What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-27 compared with 2025-03-28 · 281 added, 212 removed, 554 unchanged (47% of the section changed)

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We assume no obligation to update any of these forward-looking statements.

Unless otherwise stated, all information in this document gives effect to a ten-for-one stock split, whereby each holder of our common stock received nine additional shares of common stock for each share owned as of the record date of December 19, 2024, which was distributed on December 30, 2024.

The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this document.

Business Overview

The Company is a bank holding company that is headquartered in Grand Rapids, Michigan.

Through our wholly-owned subsidiary, Northpointe Bank, we focus on providing independent mortgage banking platforms nationwide with an alternative to traditional mortgage warehouse lending (we refer to this business as our Mortgage Purchase Program, or “MPP”, as well as residential mortgage and digital banking services to retail customers nationwide.

Northpointe Bancshares, Inc.

(the “Company”) is a bank holding company headquartered in Grand Rapids, Michigan.

Our common stock is traded on the New York Stock Exchange under the ticker symbol NPB.

Through our wholly-owned subsidiary, Northpointe Bank (the “Bank”), we focus on (1) providing a best-in-class platform for independent mortgage bankers nationwide to utilize as an alternative to traditional mortgage warehouse lending (we refer to this business as our Mortgage Purchase Program, or “MPP”) and (2) offering attractive products and services to our residential mortgage and digital banking retail customers.

Our residential lending business provides a comprehensive range of financing options nationwide through two main channels:

consumer direct and traditional retail.

These channels combine the convenience of on-line, self-service platforms with the personalized service of an experienced residential mortgage loan officer.

Both residential mortgage loan origination channels are supported by our proprietary POS digital platform that streamlines the loan application and closing processes.

We are a nationwide mortgage lender, with 122 mortgage originators across 25 states.

These channels combine the convenience of online, self-service platforms with the personalized service of an experienced residential mortgage loan officer.

Both residential mortgage loan origination channels are supported by our proprietary point-of-service digital platform that streamlines the loan application and closing processes.

Our consumer direct and traditional retail channels primarily originate mortgage loans which are saleable through an end investor.

In addition, our traditional retail channel selectively originates first-lien home equity lines which are tied seamlessly to a demand deposit sweep account (we refer to the loans we originate as “All-in-One” or “AIO” loans).

We have one bank branch located in Grand Rapids, Michigan and loan production offices located in 23 cities in 15 states across the country, which are supported by our centralized operations and back-office support teams based in Grand Rapids, Michigan.

We have one bank branch located in Grand Rapids, Michigan and physical loan production offices located in 25 cities in 15 states across the country, which are supported by our centralized operations and back-office support teams based in Grand Rapids, Michigan.

Our results of operations are driven by a combination of net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities, as well as fee income from a variety of sources.

Key components of noninterest income include gains from the sale of newly originated loans, loan servicing fees, and service charges from our deposit services and our MPP and residential lending businesses.

Key components of noninterest income include gains from the sale loans, loan servicing fees, MPP fees, service charges from our deposit services, and other fees.

Our principal operating expense, aside from interest expense, consists of salaries and employee benefits, including commissions paid to loan originators, occupancy and equipment costs, data processing expense, professional fees, and provisions for credit losses.

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In addition, we are subject to interest rate risk to the degree that our interest-earnings assets mature or reprice at different times or at different speeds than our interest-bearing liabilities.

Known Trends and Uncertainties

Our results of operations and financial condition are influenced by several known trends and uncertainties that management believes are reasonably likely to have a material impact on future performance.

These trends and uncertainties include changes in residential mortgage origination volumes, interest rate levels and volatility, competition for deposits and broader macroeconomic conditions affecting housing demand.

In particular, sustained changes in interest rates may affect net interest margin, mortgage refinancing activity, gain on sale revenue, customer deposit behavior, and the valuation of mortgage servicing rights.

Management continually evaluates these factors in assessing operating performance, capital adequacy, and liquidity planning.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and follow general practices within the banking industry.

Application of these principles requires management to make estimates, assumptions and complex judgements that affect amounts presented in our consolidated financial statements.

These estimates, assumptions and judgements are based on information available as of the date of the financial statements;

accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions, and judgements.

Our accounting and reporting policies are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry.

Accounting and reporting policies for the allowance for credit losses (“ACL”), lender risk account and capitalized mortgage loan servicing rights are deemed critical since they involve the use of estimates and require significant management judgments.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and follow general practices within the banking industry.

Application of these principles requires management to make estimates, assumptions and complex judgments that affect amounts presented in our consolidated financial statements.

These estimates, assumptions and judgments are based on information available as of the date of the financial statements;

accordingly, as this information changes, the consolidated financial statements could reflect different estimates, assumptions, and judgments.

Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry.

Accounting and reporting policies for the allowance for credit losses (“ACL”), the lender risk account (“LRA”) for loans we have sold to the Federal Home Loan Bank of Indianapolis (“FHLB”), and the capitalized mortgage loan servicing rights (“MSR”) are deemed critical since they involve the use of estimates and require significant management judgments.

Application of assumptions different than those that we have used could result in material changes in our financial position or results of operations.

Our methodology for determining the ACL and related provision for credit losses is described later in this section under “Provision for Credit Losses” and “Loan Portfolio”.

In particular, this area of accounting requires a significant amount of

judgment because a multitude of factors can influence the ultimate collection of a loan or other type of credit.

It is extremely difficult to precisely measure the amount of expected credit losses in our loan portfolio.

We use a rigorous process to attempt to accurately quantify the necessary ACL and related provision for credit losses, but there can be no assurance that our modeling process will successfully identify all of the expected credit losses in our loan portfolio.

In particular, this area of accounting requires a significant amount of judgment because a multitude of factors can influence the ultimate collection of a loan or other type of credit.

It is extremely difficult to precisely measure the amount of expected credit losses in our loans held for investment (“HFI”) portfolio.

We use a rigorous process to attempt to estimate the necessary ACL and related provision for credit losses, but there can be no assurance that our modeling process will successfully identify all of the expected credit losses in our loan portfolio.

The assumptions around establishing reasonable and supportable economic forecasts are particularly subjective.

As a result, we could record future provisions for credit losses that may be significantly different than the levels that we recorded in prior periods.

See also Note 2 and Note 3 to the Consolidated Financial Statements included within this report for further discussion on ACL.

A Lender Risk Account (“LRA”) has been established for loans we have sold to the Federal Home Loan Bank of Indianapolis (“FHLB”).

The LRA is funded and maintained by the FHLB at 1.20% of the loan balance and is used to offset credit losses over the life of the loans sold to the FHLB.

We believe the assumptions we utilize in estimating our ACL are reasonable based upon accepted industry practices and represent neither the most conservative nor aggressive assumptions.

We have established an LRA for loans sold to the FHLB.

The LRA is funded through a reduction of the purchase price and maintained by the FHLB at an initial amount of 1.20% of the loan balance and is used to offset credit losses over the life of the loans sold by the Company to the FHLB.

If the LRA has not been depleted by losses, funds are returned to the Company over time, beginning after five years and continuing through 25 years.

We carry the asset at estimated fair value.

Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, and other factors.

The fair value of our LRA is determined based on a valuation model used by an independent third party, which is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, expected loss rates and other factors.

These assumptions are particularly subjective and can have a material effect on the estimated LRA balance and income.

We believe the assumptions that we utilize in estimating fair value are reasonable based upon accepted industry practices and represent neither the most conservative or aggressive assumptions.

See also Note 2 and Note 18 for further discussion of the LRA and the methods used to determine fair value of the LRA.

We establish mortgage servicing right assets when we sell loans with servicing retained and when we purchase mortgage servicing.

The fair value of our mortgage loan servicing rights has been determined based on a valuation model used by an independent third party.

We believe the assumptions that we utilize in estimating fair value are reasonable based upon accepted industry practices and represent neither the most conservative nor aggressive assumptions.

We establish MSR assets when we sell loans with servicing retained and when we purchase mortgage servicing.

MSRs are measured at fair value, with new capitalization reported in net gain on sale of loans and any subsequent changes reported in loan servicing fees.

The fair value of our MSRs are determined based on a valuation model used by an independent third party.

There are several critical assumptions involved in establishing the value of this asset including estimated future prepayment speeds on the underlying mortgage loans, the interest rate used to discount the net cash flows from the mortgage loan servicing, the estimated amount of ancillary income that will be received in the future (such as late fees) and the estimated cost to service the mortgage loans.

We believe the assumptions that we utilize in our valuation are reasonable based upon accepted industry practices for valuing mortgage loan servicing rights and represent neither the most conservative or aggressive assumptions.

See also Note 2, Note 5 and Note 18 for further discussion of MSR activity and fair value estimation.

These assumptions are particularly subjective and can have a material effect on the estimated MSR balances and income.

Emerging Growth Company

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We have elected to take advantage of the scaled disclosures and other relief under the JOBS Act, and we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us under the JOBS Act, so long as we qualify as an emerging growth company.

Recent Developments

On December 9, 2025, we issued $70.0 million in aggregate principal amount of our 7.50% Fixed-to-Floating Rate Subordinated Notes due 2035.

The proceeds of this issue, along with cash reserves, was used to redeem the remaining $77.0 million of our 8.25% Fixed-to-Floating Rate Non-Cumulative Perpetual Series A Preferred Stock (“Series A”) on December 30, 2025.

We elected to redeem the Series A preferred stock because its interest rate was scheduled to reset to a higher rate on January 2, 2026.

Preferred stock dividends and related costs for the year ended December 31, 2025 included $3.2 million in unamortized deal issuance costs related to the redemption of the Series A preferred stock, and a special one-time dividend of $2.50 per share paid on June 30, 2025 on our Series A preferred stock and our 8.25% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series B (“Series B”).

On March 12, 2026, the Company issued $20.0 million of subordinated notes due March 15, 2036.

The notes become redeemable on March 15, 2031.

Interest payments are due on June 15 and December 15 of each year at a fixed rate of 7.50% through March 15, 2031 and convert to a variable rate of three-month SOFR plus 4.24% with payments due quarterly.

More detail on our subordinated notes and preferred stock is provided in Note 9 and Note 11, respectively, in our Notes to Consolidated Financial Statements.

On July 4, 2025, “An Act to Provide for Reconciliation Pursuant to Title II of H.

14,” more commonly referred to as the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law.

OBBBA enacted broad changes to the domestic and international taxation arena by extending many expiring Tax Cuts and Jobs Act tax provisions among other individual and business tax relief measures, along with funding national defense and border security, cutting certain federal spending programs, phasing out certain renewable energy credits created by the Inflation Reduction Act, and raising the national debt ceiling, among other things.

These changes did not have a material impact on our federal income tax expense or liability for the year ended December 31, 2025.

We do not expect these changes to have a material impact on future periods.

Primary Factors Used to Evaluate our Business

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Net interest income represents interest income from interest earning assets, primarily our loan portfolio, including MPP, residential mortgage loans, and our first lien home equity product AIO loans, as well as interest earned on our liquid assets primarily invested at the Federal Reserve and FHLB dividends, less interest expense on interest-bearing liabilities, such as deposits, FHLB advances, and other borrowings, which are used to fund those assets.

The amount of our net income is affected by overall loan demand, economic conditions, the slope of the yield curve, and changes in the absolute level of interest rates, the amounts and composition of our loan portfolio and interest-bearing liabilities.

The amount of our net interest income is affected by overall loan demand, economic conditions, the slope of the yield curve, and changes in the absolute level of interest rates, the amounts and composition of our loan portfolio and interest-bearing liabilities.

For 2025 and 2024, net interest income accounted for more than half of our total revenue.

During periods when market conditions are such that industry residential loan originations are significantly higher, such as in 2020 and 2021, it is expected that noninterest income will grow substantially, driven primarily by gain on sale of mortgage loans, resulting in net interest income dropping to under half of total revenue.

During periods when market conditions are such that industry residential loan originations are significantly higher, it is expected that noninterest income will grow substantially, driven primarily by gain on sale of mortgage loans, resulting in net interest income dropping to under half of total revenue.

Noninterest Income

Noninterest income consists of service charges on deposits and related fees, loan servicing fees, MPP related fees, and net gains on the sale of loans.

Noninterest income is a key contributor to our net income and is expected to account for more than half of our revenue in market conditions when industry residential mortgage loan origination volumes are significantly higher, such as in 2020 and 2021.

Noninterest income consists of service charges on deposits and related fees, loan servicing fees, MPP related fees, net gains on the sale of loans and other noninterest income.

Noninterest Expense

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In evaluating our level of noninterest expense, we also monitor our efficiency ratio.

As a residential real estate mortgage-focused bank, our efficiency ratio will typically be higher than other non-mortgage focused banks and will tend to decrease significantly with any meaningful increase in industry mortgage originations.

The efficiency ratio represents non-interest expense divided by the sum of net interest income and noninterest income.

mortgage originations.

The efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

We continually seek to identify ways to streamline our business and operate more efficiently, which has enabled us to reduce our noninterest expense in both absolute terms and as a percentage of our revenue while continuing to achieve growth in total loans and assets.

A large component of our expense base is mortgage- related commissions, which are variable in nature and increase or decrease in line with residential mortgage originations.

We also proactively manage our production-related back-office expenses and will right size those expenses based on the anticipated level of production.

Over the past several years, we have continued to invest in growth strategies and resources, including personnel, technology and infrastructure.

A significant component of our expense base is mortgage- related commissions, which are variable in nature and increase or decrease in line with residential mortgage originations.

We also proactively manage our production-related back-office expenses and will right size those expenses where possible based on the anticipated level of production.

Over the past several years, and most notably since becoming a public company, we have made investments in people and technology to continue our growth strategy, and to bolster our risk management functions including cybersecurity.

We believe we are well positioned to continue our growth trajectory without meaningful additions to our current cost structure.

Public Company Costs

We completed our initial public offering in February 2025.

As a result, we expect to incur additional costs associated with operating as a public company.

We expect that these costs will include additional personnel, legal, consulting, regulatory, insurance, accounting, investor relations and other expenses that we did not incur as a private company.

We completed our initial public offering in February of 2025.

As a result, we have incurred additional costs associated with operating as a public company in 2025.

While we expect certain public company costs to moderate over time as we scale and gain operating efficiencies, we expect that these costs will continue to be elevated from additional personnel, legal, consulting, regulatory, insurance, accounting, investor relations and other expenses that we did not incur as a private company.

The Sarbanes-Oxley Act, as well as rules adopted by the SEC, the FDIC, and NYSE, requires public companies to implement specified corporate governance practices that were previously inapplicable to us as a private company.

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We manage liquidity based upon factors that include the level of diversification of our funding sources, the composition and duration of our deposits, the availability of unused funding sources, off-balance sheet obligations, the amount of cash we hold and the availability of assets to be readily converted into cash without undue loss.

Our liquidity position benefits significantly from the fact that approximately one-third of the loan portfolio is in MPP, in which loans typically have a dwell time on the client’s facility for less than 30 days after the loan is funded, and which we have the unilateral right not to fund.

Our liquidity position benefits significantly from the fact that over half of the loan portfolio is in MPP, in which loans typically have a dwell time on the client’s facility for less than 30 days after the loan is funded, and which we have the unilateral right not to fund.

We maintain appropriate funding capacity through our diversified and nimble funding structure, which includes a scalable digital banking platform, non-brokered rate board time deposits, brokered CDs, and access to funding from the FHLB and other smaller facilities.

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Our capital ratios and the capital ratios of our Bank at December 31, 2025 exceeded all applicable minimum capital requirements and the regulatory standards for our Bank to be “well- capitalized.”

Highlights of 2024 Financial Results (compared to 2023)

Our net income for the year ended December 31, 2024 compared to December 31, 2023 demonstrates our success in strategic repositioning over the past several years.

• Net income available to common stockholders for 2024 was $47.2 million, an increase of $23.1 million, nearly double our net income of $24.1 million in 2023.

• Despite lower residential mortgage originations over the same period, net income available to common stockholders increased by 95.6% compared to year-end 2023, attributable to higher net interest income and lower noninterest expense, which more than offset the decrease in noninterest income.

• We did not incur any material one-time costs associated with strategic repositioning in 2024.

• Net interest income before provision increased by $13.0 million in 2024 compared to 2023, reflecting strong growth in MPP and AIO loans and a 4 basis point improvement in net interest margin.

• Noninterest expense decreased by $38.5 million, or 25.1%, in 2024, compared to 2023, primarily driven by lower variable compensation and our proactive measures to manage mortgage-related back-office expenses.

• We continued to thoughtfully change the mix of our HFI loan portfolio.

• MPP loans increased to 36.8% of total gross loans at December 31, 2024, from 27.7% at December 31, 2023.

• Residential mortgage loans decreased to 41.9% of total gross loans at December 31, 2024 from 45.1% at December 31, 2023.

• AIO Loans were 13.2% of total gross loans at December 31, 2024, up from 12.2% at December 31, 2023.

• MPP facilities increased by $564.0 million, or 49.2%, at December 31, 2024 compared to December 31, 2023, reflecting strong new customer acquisition and market share gains, as well as a slight increase in overall industry mortgage originations.

• Liquidity remained stable, with total cash and cash equivalents of $376.3 million at December 31, 2024, compared to $351.9 million at December 31, 2023.

Highlights for 2025

• Net income available to common stockholders for the year ended December 31, 2025 was $71.6 million, an increase of $24.5 million, or 51.9%, from $47.2 million for the year ended December 31, 2024.

• Earnings per diluted common share increased to $2.11 for 2025, compared to $1.83 for 2024.

• Net interest income before provision for the year ended December 31, 2025 increased by $36.5 million compared to the year ended December 31, 2024, reflecting $1.17 billion increase in average interest-earning assets and a 16 basis point improvement in net interest margin.

• Noninterest expense for the year ended December 31, 2025 increased by $14.6 million compared to the year ended December 31, 2024, primarily driven by higher incentive compensation expense reflecting the improvement in financial performance.

• Demonstrated strong balance sheet growth.

• MPP facilities increased by $1.71 billion at December 31, 2025 compared to December 31, 2024.

• AIO loans increased by $120.5 million at December 31, 2025 compared to December 31, 2024.

• Total deposits increased by $1.45 billion at December 31, 2025 compared to December 31, 2024, and include growth in the Company’s diversified digital deposit banking platform including two new deposit relationships added during 2025, along with growth in brokered CDs.

• Liquidity remained stable, with total cash and cash equivalents of $496.5 million at December 31, 2025, up $120.2 million, or 31.9% compared to $376.3 million at December 31, 2024.

• As of December 31, 2025, our capital ratios were above all regulatory requirements to be considered well-capitalized.

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(1) Loan balance includes loans held for investment and held for sale.

(1) Loan balance includes loans HFI and held for sale.

Nonaccrual loans are included in total loan balances and no adjustment has been made for these loans in the yield calculation.

Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(2) Loan fees of $303,000 and $241,000 for 2024 and 2023, respectively, are included in interest income.

(2) Net loan fees of $144,000 and $303,000 for 2025 and 2024, respectively, are included in interest income.

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

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

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

For the year ended December 31, 2024, net interest income increased to $114.2 million, an increase of $13.0 million, or 12.8%, from $101.2 million for the year ended December 31, 2023.

This increase was due to the combined impact of a 10.7%

increase in earning assets to $4.98 billion from $4.50 billion, and an increase in net interest margin from 2.25% in 2023 to 2.29% in 2024.

The increase in net interest margin was driven primarily by a higher mix of MPP facilities and AIO loans.

Yield and Volume Impact on Net Interest Income

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

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.

The following table shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities.

The following table shows the

effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities.

The effect of changes in volume is determined by multiplying the change in volume by the current period’s average rate.

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The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

For the Years Ended December 31,

For the Year Ended December 31,

Variance Due To

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Net interest income / margin $ 23,341 $ 13,183 $ 36,524

The yield and volume table above shows that the $13.0 million increase in net interest margin for 2024, compared to 2023, was due to a $9.5 million benefit from increased earnings asset volume as well as a $3.5 million increase in net interest margin as yields on assets grew more than our cost of funds in 2024.

The primary driver of our growth in net interest income in 2024 was our loan portfolio.

Total interest income on our loan portfolio grew $48.1 million in 2024, with $29.9 million coming from growth in average portfolio balances and $18.2 million from higher loan portfolio yields.

Offsetting this interest income growth was higher funding costs, primarily time deposits and borrowings.

Total funding costs increased by $37.2 million in 2024, with $19.5 million of the increase in interest expense coming from higher average balances and $17.6 million from higher funding rates.

Overall, these dynamics allowed for an increase of 4 basis points in our net interest margin from 2.25% in 2023 to 2.29% in 2024.

Provision for Credit Losses

The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is adequate to provide coverage for all expected future credit losses.

The provision for credit losses is impacted by inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, recent historical and projected future economic conditions, loan growth, the direction of the change in collateral values, and the level of actual net charge-offs incurred.

Our provision for credit losses reflect risks in the HFI loan portfolio, which is comprised predominately of collateralized single-family mortgage loans, with very low historical loss experience.

In 2024, our total provision for credit losses was a benefit of $328,000 compared to a total benefit of $1.5 million in 2023.

Our provision for credit losses reflects both our held for investment loan portfolio and the unfunded commitments on that

The provision for credit losses related to loans was an expense of $881,000 for 2024, reflecting net charge-offs of $2.0 million and an ending allowance for credit losses of $11.2 million.

For 2023, the provision for credit losses related to loans was a benefit of $2.6 million, reflecting $808,000 in net charge-offs and an ending allowance for credit losses of $12.3 million.

Provision for credit losses also includes provision for unfunded loan commitments on the Consolidated Statements of Income.

We recorded a provision for unfunded loan commitments benefit of $1.2 million for 2024 and an expense of $1.1 million for 2023, which impacted the change in allowance for each year.

On January 1, 2023, we adopted ASU 2016-13, Financial Instruments — Credit Losses:

Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”).

The impact of our adoption of CECL on January 1, 2023 increased our allowance for credit losses on portfolio loans by $9.3 million and allowance on unfunded loan commitments by $508,000.

For the year ended December 31, 2025, net interest income totaled $150.7 million, an increase of $36.5 million, or 32.0%, from $114.2 million for the year ended December 31, 2024.

This year-over-year increase was driven primarily by a $1.17 billion increase in average-earning assets and a 16 basis point improvement in net interest margin.

Average interest-earning assets increased to $6.15 billion at December 31, 2025, compared to $4.98 billion at December 31, 2024, reflecting strong growth in MPP and AIO loans, partially offset by continued run-off from the remainder of the loans HFI portfolio.

Net interest margin increased to 2.45% for the year ended December 31, 2025, compared to 2.29% for the year ended December 31, 2024.

This increase was driven primarily by a decrease in the average rate paid on interest-bearing deposits, consistent with the decrease in the federal funds rate, which outpaced the decrease in the yield earned on interest-earning assets.

Provision (Benefit) for Credit Losses

The provision (benefit) for credit losses represents a charge (gain) to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is adequate to provide coverage for all expected future credit losses.

The provision (benefit) for credit losses is impacted by inherent risk characteristics in our loan portfolio, the level of nonperforming loans and net charge-offs, both current and historic, recent historical and projected future economic conditions, loan growth, the direction of the change in collateral values, and the level of actual net charge-offs incurred.

Our provision (benefit) for credit losses reflect risks in the HFI loan portfolio, which is comprised predominately of collateralized single-family mortgage loans, with very low historical loss experience.

Our provision (benefit) for credit losses reflects both our loans HFI portfolio and the unfunded commitments on that portfolio.

For the year ended December 31, 2025, total provision for credit losses was $2.1 million compared to a provision benefit of $328,000 for the year ended December 31 2024.

This increase was driven primarily by higher levels of net charge-offs and additional provisions related to the continued growth in MPP and AIO loans.

The provision for credit losses related to loans was an expense of $2.2 million for the year ended December 31, 2025, reflecting net charge-offs of $2.9 million and an ending allowance for credit losses of $10.4 million.

For the year ended

December 31, 2024, the provision for credit losses related to loans was an expense of $881,000, reflecting $2.0 million in net charge-offs and an ending allowance for credit losses of $11.2 million.

The provision for unfunded loan commitments was a benefit of $55,000 for the year ended December 31, 2025, as compared to a benefit of $1.2 million for the year ended December 31, 2024.

The decrease reflects lower levels of unfunded commitments driven primarily by continued run-off in the construction loan portfolio.

Noninterest income

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(Dollars in thousands)

Noninterest Income For the years ended $ Increase (Decrease)

Noninterest Income For the Years Ended

December 31, $ Increase (Decrease) % Change

Service charges on deposits and other fees $ 890 $ 1,813 $ (923) (50.9) %

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$ 90,980 $ 72,923 $ 18,057 24.8 %

Noninterest income declined by $22.1 million between 2024 and 2023, driven primarily by lower net gains on sales of loans and lower loan servicing fees, partially offset by higher MPP fees.

During 2024, total residential mortgage volume decreased by $1.1 billion from the 2023 level.

This was primarily attributable to a significant reduction in retail loan production offices as part of the Company’s strategic repositioning efforts.

Over the same time period, we scaled our operating expenses accordingly such that the decrease in our noninterest income has been more than offset by lower noninterest expense.

For the year ended December 31, 2025, noninterest income totaled $91.0 million, an increase of $18.1 million, or 24.8%, from $72.9 million for the year ended December 31, 2024.

This increase was driven primarily by higher net gains on sales of loans and other noninterest income, partially offset by lower loan servicing fees.

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

(Dollars in thousands)

Loan Servicing Fees For the years ended $ Increase (Decrease)

Loan Servicing Fees For the Years Ended

December 31, $ Increase (Decrease) % Change

Fees on servicing $ 7,739 $ 12,277 $ (4,538) (37.0) %

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(3,020) (3,401) 381 (11.2) %

$ 4,719 $ 8,876 $ (4,157) (46.8) %

(1) Includes change in fair value and paid in full MSRs.

For the year ended December 31, 2025, loan servicing fees decreased by $4.2 million compared to the year ended December 31, 2024.

This decrease was largely due to the bulk sale of mortgage servicing rights early in 2024, as we made the strategic decision to scale back that part of our business.

(Dollars in thousands)

Net Gain on Sale of Loans For the years ended $ Increase (Decrease)

Net Gain on Sale of Loans For the Years Ended

December 31, $ Increase (Decrease) % Change

Capitalized MSRs $ 4,639 $ 5,004 $ (365) (7.3) %

Change in fair value of loans (1)

10,037 8,504 1,533 18.0 %

Gain (loss) on sale of portfolio loans (2)

1,234 (9,586) 10,820 (112.9) %

Gain on sale of loans, net (3)

61,288 52,766 8,522 16.2 %

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

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

Loan servicing fees decreased by $1.4 million in 2024 compared to 2023 due largely to our bulk sale of mortgage servicing assets in the first quarter of 2024 totaling $80.8 million as we made the strategic decision to scale back that part of our business.

MPP fees increased by $1.8 million in 2024 compared to 2023 due to the increase in volume of our MPP program business in 2024.

Gain on sale of loans decreased by $21.3 million in 2024 compared to 2023.

As shown in the table above, we had a favorable change in fair value adjustments on loans of $13.2 million during 2024.

This was more than offset by the $34.7 million decrease in gain on sale of loans, which is primarily attributable to the decrease in saleable residential mortgage originations in 2024.

We also recorded a $9.6 million loss in 2024 on the sale of a portion of our managed loan portfolio, which is reflected above in gain on sale of loans, net.

The loss was offset by a similar dollar fair value gain, which was recorded in change in fair value of loans above.

Other noninterest income decreased by $405,000 in 2024 compared to 2023.

The 2024 sale of mortgage servicing assets discussed above was made at fair value, so no initial gain or loss was recognized on the sale.

However, terms of the sale required us to refund MSR premium on certain loans (delinquency, underwriting deficiencies, etc.).

In 2024 we recognized a $1.7 million gain on debt extinguishment of $50.0 million in FHLB advances.

We did not have any such debt extinguishment gain or loss in 2023.

Offsetting this was the $1.1 million loss from MSR premium refund discussed above.

Overall, we recognized $1.6 million in net losses on sale of other assets in 2024 compared with net gains of $292,000 in 2023.

Other sources of noninterest income were relatively unchanged from 2023 to 2024.

$ 77,198 $ 56,688 $ 20,510 36.2 %

Total net gain on sale of loans $ 77,198 $ 56,688 $ 20,510 36.2 %

change in fair value of loans HFI and LRA (9,432) (11,151) 1,718 (15.4) %

(Gain) loss on sale of portfolio loans (1,234) 9,586 (10,820) (112.9) %

Total net gain on sale of loans, excluding portfolio sales and LRA / HFI fair value adjustments $ 66,532 $ 55,123 $ 11,408 20.7 %

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

(2) - Includes proceeds from portfolio loan sales, which are netted against any associated changes in fair value of loans to determine total gain or loss on sale.

(3) - Includes (a) net premium from sale of loans, (b) loan origination fees, points and costs, (c) provision from investor reserves, (d) gain or loss from forward commitments from hedging, and (e) change in fair value of lender risk account.

For the year ended December 31, 2025, net gain on sale of loans increased by $20.5 million compared to the year ended December 31, 2024.

The table above shows the components of net gain on sale of loans and pulls out the effect of fair value adjustments and portfolio sales to show operational gain on sale of loans held for sale.

Net gain on sale of loans for the year ended December 31, 2025 included a gain of $9.4 million from the combined change in fair value of loans HFI and LRA, both attributable to changes in market interest rates, and a gain of $1.2 million on the sale of portfolio loans.

For the year ended December 31, 2024, the combined change in fair value of fair value of loans HFI and LRA totaled $11.2 million and included a net loss on sale of portfolio loans of $9.6 million.

Excluding these items, net gain on sale of loans was $66.5 million for the year ended December 31, 2025, an increase of $11.4 million from $55.1 million for the year ended December 31, 2024.

This increase was driven primarily by higher saleable residential mortgage rate lock commitments and originations.

For the year ended December 31, 2025, other noninterest income increased by $2.0 million compared to the year ended December 31, 2024.

This increase was driven primarily by higher gains on the extinguishment of debt and on sales of real estate owned, along with a $1.1 million loss from premium refunded on certain loans in the bulk MSR sale (delinquency, underwriting deficiencies, etc.) recorded for the year ended December 31, 2024.

We recognized a $2.0 million gain on the extinguishment of $102.5 million in FHLB advances for the year ended December 31, 2025, compared to a $1.7 million gain on the extinguishment of $50.0 million in FHLB advances for the year ended December 31, 2024.

Noninterest expense

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(Dollars in thousands)

Noninterest Expense For the years ended $ Increase (Decrease)

Noninterest Expense For the Years Ended

Ended December 31, $ Increase (Decrease) % Change

Salaries and employee benefits 90,171 77,791 $ 12,380 15.9 %

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$ 129,228 $ 114,590 $ 14,638 12.8 %

For 2024, noninterest expense declined by $38.5 million, or 25.1%, to $114.6 million, from $153.1 million in 2023.

The largest driver of this decline was from a $26.5 million decline in salaries and employee benefits expense, driven primarily by lower variable commissions, along with other staff reductions, both consistent with lower residential mortgage origination volume and our ability to quickly and proactively manage our expense base.

For the year ended December 31, 2025, noninterest expense totaled $129.2 million, an increase of $14.6 million, or 12.8%, from $114.6 million for the year ended December 31, 2024.

The increase was driven primarily by higher salaries and benefits expense and professional fees.

The table below identifies the primary components of salaries and benefits:

(Dollars in thousands)

Salaries and Employee Benefits For the years ended $ Increase (Decrease)

Salaries and Employee Benefits For the Years Ended

December 31, $ Increase (Decrease) % Change

Salaries and other compensation $ 36,354 $ 37,045 $ (691) (1.9) %

Salary deferral from loan origination (4,328) (4,001) (327) 8.2 %

Bonus and non-equity incentive compensation 7,685 3,354 4,331

Bonus and incentive compensation 15,996 8,361 7,635 91.3 %

Mortgage production - variable compensation 29,168 26,108 3,060 11.7 %

401(k) matching contributions 695 1,687 (992)

Medical insurance costs 4,861 8,574 (3,713)

Employee benefits 12,981 10,278 2,703 26.3 %

Total salaries and employee benefits $ 90,171 $ 77,791 $ 12,380 15.9 %

Of the $26.5 million decrease in salaries and employee benefits from 2023 to 2024, $23.6 million was from reductions in variable commission compensation associated with lower mortgage volume.

Additionally, base salaries and other compensation decreased by $6.7 million in 2024 as we right-sized the Bank to align with lower loan production volume.

to our lower employee base, we also experienced reductions in our 401(k) matching contributions (down $992,000) and medical insurance costs (down $3.7 million).

Partially offsetting these reductions were an increase in bonus and non-equity incentive compensation expense of $4.3 million and lower salary cost deferrals from lower production (down $4.2 million).

For the year ended December 31, 2025, salaries and employee benefits expense increased by $12.4 million compared to the year ended December 31, 2024.

This increase was driven primarily by higher bonus and incentive compensation, reflecting the improvement in business activity over the prior year level, additional restricted stock expense from the initial public offering, as well as higher variable compensation related to the increase in mortgage production and higher medical insurance costs.

Base salaries and other compensation decreased by $691,000 for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This decrease was driven primarily by our strategic decision to private label ousource the non-specialized mortgage servicing business to a scaled sub-servicer.

Our average full time equivalent employees (FTE) for 2025 was 483 compared to 491 for 2024.

Occupancy and equipment expense decreased $2.5 million from 2023 to 2024 primarily due to lower building lease expense (down $1.4 million) as we downsized our facilities and personnel to align with lower production volume environment.

Data processing fees also decreased in 2024 by $2.1 million from 2023 to 2024 consistent with lower overall production volume as much of our data processing costs are unit based, so these costs decrease with mortgage volume.

Professional fees and other taxes and insurance expenses were relatively unchanged year over year, while other expenses decreased $6.7 million from 2023 to 2024.

Other expenses include several categories of expenses which are typically more tied to mortgage volumes, including marketing and credit reporting fees and the loan repurchase reserve expense.

For the year ended December 31, 2025, occupancy and equipment expense decreased by $1.0 million compared to the year ended December 31, 2024, driven primarily by lower lease expense as we leased out portions of our corporate space.

For the year ended December 31, 2025, professional fees increased by $2.1 million compared to the year ended December 31, 2024 primarily related to higher ongoing customary public company compliance costs.

For the year ended December 31, 2025, other taxes and insurance increased by $560,000 compared to the year ended December 31, 2024 driven primarily by higher FDIC assessment expense resulting from the growth in assets and continued utilization of capital.

For the year ended December 31, 2025, other noninterest expense increased by $841,000 compared to the year ended December 31, 2024, reflecting increased loan servicing expense related to the outsourcing of our non-specialty servicing business and higher loan repurchase reserve expense, partially offset by reductions in other categories, including marketing, loan collections and intangible amortization/impairment.

Preferred stock dividends and related costs

For the year ended December 31, 2025, preferred stock dividends and related costs were $11.8 million, an increase of $3.8 million, or 47.4%, from $8.0 million for the year ended December 31, 2024.

For the year ended December 31, 2025, this included $3.2 million in unamortized deal issuance costs related to the redemption of Series A preferred stock, along with a special one-time dividend of $2.50 per share, totaling $255,000, paid on June 30, 2025 on the Company’s Series A and Series B preferred stock.

The special dividend was paid in connection with amendments made to the Company’s Series A and Series B preferred stock to extend the registration rights agreements deadlines to January 2, 2026 for Series A and to January 2, 2027 for Series B.

Income tax expense

Total income tax expense was $17.7 million for 2024, compared to $10.9 million for 2023.

The effective tax rate was 24.31% for 2024 compared to 24.45% for 2023.

Total income tax expense was $27.0 million for the year ended December 31, 2025, compared to $17.7 million for the year ended December 31, 2024, primarily attributable to the increase in pretax net income.

The effective tax rate was 24.44% for or the year ended December 31, 2025 compared to 24.31% for or the year ended December 31, 2024.

Operating Segment Analysis

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Noninterest income (1)

84,958 6,022 90,980 67,505 5,418 72,923

Salaries and employee benefits (82,055) (8,116) (90,171) (72,348) (5,443) (77,791)

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Other noninterest expense (2)

(34,932) (676) (35,608) (31,796) (549) (32,345)

Noninterest expense (120,361) (8,867) (129,228) (108,511) (6,079) (114,590)

Expense allocation (3)

5,294 (5,294) — 3,419 (3,419) —

Net income before taxes 51,645 58,748 110,393 38,919 33,957 72,876

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Average balance sheet assets $ 3,579,184 $ 2,679,075 $ 6,258,259 $ 3,703,012 $ 1,418,411 $ 5,121,423

Period Ending Assets $ 3,513,191 $ 1,710,820 $ 5,224,011 $ 3,611,652 $ 1,146,826 $ 4,758,478

Period end assets $ 3,597,890 $ 3,424,935 $ 7,022,825 $ 3,513,191 $ 1,710,820 $ 5,224,011

(1) Noninterest income for MPP only includes MPP related fees.

All other noninterest income revenues are reflected in Retail Banking.

All other components of noninterest income are reflected in Retail Banking.

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

(3) Reflects corporate overhead expense allocations used by both business segments;

primarily consisting of corporate admin, finance, technology, human resources, risk, marketing and occupancy related allocations.

For 2024, our MPP segment reported net income before preferred dividends of $25.9 million, an increase of $8.5 million, or 48.6%, over the $17.4 million reported in 2023.

The increase was driven primarily by a 45.1% increase in average balances reflecting strong new customer acquisition and market share gains.

primarily consisting of corporate admin, finance, technology, human resources, risk, marketing, wire services and occupancy related allocations.

For the year ended December 31, 2025, our MPP segment reported net income before preferred dividends of $44.4 million, an increase of $18.5 million, or 71.3%, over the $25.9 million reported for the year ended December 31, 2024.

This increase was driven primarily by an 88.9% increase in average balances reflecting strong new customer acquisition and market share gains, partially offset by higher salaries and employee benefits related to the improvement in financial performance, as well as an increase in expense allocations.

Retail Banking

For 2024, our Retail Banking segment reported net income before preferred dividends of $29.2 million, an increase of $12.9 million, or 79.2%, over the $16.3 million reported in 2023.

The increase was driven primarily by lower noninterest expense, which outpaced the decrease in noninterest income and net interest income.

The decrease in noninterest expense reflects lower variable mortgage commissions and proactive expense management across the channel.

For the year ended December 31, 2025, our Retail Banking segment reported net income before preferred dividends of $39.0 million, an increase of $9.8 million, or 33.4%, over the $29.2 million reported for the year ended December 31, 2024.

This increase was driven primarily by higher noninterest income, reflecting higher gain on the sale of loans, and higher net interest income for the improvement in net interest margin and growth in AIO loans, partially offset by an increase in noninterest expense.

Discussion and Analysis of Financial Condition

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Equity and debt securities 6,085 9,881

Other securities 69,574 67,487

Loans and loans held for sale, net 4,633,637 4,121,347

Mortgage servicing rights 15,133 95,339

FHLB stock 80,109 69,574

Loans HFI and loans held for sale, net 6,320,305 4,633,637

Deposits 4,869,667 3,422,555

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Subordinated debentures 96,915 43,933

Total Equity Capital 462,490 430,620

Total stockholders' equity 569,042 462,490

Total assets were $7.02 billion at December 31, 2025, a 34.4% increase from $5.22 billion at December 31, 2024.

The $465.5 million increase in total assets from year end 2023 was primarily driven by higher net loans and loans held for sale, which increased by $512.3 million during 2024.

This $1.80 billion increase was primarily driven by higher loan balances, including loans HFI and loans held for sale, which increased by $1.69 billion during 2025.

Management believes that continued growth in MPP and AIO loans, competition for deposits, and change in interest rates represent the most significant trends affecting the Company’s financial condition, liquidity profile, and capital planning.

Loan Portfolio

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MPP 3,424,936 54.1 % 1,710,820 36.8 %

Total Loans Held for Investment 4,427,754 95.3 % 3,781,199 91.5 %

Total loans HFI 6,021,527 95.1 % 4,427,754 95.3 %

Loans held for sale 309,213 4.9 % 217,073 4.7 %

Total gross loans (HFI and HFS) $ 6,330,740 100.0 % $ 4,644,827 100.0 %

_____________________

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

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

Our loan portfolio includes both loans held for investment and loans held for sale.

Our loans held for investment portfolio comprises over 95% of our total loans and provides higher yields than other categories of earnings assets.

As evidence of our strong underwriting and diligent risk controls, our largest loan category, residential mortgages, has experienced very low net

charge-offs throughout our history, and our second largest loan category, MPP, has not experienced any charge-offs since we began this lending program in 2010.

Our loan portfolio includes both loans HFI and loans held for sale and over 99% of the portfolio is comprised of loans collateralized by residential real estate.

At December 31, 2025, our loans HFI portfolio represented 95.1% of our gross loans.

As evidence of our strong underwriting and diligent risk controls, our largest loan category, MPP, has not experienced any charge-offs since we began this lending program in 2010 and our second largest loan category, residential mortgages, has experienced very low net charge-offs throughout our history.

Our MPP business offers facilities to independent mortgage banking companies located around the country.

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We also have a smaller portfolio of construction loans, home equity lines of credit, and commercial loans, which combined represented less than 4% of the overall loan portfolio as of December 31, 2025.

As of December 31, 2024, our total loans net of allowance for credit losses including loans held for sale was $4.63 billion compared to $4.12 billion on December 31, 2023.

This loan growth was primarily attributable to the strong growth in MPP, which grew by 49.2% since December 31, 2023, reflecting the strength of scalable technology, long-standing strong relationships built by account executives since inception, as well as our ability to capitalize on recent market disruption within the business line.

Another key driver of our overall loan growth is growth in our AIO loans, which grew by 21.0% to $612.1 million as of December 31, 2024, from $506.0 million at December 31, 2023.

Prudently growing this portfolio and the associated loan customer relationships remains a key strategic priority for us.

As of December 31, 2024, residential mortgage comprised 41.9% of our total loan portfolio compared to 36.8% for MPP and 13.2% for AIO loans.

As of December 31, 2023, residential mortgage comprised 45.1% of our total loan portfolio compared to 27.7% for MPP and 12.2% for AIO loans.

The reduction in residential mortgages reflects normal amortization and pay-offs, as we are not strategically growing this portfolio.

At December 31, 2025, our total loans net of allowance for credit losses including loans held for sale was $6.32 billion compared to $4.63 billion on December 31, 2024.

This loan growth was primarily attributable to the strong growth in MPP balances, which increased by 100.2% from December 31, 2024, reflecting the strength of scalable technology, long-standing strong relationships built by account executives since inception, as well as our ability to capitalize on recent market disruption within the business line.

Another key driver of our overall loan growth is growth in our AIO loans, which increased by 19.7% to $732.6 million at December 31, 2025, from $612.1 million at December 31, 2024.

At December 31, 2025, residential mortgage loans comprised 28.0% of our total loan portfolio compared to 54.1% for MPP and 11.6% for AIO loans.

As of December 31, 2024, residential mortgage loans comprised 41.9% of our total loan portfolio compared to 36.8% for MPP and 13.2% for AIO loans.

The reduction in residential mortgage loans as a percentage of total loans reflects normal amortization and pay-offs, as we continue to focus on growing our two main portfolios, AIO and MPP.

Outside of these two portfolios, no other significant loans are being added to the loans HFI portfolio.

While MPP represents a significant and growing portion of our loan portfolio, management actively monitors concentration risk, liquidity characteristics, and counterparty exposure associated with this business line.

Contractual Maturities and Rate Structures of Loan Portfolio

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MPP — 3,424,936 — — — — — — 3,424,936

Total Loans Held for Investment:

12,794 1,718,456 467 787 15,770 14,294 401,622 2,263,564 4,427,754

Total loans HFI 3,543 3,439,980 850 339 13,705 12,989 402,757 2,147,364 6,021,527

Retail loans held for sale — — — — 1,987 — 301,337 5,889 309,213

— — — — — — 210,766 6,307 217,073

Total gross loans (HFI and HFS) $ 3,543 $ 3,439,980 $ 850 $ 339 $ 15,692 $ 12,989 $ 704,094 $ 2,153,253 $ 6,330,740

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MPP — 1,710,820 — — — — — — 1,710,820

Total Loans Held for Investment:

26,590 1,163,803 4,816 1,105 12,622 14,361 387,166 2,170,736 3,781,199

Total loans HFI 12,794 1,718,456 467 787 15,770 14,294 401,622 2,263,564 4,427,754

Retail loans held for sale — — — — — — 210,766 6,307 217,073

— — — — 2,694 — 332,135 17,614 352,443

Total gross loans (HFI and HFS) $ 12,794 $ 1,718,456 $ 467 $ 787 $ 15,770 $ 14,294 $ 612,388 $ 2,269,871 $ 4,644,827

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Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

As of December 31, 2024, 37.3% of our total loan portfolio had a contractual maturity of less than one year, up from 28.8% at December 31, 2023.

The increase was primarily due to growth in our MPP business over this period.

At December 31, 2025, 54.4% of our total loan portfolio had a contractual maturity of less than one year, up from 37.3% at December 31, 2024.

This increase was driven primarily by the strong growth in our MPP business over the period.

Our MPP facilities are floating rate and generally have terms of 30 days or less given that is the time period that a funded mortgage stays in our mortgage banking clients facility prior to the sale of the mortgage in the secondary market.

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As of December 31, 2025, 45.1% of total loans had contractual maturities of longer than 15 years, compared to 62.1% at December 31, 2024.

For our two largest categories of long duration loans as of December 31, 2024, 80.5% of residential mortgage and 100% of our AIO Loans were floating rate.

Within our two largest categories of longer duration loans, 77.0% of residential mortgage and 100% of our AIO Loans were floating rate at December 31, 2025.

Nonperforming Assets

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At December 31, 2025, nonperforming assets were $92.7 million, compared to $82.0 million at December 31, 2024.

The increase in nonperforming assets was primarily driven by higher levels of loans that are wholly or partially guaranteed by the U.S.

Government along with normal aging in the residential mortgage portfolio which contributed to higher nonperforming first liens and HELOCs.

Nonperforming assets as a percent of total assets was 1.57% at December 31, 2024 compared to 1.31% at December 31, 2023.

The increase in nonperforming assets was primarily driven by normal aging in the residential mortgage portfolio which contributed to higher nonperforming first liens and HELOCs.

Nonperforming assets as a percent of total assets decreased to 1.32% at December 31, 2025 compared to 1.57% at December 31, 2024, reflecting the growth in our MPP portfolio which does not have any non-performing assets.

Excluding the portion of our loans that are wholly or partially guaranteed by the U.S.

Government, nonperforming assets to total assets increased to 0.95% at December 31, 2024, compared to 0.52% at December 31, 2023.

Government, nonperforming assets to total assets decreased to 0.92% at December 31, 2025, compared to 0.95% at December 31, 2024.

At December 31, 2025, approximately 31% of our nonperforming loans have a form of government guarantee.

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Allowance for Credit Losses and Net Charge-Offs

The allowance for credit losses is established through a provision for credit losses charged to operations.

The ACL is established through a provision for credit losses charged to operations.

Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely.

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This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

While the entire allowance for credit losses is available to absorb losses from all loans, the following table represents management’s allocation of our allowance for credit losses by loan category, and the percentage of allowance for credit losses in each category, for the periods indicated:

While the entire ACL is available to absorb losses from all loans, the following table represents management’s allocation of our allowance for credit losses by loan category, and the percentage of allowance for credit losses in each category, for the periods indicated:

(Dollars in thousands) December 31, 2025 December 31, 2024

Total Dollars % of

Collectively Allocated for Impairment:

Collectively evaluated for impairment:

Commercial $ 61 0.6 % $ 32 0.3 %

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10,119 97.0 % 10,189 91.1 %

Individually Allocated for Impairment 995 8.9 % 150 1.2 %

Individually evaluated for impairment 311 3.0 % 995 8.9 %

Unallocated 5 — % 6 0.1 %

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

(Dollars in thousands) For the Years Ended

For the Year Ended

December 31, 2025 December 31, 2024

Activity % of Average Loans

Investment Activity % of Average Loans

Loans held for investment $ 4,427,754 $ 3,781,199

HFI Activity % of Average Loans

Loans HFI $ 6,021,527 $ 4,427,754

Loans HFI (excluding fair value loans) $ 5,842,949 $ 4,254,794

Beginning allowance for credit losses 11,190 12,295

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Provision for credit losses 2,153 881

Impact of Adopting ASC 326 — 9,307

Ending allowance for credit losses $ 10,435 $ 11,190

Allowance for credit losses to loans held for investment 0.25 % 0.33 %

Allowance for credit losses to loans HFI 0.17 % 0.25 %

Allowance for credit losses to loans HFI (excluding fair value loans) 0.18 % 0.26 %

Net charge-offs (recoveries) to average loans 0.05 % 0.04 %

The allowance for credit losses was 0.17% of total loans as of December 31, 2025 compared to 0.25% as of December 31, 2024.

Management estimates the allowance by using relevant available information from internal and external sources related to historical loss experience, current borrower risk characteristics, current economic conditions, reasonable and supportable forecasts, and other relevant factors.

This ratio includes MPP balances, which carry significantly lower reserves given the lack of loss history, and fair value loans, which are reserved for outside of the estimation of the ACL.

forecasts, and other relevant factors.

The allowance is measured on a collective or pool basis when similar risk characteristics exist or on an individual basis when loans have unique risk characteristics which differentiate them from other loans within the loan segment.

The process for estimating credit losses incorporates methodologies and procedures specific to the residential and

commercial loan portfolios, each of which has unique risk characteristics.

Our allowance for credit losses methodology is described in more detail in Note 2 of the Notes to Consolidated Financial Statements.

Our allowance for credit losses, and associated percentage of total loans, reflect the relative credit risk of our loan portfolio.

The process for estimating credit losses incorporates methodologies and procedures specific to the residential and commercial loan portfolios, each of which has unique risk characteristics.

Our ACL methodology is described in more detail in Note 1 of the Notes to Consolidated Financial Statements.

Our ACL, and associated percentage of total loans, reflect the relative credit risk of our loan portfolio.

These include the seasoning of the portfolio, LTV, FICO score, debt to income ratio (“DTI”) and collateral coverage.

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We also have purchased mortgage insurance on certain high loan to value loans, further minimizing our loss potential on those loans.

Since 2019, our cumulative charge-offs, net of recoveries, totaled $3.1 million.

Our annualized net charge-off rate was 0.04% for 2024 and 0.02% for 2023.

Our annualized net charge-off rate was 0.05% for the year ended December 31, 2025 and 0.04% for the year ended December 31, 2024.

Mortgage Servicing Rights

Mortgage servicing rights are the contractual agreement to service existing mortgage loans held by other investors.

Mortgage servicing rights were most typically created on mortgages that were originated by the Company but sold to third parties.

Additionally, a small portion of our mortgage servicing rights were acquired from other mortgage originators.

The mortgage servicing asset represents future cash flows the Company expects to receive from the mortgage for which it has the contractual right to service.

Mortgage servicing rights totaled $15.1 million at December 31, 2024, a substantial decrease from $95.3 million at December 31, 2023.

The decrease in 2024 was due to the Company’s strategic decision to sell the majority of its mortgage servicing rights portfolio.

During 2024, we performed one bulk sale of mortgage servicing rights.

The associated fair value of the assets and proceeds from the sale was $81.9 million.

MSRs are the contractual agreement to service existing mortgage loans held by other investors.

MSRs were most typically created on mortgages that were originated by the Company but sold to third parties.

Additionally, a small portion of our MSRs were acquired from other mortgage originators.

The MSR asset represents future cash flows the Company expects to receive from the mortgage for which it has the contractual right to service.

MSRs totaled $17.0 million at December 31, 2025, up from $15.1 million at December 31, 2024, but well below prior year historical levels.

In 2024, the Company made a strategic decision to sell the majority of its mortgage servicing portfolio.

Since then, the MSR portfolio and related assets have grown slightly, with that growth coming from new loans sold servicing retained.

Investment Portfolio

The Company has historically maintained a very small debt securities portfolio relative to other banking institutions preferring to invest in highly liquid loans or hold its liquidity in cash or cash equivalents.

At December 31, 2024, debt securities totaled $8.6 million, or 0.16%, of total assets compared to $14.7 million, or 0.31% at December 31, 2023.

The Company has historically maintained a very small debt securities portfolio relative to other banking institutions, as our strategy remains to invest in highly liquid loans or hold liquidity in cash or cash equivalents.

At December 31, 2025, debt securities totaled $4.7 million, or 0.07%, of total assets compared to $8.6 million, or 0.16% of total assets at December 31, 2024.

This decrease in balances from December 31, 2024 was due to the sale of a $4.0 million corporate bond during the third quarter of 2025.

This bond was sold at par, resulting in no realized gain or loss on the sale.

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

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Deposits are the primary source of funding our business operations.

As of December 31, 2024, total deposits were $3.42 billion compared to $2.93 billion at December 31, 2023.

The $497.0 million, or 17.0%, increase in our deposits from year end 2023 reflects higher time deposits and demonstrates our ability to quickly scale up our deposit base to respond to market opportunities through interest bearing demand, brokered, rate board and retail CDs.

At December 31, 2025, total deposits were $4.87 billion, compared to $3.42 billion at December 31, 2024.

This $1.45 billion, or 42.3%, increase in deposits was driven primarily by a higher level of brokered CDs, and growth in our diversified digital deposit banking platform including two new deposit relationships added during 2025.

During 2025, we completed an initiative to onboard a new custodial account relationship, totaling approximately $250 million in new interest bearing demand deposits.

In addition, we added a new deposit platform providing an additional $251 million in interest bearing demand deposits at December 31, 2025.

The growth in deposits during 2025 demonstrates our ability to quickly scale up our diversified digital deposit base and respond to market opportunities to fund stronger loan growth.

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

For the Year Ended For the Year Ended

(Dollars in thousands) December 31, 2025 December 31, 2024

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Over 12 months 8,214

Another key source of funding for the Company are collateralized borrowings from the FHLB.

Another key source of funding for us are collateralized borrowings from the FHLB.

At December 31, 2025, our total FHLB borrowings were $1.42 billion, up $163.8 million from $1.26 billion at December 31, 2024.

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During the fourth quarter of 2024, we paid off a $50.0 million FHLB advance, recognizing a $1.7 million gain on debt extinguishment.

We executed another early payoff of $102.5 million in FHLB advances in January 2025, recognizing a gain of $2.0 million.

These extinguishments were funded through our receipt of new contractual interest bearing deposits with a similar duration.

We executed another early payoff of $102.5 million in FHLB advances in the first quarter of 2025, recognizing a gain of $2.0 million.

Both of these extinguishments were funded through our receipt of new contractual interest bearing deposits with a similar duration.

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

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Weighted average rate paid 3.91 % 3.82 %

We also have a $20.0 million unsecured line of credit with another financial institution that we utilize for holding company liquidity needs.

The line of credit carries a floating rate (7.37% at December 31, 2025) and is subject to annual renewal and matures on October 21, 2026.

This line had a balance of $17.0 million at December 31, 2025 and no balance at December 31, 2024.

Subordinated Debentures and Subordinated Debentures Issued through Trusts

At December 31, 2025, we had $95.0 million in outstanding subordinated debenture notes.

These notes were issued to investors in two separate private placements, one in 2018 and one in 2024.

The two outstanding subordinated notes totaling $40.0 million qualified as Tier 2 capital at our Bank entity.

These notes were issued to investors in two separate private placements, one in 2024 and one in late 2025.

We also had a $15.0 million subordinated note issued in 2018, which was redeemed and repaid in the first quarter of 2025.

The remaining two outstanding subordinated notes

totaling $95.0 million at December 31, 2025 qualified as Tier 2 capital at our Bank entity.

See also “Recent Developments” in this Item 7 for further discussion about the 2025 issuance of subordinated debentures.

At December 31, 2024, we had $40.0 million in outstanding subordinated debenture notes.

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The two outstanding subordinated notes totaling $40.0 million at December 31, 2024 qualified as Tier 2 capital at our Bank entity.

At December 31, 2024, and 2023 we had $5.0 million in subordinated debentures issued through trusts due on March 17, 2034, but callable on March 17, 2025, which qualified as Tier 1 capital at our Bank entity.

At December 31, 2025, and 2024 we had $5.0 million in subordinated debentures issued through trusts due on March 17, 2034, but callable on March 17, 2025, which qualifies as Tier 1 capital at our Bank entity.

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

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

Subordinated Notes and Subordinated Debentures issued through Trusts at December 31, 2025

(Dollars in thousands) Issuance Date Amount of

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Subordinated notes:

Fixed to Floating due 2028 (NPB) September 28, 2018 $ 15,000 8.718%

(3 mo SOFR + 4.03)% January 1, 2025 October 1, 2028

Fixed to Floating due 2034 (NPBI) August 22, 2024 25,000 9.00% (fixed) September 1, 2029 September 1, 2034

Fixed to floating due 2034

August 22, 2024 $ 25,000 9.00% (fixed) September 1, 2029 September 1, 2034

Fixed to floating due 2035 December 9, 2025 70,000 7.50% (fixed) December 15, 2030 December 15, 2035

Subordinated debentures issued through trusts:

Trust Preferred due 2034 (NPBI) March 17, 2004 5,000 7.74%

Trust preferred due 2034

March 17, 2004 5,000 6.70%

(3 mo SOFR + 2.79)% March 17, 2026 March 17, 2034

Unamortized issuance costs (3,085)

Subordinated Notes and Subordinated Debentures issued through Trusts as of December 31, 2023

Subordinated Notes and Subordinated Debentures issued through Trusts at December 31, 2024

(Dollars in thousands) Issuance Date Amount of

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Subordinated notes:

Fixed to Floating due 2028 (NPB) September 28, 2018 $ 15,000 9.29%

Fixed to floating due 2028 (issued at Bank) September 28, 2018 $ 15,000 8.718%

(3 mo SOFR + 4.03)% January 1, 2025 October 1, 2028

Fixed to Floating due 2029 (NPBI) September 19, 2019 20,000 6.00% (fixed) September 30, 2024 September 30, 2029

Fixed to floating due 2034 August 22, 2024 25,000 9.00% (fixed) September 1, 2029 September 1, 2034

Subordinated debentures issued through trusts:

Trust Preferred due 2034 (NPBI) March 17, 2004 5,000 8.38%

Trust preferred due 2034 March 17, 2004 5,000 7.74%

(3 mo SOFR + 2.79)% March 17, 2025 March 17, 2034

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Impact of Inflation and Changing Prices

The Company’s financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).

GAAP presently requires the Company to measure financial position and operating results primarily in terms of historic dollars.

The Company’s financial statements included herein have been prepared in accordance with GAAP which presently requires the Company to measure financial position and operating results primarily in terms of historic dollars.

Changes in the relative value of money due to inflation or recession are generally not considered.

The primary effect of inflation on the operations of the Company is reflected in increased operating costs, and the Company has experienced material effects of inflation during the last four fiscal years due to the government's monetary policies and the current economic climate.

In management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate.

In management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree

than changes in the inflation rate.

While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate.

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Failure to meet minimum regulatory capital requirements may result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, our Bank must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and off-balance sheet items as calculated under regulatory accounting policies.

As of December 31, 2025, we and our Bank exceeded all applicable minimum regulatory capital requirements, including the capital conservation buffer applicable to our Bank, and our Bank qualified as “well-capitalized” for purposes of the FDIC’s prompt corrective action regulations.

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2025 December 31,

Commitments to fund loans held for investment $ 2,407,551 $ 3,373,318

Commitments to fund loans HFI $ 4,161,523 $ 2,407,551

Unused Commitments 371,034 334,180

Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss due to changes in market values of assets and liabilities.

We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads.

We have identified interest rate risk as our primary source of market risk.

Our primary business activities include gathering retail deposits, non-brokered rateboard time deposits, brokered CDs, and funding from the FHLB and other smaller facilities, which are used to invest in cash and loans.

These activities involve interest rate risk, which arises from factors such as timing and volume differences in the repricing of our rate-sensitive assets and liabilities, changes in credit spreads, fluctuations in the general level of market interest rates, and shifts in the shape and level of market yield curves.

Changes in interest rates can affect our current and prospective earnings, through volatility in our net interest income and the level of other interest rate-sensitive revenues and operating expenses.

Interest rate fluctuations can also influence the underlying economic value of our assets, liabilities and off-balance sheet items.

This is driven by the fact that the present values of future cash flows, and potentially the cash flows themselves, may change when interest rates materially move up or down depending on the economic environment.

Interest rate risk is generally considered a significant market risk for financial institutions.

The Bank’s Asset Liability Committee (“ALCO”) establishes broad policy limits with respect to interest rate risk.

We have established a system for monitoring our net interest rate sensitivity positions.

Our ALCO meets monthly to monitor the level of interest rate risk sensitivity to ensure compliance with the risk and policy limits.

Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

However, it is important to note that despite these measures, significant changes in interest rates could potentially impact our earnings, liquidity and capital positions.

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

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

We use interest rate risk models and rate shock simulations to assess the interest rate risk (“IRR”) sensitivity of net interest income and the economic value of equity (“EVE”) over a variety of parallel and non-parallel rate scenarios.

A number of assumptions are used to calculate the impact of interest rate fluctuations on our net interest income, including asset prepayment speeds, non-maturity deposit price sensitivity, and decay rates.

Due to the inherent use of estimates and assumptions in the model, our actual results may, and most likely will, differ from our simulated results.

Any key model or input changes are reported to ALCO monthly.

Management engages a third-party to review its IRR assumptions on an annual basis.

Key findings are presented to ALCO.

The interest rate sensitivity analyses discussed below are hypothetical in nature and are not intended to predict actual results.

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

(Shock in basis points) Net Interest Income

12 Month Projection

-200 -100 +100 +200

December 31, 2025 -7.71 % -3.80 % 4.03 % 8.13 %

December 31, 2024 -8.91 % -4.35 % 5.24 % 10.36 %

We also model the impact of interest rate changes on our EVE.

We base the modeling of EVE on interest rate shocks as shocks are considered more appropriate for EVE, which accelerates future interest rate risk into current capital via a present value calculation of all future cash flows from our Bank’s existing inventory of assets and liabilities.

The results from our EVE modeling reflect only assets and liabilities that exist on our balance sheet in that period, and do not incorporate the large increases to noninterest income we generate when industry residential loan originations are significantly higher.

The results of the model are presented in the table below:

(Shock in basis points) Economic Value of Equity Sensitivity

-200 -100 +100 +200

December 31, 2025 -0.90 % 0.06 % -0.32 % -0.87 %

December 31, 2024 2.13 % 2.53 % -1.88 % -4.30 %

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis