Velocity Financial, Inc. Reports Third Quarter 2025 Results
WESTLAKE VILLAGE, Calif.--( BUSINESS WIRE)--Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $25.4 million and core net income of $26.9 million for 3Q25, compared to $15.8 million and $16.9 million, respectively, for 3Q24. Earnings and core earnings per diluted share were $0.65 and $0.69 for 3Q25, compared to $0.44 and $0.47, respectively, for 3Q24.
“We continue to build on our strong momentum in 2025, delivering two record highs for quarterly loan production and pre-tax earnings,” said Chris Farrar, President and CEO. “Velocity's third quarter 2025 results were driven by higher portfolio net interest income and noninterest income from our growing production volume. Financing demand remained strong during the quarter, in both the traditional commercial and 1-4 family residential rental property markets, as investors continued to see considerable value in smaller commercial properties. We remain confident in Velocity’s long-term growth prospects and our ability to sustain profitable market share growth.”
1 Core net income and core diluted EPS are non-GAAP financial measures. Non-GAAP core adjustments include stock-based compensation expenses and costs related to the Company’s employee stock purchase plan. See “Non-GAAP Financial Measures” and “Non-GAAP Financial Measure Reconciliations to GAAP Measures” at the end of this press release for more information regarding the use of non-GAAP measures.
Operating Results
Key Performance Indicators 2
Three Months Ended September 30,
2025
2024
Variance
% Variance
($ in thousands, except per share amounts)
Income before income tax
$
35,375
$
21,244
$
14,131
66.5
%
Net income
$
25,373
$
15,803
$
9,570
60.6
%
Diluted earnings per share
$
0.65
$
0.44
$
0.21
48.5
%
Core income before income tax
$
37,490
$
23,004
$
14,486
63.0
%
Core net income
$
26,937
$
16,949
$
9,988
58.9
%
Core diluted earnings per share
$
0.69
$
0.47
$
0.22
47.0
%
Net interest margin — portfolio related
3.65
%
(1
)
3.60
%
(1
)
0.05
%
1.5
%
Net interest margin — total company
3.25
%
(1
)
3.06
%
(1
)
0.19
%
6.1
%
Average common equity
$
623,239
$
484,197
$
139,042
28.7
%
Pre-tax return on average equity
22.7
%
(1
)
17.5
%
(1
)
5.2
%
29.4
%
Core pre-tax return on average equity
24.1
%
(1
)
19.0
%
(1
)
5.1
%
26.6
%
(1)
Percentages are annualized
Condensed Results of Operations
Three Months Ended September 30,
2025
2024
$ Variance
% Variance
(In thousands)
Net interest income
$
49,076
$
35,056
$
14,020
40.0
%
Provision for (reversal of) credit losses
381
(69
)
450
652.2
%
Net interest income after provision
48,695
35,125
13,570
38.6
%
Other operating income
37,077
20,732
16,345
78.8
%
Net revenue
85,772
55,857
29,915
53.6
%
Operating expenses
50,397
34,613
15,784
45.6
%
Income before income taxes
35,375
21,244
14,131
66.5
%
Income tax expense
9,963
5,627
4,336
77.1
%
Net income
25,412
15,617
9,795
62.7
%
Net income (loss) attributable to noncontrolling interest
39
(186
)
225
121.0
%
Net income attributable to Velocity Financial, Inc.
$
25,373
$
15,803
$
9,570
60.6
%
2 Core income before income tax, core net income, core diluted EPS and core pre-tax return on average equity are non-GAAP measures. Please see “Non-GAAP Financial Measures” and “Non-GAAP Financial Measure Reconciliations to GAAP Measures” at the end of this press release.
Loan Portfolio
September 30,
2025
2024
Variance
% Variance
($ in thousands)
Total Loans Outstanding:
Investor 1-4
$
3,089,325
$
2,565,794
$
523,531
20.4
%
Mixed use
670,470
535,796
134,674
25.1
%
Retail
640,005
405,909
234,096
57.7
%
Office
504,282
266,025
238,257
89.6
%
Multifamily
461,237
363,288
97,949
27.0
%
Warehouse
421,276
300,420
120,856
40.2
%
Other (1)
488,774
316,034
172,740
54.7
%
Total loans
$
6,275,369
$
4,753,266
$
1,522,103
32.0
%
(1) All other properties individually comprised less than 5.0% of the total unpaid principal balance
Key Loan Portfolio Metrics (1):
Loan count
15,978
12,235
3,743
30.6
%
Loan-to-value
65.5
%
67.0
%
(1.5
)%
(2.2
)%
Coupon
9.74
%
9.37
%
0.37
%
3.9
%
Total portfolio yield
9.54
%
9.18
%
0.36
%
3.9
%
Portfolio cost of debt
6.27
%
6.15
%
0.12
%
1.9
%
(1) Weighted averages, except for loan count
Loan Production Volumes
Three Months Ended September 30,
2025
2024
$ Variance
% Variance
($ in thousands)
Originations Including Unfunded Commitments:
Investor 1-4 rental
$
302,327
$
219,940
$
82,387
37.5
%
Traditional commercial
374,558
175,235
199,323
113.7
%
Short-term
36,131
62,653
(26,522
)
(42.3
)%
Government insured multifamily
25,940
18,947
6,993
36.9
%
Total
$
738,956
$
476,775
$
262,181
55.0
%
Total HFI Portfolio Credit Performance
Three Months Ended September 30,
2025
2024
Variance
% Variance
($ in thousands)
Key Nonperforming Loans Metrics:
Nonperforming loans UPB
$
614,226
$
503,939
$
110,287
21.9
%
Total UPB
$
6,273,298
$
4,734,319
$
1,538,979
32.5
%
Nonperforming loans UPB / Total UPB
9.8
%
10.6
%
(0.9
)%
(8.0
)%
CECL Portfolio Credit Performance
Three Months Ended September 30,
2025
2024
Variance
% Variance
($ in thousands)
Allowance for Credit Losses:
Beginning balance
$
4,882
$
5,240
$
(358
)
(6.8
)%
Provision for (reversal of) credit losses
381
(69
)
450
652.2
%
Charge-offs
(677
)
(320
)
(357
)
111.6
%
Ending balance
$
4,586
$
4,851
$
(265
)
(5.5
)%
Total UPB subject to CECL
$
2,111,569
$
2,506,426
$
(394,857
)
(15.8
)%
Nonperforming loans UPB subject to CECL
$
259,683
$
314,456
$
(54,773
)
(17.4
)%
Nonperforming loans UPB subject to CECL / Total UPB subject to CECL
12.3
%
12.5
%
(0.2
)%
(2.0
)%
Allowance for credit losses / Total UPB subject to CECL
0.22
%
0.19
%
0.02
%
12.2
%
Charge-offs / Total UPB subject to CECL
0.13
%
(1
)
0.05
%
(1
)
0.08
%
151.1
%
(1)
Annualized
Real Estate Owned
Three Months Ended September 30,
2025
2024
$ Variance
% Variance
($ in thousands)
Gain (Loss) on REO:
Gain on transfer to REO
$
4,574
$
2,248
$
2,326
103.5
%
REO valuation loss, net
(6,307
)
(1,642
)
(4,665
)
284.1
%
Gain on sale of REO
152
615
(463
)
(75.3
)%
Total gain (loss) on REO
$
(1,581
)
$
1,221
$
(2,802
)
(229.5
)%
Nonperforming Assets (NPA) Resolution
Three Months Ended September 30,
2025
2024
UPB
Gain /
(Loss)
UPB
Gain /
(Loss)
($ in thousands)
Resolved — loans paid in full
$
43,596
$
2,177
$
28,849
$
1,116
Resolved — loans paid current
51,146
473
37,079
574
Resolved — REO sold
13,289
152
2,691
615
Total resolutions
$
108,031
$
2,802
$
68,619
$
2,305
Recovery rate on resolved
nonperforming assets
102.6
%
103.4
%
Velocity’s executive management team will host a conference call and webcast on November 6, 2025, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to review Velocity’s 3Q25 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 November 28, 2025, 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 7126972. 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.
Velocity Financial, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
September 30, 2025
December 31, 2024
(Unaudited)
ASSETS
Cash, cash equivalents, and restricted cash
$
117,810
$
70,830
Total loans, net
6,501,077
5,187,067
Accrued interest and receivables
181,069
160,088
Real estate owned, net
113,700
68,000
Other assets
45,027
41,423
Total assets
$
6,958,683
$
5,527,408
LIABILITIES
Accounts payable and accrued expenses
$
170,584
$
147,814
Secured financing, net
286,218
284,833
Securitized debt
5,532,039
4,226,464
Warehouse and repurchase facilities, net
332,386
348,082
Total liabilities
6,321,227
5,007,193
Commitments and contingencies
EQUITY
Stockholders' equity
634,259
516,944
Noncontrolling interest in subsidiary
3,197
3,271
Total equity
637,456
520,215
Total liabilities and equity
$
6,958,683
$
5,527,408
Diluted book value per share
$
16.31
$
14.26
Diluted shares at period end
39,094
36,469
Velocity Financial, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
2025
June 30,
2025
September 30,
2024
Interest income
$
144,119
$
135,567
$
105,070
Interest expense - portfolio related
88,899
81,838
63,871
Net interest income - portfolio related
55,220
53,729
41,199
Interest expense - corporate debt
6,144
6,143
6,143
Net interest income
49,076
47,586
35,056
Provision for (reversal of) credit losses
381
1,598
(69
)
Net interest income after provision for (reversal of) credit losses
48,695
45,988
35,125
Other operating income
Unrealized gain on fair value loans
30,982
29,906
35,530
Unrealized loss on fair value securitized debt
(9,988
)
(7,584
)
(24,995
)
Origination fee income
9,723
8,936
6,704
Other income
6,360
8,589
3,493
Total other operating income
37,077
39,847
20,732
Operating expenses
Compensation and employee benefits
23,300
22,605
17,586
Loan servicing
7,748
8,205
5,656
Other operating expenses
19,349
21,103
11,371
Total operating expenses
50,397
51,913
34,613
Income before income taxes
35,375
33,922
21,244
Income tax expense
9,963
7,752
5,627
Net income
25,412
26,170
15,617
Net income (loss) attributable to noncontrolling interest
39
173
(186
)
Net income attributable to Velocity Financial, Inc.
25,373
25,997
15,803
Less undistributed earnings attributable to unvested restricted stock awards
352
286
191
Net earnings attributable to common stockholders
$
25,021
$
25,711
$
15,612
Earnings per common share:
Basic
$
0.66
$
0.69
$
0.48
Diluted
$
0.65
$
0.69
$
0.44
Weighted average common shares outstanding:
Basic
38,073
37,194
32,711
Diluted
38,800
37,790
35,895
Velocity Financial, Inc.
Net Interest Margin - Portfolio Related and Total Company
($ in thousands)
Three Months Ended September 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
$
161
$
3,166
Loans held for investment
6,044,116
4,575,745
Total loans
$
6,044,277
$
144,119
9.54
%
$
4,578,911
$
105,070
9.18
%
Debt:
Warehouse facilities
$
404,509
$
8,277
8.18
%
$
311,560
$
7,105
9.12
%
Securitized debt
5,269,788
80,622
6.12
%
3,840,480
56,766
5.91
%
Total debt - portfolio related
5,674,297
88,899
6.27
%
4,152,040
63,871
6.15
%
Corporate debt
290,000
6,144
8.47
%
290,000
6,143
8.47
%
Total debt
$
5,964,297
$
95,043
6.37
%
$
4,442,040
$
70,014
6.30
%
Net interest spread -
portfolio related (2)
3.27
%
3.03
%
Net interest margin -
portfolio related
3.65
%
3.60
%
Net interest spread -
total company (3)
3.16
%
2.87
%
Net interest margin -
total company
3.25
%
3.06
%
(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.
Non-GAAP Financial Measure Reconciliations to GAAP Measures
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30,
2025
2024
Income before income tax
$
35,375
$
21,244
Equity award & ESPP expenses
2,154
1,574
Net income (loss) attributable to noncontrolling interest
39
(186
)
Core income before income tax
$
37,490
$
23,004
Average common equity
623,239
484,197
Pre-tax return on average equity
22.7
%
17.5
%
Tax effect of equity award & ESPP expenses
1.4
%
1.3
%
Tax effect of net income (loss) attributable to noncontrolling interest
0.0
%
(0.2
)%
Core pre-tax return on average equity
24.1
%
19.0
%
Three Months Ended September 30,
2025
2024
Net income
$
25,373
$
15,803
Equity award & ESPP expenses
1,564
1,146
Core net income
$
26,937
$
16,949
Diluted weighted average common shares outstanding
38,800
35,895
Core diluted earnings per share
$
0.69
$
0.47