NORTHPOINTE BANCSHARES INCNPB
NORTHPOINTE BANCSHARES INC Fair Value Disclosure
Fair Value Measurements
Accounting standards define fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that we have the ability to access as of the measurement date.
Level 2: Valuation is based upon significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be derived from or corroborated by observable market data by correlation or other means.
Level 3: Valuation is based upon significant unobservable inputs that reflect our own conclusions about the assumptions that market participants would use in pricing an asset or liability.
In instances whereby inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.
The Company records the fair values of financial assets and liabilities on a recurring and non-recurring basis using the following methods and assumptions:
Equity Securities
Equity securities with readily determinable fair value are reported at fair value. Fair value for these investments is primarily determined using a quoted price in an active market or exchange (Level 1).
Available for Sale Debt Securities
Where quoted market prices are available in an active market, securities are classified as Level 1 of the valuation hierarchy. The Company does not currently have any Level 1 debt securities. If quoted prices are not available, fair values can be estimated using (1) quoted market prices of securities with similar characteristics, (2) matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices, or (3) a discounted cash flow analysis whose significant fair value inputs can generally be verified and do not typically involve judgment by management. Included in the Company’s available for sale debt securities are corporate bonds which are classified as Level 2 assets. The valuation of these corporate bonds is determined using third-party quoted market prices of securities with similar characteristics.
Loans
Certain loans held for sale and HFI are measured at fair value on a recurring basis due to the Company’s election to adopt fair value accounting treatment for those loans originated for which the Company has entered into certain derivative financial instruments as part of its mortgage banking and related risk management activities. These instruments include interest rate lock commitments and mandatory forward commitments to sell these loans to investors known as forward mortgage-backed securities trades. This election allows for a more effective offset of the changes in fair values of the assets and the mortgage related derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting under ASC 815, Derivatives and Hedging. Mortgage loans held for sale and certain loans HFI, for which the fair value option was elected, are valued using a market approach by utilizing either: (i) the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk, (ii) current commitments to purchase loans or (iii) recent observable market trades for similar loans, adjusted to credit risk and other individual loan characteristics. As these prices are derived from market observable inputs, the Company classifies these valuations as Level 2 in the fair value disclosures. For mortgage loans held for sale for which the fair value option was elected, the earned current contractual interest payment is recognized in interest income, loan origination costs and fees on fair value option loans are recognized in earnings as incurred and not deferred. The Company has no continuing involvement in any residential mortgage loans sold.
Loans HFI that are measured at fair value are those that initially were intended for sale and then transferred to portfolio. At December 31, 2025, these loans had an aggregate unpaid principal balance of $202.6 million and aggregate fair value of $178.6 million. At December 31, 2024, these loans had an aggregate unpaid principal balance of $203.0 million and aggregate fair value of $173.0 million.
At December 31, 2025 and 2024, the fair value option was applied to loans that had been transferred from held for sale to portfolio and also to mortgage loans held for sale. The fair value adjustments are reflected in Net Gain on Sale of Loans on the Company’s Consolidated Statements of Income.
The table below shows the income statement impact for these fair value adjustments for the years ended December 31, 2025 and 2024:
| (dollars in thousands) | For the Year Ended December 31, | ||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Loans | $ | 6,067 | $ | 10,969 | |||||||||||||||||||
| Loans held for sale | 4,085 | (1,402) | |||||||||||||||||||||
Loans reported at fair value which were over 90 days past due amounted to $1.6 million and $148,000 in unpaid principal balance with a fair values of $1.4 million and $145,000 as of December 31, 2025 and 2024, respectively. The accrual of interest on loans is discontinued at the time the loan is delinquent (120 days for mortgages). Non-accrual loans reported at fair value amounted to $11.1 million in unpaid principal balance and $9.1 million in fair value as of December 31, 2025. Non-accrual loans reported at fair value amounted to $10.3 million in unpaid principal balance and $8.3 million in fair value as of December 31, 2024.
Interest Rate Lock Commitments
The estimated fair values of interest rate lock commitments utilize current secondary market prices for underlying loans and estimated servicing value with similar coupons, maturity and credit quality, subject to the anticipated loan funding probability (pull-through rate). The fair value of interest rate lock commitments is subject to change primarily due to changes in interest rates and the estimated pull-through rate. Given the significant and unobservable nature of the pull-through factor, interest rate lock commitments are classified as Level 3.
Forward Sales Commitments
Forward mortgage-backed securities trades are exchange-traded or traded within highly active dealer markets. In order to determine the fair value of these instruments, the Company utilized the exchange price or dealer market price for the particular derivative contract; therefore these contracts are classified as Level 2. The estimated fair values are subject to change primarily due to changes in interest rates.
Mortgage Service Rights
MSRs are carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, servicing costs, and other factors. As such, MSRs are considered Level 3.
Lender Risk Account
The Company’s LRA is carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, expected credit losses and other factors. As such, the LRA is considered Level 3.
Collateral Dependent Loans and Other Real Estate Owned
The fair value of collateral for collateral dependent loans and other real estate owned is generally based upon recent real estate appraisals, less costs to sell. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and the income approach. As such, the fair values of collateral dependent loans and other real estate owned are classified as Level 3.
The following tables present information about the Company’s assets measured at fair value on a recurring basis at December 31, 2025 and 2024 and the valuation techniques used by the Company to determine those fair values (dollars in thousands):
| Fair Value on a Recurring Basis at December 31, 2025 | ||||||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||||||||
| Equity securities | $ | 1,347 | $ | — | $ | — | $ | 1,347 | ||||||||||||||||||
| Available for sale debt securities | — | 4,738 | — | 4,738 | ||||||||||||||||||||||
| Mortgage banking assets: | ||||||||||||||||||||||||||
| Loans held for sale | — | 309,213 | — | 309,213 | ||||||||||||||||||||||
| Loans held for investment | — | 178,578 | — | 178,578 | ||||||||||||||||||||||
| Interest rate lock commitments | — | — | 2,712 | 2,712 | ||||||||||||||||||||||
| Forward sales commitments | — | 52 | — | 52 | ||||||||||||||||||||||
| Mortgage servicing rights | — | — | 17,048 | 17,048 | ||||||||||||||||||||||
| Lender risk account | — | — | 30,446 | 30,446 | ||||||||||||||||||||||
| Total | $ | 1,347 | $ | 492,581 | $ | 50,206 | $ | 544,134 | ||||||||||||||||||
| Financial Liabilities: | ||||||||||||||||||||||||||
| Interest rate lock commitments | — | — | 6 | 6 | ||||||||||||||||||||||
| Forward sales commitments | — | 590 | — | 590 | ||||||||||||||||||||||
| Total | $ | — | $ | 590 | $ | 6 | $ | 596 | ||||||||||||||||||
| Fair Value on a Recurring Basis at December 31, 2024 | |||||||||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||
| Equity securities | $ | 1,305 | $ | — | $ | — | $ | 1,305 | |||||||||||||||||||||
| Available for sale debt securities | — | — | 8,576 | 8,576 | |||||||||||||||||||||||||
| Mortgage banking assets: | |||||||||||||||||||||||||||||
| Loans held for sale | — | 217,073 | — | 217,073 | |||||||||||||||||||||||||
| Loans held for investment | — | 172,960 | — | 172,960 | |||||||||||||||||||||||||
| Interest rate lock commitments | — | — | 2,064 | 2,064 | |||||||||||||||||||||||||
| Forward sales commitments | — | 1,332 | — | 1,332 | |||||||||||||||||||||||||
| Mortgage servicing rights | — | — | 15,133 | 15,133 | |||||||||||||||||||||||||
| Lender risk account | — | — | 28,436 | 28,436 | |||||||||||||||||||||||||
| Total | $ | 1,305 | $ | 391,365 | $ | 54,209 | $ | 446,879 | |||||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||||||||
| Interest rate lock commitments | — | — | 17 | 17 | |||||||||||||||||||||||||
| Forward sales commitments | — | 131 | — | 131 | |||||||||||||||||||||||||
| Total | $ | — | $ | 131 | $ | 17 | $ | 148 | |||||||||||||||||||||
The Company’s policy is to recognize transfers in and transfers out of Level 1, 2, and 3 fair value classifications as of the actual date of the event of change in circumstances that caused the transfer. On June 30, 2025, the Company transferred debt securities available for sale from Level 3 to Level 2 of the fair value hierarchy. As a result, debt securities totaling $8.8 million (based on fair value) were reclassified from Level 3 to Level 2 as of June 30, 2025. These securities were previously classified as Level 3, but were moved to Level 2 after further review. The move from Level 3 to Level 2 did not impact the fair value measurement, only the classification of input used to determine that fair value.
Changes in MSRs as well as the related weighted average unobservable inputs are included in Note 5.
The following table presents a reconciliation of the Level 3 available for sale debt securities measured at fair value on a recurring basis for the years ended December 31, 2025 and 2024 (dollars in thousands):
| For the Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Balance at beginning of period | $ | 8,576 | $ | 8,923 | |||||||||||||||||||
| Purchases | — | 4,000 | |||||||||||||||||||||
| Sales | — | (5,000) | |||||||||||||||||||||
| Realized | — | (83) | |||||||||||||||||||||
| Unrealized | 209 | 736 | |||||||||||||||||||||
| Transfer to Level 2 | (8,785) | — | |||||||||||||||||||||
| Balance at end of period | $ | — | $ | 8,576 | |||||||||||||||||||
The following table presents a reconciliation of the Level 3 interest rate lock commitments measured at fair value on a recurring basis for the years ended December 31, 2025 and 2024 (dollars in thousands):
| For the Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Balance at beginning of period | $ | 2,047 | $ | 2,948 | |||||||||||||||||||
| Change in fair value | 659 | (901) | |||||||||||||||||||||
| Balance at end of period | $ | 2,706 | $ | 2,047 | |||||||||||||||||||
The following is a summary of the key unobservable inputs used in the valuation of the Level 3 interest rate lock commitments:
| December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Pull-through rate | 83.4 | % | 83.3 | % | |||||||||||||||||||
The following table presents a reconciliation of the Level 3 LRA measured at fair value on a recurring basis for the years ended December 31, 2025 and 2024 (dollars in thousands):
| For the Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Beginning of period | $ | 28,436 | $ | 31,694 | |||||||||||||||||||
| Due to loan sales | 1,101 | 2,084 | |||||||||||||||||||||
| Releases and claims paid to the Company | (2,571) | (6,200) | |||||||||||||||||||||
| Change in fair value recognized in gain on sale of loans | 3,480 | 858 | |||||||||||||||||||||
| End of period | $ | 30,446 | $ | 28,436 | |||||||||||||||||||
Both observable and unobservable inputs may be used to determine the fair value of the lender risk account, which is classified as a Level 3 asset. As a result, the unrealized gains for these assets presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.
The Company estimates the fair value of the LRA using management’s best estimate of key assumptions. These assumptions include prepayment rates, discount rates, and projected annual losses on unpaid principal of the sold loan portfolio. The weighted average of unobservable inputs for these valuation assumptions is as follows as of the dates indicated (dollars in thousands):
| Fair Value | Valuation Technique | Unobservable Inputs | Range of Inputs | Weighted Average | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| Lender Risk Account | $ | 30,446 | Present value of | Credit losses | —% - 0.17% | 0.05 | % | ||||||||||||||||||||||
| cash flows | Prepayment rates | 17.43 | % | 17.43 | % | ||||||||||||||||||||||||
| Discount rates | 5.05% - 6.57% | 5.80 | % | ||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| Lender Risk Account | $ | 28,436 | Present value of | Credit losses | —% - 0.21% | 0.08 | % | ||||||||||||||||||||||
| cash flows | Prepayment rates | 11.97 | % | 11.97 | % | ||||||||||||||||||||||||
| Discount rates | 5.86% - 6.70% | 6.39 | % | ||||||||||||||||||||||||||
The Company also has assets that under certain conditions are subject to measurement at fair value on a nonrecurring basis. These assets include individually evaluated loans and other real estate which are periodically reviewed for impairment and measured at fair value if the fair value of the asset is below the recorded book value. The Company has estimated the fair values of these assets based primarily on Level 3 inputs as described above.
The following asset classes were measured at fair value on the accompanying consolidated balance sheets as of the dates indicated due to declines in the fair value. Certain individually evaluated loans and other real estate carried at original cost, which exceeds fair value, have been omitted from the disclosure below (dollars in thousands):
| Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2025 | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at December 31, 2025 | ||||||||||||||||||||
| Individually evaluated loans | — | — | $ | 3,345 | $ | 3,345 | |||||||||||||||||
| Other real estate owned | — | — | 991 | 991 | |||||||||||||||||||
| Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2024 | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance at December 31, 2024 | ||||||||||||||||||||
| Individually evaluated loans | — | — | $ | 6,603 | $ | 6,603 | |||||||||||||||||
| Other real estate owned | — | — | 1,651 | 1,651 | |||||||||||||||||||
The following presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which fair value measurements falls as of the dates indicated (dollars in thousands):
| December 31, 2025 | |||||||||||||||||
| Fair Value Hierarchy | Carrying Value | Fair Value | |||||||||||||||
| Financial Assets: | |||||||||||||||||
| Cash and cash equivalents | Level 1 | $ | 496,459 | $ | 496,459 | ||||||||||||
| Equity securities | Level 1 | 1,347 | 1,347 | ||||||||||||||
| Debt securities available for sale | Level 2 | 4,738 | 4,738 | ||||||||||||||
| FHLB stock | Level 2 | 80,109 | 80,109 | ||||||||||||||
| Loans held for sale | Level 2 | 309,213 | 309,213 | ||||||||||||||
| Loans, net | Level 2 | 6,011,092 | 5,973,507 | ||||||||||||||
| Interest receivable | Level 2 | 28,353 | 28,353 | ||||||||||||||
| Total | 6,931,311 | 6,893,726 | |||||||||||||||
| Financial Liabilities: | |||||||||||||||||
| Deposits | Level 2 | 4,869,667 | 4,858,176 | ||||||||||||||
| Borrowings | Level 2 | 1,439,500 | 1,426,415 | ||||||||||||||
| Subordinated debentures | Level 2 | 91,915 | 91,915 | ||||||||||||||
| Subordinated debentures issued through trusts | Level 2 | 5,000 | 5,000 | ||||||||||||||
| Interest payable | Level 2 | 16,628 | 16,628 | ||||||||||||||
| Total | 6,422,710 | 6,398,134 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||
| Fair Value Hierarchy | Carrying Value | Fair Value | |||||||||||||||
| Financial Assets: | |||||||||||||||||
| Cash and cash equivalents | Level 1 | $ | 376,295 | $ | 376,295 | ||||||||||||
| Equity securities | Level 1 | 1,305 | 1,305 | ||||||||||||||
| Debt securities available for sale | Level 3 | 8,576 | 8,576 | ||||||||||||||
| FHLB stock | Level 2 | 69,574 | 69,574 | ||||||||||||||
| Loans held for sale | Level 2 | 217,073 | 217,073 | ||||||||||||||
| Loans, net | Level 2 | 4,416,564 | 4,312,773 | ||||||||||||||
| Interest receivable | Level 2 | 20,934 | 20,934 | ||||||||||||||
| Total | 5,110,321 | 5,006,530 | |||||||||||||||
| Financial Liabilities: | |||||||||||||||||
| Deposits | Level 2 | 3,422,555 | 3,423,196 | ||||||||||||||
| Borrowings | Level 2 | 1,258,750 | 1,232,310 | ||||||||||||||
| Subordinated debentures | Level 2 | 38,933 | 38,933 | ||||||||||||||
| Subordinated debentures issued through trusts | Level 2 | 5,000 | 5,000 | ||||||||||||||
| Interest payable | Level 2 | 8,114 | 8,114 | ||||||||||||||
| Total | 4,733,352 | 4,707,553 | |||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 28, 2025 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.