Northpointe Bancshares (NYSE:NPB) reported third-quarter net income of $13.9 million, or $0.39 per diluted share, while outlining a planned exit from its distributed retail and consumer direct mortgage origination channels through a non-binding letter of intent with CMG Financial and its affiliates.
Chairman and CEO Chuck Williams said the company’s decision to sell the channels followed a reassessment of the mortgage operating environment, including pressure on volumes and the fixed infrastructure required to operate a distributed retail platform. The proposed arrangement is primarily for the sale and transition of mortgage origination teams and does not include the sale or transfer of loans, servicing rights or other material assets, according to CFO Brad Howes.
Management expects to complete the proposed transaction during the fourth quarter of 2026. The company said it will remain involved in mortgage banking while shifting resources toward its Mortgage Purchase Program, specialty finance, relationship-based banking, deposit growth and specialty servicing.
Mortgage Channel Sale and Expense Reduction
Williams said the residential lending division had contributed to Northpointe’s historical success, but management concluded that current conditions had reached an “inflection point” in which origination volumes could no longer support the infrastructure overhead needed for the business.
“Our team has been incredibly efficient over the last four years in making the business work in a very tough environment,” Williams said during the question-and-answer session. “But we could no longer see a path forward for the profitability on the base overhead that it takes to run an efficient distributed retail operation.”
Howes said the company expects the transaction to have a positive long-term effect on earnings power because anticipated expense reductions are expected to exceed the associated revenue losses. Northpointe projected annualized expense savings of $50 million to $55 million, largely from commissions, salaries and benefits, with further savings expected in occupancy, technology, professional fees, marketing and other expenses.
The company expects total non-interest expense of $80 million to $95 million in 2027, compared with projected 2026 expense of $140 million to $146 million. The 2026 outlook includes an estimated $6 million to $7 million of restructuring charges related to the sale, primarily for severance and other employee-related expenses, plus an approximately $800,000 impairment charge tied to an intangible asset from a previous mortgage team acquisition.
Management said gain-on-sale revenue is expected to decline substantially following the transaction, with significantly lower revenue in the fourth quarter of 2026 and virtually no such revenue expected in 2027.
Third-Quarter Results and Notable Items
Third-quarter net income declined from $21.3 million, or $0.60 per diluted share, in the second quarter. The quarter included two notable negative items totaling $7.5 million before taxes: a $4.3 million combined fair-value decrease across three assets affected by long-term interest-rate movements and a $3.1 million operational loss related to an isolated external deposit fraud incident at a retail banking center.
Howes said the company strengthened procedures and controls in response to the fraud incident. President Kevin Comps said law enforcement, including the FBI, is involved in the investigation and that Northpointe has a pending insurance claim. The company did not provide further details on the number of customers affected or the anticipated recovery amount.
Net interest income increased by $1.2 million sequentially, supported by a $157 million increase in average interest-earning assets. Third-quarter net interest margin was 2.32%, compared with 2.36% year to date. Howes maintained full-year 2026 net interest margin guidance of 2.3% to 2.4% and projected a range of 2.4% to 2.6% for 2027.
The company said a September increase in the federal funds rate provided only a limited third-quarter benefit because its MPP facilities reprice with a one-month lag, while brokered certificate-of-deposit funding costs tend to reprice in advance of potential rate moves.
MPP, Deposits and Specialty Servicing Growth
Northpointe continued to emphasize growth in its MPP business. Period-end MPP balances rose $262.7 million from the prior quarter, while average balances increased $237.2 million, contributing a $3.7 million quarterly increase in interest income from the channel.
Comps said the company added four MPP clients representing $185 million in additional capacity and increased facility sizes for three existing clients by $100 million. Existing-client utilization averaged 58% during the quarter. At Sept. 30, Northpointe had participated out $368.3 million of MPP balances to partner banks, down from $489 million at June 30 as it optimized its balance sheet.
Average MPP yields were 6.27%, and fee-adjusted yields were 6.49%. Management cited competitive pricing, particularly among larger mortgage originators, as a factor in lower average yields.
The company projected year-end 2026 MPP balances of $4.1 billion to $4.3 billion and 2027 balances of $4.7 billion to $5 billion, net of participations. It expects AIO and other consumer loan balances to reach $900 million to $1 billion by the end of 2026 and $1.3 billion to $1.5 billion by the end of 2027.
During the quarter, Northpointe purchased $85.4 million of seasoned AIO loans at a discount, resulting in $69.9 million of net on-balance-sheet loans. Howes said the loans, originated between 2005 and 2008, have low loan-to-value ratios and an average coupon yield near 5%, which rises to about 7.5% when expected discount accretion is included.
Total deposits ended the quarter at $5.4 billion, up $210.4 million from the prior quarter. The increase reflected higher non-interest-bearing and interest-bearing demand deposits, partially offset by declines in time, savings and money market deposits that the company intentionally allowed to run down in favor of brokered and Federal Home Loan Bank funding.
Specialty servicing also expanded. Excluding mortgage servicing rights fair-value changes, servicing fees were $2.6 million, up from the prior quarter. Northpointe serviced 17,400 loans for others with unpaid principal balances totaling $6 billion, including loans handled by a sub-servicer.
Credit, Capital and Dividend
Net charge-offs were $429,000, representing an annualized 2 basis points of average loans. Nonperforming assets increased $8.9 million from the second quarter, more than half of which came from two borrowers that management said are not expected to result in material losses. Loans delinquent between 31 and 89 days declined $5.7 million.
Total assets were $7.7 billion at Sept. 30, driven by MPP and AIO growth. The wholesale funding ratio was 63.94%.
The board increased Northpointe’s regular quarterly cash dividend to $0.03 per share from $0.025 per share in the prior quarter. Howes said the company does not currently have a share repurchase program, but is in the process of developing one and expects to provide additional information in future periods.
About Northpointe Bancshares (NYSE:NPB)
Northpointe Bancshares, Inc is a bank holding company headquartered in Grand Rapids, Michigan. It operates through Northpointe Bank, a financial institution focused on providing banking and lending services to consumers and businesses.
Northpointe Bank offers residential mortgage products, including loans for home purchases and refinancing, as well as home equity lending. Its deposit products include checking, savings, money market and certificate of deposit accounts. The bank also provides personal and commercial banking services designed to meet the borrowing, cash-management and deposit needs of individuals and businesses.
Through a combination of digital banking capabilities, mortgage lending channels and its physical banking presence, Northpointe serves customers in Michigan and markets across the United States.
