Northpointe Bancshares - Earnings Call - Q2 2025

Executive Summary

• EPS of $0.51 rose 4.1% q/q and 15.9% y/y; Operating Revenue of $58.4M exceeded S&P Global consensus ($56.7M) and EPS slightly topped consensus ($0.505). Values retrieved from S&P Global.*
• Net interest margin expanded 9 bps q/q to 2.44% while the efficiency ratio improved to 53.80%, reflecting operating leverage from MPP and AIO mix shifts.
• MPP delivered record volume: $9.00B loans funded; period-end MPP balances climbed to $2.89B, with deposit growth primarily via brokered CDs; management expects ~$250M custodial deposits in Q3 to lower wholesale funding reliance.
• Asset quality remained solid: net charge-offs at 4 bps annualized; NPAs decreased sequentially on an excluding-guaranteed basis; allowance stable at 0.23% of loans.
• Catalysts: raised MPP balance outlook for Q3/Q4, maintained NIM guidance with lower-end bias, and increased full-year non-interest expense guidance (reflecting higher variable comp tied to strong activity).

What Went Well and What Went Wrong

What Went Well

• Record MPP performance and capacity expansion: “We funded over $9 billion in loans…highest quarterly level ever,” with average balances +$759M q/q and period-end +$423M (69% annualized).
• Margin and operating efficiency improved: NIM rose to 2.44% (+9 bps q/q), efficiency ratio improved to 53.80% from 55.15% q/q as mix shifted toward higher-yielding MPP/AIO and funding costs eased.
• Mortgage banking strength: Net gain on sale of loans rose to $19.4M (vs. $18.6M Q1; $13.7M Q2’24) driven by higher saleable locks/originations and favorable fair value marks; CEO emphasized “robust growth” in MPP and retail origination momentum.

What Went Wrong

• Non-interest income down q/q due to absence of prior quarter’s $2.0M FHLB extinguishment gain; loan servicing fees also below Q2’24 given prior MSR sale.
• Non-interest expense up $2.4M q/q (salaries/benefits and professional fees), reflecting variable mortgage compensation and public company costs.
• Higher wholesale funding dependency: wholesale funding ratio rose to 70.71% (66.59% in Q1), with brokered CDs the primary funding source for MPP growth; management seeks to offset with custodial deposits.

Transcript

Speaker 2

Greetings. Welcome to Northpointe Bancshares, Inc. Q2 2025 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Brad Howes, Chief Financial Officer. Thank you. You may begin.

Speaker 4

Thank you, John. Good morning. Welcome to Northpointe's second quarter 2025 earnings call. My name is Brad Howes, and I am the Chief Financial Officer. With me today are Charles Williams, our Chairman and CEO, and Kevin Comps, our President. Additional earnings materials, including the presentation slides that we will refer to on today's call, are available on Northpointe's Investor Relations website at ir.northpointe.com. As a reminder, during today's call, we may make forward-looking statements, which are subject to risk and uncertainty and are intended to be covered by the safe harbor provisions of Federal Securities Law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in both our earnings release and presentation slides.

The agenda for today's call will include prepared remarks, followed by a question and answer session, and then closing remarks. With that, I'll turn the call over to John.

Speaker 0

Thank you, Brad. Good morning, everyone, and thanks for joining. Before I begin, I'd like to thank our Northpointe team for their incredible dedication to our bank and their unwavering commitment to our clients and customers. This is now our second quarter end since the IPO in January, and I'm very pleased with the momentum we've gained and how we have continued to execute on our strategic plan. Before I turn the call over to Kevin and Brad to dive into the details, I'd like to take a moment and share some highlights from our financial and operating performance. On slide four, we lay out our performance for the second quarter of 2025. For the quarter, we earned $18 million or $0.51 per diluted share.

As you can see, all of our performance ratios improved from the first quarter level, highlighted by a 1.34% return on assets and a 14.49% return on average common equity. We also increased tangible book value per share by over 14% annualized, which reflects the strong financial performance and organic capital we generated during the quarter. Let me start with an update on the Mortgage Purchase Program, or MPP, which is our distinctive alternative to the traditional warehouse lending model. We saw another quarter of exceptional performance in the MPP business, with a period-ending balance growth of $423 million and an average balance growth of $759 million over the prior quarter. We funded over $9 billion in loans through the channel in the second quarter, which is the highest quarterly level ever for Northpointe. Overall, we're very pleased with the success and growth trajectory of the MPP business.

Through two quarters, we are slightly ahead of the balance sheet growth we outlined during the IPO and have also outpaced our initial projections in terms of facility commitment, which positions us nicely for continued success. Total period-ending balances were $2.9 billion as of June 30, 2025. With the recent success and commitment growth I just outlined, we believe we're in a good position to exceed our original growth forecast. Brad will provide additional guidance during these remarks. Our first-lien home equity loan business, which is tied seamlessly to a demand sweep account through our proprietary technology, continues to grow as well. For the quarter, these loans increased by just shy of $20 million, which is a 12% annualized growth rate. Our retail lending channel closed over $665 million in residential mortgages during the quarter, which was in line with our forecast.

Our retail origination staff continues to excel, even in the current rate environment, which has remained within a relatively tight band during 2025. Regardless of what happens to rates going forward, we will continue to take our share of the industry mortgage business, and we are well positioned to quickly capitalize on mortgage volumes should rates decline. Lastly, we recently completed an agreement to bring in approximately $250 million in new custodial deposits, which is expected to occur during the third quarter of 2025. This is an important part of our overall funding strategy, as these types of agreements help bolster our core deposits and reduce the reliance on wholesale funding. During the IPO, we said that we would look for ways to grow our non-broker deposits with the mortgage verticals we operate in.

This transaction helps that, and we will continue to explore similar types of relationships and opportunities to add core deposits. With that, I'd like to now turn it over to Kevin to talk about our business lines. Kevin.

Speaker 3

Thanks, Chuck. Good morning, everyone. On slide five, we highlight our MPP business, which is onboarding and project warehouse lending. We utilize our proprietary state-of-the-art technology stack to offer our purchase program to mortgage bankers nationwide. As Chuck highlighted, we built off the success in the first quarter and have carried that momentum into the second quarter. Period-end balances increased by $423 million, or 69% annualized. Let me break that graph down a little further for you. First, we increased facility size for five existing clients, which totaled $215 million in additional capacity. Second, there were three clients, new clients brought in, which totaled $500 million in additional capacity. Third, we saw a slight increase in the overall utilization of our existing clients. During the second quarter, we had average MPP participations of $8 million.

Participations remain an important component of our overall strategy, as they help expand that interest margin and manage the balance sheet within our capital framework. On a year-to-date basis, period-end MPP balances have increased by $1.2 billion, which is slightly above our plan. Average balances will vary a bit more due to the timing of funding and payoffs, but are largely in line with expectations. We continue to generate strong returns on the business, with average yields of 7.07% during the quarter. If you include fees, yields increased to 7.23%. This quarter, we funded the majority of that growth with brokered CDs. Average funding costs have remained in the mid-fours, giving us a fee-adjusted spread of close to 2.75%. I'd expect this trend to continue or improve slightly for the remainder of 2025.

Now turning to retail banking on slide six, I'd like to highlight the results of the three main businesses within that segment. Starting with residential lending, which includes both our traditional retail and our consumer direct channels, we continue to perform well and take our share of industry volume. We originated $665.5 million in mortgages during the second quarter, of which we sold $589.6 million. This represents approximately 89% of the total production in the quarter, which is similar to last quarter. Of that, 78% was in our traditional retail channel and 22% was in consumer direct. In the second quarter, we sold approximately 80% of our saleable mortgages service released, which is consistent with the prior quarter percentage. Additionally, 72% of our overall production was purchased business in the second quarter, flat from the first quarter level.

Within our healthcare investment portfolio, we continue to originate and retain the first-lien home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans. For the quarter, we earned $19.6 million in net gain on sale of loans. That amount includes share value increases on the healthcare investment loan portfolio and the lender risk account, which Brad will cover in more detail. We continue to look for opportunities to create additional efficiencies using technology and hire new talented lenders within the channel. In the second quarter, we hired three new mortgage originating professionals to help us continue our growth within the retail lending channel. In the middle of slide six, we highlight our digital deposit banking channel, where we feature our direct-to-customer platform and competitive product suite.

Our funding strategy and deposit franchise are much different than those of a typical community bank. We believe our strategy is quite simple but very effective. We ended the second quarter of 2025 with $4.5 billion in total deposits. The breakdown of these deposits is detailed in the appendix on slide 12. The majority of our deposit growth compared to the prior quarter was from brokered CDs, which we used to fund the strong growth in MPP. The remainder of our deposit products were down slightly from the prior quarter. Non-interest-bearing demand deposits include custodial deposits and deposit balances from our MPP clients. On the custodial side, there tends to be a little more variability in the quarter-end deposit balances, which showed the late quarter decrease. Custodial deposits remain a critical piece of our funding strategy and a key benefit of our servicing business.

As Chuck mentioned, we'll be bringing over $250 million in new custodial deposits during the third quarter of 2025. A portion of these balances have already come over in July. We do not anticipate any significant changes to the overall cost of funds, but these deposits will help lower our wholesale funding ratio in the third quarter and beyond. On the right side of slide six, we highlight our specialty mortgage servicing channel, where we focus on servicing first-lien home equity lines tied seamlessly to demand deposit sweep accounts, including what we commonly refer to as AIO loans. On the last quarter of this call, I highlighted our strategy to private-label outsource the non-specialized mortgage servicing to a skilled self-servicer. That work has been completed, and we are now realizing those cost savings.

Excluding a $300,000 negative adjustment on the change in fair value to MSR, we earned $1.8 million in loan servicing fees for Q2, which is up slightly over the prior quarter level. Including loans we outsource to a self-servicer, we service 12,700 loans for others, with a total UPV of $4.0 billion as compared to the second quarter of 2025. We also started servicing for two additional new investors, the first-lien home equity lines tied seamlessly to demand sweep account-type of products during the quarter. Coming lastly, the asset quality on slide seven, which remains one of the largest risks for any bank and one we continue to monitor very closely. Similar to what you are likely hearing from peers, our asset quality metrics remain solid. We are not seeing any systemic credit quality or borrower issues, with the small amount of charge-offs we are taking coming from isolated circumstances.

Last quarter, I discussed the increase in delinquent loans, which were partially attributable to the transfer of loans to a skilled self-servicer during the quarter. The majority of these have since been made current, paid off, or converted to permanent financing and sold, which helped drive the decrease in non-performing assets and loans past due 31 to 89 days from the prior quarter. Now I'll provide some additional details on our asset quality. We have a very sophisticated and granular allowance for credit loss process, and we spend a great deal of time analyzing the various risks. Our allowance for credit losses was $12.4 million in the second quarter of 2025, which reflects our disciplined underwriting, diligent risk control, and low levels of loss history. As you can see at the bottom of slide seven, our net charge-offs remain historically low.

For the second quarter of 2025, our net charge-offs were $488,000, or 4 bps of average loan out of investment. Virtually all of our loan portfolio is backed by residential real estate, which typically carries much lower average loss rates than other asset classes. At June 30, 2025, MPP represented 49.6% of all loans, and we've continued to experience pristine credit quality in that portfolio. Our residential mortgage portfolio is also high quality, seasoned, and geographically diverse. At June 30, 2025, our average FICO was 751, and our average LTV when you factor in mortgage insurance was 72%. I'd now like to turn the call over to Brad to cover the financials.

Speaker 4

All right. Thank you, Kevin. As I go through today's slide presentation, I will be incorporating full-year 2025 guidance into my commentary. Let's begin on slide eight. We've reported the second quarter of 2025 net income of $18 million or $0.51 per diluted share. This is up from $15 million in the first quarter of 2025 and $11.4 million in the second quarter of 2024. Our performance ratios all improved for the second straight quarter, with a 1.34% ROA, a 14.49% return on average tangible common equity, and a 53.8% efficiency ratio. As a reminder, our non-GAAP reconciliation on slide 14 provides the details of the calculations and a reconciliation to the comparable GAAP measure for all our non-GAAP metrics. Net interest income increased by $6.1 million over the prior quarter level.

This reflects the significant growth in MPP average balances, along with a nine basis point improvement in net interest margin from the prior quarter. Our yield on interest earning assets benefited from the continued improvement in the mix of loans within the healthcare investment portfolio. We continue to experience strong growth in MPP and AIO loans, both of which carry higher average yields than the remainder of the loan portfolio. Our cost of funds also decreased by three basis points from the prior quarter. This improvement reflects lower costs on our money market savings and retail CDs, partially offset by the lower average balance of non-interest earning deposits that Kevin highlighted. Our net interest margin was 2.44% for the second quarter. I'd expect us to stay in the 2.45% to 2.55% range for the full year of 2025, but likely at the lower end of the range.

My guidance is predicated on some recent trends that we've seen, including slightly lower MPP yields, slightly higher brokered CD costs, and lower balances of non-interest earning deposits. I would expect some of these trends will improve over the remainder of 2025, but if they do not, we would likely fall in the lower range of my margin guidance. Average interest earning assets increased by $766 million from the prior quarter, given the strong growth in MPP loans and continued runoff of the residential mortgage and construction loan portfolios. With all the positive momentum in that business that Chuck outlined, we are increasing our overall MPP guidance for 2025. I'd expect our Mortgage Purchase Program (MPP) loan balances to increase between $3.1 billion and $3.3 billion for Q3 2025, and that increase to between $3.3 billion and $3.5 billion for Q4 2025.

I would also expect a similar growth rate for average balances. We are not making any changes to our AIO loan balance guidance for the year end of 2025, which I'd expect to increase by between 7% and 11% from the June 30, 2025 level. Excluding MPP and AIO loans, I'd expect the rest of the loan portfolio to continue to decrease by between 5% and 8% from the June 30, 2025 level. We had a provision for credit losses of $583,000 in the second quarter of 2025, which is down from $1.3 million in the prior quarter. Let me break that down for you. A larger driver is the decrease in total delinquent and non-performing loans Kevin discussed.

We also saw the continued runoff of residential mortgage and construction loans, both of which carry higher average loss rates than MPP or AIO loans, which is where all our new growth is coming from. These improvements were partially offset by a worsening of the macroeconomic forecast, including the impact of tariffs, home prices, unemployment, and interest rates. We continue to experience a relatively low level of charge-offs, and I expect that trend to continue with any additional provision being driven by loan growth, credit migration trends, and changes in the economic forecast. Our non-interest income decreased by $435,000 from the prior quarter, which was driven primarily by a lower level of fair value gains and a decrease in other income, reflecting a gain of $2 million on the extinguishment of Federal Home Loan Bank borrowing in the first quarter of 2025.

We've added news out to the appendix on slide 13, which prints out three of our fair value assets and their associated quarterly increases and decreases. These assets tend to move up or down with interest rates and are not part of my revenue guidance each quarter. Net gain on the sale of loans was $19.4 million for the second quarter of 2025. It includes capitalization of new MSRs, changes in fair value of loans, and gains on the sale of those loans. For the second quarter, it included a $1.3 million increase in the fair value of loans to healthcare investment and a $497,000 increase in the fair value of our lender risk account with the Federal Home Loan Bank.

The change in fair value of loans to healthcare investment included an increase of $1.4 million, which is related to the agreement to sell $40.3 million of non-AIO home equity loans during the quarter. Excluding all these items, net gain on the sale of loans would have been $17.5 million, which is up from $14.9 million on a comparable basis in the first quarter of 2025. The remainder of the fair value changes within the net gain on sale of loans line item relate to regular hedging and capital market activities within our mortgage banking business, including an engaging in fair value of the locked pipeline. For 2025, we are forecasting total saleable mortgage origination to $2.1 to $2.3 billion. This estimate assumes no significant movement in mortgage rates over the remainder of the year.

Based on the volume trends we're seeing today, I'd expect that we would be towards the lower end of the saleable mortgage origination range. Consistent with last quarter's call, I'd expect to earn an all-in margin of 275 to 325 bps on those saleable mortgages. This guidance is a blend of our traditional retail and consumer direct channels, as well as loans to servicing release or servicing retain. It also includes the benefit of any new lender risk account receivable created by selling loans to the Federal Home Loan Bank. It does not, however, include any fair value changes on our loans to healthcare investment portfolio or any fair value changes on the FHLB lender risk account. For the second quarter, our date-of-sale margin exceeded the 2.75% to 3.25% range, and I'd expect our whole-year margin will come in towards the upper end of that range.

MPP fees increased by $214,000 from the prior quarter, driven by the strong level of purchases. As to any change in our participation balances, I'd expect MPP fees to continue to increase from their current run rate and range to the level of between $5 to $6 million for the year. Loan servicing fees were $1.5 million for the second quarter of 2025 and included a fair value decrease of $302,000 on the MSR asset. Excluding that decrease, loan servicing fees were $1.8 million for the quarter. I'd expect that quarterly run rate to increase slightly over the remainder of 2025 as we continue to modestly increase the size of the servicing portfolio. Non-interest expense was up $2.4 million from the prior quarter, driven primarily by higher salaries and benefits and professional fees.

Salaries and benefits expense increased $1.8 million over the prior quarter, driven primarily by the $1.7 million increase in variable mortgage compensation, which was consistent with the left quarter increase in mortgage production. Professional fees increased by $565,000 on a leap quarter basis, driven primarily by higher public company compliance costs. For 2025, I'd expect total annual non-interest expense in the range of $128 to $132 million. This increase from my prior guidance reflects higher variable MPP compensation, which is related to the stronger expected performance in that business, along with higher expected salaries and benefits and professional fees from being a public company. Our effective tax rate was flat at 23.67% for the second quarter of 2025, which I would expect to be consistent for the remainder of the year.

Returning to the balance sheet on slide nine, our total assets increased to $6.4 billion for the second quarter of 2025. This was driven primarily by the increase in MPP and AIO loans and a higher level of cash in loans out for sale, partially offset by runoff from the remainder of the loans to healthcare investment portfolio. Kevin provided details on our funding and deposits this quarter. Our wholesale funding ratio was 70.7% at June 30, 2025, up from the prior quarter level. Looking forward, we'd expect to continue to fund MPP loan growth through a combination of brokered CDs, retail deposits, and other sources of non-brokered deposits where possible. Lastly, on slide 10, we outline our regulatory capital ratios, which are estimates pending completion of regulatory reports. Our capital levels remain strong, both at the bank and the consolidated entity level.

I'd expect that existing capital, plus the additional capital we organically generate through earnings, will continue to be sufficient to support the forecasted growth we have in our plan. With that, we're happy to now take any questions. Daryl, can you please open the line for Q&A?

Speaker 2

Thank you. We will now be conducting the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question and one follow-up question. One moment, please, while we pull for your questions. Our first questions come from the line of Crispin Love with Piper Sandler. Please proceed with your questions.

Thank you. Good morning. First, can you just discuss some of the drivers of the MPP growth in the quarter, how you were able to do as much as you did? Was that partly due to some of the capital from the IPO, or did that not have an impact in the second quarter? On what type of capacity you have to fund on a quarterly basis for MPP going forward.

Speaker 0

Yeah, I can take that and Brad and Kevin can follow up. We brought a fair amount in the first quarter after the IPO with the additional capital. We brought, as indicated in the IPO, approximately $200 million to $400 million that we were participating out. That was added to the balance sheet along with some pent-up demand that was really the driver of the IPO last fall. We were able to execute on those new commitments. There was some demand, like I said, dating back to last fall. There were some outstanding balances that we brought back. All of this was covered during the presentations in the IPO. Frankly, we've just had tremendous success developing some new accounts. Our managers have done a great job, not only increasing our existing clients, but also adding a fair amount of new clients that we did not even anticipate.

We're looking for that growth to continue in the third quarter and beyond for the balance of the year. Does that answer your question?

Yes, it does. I appreciate that, Chuck. The second question for me, just on the NIP trajectory, Brad, I heard that you reiterated the 245 to 255 margin guide, but likely it'd be near the lower end of that. Halfway through the year, you're slightly below that level. As we look at the second half, can you just discuss the cadence a little bit? Are you expecting sequentially higher margins through the rest of the year in the third quarter and fourth quarter? Could those levels even be in excess of that 250, 255 level in order to get to the full-year level of around 245 to 250, if that makes sense?

Speaker 4

Yeah, that's Crispin, and you're right. In order to achieve in that range, we would have to average 10 to 20 basis points higher than they are right now, and higher than our full-year guidance projected. What I'd say about the margin guidance is that we were a little off of where we thought we were going to be for the reasons I kind of outlined with MPP deals coming in a little bit lighter. The brokered CD market picked up a little bit in the second quarter more than we thought by five basis points or so, and then our non-interest earning deposits, we saw a decrease, which was kind of related. I'd suspect that hopefully all of those go back in our original favor. We're already seeing some favorable trends in the brokered CD. Our yields on MPP were strong recorded the second half of the quarter.

I've got some good visibility and a decent level of confidence that we will fall within our original projection of the guidance range. If those things don't materialize like we think, I just want it to be conservative and give you guys an indication that we would fall towards the lower end of the range. The biggest driver I'd say of what's going to change in our margin as you look forward is that we continue to increase the percentage of MPP and AIO loans, both of which carry, you know, marriage comp yields relative to our residential mortgage portfolio, which has average yields of 4 to 5% typically. As we replace and improve the mix of the overall margin, that drives an improvement in that margin in the third and fourth quarters.

Perfect. Thank you. If I can just squeeze one more in on the AIO loan product, can you just share a little bit of color on recent trends there? How has the demand been in the AIO loan product? I know there wasn't any change in the guide, but just curious on trends and what you expect in the current environment.

Yeah, this is Kevin. I'll answer it two ways, I guess. With our own book, continue to see strong demand there. That is the product we're putting in our HSI book. Brad provided the guidance there, so we would still continue to see an increase in AIO loans throughout the rest of the year. Also, from our specialized servicing and sub-servicing business unit, the product in general is also continuing to increase in this particular environment. Still strong demand across the board. It's good for the fact that you said I'm more likely to think about these loans and the size quicker than a typical mortgage. You do have some pretty good paydowns in the quarter. We've been able to outrun those and still grow balances, which is a testament, I think, to the strong growth Kevin was talking about.

Perfect. Thank you. Appreciate you all taking my questions.

Thanks, Chuck. Thanks, Kevin.

Speaker 2

Thank you. Our next questions come from the line of Damon Del Monte with KBW. Please proceed with your questions.

Hey, good morning, guys. Thanks for taking my question. Just looking to get a little bit more color on the custodial account agreement for the $250 million. Could you just kind of give a little bit of color, I guess, kind of behind the process there of getting those on and the prospect for adding more of those types of relationships? Also, kind of how does the funding work on that? I think the commentary was that it's not going to be materially lower than the wholesale funding with the brokered CDs. Just kind of curious about some of those dynamics. Thanks.

Speaker 4

Sure. This is Kevin. I can start. Negotiated directly with the holders of those custodial funds is the way we do it. We laid this strategy out during the IPO process. Also, that this would be a way we try to divorce the fund a little bit away from our typical just wholesale funding sources. We were able to negotiate this quick agreement with kind of party third agency custodial funds. Typically, we have those who are ready for various relationships we have. From a rate perspective, slightly better than the brokered deposit rate. We did negotiate a few of the floating rates. Once again, it fits well with our outcome strategy of funding and ensuring through the curve, with our assets that also float and ensuring the curve. The benefit of this is twofold. One, it reduces our overall wholesale funding concentration.

Second, less FDIC insurance premiums are required on balances that are non-brokered funding. A trio of benefits coming through this. We are working with other counterparties on similar, I'd say, smaller types of custodial funds to bring in, in the future.

Got it. Okay. Appreciate that color. On the capital front, just kind of the comment I think was made earlier that you feel adequate with your capital levels, kind of given the growth. Do you have any targets on capital ratios as to where you feel comfortable going down to, or do you feel that, just given the growing profitability and the internal capital generation plus the excess capital, just puts you in a favorable position to kind of keep stride and not have to take the pedal off the gas at all?

Yeah, I think the short answer is yes to your question, Damon. You know, we have a capital plan, and you've got minimum capital ratios that are required to be maintained internally. Our plan does not have much to go any below those. We still maintain a buffer to all those capital ratios. You look across all eight capital ratios, as well as our QE ratio, and we forecast out the balance growth. I think our guidance was that MPP balances would grow an additional $100 to $200 million over the original plan. You have the capital to support that still. You know, and this capital that we have, when you think about it, it's self-serving because we generate retained earnings, which also increase our capital. We pay a nominal dividend, but all of that capital we generate goes towards growth.

As we perform well and we have good income expectations out for the remainder of the year and into next year, we can generate organically the capital we need to continue to grow that business within our capital framework.

Great. Thanks, Kevin.

Damon, as I mentioned in part of the prepared remarks, we'd also love your participation program so that we're overly successful beyond what we projected from our MPP.

Got it. Okay. Great. Thank you very much for taking my questions.

Thank you, Damon. Thanks, Damon.

Speaker 2

Thank you. Our next questions come from the line of Christopher Marinac with Janney Montgomery Scott. Please proceed with your questions.

Hey, thanks. Good morning. Chuck, I wanted to ask you about the big picture. As MPP grows, do you see anything in terms of other players who are either pulling back or perhaps the macro is not as popular that allows you to kind of position yourself now as where if rates change on the road, you've kind of made more even more inroads?

Speaker 0

It's an interesting question, Christopher. I'm a little confused by it.

If you look at the macro in terms of the, as you're growing your Mortgage Purchase Program, do you see changes externally in terms of players exiting the business that allows you to continue to accelerate there? Do you see other consolidation impacts that can drive the business further than what you've done here in this last two quarters?

Okay. Are you talking about our competitors in the warehouse space or our mortgage company partners?

It's really competition.

Yeah, the competition. We haven't seen the consolidation like we did last year. Really, our organic growth, or I should say the additional facilities that we've gained have been, quite frankly, because of the sales team that we have, the tech stack that we operate under, the ease, and, frankly, we focus on it as one of our primary business lines. I think our competition is certainly worthy, but I'm not sure that anybody focuses on it like we do. I think it's, again, a combination of factors that puts us in a great position to not only get the share that we want from our existing clients and just regular new business, but I think the word continues to go around.

Like I said, the ease of our tech stack and some other competitive things that, I think, you can't really quote on paper in that we listen to our clients. I think there's so many intangibles, again, that you can't just read on financials that puts us in a great position, not only for the growth that we've put together so far in the first half, but we're going to continue that momentum in the second half of the year. I guess to kind of sum it up, no matter what our competition does, we have a program that I think is second to none, and I think it's going to continue to shine, now that we have a strong capital base that we've developed with the IPO. I think continued success is there for the taking for us.

Great. That's really helpful, Chuck. Thank you. I just had a quick question on how the fair value marks could play out in the next couple of quarters. Is there a, you know, one rate that we should be watching to just kind of gauge how that moves quarter to quarter?

Speaker 4

I'd say generally, you kind of watch your two indices that I would look at would be the 10-year. The better index would probably be to look at some kind of mortgage rate index for those. I think Sandy has a kind of a conventional 30-year index. If you follow along with what happens with mortgage rates, that'll give you a good indication of the changes or the increase or decrease in fair value that we have each quarter on those three assets.

Great. That's helpful. Thank you very much.

Yeah, thanks, Chris.

Speaker 2

Thank you. This now concludes our question and answer session. I would now like to turn the floor back over to Charles Williams, Chief Executive Officer, for closing comments.

Speaker 0

Great. I want to thank all of you for joining today's call. In closing, I'm very proud in leading an outstanding Northpointe team and seeing our success so far this year. Our momentum will remain strong as we continue to be nimble, opportunistic, and lead with an entrepreneurial spirit. We will continue to deliver on our strategic plan for the remainder of 2025 and beyond. We're excited to share more with you in the upcoming quarters and look forward to seeing many of you at some upcoming investor conferences that we have in 2025. With that, again, thank you all and have a great rest of your week.

Speaker 2

Thank you, ladies and gentlemen, for your participation. This does conclude today's teleconference. Please disconnect your lines at this time and enjoy the rest of your day.