Executive Summary

Velocity delivered another strong quarter: net income $25.4M and diluted EPS $0.65, with core diluted EPS $0.69; net revenue was $85.8M, up 53.6% y/y, supported by record production and solid portfolio earnings .
EPS and revenue exceeded Wall Street consensus: EPS $0.65 vs $0.60 (+$0.05), and revenue beat on SPGI’s definition as well; note SPGI revenue taxonomy differs from company “Net revenue” (see Estimates Context) *.
Production hit a record $739.0M (including $23.9M unfunded Century construction loan); NPLs improved to 9.8% of UPB (vs 10.3% in Q2), and portfolio NIM was stable at 3.65% .
Funding diversification advanced via two securitizations, including the first single-counterparty deal ($190.9M) plus VCC 2025-4 ($457.5M); liquidity stood at $143.5M and available warehouse capacity at $600.3M .
Management tone: confident on continued growth; key call theme was robust demand and market-share gains; notable Q&A focused on REO valuation timing and stable credit reserve/CECL levels .

What Went Well and What Went Wrong

What Went Well

Record loan production of $739.0M; applications exceeded $1.4B, demonstrating strong demand and Velocity’s share gains .
Portfolio credit trends improved: NPL ratio decreased to 9.8% (from 10.3% in Q2 and 10.6% y/y); NPA resolutions realized 102.6% of UPB with $2.8M gains .
Strategic funding progress: first single-counterparty securitization ($190.9M) alongside VCC 2025-4 ($457.5M), reducing transaction costs and diversifying funding sources; “fixed income markets are very supportive” .

Management quote: “We continue to build on our strong momentum in 2025, delivering two record highs for quarterly loan production and pre-tax earnings” — Chris Farrar, CEO .

What Went Wrong

REO valuation losses weighed on results: net REO loss of $1.6M (vs $1.2M gain in 3Q24), driven by timing and market adjustments on REO marks (management emphasized non-worsening trend) .
Securitization expenses increased to $6.4M (vs $3.2M in 3Q24) due to two deals, while operating expenses rose with higher production-driven comp and servicing costs .
Portfolio NIM moderating from Q2 peak: 3.65% vs 3.82% in Q2; CFO cited stable spreads with portfolio yield 9.54% and cost of funds 6.27% .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Net Revenue ($USD Millions)	$55.9	$69.1	$85.8	$85.8
Diluted EPS ($)	$0.44	$0.51	$0.69	$0.65
Core Diluted EPS ($)	$0.47	$0.55	$0.73	$0.69
Net Interest Income ($USD Millions)	$35.1	$37.5	$47.6	$49.1
Other Operating Income ($USD Millions)	$20.7	$33.4	$39.8	$37.1
Operating Expenses ($USD Millions)	$34.6	$42.2	$51.9	$50.4
Portfolio NIM (%)	3.60%	3.35%	3.82%	3.65%
Total Company NIM (%)	3.06%	2.88%	3.39%	3.25%

Segment breakdown (Total loans outstanding by collateral)

Segment ($USD Thousands)	Q3 2024	Q3 2025
Investor 1-4	$2,565,794	$3,089,325
Mixed use	$535,796	$670,470
Retail	$405,909	$640,005
Office	$266,025	$504,282
Multifamily	$363,288	$461,237
Warehouse	$300,420	$421,276
Other	$316,034	$488,774
Total Loans	$4,753,266	$6,275,369

Key KPIs

KPI	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Production ($USD Thousands)	$476,775	$640,400	$725,387	$738,956
NPLs / Total UPB (%)	10.6%	10.8%	10.3%	9.8%
Total Portfolio UPB ($USD Thousands)	$4,734,319	$5,445,015	$5,859,653	$6,273,298
Liquidity ($USD Thousands)	—	$75,600	$139,300	$143,500
Cash / Available Borrowings ($USD Thousands)	—	$51,700 / $23,900	$79,600 / $59,700	$99,000 / $44,500
Warehouse Capacity ($USD Thousands)	—	$238,200	$476,900	$600,300
Book Value per Share ($)	$14.26	$16.19	$15.62	$16.31
Pre-tax ROE (core, %)	19.0%	20.3%	24.3%	24.1%
Weighted Avg Coupon (Portfolio, %)	9.18%	9.11%	9.65%	9.54%
LTV (Portfolio, %)	67.0%	66.1%	65.8%	65.5%
NPA Resolutions (UPB $USD Thousands / Gain $USD Thousands)	$68,619 / $2,305	$76,437 / $1,860	$103,956 / $3,634	$108,031 / $2,802

Guidance Changes

Velocity did not provide formal numerical guidance for revenue, margins, OpEx, OI&E, tax rate, or segment metrics in Q3 2025 materials; management reiterated confidence in continued growth and market health.

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q4/Full-year	No formal guidance	No formal guidance	Maintained (none provided)
Margins (NIM)	Q4/Full-year	No formal guidance	Target ~3.5%+ indicated by management tone; no numeric guide	Maintained qualitative
OpEx	Q4/Full-year	—	No formal guidance; notes production-driven comp and securitization costs	Maintained qualitative
Funding/Securitization cadence	Q4/Full-year	—	Expect continued single-counterparty transactions and diversified funding	Newly emphasized

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Demand/Production	Record production $640M in Q1; $725M in Q2; strong investor rental and traditional commercial demand	Record $739M; applications >$1.4B; market share gains	Up
Credit/NPLs	NPL ratio ~10.8% in Q1; 10.3% in Q2; strong resolutions above par	NPLs down to 9.8%; NPA resolutions $108M, 102.6% recovery	Improving
NIM/Spreads	Q1 NIM 3.35%; Q2 NIM 3.82% aided by cash interest from resolved NPLs	Portfolio NIM 3.65%; stable yield 9.54% vs 6.27% cost	Stable/moderating from Q2 peak
Funding/Securitization	Q2: four securitizations $985.5M, releases of cash; warehouse capacity $476.9M	First single-counterparty securitization $190.9M + VCC 2025-4 $457.5M; warehouse capacity $600.3M; max line $935M	Strengthening/diversifying
REO Valuations	Q1 mixed; valuation losses, net -$2.07M; Q2 net REO gain $3.78M	Net REO loss -$1.58M; mgmt explains timing of marking vs sale	Lumpy/neutral trend
Liquidity	Q1 $75.6M; Q2 $139.3M	$143.5M (cash $99.0M; avail. borrowings $44.5M)	Up

Management Commentary

“Portfolio NIM was very stable at 360 basis points above our target of 3.5%.… positive gains on resolved NPAs of $2.8 million” — Chris Farrar, CEO .
“First-ever single counterparty securitization… reduce transaction costs… diversify long-term funding options… second transaction closed in early October” — Chris Farrar, CEO .
“Total liquidity as of September 30 was just under $144 million… available warehouse line capacity… maximum line capacity… increased to $935 million” — Mark Szczepaniak, CFO .
“We believe that our earnings are going to continue to grow and expect positive results going forward” — Chris Farrar, CEO .

Q&A Highlights

REO valuation mechanics: management detailed timing differences between initial fair value recognition at REO transfer (“gain on transfer”) and subsequent writedowns to market offers ahead of sale; emphasis that overall resolutions still above prior loan balances, and the quarter’s -$6.3M reflects timing, not a worsening trend .
Headcount: 347 employees at 9/30, up ~82 y/y, reflecting growth and production scale .
Credit perspective: continued strong collections and favorable NPA resolutions; CECL reserve ~22 bps consistent across five quarters .

Estimates Context

Wall Street (S&P Global) consensus vs SPGI “actuals” and company-reported results. SPGI’s “Revenue” taxonomy may differ from Velocity’s “Net revenue.”

S&P Global Quarterly Consensus (estimates)

Metric	Q1 2025	Q2 2025	Q3 2025
Primary EPS Consensus Mean ($)	0.575*	0.533*	0.600*
Revenue Consensus Mean ($USD)	40,367,000*	39,868,000*	48,885,500*
Primary EPS – # of Estimates	2*	3*	3*
Revenue – # of Estimates	1*	2*	2*

SPGI “Actuals” (for the same taxonomy)

Metric	Q1 2025	Q2 2025	Q3 2025
Primary EPS Actual ($)	0.55*	0.73*	0.69*
Revenue Actual ($USD)	34,808,000*	55,131,000*	54,568,000*

Company-reported results (for comparability)

Metric	Q1 2025	Q2 2025	Q3 2025
Diluted EPS ($)	$0.51	$0.69	$0.65
Net Revenue ($USD)	$69,084,000	$85,835,000	$85,772,000

Notes: Values marked with an asterisk are retrieved from S&P Global. Differences between SPGI “Revenue” and Velocity’s “Net revenue” reflect reporting taxonomy. Velocity beat consensus EPS ($0.65 vs $0.60) and beat SPGI “Revenue” consensus (reported SPGI actual $54.6M vs consensus $48.9M), while company “Net revenue” is higher by definition *.

Key Takeaways for Investors

Sustained growth engine: consecutive record production (Q2, Q3) and rising applications underpin continued portfolio expansion and earnings compounding (CEO explicitly emphasizes reinvestment strategy) .
Credit normalization: NPL ratio trending down (9.8%) with consistent above-par resolutions; CECL reserve stable (~22 bps) suggests disciplined underwriting and active asset management .
Funding diversification is a catalyst: single-counterparty securitizations broaden outlets, lower transaction costs, and may support faster execution; warehouse capacity expanded materially .
Margin outlook: NIM remains healthy at 3.65% (down from Q2’s unusually strong 3.82%); spread stability supported by loan coupons ~10.5% and cost of funds ~6.27% .
Expense mix: production-driven comp and securitization costs increased; investors should monitor OpEx efficiency vs scale as origination ramps .
REO valuation volatility: quarterly lumpiness from timing of marks vs realized prices; management views it as non-trend and overall resolution economics remain favorable .
Near-term trading angle: evidence of beats vs consensus, improving credit metrics, and funding optionality can support multiple expansion; watch subsequent securitization cadence and application trends as potential near-term catalysts *.

Citations:

Q3 2025 8-K press release and financials:
Q3 2025 earnings call transcripts:
Q2 2025 8-K press release and financials:
Q1 2025 8-K press release and financials:
Other Q3 press releases (scheduling):
S&P Global consensus and actuals: GetEstimates values marked with an asterisk; Values retrieved from S&P Global*.

Velocity Financial, Inc. (VEL)·Q3 2025 Earnings Summary