Velocity Financial, Inc. Reports Second Quarter 2026 Results

About this update from Velocity Financial, Inc.

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $25.2 million and core net income of $27.9 million for 2Q26, compared to $26.0 million and $27.5 million, respectively, for 2Q25. Earnings and core earnings per diluted share were $0.64 and $0.71 for 2Q26, compared to $0.69 and $0.73, respectively, for 2Q25. “Velocity continued to deliver impressive earnings in the second quarter of 2026,” said Chris Farrar, President and CEO. “Velocity's second 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 Indicators 2       Three Months Ended June 30,                   2026     2025     $ Variance   % Variance     ($ in thousands, except per share amounts)                 Income before income tax   $ 35,235       $ 33,922       $ 1,313     3.9 % Net income   $ 25,163       $ 25,997       $ (834 )   (3.2 )% Diluted earnings per share   $ 0.64       $ 0.69       $ (0.05 )   (7.2 )% Core income before income tax   $ 38,415       $ 35,777       $ 2,638     7.4 % Core net income   $ 27,853       $ 27,470       $ 383     1.4 % Core diluted earnings per share   $ 0.71       $ 0.73       $ (0.02 )   (2.9 )% Net interest margin — portfolio related     3.66 % (1)     3.82 % (1)     (0.17 )%   (4.4 )% Net interest margin — total company     2.82 % (1)     3.39 % (1)     (0.57 )%   (16.7 )% Operating expense ratio     28.7 %       29.6 %       (0.9 )%   (3.0 )% Average common equity   $ 704,138       $ 588,814       $ 115,324     19.6 % Pre-tax return on average equity     20.0 % (1)     23.0 % (1)     (3.0 )%   (13.1 )% Core pre-tax return on average equity     21.8 % (1)     24.3 % (1)     (2.5 )%   (10.2 )% (1) Annualized Condensed Results of Operations       Three Months Ended June 30,             2026   2025   $ Variance   % Variance     ($ in thousands)         Net interest income   $ 48,890   $ 47,586   $ 1,304     2.7 % Provision for credit losses     980     1,598     (618 )   (38.7 )% Net interest income after provision     47,910     45,988     1,922     4.2 % Other operating income     47,078     39,847     7,231     18.1 % Net revenue     94,988     85,835     9,153     10.7 % Operating expenses     59,753     51,913     7,840     15.1 % Income before income taxes     35,235     33,922     1,313     3.9 % Income tax expense     9,501     7,752     1,749     22.6 % Net income     25,734     26,170     (436 )   (1.7 )% Net income attributable to noncontrolling interest     571     173     398     230.1 % Net income attributable to Velocity Financial, Inc.   $ 25,163   $ 25,997   $ (834 )   (3.2 )%   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 $47.9 million, an increase of 4.2% from $46.0 million for 2Q25 Driven by strong portfolio growth and recoveries of interest income from NPLs by our asset management team Other operating income was $47.1 million, an increase from $39.8 million for 2Q25 Driven primarily by net unrealized gain on fair value instruments and origination fee income Net revenue was $95.0 million, an increase of 10.7% from $85.8 million for 2Q25 Resulting from continued strong production-driven portfolio net interest income growth and fair value gains Operating expenses totaled $59.8 million, an increase of 15.1% from 2Q25 Compensation expense totaled $25.5 million, compared to $22.6 million for 2Q25, as headcount increased to support future planned growth Loan servicing expense totaled $15.7 million, compared to $8.2 million for 2Q25, driven mainly by the $6.0 million of recoverable protective advances that we elected to transfer into the 2026-MC2 Trust in June 2026 Real estate owned, net increased to $6.7 million from $3.3 million for 2Q25, primarily due to the increase in REOs combined with higher valuation adjustments Securitization expense decreased to $4.7 million from the issuance of two securitizations during the quarter, compared to costs of $11.5 million for four securitizations during 2Q25 Loan Portfolio       June 30,             2026   2025   $ Variance   % Variance     ($ in thousands)         Total Loans Outstanding: Investor 1-4   $ 3,184,378     $ 2,951,750     $ 232,628     7.9 % Retail     803,952       569,053       234,899     41.3 % Mixed use     763,371       632,372       130,999     20.7 % Office     658,180       459,036       199,144     43.4 % Warehouse     525,597       392,734       132,863     33.8 % Multifamily     490,402       422,603       67,799     16.0 % Other (1)     560,011       432,105       127,906     29.6 % Total loans   $ 6,985,891     $ 5,859,653     $ 1,126,238     19.2 % (1) All other properties individually comprised less than 5.0% of the total unpaid principal balance                   Key Loan Portfolio Metrics (1) : Loan count     18,219       14,854       3,365     22.7 % Loan-to-value     64.6 %     65.8 %     (1.2 )%   (1.8 )% Coupon     9.74 %     9.70 %     0.04 %   0.4 % Total portfolio yield     9.29 %     9.65 %     (0.36 )%   (3.7 )% Portfolio cost of debt     6.09 %     6.24 %     (0.15 )%   (2.5 )% (1) Weighted averages, except for loan count Total loan portfolio was $7.0 billion in UPB as of June 30, 2026, an increase of 19.2% from $5.9 billion as of June 30, 2025 Driven by healthy growth across all types of collateral securing our loans Loan prepayments totaled $250.2 million in UPB, an increase of 6.5% from $235.0 million for 1Q26, and 12.0% from $223.4 million for 2Q25 UPB of HFI FVO loans was $5.2 billion, or 74.1% of total HFI loans, as of June 30, 2026, an increase from $3.6 billion, or 62.3% as of June 30, 2025 Weighted average portfolio loan-to-value ratio was 64.6% as of June 30, 2026, down from 65.8% as of June 30, 2025, and slightly below the five-quarter trailing average of 64.7% Weighted average total portfolio yield was 9.29%, a decrease of 36 bps from 2Q25, primarily driven by higher cash receipts in 2Q25 from nonperforming loans Portfolio-related debt cost was 6.09%, a decrease of 15 bps from 2Q25, driven by lower rates of securitized debt Loan Production Volumes       Three Months Ended June 30,             2026   2025   $ Variance   % Variance     ($ in thousands)         Originations Including Advances:                 Traditional commercial   $ 337,606   $ 350,495   $ (12,889 )   (3.7 )% Investor 1-4 rental     232,292     284,885   (52,593 )   (18.5 )% Government insured multifamily     86,258     40,922     45,336     110.8 % Short-term     16,421     49,085     (32,664 )   (66.5 )% Total   $ 672,577   $ 725,387   $ (52,810 )   (7.3 )% Loan production totaled $672.6 million, including construction loan advances of $4.2 million, a decrease from $725.4 million for 2Q25 2Q26 production volume was driven by healthy demand for our traditional commercial product Weighted average coupon on 2Q26 HFI loan production was 9.99%, a decrease of 48 bps from 10.47% for 2Q25 mirroring a similar reduction in shorter term interest rates Government-insured multifamily loans are originated by our capital-light subsidiary Century Health & Housing Capital and the related GNMA securities are sold to investors for cash gains shortly after closing Total HFI Portfolio Credit Performance       Three Months Ended June 30,             2026   2025   Variance   % Variance     ($ in thousands)         Key Nonperforming Loans Metrics:                 Nonperforming loans UPB   $ 673,335     $ 601,757     $ 71,578     11.9 % Total UPB   $ 6,985,891     $ 5,859,653     $ 1,126,238     19.2 % Nonperforming loans UPB / Total UPB     9.6 %     10.3 %     (0.6 )%   (6.1 )% NPLs totaled $673.3 million in UPB as of June 30, 2026, or 9.6% of total HFI loans, compared to $601.8 million and 10.3% as of June 30, 2025 CECL Portfolio Credit Performance       Three Months Ended June 30,             2026   2025   Variance   % Variance     ($ in thousands)         Allowance for Credit Losses:                 Beginning balance   $ 4,860     $ 5,017     $ (157 )   (3.1 )% Provision for credit losses     980       1,598       (618 )   (38.7 )% Charge-offs     (738 )     (1,733 )     995     (57.4 )% Ending balance   $ 5,102     $ 4,882     $ 220     4.5 % Total UPB subject to CECL   $ 1,810,757     $ 2,210,304     $ (399,547 )   (18.1 )% Nonperforming loans UPB subject to CECL   $ 178,986     $ 283,227     $ (104,241 )   (36.8 )% Nonperforming loans UPB subject to CECL / Total UPB subject to CECL     9.9 %     12.8 %     (2.9 )%   (22.9 )% Allowance for credit losses / Total UPB subject to CECL     0.28 %     0.22 %     0.06 %   27.6 % Charge-offs / Total UPB subject to CECL     0.16 % (1)   0.31 % (1)   (0.15 )%   (48.0 )% (1) Annualized Charge-offs for 2Q26 totaled $0.7 million, compared to $1.7 million for 2Q25 The trailing five-quarter charge-offs average was $1.3 million Credit loss reserve totaled $5.1 million as of June 30, 2026, an increase of 4.5% from $4.9 million as of June 30, 2025 Provision for credit losses and charge-offs decreased due to our decreasing loan portfolio subject to credit loss reserve CECL reserve rate of 0.28% (CECL reserve as % of HFI loans at amortized cost) was slightly higher than the recent five-quarter average rate of 0.24% Real Estate Owned       Three Months Ended June 30,             2026   2025   $ Variance   % Variance     ($ in thousands)         Gain (loss) on new REO:                 Gain on transfer to REO - amortized cost loans   $ 1,025     $ 2,169     $ (1,144 )   (52.7 )% Valuation gain on transfer to REO - fair value loans     4,364       4,884       (520 )   (10.6 )% Total gain on new REO   $ 5,389     $ 7,053     $ (1,664 )   (23.6 )%                       Three Months Ended March 31,             2026   2025   $ Variance   % Variance     ($ in thousands)         Gain (loss) on existing REO:                 REO valuation loss, net   $ (3,635 )   $ (2,150 )   $ (1,485 )   69.1 % Gain on sale of REO     633       790       (157 )   (19.9 )% Total loss on existing REO   $ (3,002 )   $ (1,360 )   $ (1,642 )   120.7 % Total gain on new REO decreased to $5.4 million from $7.1 million for 2Q25, driven by lower gain on transfer to REO and valuation gain Total loss on existing REO was $3.0 million, compared to $1.4 million for 2Q25, driven by higher valuation loss Nonperforming loans (NPLs) Resolution       Three Months Ended June 30, 2026 Total Nonperforming Loans   UPB   Default Interest   Prepayment Penalty   Net Gain   Regular Accrued Interest   Servicing Advances Write-Offs   Total Recovered     ($ in thousands) Resolved — loans paid off   $ 38,257   $ 1,255   $ 633   $ 1,888     $ 3,232   $ (1,135 )   $ 3,985   Resolved — loans paid current     52,219     543     24     567       2,375     (1 )     2,941   Total resolutions   $ 90,476   $ 1,798   $ 657   $ 2,455     $ 5,607   $ (1,136 )   $ 6,926   Recovery rate                 102.7 %             107.7 %     Three Months Ended June 30, 2025 Total Nonperforming Loans   UPB   Default Interest   Prepayment Penalty   Net Gain   Regular Accrued Interest   Servicing Advances Write-Offs   Total Recovered     ($ in thousands) Resolved — loans paid off   $ 41,183   $ 1,541   $ 908   $ 2,449     $ 3,909   $ (410 )   $ 5,948   Resolved — loans paid current     49,166     394     —     394       2,474     (69 )     2,799   Total resolutions   $ 90,349   $ 1,935   $ 908   $ 2,843     $ 6,383   $ (479 )   $ 8,747   Recovery rate                 103.1 %             109.7 % NPLs resolution totaled $90.5 million in UPB, compared to $90.3 million for 2Q25, and was above the recent five-quarter average of $84.7 million Total NPL recovery rate was 107.7% or $6.9 million of UPB resolved compared to 109.7% or $8.7 million for 2Q25. Total NPL recovery rate was below the recent five-quarter average of 108.5% in UPB resolved. Velocity’s executive management team will host a conference call and webcast on August 5, 2026, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to review Velocity’s 2Q26 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 1-646-307-1963 in the U.S. and Canada and for international callers. Callers should use the conference ID/Passcode 5566224 to join the call. A replay of the call will be available through midnight on August 31, 2026, and can be accessed by dialing 1-800-770-2030 in the U.S and Canada. The passcode for the replay is 5566224. 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 .   Velocity Financial, Inc. Condensed Consolidated Balance Sheets (In thousands, except per share amounts)       June 30, 2026   December 31, 2025     (Unaudited)   (Audited) ASSETS         Cash, cash equivalents, and restricted cash   $ 245,203   $ 249,237 Total loans, net     7,283,561     6,758,131 Accrued interest and receivables     211,295     202,477 Real estate owned, net     142,085     118,289 Other assets     80,986     53,379 Total assets   $ 7,963,130   $ 7,381,513           LIABILITIES         Accounts payable and accrued expenses   $ 186,020   $ 168,314 Secured financing, net     73,427     286,679 Unsecured senior notes, net     486,170     — Securitized debt, at amortized cost     1,570,782     1,705,589 Securitized debt, at fair value     4,609,891     4,236,737 Warehouse and repurchase facilities, net     311,676     308,506 Total liabilities     7,237,966     6,705,825 Commitments and contingencies                   EQUITY         Stockholders' equity     721,537     672,535 Noncontrolling interest in subsidiary     3,627     3,153 Total equity     725,164     675,688 Total liabilities and equity   $ 7,963,130   $ 7,381,513           Diluted book value per share   $ 18.43   $ 17.19 Diluted shares at period end     39,346     39,297   Velocity Financial, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited)       Three Months Ended     June 30, 2026   March 31, 2026   June 30, 2025 Interest income   $ 160,986   $ 153,080     $ 135,567   Interest expense — portfolio related     97,627     94,027       81,838   Net interest income — portfolio related     63,359     59,053       53,729   Interest expense — corporate debt     14,469     15,133       6,143   Net interest income     48,890     43,920       47,586   Provision for credit losses     980     1,661       1,598   Net interest income after provision for credit losses     47,910     42,259       45,988   Other operating income             Unrealized gain on fair value loans     24,483     1,039       29,906   Unrealized gain (loss) on fair value securitized debt     2,297     26,254       (7,584 ) Origination fee income     12,154     7,970       8,936   Other income     8,144     7,694       8,589   Total other operating income     47,078     42,957       39,847   Operating expenses             Compensation and employee benefits     25,514     23,520       22,605   Loan servicing     15,685     8,563       8,205   Real estate owned, net     6,723     6,862       3,298   Securitization expenses     4,669     5,285       11,521   Other operating expenses     7,162     10,109       6,284   Total operating expenses     59,753     54,339       51,913   Income before income taxes     35,235     30,877       33,922   Income tax expense     9,501     8,578       7,752   Net income     25,734     22,299       26,170   Net income (loss) attributable to noncontrolling interest     571     (64 )     173   Net income attributable to Velocity Financial, Inc.     25,163     22,363       25,997   Less undistributed earnings attributable to unvested restricted stock awards     341     312       286   Net earnings attributable to common stockholders   $ 24,822   $ 22,051     $ 25,711   Earnings per common share:             Basic   $ 0.64   $ 0.57     $ 0.69   Diluted   $ 0.64   $ 0.57     $ 0.69   Weighted average common shares outstanding:             Basic     38,730     38,626       37,194   Diluted     39,304     39,174       37,790     Velocity Financial, Inc. Net Interest Margin - Portfolio Related and Total Company ($ in thousands)       Three Months Ended June 30,     2026   2025         Interest   Average       Interest   Average     Average   Income /   Yield /   Average   Income /   Yield /     Balance   Expense   Rate (1)   Balance   Expense   Rate (1) Loan Portfolio:                         Loans held for sale   $ 14,159           $ 12,677         Loans held for investment     6,917,546             5,608,086         Total loans   $ 6,931,705   $ 160,986   9.29 %   $ 5,620,763   $ 135,567   9.65 %                           Debt:                         Warehouse facilities   $ 201,023   $ 4,054   8.07 %   $ 413,441   $ 8,254   7.99 % Securitized debt     6,214,837     93,573   6.02 %     4,832,358     73,584   6.09 % Total debt — portfolio related     6,415,860     97,627   6.09 %     5,245,799     81,838   6.24 % Corporate — Secured debt     75,000     2,004   10.69 %     290,000     6,143   8.47 % Corporate — Unsecured debt     500,000     12,465   9.97 %     —     —   — % Total debt   $ 6,990,860   $ 112,096   6.41 %   $ 5,535,799   $ 87,981   6.36 %                           Net interest spread — portfolio related (2)           3.20 %           3.41 % Net interest margin — portfolio related           3.66 %           3.82 %                           Net interest spread — total company (3)           2.88 %           3.29 % Net interest margin — total company           2.82 %           3.39 % (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 June 30,     2026   2025 Income before income tax   $ 35,235     $ 33,922   Equity award & ESPP expenses     3,079       2,028   Potential M&A due diligence     672       —   Net income loss attributable to noncontrolling interest     571       173   Core income before income tax   $ 38,415     $ 35,777             Average common equity   $ 704,138     $ 588,814   Pre-tax return on average equity     20.0 %     23.0 % Tax effect of equity award & ESPP expenses     1.7 %     1.4 % Tax effect of potential M&A due diligence     0.4 %     0.0 % Tax effect of net income loss attributable to noncontrolling interest     0.3 %     0.1 % Core pre-tax return on average equity     21.8 %     24.3 %     Three Months Ended June 30,     2026   2025 Net income   $ 25,163   $ 25,997 Equity award & ESPP expenses     2,208     1,473 Due diligence and advisory fees     482     — Core net income   $ 27,853   $ 27,470           Diluted weighted average common shares outstanding     39,304     37,790 Core diluted earnings per share   $ 0.71   $ 0.73   View source version on businesswire.com: https://www.businesswire.com/news/home/20260805328428/en/

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