VEL

Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 5 p.m. ET Corporate Treasurer - Christopher Oltmann President and Chief Executive Officer - Christopher Farrar Chief Financial Officer - Mark Szczepaniak Operator: Hello, and welcome to the Velocity Financial Second Quarter 2026 Results Call. [Operator Instructions] I will now turn the conference over to Chris Oltmann, Corporate Treasurer. Please go ahead. Christopher Oltmann: Thanks, JL. Hello, everyone, and thank you for joining us today for the discussion of Velocity's Second Quarter 2026 results. Joining me today are Chris Farrar, Velocity's President and Chief Executive Officer; and Mark Szczepaniak, Velocity's Chief Financial Officer. Earlier this afternoon, we issued a press release with our second quarter results, and you can find that press release and the accompanying presentation that we will refer to during this call on our Investor Relations website at www.velfinance.com. I'd like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results may differ materially. For a discussion of some of the risks and other factors that could affect results, please see the risk factors and other cautionary statements made in our communications with shareholders, including the risk factors disclosed in our filings with the Securities and Exchange Commission. Please also note that the content of this conference call contains time-sensitive information that is accurate only as of today, and we do not undertake any duty to update forward-looking statements. We may also refer to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials in our Investor Relations website. And finally, today's call is being recorded and will be available on the company's website later today. And with that, I will now turn the call over to Chris Farrar. Christopher Farrar: Thank you, and good afternoon, everyone. I appreciate you taking the time to join us today. I'll start with how the quarter came together and then walk through the highlights. Mark will then walk you through the financials in detail before we open up for questions. Second quarter was, in many ways, a continuation of the story we've been telling all year. Demand for our products stayed healthy across both the traditional commercial and 1-4 family rental markets. Our portfolio kept compounding and our credit book performed the way we've come to expect from a well-seasoned low LTV loan book. We delivered core net income of $27.9 million this quarter, with pre-tax income up 3.9% year-over-year to $35.2 million. The modest year-over-year dip in GAAP net income and EPS came almost entirely from a higher effective tax rate, not from any softening in the underlying business. If anything, the underlying business kept getting stronger. Diluted book value per share grew to $18.43, up nearly $2.81 from a year ago, which is really the number that best captures what compounding at Velocity looks like over time. Credit remains our top priority, and this quarter, we reinforced that discipline. Non-performing loans fell to 9.6% of held-for-investment loans, down from 10.3% a year ago. And we resolved $90.5 million of NPLs with net gains of 102.7% and with total recoveries of 107.7%. Our special servicing team continues to do exactly what we ask of it, resolve assets efficiently while maximizing recovery. We've said before that we optimize for asset valuation, not volume, and that discipline continues to show up in our numbers. Charge-offs this quarter were just $700,000, below our 5-quarter trailing average. On the origination side, we again grew the portfolio the way we like to grow it deliberately. Total loan production was $672.6 million this quarter, slightly down from $725 million a year ago, but unit production was actually up 3.3%. The dollar decline reflects a lower average loan size, not softer demand. Our total loan portfolio grew to $7 billion in UPB, up 19% year-over-year, with healthy growth across every collateral type we serve. We stayed active on the funding side as well, completing 2 securitizations during the quarter and the fixed income markets remain very supportive as evidenced by the tightest spreads we've seen in the last 3 years. We ended the period with $240 million of liquidity and $662 million of available warehouse capacity, which gives us real flexibility to keep leaning into origination opportunities without stretching the balance sheet. As we look back -- sorry, at the back half of 2026, we feel good about where we sit. Credit is performing. Our funding base is diverse and well capitalized, and demand for our products remains strong. The pipeline is robust, and we expect origination volumes to increase for the rest of this year. We remain confident in our ability to keep compounding book value and earnings at the pace our investors have come to expect from us. With that, I'll turn it over to Mark to take you through the numbers in more detail. Mark Szczepaniak: Thanks, Chris. Christopher Farrar: Mark, I'll hit the first page, and then I'll turn it over to you actually. Mark Szczepaniak: Okay. Christopher Farrar: Okay. Cool. Thanks. On Page 3, just the highlights for the quarter. NIM income, as I mentioned, $25.2 million, up -- sorry, 3.2% decrease from the prior year, and that was mainly driven by the tax rate that I mentioned. Core net income, up 1.4% and portfolio NIM, 3.66% above our targeted 3.5%, down slightly from the 3.82% in the prior year, but that level was elevated due to some cash collections in that prior period. In terms of production, I already hit on the numbers there, so I won't reiterate those. And suffice it to say that we're very pleased with the way the business was performing and the production levels that we achieved. And as I mentioned, looking forward, the pipeline looks very healthy. So, we expect those volumes to increase. On the financing and capital side, I did already mention, both the securitizations and the liquidity and want folks to know that we feel like we're in a really good position to continue growing the portfolio. And I'd highlight that the MC2 securitization that we did continues to help us improve our capital efficiency, unlocking some capital that was tied up in non-performing loans. With that, I'll turn it over to Mark to take you through the rest. Mark Szczepaniak: Thanks, Chris. Good afternoon, everybody. Good evening. Velocity's second quarter of 2026 continue to reflect, as Chris mentioned, our strong earnings results for the year. Looking at Page 4, our Q2 loan production, as Chris mentioned, was just under $673 million in UPB. That's an increase of about 5.2% over Q1's production of $639 million. There were 1,600 loans -- over 1,600 loans funded in the second quarter, and that's consistent with Q1's unit production. The production during Q2 included the weighted average coupon on our new held-for-investment originations, continuing to come in strong at about 10%. And the weighted average coupon on HFI originations for the last 5 quarter average trend was at 10.2%. So, really holding that 10% WAC level constant over the last 5 quarters. The growth in originations in Q2 also continued at very tight credit levels, with the weighted average loan-to-value for the quarter at 61.1% and the last 5-quarter average trend for the weighted average loan-to-value at 62.4%. So, this Q2 production grew at a very healthy WAC, low LTV. And so it continues the trend of good borrower demand for our product even during what's been an unstable year-to-date so far, 2026 economic market. Turning to Page 5. As a result of the continued strong Q2 production, Page 5 shows the growth in the quarter for our overall loan portfolio. Total loan portfolio as of June 30 was about $7 billion in UPB. That's a 2.2% increase from Q1, and over a 19% increase year-over-year compared to the first -- or second quarter '25. The weighted average coupon on our total portfolio as of June 30 was 9.7% on a yield basis, and that was consistent quarter-over-quarter and year-over-year. So, we're holding that 9.7% coupon. And again, that kind of ties to the originations over the last 5 quarters coming in at 10%, very consistent on the WAC and also on the WAC in the portfolio. The metrics show the loan portfolio continues to provide healthy yield at tight credit levels. Flipping to Page 6. Our Q2 portfolio net interest margin was 366 basis points. That's the 10 basis points increase over Q1 NIM of 356 basis points. Looking to the right at the different components of NIM, our portfolio yield increased by 6 basis points quarter-over-quarter due to the continued loan production at the healthy WACs that we just highlighted. The higher portfolio yield of 965 basis points reflected in Q2 of '25, that was due to more cash being received during that period on non-performing loans. And cash received on non-performing loans, as we know, can vary quarter-to-quarter based on actual resolution activity and cash received. Our portfolio cost of funds remained constant quarter-over-quarter and decreased by 15 basis points year-over-year. The year-over-year decrease, again, mainly due to paying down those portfolio warehouse lines back in Q1 of this year, with the proceeds from the unsecured corporate debt issuance that we had in Q1. Looking at Page 7. Our non-performing loan rate at the end of Q2 was 9.6%, which is a 70 basis point year-over-year decrease. And the decrease is a result of both selling non-performing loans into that 2026 MC2 Trust security and also the continued strong resolution efforts by our special servicing department, which we continue to resolve those NPL resolutions at favorable gains on all of our NPA assets, which are comprised of the NPL loans as well as the REOs. The table to the right on Page 7 shows our loans held-for-investment portfolio, which include both the amortized cost loan portfolio and the fair value loan portfolio and shows the total year-over-year non-performing loan valuation allowance that we have for non-performing loans. As of June 30, the amortized cost loan portfolio had a $5.1 million CECL loss reserve and the fair value loan portfolio had a $24.3 million valuation adjustment loss allowance for a combined total portfolio valuation loss allowance of 42 basis points. Remember, both of those valuation adjustments are required under U.S. GAAP. The unrealized loss valuation adjustment on our non-performing FVO loans under U.S. GAAP represents the market value for which those loans could be sold in a secondary market. However, we do not plan on going out normally in the secondary market and the whole loan market and selling our non-performing loans anywhere at a discount because we've got a history of producing net gains on that product. Page 8 shows our CECL loan loss reserve activity. The CECL reserve, again, keep in mind, is only applicable to our amortized cost loan portfolio, which is dwindling down as it continues to pay down. It does not include the loans being carried at fair value. The CECL reserve as of the end of the quarter was $5.1 million or 28 basis points of the outstanding amortized cost HFI portfolio. On Page 9, you see our real estate owned REO activity. The graph to the left shows our ratio of REO assets to total HFI loans, and that ratio has been relatively stable over the last 12 months on a year-to-year basis. In the table to the right, we show all of our REO activity. It's broken out. The top half of the table reflects the gain or loss from recording new REOs in the period, and it segregates that new REO activity between being sourced from our amortized cost loan portfolio and our fair value loan portfolio. And for Q2 of this year, there was a $5.4 million gain on transfers of non-performing loans to new REOs compared to $7.1 million gain year-over-year in the second quarter of '25. The bottom half -- the second half of that table presents the gain or loss activities on the existing REOs subsequent to the initial recording of the REO, which reflect the lower of cost or LOCOM accounting. In Q2 of '26, there was a $3 million loss on REO activities compared to $1.4 million loss year-over-year in second quarter of '25. So if you take those 2 sections combined, the new REO activity as well as existing REO activity, it presents a holistic picture of our overall REO profit and loss activity for the period, which for second quarter of this year was a net gain of $2.4 million compared to a net gain of $5.7 million for Q2 of '25. Page 10 shows our non-performing loan resolution activity. For Q2, we resolved almost $91 million in UPB of non-performing loans, and we had total resolution dollars recovered, which includes all the past due net contractual interest of $6.9 million or 7.7% over and above the UPB compared to the resolution of $90 million in UPB of non-performing loans with total resolution dollars recovered of $8.7 million, or 9.7% year-over-year in second quarter '25. If you want to see what the amount recovered was over and above UPB and contractual interest, meaning by pure gain, there's the net gain column in those tables. Net gain column over and above recovering all UPB and past due contractual interest was for second quarter of this year, $2.5 million or 2.7% compared to a net gain of $2.8 million, or 3.1% year-over-year for second quarter '25. Then on Page 11 shows our durable funding and liquidity position at the end of the quarter. Total liquidity as of June 30 was $240 million. That's comprised of about $76 million in cash and cash equivalents and another $164 million that we had in available liquidity on unfinanced loan collateral. The available warehouse line capacity at the end of the quarter was just under $662 million with a maximum line capacity of $975 million. So, plenty of available capacity on our existing warehouse lines. In Q2, as Chris mentioned, we issued 2 securitizations. We issued the 2026-2 security with a little over $398 million in securities issued. And we also did the 2026-MC2 security, which is comprised of non-performing loans where the loans that were sold into the trust, with Velocity retaining a $30 million trust certificate of the CMBS security from that trust. And that MC2 security generated a little over $11 million in net proceeds for us. Our recourse debt-to-equity ratio at the end of the quarter remained low at 1.2x. And our total debt to equity, if you include all the non-recourse securitizations, was at 9.7x at the end of the quarter. With that, I'll turn it back over to Chris for the Q2 financial recap. Christopher Farrar: Thank you, Mark. On Page 12, just an overview of things going forward. We think the market is healthy and doing well. Credit is stable. We like the performance there. Capital markets are very supportive and wide open, which is great for our business. From an earnings perspective, we think we're going to continue to achieve above 3.5% NIM and good growth going forward. So, we like the way things are lining up for the rest of this year and into '27. So with that, that concludes our prepared remarks. And we'll open it up for questions. Operator: [Operator Instructions] Your first question comes from the line of Chris Muller of Citizens Capital Markets. Christopher Muller: Congrats on another really solid quarter here. So, I guess the government insured multi-family originations jumped in the quarter. Can you just refresh my memory on this product? And will we see more of this going forward? Or was 2Q an outlier with that? Christopher Farrar: Sure. Chris, so that is our Century Health & Housing division that produces HUD multi-family loans. Those are very large in terms of average UPB and tend to be very lumpy. I would say in prior years, with the way the Fed moved rates around, their volumes kind of slowed down for a while. Things have kind of stabilized there and normalized, I would say, in terms of market rate expectations. And so now we're starting to see better traction. And so it was a nice quarter for them, but their pipeline looks very robust and we expect to see levels kind of like this going forward. So, I don't think it's necessarily an outlier. I think it would be something similar to that on a go-forward basis. Christopher Muller: Got it. That's helpful. And then the $222 million of loan sales, I assume that's separate from the NPL securitization. And if that's true, can you just give some details on those sales, just what percent of par and anything you could provide would be helpful? Christopher Farrar: Sure. Mark, do you want to cover those? Mark Szczepaniak: Sorry. I had to take my phone off mute. What were the $222 million in loan sales that you're referring to, Chris? Christopher Muller: I was looking at the bridge portfolio, I'm trying to see what slide that was, Slide 19. Christopher Farrar: Loan sales, $222 million. Okay. Got you. Mark Szczepaniak: Okay. So, that's part of the actual MC2 securities. Again, as we said, the MC2 security, we actually sold the loans into the trust. So unlike previous REMIC securitizations where when the loans go into the trust, we have a consolidation accounting where the loans stay on our books because we have to consolidate that trust as a VIE as part of Velocity. The MC2 security was structured such a way where we are not the primary beneficiary of that 2026-MC2 trust. So the loans that were transferred to the trust come off our books. They're actually sold into the trust. That's why now we have a -- I mentioned we have a -- we retained a $30 million security at CMBS. From all our other securitizations, we don't really have a security because the trust consolidates on our books, right? So the loans stay on our books and the certificates that are issued to outside investors just become debt because it all consolidates within Velocity. The MC2 trust does not consolidate on Velocity's books. So the loans that were transferred into it are actually considered sales. They actually came off our books. And because we retained an interest in that trust, we now have a CMBS security. On the balance sheet, you'll see it say retained interest in securitization. So, that's what the loan sales are. It's all part of that MC2 trust. Christopher Farrar: Yes. And then I would add the Century activity on top of that and that will get you... Mark Szczepaniak: Right, right. Because you have about $136 million in the MC2 and you had $80 million or $80-some million on the Century deal as a held-for-sale loan that was sold to Ginnie. Correct. Operator: Your next question comes from the line of Doug Harter of BTIG. Douglas Harter: You guys -- I think you mentioned that you expect a little bit faster loan growth in the second half. Wondering if you could size that. Christopher Farrar: Wondering if we could, what, Doug? I'm sorry. You tailed off. Douglas Harter: Size that change in pace of loan growth? Christopher Farrar: Got it. Size it. Yes. We don't give formal forward guidance, but I can say that July was best month we've had in terms of submissions. So, we've seen volume really pick up just recently in the last 45 days. And that's kind of typical. In terms of seasonality, the second half of the year tends to be really good for us. So, I definitely think we'll beat last year's volumes, but we don't have a formal guidance in terms of how much that looks like or what size that is. Douglas Harter: Great. And can you just talk about how you're thinking about capacity to continue to grow the balance sheet? Obviously, you're retaining capital and compounding that way. But how do you think about the ability to kind of be more efficient with the current balance sheet? Christopher Farrar: Yes. It's something that we keep an eye on, and it's largely driven by how much growth we achieve. The portfolio, obviously, throws off nice cash flows. But to your point, depending on how aggressively we grow, we will need to access more capital potentially and we have a forward plan on that, and we update that regularly. Fortunately, the markets are all open to us right now, both on the equity and debt side. So, I would think as we grow and as we move forward, we will either tap equity or debt markets depending on where we are and where the best execution is. We won't get much more than 10x leverage. We are a levered finance company, but don't want to really exceed that. So, that will probably be somewhat of a governor in terms of whether we raise equity or debt. Operator: With no further questions, that concludes our conference call. Thank you for your participation. You may now disconnect. 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This article first appeared on GuruFocus. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Core net income of $27.9 million with pre-tax income up 3.9% year-over-year to $35.2 million. Diluted book value per share grew to $18.43, up nearly $0.81 from a year ago, reflecting strong compounding. Non-performing loans fell to 9.6% of held-for-investment loans, down from 10.3% a year ago, with $90.5 million of NPLs resolved at net gains. Total loan portfolio grew to $7 billion in UPB, up 19% year-over-year, with unit production up 3.3% despite lower average loan sizes. Completed two securitizations with the tightest spreads in three years, ending the quarter with $240 million in liquidity and $662 million in available warehouse capacity. Portfolio net interest margin improved to 366 basis points, up 10 basis points quarter-over-quarter, with a stable weighted average coupon of 9.7%. GAAP net income and EPS dipped slightly year-over-year due to a higher effective tax rate, not operational weakness. Total loan production declined to $672.6 million from $725 million a year ago, reflecting lower average loan sizes. Net gains on NPL resolutions were slightly lower at $2.5 million (2.7%) versus $2.8 million (3.1%) in the prior year quarter. Combined REO activity net gain fell to $2.4 million from $5.7 million in Q2 2025, driven by a $3 million loss on existing REOs. Total debt-to-equity ratio remains elevated at 9.7 times when including non-recourse securitizations, potentially limiting future leverage capacity. Warning! GuruFocus has detected 3 Warning Sign with VEL. Is VEL fairly valued? Test your thesis with our free DCF calculator. Q: Can you refresh my memory on the government-insured multi-family originations (Century Health and Housing division) that jumped in the quarter, and will we see more of this going forward, or was Q2 an outlier?A: Chris Farrar (President and CEO) explained that this is the HUD multi-family loan product from their Century Health and Housing division. These loans are very large in average UPB and tend to be lumpy. After a slowdown due to Fed rate movements, the market has stabilized and normalized. The pipeline looks very robust, and they expect to see similar levels going forward, so it is not necessarily an outlier. Q: Can you provide details on the $222 million in loan sales, specifically what percent of par they were sold at?A: Mark Pia (CFO) clarified that the $222 million in loan sales is part of the 2026-MC2 securitization. Unlike previous securitizations where the trust consolidates on Velocity's books, the MC2 trust does not consolidate, so the loans transferred into it are considered actual sales and came off the balance sheet. Velocity retained a $30 million trust certificate (CMBS security) from that trust. The $222 million includes approximately $136 million from the MC2 trust and about $80 million from a Century deal (HFI loan sold to Ginnie Mae). Q: You mentioned expecting a little bit faster loan growth in the second half. Can you size that change in pace?A: Chris Farrar (President and CEO) stated they do not give formal forward guidance, but noted that July was their best month in terms of submissions, with volume picking up significantly in the last 45 days. This is typical seasonality, as the second half of the year tends to be strong for them. They definitely expect to beat last year's volumes but did not provide a specific size or range. Q: How are you thinking about capacity to continue growing the balance sheet, and how do you plan to be more efficient with the current balance sheet?A: Chris Farrar (President and CEO) explained that capacity is largely driven by growth. While the portfolio throws off nice cash flows, aggressive growth may require accessing more capital. They have a forward plan and update it regularly. Both equity and debt markets are open to them, and they will tap either depending on best execution. They do not want to exceed roughly 10 times leverage, which will act as a governor on whether they raise equity or debt. Q: What drove the year-over-year decrease in GAAP net income despite strong underlying business performance?A: Chris Farrar (President and CEO) explained that the modest year-over-year dip in GAAP net income and EPS came almost entirely from a higher effective tax rate, not from any softening in the underlying business. Core net income was up 1.4%, and pre-tax income increased 3.9% year over year to $35.2 million. Q: Can you provide more detail on the non-performing loan (NPL) resolution activity and the gains achieved?A: Mark Pia (CFO) detailed that they resolved almost $91 million in UPB of non-performing loans in Q2, with total resolution dollars recovered of $107.7 million, which is 7.7% over and above the UPB. The net gain, which is over and above recovering all UPB and past due contractual interest, was $2.5 million or 2.7% for the quarter. This compares to a net gain of $2.8 million or 3.1% year over year in Q2 2025. Q: What is the current state of the portfolio's net interest margin (NIM) and its components?A: Mark Pia (CFO) reported that the Q2 portfolio net interest margin was 366 basis points, a 10 basis point increase from Q1's 356 basis points. The portfolio yield increased by 6 basis points quarter over quarter due to continued strong production at a healthy weighted average coupon of about 10%. The portfolio cost of funds remained constant quarter over quarter and decreased by 15 basis points year over year, mainly due to paying down warehouse lines with proceeds from the unsecured corporate debt issuance in Q1. Q: How did the non-performing loan rate change, and what drove the improvement?A: Mark Pia (CFO) noted that the non-performing loan rate at the end of Q2 was 9.6%, a 70 basis point year-over-year decrease. This improvement was driven by both selling non-performing loans into the 2026-MC2 trust security and continued strong resolution efforts by their special servicing department, which consistently achieves favorable gains on NPL and REO assets. Q: What was the total loan production for the quarter, and how does it compare to the prior year?A: Chris Farrar (President and CEO) reported total loan production of $672.6 million for Q2, slightly down from $725 million a year ago. However, unit production was actually up 3.3%, with the dollar decline reflecting a lower average loan size rather than softer demand. The total loan portfolio grew to $7 billion in UPB, up 19% year over year with healthy growth across every collateral type. Q: Can you provide details on the funding and liquidity position at the end of the quarter?A: Mark Pia (CFO) stated that total liquidity at the end of Q2 was $240 million, comprised of about $76 million in cash and cash equivalents and $164 million in available liquidity from unfinanced loan collateral. Available warehouse line capacity was just under $662 million with a maximum line capacity of $975 million. They completed two securitizations during the quarter, including the 2026-2 security with over $398 million in securities issued and the 2026-MC2 security. The recourse debt-to-equity ratio remained low at 1.2 times, while total debt-to-equity including non-recourse securitizations was 9.7 times. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Second Quarter Highlights Financial Results Pretax income of $35.2 million, an increase of 3.9% from $33.9 million for 2Q25. Net income of $25.2 million, a decrease of 3.2% from $26.0 million for 2Q25, mainly due to an increase in the effective tax rate in 2026. Diluted EPS of $0.64, a decrease of $0.05 from $0.69 per share for 2Q25 Core net income of $27.9 million, an increase of 1.4% from $27.5 million for 2Q25. Core diluted EPS of $0.71, a decrease from $0.73 per share for 2Q251 Diluted book value per common share of $18.43, an increase of $2.81 from $15.62 as of June 30, 2025 Portfolio net interest margin (NIM) of 3.66%, a decrease of 16 bps from 3.82% for 2Q25 Portfolio Loan production of $672.6 million decreased from $725.4 million in 2Q25 Nonperforming loans (NPL) as a percentage of Held for Investment (HFI) loans was 9.6%, a decrease from 10.3% as of June 30, 2025 NPL resolutions totaled $90.5 million in UPB Liquidity and Capitalization Completed VCC 2026-2 securitization with $398.5 million of securities issued Completed VCC 2026-MC2 securitization generating net proceeds of $11.2 million Liquidity of $240.0 million, consisting of $76.1 million in unrestricted cash and $163.9 million in available borrowings from unpledged loans. $50.3 million in restricted cash was released in July 2026. Total available warehouse line capacity of $661.8 million 1 Core net income and core diluted EPS are non-GAAP financial measures. Non-GAAP core adjustments include stock-based compensation expenses, costs related to the Company’s employee stock purchase plan and due diligence and advisory fees. 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., August 05, 2026--(BUSINESS WIRE)--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." Net interest income after provision for credit losses was $47.9 million, an increase of 4.2% from $46.0 million for 2Q25 Other operating income was $47.1 million, an increase from $39.8 million for 2Q25 Net revenue was $95.0 million, an increase of 10.7% from $85.8 million for 2Q25 Operating expenses totaled $59.8 million, an increase of 15.1% from 2Q25 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 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 totaled $672.6 million, including construction loan advances of $4.2 million, a decrease from $725.4 million for 2Q25 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 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 Charge-offs for 2Q26 totaled $0.7 million, compared to $1.7 million for 2Q25 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 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 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20260805328428/en/ Contacts Investors and Media:Chris Oltmann(818) 532-3708

Image source: The Motley Fool. Wednesday, May 6, 2026 at 5 p.m. ET President & Chief Executive Officer — Christopher Farrar Chief Financial Officer — Mark Szczepaniak Christopher Farrar: Thank you, Chris, and good evening, everyone. We appreciate you taking the time to join us today. First off, I want to apologize to everyone on our last call. We had technical difficulties, and we've been assured that by our vendor that won't happen again. So hopefully, things go well here for us. I'll start off with a few words on the environment then walk through our Q1 performance. Mark will take you and through the rest of the financials in detail before we open up for questions. The first quarter of 2026 was obviously volatile from a macro perspective, but quite steady in our corner of the world. Our end real estate markets are functioning well, our pipeline is growing and our fixed income markets are well bid. In our view, making low LTV loans secured by real estate is a smart way to generate healthy risk-adjusted returns and our Q1 results speak to the durability of what we've built at Velocity. In the first quarter, we delivered results that were in line with our expectations and importantly, consistent with the trajectory we laid out at the start of the year. Portfolio growth was measured and deliberate, NPL recoveries remained strong, and we continue to generate reliable net interest income from a well-seasoned book. Our story is about consistently compounding our capital. And in this environment, I believe consistency is exactly what our investors, our borrowers and our originator partners need to see from us. Credit is always a top priority, and this quarter reinforced that discipline. Our nonperforming loan resolutions were very consistent with positive gains and significant interest income recognition. Our dedicated special servicing team continues to resolve assets efficiently while maximizing recovery rates. I said before that we optimize for asset valuation and that disciplined approach to valuation has served us well through several cycles now. And Q1 was no exception as evidenced by the weighted average LTV on new loan originations of 64.9%. On the origination side, we were intentional. We did not chase volume for its own sake. We originated loans that met our return threshold in markets where we have depth of knowledge through originator relationships we trust. The result was a portfolio that grew nicely quarter-over-quarter with yields that remain attractive relative to our cost of funds. The most significant activity in the quarter was our first ever issuance of $500 million of unsecured corporate debt rated by Moody's and Fitch. The investor demand was broad and the deal was oversubscribed and comprised of high-quality, sophisticated investors that we are proud to call partners. This capital positions us well for future growth and strengthens our financial flexibility as we dramatically reduced our reliance on shorter term warehouse debt. As we look to the rest of 2026, we feel well positioned. Our balance sheet is clean, our funding is stable and we see a pipeline of origination opportunity that should translate into meaningful volume growth in the second half of the year. We remain confident in our ability to deliver on the objectives that we set at the beginning of the year. With that, I'll turn to the earnings presentation materials, starting on Page 3. As I mentioned in my remarks, a pretty stable, straightforward quarter, very simple. Core net income, up 30% over the prior year's quarter. NIM was very healthy and on target at just over 3.5%. Mentioned that the portfolio grew nicely, up 25% year-over-year. Continue to see positive gains on the NPL resolutions, again 102.3% and expanded our disclosures here to show the other recovered revenue on those NPLs of $4.6 million. In financing and capital, as I mentioned, the securitization markets are very healthy, and we've got another deal on the market that will price this week. Those markets are very supportive. In terms of capital and liquidity, we've never been in a stronger position. For us, it's a much larger amount of liquidity coming off that unsecured corporate debt issuance and really gives us, as I mentioned, the strength and the flexibility to navigate whatever market comes our way. So with that, I'll turn it over to Mark. Mark Szczepaniak: Thanks, Chris, and good evening, everyone. As Chris mentioned, the first quarter of '26 can kind of continue the consistent production that we saw during 2025. On Page 4 of the presentation, our Q1 loan production was just a little over $639 million in UPB. That's consistent with just under $635 million for Q4 of '25. In Q1 of '26, there were over 1,600 loans funded. The production during Q1 included the weighted average coupon on new held for investment originations continuing to come in strong at 10.1%, and the weighted average coupon on our held-for-investment originations for the last 5 quarter average trend has been at 10.3%. This growth in originations in Q1 also continued at tight credit levels with the weighted average loan-to-value for the quarter at 62.5% and on a 5-quarter average trend basis at 62.7%, so consistently tight credit levels. So strong Q1 production growth, the healthy WAC and the low LTV demonstrates a consistent trend, as Chris mentioned, of borrower demand for our product even through these recent challenging economic markets. If we go to Page 5. As a result of the strong Q1 production, Page 5 shows the growth in our overall loan portfolio at the end of Q1. The total loan portfolio as of March 31 was $6.8 billion in UPB, and that's a 5.3% increase from Q4 and a 25.6% increase in the portfolio year-over-year compared to Q1 of '25. The weighted average coupon on our loan portfolio as of March 31 was 9.75%, which is almost flat to Q4 '25 and a 16 basis point year-over-year increase compared to Q1 of '25. The total portfolio weighted average loan-to-value decreased to just under 65% as of March 31, and the loan portfolio continues to provide a healthy yield at these tight credit levels. Moving to Page 6. Our first quarter net interest margin was 3.56%. That's consistent with Q4's net interest margin of 3.59%. Kind of looking at the individual components over to the right of our net interest margin, our portfolio yield increased by 12 basis points year-over-year due to continued loan production at those healthy WACs. The higher portfolio yield in Q4 '25 was due to more cash being received during that period on our nonperforming loans. As we said, some of that cash in nonperforming loans kind of comes in lumpy time over time. So it was a little bit elevated in Q4. Our portfolio cost of funds decreased by 14 basis points, both quarter-over-quarter and year-over-year compared to Q1 '26. And that's mainly due to paying down the portfolio warehouse lines in Q1 with proceeds from the unsecured corporate debt issuance that Chris had mentioned. On Page 7, our nonperforming loan rate at the end of Q1 -- it's in the left table -- was 10.1%. That's a 70 basis point year-over-year decrease compared to Q1 of '25. We continue to see strong collection efforts by our special servicing department that have resulted in favorable gain resolutions of our nonperforming assets, which are comprised of both the nonperforming loans as well as the REOs. The table to the right shows our loans held for investment portfolio, including both our amortized cost loans and our fair value loans, and it shows the total year-over-year nonperforming loan valuation allowance we have for our nonperforming loans. As of March 31, '26, the amortized cost loan portfolio had a $4.9 million CECL loss reserve and the fair value loan portfolio had a $52.2 million valuation adjustment loss allowance for a combined valuation loss allowance of 83 basis points on the entire HFI portfolio. Both these valuation adjustments are required under U.S. GAAP. The unrealized loss valuation adjustment on our nonperforming fair value loans represents what could be achieved for those loans transacted between a willing buyer and a willing seller in the secondary market. However, we do not plan on selling these NPL loans since our in-house special servicing department has a history of producing net gains on the resolutions of these nonperforming assets. And again, that 83 basis points of total loss allowance on our entire HFI portfolio, our actual historical trends on losses has been nowhere near that 83 basis points. It's been fractions of that. On Page 8. Page 8 just shows the CECL loan loss reserve activity. The CECL reserve, remember, is only applicable on the amortized cost loan portfolio, which is continuing to pay down as all our new loans are fair value. So it does not include the fair value portfolio. And again, that CECL reserve at the end of the quarter was $4.9 million or 25 basis points of our outstanding amortized cost portfolio. So it's been very consistent. Moving to Page 10 on the real estate owned, it's -- I'm sorry, Page 9, we go to Page 9. Get my pages straight here. Page 9 shows the real estate owned activity. And the left-hand side just shows the percentage of our real estate assets to the total HFI portfolio. And you can see year-over-year, it's been very, very consistent. You're talking about basis point movement from 1.5% to 1.9%. On the right-hand side, it's an expanded disclosure that we have on total gain or loss on REO activity. And what we've done on this page is we've actually broken out the gain or loss activity on new REOs compared to the gain or loss on existing REOs. So the top half of the table shows the gain or loss from recording new REOs in that period, and it segregates that REO activity between being sourced from either the amortized cost or the fair value loan portfolios. As you can see in Q1 of '26, there was a total $6.8 million gain on transfers of nonperforming loans to new REOs in the quarter compared to $4.4 million gain year-over-year in Q1 '25. The second half of that table shows the gain or loss on activities on existing REOs subsequent to the initial recording of the REO in future periods or subsequent periods, reflecting our lower of cost or market accounting. For Q1 of '26, it was a $3.3 million loss on REO activities compared to $1.8 million in Q1. And if you take those 2 sections combined, that presents a holistic picture of our overall REO P&L activity for the period, which for Q1 of '26 was a net gain of $3.5 million compared to a net gain of $2.7 million for Q1 of '25. I think to keep in mind there is the REOs in that bottom half are not the same REOs. The REOs in the top half are new REOs that have come on. The bottom half is the activities of REOs that we've had on the books for a while are now making adjustments to based on requirements of GAAP under lower of cost or market accounting. That kind of gives you the full picture of all the REO activity. On Page 10. Page 10 shows our nonperforming loan resolutions. Chris mentioned, continued very, very strong resolutions of our nonperforming assets. In Q1 of '26, we resolved a little over $70 million in UPB of nonperforming loans and had total resolution dollars recovered, including the past due net contractual interest of $4.6 million or 6.5% over the UPB principal of the loans. And that's compared to $68 million in UPB of loans resolved in Q1 of '25 with $5.2 million in total recovered revenue or 7.6% over. And if you want to know just the gain based on the default interest and prepayment fees, that's still there, and that would be in the column that just says gains. So for the first quarter of '26, the total gains on just on default interest and prepayment would be $1.6 million of that $4.6 million, with the difference being all the collection of that past due accrued interest. Turning to Page 11 on the durable funding and liquidity. Our position at the end of the first quarter, total liquidity as of March 31 was $329 million. That's comprised of $87 million in cash and cash equivalents, and almost another $242 million in available liquidity on unfinanced collateral. The available warehouse line capacity at the end of the quarter was $835.6 million with a maximum line capacity of $935 million. During Q1, as Chris mentioned, we issued our first publicly rated unsecured debt deal, a $500 million deal. We used the proceeds to pay off our 2022 corporate secured note of $215 million. So we paid off the secured note of $215 million that was issued in '22. And then we also paid down a number of our warehouse lines with those proceeds. Also in Q1, we issued the first regular securitization of the year, 2026-1. That had a little over $335 million in securities issued. And we issued another private security 2026-P1 and that had about $178 million in securities issued. And then looking at the bottom table, our recourse debt-to-equity ratio at the end of Q1 remained very low at 1.0x. And our total debt-to-equity ratio, which includes all the nonrecourse securitizations that we do, was at 9.6x as of the end of the quarter. That kind of wraps up my Q1 '26 financial recap. And with that, I'll turn the presentation back over to Chris for an overview of Velocity's outlook on key business drivers this year. Chris? Christopher Farrar: Thanks, Mark. On Page 12, we think the markets are healthy and continue to see strong demand. Credit remains very stable for us and where we expect it to be. In terms of capital, I mentioned that all capital markets are healthy and functioning well. So we're in really good shape there. And from an earnings perspective, we continue to expect a 3.5% NIM and the portfolio to continue to grow this year as we see origination volumes pick up in the latter half of the year. That concludes our prepared remarks, and we can open it up for questions. Operator: [Operator Instructions] And our first question here will come from Chris Muller with Citizens. Christopher Muller: So originations feel like they've been on a pretty steady pace here for, I guess, the last year, 1.5 years or so. Do you guys expect origination volumes in 2026 to continue on a similar path to what we saw last year with a pickup later in the year? Christopher Farrar: Yes. Yes, we do. I think we felt like -- we felt a little bit of a slowdown kind of the end of the year and the beginning of this year. I think that was more seasonal in nature. Maybe it was the market, I'm not sure, but we've already seen kind of new origination volumes starting to pick up a little bit. And we think similar to last year, kind of Q2, Q3, those volumes will accelerate. Christopher Muller: Got it. And then you guys are generating some really impressive ROEs. Do you think that can hold in the high teens? It seems like a bunch of the inputs are suggesting that it can hold there, at least in the near term. So how are you guys thinking about ROEs going forward? Christopher Farrar: Yes, we expect them to hold in there. As I mentioned, we're very disciplined on margin. The margin is probably the most important thing to us. We treat our capital as precious and we need to make sure we earn those returns. So we don't have to chase volume because we have this in-place portfolio. We're far more focused on maintaining margin, which obviously translates into ROE. So yes is the short answer. Operator: This concludes our question-and-answer session. I'd like to turn the conference back over to Chris Farrar for any closing remarks. Christopher Farrar: Great. Thanks, everyone, who joined us today. We appreciate your continued interest in Velocity. As always, the Investor Relations team is available for follow-up conversations, and we look forward to speaking with many of you over the coming weeks. Have a great evening. Mark Szczepaniak: Thank you, everybody. Have a nice evening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Before you buy stock in Velocity Financial, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Velocity Financial wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $476,034!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,274,109!* Now, it’s worth noting Stock Advisor’s total average return is 975% — a market-crushing outperformance compared to 206% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of May 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Velocity Financial VEL Q1 2026 Earnings Transcript was originally published by The Motley Fool

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. View source version on businesswire.com: https://www.businesswire.com/news/home/20260506716612/en/ Contacts Investors and Media: Chris Oltmann (818) 532-3708

Management emphasized a strategy of 'consistently compounding capital' by prioritizing margin discipline and risk-adjusted returns over aggressive volume growth. The first quarter was characterized by macro volatility but stability in core real estate markets, with fixed income markets remaining well-bid for the company's assets. Portfolio growth of 25.6% year-over-year was driven by deliberate origination in familiar markets, maintaining a conservative weighted average LTV of 64.9% on new loans. Net interest margin (NIM) remained healthy at 3.56%, supported by a 12 basis point year-over-year increase in portfolio yield due to production at attractive coupons. The company successfully executed its first-ever $500 million unsecured corporate debt issuance, which management views as a transformative step in reducing reliance on short-term warehouse debt. Credit performance remained a primary driver of profitability, with nonperforming loan (NPL) resolutions consistently yielding positive gains and significant interest income recognition. Operational efficiency in the special servicing department allowed the company to resolve over $70 million in NPLs during the quarter, recovering 106.5% of principal balance. Management expects origination volumes to accelerate in the second half of 2026, following a seasonal slowdown at the start of the year. The company maintains a target NIM of approximately 3.5% for the remainder of the year, underpinned by disciplined pricing on new originations. High-teen ROEs are expected to be sustainable as the company prioritizes capital preservation and margin over market share expansion. The strengthened liquidity position from recent debt issuance provides the flexibility to navigate potential market volatility while funding the growing loan pipeline. Management anticipates continued portfolio growth throughout 2026 as demand for their niche real estate lending products remains robust. The $500 million unsecured debt issuance was used to retire a $215 million secured note from 2022 and pay down warehouse lines, lowering the portfolio cost of funds by 14 basis points. Expanded disclosures were introduced for REO activity to distinguish between gains on new transfers and valuation adjustments on existing holdings under lower-of-cost-or-market accounting. The company reported a combined valuation loss allowance of 83 basis points across the portfolio, though management noted historical actual losses have been significantly lower. Recourse debt-to-equity remained low at 1.0x, reflecting a conservative leverage profile despite the increase in total assets. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management confirmed they expect a similar path to the previous year, with volumes picking up in Q2 and Q3 after a slower start to the year. The early-year softness was attributed primarily to seasonal factors rather than a fundamental shift in market demand. Chris Farrar expressed confidence in maintaining high-teen ROEs by treating capital as 'precious' and refusing to chase volume at the expense of margin. The existing portfolio provides a stable base that allows the company to remain selective on new loan yields. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.