Velocity Financial, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance

• Reported pretax income of $38.3 million, an 8.2% increase from $35.4 million in 3Q25.
• Net income attributable to Velocity Financial, Inc. was $26.4 million, a 4.1% increase from $25.4 million in 3Q25.
• Diluted EPS was $0.67, an increase of $0.02 from $0.65 in 3Q25.
• Core net income was $30.0 million, an 11.5% increase from $26.9 million in 3Q25.
• Core diluted EPS was $0.76, an increase from $0.69 in 3Q25.
• Net revenue totaled $102.1 million, a 19.1% increase from $85.8 million in 3Q25.
• Net interest income was $53.5 million, a 9.0% increase from $49.1 million in 3Q25.
• Other operating income was $49.2 million, a 32.6% increase from $37.1 million in 3Q25.
• Operating expenses were $63.9 million, a 26.7% increase from $50.4 million in 3Q25, driven by $2.4 million in merger-acquisition-related costs.
• Portfolio net interest margin (NIM) was 3.78%, an increase of 13 basis points from 3.65% in 3Q25.
• Total company NIM was 2.97%, a decrease of 28 basis points from 3.25% in 3Q25.
• Diluted book value per common share was $19.23, a 17.9% increase from $16.31 as of September 30, 2025.
• Pre-tax return on average equity was 20.5%, a decrease from 22.7% in 3Q25.
• Core pre-tax return on average equity was 22.8%, a decrease from 24.1% in 3Q25.

Guidance and Future Outlook

• Management expressed confidence in Velocity's long-term growth prospects and ability to sustain profitable market share growth.
• Financing demand remained strong, evidenced by an expanding pipeline of new applications.
• The company cited consistent portfolio NIM and strong production volume as drivers for recent earnings.

Business Segments and Product Lines

• Loan production totaled $911.3 million, a 23.3% increase from $739.0 million in 3Q25.
• Total unit production increased 12.0% compared to 3Q25, with an average loan balance of $457 thousand versus $415 thousand in 3Q25.
• Production was driven by healthy demand for government-insured multifamily loans (up 497.2% to $154.9 million) and traditional commercial loans (up 12.8% to $422.5 million).
• Short-term loan production decreased 57.0% to $15.5 million.
• Weighted average coupon on held-for-investment (HFI) loan production was 10.12%, down 36 basis points from 10.48% in 3Q25.
• Total loan portfolio UPB reached $7.5 billion, an 18.8% increase from $6.3 billion in 3Q25.
• All loan types showed growth, with Office loans up 45.9% and Retail loans up 35.3%.
• UPB of HFI FVO loans was $5.7 billion, representing 76.5% of total HFI loans, up from 66.3% in 3Q25.
• Two securitizations totaling $516.0 million were completed during the quarter.

Market and Competitive Landscape

• The company operates as a vertically integrated real estate finance company originating business purpose loans secured by 1-4 unit residential rental and small commercial properties.
• Loan prepayments totaled $261.9 million in UPB, an 11.5% increase from $235.0 million in 3Q25.
• The weighted average portfolio loan-to-value ratio was 64.5% as of September 30, 2026, consistent with the five-quarter trailing average.
• Portfolio cost of debt decreased to 6.04% from 6.27% in 3Q25, driven by lower interest rates for securitized debt.

Risks and Challenges

• Nonperforming loans (NPL) as a percentage of HFI loans increased to 10.1% from 9.8% as of September 30, 2025.
• NPL UPB increased 23.2% to $756.5 million.
• Provision for credit losses was $531,000, a 39.4% increase from $381,000 in 3Q25.
• Real estate owned (REO) increased to $10.6 million from $7.9 million in 3Q25, with a total loss on existing REO of $8.8 million compared to $6.2 million in 3Q25.
• Forward-looking statements note risks including changes in federal fiscal/monetary policies, general economic and real estate market conditions, regulatory changes, customer interest, securitization market conditions, and geopolitical conflicts.

Management Commentary and Tone

• Chris Farrar, President and CEO, stated the company continued to deliver impressive earnings driven by consistent portfolio NIM and strong production volume.
• Management noted that financing demand remained strong with an expanding pipeline of new applications.
• The tone was confident regarding long-term growth prospects and the ability to sustain profitable market share growth.

Other Key Points

• NPL resolutions totaled $90.0 million in UPB, with total recoveries of 108.2% ($7.4 million of UPB resolved including accrued interest).
• Net gains on NPL resolutions were 103.0% ($2.7 million).
• Liquidity totaled $193.4 million, consisting of $86.8 million in unrestricted cash and $106.6 million in available borrowings from unpledged loans.
• Total available warehouse line capacity was $425.4 million.
• Compensation expense increased to $29.2 million from $23.3 million in 3Q25 to support future planned growth.
• Loan servicing expense increased to $9.1 million from $7.7 million in 3Q25.
• Securitization expense decreased to $5.6 million from $6.4 million in 3Q25 due to lower costs per transaction.
• Other operating expenses increased to $9.4 million from $5.0 million in 3Q25, primarily due to higher merger-acquisition-related costs.
• The company hosts a conference call and webcast on November 4, 2026, at 2:00 p.m. Pacific Time.