Velocity Financial, Inc. Reports Second Quarter 2025 Results

Second Quarter Highlights

Financial Results

• Net income of $26.0 million, an increase of 75.9% from $14.8 million for 2Q24. Diluted EPS of $0.69, an increase of $0.27 from $0.42 per share for 2Q24
  • Driven by record production volume and strong portfolio earnings
• Core net income of $27.5 million, an increase of 72.6% from $15.9 million for 2Q24. Core diluted EPS of $0.73, an increase from $0.45 per share for 2Q24
  • Core net income and Core diluted EPS are non-GAAP financial measures. Non-GAAP core adjustments included stock-based compensation expenses and costs related to the Company’s employee stock purchase plan

• Diluted book value per common share of $15.62, an increase of 17.5% from $13.29 as of June 30, 2024
• Portfolio net interest margin (NIM) of 3.82%, an increase of 47 bps from 3.35% for 1Q25 and 28 bps from 3.54% for 2Q24
  • NIM increase driven by higher cash interest received from resolved nonperforming loans
  • Consistently strong NIM levels have resulted from rate discipline on record new loan production, with average loan coupons of 10.61% on loans produced over the last five quarters

Portfolio

• Record loan production of $725.4 million in UPB, an increase of 13.3% and 71.8% from 1Q25 and 2Q24, respectively

• Nonperforming loans (NPL) as a percentage of Held for Investment (HFI) loans was 10.3%, a decrease from 10.8% and 10.5% as of March 31, 2025 and June 30, 2024, respectively
• Nonperforming assets (NPL and real estate owned) resolution totaled $104.0 million in UPB
  • Realizing 103.5% of UPB resolved with realized gains of $3.6 million

Liquidity and Capitalization

• Completed four securitizations totaling $985.5 million of securities issued
• Collapsed and refinanced two securitizations totaling $68.0 million in debt outstanding, which released $53.5 million of cash to fund future growth

• Liquidity of $139.3 million, consisting of $79.6 million in unrestricted cash and $59.7 million in available borrowings from unpledged loans

• Total available warehouse line capacity of $476.9 million

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $26.0 million and core net income of $27.5 million for 2Q25, compared to $14.8 million and $15.9 million, respectively, for 2Q24. Earnings and core earnings per diluted share were $0.69 and $0.73 for 2Q25, compared to $0.42 and $0.45, respectively, for 2Q24.

“We continue to build on our strong momentum in 2025, delivering two record highs for quarterly loan production and earnings,” said Chris Farrar, President and CEO. “Velocity's second quarter 2025 results were driven by higher portfolio net interest income and noninterest income from our growing production volume. Financing demand remained strong during the quarter, in both the traditional commercial and 1-4 family residential rental property markets, as investors continued to see considerable value in smaller commercial properties. We remain confident in Velocity’s long-term growth prospects and our ability to sustain profitable market share growth.”

Operating Results
Key Performance Indicators
	Three Months Ended June 30,
	2025			2024			$ Variance		% Variance
	($ in thousands, except per share amounts)
Income before income tax	$	33,922		$	19,873			14,049		70.7	%
Net income	$	25,997		$	14,778			11,219		75.9	%
Diluted earnings per share	$	0.69		$	0.42			0.27		65.7	%
Core income before income tax	$	35,777		$	21,507			14,270		66.4	%
Core net income	$	27,470		$	15,918			11,552		72.6	%
Core diluted earnings per share	$	0.73		$	0.45			0.28		61.5	%
Net interest margin — portfolio related		3.82	%		3.54	%				8.0	%
Net interest margin — total company		3.39	%		2.98	%				13.6	%
Average common equity	$	588,814		$	469,071			119,743		25.5	%
Pre-tax return on average equity		23.0	%		16.9	%				36.0	%
Core pre-tax return on average equity		24.3	%		18.3	%				32.5	%

Condensed Results of Operations
	Three Months Ended June 30,
	2025		2024			$ Variance		% Variance
	(In thousands)
Net interest income	$	47,586	$	32,417		$	15,169		46.8	%
Provision for credit losses		1,598		218			1,380		633.0	%
Net interest income after provision for credit losses		45,988		32,199			13,789		42.8	%
Other operating income		39,847		22,561			17,286		76.6	%
Net revenue		85,835		54,760			31,075		56.7	%
Operating expenses		51,913		34,887			17,026		48.8	%
Income before income taxes		33,922		19,873			14,049		70.7	%
Income tax expense		7,752		5,162			2,590		50.2	%
Net income		26,170		14,711			11,459		77.9	%
Net income (loss) attributable to noncontrolling interest		173		(67	)		240		358.2	%
Net income attributable to Velocity Financial, Inc.	$	25,997	$	14,778		$	11,219		75.9	%

• Net interest income after provision for credit losses was $46.0 million, an increase of 42.8% from $32.2 million for 2Q24
  • Driven by strong recoveries of interest income from NPLs by our asset management team and the growth in our total portfolio
• Other operating income was $39.8 million, an increase from $22.6 million for 2Q24
  • Driven primarily by fair value gains from record loan production during the quarter
  • Origination fee income totaled $8.9 million, an increase of 76.2% from $5.1 million for 2Q24
• Net revenue was $85.8 million, an increase of 56.7% from $54.8 million for 2Q24
  • Resulting from continued strong production-driven portfolio net interest income growth, net unrealized FV gains and origination fee income
• Operating expenses totaled $51.9 million, an increase of 48.8% from 2Q24, primarily resulting from higher production-driven compensation expenses
  • Compensation expense totaled $22.6 million, compared to $16.6 million for 2Q24
    • Driven by commission compensation on higher production volume
  • Securitization expense totaled $11.5 million from the issuance of four securitizations during the quarter, compared to costs of $6.2 million for two securitizations during 2Q24
  • Loan servicing expense totaled $8.2 million, from $5.2 million for 2Q24, driven by portfolio growth

Loan Portfolio
	June 30,
	2025			2024			$ Variance		% Variance
	($ in thousands)
Total Loans Outstanding:
Investor 1-4	$	2,951,750		$	2,424,554		$	527,196		21.7	%
Mixed use		632,372			512,761			119,611		23.3	%
Retail		569,053			397,488			171,565		43.2	%
Office		459,036			336,447			122,589		36.4	%
Multifamily		422,603			297,732			124,871		41.9	%
Warehouse		392,734			302,363			90,371		29.9	%
Other ^(1)		432,105			208,556			223,549		107.2	%
Total loans	$	5,859,653		$	4,479,901		$	1,379,752		30.8	%
^(1) All other properties individually comprised less than 5.0% of the total unpaid principal balance
Key Loan Portfolio Metrics ^(1):
Loan count		14,854			11,582
Loan-to-value		65.8	%		67.4	%
Coupon		9.70	%		9.25	%
Total portfolio yield		9.65	%		8.98	%
Portfolio cost of debt		6.24	%		6.01	%
(1) Weighted averages, except for loan count

• Total loan portfolio was $5.9 billion in UPB as of June 30, 2025, an increase of 30.8% from $4.5 billion as of June 30, 2024
  • Driven by healthy growth across all types of collateral securing our loans
  • Loan prepayments totaled $223.4 million in UPB, an increase of 14.0% from $196.0 million for 1Q25, and 34.8% from $165.8 million for 2Q24
• UPB of HFI FVO loans was $3.6 billion, or 62.3% of total HFI loans, as of June 30, 2025, an increase from $1.9 billion, or 42.0% as of June 30, 2024
• Weighted average portfolio loan-to-value ratio was 65.8% as of June 30, 2025, down from 67.4% as of June 30, 2024, and below the five-quarter trailing average of 66.6%
• Weighted average total portfolio yield was 9.65%, an increase of 67 bps from 2Q24, primarily driven by the increase in weighted average loan coupons
• Portfolio-related debt cost was 6.24%, an increase of 23 bps from 2Q24, driven by higher warehouse financing utilization and securitized debt costs

Loan Production Volumes
	Three Months Ended June 30,
	2025		2024		$ Variance			% Variance
	($ in thousands)
Originations:
Investor 1-4 rental	$	284,885	$	185,743	$	99,142			53.4	%
Traditional commercial		350,495		181,505		168,990			93.1	%
Short-term		49,085		54,978		(5,893	)		(10.7	)%
Government insured multifamily		40,922		—		40,922			100.0	%
Total	$	725,387	$	422,226	$	303,161			71.8	%

• Loan production totaled $725.4 million in UPB, an increase of 71.8% from $422.2 million for 2Q24, which is a new record for quarterly production volume in the Company’s history
  • 2Q25 production volume was driven by demand for Traditional commercial loans and Investor 1-4 rental loans, which increased 93.1% and 53.4%, respectively, from 2Q24
  • Weighted average coupon on 2Q25 HFI loan production was 10.47%, a decrease of 56 bps from 11.03% for 2Q24 mirroring a similar reduction in shorter term interest rates
• Government insured multifamily loans are originated by our capital light subsidiary Century Health & Housing Capital and sold to investors for cash gains shortly after closing

Total HFI Portfolio Credit Performance
	Three Months Ended June 30,
	2025			2024			$ Variance		% Variance
	($ in thousands)
Key Nonperforming Loans Metrics:
Nonperforming loans UPB	$	601,757		$	470,648		$	131,109		27.9	%
Total UPB	$	5,859,653		$	4,479,901		$	1,379,752		30.8	%
Nonperforming loans UPB / Total UPB		10.3	%		10.5	%				(2.2	)%

• NPL totaled $601.8 million in UPB as of June 30, 2025, or 10.3% of total HFI loans, compared to $470.6 million and 10.5% as of June 30, 2024

CECL Portfolio Credit Performance
	Three Months Ended June 30,
	2025				2024				$ Variance			% Variance
	($ in thousands)
Allowance for credit losses:
Beginning balance	$	5,017			$	5,267			$	(250	)		(4.7	)%
Provision for credit losses		1,598				218				1,380			633.0	%
Charge-offs		(1,733	)			(245	)			(1,488	)		607.3	%
Ending balance	$	4,882			$	5,240			$	(358	)		(6.8	)%
Total UPB subject to CECL	$	2,210,304			$	2,599,016			$	(388,712	)		(15.0	)%
Nonperforming loans UPB subject to CECL	$	283,227			$	324,018			$	(40,791	)		(12.6	)%
Nonperforming loans UPB subject to CECL / Total UPB subject to CECL		12.8	%			12.5	%						2.8	%
Allowance for credit losses / Total UPB subject to CECL		0.22	%			0.20	%						9.6	%
Charge-offs / Total UPB subject to CECL		0.31	%	^(1)		0.04	%	^(1)					731.7	%
^(1) Annualized

• Charge-offs for 2Q25 totaled $1.7 million, compared to $0.2 million for 2Q24
  • The trailing five-quarter charge-offs average was $0.8 million
• Credit loss reserve totaled $4.9 million as of June 30, 2025, a decrease of 6.8% from $5.2 million as of June 30, 2024
  • Driven by our decreasing loan portfolio subject to credit loss reserve
  • CECL reserve rate of 0.22% (CECL reserve as % of HFI loans at amortized cost) was relatively consistent with the recent five-quarter average rate of 0.20%

Real Estate Owned
	Three Months Ended June 30,
	2025			2024			$ Variance			% Variance
	($ in thousands)
Gain (Loss) on REO:
Gain on transfer to REO	$	5,141		$	2,914		$	2,227			76.4	%
REO valuation loss, net		(2,150	)		(540	)		(1,610	)		298.1	%
Gain (loss) on sale of REO		790			(37	)		827			2,235.1	%
Total gain on REO	$	3,781		$	2,337		$	1,444			61.8	%

• Total gain on REO was $3.8 million, compared to $2.3 million for 2Q24, driven by gain on foreclosed loans transferred to REO

Nonperforming Assets (NPA) Resolution
	Three Months Ended June 30,
	2025					2024
	UPB		Gain / (Loss)			UPB		Gain / (Loss)
	($ in thousands)
Resolved — loans paid in full	$	41,183	$	2,449		$	30,664	$	886
Resolved — loans paid current		49,166		394			37,981		189
Resolved — REO sold		13,607		791			12,035		(37	)
Total resolutions	$	103,956	$	3,634		$	80,680	$	1,038
Recovery rate on resolved nonperforming assets				103.5	%				101.3	%

• NPA resolution totaled $104.0 million in UPB, realizing 103.5% of UPB resolved compared to $80.7 million in UPB and realization of 101.3% of UPB resolved for 2Q24

• UPB of NPA resolution for 2Q25 was above the recent five-quarter average of $81.8 million in UPB resolved and remained consistent with the average gains of 103.5% of UPB resolved

Velocity’s executive management team will host a conference call and webcast on August 7, 2025, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to review its 2Q25 financial results.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website: https://www.velfinance.com/events-and-presentations. To listen to the webcast, please visit Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website after the conference call is completed.

Conference Call Information

To participate by phone, please dial in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to join the Velocity Financial, Inc. conference call.

A replay of the call will be available through midnight on August 30, 2025, and can be accessed by dialing 1-877-344-7529 in the U.S. and 855-669-9658 in Canada or 1-412-317-0088 internationally. The passcode for the replay is 6718651. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages business purpose loans secured by 1-4 unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 21 years.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.

Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs, costs incurred from activities that are not normal recurring operating expenses, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.

We have included non-GAAP core net income, and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” ”position,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) changes in federal government fiscal and monetary policies, (2) general economic and real estate market conditions, including the risk of recession, (3) regulatory and/or legislative changes, (4) our customers’ continued interest in loans and doing business with us, (5) market conditions and investor interest in our future securitizations, and (6) geopolitical conflicts.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.

Velocity Financial, Inc. Condensed Consolidated Balance Sheets (In thousands, except per share amounts)
	June 30, 2025		December 31, 2024
	(Unaudited)
ASSETS
Cash, cash equivalents, and restricted cash	$	97,189	$	70,830
Total loans, net		6,053,225		5,187,067
Accrued interest and receivables		186,345		160,088
Real estate owned, net		93,387		68,000
Other assets		45,734		41,423
Total assets	$	6,475,880	$	5,527,408
LIABILITIES
Accounts payable and accrued expenses	$	164,935	$	147,814
Secured financing, net		285,756		284,833
Securitized debt		5,092,519		4,226,464
Warehouse and repurchase facilities, net		331,057		348,082
Derivative liability		560		—
Total liabilities		5,874,827		5,007,193
Commitments and contingencies
EQUITY
Stockholders' equity		597,895		516,944
Noncontrolling interest in subsidiary		3,158		3,271
Total equity		601,053		520,215
Total liabilities and equity	$	6,475,880	$	5,527,408
Diluted book value per share	$	15.62	$	14.26
Diluted shares at period end		38,475		36,469

Velocity Financial, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)
	Three Months Ended
	June 30, 2025			March 31, 2025			June 30, 2024
Interest income	$	135,567		$	118,740		$	97,760
Interest expense — portfolio related		81,838			75,088			59,188
Net interest income — portfolio related		53,729			43,652			38,572
Interest expense — corporate debt		6,143			6,142			6,155
Net interest income		47,586			37,510			32,417
Provision for credit losses		1,598			1,872			218
Net interest income after provision for credit losses		45,988			35,638			32,199
Other operating income
Unrealized gain on fair value loans		29,906			34,836			17,123
Unrealized loss on fair value securitized debt		(7,584	)		(13,682	)		(4,643	)
Origination fee income		8,936			8,679			5,072
Other income		8,589			3,613			5,009
Total other operating income		39,847			33,446			22,561
Operating expenses
Compensation and employee benefits		22,605			21,684			16,562
Loan servicing		8,205			8,008			5,160
Other operating expenses		21,103			12,498			13,165
Total operating expenses		51,913			42,190			34,887
Income before income taxes		33,922			26,894			19,873
Income tax expense		7,752			8,246			5,162
Net income		26,170			18,648			14,711
Net income (loss) attributable to noncontrolling interest		173			(239	)		(67	)
Net income attributable to Velocity Financial, Inc.		25,997			18,887			14,778
Less undistributed earnings attributable to unvested restricted stock awards		286			233			182
Net earnings attributable to common stockholders	$	25,711		$	18,654		$	14,596
Earnings per common share:
Basic	$	0.69		$	0.55		$	0.45
Diluted	$	0.69		$	0.51		$	0.42
Weighted average common shares outstanding:
Basic		37,194			33,687			32,585
Diluted		37,790			36,811			35,600

Velocity Financial, Inc. Net Interest Margin - Portfolio Related and Total Company ($ In thousands)
	Three Months Ended June 30,
	2025							2024
			Interest		Average					Interest		Average
	Average		Income /		Yield /			Average		Income /		Yield /
	Balance		Expense		Rate ^(1)			Balance		Expense		Rate ^(1)
Loan Portfolio:
Loans held for sale	$	12,677						$	9,979
Loans held for investment		5,608,086							4,345,962
Total loans	$	5,620,763	$	135,567		9.65	%	$	4,355,941	$	97,760		8.98	%
Debt:
Warehouse facilities	$	413,441	$	8,254		7.99	%	$	263,029	$	6,116		9.30	%
Securitized debt		4,832,358		73,584		6.09	%		3,678,478		53,072		5.77	%
Total debt - portfolio related		5,245,799		81,838		6.24	%		3,941,507		59,188		6.01	%
Corporate debt		290,000		6,143		8.47	%		290,000		6,155		8.49	%
Total debt	$	5,535,799	$	87,981		6.36	%	$	4,231,507	$	65,343		6.18	%
Net interest spread - portfolio related ^(2)						3.41	%						2.97	%
Net interest margin - portfolio related						3.82	%						3.54	%
Net interest spread - total company^(3)						3.29	%						2.80	%
Net interest margin - total company						3.39	%						2.98	%

(1)	Annualized
(2)	Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt
(3)	Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt

Velocity Financial, Inc. Adjusted Financial Metric Reconciliation to GAAP Net Income (In thousands, except per share amounts) (Unaudited)
	Three Months Ended
	June 30, 2025		March 31, 2025		June 30, 2024
Net income	$	25,997	$	18,887	$	14,778
Equity award & ESPP expenses		1,473		1,366		1,140
Core net income	$	27,470	$	20,253	$	15,918
Diluted weighted average common shares outstanding		37,790		36,811		35,600
Core diluted earnings per share	$	0.73	$	0.55	$	0.45