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

“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