Q2 2026 Northpointe Bancshares Inc Earnings Call

July 22, 2026

Speaker #1: Greetings, and welcome to Northpointe Bancshares' second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.

Operator: Greetings, and welcome to Northpointe Bancshares' Q2 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brad Howes, Executive Vice President and CFO. Thank you. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Bradley Howes, Executive Vice President and CFO.

Speaker #1: Thank you. You may begin.

Speaker #2: Good morning, and welcome to Northpointe's second quarter 2026 earnings call. My name is Brad Howes, and I am the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO, and Kevin Combs, our President.

Brad T. Howes: Good morning, welcome to Northpointe's Q2 2026 earnings call. My name is Brad Howes, and I am the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO, and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on Northpointe's investor relations website, ir.northpointe.com. As a reminder, during today's call, we may make forward-looking statements which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides.

Brad Howes: Good morning, welcome to Northpointe's Q2 2026 Earnings Call. My name is Brad Howes, and I am the Chief Financial Officer. With me today are Chuck Williams, our Chairman and CEO, and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on Northpointe's investor relations website, ir.northpointe.com. As a reminder, during today's call, we may make forward-looking statements which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law.

Speaker #2: Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on the Northpointe Investor Relations website: ir.northpointe.com. As a reminder, during today's call we may make forward-looking statements, which are subject to risks and uncertainties, and are intended to be covered by the Safe Harbor provisions of Federal Securities Law.

Speaker #2: For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings.

Brad Howes: For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides. The agenda for today's call will include prepared remarks, followed by a question-and-answer session. With that, I'll turn the call over to Chuck.

Speaker #2: We will also reference non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides. The agenda for today's call will include prepared remarks, followed by a question-and-answer session.

Brad T. Howes: The agenda for today's call will include prepared remarks, followed by a question-and-answer session. With that, I'll turn the call over to Chuck.

Speaker #2: With that, I'll turn the call over to Chuck.

Speaker #3: Thank you, Brad. Good morning, everyone, and thank you for joining. As I reflect on the progress we have made over the past year, I'm extremely proud of our leadership team and dedicated employees for all they’ve accomplished so far.

Charles A. Williams: Thank you, Brad. Good morning, everyone, thank you for joining. As I reflect on the progress we have made over the past year, I'm extremely proud of our leadership team and dedicated employees for all they've accomplished so far. As an organization, we have executed on our strategic priorities and positioned Northpointe for continued success in 2026 and beyond. Over the last 12 months, we have increased our year-to-date diluted earnings per share by 21%. We've grown our tangible book value by over $2.25 per share. We've generated strong new business with new loans and deposits each growing by 17%. We've added new funding sources to bolster core deposits and lower our wholesale funding ratio from 71% to 63%. For the Q2, we earned $0.60 per diluted shares and have earned $1.22 per diluted share on a year-to-date basis.

Chuck Williams: Thank you, Brad. Good morning, everyone, thank you for joining. As I reflect on the progress we have made over the past year, I'm extremely proud of our leadership team and dedicated employees for all they've accomplished so far. As an organization, we have executed on our strategic priorities and positioned Northpointe for continued success in 2026 and beyond. Over the last 12 months, we have increased our year-to-date diluted earnings per share by 21%. We've grown our tangible book value by over $2.25 per share. We've generated strong new business with new loans and deposits each growing by 17%. We've added new funding sources to bolster core deposits and lower our wholesale funding ratio from 71% to 63%. For the Q2, we earned $0.60 per diluted shares and have earned $1.22 per diluted share on a year-to-date basis.

Speaker #3: As an organization, we have executed on our strategic priorities and positioned Northpointe for continued success in 2026 and beyond. Over the last 12 months, we have increased our year-to-date diluted earnings per share by 21%.

Speaker #3: We've grown our tangible book value by over $2.25 per share. We've generated strong new business, with new loans and deposits each growing by 17%.

Speaker #3: We've added new funding sources to bolster core deposits and lower our wholesale funding ratio from 71% to 63%. For the second quarter, we earned $0.60 per diluted share and have earned $1.22 per diluted share on a year-to-date basis.

Speaker #3: This quarter's return on average assets was 1.18%, and return on average tangible common equity was 14.69%. Factoring in the impact of dividends paid, our tangible book value per share increased by 15% annualized over the prior quarter.

Charles A. Williams: This quarter's return on average assets was 1.18%, and return on average tangible common equity was 14.69%. Factoring in the impact of dividends paid, our tangible book value per share increased by 15% annualized over the prior quarter. From my seat, the economy seems to be pretty resilient, despite the current geopolitical and macroeconomic risks. Consumer spending remains healthy, credit quality is stable, and we continue to see good loan demand across our footprint. Before I turn the call over to Kevin and Brad, let me walk through a few highlights of our Mortgage Purchase Program or MPP business, which remains one of the largest catalysts of our strong financial performance. MPP balances ended the quarter at $3.9 billion, which increased by over $1 billion or 36% from Q2 2025.

Chuck Williams: This quarter's return on average assets was 1.18%, and return on average tangible common equity was 14.69%. Factoring in the impact of dividends paid, our tangible book value per share increased by 15% annualized over the prior quarter. From my seat, the economy seems to be pretty resilient, despite the current geopolitical and macroeconomic risks. Consumer spending remains healthy, credit quality is stable, and we continue to see good loan demand across our footprint. Before I turn the call over to Kevin and Brad, let me walk through a few highlights of our Mortgage Purchase Program or MPP business, which remains one of the largest catalysts of our strong financial performance. MPP balances ended the quarter at $3.9 billion, which increased by over $1 billion or 36% from Q2 2025.

Speaker #3: From my seat, the economy seems to be pretty resilient, despite the current geopolitical and macroeconomic risks. Consumer spending remains healthy, credit quality is stable, and we continue to see good loan demand across our footprint.

Speaker #3: Before I turn the call over to Kevin and Brad, let me walk through a few highlights of our Mortgage Purchase Program, or MPP business, which remains one of the largest catalysts of our strong financial performance.

Speaker #3: MPP balances ended the quarter at $3.9 billion, which increased by over $1 billion, or 36%, from the second quarter of last year. Total loans funded through the channel continue to increase, with $12.8 billion for the quarter, which is up from $11.2 billion in the prior quarter and $9 billion from the second quarter of 2025.

Charles A. Williams: Total loans funded through the channel continues to increase with $12.8 billion for the quarter, which is up $11.2 billion in the prior quarter and $9 billion from Q2 2025. Demand within the channel remains strong with a healthy pipeline of additional business. As such, we began to utilize higher levels of participations in the program, which helps us manage our balance sheet within our existing capital framework while optimizing our revenue streams. We began a strategy several quarters ago to expand and add additional partner financial institutions so that we could continue to grow the business and meet additional demand. That initiative has gone well so far as we have added several new partners this quarter. We have a healthy pipeline of others who are interested in the participation program.

Chuck Williams: Total loans funded through the channel continues to increase with $12.8 billion for the quarter, which is up $11.2 billion in the prior quarter and $9 billion from Q2 2025. Demand within the channel remains strong with a healthy pipeline of additional business. As such, we began to utilize higher levels of participations in the program, which helps us manage our balance sheet within our existing capital framework while optimizing our revenue streams. We began a strategy several quarters ago to expand and add additional partner financial institutions so that we could continue to grow the business and meet additional demand. That initiative has gone well so far as we have added several new partners this quarter. We have a healthy pipeline of others who are interested in the participation program.

Speaker #3: Demand within the channel remains strong, with a healthy pipeline of additional business. As such, we've began to utilize higher levels of participations in the program.

Speaker #3: This helps us manage our balance sheet within our existing capital framework while optimizing our revenue streams. We began a strategy several quarters ago to expand and add additional partner financial institutions so that we could continue to grow the business and meet additional demand.

Speaker #3: That initiative has gone well so far, as we have added several new partners this quarter. We have a healthy pipeline of others who are interested in the participation program.

Speaker #3: Turning to the residential lending channel, we remain focused on increasing mortgage origination productivity and attracting and retaining high-quality, talented lenders. We continue to make investments in technology and people to cultivate and grow this business, while remaining nimble in managing overhead efficiently to remain profitable in any rate cycle.

Charles A. Williams: Turning to the residential lending channel, we remain focused on increasing mortgage origination productivity and attracting and retaining high-quality, talented lenders. We continue to make investments in technology and people to cultivate and grow this business while remaining nimble and managing overhead efficiently to remain profitable in any rate cycle. Regardless of what happens to the mortgage volumes going forward, we continue to take our fair share of the business, and we're well-positioned to quickly capitalize on additional mortgage volume should rates decrease. I'd like to turn the call over to Kevin to provide more details on our business lines.

Chuck Williams: Turning to the residential lending channel, we remain focused on increasing mortgage origination productivity and attracting and retaining high-quality, talented lenders. We continue to make investments in technology and people to cultivate and grow this business while remaining nimble and managing overhead efficiently to remain profitable in any rate cycle. Regardless of what happens to the mortgage volumes going forward, we continue to take our fair share of the business, and we're well-positioned to quickly capitalize on additional mortgage volume should rates decrease. I'd like to turn the call over to Kevin to provide more details on our business lines.

Speaker #3: Regardless of what happens to the mortgage volumes going forward, we continue to take our fair share of the business. And we're well positioned to quickly capitalize on additional mortgage volume should rates decrease.

Speaker #3: I'd like to turn the call over to Kevin to provide more details on our business lines.

Speaker #4: Thanks, Chuck. Good morning, everyone. Let's start with our MPP business on slide 6. Compared to the prior quarter, period ending MPP balances increased by 77.3 million, but average balances increased by 477.5 million, which helped drive a nice increase in interest income.

Kevin J. Comps: Thanks, Chuck. Good morning, everyone. Let's start with our MPP business on slide six. Compared to the prior quarter, period-ending MPP balances increased by $77.3 million, but average balances increased by $477.5 million, which helped drive a nice increase in interest income. Let me break down the Q2 2026 growth a bit further. First, we brought in 11 new clients, which totaled $380 million in additional capacity. Second, we increased facility size for six existing clients, which totaled $265 million in additional capacity. Third, the overall utilization of our existing clients remained strong during the quarter, averaging 61%, which is up from 57% in the prior quarter. As discussed on prior calls, our MPP balances are net of any balances that we have participated out. At 30 June 2026, we had participated $489.0 million to our partner banks, which is up from $412.7 million at 31 March 2026.

Kevin Comps: Thanks, Chuck. Good morning, everyone. Let's start with our MPP business on slide six. Compared to the prior quarter, period-ending MPP balances increased by $77.3 million, but average balances increased by $477.5 million, which helped drive a nice increase in interest income. Let me break down the Q2 2026 growth a bit further. First, we brought in 11 new clients, which totaled $380 million in additional capacity. Second, we increased facility size for six existing clients, which totaled $265 million in additional capacity. Third, the overall utilization of our existing clients remained strong during the quarter, averaging 61%, which is up from 57% in the prior quarter. As discussed on prior calls, our MPP balances are net of any balances that we have participated out. At 30 June 2026, we had participated $489.0 million to our partner banks, which is up from $412.7 million at 31 March 2026.

Speaker #4: Let me break down the second quarter 2026 growth a bit further. First, we brought in 11 new clients, which totaled $380 million in additional capacity.

Speaker #4: Second, we increased facility size for 6 existing clients, which totaled $265 million in additional capacity. And third, the overall utilization of our existing clients remained strong during the quarter, averaging 61%, which is up from 57% in the prior quarter.

Speaker #4: As discussed on prior calls, our MPP balances are net of any balances that we have participated out. At June 30, 2026, we had participated $489.0 million to our partner banks.

Speaker #4: This is up from $412.7 million as of March 31, 2026. Average MPP yields were 6.35%, and fee-adjusted yields were 6.59% during the second quarter of 2026.

Kevin J. Comps: Average MPP yields were 6.35%, and fee-adjusted yields were 6.59% during Q2 2026. The average yield was down 24 basis points from the prior quarter, reflecting a decrease in SOFR over the same period, along with tighter spreads in the business. Margins this quarter were impacted by competitive pricing within the industry, especially with larger mortgage originators, thinner pricing on new deals, and a higher proportional mix of larger clients with lower risk-adjusted pricing relative to the prior quarter. Turning now to retail banking on slide seven, I'd like to highlight the results of the three main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we closed $670.6 million in mortgages during Q2, which is down slightly from $693.7 million in the prior quarter.

Kevin Comps: Average MPP yields were 6.35%, and fee-adjusted yields were 6.59% during Q2 2026. The average yield was down 24 basis points from the prior quarter, reflecting a decrease in SOFR over the same period, along with tighter spreads in the business. Margins this quarter were impacted by competitive pricing within the industry, especially with larger mortgage originators, thinner pricing on new deals, and a higher proportional mix of larger clients with lower risk-adjusted pricing relative to the prior quarter. Turning now to retail banking on slide seven, I'd like to highlight the results of the three main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we closed $670.6 million in mortgages during Q2, which is down slightly from $693.7 million in the prior quarter.

Speaker #4: The average yield was down 24 basis points from the prior quarter, reflecting a decrease in SOFR over the same period, along with tighter spreads in the business.

Speaker #4: Margins this quarter were impacted by competitive pricing within the industry, especially with larger mortgage originators, better pricing on new deals, and a higher proportional mix of larger clients with lower risk-adjusted pricing relative to the prior quarter.

Speaker #4: Turning now to retail banking on slide 7, I'd like to highlight the results of the three main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we closed $670.6 million in mortgages during the second quarter.

Speaker #4: Which is down slightly from $693.7 million in the prior quarter. During the second quarter of 2026, saleable volume was $572.5 million, down from $626.6 million in the prior quarter. During the first quarter of 2026, we saw a temporary drop in mortgage rates, which spurred additional refinance activity for the period.

Kevin J. Comps: During Q2 2026, saleable volume was $572.5 million, down from $626.6 million in the prior quarter. During Q1 2026, we saw a temporary drop in mortgage rates, which spurred additional refinance activity for the period. Refinance activity made up 27% of the total saleable volume in Q2 2026, down from 59% in Q1 2026. While refinances were down, purchase volume increased by 61% over the prior quarter level, driven by the performance in our traditional retail channel. Approximately 81% of the saleable mortgage originations were in the traditional retail channel and 19% were in our consumer direct channel this quarter. This compares to 61% of the saleable mortgages originations coming from the traditional retail channel and 39% from the consumer direct channel in Q1 2026.

Kevin Comps: During Q2 2026, saleable volume was $572.5 million, down from $626.6 million in the prior quarter. During Q1 2026, we saw a temporary drop in mortgage rates, which spurred additional refinance activity for the period. Refinance activity made up 27% of the total saleable volume in Q2 2026, down from 59% in Q1 2026. While refinances were down, purchase volume increased by 61% over the prior quarter level, driven by the performance in our traditional retail channel. Approximately 81% of the saleable mortgage originations were in the traditional retail channel and 19% were in our consumer direct channel this quarter. This compares to 61% of the saleable mortgages originations coming from the traditional retail channel and 39% from the consumer direct channel in Q1 2026.

Speaker #4: Refinance activity made up 27% of the total saleable volume in the second quarter of 2026, down from 59% in the first quarter of 2026.

Speaker #4: While refinances were down, purchase volume increased by 61% over the prior quarter level, driven by the performance in our traditional retail channel. Approximately 81% of the saleable mortgage originations were in the traditional retail channel, and 19% were in our consumer direct channel this quarter.

Speaker #4: This compares to 61% of the saleable mortgage originations coming from the traditional retail channel and 39% from the consumer direct channel in the first quarter of 2026.

Speaker #4: We sold approximately 61% of total saleable mortgages on a service-release basis during the second quarter of 2026, which is down from 68% in the prior quarter.

Kevin J. Comps: We sold approximately 61% of total saleable mortgages on a service-release basis during Q2 2026, which is down from 68% in the prior quarter. As Chuck highlighted, we continue to look for opportunities to hire new talented lenders within this channel. During Q2, we hired four new mortgage professionals in existing markets to help us continue to grow the channel. In the middle of slide seven, we highlight our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite. We ended Q4 with $5.2 billion in total deposits, an increase from the prior quarter. The breakout of these deposits is detailed in the appendix on slide 13. The majority of our deposit growth compared to the prior quarter was driven by broker deposits.

Kevin Comps: We sold approximately 61% of total saleable mortgages on a service-release basis during Q2 2026, which is down from 68% in the prior quarter. As Chuck highlighted, we continue to look for opportunities to hire new talented lenders within this channel. During Q2, we hired four new mortgage professionals in existing markets to help us continue to grow the channel. In the middle of slide seven, we highlight our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite. We ended Q4 with $5.2 billion in total deposits, an increase from the prior quarter. The breakout of these deposits is detailed in the appendix on slide 13. The majority of our deposit growth compared to the prior quarter was driven by broker deposits.

Speaker #4: As Chuck highlighted, we continue to look for opportunities to hire new, talented lenders within this channel. During the second quarter, we hired four new mortgage professionals in existing markets to help us continue to grow the channel.

Speaker #4: In the middle of slide 7, we highlight our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite. We ended the fourth quarter with 5.2 billion in total deposits, an increase from the prior quarter.

Speaker #4: The breakout of these deposits is detailed in the appendix on slide 13. The majority of our deposit growth compared to the prior quarter was driven by broker deposits.

Speaker #4: However, over the last year, we've been successful in adding new funding partner relationships to help bolster core deposits and fund our planned growth. Non-interest-bearing demand deposits have increased by 30%, interest-bearing demand deposits have increased by 81%, and savings and money market deposits have increased by 45%, compared to the second quarter of 2025.

Kevin J. Comps: Over the last year, we've been successful at adding new funding partner relationships to help bolster core deposits and fund our planned growth. Non-interest-bearing demand deposits have increased by 30%, interest-bearing demand deposits have increased by 81%, and savings and money market deposits have increased by 45% compared to Q2 2025. On the right side of slide seven, we highlight our specialty mortgage servicing channel, where we focus on servicing first-lien home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans. Over the past year, we have increased our specialty servicing portfolio by 35%. Excluding the adjustment for the change in fair value of MSRs, we earned $2.4 million in loan servicing fees for Q2, which is up from the prior quarter.

Kevin Comps: Over the last year, we've been successful at adding new funding partner relationships to help bolster core deposits and fund our planned growth. Non-interest-bearing demand deposits have increased by 30%, interest-bearing demand deposits have increased by 81%, and savings and money market deposits have increased by 45% compared to Q2 2025. On the right side of slide seven, we highlight our specialty mortgage servicing channel, where we focus on servicing first-lien home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans. Over the past year, we have increased our specialty servicing portfolio by 35%. Excluding the adjustment for the change in fair value of MSRs, we earned $2.4 million in loan servicing fees for Q2, which is up from the prior quarter.

Speaker #4: On the right side of slide 7, we highlight our specialty mortgage servicing channel, where we focus on servicing first lien, home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans.

Speaker #4: Over the past year, we have increased our specialty servicing portfolio by 35%. Excluding the adjustment for the change in fair value of MSRs, we earned $2.4 million in loan servicing fees for Q2, which is up from the prior quarter.

Speaker #4: Including loans, we outsource to a subservicer. We service 16,200 loans for others, with a total UPB of $5.5 billion as of the second quarter of 2026.

Kevin J. Comps: Including loans we outsourced to a sub-servicer, we serviced 16,200 loans for others with a total UPB of $5.5 billion as of Q2 2026. Turning lastly to asset quality, we had net charge-offs of $528,000 in Q2 2026. This represents an annual net charge-off ratio to average loans of 3 basis points, which is remaining well below long-term historical averages. As Chuck indicated, credit quality remains stable and we are not seeing any systemic borrower issues in any of our portfolios. All of our key asset metric qualities are outlined on slide eight. I'd like to turn the call over to Brad to cover the financials.

Kevin Comps: Including loans we outsourced to a sub-servicer, we serviced 16,200 loans for others with a total UPB of $5.5 billion as of Q2 2026. Turning lastly to asset quality, we had net charge-offs of $528,000 in Q2 2026. This represents an annual net charge-off ratio to average loans of 3 basis points, which is remaining well below long-term historical averages. As Chuck indicated, credit quality remains stable and we are not seeing any systemic borrower issues in any of our portfolios. All of our key asset metric qualities are outlined on slide eight. I'd like to turn the call over to Brad to cover the financials.

Speaker #4: Turning lastly to asset quality, we had net charge-offs of $528,000 in the second quarter of 2026. This represents an annual net charge-off ratio to average loans of 3 basis points.

Speaker #4: Which is remaining well below long-term historical averages. As Chuck indicated, credit quality remained stable, and we are not seeing any systemic borrower issues in any of our portfolios.

Speaker #4: All of our key asset metric qualities are outlined on slide 8. Now, I'd like to turn the call over to Brad to cover the financials.

Speaker #5: All right. Thanks, Kevin. As I go through today's slide presentation, I will be incorporating full-year 2026 guidance into my commentary. Let's start on slide 9.

Brad T. Howes: Thanks, Kevin. As I go through today's slide presentation, I will be incorporating full-year 2026 guidance into my commentary. Let's start on slide nine. As a reminder, our non-GAAP reconciliation on slide 15 provides additional details of the calculations and a reconciliation to the comparable GAAP measure for all non-GAAP metrics. For Q2 2026, we had net income to common stockholders of $21.3 million or $0.60 per diluted share. Our performance and profitability metrics, which are laid out on slide five, remain strong. Net interest income increased by $1.1 million from the prior quarter, reflecting an increase in average interest-earning assets of $389.5 million over the prior quarter level, partially offset by a 9 basis point decrease in our net interest margin.

Brad Howes: Thanks, Kevin. As I go through today's slide presentation, I will be incorporating full-year 2026 guidance into my commentary. Let's start on slide nine. As a reminder, our non-GAAP reconciliation on slide 15 provides additional details of the calculations and a reconciliation to the comparable GAAP measure for all non-GAAP metrics. For Q2 2026, we had net income to common stockholders of $21.3 million or $0.60 per diluted share. Our performance and profitability metrics, which are laid out on slide five, remain strong. Net interest income increased by $1.1 million from the prior quarter, reflecting an increase in average interest-earning assets of $389.5 million over the prior quarter level, partially offset by a 9 basis point decrease in our net interest margin.

Speaker #5: As a reminder, our non-GAAP reconciliation on slide 15 provides additional details of the calculations and our reconciliation to the comparable GAAP measure for all non-GAAP metrics.

Speaker #5: For the second quarter of 2026, we had net income to common stockholders of $21.3 million, or $0.60 per diluted share. Our performance and profitability metrics, which are laid out on slide 5, remain strong.

Speaker #5: Net interest income increased by $1.1 million from the prior quarter, reflecting an increase in average interest-earning assets of $389.5 million over the prior quarter level.

Speaker #5: Partially offset by a 9 basis point decrease in our net interest margin. Our yield on average interest-earning assets was down 8 basis points from the prior quarter, driven primarily by a decrease in loan yields.

Brad T. Howes: Our yield on average interest-earning assets was down 8 basis points from the prior quarter, driven primarily by a decrease in loan yields. The largest driver of this decrease was from tighter yields on our MPP facilities, as Kevin outlined. This was partially offset by higher average yields on our AIO loans, which are mostly tied to the one-year CMT rate. Our cost of funds was flat this quarter at 4.01%. We had begun to see somewhat lower rates on new brokered CD issuances in the early part of 2026, but those have since risen back up and I'd expect them to remain close to the level they are at today. As discussed on previous calls, we've continued to add new funding relationships to help bolster core deposits and lower our wholesale funding ratio. Oftentimes, these carry higher rates than brokered funding.

Brad Howes: Our yield on average interest-earning assets was down 8 basis points from the prior quarter, driven primarily by a decrease in loan yields. The largest driver of this decrease was from tighter yields on our MPP facilities, as Kevin outlined. This was partially offset by higher average yields on our AIO loans, which are mostly tied to the one-year CMT rate. Our cost of funds was flat this quarter at 4.01%. We had begun to see somewhat lower rates on new brokered CD issuances in the early part of 2026, but those have since risen back up and I'd expect them to remain close to the level they are at today. As discussed on previous calls, we've continued to add new funding relationships to help bolster core deposits and lower our wholesale funding ratio. Oftentimes, these carry higher rates than brokered funding.

Speaker #5: The largest driver of this decrease was from tighter yields on our MPP facilities, as Kevin outlined. This was partially offset by higher average yields on our AIO loans, which are mostly tied to the one-year CMT rate.

Speaker #5: Our cost of funds was flat this quarter at 4.01%. We had begun to see somewhat lower rates on new brokered CD issuances in the early part of 2026, but those have since risen back up, and I'd expect them to remain close to the level they are at today.

Speaker #5: As discussed on previous calls, we’ve continued to add new funding relationships to help bolster core deposits and lower our wholesale funding ratio. Oftentimes, these carry higher rates than brokered funding.

Speaker #5: We see the overall P&L benefit through lower FDIC insurance premiums, but that is partially offset by higher funding costs. We saw that play out to a small extent this quarter, and expect that to continue as we utilize more of these types of funding partners.

Brad T. Howes: We see the overall P&L benefit through lower FDIC insurance premiums, but that is partially offset by higher funding costs. We saw that play out to a small extent this quarter and expect that to continue as we utilize more of these types of funding partners. Our Q2 net interest margin was 2.33%, and year-to-date 2026 was 2.37%. Based on the tightening of MPP yields and no significant forecasted changes to the mix or rates paid on liabilities, I'm expecting a net interest margin range of 2.3% to 2.4% for full year 2026. My guidance assumes continued increase in yields based on the mix of loans within the held for investment portfolio, and that funding costs will remain at or near current levels. I'm also assuming that we do not see any additional Fed funds rate movements in the remainder of the year. Turning to loan growth guidance.

Brad Howes: We see the overall P&L benefit through lower FDIC insurance premiums, but that is partially offset by higher funding costs. We saw that play out to a small extent this quarter and expect that to continue as we utilize more of these types of funding partners. Our Q2 net interest margin was 2.33%, and year-to-date 2026 was 2.37%. Based on the tightening of MPP yields and no significant forecasted changes to the mix or rates paid on liabilities, I'm expecting a net interest margin range of 2.3% to 2.4% for full year 2026. My guidance assumes continued increase in yields based on the mix of loans within the held for investment portfolio, and that funding costs will remain at or near current levels. I'm also assuming that we do not see any additional Fed funds rate movements in the remainder of the year. Turning to loan growth guidance.

Speaker #5: Our second quarter net interest margin was 2.33%, and year-to-date 2026 was 2.37%. Based on the tightening of MPP yields and no significant forecasted changes to the mix or rates paid on liabilities, I'm expecting a net interest margin range of 2.3 to 2.4 percent for full year 2026.

Speaker #5: My guidance assumes a continued increase in yields based on the mix of loans within the held-for-investment portfolio, and that funding costs will remain at or near current levels.

Speaker #5: I'm also assuming that we do not see any additional Fed funds rate movements in the remainder of the year. Turning to loan growth guidance for 2026, I expect MPP balances to remain between $4.1 and $4.3 billion by year-end.

Brad T. Howes: For 2026, I expect MPP balances to remain between $4.1 and 4.3 billion by year-end. I am also still expecting $300 to 500 million on average will be participated out throughout 2026. I'd also expect period-ending AIO balances to increase between $900 million and 1.0 billion by year-end. Excluding MPP and AIO loans, I'd expect the rest of the loan portfolio to decline to between $1.9 and 2.1 billion by year-end 2026. This includes loans held for sale, which tend to vary based on the timing of loan sales. None of the loan growth expectations have changed from the guidance I provided last quarter. Kevin provided details on our asset quality trends this quarter, which remain stable.

Brad Howes: For 2026, I expect MPP balances to remain between $4.1 and 4.3 billion by year-end. I am also still expecting $300 to 500 million on average will be participated out throughout 2026. I'd also expect period-ending AIO balances to increase between $900 million and 1.0 billion by year-end. Excluding MPP and AIO loans, I'd expect the rest of the loan portfolio to decline to between $1.9 and 2.1 billion by year-end 2026. This includes loans held for sale, which tend to vary based on the timing of loan sales. None of the loan growth expectations have changed from the guidance I provided last quarter. Kevin provided details on our asset quality trends this quarter, which remain stable.

Speaker #5: I am also still expecting $300 million to $500 million, on average, will be participated out throughout 2026. I'd also expect period-ending AIO balances to increase to between $900 million and $1.0 billion by year-end.

Speaker #5: Excluding MPP and AIO loans, I'd expect the rest of the loan portfolio to decline to between $1.9 and $2.1 billion by year-end 2026. This includes loans held for sale, which tend to vary based on the timing of loan sales.

Speaker #5: None of the loan growth expectations have changed from the guidance I provided last quarter. Kevin provided details on our asset quality trends this quarter, which remain stable.

Speaker #5: With the low level of charge-offs and the decrease in non-performing assets, along with the continued runoff of non-AIO and MPP loans, we had total provision expense of $210,000 in the second quarter of 2026.

Brad T. Howes: With the low level of charge-offs and the decrease in non-performing assets, along with the continued runoff of non-AIO and MPP loans, we had total provision expense of $210,000 in Q2 2026. I now expect total provision expense in the range between $2 and 3 million for 2026, which would be driven by the replenishment of net charge-offs and growth in our MPP and AIO loans. Any additional provision expense or benefit related to credit migration trends, changes in the economic forecast, or other changes to the credit models are not part of my guidance. Non-interest income decreased slightly from the prior quarter and includes the impact from three of our fair value assets. On the top of slide 14, we break out those three assets and their associated quarterly increases or decreases in fair value.

Brad Howes: With the low level of charge-offs and the decrease in non-performing assets, along with the continued runoff of non-AIO and MPP loans, we had total provision expense of $210,000 in Q2 2026. I now expect total provision expense in the range between $2 and 3 million for 2026, which would be driven by the replenishment of net charge-offs and growth in our MPP and AIO loans. Any additional provision expense or benefit related to credit migration trends, changes in the economic forecast, or other changes to the credit models are not part of my guidance. Non-interest income decreased slightly from the prior quarter and includes the impact from three of our fair value assets. On the top of slide 14, we break out those three assets and their associated quarterly increases or decreases in fair value.

Speaker #5: I'd now expect total provision expense in the range between $2 and $3 million for 2026, which would be driven by the replenishment on net charge-offs and growth in our MPP and AIO loans.

Speaker #5: Any additional provision expense or benefit related to credit migration trends, changes in the economic forecast, or other changes to the credit models are not part of my guidance.

Speaker #5: Non-interest income decreased slightly from the prior quarter and includes the impact from three of our fair value assets. At the top of slide 14, we break out those three assets and their associated quarterly increases or decreases in fair value.

Speaker #5: As a reminder, these tend to move up or down with interest rates and are not part of my revenue guidance each quarter. At the bottom of slide 14, and in our earnings release tables, we provide further details on the components of net gain on sale of loans.

Brad T. Howes: As a reminder, these tend to move up or down with interest rates and are not part of my revenue guidance each quarter. On the bottom of slide 14 and in our earnings release tables, we provide further details on the components of net gain on sale of loans. As you can see on the chart, Q2 net gain on sale of loans included a $0.7 million increase in fair value of loans held for investment and the lender risk account with the Federal Home Loan Bank. Excluding these items, net gain on the sale of loans would have been $16.4 million, which is down from $17.8 million on a comparable basis in the prior quarter. This decrease was driven by a lower saleable volume Kevin highlighted during his commentary, partially offset by higher gain on sale margins.

Brad Howes: As a reminder, these tend to move up or down with interest rates and are not part of my revenue guidance each quarter. On the bottom of slide 14 and in our earnings release tables, we provide further details on the components of net gain on sale of loans. As you can see on the chart, Q2 net gain on sale of loans included a $0.7 million increase in fair value of loans held for investment and the lender risk account with the Federal Home Loan Bank. Excluding these items, net gain on the sale of loans would have been $16.4 million, which is down from $17.8 million on a comparable basis in the prior quarter. This decrease was driven by a lower saleable volume Kevin highlighted during his commentary, partially offset by higher gain on sale margins.

Speaker #5: As you can see on the chart, second quarter net gain on sale of loans included a $0.7 million increase in fair value of loans held for investment, and the lender risk account with the Federal Home Loan Bank.

Speaker #5: Excluding these items, net gain on the sale of loans would have been 16.4 million, which is down from 17.8 million on a comparable basis in the prior quarter.

Speaker #5: This decrease was driven by a lower saleable volume Kevin highlighted during his commentary, partially offset by higher gain-on-sale margins. For 2026, I am maintaining total saleable mortgage originations of $2.2 billion to $2.4 billion, with all-in margins of 2.75% to 3.25% on those originations.

Brad T. Howes: For 2026, I am maintaining total saleable mortgage originations of $2.2 to 2.4 billion, with all-in margins of 2.75% to 3.25% on those originations. My margin guidance is a blend of margins from our traditional retail and consumer direct channels. The consumer direct channel has lower margins with an offsetting lower variable mortgage expense. These estimates do not assume any significant changes in mortgage rates, nor do they assume any changes to the current level of mortgage originators within the bank. I'd expect MPP fees to range between $9 and 11 million for full year 2026. This is based on the expected participation balances and continued growth in loans funded over the remainder of the year. Excluding MSR fair value changes, loan servicing fees were $2.4 million for the quarter, up from the prior quarter level.

Brad Howes: For 2026, I am maintaining total saleable mortgage originations of $2.2 to 2.4 billion, with all-in margins of 2.75% to 3.25% on those originations. My margin guidance is a blend of margins from our traditional retail and consumer direct channels. The consumer direct channel has lower margins with an offsetting lower variable mortgage expense. These estimates do not assume any significant changes in mortgage rates, nor do they assume any changes to the current level of mortgage originators within the bank. I'd expect MPP fees to range between $9 and 11 million for full year 2026. This is based on the expected participation balances and continued growth in loans funded over the remainder of the year. Excluding MSR fair value changes, loan servicing fees were $2.4 million for the quarter, up from the prior quarter level.

Speaker #5: My margin guidance is a blend of margins from our traditional retail and consumer direct channels. The consumer direct channel has lower margins with an offsetting lower variable mortgage expense.

Speaker #5: These estimates do not assume any significant changes in mortgage rates, nor do they assume any changes to the current level of mortgage originators within the bank.

Speaker #5: I'd expect MPP fees to range between $9 million and $11 million for the full year 2026. This is based on the expected participation balances and continued growth in loans funded over the remainder of the year.

Speaker #5: Excluding MSR fair value changes, loan servicing fees were $2.4 million for the quarter, up from the prior quarter level. I'd expect that quarterly run rate to continue to increase in 2026, with full-year revenue between $9 and $11 million.

Brad T. Howes: I'd expect that quarterly run rate to continue to increase in 2026, with full year revenue between $9 and 11 million. Non-interest expense was up $0.8 million from the prior quarter. This was driven primarily by higher salaries and benefits, mostly related to variable compensation on mortgage production, reflecting a higher mix of traditional retail volume during the quarter. For full year 2026, I'd expect total non-interest expense to remain in the range of $138 to 142 million. No change from my prior guidance. Turning to the balance sheet on slide 10, total assets increased to $7.5 billion at 30 June 2026, based on the growth in MPP and AIO balances during the quarter. Our wholesale funding ratio was 63.09% at 30 June 2026, up slightly from the prior quarter.

Brad Howes: I'd expect that quarterly run rate to continue to increase in 2026, with full year revenue between $9 and 11 million. Non-interest expense was up $0.8 million from the prior quarter. This was driven primarily by higher salaries and benefits, mostly related to variable compensation on mortgage production, reflecting a higher mix of traditional retail volume during the quarter. For full year 2026, I'd expect total non-interest expense to remain in the range of $138 to 142 million. No change from my prior guidance. Turning to the balance sheet on slide 10, total assets increased to $7.5 billion at 30 June 2026, based on the growth in MPP and AIO balances during the quarter. Our wholesale funding ratio was 63.09% at 30 June 2026, up slightly from the prior quarter.

Speaker #5: Non-interest expense was up 0.8 million from the prior quarter, this was driven primarily by higher salaries and benefits, mostly related to variable compensation on mortgage production, reflecting a higher mix of traditional retail volume during the quarter.

Speaker #5: For full year 2026, I'd expect total non-interest expense to remain in the range of $138 to $142 million, no change from my prior guidance.

Speaker #5: Turning to the balance sheet on slide 10, total assets increased to $7.5 billion at June 30, 2026, based on the growth in MPP and AIO balances during the quarter.

Speaker #5: Our wholesale funding ratio was 63.09% at June 30, 2026, up slightly from the prior quarter. Looking forward, we'd expect a continued to fund MPP and AIO growth through a combination of brokered CDs, retail deposits, and other sources of non-brokered deposits where possible.

Brad T. Howes: Looking forward, we expect to continue to fund MPP and AIO growth through a combination of brokered CDs, retail deposits, and other sources of non-brokered deposits where possible. Our effective tax rate was 24.72% for Q2 2026, flat from the prior quarter level. We are currently exploring opportunities to purchase investment tax credits, which could help lower our overall effective tax rate for 2026. I plan to provide additional details on that initiative on the next earnings call. Lastly, on slide 11, we outline our regulatory capital ratios, which are estimates pending completion of regulatory reports. Looking forward, I'd expect we will continue to leverage additional capital generated through retained earnings to grow MPP and AIO loan balances. With that, we are happy to now take questions. Rob, please open the line for Q&A.

Brad Howes: Looking forward, we expect to continue to fund MPP and AIO growth through a combination of brokered CDs, retail deposits, and other sources of non-brokered deposits where possible. Our effective tax rate was 24.72% for Q2 2026, flat from the prior quarter level. We are currently exploring opportunities to purchase investment tax credits, which could help lower our overall effective tax rate for 2026. I plan to provide additional details on that initiative on the next earnings call. Lastly, on slide 11, we outline our regulatory capital ratios, which are estimates pending completion of regulatory reports. Looking forward, I'd expect we will continue to leverage additional capital generated through retained earnings to grow MPP and AIO loan balances. With that, we are happy to now take questions. Rob, please open the line for Q&A.

Speaker #5: Our effective tax rate was 24.72% for the second quarter of 2026, flat from the prior quarter level. We are currently exploring opportunities to purchase investment tax credits, which could help lower our overall effective tax rate for 2026.

Speaker #5: I plan to provide additional details on that initiative on the next earnings call. Lastly, on slide ratios. Which are estimates pending completion of regulatory reports.

Speaker #5: Looking forward, I’d expect we will continue to leverage additional capital generated through retained earnings to grow MPP and AIO loan balances. With that, we are happy to now take questions.

Speaker #5: Rob, please open the line for Q&A.

Speaker #1: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Crispin Love with Piper Sandler. Your line is now live.

Operator: Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Crispin Love with Piper Sandler. Your line is now live.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker #1: For participants choosing speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #1: Our first question comes from Crispin Love with Piper Sandler. Crispin, your line is now live.

Speaker #5: Thank you. I appreciate you taking the questions. Just on the net interest margin for the second quarter, can you discuss some of the dynamics there? You did call out the lower yields on MPP balances and tighter spreads, given competition.

Crispin Love: Thank you. I appreciate taking the questions. Just on the net interest margin in Q2, can you discuss some of the dynamics there? You did call out the lower yields on MPP balances and tighter spreads given competition. Was that driven by the overall kind of softer mortgage environment, and is that something that could persist in H2 if rates do remain elevated? The competitors that you mentioned, are those ones that you typically don't see in the warehouse bank business?

Speaker #5: Was that driven by the overall, kind of, softer mortgage environment? And is that something that could persist in the second half if rates do remain elevated? And then the competitors that you mentioned—are those ones that you typically don't see in the warehouse business?

Brad T. Howes: Thanks, Crispin. Yeah, I can start, and Chuck and Kevin should certainly chime in. As far as the quarter-over-quarter change in margin, from a high level, we talked about the MPP yields, and I'll get to that in a second. I think cost of funds was overall relatively flat. We see that pretty constant going forward, absent any significant changes in rates. AIO yields did increase based on their being tied to the CMT rate, which went up a little bit quarter-over-quarter. The biggest driver I'd say would be MPP yields, and we pointed to the competition. I don't know that it was a change in anything we did, just increased competitive pressures throughout the industry. Warehouse clients typically have a lot of capacity right now.

Brad Howes: Thanks, Crispin. Yeah, I can start, and Chuck and Kevin should certainly chime in. As far as the quarter-over-quarter change in margin, from a high level, we talked about the MPP yields, and I'll get to that in a second. I think cost of funds was overall relatively flat. We see that pretty constant going forward, absent any significant changes in rates. AIO yields did increase based on their being tied to the CMT rate, which went up a little bit quarter-over-quarter. The biggest driver I'd say would be MPP yields, and we pointed to the competition. I don't know that it was a change in anything we did, just increased competitive pressures throughout the industry. Warehouse clients typically have a lot of capacity right now.

Speaker #5: Thanks, Crispin. Yeah, I can start, and Chuck and Kevin should certainly chime in. As far as the quarter-over-quarter change in margin, from a high level, we talked about the MPP yields, and I'll get to that in a second.

Speaker #5: I think cost of funds was overall relatively flat. We see that as pretty constant going forward, absent any significant changes in rates. AIO yields did increase based on their being tied to the CMT rate, which went up a little bit quarter over quarter.

Speaker #5: So the biggest driver, I'd say, would be MPP yields, and we pointed to the competition. I don't know that it was a change in anything we did—just increased competitive pressures throughout the industry.

Speaker #5: Warehouse clients typically have a lot of capacity right now, and I think, going forward as we see it, there could be some competition remaining. That was kind of baked into our margin guidance.

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

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

Speaker #5: We'll see how things shake out. We don't think anything's going to change from a rate perspective, but that could obviously change things a lot, too.

Speaker #5: Yeah, I think as our growth continues—which, as you can see from the numbers, has been pretty impressive over the last year—we are seeing some competitive pressures.

Charles A. Williams: Yeah. I think as our growth continues, which as you can see from the numbers, been pretty impressive the last year. We are seeing some competitive pressures. There's no doubt out there with lower volumes. I would say the overall plan continues to remain the same. There was a little tightening. We've had to make some adjustments here and there, but no wholesale changes, and our margins are still greater than the industry itself, which we pride ourselves on. I think, yeah, it's just a function of more entrants into the space. There's competitive pressures from a limited, I should say, not expanding volumes in the space while we continue to grow pretty substantially. A combination of all those factors has put some tightening on it. We're looking forward to continued growth in the channel.

Chuck Williams: Yeah. I think as our growth continues, which as you can see from the numbers, been pretty impressive the last year. We are seeing some competitive pressures. There's no doubt out there with lower volumes. I would say the overall plan continues to remain the same. There was a little tightening. We've had to make some adjustments here and there, but no wholesale changes, and our margins are still greater than the industry itself, which we pride ourselves on. I think, yeah, it's just a function of more entrants into the space. There's competitive pressures from a limited, I should say, not expanding volumes in the space while we continue to grow pretty substantially. A combination of all those factors has put some tightening on it. We're looking forward to continued growth in the channel.

Speaker #5: There's no doubt, out there with lower volumes. I would say the overall plan continues to remain the same. There was a little tightening; we've had to make some adjustments here and there, but no wholesale changes, and our margins are still greater than the industry itself, which we pride ourselves on.

Speaker #5: So, I think, yeah, it's just a function of more entrants into the space. There are competitive pressures from limited, I should say, non-expanding volumes in the space, while we continue to grow pretty substantially.

Speaker #5: So, a combination of all those factors has put some tightening on it, but we're looking forward to continued growth in the channel. We have some capacity.

Charles A. Williams: We have some capacity, the tech stack, the funding, and so we're really optimistic. We know the compression on the margin was troubling in Q2. We're not hiding from that. The growth and the metrics and everything in the business remain very strong.

Chuck Williams: We have some capacity, the tech stack, the funding, and so we're really optimistic. We know the compression on the margin was troubling in Q2. We're not hiding from that. The growth and the metrics and everything in the business remain very strong.

Speaker #5: The tech stack, the funding, and so we're really optimistic. We know the compression on the margin was troubling in the second quarter.

Speaker #5: We're not hiding from that, but the growth, the metrics, and everything in the business remain very strong. Great, thank you, Chuck. Yeah, just following up on that last point—on the growth on the MPP side, growth was really strong here. A little bit softer on a sequential basis in the second quarter, but still positive and really solid year on year.

Crispin Love: Great. Thank you, Chuck. Yeah, just following up on that last point on the growth on the MPP side. Growth's really strong here. A little bit softer on a sequential basis in Q2, but still positive and real solid year on year. You kept the guide here. Can you discuss some of the sources of that growth as you look forward? Kind of how you break out between existing clients expanding versus adding new clients in the area?

Speaker #5: You kept the guide here. Can you just discuss some of the sources of that growth as you look forward, kind of how you break out between existing clients, expanding, versing versus adding new clients in the area?

Speaker #5: Yeah. So when we look at the growth, Crispin, the period-ending growth, as you pointed out, was a little softer than last quarter.

Brad T. Howes: Yeah. When we look at the growth, Crispin, the period-ending growth, as you pointed out, was a little softer than last quarter. That's really driven on our capital constraints, right? Where we sit from a capital perspective. We're now five or six quarters since we raised capital. We watch those capital levels very closely. The period end is the one that matters. What we really look at, though, is average balance growth, right? We can hold those a little higher. That's what drives interest income, and that's what drives our net income in the channel. We actually did grow average balances by 300 or 400 million over the prior quarter level, which is really good. As you pointed out, growth is going to slow as we butt up against our limitations on the capital side.

Brad Howes: Yeah. When we look at the growth, Crispin, the period-ending growth, as you pointed out, was a little softer than last quarter. That's really driven on our capital constraints, right? Where we sit from a capital perspective. We're now five or six quarters since we raised capital. We watch those capital levels very closely. The period end is the one that matters. What we really look at, though, is average balance growth, right? We can hold those a little higher. That's what drives interest income, and that's what drives our net income in the channel. We actually did grow average balances by 300 or 400 million over the prior quarter level, which is really good. As you pointed out, growth is going to slow as we butt up against our limitations on the capital side.

Speaker #5: That's really driven by our capital constraints, right, and where we sit from a capital perspective. We're now, what, five or six quarters since we raised capital.

Speaker #5: So we watch those capital levels very closely. The period-end is the one that matters. What we really look at, though, is average balance growth, right?

Speaker #5: So we can hold those a little higher. That's what drives interest income, and that's what drives our net income in the channel. And we actually did grow average balances by 3 or 4 hundred million over the prior quarter level, which is really good.

Speaker #5: But as you pointed out, we growth is going to slow as we bought up against our limitations on the capital side. As far as can you repeat the second part of your question?

Brad T. Howes: Can you repeat the second part of your question?

Brad Howes: Can you repeat the second part of your question?

Speaker #5: Just the sources of the growth going forward as you look from existing clients expanding versus adding new clients in the area. Yeah. So, I'll jump in.

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

Kevin J. Comps: Yeah. I'll jump in. This is Kevin. A couple things on the growth side still. We do continue to have a pipeline of new clients coming into the program. That is probably more active now than historical increases. As my talking points earlier, we did have increases in existing clients during the quarter also. More of it's the pipeline of new clients coming on board will probably drive the most growth. We also mentioned a couple times during our prepared remarks about the participation program, and we have the capacity there beyond our own balance sheet size, as we've talked about previously, to continue the growth of the program and really optimize our balance sheet with the average assets in the program, to Brad's point earlier. We've got multiple levers that we're in the process of executing against on that side.

Kevin Comps: Yeah. I'll jump in. This is Kevin. A couple things on the growth side still. We do continue to have a pipeline of new clients coming into the program. That is probably more active now than historical increases. As my talking points earlier, we did have increases in existing clients during the quarter also. More of it's the pipeline of new clients coming on board will probably drive the most growth. We also mentioned a couple times during our prepared remarks about the participation program, and we have the capacity there beyond our own balance sheet size, as we've talked about previously, to continue the growth of the program and really optimize our balance sheet with the average assets in the program, to Brad's point earlier. We've got multiple levers that we're in the process of executing against on that side.

Speaker #5: This is Kevin. So, a couple of things on the growth side still. We do continue to have a pipeline of new clients coming into the program.

Speaker #5: So that is probably more active now than historical increases. So, as my talking points mentioned earlier, we did have increases in existing clients during the quarter also, but more of it's the pipeline of new clients coming on board that will probably drive the most growth.

Speaker #5: And we also mentioned a couple of times during our prepared remarks the participation program, and we have the capacity there, beyond our own balance sheet size, as we've talked about previously, to continue the growth of the program and really optimize our balance sheet with the average assets in the program—to Brad's point earlier.

Speaker #5: So, we've got multiple levers that we're in the process of executing against on that side. Great, thank you. I appreciate you taking my questions.

Crispin Love: Great. Thank you. Appreciate you taking my questions.

Speaker #3: Thanks, Crispin.

Brad T. Howes: Thanks, Crispin.

Brad Howes: Thanks, Crispin.

Speaker #5: Thanks, Crispin.

Charles A. Williams: Thanks, Crispin.

Chuck Williams: Thanks, Crispin.

Speaker #2: Our next question comes from Damon Del Monte with KBW. Your line is now live.

Operator: Our next question comes from Damon Del Monte with KBW. Your line is now live.

Speaker #4: Hey, good morning, guys. Hope everybody's doing well today. Brad, I think in your prepared comments that included the guidance, you had said that the all-in margin on the mortgage origination business is expected to be 275 to 325.

Damon DelMonte: Hey, good morning, guys. Hope everybody's doing well today. Brad, I think in your prepared comments that included the guidance, you had said that the all-in margin on the mortgage origination business is expected to be 275 to 325. What was this quarter's margin again?

Speaker #4: What was this quarter's margin again?

Speaker #5: This quarter, we were probably I would say towards the midpoint or upper end of the range. It depends on how you look at it, right?

Brad T. Howes: This quarter, we were probably, I would say, towards the midpoint or upper end of the range. It depends on how you look at it, right? We look at margin on a saleable locked volume basis because that's really where the revenue's generated from a fair value perspective. If you look at it on closed volume, you tend to get some variability in when the loan closes versus when it's locked and when the revenue is put onto the income statement. If I'm looking at saleable volume and we take a lock factor of, let's just say 80% for easy math, you come up with a margin probably in the middle to top end of that range. Which a lot of it has been driven by the performance of our capital markets units.

Brad Howes: This quarter, we were probably, I would say, towards the midpoint or upper end of the range. It depends on how you look at it, right? We look at margin on a saleable locked volume basis because that's really where the revenue's generated from a fair value perspective. If you look at it on closed volume, you tend to get some variability in when the loan closes versus when it's locked and when the revenue is put onto the income statement. If I'm looking at saleable volume and we take a lock factor of, let's just say 80% for easy math, you come up with a margin probably in the middle to top end of that range. Which a lot of it has been driven by the performance of our capital markets units.

Speaker #5: We look at margin on a saleable lock volume basis because that's really where the revenue is generated from a fair value perspective. If you look at it on close volume, you tend to get some variability in when the loan closes versus when it's locked and when the revenue is put onto the income statement.

Speaker #5: So, if I'm looking at saleable volume and we take a lock factor of, let's just say, 80% for easy math, you come up with a margin probably in the middle to top end of that range.

Speaker #5: A lot of this has been driven by the performance of our capital markets units. I'd say overall margins have remained pretty competitive, especially in the agency space on saleable mortgage originations.

Brad T. Howes: I'd say, overall margins have remained pretty competitive, especially in the agency space on saleable mortgage originations. We do a nice piece of non-QM business, which has some higher margins. We can do other loans that get pooled and that smaller loan dollars that have some nicer margins. Overall, we probably see margins within that range. Anything we can do above that is based on how well we execute from a capital markets perspective and outperform.

Brad Howes: I'd say, overall margins have remained pretty competitive, especially in the agency space on saleable mortgage originations. We do a nice piece of non-QM business, which has some higher margins. We can do other loans that get pooled and that smaller loan dollars that have some nicer margins. Overall, we probably see margins within that range. Anything we can do above that is based on how well we execute from a capital markets perspective and outperform.

Speaker #5: We do a nice piece of non-QM business, which has some higher margins. We can do other loans that get pooled, and those smaller loan dollars have some nicer margins.

Speaker #5: But overall, we probably see margins within that range, and then anything we can do above that is based on how well we execute from a capital markets perspective and outperform.

Speaker #4: Got it. Okay, great. Appreciate that color. And then the commentary on the provision outlook, I think you reiterated that 2 to 3 million for the full year.

Damon DelMonte: Got it. Okay, great. Appreciate that color. The commentary on the provision outlook, I think you reiterated it, $2 to 3 million for the full year. If you look at H1, there's a slight release in reserves. Are you expecting there to really be something on that middle point of that range? Or, I guess, basically I'm trying to say, based on the strong H1, to have that much for the full year implies a lift from where I think we were expecting in H2. Am I reading into that too much?

Speaker #4: I mean, if you look at the first half of the year, there was a slight release in reserves. So, are you expecting there to really be something at the midpoint of that range? Or, I guess basically what I'm trying to say is, based on the strong first half, to kind of have that much for the full year implies you were expecting something in the back half of the year.

Speaker #4: Am I reading into that too much?

Speaker #5: No, you're not. You've got it accurate. I'd say we'd be at the based on where we're turning today and if we just look at expected charge-off replenishment and any provisions related to new growth, we'd be probably at the bottom end of the range.

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

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

Damon DelMonte: Yep.

Speaker #5: You never know what’s going to happen, right? I don’t give any color on what I think is going to happen to home prices or any shift in the mix of the quality of the portfolio, or anything like that.

Brad T. Howes: Who knows what's going to happen, right? I don't give any color on what I think are going to happen to home prices or any shift in the mix of the quality of the portfolio or anything like that. Those are going to be larger drivers of the provision. They're tough to predict and who knows what'll happen in the next couple of quarters. Nothing we see right now. Yeah, everything based on what you're saying and what I've guided to, should point to kind of the bottom end of that range. If we think about a normalized level for Q3, Q4.

Brad Howes: Who knows what's going to happen, right? I don't give any color on what I think are going to happen to home prices or any shift in the mix of the quality of the portfolio or anything like that. Those are going to be larger drivers of the provision. They're tough to predict and who knows what'll happen in the next couple of quarters. Nothing we see right now. Yeah, everything based on what you're saying and what I've guided to, should point to kind of the bottom end of that range. If we think about a normalized level for Q3, Q4.

Speaker #5: Those are going to be larger drivers of the provision. They're tough to predict, and who knows what will happen in the next couple of quarters.

Speaker #5: Nothing we see right now. So yeah, everything, based on what you're saying and what I'm guided to, should point to kind of the bottom end of that range.

Speaker #5: If we think about a normalized level for Q3, Q4.

Speaker #4: Okay, great. That makes a lot of sense. Thank you. And then I guess just lastly, could you just talk a little bit about the ongoing strategy to kind of win over the core deposit customers and kind of some of the opportunities that you see in the back half of this year?

Damon DelMonte: Okay, great. That makes a lot of sense. Thank you. I guess just lastly, could you just talk a little bit about the ongoing strategy to kind of win over the core deposit customers and kind of some of the opportunities that you see in H2?

Speaker #5: Yeah. So this is Kevin. So yeah, we continue to hit that hard as a company strategy perspective. Nothing concrete to report here today on the topic, but definitely we're still looking for those same type of relationships that we've talked about previously and have been successful over the last 12 months bringing on.

Kevin J. Comps: Yes. This is Kevin. Yeah, we continue to hit that hard as a company strategy perspective. Nothing concrete to report here today on the topic, but definitely we are still looking for those same type of relationships that we have talked about previously and have been successful over the last 12 months bringing on. To Brad's point, if we could bring on some of these types of funds, we get some relief on FDIC insurance, and pay similar or lower cost to broker funds. That is still what we are shooting to do. We keep having those conversations, and hopefully we will have something to report as we move forward.

Kevin Comps: Yes. This is Kevin. Yeah, we continue to hit that hard as a company strategy perspective. Nothing concrete to report here today on the topic, but definitely we are still looking for those same type of relationships that we have talked about previously and have been successful over the last 12 months bringing on. To Brad's point, if we could bring on some of these types of funds, we get some relief on FDIC insurance, and pay similar or lower cost to broker funds. That is still what we are shooting to do. We keep having those conversations, and hopefully we will have something to report as we move forward.

Speaker #5: To Brad's point, we could bring on some of these types of funds, get some relief on FDIC insurance, and pay similar or lower-cost, appropriate funds.

Speaker #5: That's still what we're shooting to do, and we keep having those conversations. Hopefully, we'll have something to report as we move forward.

Speaker #4: Got it. Okay, great. That's all that I had. Thanks a lot.

Damon DelMonte: Got it. Okay, great. That is all that I had. Thanks a lot.

Speaker #5: Thanks.

Kevin J. Comps: Thanks.

Kevin Comps: Thanks.

Speaker #3: Thanks, Tim.

Brad T. Howes: Thanks, Damon.

Brad Howes: Thanks, Damon.

Speaker #5: Thanks, Damon.

Speaker #2: Our next question comes from Christopher Marinac with Breen Capital. Your line is now live.

Operator: Our next question comes from Christopher Marinac with Brean Capital. Your line is now live.

Speaker #6: Hey, thanks. Good morning. I wanted to leverage off the last question on core deposits. Do you see, with the improvement on the wholesale funding ratio, incrementally, does that help you on your FDIC costs or any other kind of liquidity measures?

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

Speaker #6: Does that help you grind margin up from that angle?

Speaker #5: I would say not the margin, Chris, but it does help on the FDIC insurance costs. A lot of times we bring in those types of relationships that Kevin just highlighted.

Brad T. Howes: I would say not the margin, Chris, it does help on the FDIC insurance costs. A lot of times, if we bring in those types of relationships that Kevin just highlighted, they'd be at a similar cost. If we can get them a little less than broker, obviously that'll help the margin. They're pretty much comparable or even a little above if we see them. If we do, we see there's a, call it 15 to 20 basis point improvement in our FDIC insurance related to lower wholesale funding ratio. That is one of the big drivers of our FDIC insurance costs. If you look last quarter to this quarter, that kind of played out a little bit in the P&L.

Brad Howes: I would say not the margin, Chris, it does help on the FDIC insurance costs. A lot of times, if we bring in those types of relationships that Kevin just highlighted, they'd be at a similar cost. If we can get them a little less than broker, obviously that'll help the margin. They're pretty much comparable or even a little above if we see them. If we do, we see there's a, call it 15 to 20 basis point improvement in our FDIC insurance related to lower wholesale funding ratio. That is one of the big drivers of our FDIC insurance costs. If you look last quarter to this quarter, that kind of played out a little bit in the P&L.

Speaker #5: They'd be at a similar cost. If we can get them a little less than broker, obviously that'll help the margin, but they're pretty much comparable or even a little above if we see them.

Speaker #5: And if we do, we see there's a, call it, 15 to 20 basis point improvement in our FDIC insurance related to a lower wholesale funding ratio.

Speaker #5: So that is one of the big drivers of our FDIC insurance costs. And if you look last quarter to this quarter, that kind of played out a little bit in the P&L.

Speaker #5: We were down, I want to say, $200,000 or $300,000 quarter over quarter, really driven by the fact that we had a lower wholesale funding ratio.

Brad T. Howes: We were down, I want to say two or 300,000 quarter over quarter, really driven by the fact that we had a lower wholesale funding ratio. That looks back over the last four quarters. It's not always a point-in-time snapshot. As we continue to do these, I think we'll see P&L benefit, nice decreases in that expense and with a similar or possibly even a lower funding cost if we can get it.

Brad Howes: We were down, I want to say two or 300,000 quarter over quarter, really driven by the fact that we had a lower wholesale funding ratio. That looks back over the last four quarters. It's not always a point-in-time snapshot. As we continue to do these, I think we'll see P&L benefit, nice decreases in that expense and with a similar or possibly even a lower funding cost if we can get it.

Speaker #5: And that looks back over the last four quarters. It's not always a point-in-time snapshot. So, as we continue to do these, I think we'll see P&L benefit, nice decreases in that expense, and with similar or possibly even a lower funding cost if we can get it.

Speaker #6: Okay, great. And you mentioned at the beginning of the call about the sort of mixed change with larger customers that's helping or that's impacting some of the narrower spreads.

Christopher Marinac: Okay, great. You mentioned at the beginning of the call about the sort of mix change with the larger customers that helps or that is impacting some of the narrower spreads. Do you have a goal for how those customer mix looks looking out several quarters?

Speaker #6: Do you have a goal for how that customer mix looks looking out several quarters? Yeah.

Speaker #5: Go ahead. I don't know if we have any specific goals. We continue to explore business on any avenue, so I don't think that we have any specific, "We have to add this big customer, that big customer."

Kevin J. Comps: Go ahead.

Kevin Comps: Go ahead.

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

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

Speaker #5: So that's really, yeah, we explore all avenues for new business. So I don't think there's any particular goal on large or small clients.

Speaker #6: Okay. So the mix will be what it will be every quarter and year, and we'll just...

Christopher Marinac: Okay. The mix will be what it will be every quarter and year.

Speaker #5: Yeah, I wouldn't suspect it's going to change much. For every large client that we add, we add five or six midsize or smaller ones.

Charles A. Williams: Yeah, I wouldn't suspect it's going to change much. For every large client that we add, we add five or six mid-size or smaller ones. That's always been our strategy for 15 years. I don't see a major shift in that strategy at all.

Chuck Williams: Yeah, I wouldn't suspect it's going to change much. For every large client that we add, we add five or six mid-size or smaller ones. That's always been our strategy for 15 years. I don't see a major shift in that strategy at all.

Speaker #5: So that's always been our strategy for 15 years. I don't see a major shift in that strategy at all.

Speaker #6: Okay. And then, Chuck, I wanted to ask about this point in the cycle. Would you anticipate any competitors leaving, or is that not what should be anticipated?

Christopher Marinac: Okay. Chuck, I wanted to ask about this time of the cycle. Would you anticipate any competitors leaving? Is that not what should be anticipated?

Speaker #5: Yeah, that's a good question. Right now, I think just everybody is looking for volume. We've had some—the success that we had in 2024—we had a couple of larger funders leave because of liquidity.

Charles A. Williams: Yeah, that's a good question. Right now, I think just everybody is looking for volume. Obviously, the success that we had in 2024, we had a couple of larger funders leave because of liquidity. Absent a liquidity event, I think in the banking industry, I don't sense that there is anybody leaving. To the contrary, there's some other entrants. We're still very confident in our system, and as I mentioned, our crew is continuing to develop business and grow in a very challenging environment as far as that goes. Nobody's leaving, and we're continuing to see pressure. Our growth continues, and we've had to adjust some things, as I've mentioned, with a client or two. There's no wholesale, and we'd let you know. There's no wholesale issues at this point.

Chuck Williams: Yeah, that's a good question. Right now, I think just everybody is looking for volume. Obviously, the success that we had in 2024, we had a couple of larger funders leave because of liquidity. Absent a liquidity event, I think in the banking industry, I don't sense that there is anybody leaving. To the contrary, there's some other entrants. We're still very confident in our system, and as I mentioned, our crew is continuing to develop business and grow in a very challenging environment as far as that goes. Nobody's leaving, and we're continuing to see pressure. Our growth continues, and we've had to adjust some things, as I've mentioned, with a client or two. There's no wholesale, and we'd let you know. There's no wholesale issues at this point.

Speaker #5: So absent a liquidity event, I think in the banking industry, I don't sense that there is anybody leaving. To the contrary, there's some other entrants.

Speaker #5: But we're still very, very confident in our system and, as I mentioned, our crew is continuing to develop business and grow in a very challenging environment as far as that goes.

Speaker #5: It's nobody's leaving and we're continuing to see pressure. But our growth continues and we've had to adjust some things as I've mentioned. With a client or two but there's no wholesale and we let you know.

Speaker #5: There's no wholesale issues at this point, so. But.

Christopher Marinac: Thanks for that.

Speaker #6: Thanks for that.

Speaker #5: I gave a little more color, but no, we don't yeah. I don't see like unless there's an industry banking industry I'm talking about, something happening on liquidity, I don't see anybody leaving at this point.

Charles A. Williams: I gave a little more color, but no, we don't. Unless there's an industry, banking industry, I'm talking about something happening on liquidity, I don't see anybody leaving at this point.

Chuck Williams: I gave a little more color, but no, we don't. Unless there's an industry, banking industry, I'm talking about something happening on liquidity, I don't see anybody leaving at this point.

Speaker #6: And Chuck, your relative size is an advantage also.

Christopher Marinac: Chuck, your relative size is an advantage also.

Speaker #5: Yeah, absolutely. In the metrics—and obviously we missed—but the metrics, and what we talk about and what's going on inside of our walls, are good stuff.

Charles A. Williams: Yeah. Absolutely. The metrics, and it's obviously we missed, but the metrics and what we talk about and what's going on inside of our walls are good stuff. You can't hide from the numbers. I think some things that we kind of gloss over is asset quality remains excellent and improved a little over the Q1. As Brad said, we don't have a crystal ball on what's going to happen, but we've got a really seasoned portfolio, and we're just not seeing any pressure there, which is a great thing for our institution. So, yeah, again, we're really confident about where we're going and what we're doing. We continue to say we can operate in any interest rate environment.

Chuck Williams: Yeah. Absolutely. The metrics, and it's obviously we missed, but the metrics and what we talk about and what's going on inside of our walls are good stuff. You can't hide from the numbers. I think some things that we kind of gloss over is asset quality remains excellent and improved a little over the Q1. As Brad said, we don't have a crystal ball on what's going to happen, but we've got a really seasoned portfolio, and we're just not seeing any pressure there, which is a great thing for our institution. So, yeah, again, we're really confident about where we're going and what we're doing. We continue to say we can operate in any interest rate environment.

Speaker #5: So, you can't hide from the numbers. But I think some things that we kind of gloss over is asset quality remains excellent. It improved a little over the first quarter, and as Brad said, we don't have a crystal ball on what's going to happen, but we've got a really seasoned portfolio, and we're just not seeing any pressure there, which is a great thing for our institution. So yeah, again, we're really confident about where we're going and what we're doing, and we continue to say we can operate in any interest rate environment.

Speaker #5: Should interest rates ease a little bit, which I don't anticipate with everything going on in the economy, but if they were, we're going to be able to pounce on that as well.

Charles A. Williams: Should interest rates ease a little bit, which I don't anticipate with everything going on in the economy, but if they were, we're going to be able to pounce on that as well. In the meantime, we're just going to keep growing and cruising along with what we're doing.

Chuck Williams: Should interest rates ease a little bit, which I don't anticipate with everything going on in the economy, but if they were, we're going to be able to pounce on that as well. In the meantime, we're just going to keep growing and cruising along with what we're doing.

Speaker #5: So, in the meantime, we're just going to keep growing and cruising along with what we're doing.

Speaker #6: Great. Thanks again for taking all of our questions this morning.

Christopher Marinac: Great. Thanks again for taking all of our questions this morning.

Speaker #5: Our pleasure. Thanks, Chris.

Charles A. Williams: Our pleasure.

Chuck Williams: Our pleasure.

Kevin J. Comps: Thanks, Chris.

Kevin Comps: Thanks, Chris.

Speaker #2: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we pull for additional questions.

Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we poll for additional questions. There are no further questions at this time. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker #2: There are no further questions at this time. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Charles A. Williams: Thank you.

Chuck Williams: Thank you.

Q2 2026 Northpointe Bancshares Inc Earnings Call

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