Velocity Financial, Inc. Reports Second Quarter 2026 Results

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 Indicators2
		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

 

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