Velocity Financial, Inc. Reports Fourth Quarter and Full-Year 2025 Results

Fourth Quarter Highlights

Financial Results

• Net income of $34.8 million, an increase of 69.0% from $20.6 million for 4Q24. Diluted EPS of $0.89, an increase of $0.32 from $0.57 per share for 4Q24
  • Driven by record production volume, strong portfolio earnings and a tax effected gain of $13.4 million on sale of NPL loans
• Core net income of $36.3 million, an increase of 67.0% from $21.8 million for 4Q24. Core diluted EPS of $0.93, an increase from $0.60 per share for 4Q24¹
• Diluted book value per common share of $17.19 or $675.7 million, an increase of 20.5% from $14.26 or $520.2 million as of December 31, 2024
• Portfolio net interest margin (NIM) of 3.59%, a decrease of 11 bps from 3.70% for 4Q24
  • Consistently strong NIM levels have resulted from rate discipline on record new loan production, with average loan coupons of 10.40% on loans produced over the last five quarters

Portfolio

• Total loan production of $634.6 million, an increase of 12.6% from 4Q24
• Nonperforming loans (NPLs) as a percentage of Held for Investment (HFI) loans was 8.5%, a decrease from 10.7% as of December 31, 2024
• NPLs resolution totaled $78.1 million in UPB
  • Net gains of 103.0% or $2.3 million
  • Total NPLs recoveries of 109.8% or $7.6 million of UPB resolved including accrued interest received

Liquidity and Capitalization

• Completed two securitizations totaling $646.3 million
• Liquidity of $116.8 million, consisting of $92.1 million in unrestricted cash and $24.7 million in available borrowings from unpledged loans
• Total available warehouse line capacity of $599.9 million

¹ Core net income and core diluted EPS are non-GAAP financial measures. Non-GAAP core adjustments include stock-based compensation expenses and costs related to the Company's employee stock purchase plan. See "Non-GAAP Financial Measures" and "Non-GAAP Financial Measure Reconciliations to GAAP Measures" at the end of this press release for more information regarding the use of non-GAAP measures.

Velocity Financial, Inc. (NYSE:VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $105.1 million and core net income of $111.0 million for 2025, compared to $68.4 million and $72.9 million, respectively, for 2024. Earnings and core earnings per diluted share were $2.75 and $2.91 for 2025, compared to $1.91 and $2.03, respectively, for 2024.

"Velocity delivered impressive earnings in the fourth quarter and full year 2025," said Chris Farrar, President and CEO. "The Company's record full-year 2025 earnings were driven by continued strong production, which also reached record levels. Our success resulted from ongoing initiatives to capture a greater share of the large but fragmented business purpose loan market. I'm especially proud of our team's ability to achieve outstanding production volume growth while remaining focused on credit discipline and maintaining strong margins. We are well positioned to drive future earnings by addressing the important niche we serve."

Operating Results

Key Performance Indicators²

Condensed Results of Operations

• Net interest income after provision for credit losses was $49.7 million, an increase of 27.9% from $38.8 million for 4Q24
  • Driven by strong portfolio growth and recoveries of interest income from NPLs by our asset management team
• Other operating income was $53.2 million, an increase from $32.3 million for 4Q24
  • Driven primarily by net unrealized gain on fair value instruments and origination fee income
• Net revenue was $102.9 million, an increase of 44.6% from $71.2 million for 4Q24
  • Resulted from continued strong production-driven portfolio net interest income growth, fair value gains and origination fee income
• Operating expenses totaled $52.9 million, an increase of 35.1% from 4Q24, primarily from higher production-driven compensation expenses
  • Compensation expense totaled $22.6 million compared to $20.1 million for 4Q24
    • Driven by increases in headcount and commission compensation on higher production volume
  • Securitization expense totaled $6.3 million from the issuance of two securitizations, compared to costs of $7.1 million for two securitizations during 4Q24
  • Loan servicing expense totaled $9.4 million, from $6.7 million for 4Q24, driven by portfolio growth
  • REO, net expense was $8.7 million compared to $0.3 million for 4Q24, driven mainly by valuation adjustments

Loan Portfolio

• Total loan portfolio was $6.5 billion in UPB as of December 31, 2025, an increase of 28.4% from $5.1 billion as of December 31, 2024
  • Driven by healthy growth across all types of collateral securing our loans
  • Loan prepayments totaled $227.6 million in UPB, an increase of 12.0% from $203.2 million for 4Q24
• UPB of HFI FVO loans was $4.5 billion, or 69.0% of total HFI loans, as of December 31, 2025, an increase from $2.7 billion, or 52.5% as of December 31, 2024
• Weighted average portfolio loan-to-value ratio was 65.2% as of December 31, 2025, down from 66.6% as of December 31, 2024, and slightly below the five-quarter trailing average of 65.4%
• Weighted average portfolio yield was 9.47%, an increase of 13 bps from 4Q24, primarily driven by higher weighted average loan coupons
• Portfolio-related debt cost was 6.23%, an increase of 9 bps from 4Q24, driven by higher warehouse financing utilization and securitized debt interest expense

Loan Production Volumes

• Loan production totaled $634.6 million, an increase of 12.6% from $563.5 million for 4Q24
  • 4Q25 production volume was driven mainly by demand for Investor 1-4 rental loans, which increased 40.6% from 4Q24
  • Weighted average coupon on 4Q25 HFI loan production was 10.14%, a decrease of 65 bps from 10.79% for 4Q24 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 the related GNMA securities are sold to investors for cash gains shortly after closing

Total HFI Portfolio Credit Performance

• NPL totaled $554.5 million in UPB as of December 31, 2025, or 8.5% of total HFI loans, compared to $539.4 million or 10.7% as of December 31, 2024

CECL Portfolio Credit Performance

• Charge-offs for 4Q25 totaled $2.0 million, compared to $0.7 million for 4Q24
  • The trailing five-quarter charge-offs average was $1.2 million
• Credit loss reserve totaled $4.5 million as of December 31, 2025, an increase of 8.3% from $4.2 million as of December 31, 2024
  • Driven by higher provision for credit losses and charge-offs
  • 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 0.21%

Real Estate Owned

• Total loss on REO was $3.7 million, compared to a gain of $3.6 million for 4Q24, driven by higher valuation loss and lower gain on sale

NPLs Resolution

• NPLs resolution totaled $78.1 million in UPB compared to $69.3 million for 4Q24, and was below the recent five-quarter average of $80.1 million
• Total NPLs recovered was 109.8% or $7.6 million of UPB resolved compared to 110.8% or $7.5 million for 4Q24. Total NPLs recovered was above the recent five-quarter average of 109.4% in UPB resolved

Full-Year 2025 Results

Key Performance Indicators²

Condensed Results of Operations

• Net income of $105.1 million, an increase of 53.5% from $68.4 million for 2024. Diluted EPS of $2.75, an increase of $0.84 from $1.91 per share for 2024
  • Net interest income after provision for credit losses was $180.0 million, an increase of 33.7% from $134.6 million for 2024
  • Other operating income totaled $163.6 million, an increase of 61.4% from $101.4 million for 2024, mainly attributable to net unrealized FVO gains on loans and securitized debt of $86.4 million, compared to $58.4 million for 2024
  • Total operating expenses were $197.4 million, an increase of 41.3% from $139.6 million for 2024, driven by higher headcount, commissions and loan servicing expenses to support our growth and valuation adjustments on REOs
• Core net income of $111.0 million, an increase of 52.3% from $72.9 million for 2024. Core diluted EPS of $2.91, an increase from $2.03 per share for 2024¹
• Portfolio NIM of 3.61%, an increase of 5 bps from 3.56% for 2024

Loan Portfolio

• Loan production totaled $2.7 billion, including the unfunded portion of a construction loan originated by Century of $22.1 million, an increase of 48.7% from $1.8 billion for 2024
  • 2025 loan production volume reached the highest annual volume in Velocity's history
  • Driven by strategic growth of our origination platform and focus on providing financing solutions to underserved market segments

CECL Portfolio Credit Performance

• Charge-offs for 2025 totaled $5.5 million, compared to $1.8 million for 2024, resulted mainly from two unusually large charge-offs taken during 2025

Real Estate Owned

• Net REO loss was $0.4 million, compared to a net gain of $6.9 million for 2024, driven mainly by higher valuation loss, largely offset by a gain from loans transferred to REO.

NPLs Resolution

• NPLs resolution totaled $331.5 million and $253.4 million in UPB for the years ended December 31, 2025 and 2024, respectively
• Total NPLs recovered was 109.0% of UPB resolved compared to 108.8% for 2024

Other

• Completed nine securitizations totaling $2.6 billion in 2025

Velocity's executive management team will host a conference call and webcast on March 11, 2026, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to review Velocity's 4Q25 and full-year 2025 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 following the completion of the conference call.

Conference Call Information

To participate by phone, please dial in 15 minutes prior to the start time to allow for wait time 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. earnings call.

A replay of the call will be available through midnight on March 27, 2026, and can be accessed by dialing 1-855-669-9658 in the U.S and Canada or 1-412-317-0088 internationally. The passcode for the replay is 4826570. 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, core income before income tax, core pre-tax return on average equity 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. Non-GAAP core income before income tax is core net income before deducting income taxes. Non-GAAP core pre-tax return on average equity is core income before income tax divided by our average shareholders' equity.

We have included non-GAAP core net income, non-GAAP core income before income tax, non-GAAP core pre-tax return on average equity 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, non-GAAP core income before income tax, non-GAAP core pre-tax return on average equity 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 Net Income, please refer to the section of this press release below titled "Non-GAAP Financial Measure Reconciliations to GAAP Measures" 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.