[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Second Quarter Highlights](index=1&type=section&id=Second%20Quarter%20Highlights) Velocity Financial, Inc. achieved significant 2Q25 financial growth, marked by record loan production, strong portfolio earnings, and improved net interest margin 2Q25 Financial Performance Highlights (YoY) | Metric | 2Q25 | 2Q24 | Change (Millions USD) | Change (%) | | :-------------------------------- | :----- | :----- | :-------------------- | :--------- | | Net Income | $26.0 million | $14.8 million | $11.2 million | 75.9% | | Diluted EPS | $0.69 | $0.42 | $0.27 | 64.3% | | Core Net Income | $27.5 million | $15.9 million | $11.6 million | 72.6% | | Core Diluted EPS | $0.73 | $0.45 | $0.28 | 62.2% | | Diluted Book Value per Common Share (as of June 30) | $15.62 | $13.29 | $2.33 | 17.5% | 2Q25 Portfolio & Operational Highlights | Metric | 2Q25 | 1Q25 | 2Q24 | Change (vs 1Q25) | Change (vs 2Q24) | | :------------------------------------ | :----- | :----- | :----- | :--------------- | :--------------- | | Portfolio Net Interest Margin (NIM) | 3.82% | 3.35% | 3.54% | +47 bps | +28 bps | | Record Loan Production (UPB) | $725.4 million | - | $422.2 million | +13.3% | +71.8% | | Nonperforming Loans (NPL) as % of HFI | 10.3% | 10.8% | 10.5% | -0.5% | -0.2% | | NPA Resolution (UPB) | $104.0 million | - | - | - | - | | Realized Gains from NPA Resolution | $3.6 million | - | - | - | - | | Recovery Rate on UPB Resolved | 103.5% | - | - | - | - | - **NIM** increase driven by higher cash interest received from resolved nonperforming loans and rate discipline on new loan production, with average loan coupons of **10.61%** on loans produced over the last five quarters[5](index=5&type=chunk) - Completed **four securitizations** totaling **$985.5 million** of securities issued and collapsed/refinanced two securitizations totaling **$68.0 million** in debt outstanding, which released **$53.5 million** of cash to fund future growth[5](index=5&type=chunk) - Liquidity of **$139.3 million**, consisting of **$79.6 million** in unrestricted cash and **$59.7 million** in available borrowings from unpledged loans, with total available warehouse line capacity of **$476.9 million**[5](index=5&type=chunk) [CEO Commentary](index=2&type=section&id=CEO%20Commentary) CEO Chris Farrar highlighted record 2Q25 loan production and earnings, driven by increased net interest and noninterest income from strong financing demand - Achieved two record highs for quarterly loan production and earnings in **2Q25**[6](index=6&type=chunk) - Results driven by higher portfolio net interest income and noninterest income from growing production volume[6](index=6&type=chunk) - Strong financing demand observed in both traditional commercial and 1-4 family residential rental property markets, as investors continued to see considerable value in smaller commercial properties[6](index=6&type=chunk) - Confident in Velocity's long-term growth prospects and ability to sustain profitable market share growth[6](index=6&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) [Operating Results](index=2&type=section&id=Operating%20Results) Velocity Financial's 2Q25 operating results showed robust growth in net income and EPS, driven by increased net interest income and other operating income [Key Performance Indicators](index=2&type=section&id=Key%20Performance%20Indicators) 2Q25 Key Performance Indicators (YoY) | Indicator | 2Q25 ($ in thousands) | 2Q24 ($ in thousands) | $ Variance | % Variance | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Income before income tax | $33,922 | $19,873 | $14,049 | 70.7% | | Net income | $25,997 | $14,778 | $11,219 | 75.9% | | Diluted earnings per share | $0.69 | $0.42 | $0.27 | 65.7% | | Core income before income tax | $35,777 | $21,507 | $14,270 | 66.4% | | Core net income | $27,470 | $15,918 | $11,552 | 72.6% | | Core diluted earnings per share | $0.73 | $0.45 | $0.28 | 61.5% | | Net interest margin — portfolio related | 3.82% | 3.54% | - | 8.0% | | Net interest margin — total company | 3.39% | 2.98% | - | 13.6% | | Average common equity | $588,814 | $469,071 | $119,743 | 25.5% | | Pre-tax return on average equity | 23.0% | 16.9% | - | 36.0% | | Core pre-tax return on average equity | 24.3% | 18.3% | - | 32.5% | [Condensed Results of Operations](index=2&type=section&id=Condensed%20Results%20of%20Operations) 2Q25 Condensed Results of Operations (YoY) | Metric | 2Q25 ($ in thousands) | 2Q24 ($ in thousands) | $ Variance | % Variance | | :------------------------------------------ | :-------------------- | :-------------------- | :--------- | :--------- | | Net interest income | $47,586 | $32,417 | $15,169 | 46.8% | | Provision for credit losses | $1,598 | $218 | $1,380 | 633.0% | | Net interest income after provision for credit losses | $45,988 | $32,199 | $13,789 | 42.8% | | Other operating income | $39,847 | $22,561 | $17,286 | 76.6% | | Net revenue | $85,835 | $54,760 | $31,075 | 56.7% | | Operating expenses | $51,913 | $34,887 | $17,026 | 48.8% | | Income before income taxes | $33,922 | $19,873 | $14,049 | 70.7% | | Net income attributable to Velocity Financial, Inc. | $25,997 | $14,778 | $11,219 | 75.9% | - Net interest income after provision for credit losses increased **42.8%** to **$46.0 million**, driven by strong recoveries of interest income from NPLs and growth in the total portfolio[8](index=8&type=chunk) - Other operating income increased **76.6%** to **$39.8 million**, primarily due to fair value gains from record loan production during the quarter[8](index=8&type=chunk) - Origination fee income totaled **$8.9 million**, an increase of **76.2%** from **$5.1 million** for 2Q24[9](index=9&type=chunk) - Net revenue increased **56.7%** to **$85.8 million**, resulting from continued strong production-driven portfolio net interest income growth, net unrealized FV gains, and origination fee income[9](index=9&type=chunk) - Operating expenses totaled **$51.9 million**, an increase of **48.8%** from 2Q24, primarily resulting from higher production-driven compensation expenses (**$22.6 million** vs. **$16.6 million** for 2Q24), securitization expenses (**$11.5 million** from four securitizations vs. **$6.2 million** for two in 2Q24), and loan servicing expense (**$8.2 million** vs. **$5.2 million** for 2Q24) driven by portfolio growth[11](index=11&type=chunk) [Net Interest Margin Analysis](index=10&type=section&id=Net%20Interest%20Margin%20Analysis) Velocity Financial's 2Q25 net interest margin improved, with portfolio-related NIM at 3.82% and total company NIM at 3.39%, driven by higher portfolio yield 2Q25 Net Interest Margin Analysis (YoY) | Metric | 2Q25 | 2Q24 | Change (bps) | | :------------------------------------ | :----- | :----- | :----------- | | Net interest spread - portfolio related | 3.41% | 2.97% | +44 | | Net interest margin - portfolio related | 3.82% | 3.54% | +28 | | Net interest spread - total company | 3.29% | 2.80% | +49 | | Net interest margin - total company | 3.39% | 2.98% | +41 | | Total loans (Average Balance) | $5,620,763 (thousands) | $4,355,941 (thousands) | +$1,264,822 (thousands) | | Total portfolio yield | 9.65% | 8.98% | +67 | | Total debt - portfolio related (Average Balance) | $5,245,799 (thousands) | $3,941,507 (thousands) | +$1,304,292 (thousands) | | Portfolio-related debt cost | 6.24% | 6.01% | +23 | [Loan Portfolio & Credit Quality](index=3&type=section&id=Loan%20Portfolio%20%26%20Credit%20Quality) [Loan Portfolio Overview](index=3&type=section&id=Loan%20Portfolio%20Overview) Velocity Financial's total loan portfolio grew 30.8% to **$5.9 billion** in 2Q25, driven by broad collateral growth, improved LTV, and increased portfolio yield Total Loans Outstanding by Collateral Type (as of June 30) | Loan Type | 2025 ($ in thousands) | 2024 ($ in thousands) | $ Variance | % Variance | | :-------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Investor 1-4 | $2,951,750 | $2,424,554 | $527,196 | 21.7% | | Mixed use | $632,372 | $512,761 | $119,611 | 23.3% | | Retail | $569,053 | $397,488 | $171,565 | 43.2% | | Office | $459,036 | $336,447 | $122,589 | 36.4% | | Multifamily | $422,603 | $297,732 | $124,871 | 41.9% | | Warehouse | $392,734 | $302,363 | $90,371 | 29.9% | | Other | $432,105 | $208,556 | $223,549 | 107.2% | | **Total loans** | **$5,859,653** | **$4,479,901** | **$1,379,752** | **30.8%** | Key Loan Portfolio Metrics (as of June 30) | Metric | 2025 | 2024 | | :-------------------- | :----- | :----- | | Loan count | 14,854 | 11,582 | | Loan-to-value | 65.8% | 67.4% | | Coupon | 9.70% | 9.25% | | Total portfolio yield | 9.65% | 8.98% | | Portfolio cost of debt | 6.24% | 6.01% | - Total loan portfolio increased by **30.8%** to **$5.9 billion** in UPB, driven by healthy growth across all types of collateral securing the loans[12](index=12&type=chunk) - Loan prepayments totaled **$223.4 million** in UPB, an increase of **14.0%** from 1Q25 and **34.8%** from 2Q24[12](index=12&type=chunk) - Weighted average portfolio loan-to-value ratio decreased to **65.8%** as of June 30, 2025, down from **67.4%** as of June 30, 2024, and below the five-quarter trailing average of **66.6%**[12](index=12&type=chunk) - Weighted average total portfolio yield was **9.65%**, an increase of **67 bps** from 2Q24, primarily driven by the increase in weighted average loan coupons[12](index=12&type=chunk) - Portfolio-related debt cost was **6.24%**, an increase of **23 bps** from 2Q24, driven by higher warehouse financing utilization and securitized debt costs[12](index=12&type=chunk) [Loan Production Volumes](index=4&type=section&id=Loan%20Production%20Volumes) Velocity Financial achieved record 2Q25 loan production of **$725.4 million** UPB, a 71.8% YoY increase, driven by strong demand for commercial and residential rental loans 2Q25 Loan Originations by Type (YoY) | Origination Type | 2Q25 ($ in thousands) | 2Q24 ($ in thousands) | $ Variance | % Variance | | :-------------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Investor 1-4 rental | $284,885 | $185,743 | $99,142 | 53.4% | | Traditional commercial | $350,495 | $181,505 | $168,990 | 93.1% | | Short-term | $49,085 | $54,978 | $(5,893) | (10.7)% | | Government insured multifamily | $40,922 | $0 | $40,922 | 100.0% | | **Total** | **$725,387** | **$422,226** | **$303,161** | **71.8%** | - Loan production totaled **$725.4 million** in UPB, an increase of **71.8%** from **$422.2 million** for 2Q24, which is a new record for quarterly production volume in the Company's history[17](index=17&type=chunk) - 2Q25 production volume was driven by demand for Traditional commercial loans and Investor 1-4 rental loans, which increased **93.1%** and **53.4%**, respectively, from 2Q24[17](index=17&type=chunk) - Weighted average coupon on 2Q25 HFI loan production was **10.47%**, a decrease of **56 bps** from **11.03%** for 2Q24, mirroring a similar reduction in shorter term interest rates[17](index=17&type=chunk) - Government insured multifamily loans are originated by the capital light subsidiary Century Health & Housing Capital and sold to investors for cash gains shortly after closing[17](index=17&type=chunk) [Credit Performance](index=4&type=section&id=Credit%20Performance) Velocity Financial maintained stable 2Q25 credit performance, with NPLs slightly decreasing as a percentage of HFI loans, strong NPA recovery rates, and realized REO gains [Total HFI Portfolio Credit Performance](index=4&type=section&id=Total%20HFI%20Portfolio%20Credit%20Performance) 2Q25 Total HFI Portfolio Credit Performance (YoY) | Metric | 2Q25 ($ in thousands) | 2Q24 ($ in thousands) | $ Variance | % Variance | | :-------------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Nonperforming loans UPB | $601,757 | $470,648 | $131,109 | 27.9% | | Total UPB | $5,859,653 | $4,479,901 | $1,379,752 | 30.8% | | Nonperforming loans UPB / Total UPB | 10.3% | 10.5% | - | (2.2)% | - Nonperforming loans (NPL) totaled **$601.8 million** in UPB as of June 30, 2025, or **10.3%** of total HFI loans, compared to **$470.6 million** and **10.5%** as of June 30, 2024[14](index=14&type=chunk) [CECL Portfolio Credit Performance](index=4&type=section&id=CECL%20Portfolio%20Credit%20Performance) 2Q25 CECL Portfolio Credit Performance (YoY) | Metric | 2Q25 ($ in thousands) | 2Q24 ($ in thousands) | $ Variance | % Variance | | :------------------------------------------ | :-------------------- | :-------------------- | :--------- | :--------- | | Allowance for credit losses (Ending balance) | $4,882 | $5,240 | $(358) | (6.8)% | | Provision for credit losses | $1,598 | $218 | $1,380 | 633.0% | | Charge-offs | $(1,733) | $(245) | $(1,488) | 607.3% | | Total UPB subject to CECL | $2,210,304 | $2,599,016 | $(388,712) | (15.0)% | | Nonperforming loans UPB subject to CECL | $283,227 | $324,018 | $(40,791) | (12.6)% | | NPL UPB subject to CECL / Total UPB subject to CECL | 12.8% | 12.5% | - | 2.8% | | Allowance for credit losses / Total UPB subject to CECL | 0.22% | 0.20% | - | 9.6% | | Charge-offs / Total UPB subject to CECL (Annualized) | 0.31% | 0.04% | - | 731.7% | - Charge-offs for 2Q25 totaled **$1.7 million**, compared to **$0.2 million** for 2Q24, with the trailing five-quarter charge-offs average at **$0.8 million**[18](index=18&type=chunk) [Real Estate Owned](index=5&type=section&id=Real%20Estate%20Owned) 2Q25 Gain (Loss) on REO (YoY) | Metric | 2Q25 ($ in thousands) | 2Q24 ($ in thousands) | $ Variance | % Variance | | :-------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Gain on transfer to REO | $5,141 | $2,914 | $2,227 | 76.4% | | REO valuation loss, net | $(2,150) | $(540) | $(1,610) | 298.1% | | Gain (loss) on sale of REO | $790 | $(37) | $827 | 2,235.1% | | **Total gain on REO** | **$3,781** | **$2,337** | **$1,444** | **61.8%** | - Total gain on REO was **$3.8 million**, compared to **$2.3 million** for 2Q24, driven by gain on foreclosed loans transferred to REO[19](index=19&type=chunk) [Nonperforming Assets (NPA) Resolution](index=5&type=section&id=Nonperforming%20Assets%20%28NPA%29%20Resolution) 2Q25 Nonperforming Assets (NPA) Resolution (YoY) | Resolution Type | 2Q25 UPB ($ in thousands) | 2Q25 Gain / (Loss) ($ in thousands) | 2Q24 UPB ($ in thousands) | 2Q24 Gain / (Loss) ($ in thousands) | | :------------------------ | :------------------------ | :---------------------------------- | :------------------------ | :---------------------------------- | | Resolved — loans paid in full | $41,183 | $2,449 | $30,664 | $886 | | Resolved — loans paid current | $49,166 | $394 | $37,981 | $189 | | Resolved — REO sold | $13,607 | $791 | $12,035 | $(37) | | **Total resolutions** | **$103,956** | **$3,634** | **$80,680** | **$1,038** | | Recovery rate on resolved nonperforming assets | 103.5% | - | 101.3% | - | - NPA resolution totaled **$104.0 million** in UPB, realizing **103.5%** of UPB resolved compared to **$80.7 million** in UPB and realization of **101.3%** of UPB resolved for 2Q24[21](index=21&type=chunk) - UPB of NPA resolution for 2Q25 was above the recent five-quarter average of **$81.8 million** in UPB resolved and remained consistent with the average gains of **103.5%** of UPB resolved[21](index=21&type=chunk) - Credit loss reserve totaled **$4.9 million** as of June 30, 2025, a decrease of **6.8%** from **$5.2 million** as of June 30, 2024, driven by a decreasing loan portfolio subject to credit loss reserve[22](index=22&type=chunk) - **CECL** reserve rate of **0.22%** (CECL reserve as % of HFI loans at amortized cost) was relatively consistent with the recent five-quarter average rate of **0.20%**[22](index=22&type=chunk) [Financial Statements](index=8&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Velocity Financial's June 30, 2025 balance sheet shows significant growth in total assets and loans, with increased liabilities from securitized debt and higher stockholders' equity Condensed Consolidated Balance Sheets (as of June 30, 2025 vs. December 31, 2024) | Asset/Liability/Equity | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------------- | :----------------------------- | :--------------------------------- | | Cash, cash equivalents, and restricted cash | $97,189 | $70,830 | | Total loans, net | $6,053,225 | $5,187,067 | | Real estate owned, net | $93,387 | $68,000 | | **Total assets** | **$6,475,880** | **$5,527,408** | | Accounts payable and accrued expenses | $164,935 | $147,814 | | Secured financing, net | $285,756 | $284,833 | | Securitized debt | $5,092,519 | $4,226,464 | | Warehouse and repurchase facilities, net | $331,057 | $348,082 | | **Total liabilities** | **$5,874,827** | **$5,007,193** | | Stockholders' equity | $597,895 | $516,944 | | **Total equity** | **$601,053** | **$520,215** | | Diluted book value per share | $15.62 | $14.26 | | Diluted shares at period end | 38,475 | 36,469 | [Condensed Consolidated Statements of Income](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Velocity Financial's 2Q25 consolidated income statements reflect strong performance, with net income reaching **$26.0 million**, driven by higher interest and other operating income Condensed Consolidated Statements of Income (Three Months Ended June 30) | Income Statement Item | 2025 ($ in thousands) | 2024 ($ in thousands) | | :------------------------------------------ | :-------------------- | :-------------------- | | Interest income | $135,567 | $97,760 | | Interest expense — portfolio related | $81,838 | $59,188 | | Net interest income — portfolio related | $53,729 | $38,572 | | Net interest income | $47,586 | $32,417 | | Provision for credit losses | $1,598 | $218 | | Net interest income after provision for credit losses | $45,988 | $32,199 | | Total other operating income | $39,847 | $22,561 | | Total operating expenses | $51,913 | $34,887 | | Income before income taxes | $33,922 | $19,873 | | Income tax expense | $7,752 | $5,162 | | Net income | $26,170 | $14,711 | | Net income attributable to Velocity Financial, Inc. | $25,997 | $14,778 | | Diluted earnings per share | $0.69 | $0.42 | | Diluted weighted average common shares outstanding | 37,790 | 35,600 | [Additional Information](index=6&type=section&id=Additional%20Information) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) Velocity Financial uses non-GAAP core net income and diluted EPS to provide a clearer view of underlying operating performance by adjusting for non-recurring expenses - Non-GAAP core net income and core diluted EPS are used to supplement GAAP financial statements[26](index=26&type=chunk) - These measures adjust net income/loss and diluted EPS to eliminate the effect of certain costs, non-recurring operating expenses, and acquisition costs[27](index=27&type=chunk) - Management uses these measures to evaluate operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources[28](index=28&type=chunk) - They provide useful information to investors and others in understanding and evaluating operating results in the same manner as management and board of directors, and for period-to-period comparisons by removing nonrecurring items[29](index=29&type=chunk) - Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP, and are not necessarily comparable to similarly titled measures presented by other companies[30](index=30&type=chunk) Adjusted Financial Metric Reconciliation to GAAP Net Income (Three Months Ended June 30) | Metric | 2025 ($ in thousands) | 2024 ($ in thousands) | | :------------------------------------------ | :-------------------- | :-------------------- | | Net income | $25,997 | $14,778 | | Equity award & ESPP expenses | $1,473 | $1,140 | | Core net income | $27,470 | $15,918 | | Diluted weighted average common shares outstanding | 37,790 | 35,600 | | Core diluted earnings per share | $0.73 | $0.45 | [Forward-Looking Statements](index=7&type=section&id=Forward-Looking%20Statements) This section disclaims forward-looking statements, which are subject to numerous risks and uncertainties, including economic conditions, regulatory changes, and geopolitical conflicts - 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[32](index=32&type=chunk) - Identifiable by terms 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[32](index=32&type=chunk) - Reflect 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[33](index=33&type=chunk) - While forward-looking statements reflect good faith projections, assumptions, and expectations, they are not guarantees of future results; the company disclaims any obligation to publicly update or revise them, except as required by applicable law[33](index=33&type=chunk) - Factors that could cause material differences include changes in federal government fiscal and monetary policies, general economic and real estate market conditions (including the risk of recession), regulatory and/or legislative changes, customer interest in loans and doing business with the company, market conditions and investor interest in future securitizations, and geopolitical conflicts[33](index=33&type=chunk) [Company Information & Investor Relations](index=6&type=section&id=Company%20Information%20%26%20Investor%20Relations) Velocity Financial, Inc. is a real estate finance company specializing in business purpose loans, providing details for its 2Q25 earnings conference call and webcast - Velocity Financial, Inc. is a vertically integrated real estate finance company based in Westlake Village, California, that primarily originates and manages business purpose loans secured by 1-4 unit residential rental and small commercial properties[23](index=23&type=chunk) - The company originates loans nationwide across an extensive network of independent mortgage brokers built and refined over **21 years**[23](index=23&type=chunk) - A conference call and webcast for 2Q25 financial results will be hosted on **August 7, 2025, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time**[24](index=24&type=chunk) - Webcast accessible live in listen-only mode through the Events and Presentations section of the Velocity Financial Investor Relations website: https://www.velfinance.com/events-and-presentations[24](index=24&type=chunk) - To participate by phone, dial **1-833-316-0544** (U.S. and Canada) or **1-412-317-5725** (international) and ask to join the Velocity Financial, Inc. conference call[25](index=25&type=chunk) - A replay of the call will be available through midnight on **August 30, 2025**, by dialing **1-877-344-7529** (U.S.), **855-669-9658** (Canada), or **1-412-317-0088** (internationally) with passcode **6718651**, and also on the Investor Relations website[25](index=25&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited consolidated financial statements for Q2 2025 reflect significant growth in assets, liabilities, and equity, with net income reaching $26.0 million [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets reached $6.48 billion by June 30, 2025, primarily from fair value loans, leading to total equity of $601.1 million Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$6,475,880** | **$5,527,408** | | Total loans, net | $6,053,225 | $5,187,067 | | Cash and cash equivalents | $79,559 | $49,901 | | **Total Liabilities** | **$5,874,827** | **$5,007,193** | | Securitized debt (amortized + fair value) | $5,092,519 | $4,226,464 | | Warehouse and repurchase facilities, net | $331,057 | $348,082 | | **Total Equity** | **$601,053** | **$520,215** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q2 2025 surged 76% to $26.0 million, driven by a 47% rise in net interest income and increased other operating income Key Income Statement Data (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $47,586 | $32,417 | $85,096 | $61,891 | | Total Other Operating Income | $39,847 | $22,561 | $73,293 | $48,336 | | Income Before Income Taxes | $33,922 | $19,873 | $60,816 | $43,110 | | Net Income Attributable to Velocity | $25,997 | $14,778 | $44,884 | $32,029 | | Diluted EPS | $0.69 | $0.42 | $1.20 | $0.90 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q2 2025 increased to $24.6 million, including net income and an other comprehensive loss from hedges Comprehensive Income Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Velocity | $25,997 | $14,778 | $44,884 | $32,029 | | Other Comprehensive Income (Loss) | $(1,408) | $804 | $(2,402) | $2,808 | | **Total Comprehensive Income** | **$24,589** | **$15,582** | **$42,482** | **$34,837** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was $11.2 million, with significant investing in loans funded by securitizations and warehouse borrowings Net Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $11,198 | $22,053 | | Net Cash used in Investing Activities | $(842,611) | $(409,281) | | Net Cash from Financing Activities | $857,772 | $404,960 | | **Net Increase in Cash** | **$26,359** | **$17,732** | [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail accounting policies, loan portfolio composition, debt structure, and credit quality, including fair value option application - The company elected to apply fair value option (FVO) accounting to mortgage loans originated effective October 1, 2022, and to securitized debt issued effective January 1, 2023, when the underlying collateral is also at fair value[36](index=36&type=chunk)[37](index=37&type=chunk) Loan Portfolio Breakdown (in thousands) | Loan Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Loans Held for Investment, at Amortized Cost | $2,226,720 | $2,420,116 | | Loans Held for Investment, at Fair Value | $3,826,505 | $2,766,951 | | **Total Loans Held for Investment** | **$6,053,225** | **$5,187,067** | - As of June 30, 2025, the amortized cost basis of nonperforming loans on nonaccrual status was **$286.3 million**, a decrease from **$313.3 million** at year-end 2024[56](index=56&type=chunk) Debt Summary (in thousands) | Debt Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Securitized Debt, at Amortized Cost | $1,859,750 | $2,019,056 | | Securitized Debt, at Fair Value | $3,232,769 | $2,207,408 | | Warehouse and Repurchase Facilities, net | $331,057 | $348,082 | | Secured Financing (Corporate Debt), net | $285,756 | $284,833 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong Q2 2025 performance to loan portfolio growth, improved net interest margin, and increased originations [Portfolio and Asset Quality](index=47&type=section&id=Portfolio%20and%20Asset%20Quality) The loan portfolio grew to $5.9 billion UPB, with improved LTV and stable nonperforming loan percentages, alongside increased originations Key Portfolio Statistics | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Loans (UPB) | $5,859,653 thousand | $4,479,901 thousand | | Weighted Average LTV | 65.8% | 67.4% | | Weighted Average Coupon | 9.7% | 9.3% | | Nonperforming Loans (% of total) | 10.3% | 10.5% | - The company resolved **$104.0 million** of nonperforming assets during Q2 2025, realizing net gains of **$3.6 million** from these activities[189](index=189&type=chunk) - The loan portfolio is geographically concentrated, with **20.9%** in California, **14.3%** in New York, and **12.6%** in Florida[193](index=193&type=chunk)[195](index=195&type=chunk) [Consolidated Results of Operations](index=58&type=section&id=Consolidated%20Results%20of%20Operations) Net interest income after provision for credit losses increased 43% in Q2 2025, driven by higher interest income and other operating income - Portfolio-related net interest income increased **39.3%** to **$53.7 million** in Q2 2025 from **$38.6 million** in Q2 2024, driven by higher average loan balances and yields[230](index=230&type=chunk) - The increase in interest income for Q2 2025 was primarily due to a **$1.26 billion** increase in average loan volume and a **67 basis point** increase in average yield compared to Q2 2024[233](index=233&type=chunk) - Total operating expenses increased by **$17.0 million** year-over-year, primarily due to higher compensation and benefits, securitization expenses, and loan servicing costs[252](index=252&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity was $139.3 million as of June 30, 2025, supported by warehouse facilities and an ATM equity offering program - Total liquidity was **$139.3 million** as of June 30, 2025, with total liquidity plus available warehouse capacity reaching **$556.5 million**[266](index=266&type=chunk) - The company has five non-mark-to-market, one mark-to-market, and one modified mark-to-market warehouse facility with **$333.1 million** in outstanding borrowings and **$476.9 million** of available capacity as of June 30, 2025[273](index=273&type=chunk)[294](index=294&type=chunk) - From May 2011 through June 2025, the company has completed **42 securitization transactions**, issuing **$9.3 billion** in securities[277](index=277&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is omitted as permitted under reduced disclosure requirements for a smaller reporting company - The company has omitted this section pursuant to smaller reporting company reduced disclosure requirements[300](index=300&type=chunk) [Item 4. Controls and Procedures](index=69&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period[302](index=302&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, such controls[303](index=303&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, not expecting a material adverse effect on its financial condition - Management does not expect any currently pending or threatened legal matters to have a material adverse effect on the company's business, financial position, or cash flows[306](index=306&type=chunk) [Item 1A. Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) This section is omitted as permitted under reduced disclosure requirements for a smaller reporting company - The company has omitted this section pursuant to smaller reporting company reduced disclosure requirements[307](index=307&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Warrants for 3,013,124 shares were exercised in Q2 2025, with the company repurchasing 267,582 shares related to exercises and tax obligations - In Q2 2025, warrants to purchase an aggregate of **3,013,124 shares** were exercised, with the March 2025 exercise of **1,339,166 warrants** done on a net settlement basis[308](index=308&type=chunk) - The company purchased **267,582 shares** of its common stock during the three months ended June 30, 2025, primarily through shares withheld from warrant exercises and vested stock awards[310](index=310&type=chunk)[311](index=311&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) Two executives adopted Rule 10b5-1 trading plans in March 2025 for potential sales of their common stock - On March 18, 2025, EVP Jeffrey T. Taylor adopted a Rule 10b5-1 trading plan for the sale of up to **21,250 shares**[314](index=314&type=chunk) - On March 20, 2025, CFO Mark R. Szczepaniak adopted a Rule 10b5-1 trading plan for the sale of up to **18,870 shares**[315](index=315&type=chunk) [Item 6. Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or incorporated by reference into the Form 10-Q, including governance documents and certifications

Financial Data and Key Metrics Changes - The company reported a record quarterly net income increase of 76% and new loan production up 72% compared to Q2 2024 [5] - Revenue grew by $31 million, with pretax income increasing by $14 million, resulting in a core pretax return on equity of 24% [5][6] - The net interest margin (NIM) for the quarter increased to 3.82%, up 47 basis points from the previous quarter [9][17] Business Line Data and Key Metrics Changes - The total loan portfolio grew by 30.8% year over year, reaching $5.9 billion in UPB [16] - Record loan production in Q2 was just over $725 million, a 13.3% increase from Q1 [14] - The weighted average coupon on new held-for-investment originations was strong at 10.5% [15] Market Data and Key Metrics Changes - The company experienced a significant increase in transactions, particularly in commercial and residential properties, with a portfolio increase of approximately $1.4 billion [6] - Nonperforming loans slightly decreased to 10.3%, reflecting effective asset management and resolution efforts [9][19] Company Strategy and Development Direction - The company aims to leverage its unique business structure as a C Corp to retain earnings and grow book value [11][12] - There is a focus on technology improvements to enhance operational efficiency over the next 12 to 18 months [35][36] - The company is exploring opportunities for alternative financing sources, including private capital, to support portfolio growth [43][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing healthy market conditions and a strong pipeline for new loans [22] - The target NIM is set at 3.5%, with expectations for sustainable growth in loan production [26][30] - The company believes it has not reached peak performance and sees room for improvement in efficiency [35][36] Other Important Information - The company completed four securitizations in Q2, issuing nearly $1 billion in securities, which provided significant liquidity [7][21] - Total liquidity at the end of Q2 was $139.2 million, with ample warehouse capacity to support growth [21] Q&A Session Summary Question: Can you discuss NIM expectations going into Q3 and loan growth for H2? - Management targets a consistent NIM of 3.5% and expects continued loan growth, although it may not be linear [26][30] Question: Are there opportunities for improvement or is this optimal performance? - Management believes there is room for improvement, particularly through technology enhancements to increase productivity [35][36] Question: How broad is the company's origination platform geographically? - The company operates in 48 states, with a strong presence in major MSAs, including a high-performing office in Miami [38][39] Question: Will the company consider incorporating loan sales into its financing strategy? - Management is open to exploring private credit sources and alternative financing structures to support growth [43][44] Question: What is driving the increase in prepayment rates? - Prepayment activity is driven by property sales and refinancing, with the company indifferent to the reasons due to prepayment penalty fees [45][46]

Financial Performance - Net income reached $26.0 million, a 75.9% increase compared to $14.8 million in 2Q24[7] - Core net income increased by 72.6% to $27.5 million from $15.9 million in 2Q24[7] - Portfolio net interest margin (NIM) increased to 3.82%, up 47 bps from 3.35% in 1Q25[7] - Diluted book value per share as of June 30, 2025, was $15.62, a 5.1% increase from $14.87 as of March 31, 2025[15] Loan Portfolio and Production - Loan production reached a record of $725.4 million in UPB, a 13.3% increase from 1Q25 and a 71.8% increase from 2Q24[7, 18] - The total loan portfolio was $5.9 billion in UPB as of June 30, 2025, a 30.8% increase from $4.5 billion in UPB as of June 30, 2024[7, 21] - The UPB of fair value option (FVO) loans was $3.6 billion, or 62.3% of total loans, as of June 30, 2025, an increase from 42.0% as of June 30, 2024[21] Capital and Financing - The company completed four securitizations totaling $985.5 million of securities issued[6] - The company collapsed and refinanced two securitizations totaling $68.0 million in debt outstanding, which released $53.5 million of capital[6] - Nonperforming loans (NPL) as a % of HFI loans decreased to 10.3%, down from 10.8% as of March 31, 2025[7]

Group 1 - Velocity Financial (NYSE: VEL) is a vertically integrated real estate finance company that has shown promise, yet its shares have not performed as expected [1] - The company is part of a broader investment strategy that focuses on small companies with high growth potential, utilizing a buy and hold approach with tranche purchases [2] - The analyst has a beneficial long position in VEL shares, indicating confidence in the company's future performance [3]

Financial Performance - Net income for Q1 2025 was $18.9 million, a 9.5% increase from $17.3 million in Q1 2024, with diluted EPS rising to $0.51 from $0.49[4] - Core net income reached $20.3 million, up 11.0% from $18.2 million in Q1 2024, with core diluted EPS increasing to $0.55 from $0.51[4] - Net revenue for 1Q25 was $69.1 million, a 27.4% increase from $54.2 million in 1Q24, driven by strong portfolio net interest income growth and unrealized fair value gains[18] - Total net interest income was $35.6 million for 1Q25, up 25.2% from $28.5 million in 1Q24, with portfolio net interest income at $43.7 million, also a 25.2% increase[18] - Net income attributable to Velocity Financial, Inc. for the quarter was $18,887,000, compared to $17,251,000 in the same quarter last year, showing an increase of 9.5%[46] - Core net income for the quarter was $20,253,000, up from $18,249,000 in the same quarter last year, which is a growth of 11.0%[52] - Basic earnings per share for the quarter was $0.55, compared to $0.52 in the same quarter last year, reflecting an increase of 5.8%[46] Loan Production and Portfolio - Record loan production of $640.4 million in UPB, representing a 69.1% increase from $378.7 million in Q1 2024[4] - Total loan portfolio was $5.4 billion in UPB, a 27.3% increase from $4.3 billion in Q1 2024, driven by a 19.8% growth in Investor 1-4 Rental loans[12] - The average loan portfolio balance increased to $5,214,186,000 from $4,159,412,000 in the same quarter last year, representing a growth of 25.4%[48] Nonperforming Loans and Credit Quality - Nonperforming loans (NPL) as a percentage of Held for Investment (HFI) loans were 10.8%, slightly up from 10.1% in Q1 2024[4] - Nonperforming loans (NPL) reached $587.8 million as of March 31, 2025, representing 10.8% of loans held for investment (HFI), an increase from $432.6 million and 10.1% a year earlier[15] - The provision for credit losses was $1,872,000, compared to a reversal of $1,002,000 in the same quarter last year, indicating a shift in credit quality assessment[46] Operating Expenses - Operating expenses totaled $42.2 million for 1Q25, a 36.0% increase from $31.0 million in 1Q24, primarily due to higher production-driven compensation expenses[20] - Compensation expenses rose to $21.7 million in 1Q25, compared to $15.4 million in 1Q24, reflecting increased commission compensation on higher production volume[20] - Total operating expenses for the quarter were $42,190,000, up from $31,011,000 in the same quarter last year, indicating a rise of 36.0%[46] Liquidity and Capital - Liquidity as of March 31, 2025, was $75.6 million, with total available warehouse line capacity of $238.2 million[4] - Total assets as of March 31, 2025, were $5,971.53 million, an increase from $5,527.41 million as of December 31, 2024[42] - Total loans, net, increased to $5,614.21 million as of March 31, 2025, compared to $5,187.07 million as of December 31, 2024[42] - Cash and cash equivalents rose to $51.68 million as of March 31, 2025, up from $49.90 million as of December 31, 2024[42] - Book value per share increased to $16.19 as of March 31, 2025, compared to $15.70 as of December 31, 2024[42] - Stockholders' equity grew to $566.22 million as of March 31, 2025, from $520.22 million as of December 31, 2024[42] Securitization and Interest Rates - The weighted average loan-to-value ratio was 66.1% as of March 31, 2025, down from 67.6% in Q1 2024[12] - The weighted average rate on outstanding securitizations was 5.87% as of March 31, 2025, an increase of 44 basis points from the previous year[22] - The company completed one securitization in 1Q25 totaling $342.8 million with a weighted average rate of 6.7%, down from 7.9% in 1Q24[22] - The net interest margin - portfolio related for the quarter was 3.35%, consistent with the previous quarter, indicating stable performance[48] - The company reported a net interest spread - total company of 2.75%, an increase from 2.62% in the same quarter last year, showing improved efficiency[48] Future Outlook and Risks - The company expects solid investor loan demand to continue, driven by strong financing demand in both traditional commercial and residential rental property markets[6] - Forward-looking statements indicate potential risks including general economic conditions and regulatory changes that may impact future results[38]

Financial Data and Key Metrics Changes - The company originated $640 million in new loans, a 69% increase year-over-year, driving a 27% increase in net revenue and a 17% increase in core pretax earnings [5][8] - Core earnings per share increased to $0.55 from $0.51 a year ago, marking the second-best quarterly earnings in company history [8] - The total loan portfolio reached just under $5.5 billion, a 7.8% increase from year-end 2024 and a 27.3% increase year-over-year [13][14] Business Line Data and Key Metrics Changes - The weighted average coupon on new held-for-investment originations was strong at 10.5%, with a five-quarter average trend of 10.8% [12] - The weighted average loan-to-value ratio for the quarter was just under 63%, indicating tight credit levels [13] - Nonperforming loans remained stable at 10.8%, consistent with the previous quarter [16][17] Market Data and Key Metrics Changes - The company reported strong demand across all property types, with a recent shift towards commercial loans [5][22] - The real estate markets are functioning well, with healthy investor demand and participation in offerings despite market volatility [6][22] Company Strategy and Development Direction - The company aims to grow its portfolio to $10 billion over the next five years, requiring additional headcount and potential expansion into new geographic areas [49][50] - The focus remains on leveraging technology to scale the business while minimizing headcount increases [50][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future, citing strong market demand and positive credit resolutions [22] - The company remains optimistic about earnings for the rest of the year, with expectations of stable origination yields [26][27] Other Important Information - The company completed four successful debt transactions and issued three new securitizations, indicating robust capital market activity [6][20] - Total liquidity as of March 31 was $75.6 million, with significant available warehouse line capacity [20] Q&A Session Summary Question: Will Q2 NIM be similar to Q1? - Management indicated that Q2 NIM is expected to be in the range of 3.35% to 3.5%, which is considered normal [24][25] Question: What is the outlook for new origination yields? - Management expects yields to remain stable, with potential for a decrease later in the year if the Federal Reserve continues to cut rates [26][27] Question: Is the increase in commercial demand due to borrowers being shut out of other channels? - Management clarified that the increase is primarily due to the establishment of a new commercial division rather than a shift in demand [31][32] Question: What will the raised capital be used for? - The raised capital will be used to continue making more loans, with a focus on growing the portfolio [36][37] Question: What is the current total headcount and office locations? - The company currently has 323 employees and operates from five office locations [46][47] Question: What is the long-term vision for the company? - The company aims to grow its portfolio to $10 billion in five years, with a focus on technology to enhance productivity [49][50]

Loan Portfolio and Performance - As of March 31, 2025, the company's loan portfolio totaled $5.4 billion, with an average loan balance of approximately $393.0 thousand[155]. - The annualized yield on the total portfolio for the three months ended March 31, 2025, was 9.11%[155]. - The portfolio-related net interest margin for both the three months ended March 31, 2025, and 2024, was 3.35%[157]. - Total loans increased from $4.28 billion as of March 31, 2024, to $5.45 billion as of March 31, 2025, representing a growth of approximately 27.3%[175]. - The weighted average loan-to-value (LTV) ratio at origination was 66.1% as of March 31, 2025, slightly down from 67.6% as of March 31, 2024[175]. - Total loan originations for the three months ended March 31, 2025, increased to $640.4 million, up $76.9 million from the previous quarter and $261.8 million from the same quarter last year[179]. - The weighted average loan-to-value (LTV) ratio for total loan originations was 62.3% for the three months ended March 31, 2025[179]. - The company’s portfolio of loans held for investment includes a significant portion (95.4%) maturing in more than five years as of March 31, 2025[180]. Nonperforming Loans and Credit Losses - Nonperforming loans as a percentage of total loans were 10.8% as of March 31, 2025, compared to 10.1% as of March 31, 2024[175]. - Nonperforming loans amounted to $587.8 million, or 10.8% of the held for investment loan portfolio, compared to $539.4 million, or 10.7% as of December 31, 2024[190]. - The allowance for credit losses as of March 31, 2025, was $5.0 million, slightly higher than the expected range of 0.15% to 0.20% of loans held for investment[186]. - Charge-offs for the three months ended March 31, 2025, were $1.03 million, representing 1.38% of average nonperforming loans[182]. - The provision for credit losses for the three months ended March 31, 2025, was $1.87 million, compared to $22,000 for the previous quarter[188]. - Resolved $76.4 million of nonperforming assets for Q1 2025, down from $79.4 million in Q4 2024, but up from $54.5 million in Q1 2024[191]. - Recovery rate on resolved nonperforming assets was 103.1% in Q1 2025, compared to 109.2% in Q4 2024 and 102.5% in Q1 2024[192]. Financial Performance - For the three months ended March 31, 2025, the company generated pre-tax income of $26.9 million and net income of $18.6 million, compared to $23.2 million and $17.3 million for the same period in 2024[157]. - Net income attributable to Velocity Financial, Inc. for the three months ended March 31, 2025, was $18,887,000, compared to $17,251,000 in the same period in 2024, a growth of 9%[230]. - Total operating expenses for the three months ended March 31, 2025, were $42,190,000, an increase from $31,011,000 in the same period of 2024, indicating a 36% rise[230]. - The provision for credit losses for the three months ended March 31, 2025, was $1,872,000, compared to $1,002,000 for the same period in 2024, showing an increase of 87%[230]. - Interest income for the three months ended March 31, 2025, was $118,740,000, compared to $90,529,000 for the same period in 2024, representing a 31% increase[230]. - Net interest income after provision for credit losses for the three months ended March 31, 2025, was $35,638,000, up from $28,472,000 in the same period of 2024, reflecting a 25% increase[230]. - Total other operating income increased by $7.7 million to $33.4 million for the three months ended March 31, 2025, primarily driven by increased origination fee income and unrealized gains from fair value marks[238]. Debt and Financing - The company has executed 38 securitized debt transactions, resulting in over $8.3 billion in gross debt proceeds from May 2011 through March 2025[156]. - Total debt as of March 31, 2025, was $5,111,067,000, with a portfolio-related interest expense of $75,088,000[230]. - The outstanding bond balance increased to $4,429,240,000 as of March 31, 2025, compared to $4,269,008,000 on December 31, 2024, reflecting a growth of approximately 3.75%[271]. - A five-year $215.0 million syndicated corporate debt agreement was established on March 15, 2022, with a fixed interest rate of 7.125% maturing on March 15, 2027[275]. - A subsequent five-year $75.0 million syndicated corporate debt agreement was entered into on February 5, 2024, with an interest rate of 9.875% maturing on February 15, 2029[276]. Cash Flow and Liquidity - Total liquidity, including available warehouse capacity, was $313.8 million as of March 31, 2025, consisting of $238.2 million in available warehouse capacity and $51.7 million in cash[259]. - Cash provided by operating activities was $3.54 million for the three months ended March 31, 2025, down from $10.58 million in the previous year[260]. - Cash used in investing activities was $401.41 million for the three months ended March 31, 2025, compared to $212.44 million in the previous year[260]. - Cash provided by financing activities was $401.51 million for the three months ended March 31, 2025, up from $198.98 million in the previous year[260]. - As of March 31, 2025, borrowings under warehouse facilities amounted to $571.8 million, with $238.2 million of available capacity[265]. Forward-Looking Statements - The company acknowledges that forward-looking statements may not prove to be correct and actual results may differ materially from anticipated results[285]. - Forward-looking statements include expectations regarding loan originations and the resolution of non-performing loans[285]. - The company will not update any forward-looking statements after the date they are made, except as required by law[286]. - Important factors that could cause actual results to differ are detailed in the Quarterly Report and other filed documents[285].

Financial Data and Key Metrics Changes - The company originated $640 million in new loans, a 69% increase year-over-year, driving a 27% increase in net revenue and a 17% increase in core pretax earnings [4][12] - Core earnings per share increased to $0.55 from $0.51 a year ago, marking the second-best quarterly earnings in company history [7] - The total loan portfolio reached just under $5.5 billion, a 7.8% increase from year-end 2024 and a 27.3% increase year-over-year [13][14] Business Line Data and Key Metrics Changes - The weighted average coupon on new held-for-investment originations was strong at 10.5%, with a five-quarter average trend of 10.8% [12] - The weighted average loan-to-value ratio for the quarter was just under 63%, indicating tight credit levels [13] - Non-performing loans remained stable at 10.8%, consistent with previous quarters [15][16] Market Data and Key Metrics Changes - The company reported strong demand across all property types, with a recent shift towards commercial loans [4] - The real estate markets are functioning well, with healthy investor demand and participation in offerings despite market volatility [5][21] Company Strategy and Development Direction - The company aims to grow its portfolio to $10 billion over the next five years, focusing on technology to scale the business without significantly increasing headcount [47][49] - The company has been active in capital markets, completing four successful debt transactions and issuing three new securitizations [5][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future, citing strong production and healthy demand in real estate markets [21] - The company does not anticipate material impacts from external factors such as tariff discussions [21] Other Important Information - The company has a total liquidity of $75.6 million, comprised of cash and available liquidity on unfinanced collateral [19] - The CECL loan loss reserve at the end of the quarter was $5 million, slightly above the expected normal range due to macroeconomic forecasts [17][18] Q&A Session Summary Question: Will the NIM remain stable in Q2? - Management indicated that the NIM is expected to be around 3.35% to 3.5%, which is considered normal [23] Question: What is the outlook for new origination yields? - Management expects yields to remain stable, with potential for a decrease later in the year if the Federal Reserve continues to cut rates [25][26] Question: Is the increase in commercial demand due to borrowers being shut out of other channels? - Management clarified that the increase is primarily due to the establishment of a small commercial division rather than a demand issue [30] Question: What will the raised capital be used for? - The raised capital will be used to continue making more loans, with a focus on growing the portfolio [34] Question: What is the current total headcount and office locations? - The company has a total headcount of 323 and operates from five office locations [43][45] Question: What is the long-term vision for the company? - The company aims to grow its portfolio to $10 billion in five years while leveraging technology to enhance productivity [47][49]

1Q25 Results Presentation May 1, 2025 Forward-looking statements For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled ''Risk Factors" previously disclosed in our Form 10-Q filed with the SEC on May 14, 2020, as well as other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relation ...