Executive Summary

Velocity Financial delivered record quarterly loan production and strong earnings in Q2 2025: net income $26.0M (+75.9% YoY) and diluted EPS $0.69; core net income $27.5M and core diluted EPS $0.73 .
Significant Street beats: primary EPS $0.73 vs $0.53 consensus (+$0.20); revenue $55.1M vs $39.9M consensus (+$15.2M). Bold beats driven by production-led portfolio NII growth, fair value gains, and NPL resolution recoveries. Values retrieved from S&P Global*.
Portfolio NIM expanded to 3.82% (+47 bps QoQ; +28 bps YoY), aided by cash interest from resolved nonperforming loans and rate discipline on new production .
Liquidity and capital markets execution remained robust: four securitizations totaling $985.5M; collapsed/refinanced two deals releasing $53.5M cash; KBRA affirmed/upgraded tranches across 26 securitizations—evidencing stable collateral and minimal losses .
Management tone confident on sustained profitable share gains in underserved segments; dual listing on NYSE Texas announced post-quarter, modestly increasing visibility and trading venues .

What Went Well and What Went Wrong

What Went Well

Record originations: $725.4M UPB (+13.3% QoQ; +71.8% YoY), led by Traditional Commercial (+93.1% YoY) and Investor 1-4 rental (+53.4% YoY) .
NIM expansion: portfolio NIM 3.82% (+47 bps QoQ; +28 bps YoY) with consistently strong coupons (10.47% WAC on Q2 production; ~10.61% average for last five quarters) .
Management quote highlighting durable demand and confidence: “We continue to build on our strong momentum... results were driven by higher portfolio net interest income and noninterest income from our growing production volume... We remain confident in Velocity’s long-term growth prospects” — Chris Farrar, CEO .

What Went Wrong

Operating expenses rose to $51.9M (+48.8% YoY) on production-driven compensation (+$6.0M YoY) and securitization costs (+$5.3M YoY), partially offsetting revenue growth .
Credit costs ticked up: provision $1.6M vs $0.2M YoY; charge-offs $1.7M vs $0.2M YoY, though reserves remained modest given portfolio mix (CECL reserve rate 0.22%) .
Elevated NPLs by UPB: $601.8M (10.3% of HFI loans), up from $470.6M (10.5%) YoY; while resolution activity produced gains, the stock of NPLs remains a watch item .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Net Revenue ($USD Millions)	$71.165	$69.084	$85.835
Net Interest Income ($USD Millions)	$38.857	$37.510	$47.586
Other Operating Income ($USD Millions)	$32.330	$33.446	$39.847
Operating Expenses ($USD Millions)	$39.127	$42.190	$51.913
Income Before Taxes ($USD Millions)	$32.038	$26.894	$33.922
Net Income Attributable to VEL ($USD Millions)	$20.587	$18.887	$25.997
Diluted EPS ($)	$0.57	$0.51	$0.69
Core Diluted EPS ($)	$0.60	$0.55	$0.73
Portfolio NIM (%)	3.70%	3.35%	3.82%
Total Company NIM (%)	3.20%	2.88%	3.39%

YoY context for Q2: Net revenue +56.7% vs $54.8M in Q2 2024 ; diluted EPS +65.7% vs $0.42 ; portfolio NIM +28 bps vs 3.54% .

Segment Breakdown – Loan Production Volumes

Segment ($USD Millions)	Q2 2024	Q1 2025	Q2 2025
Investor 1-4 Rental	$185.7	$266.6	$284.9
Traditional Commercial	$181.5	$324.8	$350.5
Short-term	$55.0	$44.1	$49.1
Gov’t Insured Multifamily (CHHC)	—	$4.9	$40.9
Total Production	$422.2	$640.4	$725.4

KPIs and Credit Metrics

KPI	Q4 2024	Q1 2025	Q2 2025
Total Loans Outstanding (UPB, $USD Thousands)	$5,055,937	$5,445,015	$5,859,653
NPL (% of HFI Loans)	10.7%	10.8%	10.3%
NPA Resolutions – UPB ($USD Thousands)	$79,357	$76,437	$103,956
Recovery Rate on Resolved NPA (%)	107.0%	102.4%	103.5%
CECL Reserve ($USD Thousands)	$4,174	$5,017	$4,882
CECL Reserve Rate (%)	0.17%	0.22%	0.22%
Origination Fee Income ($USD Thousands)	$7,245	$8,679	$8,936
Weighted Avg Portfolio Yield (%)	9.34%	9.11%	9.65%
Portfolio Cost of Debt (%)	6.14%	6.23%	6.24%

Guidance Changes

Velocity did not provide formal quantitative guidance ranges in the Q2 2025 materials. Management reiterated confidence in sustained profitable growth and noted demand strength across traditional commercial and 1-4 family rental markets .

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Quarter	Not provided	Not provided	Maintained: no formal guidance
Margins (NIM)	FY/Quarter	Not provided	Commentary: NIM supported by NPL resolution timing and disciplined coupons	Narrative positive; no range
OpEx	FY/Quarter	Not provided	Elevated from production scale and securitization activity	Higher operational scale
Capital Markets	FY/Quarter	Not provided	Four securitizations ($985.5M); cash release $53.5M	Positive execution

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 & Q1 2025)	Current Period (Q2 2025)	Trend
Capital markets/securitizations	2Q in 4Q24 totaling ~$586.8M; 1Q25 VCC 2025-1 $342.8M; April ’25 two additional deals	Four securitizations totaling $985.5M; collapsed/refi’d two, releasing $53.5M cash	Improving scale/liquidity
Net interest margin	4Q24 portfolio NIM 3.70%; 1Q25 3.35% (timing of cash interest on NPL)	3.82% portfolio NIM (+47 bps QoQ), boosted by resolved NPL cash interest and rate discipline	Expanding
Origination demand	4Q24 $563.5M; 1Q25 $640.4M record	2Q25 $725.4M new record; strong demand in traditional commercial and rental	Strengthening
Credit performance/NPL resolution	Consistent gains; REO gains $3.6M (4Q24); recoveries >100%	NPA resolution $104.0M UPB; recovery 103.5%; charge-offs higher YoY	Resolutions robust; watch charge-offs
Ratings/structural strength	—	KBRA affirmed 344 tranches, upgraded 14; minimal cumulative losses (0.00%–0.58%)	Positive external validation
Macro & borrower behavior	—	Higher prepayments QoQ; coupon down 56 bps vs Q2 2024 tracking rate moves	Mixed (rates easing vs churn)

Note: Full transcript retrieval via document tool failed; highlights synthesized from company materials and reputable transcript summaries .

Management Commentary

“We continue to build on our strong momentum in 2025, delivering two record highs for quarterly loan production and earnings... Financing demand remained strong... We remain confident in Velocity’s long-term growth prospects and our ability to sustain profitable market share growth.” — Chris Farrar, President and CEO .
Liquidity: $139.3M (unrestricted cash $79.6M; available borrowings $59.7M); warehouse capacity $476.9M .
Strategic execution: four securitizations ($985.5M); two deal collapses/refis releasing $53.5M cash to fund growth .

Q&A Highlights

Street beat context: EPS beat by ~$0.20; revenue beat by ~$15M per consensus frameworks (consistent with SPGI estimate context below). Call commentary emphasized production-led earnings and NIM expansion via NPL resolution timing .
Capital sources: management referenced inbound private credit interest and potential private structures as incremental funding avenues beyond whole loans .
Prepayments: driven by borrower sales/refi; firm positions as medium-term lender with prepayment penalties to support yields .
Clarifications: Commentary noted NIM can be volatile period-to-period given timing of delinquent asset resolutions, despite durable underlying spread discipline .

Estimates Context

Metric	Period	Consensus	Actual (SPGI)	Company-Reported
Primary EPS	Q2 2025	$0.53*	$0.73*	GAAP diluted $0.69
Revenue	Q2 2025	$39.87M*	$55.13M*	Net revenue $85.84M
Primary EPS	Q3 2025	$0.60*	—	—
Revenue	Q3 2025	$48.89M*	—	—
Primary EPS	FY 2025	$2.56*	—	—
Revenue	FY 2025	$187.33M*	—	—

Notes: SPGI “Primary EPS” aligns with normalized EPS; company also reports core diluted EPS $0.73. SPGI “Revenue” for financials often reflects a Street-defined revenue proxy rather than company “Net revenue,” explaining numeric differences. Values retrieved from S&P Global*.

Implications:

EPS beat is clear on both normalized/core ($0.73 vs $0.53) and GAAP ($0.69 vs consensus frameworks), driven by NII and fair value gains tied to record production and NPL resolution .
Street revenue proxy beat, while company net revenue expanded more sharply; analysts may adjust models for higher origination fees, fair value gains, and NPL resolution cash interest .

Key Takeaways for Investors

Velocity is compounding earnings with production scale and disciplined pricing, translating to NIM expansion and outsized EPS beats—momentum likely to support estimate revisions near term .
Credit remains a focal point: elevated NPL UPB persists, but resolution activity generates gains above par and supports cash interest recovery; monitor charge-off normalization .
Operating leverage mixed: revenue growth strong, but OpEx scaled with commissions and securitization volume; sustaining ROE hinges on balancing growth and cost discipline .
Capital markets access robust: frequent securitizations at improving rates and structural actions (collapses/refis) enhance liquidity; KBRA upgrades/affirmations validate portfolio performance .
Segment mix tilt to Traditional Commercial and Investor 1-4 rental is intact; continued demand provides pipeline visibility though rate moves may influence coupons and prepayments .
Street may recalibrate “revenue” definitions vs company net revenue; focus on net revenue, NII, and core EPS as more indicative of operating momentum .
Near-term trading catalysts: record production/NIM expansion and securitization cadence; watch disclosures on private credit interest and any formal guidance shifts on margin/credit trends .

Additional references and context:

Q2 2025 press release and detailed tables .
8-K Item 2.02 furnishing Q2 results and exhibits .
Q1 2025 8-K and operating detail for trend analysis .
Q4 2024 press release for base-line trajectory and NIM uplift .
KBRA securitization ratings affirmation/upgrade .
Dual listing on NYSE Texas (post-quarter visibility) .
Transcript summaries for Q&A context .

*Values retrieved from S&P Global.

Velocity Financial, Inc. (VEL)·Q2 2025 Earnings Summary