Velocity Financial, Inc. Reports Third Quarter 2024 Results

Third Quarter Highlights:

Net income of $15.8 million, up 30.8% from $12.1 million for 3Q23. Diluted EPS of $0.44, up $0.09 from $0.35 per share for 3Q23
Core net income(1) of $16.9 million, an increase of 31.2% from $12.9 million for 3Q23. Core diluted EPS(1) of $0.47, up from $0.37 per share for 3Q23
Loan production of $476.8 million in UPB, a 12.9% and 64.1% increase from 2Q24 and 3Q23, respectively
Nonperforming loans as a percentage of Held for Investment (HFI)(2) loans was 10.6%, up slightly from 10.5% as of June 30, 2024, and 10.1% as of September 30, 2023, respectively
Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled $68.6 million in UPB
- Realized gains of $2.3 million or 103.4% of UPB resolved
Portfolio net interest margin (NIM) of 3.60%, an increase of 6 bps Q/Q and 26 bps from 3.34% for 3Q23
Completed the VCC 2024-4 securitization totaling $253.6 million of securities issued
Collapsed the 2020-2 securitization allowing us to redeploy $25.1 million in retained equity more efficiently
Liquidity(3) of $92.8 million and total available warehouse line capacity of $349.3 million as of September 30, 2024
Recourse debt to equity ratio of 1.5x due to aggregation of new loans which were securitized after quarter end
GAAP Book value per common share of $14.91 as of September 30, 2024, a 14.7% increase from $13.00 as of September 30, 2023

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $15.8 million and core net income of $16.9 million for 3Q24, compared to net income of $12.1 million and core net income of $12.9 million for 3Q23. Earnings and core earnings per diluted share were $0.44 and $0.47, respectively, for 3Q24, compared to $0.35 and $0.37 for 3Q23.

“Velocity continued to expand on this year’s considerable achievements by delivering another quarter of solid production volume and portfolio growth,” said Chris Farrar, President and CEO. “The third quarter of 2024 marked the sixth consecutive quarter of profitable production volume growth in an environment where other lenders have struggled. We have successfully leveraged investments in our production platform and sales force to expand our reach into the broker community and generate greater awareness among real estate investors regarding Velocity’s financing solutions. These successes have been supported by disciplined capital and asset management. Resolution gains on nonperforming loans reached $2.3 million, or 3.4% of total unpaid principal resolved. During the quarter, we successfully issued our fourth securitization of 2024, which met with strong investor demand and improved pricing. We also collapsed capital-inefficient securitized debt that was successfully refinanced, unlocking capital to support future growth. These strong results have us on track to achieve an all-time full-year funding record for the Company in 2024 while also realizing our goal of a $5 billion loan portfolio by 2025.”

Third Quarter Operating Results

KEY PERFORMANCE INDICATORS ($ in thousands)

3Q 2024

3Q 2023

$ Variance

% Variance

Pretax income

21,244.2

17,238.5

4,005.7

23.2

Net income

15,803.2

12,085.9

3,717.2

30.8

Diluted earnings per share

0.44

0.35

0.09

26.5

Core pretax income

23,003.6

18,334.9

4,668.7

25.5

Core net income(a)

16,948.7

12,918.1

4,030.6

31.2

Core diluted earnings per share(a)

0.47

0.37

0.10

26.9

Pretax return on equity

17.55

16.82

n.a.

4.3

Core pretax return on equity(a)

19.00

17.89

n.a.

6.2

Net interest margin - portfolio

3.60

3.34

n.a.

7.8

Net interest margin - total company

3.06

2.90

n.a.

5.6

Average common equity

484,197.4

409,954.3

74,243.1

18.1

(a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release. n.a.- not applicable

Discussion of results:

Net income in 3Q24 was $15.8 million, compared to $12.1 million for 3Q23
- Strong portfolio earnings driven by production volume growth and continued focus on optimizing loan resolution gains
Core net income(1) was $16.9 million, compared to $12.9 million for 3Q23
- 3Q24 core adjustments included incentive compensation expenses and costs related to the Company’s employee stock purchase plan (ESPP)
Portfolio NIM for 3Q24 was 3.60%, compared to 3.34% for 3Q23, a 7.8% Y/Y increase driven by consistent HFI portfolio growth and average loan coupons of approximately 11.0% on recent loan production

TOTAL LOAN PORTFOLIO ($ of UPB in millions)

3Q 2024

3Q 2023

$ Variance % Variance Held for Investment Investor 1-4 Rental

2,565.8

2,120.2

445.6

21.0

Mixed Use

535.8

457.1

78.7

17.2

Multi-Family

344.3

305.0

39.3

12.9

Retail

405.9

327.8

78.1

23.8

Warehouse

300.4

246.6

53.8

21.8

All Other

582.1

401.1

181.0

45.1

Total

4,734.3

3,857.8

876.5

22.7

Held for Sale Investor 1-4 Rental

0.0

Government Insured Multifamily (CHHC)

18.9

n.m. Multi-Family

6.6

(6.6

)

n.m. Warehouse

11.2

(11.2

)

n.m. All Other

1.2

(1.2

)

n.m. Total Managed Loan Portfolio UPB

4,753.3

3,876.7

876.5

22.6

Key loan portfolio metrics: Total loan count

12,235

9,953

Weighted average loan to value

67.0

68.0

Weighted average coupon

9.37

8.63

Weighted average total portfolio yield

9.18

8.38

Weighted average portfolio debt cost

6.15

5.63

n.m. - non meaningful

Discussion of results:

Velocity’s total loan portfolio was $4.8 billion in UPB as of September 30, 2024, an increase of 22.6% from $3.9 billion in UPB as of September 30, 2023
- Primarily driven by 21.0% Y/Y growth in loans collateralized by Investor 1-4 Rental properties and 45.1% Y/Y growth in loans collateralized by “Other” commercial properties
- Government Insured Multifamily loans are originated by our subsidiary CHHC and sold to investors for cash gains shortly after closing
- Loan prepayments totaled $173.9 million in UPB, an increase from $165.8 million for 2Q24, and $104.6 million for 3Q23
The UPB of fair value option (FVO) loans was $2.2 billion, or 47.3% of total loans, as of September 30, 2024, an increase from $955.6 million in UPB, or 24.7% as of September 30, 2023
The weighted average portfolio loan-to-value ratio was 67.0% as of September 30, 2024, down from 68.0% as of September 30, 2023, and consistent with the five-quarter trailing average of 67.5%
The weighted average total portfolio yield was 9.18% as of September 30, 2024, an increase of 80 bps from September 30, 2023, driven by a 74 bps increase in the weighted average loan coupons over the same period
Portfolio-related debt cost as of September 30, 2024, was 6.15%, an increase of 52 bps from September 30, 2023, driven by the higher warehouse utilization and rates on recent securitizations

LOAN PRODUCTION VOLUMES ($ in millions)

3Q 2024

3Q 2023

$ Variance % Variance Investor 1-4 Rental

219.9

154.3

65.7

42.6

Traditional Commercial

175.2

97.5

77.7

79.6

Government Insured Multifamily (CHHC)

18.9

n.m. Short-term

62.7

38.8

23.9

61.7

Total loan production

476.8

290.6

186.2

64.1

Acquisitions

n.m. - non meaningful

Discussion of results:

Loan production for 3Q24 totaled $476.8 million in UPB, a 64.1% increase from $290.6 million for 3Q23
Traditional Commercial financing demand led the Y/Y growth; however, Investor 1-4 rental and Short-term financing also experienced strong demand. The weighted average coupon (WAC) on 3Q24 HFI loan production was 10.8%, a modest decrease from 11.0% for 3Q23

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS ($ in thousands)

3Q 2024

3Q 2023

$ Variance % Variance Nonperforming loans(a)

503,939.0

387,725.0

116,214.0

30.0

Total HFI loans

4,734,319.0

3,857,778.7

876,540.3

22.7

Nonperforming loans % total HFI loans

10.6

10.1

n.a.

5.5

Average nonperforming loans subject to CECL reserve (b)

320,135.3

351,848.0

(31,712.7

)

(9.0

Total charge offs

319.6

95.2

224.4

235.7

Charge-offs as a % of avg. nonperforming CECL loans(c)

0.40

0.11

n.a.

269.0

Loan loss reserve

4,851.2

4,684.8

166.4

3.6

Gain on transfer to REO

2,248.6

1,935.4

312.9

16.2

REO valuations, net

(1,642.0

)

(224.5

)

(1,417.9

)

(631.5

Gain (loss) on sale of REO

615.1

(137.0

)

752.2

548.9

(a) Total HFI nonperforming/nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual. (b) Reflects monthly average nonperforming loans held for investment, excluding FVO loans, during the period. (c) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period. n.a.- not applicable

Discussion of results:

Nonperforming loans (NPL) totaled $503.9 million in UPB as of September 30, 2024, or 10.6% of loans HFI, compared to $387.7 million and 10.1% as of September 30, 2023
- NPLs in foreclosure status comprised 8.1% of loans HFI as of September 30, 2024, down slightly from 8.2% as of September 30, 2023
Charge-offs for 3Q24 totaled $319.6 thousand, compared to $95.2 thousand for 3Q23
- The trailing five-quarter charge-off average was $381.5 thousand
Net charge-off and REO activity comprises charge-offs, gain on transfer of REO, gain (loss) on sale of REO, and REO valuations. For 3Q24, net charge-off and REO activity resulted in a net gain of $0.9 million, compared to a net gain of $1.5 million for 3Q23, primarily driven by gains on loans transferred to REO
The loan loss reserve totaled $4.9 million as of September 30, 2024, a 3.6% increase from $4.7 million as of September 30, 2023
- Mainly driven by updated valuation of the individually assessed NPL portfolio
- The CECL reserve rate was 0.19% (CECL Reserve as % of Amortized Cost HFI loans), which was in line with the recent five-quarter average rate of 0.18% and within management’s expected range of 0.15% to 0.20%

NET REVENUES ($ in thousands)

3Q 2024

3Q 2023

$ Variance % Variance Interest income

105,069.6

79,088.4

25,981.2

32.9

Interest expense - portfolio related

(63,870.5

)

(47,583.0

)

(16,287.6

)

34.2

Net Interest Income - portfolio related

41,199.0

31,505.5

9,693.6

30.8

Interest expense - corporate debt

(6,142.8

)

(4,137.9

)

(2,004.8

)

48.4

Loan loss provision

68.9

(153.8

)

222.7

(144.8

Net interest income after provision for loan losses

35,125.2

27,212.7

7,912.4

29.1

Gain on disposition of loans

2,291.0

3,606.3

(1,315.3

)

(36.5

Unrealized (loss) gain on fair value loans

35,529.7

(1,283.5

)

36,813.2

2868.1

Unrealized gain (loss) on fair value of securitized debt

(24,995.4

)

9,692.3

(34,687.7

)

(357.9

Unrealized gain/(loss) on mortgage servicing rights

(993.4

)

341.1

(1,334.5

)

(391.3

Origination fee income(a)

6,703.8

3,323.5

3,380.3

101.7

Interest income on cash balance

1,676.2

1,341.9

334.3

24.9

Other operating income (expense)

518.8

339.7

179.1

52.7

Total other operating income (expense)

20,731.7

17,360.2

3,371.4

19.4

Net revenue

55,856.8

44,573.0

11,283.8

25.3

(a) 3Q23 includes a reclass of production fees to expenses

Discussion of results:

Net Revenue for 3Q24 was $55.9 million, an increase of 25.3% from $44.6 million for 3Q23
- Driven by strong production-driven portfolio growth and disciplined focus on maintaining a net interest margin above 3.0%
Total net interest income for 3Q24, including corporate debt interest expense and loan loss provision, was $35.1 million, a 29.1% increase from $27.2 million for 3Q23
- Portfolio net Interest income was $41.2 million for 3Q24, an increase of 30.8% from 3Q23 resulting from portfolio growth and a 26bps increase in NIM
Total other operating income was $20.7 million for 3Q24, an increase from $17.4 million for 3Q23
- Net unrealized FVO gains on loans and securitized debt were $10.5 million, compared to a net gain of $8.4 million for 3Q23
- Origination income totaled $6.7 million, resulting from improved origination fees of 1.4% charged on 3Q24 new loan production
- Gain on disposition of loans totaled $2.3 million for 3Q24, driven by loans transferred to Real Estate Owned (REO)

OPERATING EXPENSES ($ in thousands)

3Q 2024

3Q 2023

$ Variance % Variance Compensation and employee benefits

17,585.9

12,522.8

5,063.1

40.4

Origination (income)/expense(a)

866.6

273.2

593.4

217.2

Securitization expenses

3,186.1

4,930.5

(1,744.3

)

(35.4

Rent and occupancy

518.8

472.4

46.4

9.8

Loan servicing

5,656.1

4,901.4

754.6

15.4

Professional fees

2,304.5

853.8

1,450.7

169.9

Real estate owned, net

1,951.0

1,238.7

712.3

57.5

Other expenses

2,542.6

2,141.6

401.0

18.7

Total operating expenses

34,612.6

27,334.5

7,278.1

26.6

(a) 3Q23 includes a reclass of production fees to expenses

Discussion of results:

Operating expenses totaled $34.6 million for 3Q24, an increase of 26.6% from 3Q23, primarily driven by the continued growth of our origination platform and higher production volume
- Compensation expense totaled $17.6 million, compared to $12.5 million for 3Q23
  - Driven by higher commissions on increased production volume and growth of the production team
- Securitization expenses totaled $3.2 million from issuing one securitization during the quarter, compared to costs of $4.9 million for two securitizations during 3Q23
- Loan servicing expense totaled $5.7 million, a 15.4% increase from $4.9 million for 3Q23, driven by portfolio growth
- Professional fees totaled $2.3 million, a 169.9% increase from $0.9 million for 3Q23, driven by increased legal expenses
- REO expenses totaled $2.0 million, a 57.5% increase from $1.2 million for 3Q23, driven by higher valuation adjustment and property preservation expenses

SECURITIZATIONS ($ in thousands) Securities Balance at Balance at Trusts Issued 9/30/2024 W.A. Rate 9/30/2023 W.A. Rate 2017-2 Trust

245,601

36,321

4.14

48,206

3.95

2018-1 Trust

176,816

26,820

4.14

35,010

3.99

2018-2 Trust

307,988

63,005

4.49

80,409

4.43

2019-1 Trust

235,580

64,004

4.12

79,215

4.06

2019-2 Trust

207,020

50,835

3.42

69,216

3.40

2019-3 Trust

154,419

50,268

3.28

60,482

3.29

2020-1 Trust

248,700

96,201

2.89

110,958

2.89

2020-2 Trust

96,352

49,528

4.59

2021-1 Trust

251,301

157,675

1.77

176,529

1.76

2021-2 Trust

194,918

129,046

2.06

149,431

2.02

2021-3 Trust

204,205

142,029

2.47

161,467

2.47

2021-4 Trust

319,116

219,627

3.23

250,941

3.24

2022-1 Trust

273,594

221,565

3.94

240,733

3.94

2022-2 Trust

241,388

198,288

5.07

221,631

5.08

2022-MC1 Trust

84,967

18,401

6.88

35,677

6.90

2022-3 Trust

296,323

239,881

5.71

262,308

5.71

2022-4 Trust

308,357

239,871

6.21

283,270

6.23

2022-5 Trust

188,754

138,941

7.08

171,183

7.05

2023-1 Trust

198,715

156,125

7.03

181,006

7.01

2023-1R Trust

64,833

44,985

7.61

60,515

7.69

2023-2 Trust

202,210

168,556

7.33

194,955

7.19

2023-RTL1 Trust

81,608

8.24

81,608

8.23

2023-3 Trust

234,741

217,620

7.94

232,802

7.80

2023-4 Trust

202,890

196,999

8.40

2024-1 Trust

209,862

187,751

7.64

2024-2 Trust

286,235

267,393

7.06

2024-3 Trust

204,599

196,559

7.20

2024-4 Trust

253,612

252,307

6.90

5,974,704

3,862,681

5.72

3,237,080

5.01

Discussion of results

The weighted average rate on Velocity’s outstanding securitizations was 5.72% as of September 30, 2024, an increase of 71 bps from September 30, 2023
The company completed one securitization during 3Q24, totaling $253.6 million of securities issued with a weighted average rate of 6.9%
- Down from a weighted average rate of 7.6% for securitizations issued during 3Q23
Sold two retained tranches from 2023 securitizations during 3Q24, totaling $36.6 million of securities issued
Subsequent to quarter end, the company completed the VCC 2024-5 securitization totaling $300.4 million of securities issued with a weighted average rate of 6.0%
Collapsed the VCC 2020-2 securitization totaling $39.4 million in outstanding bonds in 3Q24, which unlocked $25.1 million of retained equity
- The collateral from the collapsed securitization was refinanced on warehouse lines and will be securitized in future periods

RESOLUTION ACTIVITIES LONG-TERM LOANS RESOLUTION ACTIVITY THIRD QUARTER 2024 THIRD QUARTER 2023 ($ in thousands) UPB $ Gain / (Loss)$ UPB $ Gain / (Loss)$ Paid in full

23,874.5

965.2

20,668.0

758.0

Paid current

34,956.6

567.0

26,950.0

206.0

REO sold (a)

1,431.4

290.0

6,341.0

162.0

Total resolutions

60,262.6

1,822.2

53,959.0

1,126.0

Resolutions as a % of nonperforming UPB

103.0

102.1

SHORT-TERM AND FORBEARANCE LOANS RESOLUTION ACTIVITY THIRD QUARTER 2024 THIRD QUARTER 2023 ($ in thousands) UPB $ Gain / (Loss)$ UPB $ Gain / (Loss)$ Paid in full

4,974.1

151.0

2,967.0

38.0

Paid current

2,122.0

7.3

6,292.0

REO sold

1,260.3

325.1

2,434.0

(11.0

)

Total resolutions

8,356.3

483.5

11,693.0

27.0

Resolutions as a % of nonperforming UPB

105.8

100.2

Grand total resolutions

68,618.9

2,305.6

65,652.0

1,153.0

Grand total resolutions as a % of nonperforming UPB

103.4

101.8

Discussion of results:

NPL resolution totaled $68.6 million in UPB, realizing 103.4% of UPB resolved compared to $65.7 million in UPB and realization of 101.8% of UPB resolved for 3Q23
The UPB of loan resolutions in 3Q24 was in line with the recent five-quarter resolution average of $68.1 million in UPB and 102.1% of UPB resolved

Velocity’s executive management team will host a conference call and webcast on November 7th, 2024, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to review 3Q24 financial results.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website: https://www.velfinance.com/events-and-presentations. To listen to the webcast, please visit Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website after the conference call is completed.

Conference Call Information

To participate by phone, please dial in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to join the Velocity Financial, Inc. conference call.

A replay of the call will be available through midnight on November 29, 2024, and can be accessed by dialing 1-877-344-7529 in the U.S. and 855-669-9658 in Canada or 1-412-317-0088 internationally. The passcode for the replay is #8544057. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages business purpose loans secured by 1-4 unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 20 years.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.

Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs incurred from activities that are not normal recurring operating expenses, such as COVID-stressed charges and recoveries of loan loss provision, nonrecurring debt amortization, the impact of operational measures taken to address the COVID-19 pandemic and workforce reduction costs, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.

We have included non-GAAP core net income, and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” ”position,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, including the risk of recession (3) regulatory and/or legislative changes, (4) our customers' continued interest in loans and doing business with us, (5) market conditions and investor interest in our future securitizations, and (6) the continued conflict in Ukraine and Israel and (7) changes in federal government fiscal and monetary policies.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors” 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 Relations web page at www.velfinance.com.

Velocity Financial, Inc.

Consolidated Balance Sheet

Quarter Ended 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023 Unaudited Unaudited Unaudited Audited Unaudited (In thousands) Assets Cash and cash equivalents

44,094

47,366

34,829

40,566

29,393

Restricted cash

23,167

32,293

24,216

21,361

17,703

Loans held for sale, at fair value

19,231

17,590

19,536

Loans held for investment, at fair value

2,354,718

1,971,683

1,649,540

1,306,072

951,990

Loans held for investment, at amortized cost

2,526,320

2,619,619

2,727,518

2,828,123

2,945,840

Total loans, net

4,900,269

4,591,302

4,377,058

4,151,785

3,917,366

Accrued interest receivables

32,944

31,124

29,374

27,028

24,756

Receivables due from servicers

93,681

82,359

87,523

85,077

70,139

Other receivables

4,265

6,566

2,113

8,763

236

Real estate owned, net

62,361

50,757

46,280

44,268

29,299

Property and equipment, net

1,693

1,912

2,013

2,785

2,861

Deferred tax asset

14,501

1,144

1,580

2,339

705

Mortgage Servicing Rights, at fair value

12,416

12,229

9,022

8,578

9,786

Derivative assets

1,967

1,261

Goodwill

6,775

Other assets

6,308

9,566

5,468

5,248

7,028

Total Assets

5,202,474

4,873,393

4,628,218

4,404,573

4,117,308

Liabilities and members' equity Accounts payable and accrued expenses

140,534

138,033

123,988

121,969

97,869

Secured financing, net

284,371

283,909

283,813

211,083

210,774

Securitized debt, at amortized cost

2,105,099

2,228,941

2,329,906

2,418,811

2,504,334

Securitized debt, at fair value

1,749,268

1,509,952

1,073,843

877,417

669,139

Warehouse & repurchase facilities

434,027

237,437

360,216

334,755

215,176

Derivative liability

1,486

374

3,665

Total Liabilities

4,714,785

4,398,646

4,171,766

3,967,700

3,697,292

Stockholders' Equity Stockholders' equity

484,636

471,323

452,941

433,444

416,398

Noncontrolling interest in subsidiary

3,053

3,424

3,511

3,429

3,618

Total equity

487,689

474,747

456,452

436,873

420,016

Total Liabilities and members' equity

5,202,474

4,873,393

4,628,218

4,404,573

4,117,308

Book value per share

14.91

14.52

14.01

13.49

13.00

Shares outstanding

32,712

(1)

32,701

(2)

32,574

(3)

32,395

(4)

32,314

(5)

(1)

Based on 32,711,910 common shares outstanding as of September 30, 2024, and excludes unvested shares of common stock authorized for incentive compensation totaling 402,935.

(2)

Based on 32,701,185 common shares outstanding as of June 30, 2024, and excludes unvested shares of common stock authorized for incentive compensation totaling 397,450.

(3)

Based on 32,574,498 common shares outstanding as of March 31, 2024, and excludes unvested shares of common stock authorized for incentive compensation totaling 411,296.

(4)

Based on 32,395,423 common shares outstanding as of December 31, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 470,413.

(5)

Based on 32,313,744 common shares outstanding as of September 30, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 589,634.

Velocity Financial, Inc.

Consolidated Statements of Income (Quarters)

Quarter Ended ($ in thousands) 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023 Unaudited Unaudited Unaudited Unaudited Unaudited Revenues Interest income

105,070

97,760

90,529

86,269

79,088

Interest expense - portfolio related

63,871

59,188

55,675

51,405

47,583

Net interest income - portfolio related

41,199

38,572

34,854

34,864

31,505

Interest expense - corporate debt

6,143

6,155

5,380

4,140

4,138

Net interest income

35,056

32,417

29,474

30,724

27,367

Provision for loan losses

(69

)

218

1,002

827

154

Net interest income after provision for loan losses

35,125

32,199

28,472

29,897

27,213

Other operating income Gain on disposition of loans

2,291

3,168

1,699

1,482

3,606

Unrealized gain (loss) on fair value loans

35,530

17,123

18,925

39,367

(1,284

)

Unrealized gain (loss) on fair value securitized debt

(24,995

)

(4,643

)

(2,318

)

(24,085

)

9,692

Unrealized gain/(loss) on mortgage servicing rights

(993

)

(373

)

444

(1,208

)

341

Origination fee income

6,704

5,072

4,986

3,981

3,323

Interest income on cash balance

1,676

1,731

1,631

1,716

1,342

Other income (expense)

519

483

408

418

340

Total other operating income

20,732

22,561

25,775

21,670

17,360

Net revenue

55,857

54,760

54,247

51,567

44,573

Operating expenses Compensation and employee benefits

17,586

16,562

15,357

15,143

12,523

Origination expenses

867

749

646

173

273

Securitizations expenses

3,186

6,232

2,874

2,709

4,930

Rent and occupancy

519

617

498

551

472

Loan servicing

5,656

5,160

4,824

4,636

4,901

Professional fees

2,305

1,718

2,115

1,733

854

Real estate owned, net

1,951

1,355

2,455

2,068

1,239

Other operating expenses

2,543

2,494

2,242

2,248

2,142

Total operating expenses

34,613

34,887

31,011

29,260

27,334

Income before income taxes

21,244

19,873

23,236

22,307

17,239

Income tax expense

5,627

5,162

5,903

5,141

5,070

Net income

15,617

14,711

17,333

17,166

12,169

Net income attributable to noncontrolling interest

(186

)

(67

)

(189

)

Net income attributable to Velocity Financial, Inc.

15,803

14,778

17,251

17,355

12,086

Less undistributed earnings attributable to participating securities

191

182

217

225

183

Net earnings attributable to common shareholders

15,612

14,596

17,034

17,130

11,903

Basic earnings (loss) per share

0.48

0.45

0.52

0.53

0.37

Diluted earnings (loss) per common share

0.44

0.42

0.49

0.50

0.35

Basic weighted average common shares outstanding

32,711

32,585

32,541

32,326

32,275

Diluted weighted average common shares outstanding

35,895

35,600

35,439

34,991

34,731

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

Quarters:

Quarter Ended September 30, 2024 Quarter Ended September 30, 2023 Interest Average Interest Average Average Income / Yield / Average Income / Yield / ($ in thousands) Balance Expense Rate(1) Balance Expense Rate(1) Loan portfolio: Loans held for sale

3,166

3,170

Loans held for investment

4,575,745

3,770,460

Total loans

4,578,911

105,070

9.18

3,773,630

79,088

8.38

Debt: Warehouse and repurchase facilities

311,560

7,105

9.12

192,855

4,943

10.25

Securitizations

3,840,480

56,766

5.91

3,186,756

42,640

5.35

Total debt - portfolio related

4,152,040

63,871

6.15

3,379,611

47,583

5.63

Corporate debt

290,000

6,143

8.47

215,000

4,138

7.70

Total debt

4,442,040

70,014

6.30

3,594,611

51,721

5.76

Net interest spread - portfolio related (2)

3.03

2.75

Net interest margin - portfolio related

3.60

3.34

Net interest spread - total company (3)

2.87

2.63

Net interest margin - total company

3.06

2.90

(1) Annualized. (2) Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt. (3) Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)

Quarters:

Core Net Income Quarter Ended ($ in thousands) 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023 Net Income

15,803

14,778

17,251

17,355

12,086

Tax liability reduction

(1,866