Velocity Financial, Inc. Reports First Quarter 2026 Results

First Quarter Highlights

Financial Results

• Net income of $22.4 million, an increase of 18.4% from $18.9 million for 1Q25. Diluted EPS of $0.57, an increase of $0.06 from $0.51 per share for 1Q25

  • Driven by loan portfolio growth and strong portfolio earnings

• Core net income of $26.5 million, an increase of 30.8% from $20.3 million for 1Q25. Core diluted EPS of $0.68, an increase from $0.55 per share for 1Q25¹

• Diluted book value per common share of $17.75, an increase of 19.4% from $14.87 as of March 31, 2025

• Portfolio net interest margin (NIM) of 3.56%, an increase of 21 bps from 3.35% for 1Q25

  • Consistently strong NIM levels have resulted from rate discipline on new loan production, with average loan coupons of 10.28% on loans produced over the last five quarters

Portfolio

• Loan production of $639.4 million, flat with $640.4 million in 1Q25

• Nonperforming loans (NPL) as a percentage of Held for Investment (HFI) loans was 10.1%, a decrease from 10.8% as of March 31, 2025

• NPL resolutions totaled $70.1 million in UPB

  • Net gains of 102.3% or $1.6 million

  • Total NPL recoveries of 106.5% or $4.6 million of UPB resolved including accrued interest received

Liquidity and Capitalization

• Completed two securitizations totaling $513.8 million

• Liquidity of $329.0 million, consisting of $87.1 million in unrestricted cash and $241.9 million in available borrowings from unpledged loans

• Total available warehouse line capacity of $835.6 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.

WESTLAKE VILLAGE, Calif., May 06, 2026--(BUSINESS WIRE)--Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $22.4 million and core net income of $26.5 million for 1Q26, compared to $18.9 million and $20.3 million, respectively, for 1Q25. Earnings and core earnings per diluted share were $0.57 and $0.68 for 1Q26, compared to $0.51 and $0.55, respectively, for 1Q25.

"Velocity continued to deliver impressive earnings in the first quarter of 2026" said Chris Farrar, President and CEO. "Velocity's first quarter 2026 results were driven by higher portfolio net interest income and noninterest income from our growing portfolio and new 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 Indicators²

Condensed Results of Operations

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.

• Net interest income after provision for credit losses was $42.3 million, an increase of 18.6% from $35.6 million for 1Q25

  • Driven by strong portfolio growth and recoveries of interest income from NPLs by our asset management team

• Other operating income was $43.0 million, an increase from $33.4 million for 1Q25

  • Driven primarily by net unrealized gain on fair value instruments

• Net revenue was $85.2 million, an increase of 23.4% from $69.1 million for 1Q25

  • Resulting from continued strong production-driven portfolio net interest income growth and fair value gains

• Operating expenses totaled $54.3 million, an increase of 28.8% from 1Q25, primarily from higher professional fees related to business development opportunities and the growth in our platform

  • Compensation expense totaled $23.5 million, compared to $21.7 million for 1Q25

    • Driven by increases in headcount to support future planned growth

  • Professional fees totaled $5.8 million, compared to $1.8 million for 1Q25

    • Driven by higher legal fees related to potential merger and acquisition due diligence

  • Securitization expense totaled $5.3 million from the issuance of two securitizations during the quarter, compared to costs of $4.0 million for one securitization during 1Q25

  • Loan servicing expense totaled $8.6 million, from $8.0 million for 1Q25, driven by portfolio growth

Loan Portfolio

• Total loan portfolio was $6.8 billion in UPB as of March 31, 2026, an increase of 25.4% from $5.4 billion as of March 31, 2025

  • Driven by healthy growth across all types of collateral securing our loans

  • Loan prepayments totaled $235.0 million in UPB, an increase of 3.2% from $227.6 million for 4Q25, and 19.9% from $196.0 million for 1Q25

• UPB of HFI FVO loans was $4.9 billion, or 71.7% of total HFI loans, as of March 31, 2026, an increase from $3.1 billion, or 57.7% as of March 31, 2025

• Weighted average portfolio loan-to-value ratio was 64.9% as of March 31, 2026, down from 66.1% as of March 31, 2025, and below the five-quarter trailing average of 65.0%

• Weighted average total portfolio yield was 9.23%, an increase of 12 bps from 1Q25, primarily driven by the increase in weighted average loan coupons

• Portfolio-related debt cost was 6.09%, a decrease of 14 bps from 1Q25, driven by lower warehouse financing utilization and securitized debt interest expense

Loan Production Volumes

• Loan production totaled $639.4 million, including construction loan advances of $2.2 million, consistent with $640.4 million for 1Q25

  • 1Q26 production volume was driven by healthy demand for our traditional commercial product

  • Weighted average coupon on 1Q26 HFI loan production was 10.15%, a decrease of 36 bps from 10.51% for 1Q25 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

• NPLs totaled $692.1 million in UPB as of March 31, 2026, or 10.1% of total HFI loans, compared to $587.8 million and 10.8% as of March 31, 2025

CECL Portfolio Credit Performance

• Charge-offs for 1Q26 totaled $1.3 million, compared to $1.0 million for 1Q25

  • The trailing five-quarter charge-offs average was $1.4 million

• Credit loss reserve totaled $4.9 million as of March 31, 2026, a decrease of 3.1% from $5.0 million as of March 31, 2025

  • Driven by our decreasing loan portfolio subject to credit loss reserve

  • CECL reserve rate of 0.25% (CECL reserve as % of HFI loans at amortized cost) was relatively consistent with the recent five-quarter average rate of 0.23%

Real Estate Owned

• Total gain on new REO was $6.8 million, compared to a gain of $4.4 million for 1Q25, driven by higher valuation gain

• Total loss on existing REO was $3.3 million, compared to a loss of $1.8 million for 1Q25, driven by valuation loss

Nonperforming loans (NPLs) Resolution

• NPLs resolution totaled $70.1 million in UPB, realizing gains of 102.3% of UPB resolved compared to $68.3 million in UPB and similar gains of 102.3% of UPB resolved for 1Q25

• UPB of NPLs resolution for 1Q26 was below the recent five-quarter average of $80.3 million in UPB resolved and below the average gains of 108.5% of UPB resolved

Velocity’s executive management team will host a conference call and webcast on May 6, 2026, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to review Velocity’s 1Q26 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 May 29, 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 6829289. 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 22 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.

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Contacts

Investors and Media:
Chris Oltmann
(818) 532-3708