.06% |
| Sub debt | 29,142 | 887 | 12.34% | 39,378 | 792 | 8.09% |
| Borrowings | 1,210,086 | 11,564 | 3.88% | 1,321,419 | 11,064 | 3.37% |
| Total interest-bearing liabilities | 4,570,449 | 48,761 | 4.33% | 4,024,182 | 45,387 | 4.54% |
| Noninterest-bearing liabilities |  |  |  |  |  |  |
| Noninterest-bearing deposits | 207,166 |  |  | 255,837 |  |  |
| Other noninterest-bearing liabilities | 39,128 |  |  | 62,092 |  |  |
| Total noninterest-bearing liabilities | 246,294 |  |  | 317,929 |  |  |
| Equity | 531,159 |  |  | 440,970 |  |  |
|  | $5,347,902 |  |  | $4,783,081 |  |  |
| Net interest spread(5) |  |  | 1.80% |  |  | 1.81% |
| Net interest margin(6) |  | $30,389 | 2.35% |  | $27,195 | 2.38% |

(1) Loan balance includes loans held for investment and held for sale. Nonaccrual loans are included in total loan balances and no adjustment has been made for these loans in the yield calculation. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(2) Loan fees of $40,000 and $72,000 for the three months ended March 31, 2025 and 2024, respectively, are included in interest income.

(3) Average yield based on carrying value and there are no tax-exempt securities in the portfolio.

(4) Noninterest-earning assets includes the allowance for credit losses.

(5) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.

(6) Net interest margin is annualized net interest income divided by total average interest-earning assets.

For the three months ended March 31, 2025, net interest income increased to $30.4 million, an increase of $3.2 million, or 11.7%, from $27.2 million for the same period in 2024. This increase was driven primarily by a 13.9% increase in earning assets, partially offset by lower net interest margin.

Average interest-earning assets were $5.24 billion at March 31 2025, an increase of $641.3 million from $4.60 billion at March 31, 2024, reflecting strong growth in loans, particularly MPP and AIO.

Net interest margin was 2.35% for the three months ended March 31, 2025, a decrease of 3 bps from 2.38% for the three months ended March 31, 2024. This decrease was driven primarily by average yields on interest earning assets decreasing by slightly more than our decrease in cost of funds, as well as a change in the mix of interest-earning assets. For the three months ended March 31, 2025, the yield on interest earning assets decreased by 22 bps from same period in 2024 and the rate on interest-bearing liabilities decreased by 21 bps from the same period in 2024, both reflecting a reduction in the federal funds rate.

### Yield and Volume Impact on Net Interest Income

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities. The effect of changes in volume is determined by multiplying the change in volume by the current period’s average rate. The effect of rate changes is calculated by multiplying the change in average rate by the previous period’s volume. The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

*(Dollars in thousands)*

| Interest-Earning Assets | For the Three Months Ended March 31, 2025 vs 2024 Variance Due To Volume | Yield/Rate | Total |
| --- | ---: | ---: | ---: |
| Loans | $8,786 | $(1,612) | $7,174 |
| Securities, AFS | (11) | — | (11) |
| Securities, FHLB Stock | 26 | 104 | 130 |
| Interest-bearing deposits | 616 | (1,341) | (725) |
| Total interest-earning assets | 9,417 | (2,849) | 6,568 |
| **Interest-Bearing Liabilities** |  |  |  |
| Deposits: |  |  |  |
| Transaction accounts | 3,994 | (1,161) | 2,833 |
| Money market & savings | (253) | (274) | (527) |
| Time | 3,277 | (2,804) | 473 |
| Total interest-bearing deposits | 7,018 | (4,239) | 2,779 |
| Sub debt | (192) | 287 | 95 |
| Borrowings | (780) | 1,280 | 500 |
| Total interest-bearing liabilities | 6,046 | (2,672) | 3,374 |
| Net interest income / margin | $3,371 | $(177) | $3,194 |

The yield and volume table above shows that the $3.2 million increase in net interest income for the three months ended March 31 2025 compared to the same period in 2024 was due to a $3.4 million benefit from increased earnings asset volume partially offset by a $177,000 decrease in net interest margin as the decrease in yields on assets was more than the decrease in the cost of funds. The primary driver of our growth in net interest income in the first quarter of 2025 was our loan portfolio. Total interest income on our loan portfolio grew $7.2 million in the three months ended March 31, 2025 compared to the same period in 2024, with $8.8 million coming from growth in average portfolio balances partially offset by a reduction of $1.6 million from lower loan portfolio yields. Offsetting this interest income growth was higher funding costs, among most funding sources, primarily volume related. Total funding costs increased by $3.4 million in the three months ended March 31, 2025 compared to the same period in 2024, with $6.0 million of the increase in interest expense coming from higher average balances, partially offset by $2.7 million from lower funding rates.

### Provision for Credit Losses

The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is adequate to provide coverage for all expected future credit losses. The provision for credit losses is impacted by inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, recent historical and projected future economic conditions, loan growth, the direction of the change in collateral values, and the level of actual net charge-offs incurred. Our provision for credit losses reflects risks in the HFI loan portfolio, which is comprised predominately of collateralized single-family mortgage loans, with very low historical loss experience.

For the three months ended March 31, 2025, our total provision for credit losses was $1.3 million, compared to a total benefit of $357,000 for the same period in 2024. Our provision for credit losses reflects both our held for investment loan portfolio and the unfunded commitments on that portfolio. The increase in provision for credit losses for the three months ended March 31 2025 compared to the same period in 2024, was driven primarily by continued growth in the portfolio, reserve increases on individually evaluated loans, credit migration trends, and changes in the economic forecasts used in the credit models. The provision for credit losses related to loans was an expense of $1.4 million for the three months ended March 31, 2025, reflecting net charge-offs of $259,000 and an ending allowance for credit losses of $12.3 million. For the three months ended March 31, 2024, the provision for credit losses related to loans was an expense of $331,000, reflecting $9,000 in net recoveries and an ending allowance for credit losses of $12.6 million. Provision for credit losses also includes provision for unfunded loan commitments on the Consolidated Statements of Income. We recorded a provision for unfunded loan commitments benefit of $90,000 for the three months ended March 31, 2025 and a benefit of $688,000 for the three months ended March 31, 2024, which impacted the change in allowance for each period. The benefit in both these periods reflect lower levels of unfunded commitments driven primarily by continued run-off in the construction loan portfolio.

### Noninterest Income

The following table presents the major components of our noninterest income for the three months ended March 31, 2025 and 2024:

| (Dollars in thousands) Noninterest Income 2025 | For the Three Months Ended March 31, 2024 |  | $ Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Service charges on deposits and other fees | $180 | $508 | $(328) |
| Loan servicing fees | 995 | 3,862 | (2,867) |
| MPP fees | 1,141 | 945 | 196 |
| Net gain on sale of loans | 18,587 | 11,352 | 7,235 |
| Other noninterest income | 1,970 | (20) | 1,990 |
|  | **$22,873** | **$16,647** | **$6,226** |

For the three months ended March 31, 2025, noninterest income was $22.9 million, an increase of $6.2 million compared to the same period in 2024, driven primarily by higher net gains on sales of loans and other noninterest income, partially offset by lower loan servicing fees and deposit service charges.

The following tables present the major components of our loan servicing fees and net gain on sale of loans for the three months ended March 31, 2025 and 2024:

### Northpointe Bancshares, Inc.

| (Dollars in thousands) Loan Servicing Fees | 2025 | For the Three Months Ended March 31, 2024 | $ Increase (Decrease) |
| --- | --- | ---: | ---: |
| Fees on servicing |  | $1,702 $5,670 | $(3,968) |
| Change in fair value of MSRs (1) |  | (707) (1,808) | 1,101 |
|  |  | $995 $3,862 | $(2,867) |
| (1) - Includes change in fair value and paid in full MSRs. |  |  |  |
| **(Dollars in thousands) Net Gain on Sale of Loans** |  | **For the Three Months Ended March 31,** | **$ Increase (Decrease)** |
|  | **2025** | **2024** |  |
| Capitalized MSRs |  | $1,066 $485 | $581 |
| Change in fair value of loans (1) |  | 4,678 (1,185) | 5,863 |
| Gain on sale of loans, net (2) |  | 12,843 12,052 | 791 |
|  |  | $18,587 $11,352 | $7,235 |

(1) - Includes the change in fair value of interest rate locks, loans held for sale, and held for investment.

(2) - Includes (a) net gain on sale of loans, (b) loan origination fees, points and costs, (c) provision from investor reserves, (d) gain or loss from forward commitments from hedging, and (e) fair value of LRA.

For the three months ended March 31, 2025, loan servicing fees decreased by $2.9 million compared to the same period in 2024, due largely to a $80.8 million bulk sale of MSRs completed in the first quarter of 2024 as we made the strategic decision to scale back that part of our business.

For the three months ended March 31, 2025, MPP fees increased by $196,000 compared to the same period in 2024, driven primarily by an increase in overall volume of the MPP program.

For the three months ended March 31, 2025, gain on sale of loans increased by $7.2 million compared to the same period in 2024. This was driven primarily by an increase in the fair value of loans of $5.9 million, which was attributable to lower market interest rates, along with smaller increases from capitalized MSRs and gain on sale of loans, net, over the same period.

For the three months ended March 31, 2025, other noninterest income increased by $2.0 million compared to the same period in 2024. For the three months ended March 31, 2025, we recognized a $2.0 million gain on debt extinguishment of $102.5 million in FHLB advances, and we did not have any such debt extinguishment gain or loss for the same period in 2024.

### Noninterest Expense

The following table presents the major components of our noninterest expense for the three months ended March 31, 2025 and 2024:

| (Dollars in thousands) Noninterest Expense 2025 | For the Three Months Ended March 31, 2024 |  | $ Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Salaries and employee benefits | $20,443 | $18,020 | $2,423 |
| Occupancy and equipment | 972 | 1,295 | (323) |
| Data processing expense | 2,107 | 2,498 | (391) |
| Professional fees | 1,228 | 1,119 | 109 |
| Other taxes and insurance | 1,787 | 1,810 | (23) |
| Other | 2,835 | 3,242 | (407) |
|  | **$29,372** | **$27,984** | **$1,388** |

50

For the three months ended March 31, 2025, noninterest expense was $29.4 million, an increase of $1.4 million, compared to the same period in 2024. Salaries and employee benefits expense represent the largest component of our noninterest expense, which are broken out in the below table for the three months ended March 31, 2025 and 2024:

| (Dollars in thousands) Salaries and Employee Benefits 2025 | For the Three Months Ended March 31, 2024 |  | $ Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Salaries and other compensation | $8,607 | $9,073 | $(466) |
| Salary deferral from loan origination | (969) | (979) | 10 |
| Bonus and incentive compensation | 3,642 | 1,698 | 1,944 |
| Mortgage production - variable compensation | 6,059 | 5,866 | 193 |
| Employee benefits | 3,104 | 2,362 | 742 |
| Total salaries and employee benefits | **$20,443** | **$18,020** | **$2,423** |

For the three months ended March 31, 2025, salaries and employee benefits increased by $2.4 million compared to the same period in 2024. Of this increase, $1.9 million was from higher bonus and incentive compensation expense, attributable to our initial public offering and the improvement in net income, along with a $742,000 increase in employee benefit expense from higher payroll tax expenses and an increase of $193,000 in variable commission compensation associated with mortgage volume. Partially offsetting this was a decrease in base salaries and other compensation of $466,000 as we continued to proactively manage staffing levels to align with lower mortgage loan production volume. Our average full time equivalent employees (FTE) was 491 for the three months ended March 31, 2025, compared to 610 for the three months ended March 31, 2024.

For the three months ended March 31, 2025, occupancy and equipment expense decreased by $323,000 compared to the same period in 2024, driven primarily by lower building lease expense. For the three months ended March 31, 2025, data processing fees decreased by $391,000 compared to the same period in 2024, which was consistent with lower mortgage volume as much of our data processing costs are unit based. For the three months ended March 31, 2025, professional fees increased by $109,000 compared to same period in 2024, largely due to higher expenses associated with being a public company.

For the three months ended March 31, 2025, other expenses decreased by $407,000 compared to the same period in 2024. Other expenses include several categories of expenses which are typically more tied to mortgage volume, including marketing and credit reporting fees and the loan repurchase reserve expense.

### Income Tax Expense

For the three months ended March 31, 2025, total income tax expense was $5.3 million compared to $4.0 million for the same period in 2024. The effective tax rate was 23.67% for the three months ended March 31, 2025 compared to 24.45% for the same period in 2024.

### Operating Segment Analysis

We have two reporting segments, Retail Banking and MPP. As discussed in Note 20 of our Consolidated Financial Statements, our reportable segments have been determined based on management’s focus and internal reporting structure.

The MPP segment provides collateralized mortgage purchase facilities to independent mortgage bankers nationwide. The Retail Banking segment provides a vast array of financial products and services to consumers nationwide. These include residential mortgages, AIO Loans, other consumer loans, and loan servicing, as well as various types of deposit products, including checking, savings and time deposit accounts. It also includes general and administrative expenses for the enterprise-wide support functions, which are allocated among the segments, internal funds transfer pricing offsets resulting from allocations to or from the other segments, and certain elimination entries.

Our reported segments and the financial information disclosed in the reported segments are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures may result in future changes to previously reported operating segment financial information.

The following table presents our reported segment results for the three months ended March 31, 2025 and 2024:

*(Dollars in thousands)*

| 2025 Retail Banking | As of or for the Three Months Ended March 31, MPP | Total | Retail Banking | 2024 MPP | Total |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest income | $47,462 | $31,688 | $79,150 | $49,566 | $23,016 | $72,582 |
| Interest expense | (48,761) | — | (48,761) | (45,387) | — | (45,387) |
| Funds transfer pricing | 20,767 | (20,767) | — | 15,353 | (15,353) | — |
| **Net interest income** | **19,468** | **10,921** | **30,389** | **19,532** | **7,663** | **27,195** |
| Provision (benefit) for credit losses | 992 | 303 | 1,295 | (433) | 76 | (357) |
| **Net income after provision** | **18,476** | **10,618** | **29,094** | **19,965** | **7,587** | **27,552** |
| Noninterest income (1) | 21,732 | 1,141 | 22,873 | 15,702 | 945 | 16,647 |
| Salaries and employee benefits | (18,931) | (1,512) | (20,443) | (16,802) | (1,218) | (18,020) |
| Occupancy and equipment | (950) | (22) | (972) | (1,273) | (22) | (1,295) |
| Other noninterest expense (2) | (7,844) | (113) | (7,957) | (8,571) | (98) | (8,669) |
| Noninterest expense | (27,725) | (1,647) | (29,372) | (26,646) | (1,338) | (27,984) |
| Expense allocation (3) | 1,153 | (1,152) | 1 | 866 | (866) | — |
| **Net income before taxes** | **13,636** | **8,960** | **22,596** | **9,887** | **6,328** | **16,215** |
| Income tax expense | (3,227) | (2,121) | (5,348) | (2,466) | (1,498) | (3,964) |
| **Net income before preferred dividends** | **$10,409** | **$6,839** | **$17,248** | **$7,421** | **$4,830** | **$12,251** |
| Average balance sheet assets | $3,551,982 | $1,795,920 | $5,347,902 | $3,657,574 | $1,125,507 | $4,783,081 |
| Period end assets | $3,391,443 | $2,468,212 | $5,859,655 | $3,613,448 | $1,251,833 | $4,865,281 |

(1) Noninterest income for MPP only includes MPP related fees. All other noninterest income is reflected in Retail Banking.

(2) Includes data processing, professional services, office supplies and other miscellaneous expenses.

(3) Reflects corporate overhead expense allocations used by both business segments; primarily consisting of corporate admin, finance, technology, human resources, risk, marketing and occupancy related allocations.

### MPP

For the three months ended March 31, 2025, our MPP segment reported net income before preferred dividends of $6.8 million, an increase of $2.0 million, or 41.6%, over the $4.8 million reported for the same period in 2024. This increase was driven primarily by a 59.6% increase in average balances which drove higher net interest income and fees. The increase in average balances reflects strong loan growth from new customer acquisition and market share gains.

### Retail Banking

For the three months ended March 31, 2025, our Retail Banking segment reported net income before preferred dividends of $10.4 million, an increase of $3.0 million, or 40.3%, over the $7.4 million reported for the same period in 2024. This increase was driven primarily by lower noninterest expense, which outpaced the decrease in noninterest income and net interest income. The decrease in noninterest expense reflects lower variable mortgage commissions and proactive expense management across the channel.

### Discussion and Analysis of Financial Condition

The following table summarizes selected components of our balance sheets at March 31, 2025 and December 31, 2024:

*(Dollars in thousands)*

| BALANCE SHEET DATA | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Total Assets | $5,859,655 | $5,224,011 |
| Cash and cash equivalents | 321,499 | 376,295 |
| Equity and debt securities | 9,919 | 9,881 |
| FHLB stock | 69,574 | 69,574 |
| Loans and loans held for sale, net | 5,342,488 | 4,633,637 |
| Deposits | 3,822,622 | 3,422,555 |
| Borrowings | 1,371,158 | 1,258,750 |
| Subordinated debentures | 29,159 | 43,933 |
| Total equity capital | 586,522 | 462,490 |

### Total Assets

Total assets were $5.86 billion at March 31, 2025 as compared to $5.22 billion at December 31, 2024. This $635.6 million increase in total assets was driven primarily by higher balances of net loans and loans held for sale, partially offset by lower cash and cash equivalents.

### Loan Portfolio

The following table presents the balance and associated percentage of each major loan type within our portfolio, including net deferred fees and costs, as of the dates indicated:

*(Dollars in thousands)*

| Residential: | March 31, 2025 Amount % of Total Gross Loans | Amount | December 31, 2024 % of Total Gross Loans |  |
| --- | ---: | ---: | ---: | ---: |
| Construction | $40,995 | 0.8% | $51,408 | 1.1% |
| All-in-One (AIO)(1) | 643,180 | 12.0% | 612,080 | 13.2% |
| Other consumer / home equity(1) | 94,060 | 1.8% | 97,258 | 2.1% |
| Residential mortgage(2) | 1,899,823 | 35.5% | 1,948,175 | 41.9% |
| Commercial | 900 | 0.0% | 8,013 | 0.2% |
| MPP | 2,468,212 | 46.1% | 1,710,820 | 36.8% |
| Total loans held for investment | 5,147,170 | 96.1% | 4,427,754 | 95.3% |
| Loans held for sale | 207,633 | 3.9% | 217,073 | 4.7% |
| Total gross loans (HFI and HFS) | $5,354,803 | 100.0% | $4,644,827 | 100.0% |

(1) AIO and Other Consumer / Home Equity are aggregated into Home equity lines of credit loans within the tables in our consolidated financial statements.

(2) Residential Mortgage loans consist of Closed end first liens, Closed end second liens, and Land development loans.

Our loan portfolio includes both loans held for investment and loans held for sale. Our loans held for investment portfolio comprises over 96% of our total gross loans.

Our MPP business offers facilities to independent mortgage banking companies located nationwide. These are floating rate, short term advances that are collateralized by one-to-four family mortgage loans that our mortgage bankers are preparing to be delivered to the secondary mortgage market. In most cases, these mortgage loans sit in our mortgage banking client’s facility for less than 30 days after the loan is purchased.

Residential mortgage loans include fixed or adjustable-rate residential real estate loans collateralized by one-to-four family properties. Our portfolio is geographically diversified across the United States. To mitigate interest rate risk, most of the loans we choose to hold in our portfolio are floating rate loans. The majority of our residential mortgage loans at March 31, 2025 are first liens.

AIO loans are floating rate, first mortgage revolving equity loans that include a checking account linked to the revolving equity loans.

We also have a smaller portfolio of construction loans, home equity lines of credit, and commercial loans, which combined represented less than 3% of the overall loan portfolio as of March 31, 2025.

At March 31, 2025, our total loans net of allowance for credit losses including loans held for sale was $5.34 billion, as compared to $4.64 billion on December 31, 2024. This increase of $710.0 million over the prior quarter was driven primarily by the strong growth in MPP and AIO balances, which increased by $757.4 million and $31.1 million, respectively. Growing the MPP business remains one of our top strategic priorities, and reflects the strength of our scalable technology, long-standing strong relationships, as well as our ability to capitalize on recent market disruption within the business line. We also remain focused on prudently growing the portfolio of first-lien home equity lines, which includes AIO loans.

As of March 31, 2025, residential mortgage comprised 35.5% of our total loan portfolio compared to 46.1% for MPP and 12.0% for AIO loans. As of December 31, 2024, residential mortgage comprised 41.9% of our total loan portfolio compared to 36.8% for MPP and 13.2% for AIO loans. The reduction in residential mortgages reflects normal amortization and pay-offs, as we are not strategically growing this portfolio.

### Contractual Maturities and Rate Structures of Loan Portfolio

The following table sets forth the contractual maturities and rate structures at March 31, 2025 and December 31, 2024:

### Contractual Loan Maturities as of March 31, 2025

*(Dollars in thousands)*

| Residential | Due in 1 Year or less Fixed Rate | Adjustable Rate | Due after 1 Year through 5 years Fixed Rate | Adjustable Rate | Due after 5 Years through 15 years Fixed Rate | Adjustable Rate | Due after 15 years Fixed Rate | Adjustable Rate | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Construction | $10,087 | $— | $— | $— | $— | $— | $27,972 | $2,936 | $40,995 |
| All-in-One (AIO)(1) | — | — | — | — | — | — | — | 643,180 | 643,180 |
| Other consumer / home equity(1) | — | — | — | — | 70 | 85 | 847 | 93,058 | 94,060 |
| Residential mortgage(2) | 177 | 19 | 328 | 559 | 15,660 | 14,967 | 406,709 | 1,461,404 | 1,899,823 |
| Commercial | 201 | 234 | 329 | — | 136 | — | — | — | 900 |
| MPP | — | 2,468,212 | — | — | — | — | — | — | 2,468,212 |
| Total loans held for investment: | 10,465 | 2,468,465 | 657 | 559 | 15,866 | 15,052 | 435,528 | 2,200,578 | 5,147,170 |
| Retail loans held for sale: | — | — | — | — | 435 | — | 206,022 | 1,176 | 207,633 |
| **Total gross loans (HFI and HFS)** | **$10,465** | **$2,468,465** | **$657** | **$559** | **$16,301** | **$15,052** | **$641,550** | **$2,201,754** | **$5,354,803** |

(1) AIO and Other Consumer / Home Equity are aggregated into Home equity lines of credit loans within the tables in our consolidated financial statements.

(2) Residential Mortgage loans consist of Closed end first liens, Closed end second liens, and Land development loans.

### Contractual Loan Maturities as of December 31, 2024

*(Dollars in thousands)*

| Residential | Due in 1 Year or less Fixed Rate | Adjustable Rate | Due after 1 Year through 5 years Fixed Rate | Adjustable Rate | Due after 5 Years through 15 years Fixed Rate | Adjustable Rate | Due after 15 years Fixed Rate | Adjustable Rate | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Construction | $12,401 | $— | $— | $— | $— | $— | $38,013 | $994 | $51,408 |
| All-in-One (AIO)(1) | — | — | — | — | — | — | — | 612,080 | $612,080 |
| Other consumer / home equity(1) | — | — | — | — | — | 70 | — | 97,188 | 97,258 |
| Residential mortgage(2) | 393 | 333 | 347 | 553 | 15,655 | 14,142 | 363,450 | 1,553,302 | 1,948,175 |
| Commercial | — | 7,303 | 120 | 234 | 115 | 82 | 159 | — | 8,013 |
| MPP | — | 1,710,820 | — | — | — | — | — | — | 1,710,820 |
| Total loans held for investment: | 12,794 | 1,718,456 | 467 | 787 | 15,770 | 14,294 | 401,622 | 2,263,564 | 4,427,754 |
| Retail loans held for sale: | — | — | — | — | — | — | 210,766 | 6,307 | 217,073 |
| **Total gross loans (HFI and HFS)** | **$12,794** | **$1,718,456** | **$467** | **$787** | **$15,770** | **$14,294** | **$612,388** | **$2,269,871** | **$4,644,827** |

(1) AIO and Other Consumer / Home Equity are aggregated into Home equity lines of credit loans within the tables in our consolidated financial statements.

(2) Residential Mortgage loans consist of Closed end first liens, Closed end second liens, and Land development loans.

Our mortgage loan portfolio has ARMs which reset annually after the initial fixed rate period, which ranges from one to 10 years. AIO loans are adjustable rate and reset monthly. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

As of March 31, 2025, 46.3% of our total loan portfolio had a contractual maturity of less than one year, up from 37.3% at December 31, 2024. The increase was primarily due to growth in our MPP business over this period. Our MPP facilities are floating rate and generally have terms of 30 days or less given that is the time period that a funded mortgage stays in our mortgage banking clients facility prior to the sale of the mortgage in the secondary market. Very few of our loans have intermediate contractual maturities of between one and fifteen years. As of March 31, 2025, 53.1% of total loans had contractual maturities of longer than 15 years, compared to 62.1% at December 31, 2024. For our two largest categories of long duration loans as of March 31, 2025, 77.7% of residential mortgage and 100% of our AIO Loans were floating rate.

### Nonperforming Assets

The following table provides details of our nonperforming and restructured assets (including both loans held for investment and loans held for sale) as of the dates presented and certain other related information:

*(Dollars in thousands)*

| Nonaccrual loans(1): | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Commercial | — | 118 |
| Construction | 1,757 | 1,921 |
| Land development | 2,296 | 2,312 |
| Home equity lines of credit | 11,930 | 10,807 |
| First lien mortgage | 29,679 | 25,706 |
| First lien mortgage wholly or partially guaranteed by the U.S Government | 29,492 | 32,159 |
| Junior lien mortgage | 1,577 | 1,532 |
| MPP | — | — |
|  | 76,731 | 74,555 |
| **Loans past due 90 days or more and still accruing(1):** |  |  |
| Commercial | — | — |
| Construction | 1,866 | — |
| Land development | 751 | — |
| Home equity lines of credit | 289 | 200 |
| First lien mortgage | 6,098 | 3,823 |
| First lien mortgage wholly or partially guaranteed by the U.S Government | 605 | 346 |
| Junior lien mortgage | 608 | 30 |
| MPP | — | — |
|  | 10,217 | 4,399 |
| Total nonperforming loans | 86,948 | 78,954 |
| Other real estate owned | 873 | 3,030 |
| Total nonperforming assets | $87,821 | $81,984 |
| Nonaccrual loans to total loans | 1.43% | 1.61% |
| Nonperforming loans to total loans | 1.62% | 1.70% |
| Nonperforming assets to total assets | 1.50% | 1.57% |
| Allowance for credit losses to nonaccrual loans | 16.05% | 15.01% |
| Ratios excluding loans wholly or partially guaranteed by the U.S Government |  |  |
| Nonaccrual loans to total loans | 0.88% | 0.91% |
| Nonperforming loans to total loans | 1.06% | 1.00% |
| Nonperforming assets to total assets | 0.99% | 0.95% |
| Allowance for credit losses to nonaccrual loans | 26.07% | 26.39% |

(1) Includes loans which are reported at fair value (see Note 17 of our consolidated financial statements).

At March 31, 2025, nonperforming assets were $87.8 million compared to $82.0 million at December 31, 2024. The increase in nonperforming assets was driven primarily by normal aging within the loans held for investment portfolio. A substantial portion of the linked quarter increase in non-performing loans related to the Company's transfer of servicing to a scaled sub-servicer. The majority of these loans have already, or are expected to, pay in full or become current. Nonperforming assets as a percent of total assets was 1.50% at March 31, 2025 compared to 1.57% at December 31, 2024.

A substantial portion of the Company's non-performing loans are wholly or partially guaranteed by the U.S. Government, so asset quality metrics within this Quarterly Report on Form 10-Q are shown with and without these guaranteed loans. Excluding the portion of our loans that are wholly or partially guaranteed by the U.S. Government, nonperforming assets to total assets increased to 0.99% at March 31, 2025, compared to 0.95% at December 31, 2024. At March 31, 2025, approximately 35% of our nonperforming loans have a form of government guarantee.

The Company uses a risk grading system for our loans to aid us in evaluating the overall credit of our loan portfolio and assessing the adequacy of our allowance for credit losses. All loans are categorized into a risk category at the time of origination. Loans are re-evaluated for proper risk grading as new information such as payment patterns, collateral condition and other relevant information comes to our attention. Our classified assets are described in more detail in Note 3 of the Notes to Consolidated Financial Statements.

### Allowance for Credit Losses and Net Charge-Offs

The allowance for credit losses is established through a provision for credit losses charged to operations. Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries of previously charged off amounts, if any, are credited to the allowance for credit losses. The allowance for credit losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans considering historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. While the entire allowance for credit losses is available to absorb losses from all loans, the following table represents management’s allocation of our allowance for credit losses by loan category, and the percentage of allowance for credit losses in each category, for the periods indicated:

*(Dollars in thousands)*

| Collectively allocated for impairment: | March 31, 2025 Dollars % of Total | Dollars | December 31, 2024 % of Total |  |
| --- | ---: | ---: | ---: | ---: |
| Commercial | $4 | —% | $32 | 0.3% |
| Construction | 645 | 5.2% | 390 | 3.5% |
| Land development | 964 | 7.8% | 976 | 8.7% |
| Home equity lines of credit | 1,877 | 15.2% | 1,920 | 17.2% |
| First lien mortgage | 4,657 | 37.8% | 4,515 | 40.3% |
| Junior lien mortgage | 2,084 | 16.9% | 1,672 | 14.9% |
| MPP | 987 | 8.0% | 684 | 6.1% |
|  | 11,218 | 91.1% | 10,189 | 91.1% |
| Individually allocated for impairment | 1,094 | 8.9% | 995 | 8.9% |
| Unallocated | 3 | —% | 6 | 0.1% |
|  | 1,097 | 8.9% | 1,001 | 8.9% |
| Total allowance for credit losses | $12,315 | 100.0% | $11,190 | 100.0% |

57

The following table provides an analysis of the activity in our allowance for the periods indicated:

*(Dollars in thousands)*

| March 31, 2025 | For the Three Months Ended March 31, 2024 Activity % of Average Loans Held for Investment (1) | Activity | % of Average Loans Held for Investment (1) |  |
| --- | ---: | ---: | ---: | ---: |
| Loans held for investment | $5,147,170 |  | $3,983,069 |  |
| Beginning allowance for credit losses | $11,190 |  | $12,295 |  |
| Net charge-offs (recoveries): |  |  |  |  |
| Commercial | (4) | -0.22% | (14) | -1.05% |
| Construction | — | 0.00% | 25 | 0.06% |
| Land development | — | 0.00% | — | 0.00% |
| Home equity lines of credit | 40 | 0.02% | 2 | 0.00% |
| First lien mortgage | 172 | 0.04% | (21) | 0.00% |
| Junior lien mortgage | 51 | 0.27% | — | 0.00% |
| MPP | — | 0.00% | — | 0.00% |
| Total net charge-offs (recoveries) | 259 |  | (8) |  |
| Provision for credit losses | 1,384 |  | 332 |  |
| Ending allowance for credit losses | $12,315 |  | $12,635 |  |
| Allowance for credit losses to loans held for investment | 0.24% |  | 0.32% |  |
| Net charge-offs (recoveries) to average loans | 0.02% |  | 0.00% |  |
| (1) Net charge-offs annualized for interim period |  |  |  |  |

The allowance for credit losses was 0.24% of total loans at March 31, 2025 as compared to 0.32% as of December 31, 2024. Management estimates the allowance by using relevant available information from internal and external sources related to historical loss experience, current borrower risk characteristics, current economic conditions, reasonable and supportable forecasts, and other relevant factors. The allowance is measured on a collective or pool basis when similar risk characteristics exist or on an individual basis when loans have unique risk characteristics which differentiate them from other loans within the loan segment. The process for estimating credit losses incorporates methodologies and procedures specific to the residential and commercial loan portfolios, each of which has unique risk characteristics. Our allowance for credit losses methodology is described in more detail in Notes 1 and 3 of the Notes to Consolidated Financial Statements.

Our allowance for credit losses, and associated percentage of total loans, reflect the relative credit risk of our loan portfolio. These include the seasoning of the portfolio, LTV, FICO score, debt to income ratio (“DTI”) and collateral coverage. Given these risk characteristics, and the stark contrast to other financial institutions with a commercial heavy loan portfolio, our allowance and associated ratios will be much lower than those of bank peers with similar asset size. This nuance is also evidenced by the low level of charge-offs we have historically incurred. Additionally, as discussed above, our MPP portfolio makes up an increasing portion of our total loan portfolio and we have yet to experience any loss on that portfolio. We also have purchased mortgage insurance on certain high loan to value loans, further minimizing our loss potential on those loans. Since 2019, our cumulative charge-offs, net of recoveries, totaled $3.1 million. Our annualized net charge-off rate was 0.02% for the three months ended March 31, 2025 and we had net recoveries for the three months ended March 31, 2024.

### Investment Portfolio

The Company has historically maintained a very small debt securities portfolio relative to other banking institutions, preferring to invest in highly liquid loans or hold its liquidity in cash or cash equivalents. At March 31, 2025, debt securities totaled $8.6 million, or 0.15%, of total assets compared to $8.6 million, or 0.16%, at December 31, 2024.

The following table presents the carrying value of our investment portfolio as of the dates indicated:

*(Dollars in thousands)*

| Available for sale securities: | March 31, 2025 Carrying Value % of Total | Carrying Value | December 31, 2024 % of Total |  |
| --- | ---: | ---: | ---: | ---: |
| Corporate debt | $8,594 | 100.0% | $8,576 | 100.0% |
| Total available for sale securities | 8,594 | 100.0% | 8,576 | 100.0% |
| Total investment securities | $8,594 | 100.0% | $8,576 | 100.0% |

The following table presents the par value of our debt securities by their stated maturities, as well as the weighted average yields for each maturity range as of the dates indicated (dollars in thousands):

| March 31, 2025 Par Value Available for sale securities: | Due in 1 Year or Less Weighted Avg Yield(1) | Par Value | Due after 1 Year through 5 Years Weighted Avg Yield(1) | Par Value | Due after 5 Years through 10 Years Weighted Avg Yield(1) | Par Value | Due after 10 Years Weighted Avg Yield(1) | Par Value | Total Weighted Avg Yield(1) |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate debt | — | — | — | — | $9,000 | 6.30% | — | — | $9,000 | 6.30% |
| Total available for sale securities | — | — | — | — | 9,000 | 6.30% | — | — | 9,000 | 6.30% |
| Total investment securities | — | — | — | — | $9,000 | 6.30% | — | — | $9,000 | 6.30% |

| December 31, 2024 Par Value Available for sale securities: | Due in 1 Year or Less Weighted Avg Yield(1) | Par Value | Due after 1 Year through 5 Years Weighted Avg Yield(1) | Par Value | Due after 5 Years through 10 Years Weighted Avg Yield(1) | Par Value | Due after 10 Years Weighted Avg Yield(1) | Par Value | Total Weighted Avg Yield(1) |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Corporate debt | — | — | $— | —% | $9,000 | 6.63% | $— | —% | $9,000 | 6.63% |
| Total available for sale securities | — | — | — | —% | 9,000 | 6.63% | — | —% | 9,000 | 6.63% |
| Total investment securities | — | — | $— | —% | $9,000 | 6.63% | $— | —% | $9,000 | 6.63% |

(1) Weighted-average yields on investment securities are computed based on par value and exclude any premiums or discounts recorded. There are no tax-exempt securities in the portfolio.

### Deposits

Deposits are the primary source of funding our business operations. At March 31, 2025, total deposits were $3.82 billion compared to $3.42 billion at December 31, 2024. This $400.1 million increase in deposits from the prior quarter was driven primarily by higher brokered CDs, along with increases in the Company's diversified digital deposit banking platform including non-interest bearing demand, interest-bearing demand, retail CDs and rateboard CDs.

The following table summarizes our deposit composition by average deposits and average rates paid for the periods indicated:

*(Dollars in thousands)*

|  | March 31, 2025 Average Amount Weighted Avg Rate Paid | Percent of Total Deposits | Average Amount | December 31, 2024 Weighted Avg Rate Paid | Percent of Total Deposits |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Noninterest bearing demand | $207,166 | 0.00% | 6% | $250,135 | 0.00% | 8% |
| Interest bearing demand | 739,709 | 4.38% | 21% | 412,396 | 4.83% | 13% |
| Savings & money market | 337,124 | 3.91% | 10% | 380,131 | 4.39% | 12% |
| Time | 2,254,388 | 4.51% | 64% | 2,221,123 | 5.16% | 68% |
| Total deposits | $3,538,387 | 4.10% | 100% | $3,263,785 | 4.63% | 100% |

59

The following tables set forth the maturity of time deposits for the period ending indicated (dollars in thousands):

*(dollars in thousands)*

| March 31, 2025 | Three Months or Less | Three to Six Months | Six to Twelve Months | After Twelve Months | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Brokered CDs | $2,000,000 | $— | $— | $87,330 | $2,087,330 |
| All other CDs | 90,816 | 144,102 | 91,020 | 85,150 | 411,088 |
| Total time deposits | $2,090,816 | $144,102 | $91,020 | $172,480 | $2,498,418 |

*(dollars in thousands)*

| December 31, 2024 | Three Months or Less | Three to Six Months | Six to Twelve Months | After Twelve Months | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Brokered CDs | $1,731,707 | $— | $— | $87,330 | $1,819,037 |
| All other CDs | 69,327 | 60,775 | 151,851 | 87,979 | 369,932 |
| Total time deposits | $1,801,034 | $60,775 | $151,851 | $175,309 | $2,188,969 |

Total uninsured deposits were $378.1 million at March 31, 2025 and $309.9 million at December 31, 2024.

The following table shows the portion of time deposits that are uninsured, by remaining time until maturity, at March 31, 2025:

*(Dollars in thousands)*

|  | March 31, 2025 |
| --- | ---: |
| 3 months or less | $22,090 |
| Over 3 through 6 months | 48,706 |
| Over 6 through 12 months | 19,793 |
| Over 12 months | 10,446 |
| **Total:** | **$101,035** |

### Borrowings

Another key source of funding for the Company are collateralized borrowings from the FHLB. At March 31, 2025, our total FHLB borrowings were $1.24 billion, down $22.5 million from $1.26 billion at December 31, 2024. At March 31, 2025, we had $1.06 billion in additional borrowing capacity at the FHLB. Early in the first quarter of 2025, we paid off $102.5 million in FHLB advances, recognizing a gain of $2.0 million. This extinguishment was funded through our receipt of new contractual interest bearing deposits with a similar duration, as part of our strategy to reduce the wholesale funding ratio. At March 31, 2025, we had $44.9 million in outstanding short-term borrowings on our FHLB line of credit. We had no such borrowings at December 31, 2024. At March 31, 2025, we also had $90.0 million in overnight borrowings compared to no overnight borrowings at December 31, 2024.

The following table is a summary of our outstanding FHLB advances for the periods indicated:

*(Dollars in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Period ending balance | $1,236,250 | $1,258,750 |
| Average balance during period | 1,205,751 | 1,300,488 |
| Maximum outstanding at any month end | 1,281,158 | 1,371,422 |
| Weighted average rate paid | 3.85% | 3.82% |

### Subordinated Debentures and Subordinated Debentures Issued through Trusts

At March 31, 2025, we had $25.0 million in outstanding subordinated debenture notes, which is detailed in the tables below and described further in Note 9 to the Condensed Consolidated Financial Statements included within this report.

At December 31, 2024, we had $40.0 million in outstanding subordinated debenture notes, which were issued to investors in two separate private placements, one in 2018 and one in 2024. On January 1, 2025, we redeemed $15.0 million of these subordinated debentures.

At both March 31, 2025 and December 31, 2024, we had $5.0 million in subordinated debentures issued through trusts due on March 17, 2034, but callable on March 17, 2025.

The following tables provide a summary of our outstanding subordinated notes and subordinated debentures issued through trusts for the periods indicated:

*Subordinated Notes and Subordinated Debentures issued through Trusts as of March 31, 2025*

*(Dollars in thousands)*

| Subordinated notes: | Issuance Date | Amount of Notes | Current Coupon | Next Call Date | Maturity Date |
| --- | --- | ---: | --- | --- | --- |
| Fixed to floating due 2034 | August 22, 2024 | 25,000 | 9.00% (fixed) | September 1, 2029 | September 1, 2034 |
| **Subordinated debentures issued through trusts:** |  |  |  |  |  |
| Trust preferred due 2034 | March 17, 2004 | 5,000 | 7.34% (3 mo SOFR + 2.79)% | June 17, 2025 | March 17, 2034 |
|  |  | **30,000** |  |  |  |
| Unamortized issuance costs |  | (841) |  |  |  |
|  |  | **$29,159** |  |  |  |

*Subordinated Notes and Subordinated Debentures issued through Trusts as of December 31, 2024*

*(Dollars in thousands)*

| Subordinated notes: | Issuance Date | Amount of Notes | Current Coupon | Next Call Date | Maturity Date |
| --- | --- | ---: | --- | --- | --- |
| Fixed to floating due 2028 (issued at Bank) | September 28, 2018 | $15,000 | 8.718% (3 mo SOFR + 4.03)% | January 1, 2025 | October 1, 2028 |
| Fixed to floating due 2034 | August 22, 2024 | 25,000 | 9.00% (fixed) | September 1, 2029 | September 1, 2034 |
| **Subordinated debentures issued through trusts:** |  |  |  |  |  |
| Trust preferred due 2034 | March 17, 2004 | 5,000 | 7.74% (3 mo SOFR + 2.79)% | March 17, 2025 | March 17, 2034 |
|  |  | **45,000** |  |  |  |
| Unamortized issuance costs |  | (1,103) |  |  |  |
|  |  | **$43,897** |  |  |  |

### Impact of Inflation and Changing Prices

The Company’s financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). GAAP presently requires the Company to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on the operations of the Company is reflected in increased operating costs, and the Company has experienced material effects of inflation during the last four fiscal years due to the government's monetary policies and the current economic climate. In management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond the control of the Company, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities, among other things, as further discussed in the next section.

### Liquidity

Liquidity refers to our capacity to meet our cash obligations at a reasonable cost. Our cash obligations require us to have cash flow that is adequate to fund loan growth and maintain on-balance sheet liquidity while meeting present and future obligations of deposit withdrawals, borrowing maturities and other contractual cash obligations. In managing our cash flows, management regularly confronts situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints in accessing sources of funds and the ability to convert assets into cash. Changes in economic conditions or exposure to credit, market, operational, legal and reputational risks also could affect our Bank’s liquidity risk profile and are considered in the assessment of liquidity management. The Company is a corporation separate and apart from our Bank and, therefore, must provide for its own liquidity, including liquidity required to meet its debt service requirements on its senior notes and junior subordinated debentures. The Company’s main source of cash flow is dividends declared and paid to it by the Bank.

There are statutory and regulatory limitations that affect the ability of our Bank to pay dividends to the Company. See the section entitled “Supervision and Regulation” and our forward looking statements in our 2024 Form 10-K for more information. We believe that these limitations will not impact our ability to meet our ongoing short-term cash obligations. For contingency purposes, the Company typically maintains a minimum level of cash to fund two year’s projected operating cash flow needs and debt service. We continually monitor our liquidity position to ensure that our assets and liabilities are managed in a manner to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands. Management has established a comprehensive management process for identifying, measuring, monitoring and controlling liquidity risk.

Because of its critical importance to the viability of our Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include: effective corporate governance consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures and limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems including stress tests that are commensurate with the complexity of our business activities; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate levels of highly liquid marketable securities free of legal, regulatory, or operational impediments, that can be used to meet liquidity needs in stressful situations; comprehensive contingency funding plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of our Bank’s liquidity risk management process.

The Company considers the maintenance of adequate liquidity to be an important part of managing risk. Consistent with our balance sheet strategy, we have intentionally kept our liquidity primarily in cash and interest-bearing deposits rather than investing heavily in investment securities, which typically includes significant unrealized gains or losses.

Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our liquidity requirements are met primarily through our deposits, FHLB advances and the principal and interest payments we receive on loans and investment securities. Cash on hand, cash at third-party banks, and maturing or prepaying balances in our loan portfolios are our most liquid assets. Additionally, the Company has a unilateral right not to fund its MPP facilities, it could exercise within 30 days, if needed or as necessary, to generate additional liquidity. Other sources of liquidity that are routinely available to us include funds from retail and wholesale deposits, advances from the FHLB and proceeds from the sale of loans. See “FHLB Advances” above for more information regarding FHLB advances that are available to us. Less commonly used sources of funding include other borrowings and lines of credit. We believe we have ample liquidity resources to fund future growth and meet other cash needs as necessary.

### Capital Adequacy

We and our Bank are subject to various regulatory capital requirements administered by the federal and state banking regulators. Our capital management consists of providing equity to support our current operations and future growth. Failure to meet minimum regulatory capital requirements may result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, our Bank must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and off-balance sheet items as calculated under regulatory accounting policies. At March 31, 2025, we and our Bank exceeded all applicable minimum regulatory capital requirements, including the capital conservation buffer applicable to our Bank, and our Bank qualified as “well-capitalized” for purposes of the FDIC’s prompt corrective action regulations.

The following table presents our regulatory capital ratios as of the dates presented, as well as the regulatory capital ratios that are required by FDIC regulations for our Bank to maintain “well-capitalized” status:

### Regulatory Capital Ratios

*(Dollars in thousands)*

| Northpointe Bancshares Inc. As of March 31, 2025 | Actual Amount | Ratio | Required for Capital Adequacy Purposes Amount | Ratio | Required to be Well Capitalized Under PCA Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total capital to RWA | $627,393 | 12.74% | $394,033 | 8.00% | N/A | N/A |
| Tier 1 capital to RWA | $592,215 | 12.02% | $295,525 | 6.00% | N/A | N/A |
| Common Equity Tier 1 to RWA | $488,481 | 9.92% | $221,644 | 4.50% | N/A | N/A |
| Tier 1 capital to average assets (leverage) | $592,215 | 11.07% | $213,931 | 4.00% | N/A | N/A |
| **As of December 31, 2024** |  |  |  |  |  |  |
| Total capital to RWA | $509,591 | 12.09% | $337,246 | 8.00% | N/A | N/A |
| Tier 1 capital to RWA | $469,977 | 11.15% | $252,935 | 6.00% | N/A | N/A |
| Common Equity Tier 1 to RWA | $361,404 | 8.57% | $189,701 | 4.50% | N/A | N/A |
| Tier 1 capital to average assets (leverage) | $469,977 | 8.77% | $214,421 | 4.00% | N/A | N/A |
| **Northpointe Bank** |  |  |  |  |  |  |
| **As of March 31, 2025** |  |  |  |  |  |  |
| Total capital to RWA | $598,837 | 12.16% | $394,043 | 8.00% | $492,553 | 10.00% |
| Tier 1 capital to RWA | $588,659 | 11.95% | $295,532 | 6.00% | $394,043 | 8.00% |
| Common Equity Tier 1 to RWA | $588,659 | 11.95% | $221,649 | 4.50% | $320,160 | 6.50% |
| Tier 1 capital to average assets (leverage) | $588,659 | 11.01% | $213,818 | 4.00% | $267,273 | 5.00% |
| **As of December 31, 2024** |  |  |  |  |  |  |
| Total capital to RWA | $502,996 | 11.93% | $337,246 | 8.00% | $421,553 | 10.00% |
| Tier 1 capital to RWA | $487,519 | 11.56% | $252,932 | 6.00% | $337,242 | 8.00% |
| Common Equity Tier 1 to RWA | $487,519 | 11.56% | $189,699 | 4.50% | $274,010 | 6.50% |
| Tier 1 capital to average assets (leverage) | $487,519 | 9.09% | $214,419 | 4.00% | $268,024 | 5.00% |

On March 31, 2025, we redeemed 5,000 shares of our 8.25% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A for $4.9 million. In 2024, we redeemed an additional 13,000 shares of the Series A Preferred Stock for $11.6 million. At March 31, 2025, we had a total of $98.7 million of preferred stock outstanding compared to $103.6 million at December 31, 2024.

### Off-balance Sheet Arrangements

In the normal course of business, we enter into lending commitments that are not on our consolidated balance sheet. The largest component is lending commitments to our MPP customers, which the Company has a unilateral right not to fund. The remainder are undrawn revolving loan commitments on our AIO Loans and undrawn commitments on home equity lines of credit. While these commitments represent contractual cash requirements, a portion of these commitments to extend credit are expected to expire without being drawn upon. Therefore, future commitments do not necessarily represent future cash requirements.

The following is a summary of our off-balance commitments outstanding as of the dates presented.

*(Dollars in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Commitments to fund loans held for investment | $3,099,817 | $2,407,551 |
| Unused Commitments | 347,736 | 334,180 |

63

## Market risk

As filed, 5,313 characters.

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified interest rate risk as our primary source of market risk. Our primary business activities include gathering retail deposits, non-brokered rateboard time deposits, brokered CDs, and funding from the FHLB and other smaller facilities, which are used to invest in cash and loans. These activities involve interest rate risk, which arises from factors such as timing and volume differences in the repricing of our rate-sensitive assets and liabilities, changes in credit spreads, fluctuations in the general level of market interest rates, and shifts in the shape and level of market yield curves. Changes in interest rates can affect our current and prospective earnings, through volatility in our net interest income and the level of other interest rate-sensitive revenues and operating expenses. Interest rate fluctuations can also influence the underlying economic value of our assets, liabilities and off-balance sheet items. This is driven by the fact that the present values of future cash flows, and potentially the cash flows themselves, may change when interest rates materially move up or down depending on the economic environment.

Interest rate risk is generally considered a significant market risk for financial institutions. The Bank’s ALCO establishes broad policy limits with respect to interest rate risk. We have established a system for monitoring our net interest rate sensitivity positions. Our ALCO meets monthly to monitor the level of interest rate risk sensitivity to ensure compliance with the risk and policy limits. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints. However, it is important to note that despite these measures, significant changes in interest rates could potentially impact our earnings, liquidity and capital positions.

An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest- bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.

We use interest rate risk models and rate shock simulations to assess the interest rate risk (“IRR”) sensitivity of net interest income and the economic value of equity (“EVE”) over a variety of parallel and non-parallel rate scenarios. A number of assumptions are used to calculate the impact of interest rate fluctuations on our net interest income, including asset prepayment speeds, non-maturity deposit price sensitivity, and decay rates. Due to the inherent use of estimates and assumptions in the model, our actual results may, and most likely will, differ from our simulated results. Any key model or input changes are reported to ALCO monthly. Management engages a third-party to review its IRR assumptions on an annual basis. Key findings are presented to ALCO.

Potential changes to our net interest income in hypothetical rising and declining rate scenarios are calculated at March 31, 2025 and December 31, 2024 and are presented in the table below:

| (Shock in basis points) | 12 Month Projection | Net Interest Income Sensitivity |  |  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | --- | ---: |
|  | **-200** |  | **-100** |  | **+100** |  | **+200** |  |
| March 31, 2025 |  | -11.98% |  | -6.01% |  | 6.24% |  | 12.50% |
| December 31, 2024 |  | -8.91% |  | -4.35% |  | 5.24% |  | 10.36% |

We also model the impact of interest rate changes on our EVE. We base the modeling of EVE on interest rate shocks as shocks are considered more appropriate for EVE, which accelerates future interest rate risk into current capital via a present value calculation of all future cash flows from our Bank’s existing inventory of assets and liabilities. The results from our EVE modeling reflect only assets and liabilities that exist on our balance sheet in that period, and do not incorporate the large increases to noninterest income we generate when industry residential loan originations are significantly higher, such as in 2020 and 2021. The results of the model are presented in the table below:

| (Shock in basis points) |  | Economic Value of Equity Sensitivity |  |  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | --- | ---: |
|  | **-200** |  | **-100** |  | **+100** |  | **+200** |  |
| March 31, 2025 |  | -1.33% |  | -0.09% |  | -0.12% |  | -0.69% |
| December 31, 2024 |  | 2.13% |  | 2.53% |  | -1.88% |  | -4.30% |

64

## Controls and procedures

As filed, 1,812 characters.

### Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on their evaluation of the Company’s disclosure controls and procedures as of March 31, 2025, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations and are operating in an effective manner.

### Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 797 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Part I – Item 1A – Risk Factors” of the Company’s 2024 Form 10-K, which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in the Company’s 2024 Form 10-K.

Filed May 15, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-025977. Last ingested by Listed: Oct 29, 2026, 16:06 ET. No prices; not investment advice.