Velocity Financial's Net Income Jumps 47% on Strong Loan Growth

TL;DR

**Velocity is crushing it with massive loan growth and surging profits, making it a strong buy in the non-bank lending space.**

AI Summary

Velocity Financial, Inc. (VEL) demonstrated robust financial growth for the nine months ended September 30, 2025, with net income attributable to Velocity Financial, Inc. surging to $70.257 million, a significant increase from $47.832 million in the prior year period. This 46.9% rise was primarily driven by a substantial increase in net interest income, which grew to $134.172 million from $96.948 million, and a strong performance in other operating income, totaling $110.370 million compared to $69.068 million. The company's total assets expanded considerably to $6.958 billion as of September 30, 2025, up from $5.527 billion at December 31, 2024, largely due to a significant increase in loans held for investment at fair value, which rose from $2.766 billion to $4.371 billion. Operating expenses also increased, reaching $144.500 million for the nine months ended September 30, 2025, up from $100.511 million, with compensation and employee benefits rising to $67.589 million. The provision for credit losses increased to $3.851 million from $1.151 million, reflecting potential risks in the loan portfolio. Cash and cash equivalents nearly doubled to $98.964 million from $49.901 million, indicating improved liquidity.

Why It Matters

This strong performance from Velocity Financial, Inc. signals a robust market for investor real estate loans, directly benefiting investors through increased earnings per share, which rose to $1.91 basic EPS for the nine months ended September 30, 2025, from $1.45. Employees may see continued growth opportunities as compensation and benefits increased by $18.084 million. For customers, the expansion of loans held for investment suggests continued access to capital in the investor real estate market. In a competitive landscape, Velocity's significant asset growth and increased securitized debt demonstrate its ability to scale and fund its operations, potentially solidifying its market position against other specialized lenders.

Risk Assessment

Risk Level: medium — The company's provision for credit losses increased significantly to $3.851 million for the nine months ended September 30, 2025, compared to $1.151 million in the prior year, indicating a potential rise in loan defaults or a more conservative outlook. Additionally, 'Real estate owned, net' increased to $113.700 million as of September 30, 2025, from $68.000 million at December 31, 2024, suggesting a higher volume of foreclosed properties, which can be costly to manage and dispose of.

Analyst Insight

Investors should consider Velocity Financial's strong earnings growth and expanding loan portfolio as a positive indicator, but remain vigilant regarding the rising provision for credit losses and increased real estate owned. A deeper dive into the quality of the loan book and the specific types of real estate owned would be prudent before making significant investment decisions.

Financial Highlights

debt To Equity

N/A

revenue

$244.542M

operating Margin

N/A

total Assets

$6.958B

total Debt

N/A

net Income

$70.257M

eps

$1.91

gross Margin

N/A

cash Position

$98.964M

revenue Growth

+47.0%

Revenue Breakdown

Key Numbers

• $70.257M — Net income attributable to Velocity Financial, Inc. (Increased from $47.832 million for the nine months ended September 30, 2024, representing a 46.9% increase.)
• $6.958B — Total assets (Increased from $5.527 billion at December 31, 2024, reflecting substantial growth in the loan portfolio.)
• $4.371B — Loans held for investment, at fair value (Increased from $2.766 billion at December 31, 2024, indicating significant portfolio expansion.)
• $134.172M — Net interest income (Increased from $96.948 million for the nine months ended September 30, 2024, demonstrating improved core profitability.)
• $110.370M — Total other operating income (Increased from $69.068 million for the nine months ended September 30, 2024, contributing to overall revenue growth.)
• $3.851M — Provision for credit losses (Increased from $1.151 million for the nine months ended September 30, 2024, suggesting higher credit risk or more conservative provisioning.)
• $113.700M — Real estate owned, net (Increased from $68.000 million at December 31, 2024, indicating a rise in foreclosed properties.)
• $0.66 — Basic earnings per common share (Q3 2025) (Increased from $0.48 in Q3 2024, showing improved per-share profitability.)
• $1.91 — Basic earnings per common share (YTD 2025) (Increased from $1.45 for the nine months ended September 30, 2024.)
• 38,900,030 — Common shares outstanding (As of October 31, 2025, up from 33,545,585 shares outstanding at December 31, 2024.)

Key Players & Entities

• Velocity Financial, Inc. (company) — Registrant and primary entity in the filing
• Velocity Financial, LLC (company) — Former name of the company before conversion to a corporation
• Velocity Commercial Capital, LLC (company) — Mortgage lender subsidiary
• Century Health & Housing Capital, LLC (company) — Subsidiary acquired in December 2021, Ginnie Mae issuer/servicer
• Ginnie Mae (regulator) — Government National Mortgage Association, regulator for Century Health & Housing Capital
• Federal Housing Administration (regulator) — Insurer of mortgages financed by Century Health & Housing Capital
• New York Stock Exchange (regulator) — Exchange where VEL common stock trades
• NYSE Texas, Inc. (regulator) — Exchange where VEL common stock also trades since August 2025
• Securities and Exchange Commission (regulator) — Regulatory body for the 10-Q filing

FAQ

Risk Factors

• Credit Risk and Loan Portfolio Quality [high — financial]: The provision for credit losses increased to $3.851 million from $1.151 million, indicating potential deterioration in loan quality or a more conservative provisioning stance. The significant growth in loans held for investment to $4.371 billion from $2.766 billion amplifies this risk.
• Interest Rate Sensitivity [medium — financial]: As a financial institution, VEL is exposed to interest rate risk. Changes in interest rates can affect net interest income and the fair value of its assets and liabilities. The company's substantial growth in interest-earning assets makes it more sensitive to rate fluctuations.
• Increased Operating Expenses [medium — operational]: Operating expenses rose to $144.500 million from $100.511 million, with compensation and employee benefits increasing to $67.589 million. Managing these rising costs while maintaining profitability is crucial.
• Growth in Real Estate Owned [medium — financial]: Real estate owned, net, increased significantly to $113.700 million from $68.000 million. This rise in foreclosed properties can lead to increased holding costs, potential valuation declines, and disposition risks.
• Economic Downturn Impact [medium — market]: A general economic downturn could negatively impact VEL's borrowers, increasing delinquency rates and the need for higher credit loss provisions. This is particularly relevant given the expansion of the loan portfolio.

Industry Context

Velocity Financial operates in the non-bank mortgage lending sector, a competitive landscape characterized by fluctuating interest rates and evolving regulatory environments. The industry is seeing increased demand for mortgage origination and servicing, but also faces challenges from rising interest rates impacting borrower affordability and potential economic slowdowns. Competition comes from traditional banks, credit unions, and other non-bank lenders.

Regulatory Implications

As a financial services company, VEL is subject to various regulations, including those related to lending practices, capital requirements, and consumer protection. Changes in these regulations, such as new capital adequacy rules or stricter compliance mandates, could increase operating costs and impact business strategies.

What Investors Should Do

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Glossary

Net interest income

The difference between interest income generated by a financial institution's interest-earning assets and the interest expense paid on its interest-bearing liabilities. (A core measure of profitability for lending institutions like VEL, reflecting the spread earned on its loan portfolio and funding costs.)

Loans held for investment, at fair value

Loans that a financial institution intends to hold until maturity or for an extended period, and whose value is reported at its current market price. (Represents a significant portion of VEL's assets, indicating the scale of its lending operations and the impact of fair value adjustments on its balance sheet.)

Provision for credit losses

An expense set aside by a financial institution to cover potential losses from loans that may not be repaid by borrowers. (An indicator of the perceived risk within the loan portfolio and the company's accounting for potential defaults.)

Real estate owned, net

Properties that a financial institution has acquired through foreclosure proceedings, typically because the borrower defaulted on their loan. (Represents assets acquired due to loan defaults, which can carry risks related to valuation, holding costs, and disposition.)

Basic earnings per common share

The net income attributable to each outstanding share of common stock, calculated by dividing net income by the weighted-average number of common shares outstanding. (A key profitability metric for shareholders, showing how much profit is generated per share of ownership.)

Year-Over-Year Comparison

Velocity Financial has demonstrated strong year-over-year growth, with net income increasing by 46.9% to $70.257 million for the nine months ended September 30, 2025. This growth is underpinned by a substantial rise in net interest income (+38.4%) and a significant surge in other operating income (+60.0%). Total assets have expanded considerably, driven by a larger loan portfolio. However, operating expenses have also increased, and the provision for credit losses has risen, indicating potential headwinds and increased risk management focus compared to the prior period.

Key Financial Figures

• $0.01 — ch registered Common stock, par value $0.01 per share VEL The New York Stock Ex

Filing Documents

• vel-20250930.htm (10-Q) — 9337KB
• vel-ex31_1.htm (EX-31.1) — 20KB
• vel-ex31_2.htm (EX-31.2) — 20KB
• vel-ex32_1.htm (EX-32.1) — 14KB
• vel-ex32_2.htm (EX-32.2) — 14KB
• 0001193125-25-270220.txt ( ) — 34790KB
• vel-20250930.xsd (EX-101.SCH) — 2284KB
• vel-20250930_htm.xml (XML) — 10070KB

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 9 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 38 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 60 Item 4.

Controls and Procedures

Controls and Procedures 60 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 61 Item 1A.

Risk Factors

Risk Factors 61 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 61 Item 3. Defaults Upon Senior Securities 61 Item 4. Mine Safety Disclosures 61 Item 5. Other Information 61 Item 6. Exhibits 62

SIGNATURES

SIGNATURES 64 i

—FINANCI AL INFORMATION

PART I—FINANCI AL INFORMATION

Consolidated Financ ial Statements (Unaudited)

Item 1. Consolidated Financ ial Statements (Unaudited) VELOCITY FINANCIAL, INC. CONSOLIDATED B ALANCE SHEETS (In thousands, except share data) September 30, 2025 December 31, 2024 (Unaudited) ASSETS Cash and cash equivalents $ 98,964 $ 49,901 Restricted cash 18,846 20,929 Loans held for sale, at fair value 2,590 — Loans held for investment, at amortized cost (net of allowance for credit losses of $ 4,586 and $ 4,174 as of September 30, 2025 and December 31, 2024, respectively) 2,127,170 2,420,116 Loans held for investment, at fair value 4,371,317 2,766,951 Total loans, net 6,501,077 5,187,067 Accrued interest receivables 46,553 35,235 Receivables due from servicers 131,761 123,494 Other receivables 2,755 1,359 Real estate owned, net 113,700 68,000 Property and equipment, net 1,481 1,650 Deferred tax asset 16,625 13,612 Mortgage servicing rights, at fair value 12,597 13,712 Derivative assets 18 — Goodwill 6,775 6,775 Other assets 7,531 5,674 Total assets $ 6,958,683 $ 5,527,408 LIABILITIES Accounts payable and accrued expenses $ 170,584 $ 147,814 Secured financing, net 286,218 284,833 Securitized debt, at amortized cost 1,783,150 2,019,056 Securitized debt, at fair value 3,748,889 2,207,408 Warehouse and repurchase facilities, net 332,386 348,082 Total liabilities 6,321,227 5,007,193 Commitments and contingencies EQUITY Common stock ($ 0.01 par value, 100,000,000 shares authorized; 39,508,370 and 33,761,147 shares issued, 38,900,030 and 33,545,585 shares outstanding as of September 30, 2025 and December 31, 2024, respectively) 396 339 Additional paid-in capital 379,401 322,954 Retained earnings 267,582 197,325 Treasury stock, at cost ( 608,340 and 215,562 common shares as of September 30, 2025 and December 31, 2024, respectively) ( 10,203 ) ( 2,869 ) Accumulated other co