Core Insights - The company achieved a record loan production of $739 million in Q3, representing a 32% net increase year over year after accounting for prepayments [1][4][7] - Net income increased by 60% year over year, with core diluted EPS at $0.69 per share [2] - The nonperforming loan (NPL) rate decreased to 9.8%, down from 10.6% in the previous quarter, indicating stable asset quality [1][11] Production and Financial Performance - Loan production for Q3 was $739 million, surpassing the previous quarter's record of $725 million, with a total of 1,778 loans originated [7] - New applications exceeded $1.4 billion for the quarter, reflecting strong demand for the company's products [4] - The weighted average coupon on new held-for-investment originations was 10%, consistent with the last five-quarter average of 10.6% [7][8] Portfolio and Asset Management - The total loan portfolio reached just under $6.3 billion in unpaid principal balance (UPB), marking a 7.1% increase from Q2 and a 32% increase year over year [8] - The weighted average loan-to-value ratio remained low at 65.5%, indicating disciplined credit practices [4][10] - Nonperforming asset resolution gains totaled $2.8 million, averaging 3.8% quarterly over the last five quarters [11] Capital and Liquidity - The company maintained a strong portfolio net interest margin (NIM) at 3.65%, consistent with the last five-quarter average [10] - Total liquidity as of September 30 was just under $144 million, with over $600 million in available warehouse capacity [13][14] - The company is focused on compounding earnings by reinvesting profits back into the platform and portfolio [5][6] Strategic Initiatives - The company closed its first-ever single counterparty securitization with a top-tier money manager, which is expected to reduce transaction costs and diversify funding options [3] - The management expressed optimism about future earnings growth, citing healthy market conditions and robust capital markets, particularly in fixed income [15]

Financial Performance - Net income for Q3 2025 was $25.4 million, a 60.6% increase from $15.8 million in Q3 2024, with diluted EPS rising to $0.65 from $0.44[5] - Core net income reached $26.9 million, up 58.9% from $16.9 million in Q3 2024, with core diluted EPS increasing to $0.69 from $0.47[6] - Net income attributable to Velocity Financial, Inc. for Q3 2025 was $25,373,000, a 60.9% increase from $15,803,000 in Q3 2024[43] - Core diluted earnings per share for Q3 2025 were $0.69, compared to $0.47 for Q3 2024, indicating a growth of 46.8%[43] Loan Production and Growth - Record loan production totaled $739.0 million, a 55.0% increase from $476.8 million in Q3 2024, driven by strong demand for traditional commercial and investor 1-4 rental loans[18] - Total loans outstanding increased to $6.3 billion, a 32.0% rise from $4.8 billion in Q3 2024, with significant growth across all collateral types[14] - Total loans, net rose to $6.5 billion as of September 30, 2025, up from $5.2 billion at the end of 2024, indicating a growth of 25.4%[37] Interest Income and Margin - Net interest income after provision for credit losses was $48.7 million, a 38.6% increase from $35.1 million in Q3 2024, supported by strong portfolio growth[13] - Interest income for the three months ended September 30, 2025, was $144,119,000, an increase of 37.1% compared to $105,070,000 for the same period in 2024[39] - The net interest margin for the total company improved to 3.25% in Q3 2025 from 3.06% in Q3 2024[41] - The company reported a net interest spread of 3.16% for the total company in Q3 2025, compared to 2.87% in Q3 2024[41] Operating Expenses - Operating expenses rose to $50.4 million, a 45.6% increase from Q3 2024, primarily due to higher production-driven compensation expenses[13] - Total operating expenses for the three months ended September 30, 2025, were $50,397,000, compared to $34,613,000 in the same period of 2024, representing an increase of 45.6%[39] Credit Quality and Losses - Nonperforming loans (NPL) as a percentage of Held for Investment (HFI) loans decreased to 9.8% from 10.6% in Q3 2024, with NPLs totaling $614.2 million[16] - The allowance for credit losses decreased to $4.6 million as of September 30, 2025, a 5.5% decline from $4.9 million in the same period of 2024[23] - The provision for credit losses increased significantly to $381,000 in Q3 2025, compared to a reversal of $69,000 in Q3 2024, representing a variance of 652.2%[23] - Charge-offs for Q3 2025 amounted to $677,000, an increase of 111.6% from $320,000 in Q3 2024[23] - Provision for credit losses was $381,000 in Q3 2025, a significant decrease from a provision of $(69,000) in Q3 2024, indicating improved credit quality[39] Asset Growth - The total assets increased to $6.96 billion as of September 30, 2025, compared to $5.53 billion at the end of 2024, reflecting a growth of 25.9%[37] - The total equity rose to $637.5 million as of September 30, 2025, compared to $520.2 million at the end of 2024, indicating a growth of 22.5%[37] - The diluted book value per share increased to $16.31 as of September 30, 2025, up from $14.26 at the end of 2024, representing a growth of 14.4%[37] Other Income and Liquidity - Other operating income was $37.1 million, an increase of 78.8% from $20.7 million in Q3 2024, driven by record origination volumes[13] - Liquidity stood at $143.5 million, comprising $99.0 million in unrestricted cash and $44.5 million in available borrowings from unpledged loans[5] - Nonperforming assets (NPA) resolution totaled $108.0 million in UPB for Q3 2025, achieving a recovery rate of 102.6% compared to $68.6 million in UPB with a recovery rate of 103.4% in Q3 2024[22] - The total loss on real estate owned (REO) was $1.6 million in Q3 2025, a significant decline from a gain of $1.2 million in Q3 2024, driven by higher valuation losses[21]

Financial Data and Key Metrics Changes - The company achieved a record quarter with pre-tax earnings up 66.5% and net income up 60% year over year [4][6] - Production volumes reached $739 million, a 32% net increase in the portfolio year over year after netting out prepayments [4][10] - Core diluted EPS was reported at 69 cents per share, with a portfolio NIM stable at 360 basis points above the target of 3.5% [6][11] Business Line Data and Key Metrics Changes - Loan production for Q3 was $739 million, breaking the previous quarter's record of $725 million, with a total of 1,778 loans originated [9][10] - The weighted average coupon on new held-for-investment originations was strong at 10.5%, consistent with the last five quarters' average of 10.6% [9][10] - The total loan portfolio as of September 30 was just under $6.3 billion, reflecting a 7.1% increase from Q2 and a 32% increase year over year [10][11] Market Data and Key Metrics Changes - The weighted average loan-to-value for the quarter was at 62.8%, consistent with the last five quarters' average [10] - Non-performing loan rate at the end of Q3 was 9.8%, down from 10.6% in Q2 and 80 basis points year over year [11][12] - Total liquidity as of September 30 was just under $144 million, with over $600 million of warehouse capacity available [14] Company Strategy and Development Direction - The company emphasizes compounding earnings by reinvesting all earnings back into the platform and portfolio [7] - A strategic partnership was formed for the first-ever single counterparty securitization, aimed at reducing transaction costs and diversifying funding options [5][6] - The company plans to maximize opportunities in the supportive fixed income markets [5][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing healthy markets and strong credit performance [16] - The capital markets, especially in fixed income, are described as extremely robust, with expectations for continued earnings growth [16] Other Important Information - The company reported a net loss of $1.6 million in REO activities, primarily due to REO valuations [13] - The CECL loan loss reserve was $4.6 million, or 22 basis points, consistent over the last five quarters [13][14] Q&A Session Summary Question: Concerns about REO valuations and charge-offs - Management explained that the negative $6.3 million in REO valuations is primarily a timing issue, reflecting adjustments to market realities [20][22] - The REO is initially booked at fair value, and subsequent adjustments may reflect market conditions at the time of sale [22][24] Question: Current headcount and changes over the last year - The company reported a headcount of 347 as of September 30, an increase of about 82 employees year over year [30]

Loan Portfolio and Performance - As of September 30, 2025, the company's loan portfolio totaled $6.3 billion with an average loan balance of approximately $393 thousand[155]. - The annualized yield on the total portfolio for the three months ended September 30, 2025, was 9.54%, while for the nine months it was 9.44%[155]. - The portfolio-related net interest margin for the three months ended September 30, 2025, was 3.65%, an increase from 3.60% in the same period of 2024[157]. - For the three months ended September 30, 2025, the company generated pre-tax income of $35.4 million, compared to $21.2 million for the same period in 2024, representing a 67% increase[157]. - The total loans (UPB) increased from $4.75 billion as of September 30, 2024, to $6.28 billion as of September 30, 2025, reflecting a growth of approximately 32%[175]. - Nonperforming loans as a percentage of total loans decreased from 10.6% as of September 30, 2024, to 9.8% as of September 30, 2025[175]. - The weighted average loan-to-value ratio at origination for the portfolio was 65.5% as of September 30, 2025[175]. - Total loan originations including unfunded commitments increased to $738.96 million for the three months ended September 30, 2025, up $13.6 million from the previous quarter and $262.2 million from the same quarter last year[179]. - The unpaid principal balance of loans held for investment as of September 30, 2025, was $6.27 billion, an increase from $5.06 billion as of December 31, 2024[181]. - Nonperforming loans represented 12.3% of the total unpaid principal balance of loans held for investment as of September 30, 2025[190]. - Total loans held for investment amounted to $6.27 billion as of September 30, 2025, with 90.2% classified as performing loans[191]. - Loans due in more than five years accounted for 95.9% of the total loans held for investment as of September 30, 2025[181]. Financial Results and Income - The company reported a total gain on real estate owned (REO) of $3.26 million for the nine months ended September 30, 2025[183]. - The company resolved $108.0 million of nonperforming assets in Q3 2025, up from $104.0 million in Q2 2025 and $68.6 million in Q3 2024, with net gains of $2.8 million, $3.6 million, and $2.3 million for the respective quarters[193]. - The recovery rate on resolved nonperforming assets was 102.7% for Q3 2025, compared to 103.4% for Q2 2025 and 103.0% for Q3 2024[194]. - The company generated approximately $47.0 million in net cash and cash equivalents from operating, investing, and financing activities during the nine months ended September 30, 2025, compared to $5.3 million in 2024[275]. - Net income attributable to Velocity Financial, Inc. was $25.4 million for the three months ended September 30, 2025, compared to $15.8 million in 2024, and $70.3 million for the nine months ended September 30, 2025, compared to $47.8 million in 2024[233]. - Interest income increased by $39.0 million to $144.1 million for the three months ended September 30, 2025, compared to $105.1 million for the same period in 2024, driven by higher average loan portfolio balances and yield[235]. - Net interest income - portfolio related rose 34.0% to $55.2 million for the three months ended September 30, 2025, up from $41.2 million in 2024, and increased 33.1% to $152.6 million for the nine months ended September 30, 2025, compared to $114.6 million in 2024[234]. Operating Expenses - Total operating expenses increased to $50.4 million for the three months ended September 30, 2025, from $34.6 million in 2024, and to $144.5 million for the nine months ended September 30, 2025, from $100.5 million in 2024[233]. - Provision for credit losses increased to $0.4 million for the three months ended September 30, 2025, from a reversal of $0.1 million in 2024, and to $3.9 million for the nine months ended September 30, 2025, from $1.2 million in 2024[245]. - Compensation and employee benefits increased by $5.7 million to $23.3 million for the three months ended September 30, 2025, compared to $17.6 million for the same period in 2024, mainly due to higher headcount and commissions[255]. - Securitization expenses increased to $6.4 million for the three months ended September 30, 2025, from $3.2 million for the same period in 2024, resulting from more securitization transactions[257]. - Loan servicing expenses increased to $7.7 million for the three months ended September 30, 2025, from $5.7 million for the same period in 2024, primarily due to the growth of the loan portfolio[258]. Debt and Liquidity - The company completed 44 securitization transactions from May 2011 through September 2025, issuing $9.9 billion in principal amount of securities[281]. - Outstanding bond balances for securitized debt as of September 30, 2025, totaled $5.55 billion, an increase from $4.27 billion as of December 31, 2024[284]. - The company had five non-mark-to-market warehouse facilities and one mark-to-market facility as of September 30, 2025, with borrowings of $334.7 million and $600.3 million of available capacity[276]. - Total liquidity as of September 30, 2025, was $143.5 million, consisting of $99.0 million in cash and $44.5 million in borrowings from available warehouse capacity[269]. - As of September 30, 2025, the company had $555.8 million in additional available warehouse capacity, bringing total liquidity plus available warehouse capacity to $699.3 million[269]. - The company entered into a five-year $215.0 million syndicated corporate debt agreement on March 15, 2022, with a fixed interest rate of 7.125% maturing on March 15, 2027[288]. - A second five-year $75.0 million syndicated corporate debt agreement was established on February 5, 2024, with an interest rate of 9.875% maturing on February 15, 2029[289]. Market Conditions and Future Outlook - Market uncertainties, including geopolitical conflicts and macroeconomic conditions, may impact the company's operational and financial performance[160]. - The company is applying a severe stress scenario for its current expected credit loss (CECL) estimate, reflecting economic uncertainties[185]. - Forward-looking statements indicate expectations regarding loan originations and strategies for future funding and development of business and products[301]. - The company does not plan to structure any securitized debt as sales or utilize off-balance-sheet vehicles, ensuring sufficient funding for working capital requirements[287]. - The company has never maintained relationships with unconsolidated entities for off-balance-sheet arrangements, ensuring transparency in financial commitments[299].

Group 1 - The article does not provide any specific content or key points related to a company or industry [1]

Financial Performance - Net income reached $25.4 million, a 60.6% increase from $15.8 million in 3Q24[8] - Core net income increased by 58.9% to $26.9 million, compared to $16.9 million in 3Q24[8] - Diluted EPS rose to $0.65, up from $0.44 per share in 3Q24[8] - Core diluted EPS increased to $0.69, up from $0.47 per share in 3Q24[8] Loan Production and Portfolio - Loan production hit a new record of $739.0 million, a 55.0% increase from 3Q24[6] - The total loan portfolio reached $6.3 billion in UPB as of September 30, 2025, a 32.0% increase from $4.8 billion in UPB as of September 30, 2024[6] - Portfolio net interest margin (NIM) for 3Q25 was 3.65%, an increase of 5 bps from 3.60% for 3Q24[8] - The UPB of fair value option (FVO) loans was $4.2 billion, or 66.3% of total loans, as of September 30, 2025, an increase from $2.2 billion in UPB, or 47.1% as of September 30, 2024[19] Asset Quality and Resolution - Nonperforming loans (NPL) as a % of HFI loans decreased to 9.8%, down from 10.6% as of September 30, 2024[6] - 3Q25 NPA resolutions realized gains of $2.8 million, or 102.6%, of UPB resolved[6] - NPA resolutions totaled $108.0 million in UPB, realizing 102.6% of UPB resolved, compared to $68.6 million in UPB and realization of 103.4% of UPB resolved for 3Q24[33] Financing and Capital - Completed the 1st single counterparty securitization totaling $190.9 million of securities issued with a large money manager in July, in addition to the VCC 2025-4 securitization totaling $457.5 million of securities issued[6,9] - Liquidity of $143.5 million, consisting of $99.0 million in unrestricted cash and $44.5 million in available borrowings from unpledged loans[9] - Total available warehouse line capacity of $600.3 million[9]

[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]