Velocity Financial, Inc. Reports Transformational FY2025 Results and Strong Outlook for 2026

Key Financial Highlights for Shareholders

• Record Core Earnings Per Share (EPS): Velocity Financial, Inc. (“Velocity”) achieved a record core EPS of \$2.91 for FY2025, demonstrating robust profitability.
• Core Pretax Return on Average Equity (ROAE): 26%, reflecting strong operational efficiency and capital deployment separating Velocity from peers.
• Book Value Growth: Book value grew 21% year-over-year, an important metric for shareholder value creation.
• Loan Portfolio Expansion: Total loan portfolio reached \$6.5 billion (UPB) as of December 31, 2025, marking a 28.4% increase year-over-year.
• Originations: Total loan originations soared to \$634.6 million in Q4 2025 (up 12.6% YoY), with full-year origination growth at 49%.

Quarterly Performance: Q4 2025

• Net Income: \$34.8 million, up 69.0% from \$20.6 million in Q4 2024.
• Diluted EPS: \$0.89, an increase of \$0.32 YoY.
• Core Net Income: \$36.3 million, up 67.0% from \$21.8 million in Q4 2024.
• Core Diluted EPS: \$0.93, compared to \$0.60 in Q4 2024.
• Portfolio Net Interest Margin (NIM): 3.59% for Q4 2025, a slight decline from 3.70% in Q4 2024 but remains strong.

Asset Quality and Risk Management

• Nonperforming Loans (NPL): NPLs as a percentage of held-for-investment loans dropped to 8.5% from 10.7% at year-end 2024, primarily due to the sale of \$128.9 million in UPB of NPLs, generating a tax-effected gain of \$13.4 million and releasing approximately \$50 million in working capital.
• NPL Resolutions: Q4 2025 resolutions totaled \$78.1 million in UPB, with recoveries at 109.8% of principal resolved, indicating effective special servicing and strong asset recovery rates.
• Loan Loss Reserves: CECL reserve increased slightly to \$4.5 million (0.22% of amortized cost HFI loans), reflecting prudent risk management amid higher charge-offs in the legacy portfolio.
• Charge-Offs and REO Losses: Q4 2025 charge-offs were \$2.0 million (above the five-quarter average), and REO losses totaled \$3.7 million (vs. a \$3.6 million gain in Q4 2024), mainly due to higher valuation losses and lower sale gains.

Capital Markets and Liquidity Position

• Securitizations: Completed two private securitizations in Q4 2025, totaling \$646.3 million with a weighted average rate of 6.1%, further enhancing balance sheet flexibility.
• Unsecured Debt Issuance: In January 2026, Velocity closed a milestone \$500 million publicly rated unsecured corporate debt issuance, providing significant capital for future growth and reducing reliance on recourse warehouse lines.
• Warehouse Line Capacity: Maximum capacity increased to \$935 million, with \$599.9 million available as of December 31, 2025.
• Liquidity: \$116.8 million in liquidity, including \$92.1 million in unrestricted cash and \$24.7 million in available borrowings.
• Leverage: Recourse debt to equity ratio improved to 1.0x, down from 1.2x at year-end 2024.

Operational and Market Outlook

• Market Positioning: Velocity expects continued growth in its target market for small balance investor properties, especially in 1-4 family and traditional commercial segments.
• Loan Securitization Pipeline: Next long-term loan securitization targeted for March 2026, with the securitization market remaining supportive.
• NIM Target: Management maintains a NIM target of approximately 3.5%.
• 2026 Guidance: Anticipates strong portfolio growth and continued pricing discipline on new originations, supporting earnings momentum.

Shareholder Value and Returns

• Book Value Per Share: Diluted book value per share rose to \$17.19 (+5.4% quarter-over-quarter), with adjusted diluted book value per share at \$18.84, reflecting fair value adjustments for loans and securitizations carried at amortized cost.
• Compounded Growth: Core diluted EPS CAGR stands at 37.4%, Core ROAE CAGR at 18.8%, and Stockholders’ Equity CAGR at 21.3% over recent years, underlining Velocity’s ability to compound returns through reinvested earnings.

Forward-Looking Considerations and Risks

• Management highlights potential risks from changes in federal policies, economic and real estate market conditions, regulatory shifts, customer demand, investor appetite for securitizations, and geopolitical events.
• Investors are encouraged to review filings for additional risk factors that may materially impact future results.

What This Means for Investors

Velocity’s FY2025 performance demonstrates accelerating profitability, strong risk management, robust capital markets execution, and a clear runway for continued growth. Key value drivers include record core EPS, rapid portfolio expansion, improved asset quality, and a strengthened liquidity and capital position, all of which are price sensitive and likely to impact share valuation positively. The company’s reduced leverage and recent successful unsecured debt issuance add further flexibility, while its outlook for 2026 remains bullish. These developments position Velocity as a compelling growth investment in the specialty finance sector.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. Investors should review official company filings and consult their own advisors before making investment decisions.

View Velocity Financial, Inc. Historical chart here