Velocity Financial, Inc. (VEL)

CIK: 0001692376. SIC: 6199 Finance Services. Latest 10-K as of: 2026-03-12.

SIC breadcrumb: Finance, Insurance, And Real Estate > SIC Major Group 61 > SIC 6199 Finance Services

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1692376. Latest filing source: 0001193125-26-102677.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001692376.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001692376.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-209674.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-07. Report date: 2026-03-31.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the information included in our Annual Report on Form 10-K for the year ended December 31, 2025, as well as the unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

In addition, the statements and assumptions in this Quarterly Report that are not statements of historical fact are forward-looking statements within the meaning of federal securities laws. In particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the next quarter and beyond are forward-looking statements. For important information regarding these forward-looking statements, please see the discussion below under the caption “Forward-Looking Statements.”

References to “the Company,” “Velocity,” “we,” “us” and “our” refer to Velocity Financial, Inc. and include all of its consolidated subsidiaries, unless otherwise indicated or the context requires otherwise.

Business

We are a vertically integrated real estate finance company founded in 2004. We originate, securitize, and manage a nationwide portfolio of loans secured by real estate to earn attractive risk adjusted spreads for our shareholders. We primarily originate investor loans secured by 1-4 unit residential rental properties, as well as loans for multi-family, mixed use and commercial properties. We originate loans nationwide across our extensive network of independent mortgage brokers and direct borrower relationships, which we have built and refined over the 22 years since our inception. Our objective is to be the preferred and one of the most recognized brands in our core market.

We operate in a large and highly fragmented market with substantial demand for financing and limited supply of institutional financing alternatives. We have developed the highly-specialized skill set required to effectively compete in this market, which we believe has afforded us a durable business model capable of generating attractive risk-adjusted returns for our stockholders throughout various business cycles. We offer competitive pricing to our borrowers by pursuing low-cost financing strategies and by driving front-end process efficiencies through customized technology designed to control the cost of originating a loan. Furthermore, by originating loans through our efficient and scalable network of approved mortgage brokers, we are able to maintain a wide geographical presence and nimble operating infrastructure capable of reacting quickly to changing market environments.

Our primary source of revenue is interest income earned on our loan portfolio. Our typical loan is secured by a first lien on the underlying property with a personal guarantee, and based on all loans in our portfolio as of March 31, 2026, has an average balance of approximately $388 thousand. As of March 31, 2026, our loan portfolio totaled $6.8 billion of UPB on properties in 48 states and the District of Columbia. The total portfolio had a weighted average loan-to-value ratio, or LTV at origination, of 64.9%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 46.9% of the UPB. For the three months ended March 31, 2026, the annualized yield on our total portfolio was 9.23%.

We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, unsecured and secured debt, and equity. The securitized debt market is our primary source of long-term financing. We have successfully executed 48 securitized debt transactions, resulting in a total of over $11.1 billion in gross debt proceeds from May 2011 through March 2026. We may also sell loans from time to time for cash in lieu of holding the loans in our loan portfolio.

One of our core profitably measurements is our portfolio related net interest margin, which measures the difference between interest income earned on loans and interest expense paid on portfolio-related debt, relative to the amount of loans outstanding over the period. Our portfolio-related debt consists of warehouse facilities and securitized debt and excludes corporate debt and unsecured debt. For the three months ended March 31, 2026, our annualized portfolio related net interest margin was 3.56%, compared to 3.35% for the three months ended March 31, 2025. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt and unsecured debt, provision for credit losses and operating expenses. For the three months ended March 31, 2026, including net income attributable to noncontrolling interest, we generated pre-tax income of $30.9 million, and net income of $22.4 million. For the three months ended March 31, 2025, including net income attributable to noncontrolling interest, we generated pre-tax income of $26.9 million, and net income of $18.9 million.

On December 28, 2021, the Company acquired an 80% ownership interest in Century Health & Housing Capital, LLC (“Century”). Century is a licensed Ginnie Mae issuer/servicer that provides government-insured Federal Housing Administration (“FHA”) mortgage financing for multifamily housing, senior housing and long-term care/assisted living facilities. Century originates loans through its borrower-direct origination channel and services the loans through its in-house servicing platform, which enables the formation of long-term relationships with its clients and drives strong portfolio retention. Century earns origination fees and servicing fees from the mortgage servicing rights on its servicing portfolio.

Items Affecting Comparability of Results

Due to a number of factors, our historical financial results may not be comparable, either from period to period, or to our financial results in future periods. We have summarized the key factors affecting the comparability of our financial results below.

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Recent Developments

Corporate Debt

In January 2026, we completed the issuance and sale of $500.0 million aggregate principal amount of 9.375% Senior Notes due 2031 (“the 2026 Term Notes”), which will mature on February 15, 2031. The 2026 Term Notes bear interest at 9.375% and are guaranteed by us on an unsecured basis.

In January 2026, we paid off the $215.0 million secured debt, or the "2022 Term Loan" with proceeds from the issuance and sale of $500.0 million Senior Notes.

Securitized Debt

In February 2026, we completed the securitization of $355.2 million of investor real estate loans, as measured by UPB, through a consolidated VIE.

In March 2026, we completed the securitization of $189.9 million of investor real estate loans, as measured by UPB, through a consolidated VIE.

Continued Market Uncertainties

Our operational and financial performance will depend on certain market developments, including the impact of tariffs, the actions of the Federal Reserve, the Russia/Ukraine war, the ongoing conflicts in the Middle East, the prolonged government shutdown, heightened stress in the real estate and corporate debt markets, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires certain judgments and assumptions, based on information available at the time of preparation of the consolidated financial statements, in determining accounting estimates used in preparation of the consolidated financial statements. The following discussion addresses the accounting policies that we believe apply to us based on the nature of our operations. Our most critical accounting policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all the decisions and assessments used to prepare our financial statements are based upon reasonable assumptions given the information available at that time.

These policies and estimates relate to the allowance for credit losses and fair value option accounting. Our critical accounting policies and estimates are described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC.

How We Assess Our Business Performance

Net income is the primary metric by which we assess our business performance. Accordingly, we closely monitor the primary drivers of net income which consist of the following:

Net Interest Income

Net interest income is the largest contributor to our net income and is monitored both on an absolute basis and relative to provision for credit losses and operating expenses. We generate net interest income to the extent that the rate at which we lend in our portfolio exceeds the cost of financing our portfolio, which we primarily achieve through long-term securitized debt. Accordingly, we closely monitor the financing markets and maintain consistent dialogue with investors and financial institutions as we evaluate our financing sources and cost of funds.

To evaluate net interest income, we measure and monitor: (1) the yields on our loans, (2) the costs of our funding sources, (3) our net interest spread and (4) our net interest margin. Net interest spread measures the difference between the rates earned on our loans and the rates paid on our funding sources. Net interest margin measures the difference between our annualized interest income and annualized interest expense, or net interest income, as a percentage of average loans outstanding over the specified time period.

Periodic changes in net interest income are primarily driven by: (1) origination volume and changes in average outstanding loan balances and (2) interest rates and changes in interest earned on our portfolio or paid on our debt. Historically, origination volume and portfolio size have been the largest contributors to the growth in our net interest income. We measure net interest income before and after interest expense related to our secured and unsecured corporate debt, and before and after our provision for credit losses.

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Credit Losses

We strive to minimize actual credit losses through our rigorous screening and underwriting process and life of loan portfolio management and special servicing practices. We closely monitor the credit performance of our loan portfolio, including delinquency rates and expected and actual credit losses, as a key factor in assessing our overall business performance.

Operating Expenses

We incur operating expenses from compensation and benefits related to our employee base, rent and other occupancy costs associated with our leased facilities, our third-party primary loan servicing vendors, professional fees to the extent we utilize third-party legal, consulting and advisory firms, and costs associated with the resolution and disposition of real estate owned, and securitization expenses, among other items. We monitor and strive to prudently manage operating expenses and to balance current period profitability with investment in the continued development of our platform. Because volume and portfolio size determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor origination volume along with all key terms of new loan originations, such as interest rates, loan-to-value ratios, estimated credit losses and expected duration.

Factors Affecting Our Results of Operations

Our results of operations depend on, among other things, the level of our net interest income, the credit performance of our loan portfolio and the efficiency of our operating platform. These measur

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-12. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes and the other financial information included elsewhere in this Annual Report. This discussion contains forward-looking statements, as described above under the heading “Forward-Looking Statements” that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report.

Business

We are a vertically integrated real estate finance company founded in 2004. We primarily originate and manage investor loans secured by 1-4 unit residential rental and commercial properties, which we collectively refer to as investor real estate loans.

Our primary source of revenue is interest income earned on our loan portfolio. Our typical loan is secured by a first lien on the underlying property with a personal guarantee and, based on all loans in our portfolio as of December 31, 2025, has an average balance of approximately $390 thousand. As of December 31, 2025, our loan portfolio totaled $6.5 billion of UPB on properties in 48 states and the District of Columbia. The total portfolio had a weighted average loan-to-value ratio, or LTV at origination, of 65.2%, and was concentrated in 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, representing 48.1% of UPB. For the year ended December 31, 2025, the yield on our total portfolio was 9.45%.

We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, unsecured debt, corporate debt and equity. The securitized debt market is our primary source of long-term, non-recourse financing. We have successfully executed 46 securitized debt offerings, issuing $10.6 billion in principal amount of securities from May 2011 through December 2025.

Besides net income, another core profitably measurement is our portfolio related net interest margin, which measures the difference between interest income earned on loans and interest expense paid on portfolio-related debt, relative to the amount of loans outstanding over the period. Our portfolio-related debt consists of warehouse facilities and securitized debt and excludes corporate debt. For the year ended December 31, 2025, our portfolio related net interest margin was 3.61%. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt, provision for credit losses and operating expenses. For the year ended December 31, 2025, including net income attributable to noncontrolling interest, we generated pre-tax and net income of $146.2 million and $105.0 million, respectively, and earned a pre-tax return on average equity and return on average equity of 24.4% and 17.5%, respectively.

Items Affecting Comparability of Results

Due to a number of factors, our historical financial results may not be comparable, either from period to period, or to our financial results in future periods. We have summarized the key factors affecting the comparability of our financial results below.

In January 2026, the Company completed the issuance and sale of $500.0 million aggregate principal amount of 9.375% Senior Notes (“the 2026 Term Notes”) which will mature on February 15, 2031.

In February 2024, the Company issued $75.0 million principal amount of five-year Senior Secured Notes. The Notes bear interest at 9.875% and mature on February 15, 2029.

From September 2023, the Company utilized forward starting interest rate swaps or interest rate payer and receiver swaptions designated as cash flow hedges to manage the exposure to interest rate volatility associated with future issuances of fixed-rate debt. The gains or losses on these interest rate derivative instruments that are designated and qualify as cash flow hedges are reported as a component of accumulated other comprehensive income.

Fair Value Option (“FVO”) Accounting

We made an election to apply FVO accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022. The fair value option loans are presented as a separate line item in the Consolidated Balance Sheets. We do not record an allowance for credit losses on fair value option loans.

The FVO accounting for our securitized debt is on a case-by-case basis effective January 1, 2023. The fair value option securitized debt is presented as a separate line item in the Consolidated Balance Sheets.

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Income Taxes

Our REMIC transactions can create significant U.S. GAAP versus tax differences. The U.S. GAAP treatment considers each REMIC as a variable interest entity that is required to be consolidated in our financial statements, accounting for the securitization as a secured borrowing. Under IRS rules, the REMICs require sale treatment, and we are required to either recognize taxable income or loss to the extent the fair market value of the REMICs is greater than or less than our cost basis, the payment of which creates either a deferred tax asset or deferred tax liability.

We will continue to recognize deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of our existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that included the enactment date, as applicable.

Interest Expense on Corporate Debt

In March 2022, we entered into a five-year $215.0 million syndicated corporate debt agreement (“the 2022 Term Loan”). The 2022 Term Loan was paid off on January 30, 2026 with proceeds from the issuance and sale of $500 million Senior Notes. In February 2024, we entered into a five-year $75.0 million syndicated corporate debt agreement (“the 2024 Term Loan”). We incurred $24.6 million, $23.8 million and $16.6 million of interest expense related to our corporate debt for the years ended December 31, 2025, 2024 and 2023, respectively.

Recent Developments

Corporate Debt

On January 30, 2026, we completed the issuance and sale of $500 million aggregate principal amount of 9.375% Senior Notes due 2031 (“the 2026 Term Notes”). The 2026 Term Notes bear interest at 9.375% and are guaranteed by us on an unsecured basis.

Securitized Debt

In February 2026, we completed the securitization of $355.2 million of investor real estate loans, as measured by UPB, through a consolidated VIE.

Market Uncertainties

Our operational and financial performance will depend on certain market developments, including the actions of the Federal Reserve, the ongoing Russia/Ukraine war and conflicts in the Middle East, a possible global recession, heightened stress in the real estate and corporate debt markets, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

Critical Accounting Estimates and Significant Accounting Policies

Our consolidated financial statements are prepared in accordance with GAAP in the United States and follow general practices within the financial services industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant accounting policies we follow are summarized in “Note 2 — Basis of Presentation and Summary of Significant Accounting Policies.”

Management considers an accounting estimate to be critical to reported financial results if: (1) the accounting estimates require management to make assumptions about matters that are highly uncertain, and (2) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our consolidated financial statements, results of operations, or liquidity. Our critical accounting estimates are summarized below.

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Allowance for Credit Losses

For our loans held for investment where we have not elected FVO accounting, we calculate an allowance for credit losses. Under the current expected credit loss (“CECL”) methodology, the allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. We identified the following portfolio segments based on risk characteristics of the loans in its loan portfolio (pool):

•
Residential 1– 4 Unit – Purchase (loans to purchase 1– 4 unit residential rental properties);

•
Residential 1– 4 Unit – Refinance (refinance loans on 1– 4 unit residential rental properties);

•
Commercial – Purchase (loans to purchase traditional commercial properties);

•
Commercial – Refinance (refinance loans on traditional commercial properties);

•
Short Term 1– 4 Unit – Purchase (short-term loans to purchase 1– 4 unit residential rental properties); and

•
Short Term 1– 4 Unit – Refinance (short-term refinance loans on 1– 4 unit residential rental properties).

We determined the collectability of our loans by evaluating certain risk characteristics. The segmentation of our loan portfolio was determined based on analyses of our loan portfolio performance over the past ten years. Based on analyses of the loan portfolio’s historical performance, we concluded that loan purpose and product types are the most significant risk factors in determining our expectation of future credit losses. Loan purpose considers whether a borrower is acquiring the property or refinancing an existing property. Our historical experience shows that refinance loans have higher loss rates than loans for property acquisitions. Product type includes residential 1-4 unit property and traditional commercial property. Our historical experience shows that traditional commercial property loans have higher loss rates than residential 1-4 unit property loans. Short term loans have a maturity of one to two years from origination. Long term loans have a maturity of up to 30 years from origination.

We estimate the allowance for credit losses using relevant available information, from internal and external sources, relating to historical performance, current conditions, and reasonable and supportable macroeconomic forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels, or term, as well as for changes in environmental conditions, such as unemployment rates, property values and changes in the competitive or regulatory environment.

We use an open pool loss rate methodology to model expected credit losses. To determine the loss rates using the open pool method, we start with our historical database of losses, segmenting the loans by loan purpose, product type and repayment period. A third-party model applying the open pool method is used to estimate an annual average loss rate by dividing the respective pool’s quarterly historical losses by the pool’s respective prior quarters’ ending unamortized loan cost balance and deriving an annual average loss rate from the historical quarterly loss rates. The model then adjusts the annual average loss rates based upon macroeconomic forecasts over a reasonable and supportable period, followed by a straight-line reversion to the historical loss rates. The adjusted annual average loss rates are applied to the forecasted pool balance within each segment. The forecasted balances in the loan pool segments are calculated based on a principal amortization using contractual maturity, factoring in further principal reductions from estimated prepayments. Estimated prepayments, or Constant Prepayment Rates (“CPRs”) are developed from multiple loan characteristic considerations, such as property types, Fair Isaac Corporation (“FICO”) scores, loan purpose, and prepayment penalty terms, which is the most significant driver of prepayment activity. The prepayment penalty terms differ between the short-term and long-term loans, and we have developed a CPR curve for our short-term loans (two-year or less) and one for our long-term loans (30-year). Data from 2012-2025 is used to develop prepayment rates for our long-term loans. Because of the prepayment penalty structure in our long-term loans, prepayments during the active penalty term are historically low and begin to ramp up after the prepayment penalty term. The active prepayment penalty term is considered for existing and new loans over the reasonable and supportable forecast period in determining estimated prepayments. We back-test the CPR curves on a quarterly basis and adjust the CPR curves as appropriate. The reasonable and supportable period is meant to represent the period in which we believe the forecasted macroeconomic variables can be reasonably estimated. Significant variables or assumptions incorporated in the macroeconomic forecasts include U.S. unemployment, U.S. real gross domestic product (“GDP”) index, real disposable personal income (“DPI”) index, and consumer price index (“CPI”). We

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consider multiple scenarios from different macroeconomic forecasts and use different forecast and reversion periods for estimating lifetime expected credit losses.

We have determined that once a loan becomes nonperforming (90 or more days past due), it no longer shares the same risk characteristics of the other loans within its segment of homogeneous loans (pool). We pull these loans out of the segments and evaluate the loans individually using the practical expedient to determine the credit exposure. Nonperforming loans (“NPLs”) are considered collateral dependent. Using the practical expedient, the fair value of the underlying collateral, less estimated selling costs, is compared to the carrying value of the loan in the determination of a credit loss.

The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when we believe the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The allowance for credit losses is maintained at a level deemed adequate by management to provide for expected losses in the portfolio at the balance sheet date. While we use available information to estimate our required allowance for credit losses, future additions to the allowance for credit losses may be necessary based on changes in estimates resulting from economic and other conditions.

We made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables. When a loan is placed on nonaccrual status, the accrued and unpaid interest is reversed as a reduction of interest income and accrued interest receivable. Accrued interest receivable is excluded from the amortized cost of loans and it is presented as “Accrued interest receivable” in the Consolidated Balance Sheets.

Fair Value Option Accounting

We made an election to apply the fair value option accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022. We will consider applying FVO accounting to acquired loans on a case-by-case basis. The fair value option loans are presented as a separate line item in the Consolidated Balance Sheets. We do not record a CECL reserve on fair value option loans.

In accordance with ASC 820, we utilize a third-party loan valuation specialist to determine the fair value of our nonperforming mortgage loans. We use a third-party loan valuation model to estimate the fair value of our performing mortgage loans. We use a discounted cash flow methodology, that forecasts contractual cash flows, adjusting for projected prepayments and defaults, and discounting these cash flows back to a present value, using a reasonable discount rate.

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How We Assess Our Business Performance

Net income is the primary metric by which we assess our business performance. Accordingly, we closely monitor the primary drivers of net income which consist of the following:

Net Interest Income

Net interest income is the largest contributor to our net income and is monitored on both an absolute basis and relative to provision for credit losses and operating expenses. We generate net interest income to the extent that the rate at which we lend in our portfolio exceeds the cost of financing our portfolio, which we primarily achieve through long-term securitized debt. Accordingly, we closely monitor the financing markets and maintain consistent dialogue with investors and financial institutions as we evaluate our financing sources and cost of funds.

To evaluate net interest income, we measure and monitor: (1) the yields on our loans, (2) the costs of our funding sources, (3) our net interest spread, and (4) our net interest margin. Net interest spread measures the difference between the rates earned on our loans and the rates paid on our funding sources. Net interest margin measures the difference between our annualized interest income and annualized interest expense, or net interest income, as a percentage of average loans outstanding over the specified time period.

Periodic changes in net interest income are primarily driven by: (1) origination volume and changes in average outstanding loan balances, and (2) interest rates and changes in interest earned on our portfolio or paid on our debt. Historically, origination volume and portfolio size have been the largest contributors to the growth in our net interest income. We measure net interest income before and after interest expense related to our corporate debt and before and after our provision for credit losses.

Credit Losses

We strive to minimize actual credit losses through our rigorous screening and underwriting process and life of loan portfolio management and special servicing practices. We closely monitor the credit performance of our loan portfolio, including delinquency rates and expected and actual credit losses, as a key factor in assessing our overall business performance.

Operating Expenses

We incur operating expenses from compensation and benefits related to our employee base, rent and other occupancy costs associated with our leased facilities, our third-party primary loan servicing vendors, professional fees to the extent we utilize third-party legal, consulting and advisory firms, costs associated with the resolution and disposition of real estate owned, and securitization expenses, among other items. We monitor and strive to prudently manage operating expenses and to balance current period profitability with investment in the continued development of our platform. Because volume and portfolio size determine the magnitude of the impact of each of the above factors on our earnings, we also closely monitor origination volume along with all key terms of new loan originations, such as interest rates, loan-to-value ratios, estimated credit losses and expected duration.

Factors Affecting Our Results of Operations

We believe there are a number of factors that impact our business, including those discussed below and elsewhere in this Annual Report.

Our results of operations depend on, among other things, the level of our net interest income, the credit performance of our loan portfolio and the efficiency of our operating platform. These measures are affected by various factors, including the demand for investor real estate loans, the competitiveness of the market for originating or acquiring investor real estate loans, the cost of financing our portfolio, operating costs, the availability of funding sources and the underlying performance of the collateral supporting our loans. While we have been successful at managing these elements in the past, there are certain circumstances beyond our control, including the ongoing Russia/Ukraine war and conflicts in the Middle East, the implementation of tariffs, the recent U.S. government shutdown, heightened stress in the real estate and corporate debt markets, an expected recession, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

39

Origination Volume

Portfolio related net interest income is the largest contributor to our net income. We grew our portfolio related net interest income by $50.7 million or 31.8% to $210.4 million for the year ended December 31, 2025 from $159.6 million for the year ended December 31, 2024. The growth in net interest income is largely attributable to new loan originations which we have achieved by executing our principal strategies of expanding our broker network and further penetrating our network of existing brokers. We anticipate that our future performance will continue to depend on growing our origination/acquisition volume and believe that the large and highly fragmented nature of our core market provides meaningful opportunity to achieve this. We intend to grow our portfolio by continuing to serve and build loyalty within our existing network of brokers while expanding our network with new brokers through targeted marketing and improved brand awareness.

Our future performance could be impacted to the extent that our origination volumes decline as we rely on new loans to offset maturities and prepayments in our existing portfolio. To augment our core origination business, we continually assess opportunities to acquire portfolios of loans that meet our investment criteria. In our experience, portfolio acquisition opportunities have generally been more attractive and plentiful during market conditions when origination opportunities are less favorable. Accordingly, we believe our acquisition strategy not only expands our core business, but also provides a counter-cyclical benefit.

Competition

The investor real estate loan market is highly competitive, which could affect our profitability and growth. We believe we compete favorably through diversified borrower access driven by our extensive network of mortgage brokers and by emphasizing a high level of real estate and financial expertise, customer service, and flexibility in structuring transactions, as well as by attracting and retaining experienced managerial and marketing personnel. However, some of our competitors may be better positioned to market their services and financing programs because of their ability to offer more favorable rates, terms, and other services.

Availability and Cost of Funding

Our primary funding sources have historically included cash from operations, warehouse facilities, term securitized debt, unsecured debt, corporate debt, and equity. We believe we have an established brand in the term securitized debt market and that this market will continue to support our portfolio growth with long-term financing. Changes in macroeconomic conditions can adversely impact our ability to issue securitized debt and, thereby, limit our options for long-term financing. In consideration of this potential risk, we have entered into a credit facility for longer-term financing that will provide us with capital resources to fund loan growth in the event we are not able to issue securitized debt.

All our warehouse repurchase and revolving loan facilities have interest payment obligations tied to the Secured Overnight Financing Rate (“SOFR”).

Loan Performance

We underwrite and structure our loans to minimize potential losses. We believe our fully amortizing loan structures and avoidance of large balloon payments, coupled with meaningful borrower equity in properties, limit the probability of losses and that our proven in-house asset management capability allows us to minimize potential losses in situations where there is insufficient equity in the property. Our income is highly dependent upon borrowers making their payments and resolving delinquent loans as favorably as possible. Macroeconomic conditions can, however, impact credit trends in our core market and have an adverse impact on financial results.

40

Macroeconomic Conditions

The investor real estate loan market may be impacted by a wide range of macroeconomic factors such as interest rates, residential and commercial real estate prices, home ownership and unemployment rates, and availability of credit, among others. We believe our prudent underwriting, conservative loan structures and interest rate protections, and proven in-house asset management capability leave us well positioned to manage changing macroeconomic conditions.

Operating Efficiency

We generate positive operating leverage to the extent that our revenue grows at a faster rate than our expenses. We believe our platform is highly scalable and that we can generate positive operating leverage in future periods, primarily due to the technology and other investments we have made in our platform to date and our focus on a scalable, cost-effective mortgage broker network to generate new loan originations.

Portfolio and Asset Quality

Key Portfolio Statistics

December 31,

2025

2024

2023

($ in thousands)

Total loans (UPB)

$

6,491,338

$

5,055,937

$

4,072,890

Loan count

16,652

12,932

10,477

Average loan balance

$

390

$

391

$

389

Weighted average loan-to-value

65.2

%

66.6

%

67.8

%

Weighted average coupon

9.74

%

9.53

%

8.88

%

Nonperforming loans (UPB) (A)

$

554,540

$

539,438

$

394,562

Nonperforming loans (% of total) (A)

8.5

%

10.7

%

9.7

%

(A)
Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $29.6 million, $40.1 million and $42.2 million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of December 31, 2025, 2024 and 2023, respectively.

Total Loans. Total loans reflects the aggregate UPB at the end of the period. It excludes deferred origination costs, acquisition discounts, fair value adjustments and allowance for credit losses.

Loan Count. Loan count reflects the number of loans at the end of the period. It includes all loans with an outstanding principal balance.

Average Loan Balance. Average loan balance reflects the average UPB at the end of the period (i.e., total loans divided by loan count).

Weighted Average Loan-to-Value. Loan-to-value, or LTV, reflects the ratio of the original loan amount to the appraised value of the underlying property at the time of origination. In instances where the LTV at origination is not available for an acquired loan, the LTV reflects our best estimate of value at the time of acquisition. Weighted average LTV is calculated for the population of loans outstanding at the end of each specified period using the original loan amounts and appraised LTVs at the time of origination of each loan. LTV is a key statistic because requiring the borrower to invest more equity in the collateral minimizes our exposure for future credit losses.

Weighted Average Coupon. Weighted average coupon reflects the weighted average loan rate at the end of the period.

Nonperforming Loans. Loans that are 90 or more days past due, in bankruptcy, in foreclosure, or not accruing interest, are considered nonperforming loans. The dollar amount of nonperforming loans presented in the table above reflects the UPB of all loans that meet this definition.

41

Originations and Acquisitions

The following table presents new loan originations including unfunded commitments and acquisitions and includes average loan size, weighted average coupon and weighted average loan-to-value for the periods indicated:

Loan Count

Loan Balance

Average

Loan Size

Weighted

Average

Coupon

Weighted

Average

LTV

($ in thousands)

Year Ended December 31, 2025

Loan originations — held for investment

6,636

$

2,665,814

$

402

10.4

%

62.7

%

Loan originations — held for sale

2

49,697

24,849

5.7

%

59.2

%

Total loan originations

6,638

2,715,511

409

10.3

%

62.7

%

Unfunded commitments

—

22,052

—

5.9

%

85.0

%

Total loans originated including unfunded commitments

6,638

$

2,737,563

$

412

10.3

%

62.9

%

Year Ended December 31, 2024

Loan originations — held for investment

4,532

$

1,817,600

$

401

10.9

%

63.5

%

Loan originations — held for sale

2

23,554

11,777

5.1

%

64.1

%

Total loan originations

4,534

1,841,154

406

10.8

%

63.5

%

Loan acquisitions — held for investment

34

15,641

460

10.9

%

58.0

%

Total loans originated and acquired

4,568

$

1,856,795

$

406

10.8

%

63.5

%

Year Ended December 31, 2023

Loan originations — held for investment

2,955

$

1,079,811

$

365

11.1

%

66.4

%

Loan originations — held for sale

10

38,036

3,804

7.9

%

48.2

%

Total loans originated

2,965

$

1,117,847

$

377

11.0

%

65.8

%

For the year ended December 31, 2025, we originated $2.7 billion of loans, an increase of $896.4 million, or 48.7% from $1.8 billion for the year ended December 31, 2024. Loan originations for the year ended December 31, 2024, increased $723.3 million, or 64.7% from $1.1 billion for the year ended December 31, 2023.

Loans Held for Investment

Our total portfolio of loans held for investment consists of both loans held for investment carried at amortized cost, and loans held for investment at fair value, which are presented in the Consolidated Balance Sheets as “Loans held for investment, at amortized cost” and “Loans held for investment, at fair value”, respectively. The following tables show the various components of loans held for investment as of the dates indicated:

Loans held for investment, at amortized cost

December 31,

2025

2024

2023

(In thousands)

Unpaid principal balance

$

2,013,514

$

2,400,720

$

2,804,541

Deferred loan origination costs

19,269

23,570

28,351

Allowance for credit losses

(4,521

)

(4,174

)

(4,769

)

Loans held for investment, at amortized cost

$

2,028,262

$

2,420,116

$

2,828,123

42

Loans held for investment, at fair value

December 31,

2025

2024

2023

(In thousands)

Unpaid principal balance

$

4,477,824

$

2,655,217

$

1,251,395

Valuation adjustments on performing FVO loans

300,344

151,770

66,882

Valuation adjustments on nonperforming FVO loans

(48,299

)

(40,036

)

(12,205

)

Loans held for investment, at fair value

$

4,729,869

$

2,766,951

$

1,306,072

The following table illustrates the contractual maturities for our loans held for investment in aggregate UPB and as a percentage of our total held for investment loan portfolio as of the dates indicated:

December 31,

2025

2024

2023

UPB

%

UPB

%

UPB

%

($ in thousands)

Loans due in less than one year

$

159,623

2.5

%

$

157,521

3.1

%

$

151,670

3.8

%

Loans due in one to five years

78,875

1.2

83,993

1.7

54,345

1.3

Loans due in more than five years

6,252,840

96.3

4,814,423

95.2

3,849,921

94.9

Total loans held for investment

$

6,491,338

100.0

%

$

5,055,937

100.0

%

$

4,055,936

100.0

%

Charge-offs, Gain on REO

The valuation impact to our earnings from loans becoming REO or in REO is a combination of: (1) loan charge-offs, (2) gain on transfer to REO included in “Gain on disposition of loans” in the Consolidated Statements of Income, (3) net valuation adjustments on REO, and (4) net gain or loss on sale of REO.

The table below shows our actual charge-offs, gain on transfer of nonperforming loans to REO, net valuation adjustments on REO, and gain on sale of REO, for the periods indicated:

Year Ended December 31,

2025

2024

2023

($ in thousands)

Average nonperforming loans for the period (1)

$

274,372

$

318,858

$

328,105

Charge-offs (3)

5,458

1,768

2,039

Charge-offs / Average nonperforming loans for the period (1)

1.99

%

0.55

%

0.62

%

Gain (loss) on REO:

Gain on transfer to REO

$

15,653

$

8,704

$

7,412

REO valuations, net

(17,520

)

(6,121

)

(3,903

)

Gain on sale of REO

1,445

4,275

568

Total gain (loss) on REO (2)

$

(422

)

$

6,858

$

4,077

(1)
Reflects the monthly average of nonperforming loans held for investment, excluding FVO loans, during the period.

(2)
Total gain on REO excludes charge-offs.

(3)
The increase in charge-offs was higher than the previous year mainly as a result of two unusually large charge-offs taken during 2025.

Allowance for Credit Losses

Our allowance for credit losses increased to $4.5 million as of December 31, 2025, from $4.2 million as of December 31, 2024. The increase in allowance was primarily due to higher charge-offs from two unusually large losses on a couple of legacy loan types on which we no longer lend and have no additional such loan types in our portfolio.

43

Our allowance for credit losses decreased to $4.2 million as of December 31, 2024, from $4.8 million as of December 31, 2023. The decrease in allowance was primarily due to loan paydowns and payoffs decreasing our portfolio of loans held for investment carried at amortized cost.

Our allowance for credit losses is based on an analysis of historical credit loss data from January 1, 2022 through December 31, 2025, adjusted for macroeconomic forecasts. We strive to minimize actual credit losses through our rigorous screening and underwriting process, life of loan portfolio management and special servicing practices. Additionally, we believe borrower equity of 25% to 40% provides significant protection against credit losses. The various scenarios, the weighting of scenarios, as well as the forecast period and reversion to historical loss, are subject to change as conditions in the market change and our ability to forecast as economic events evolves.

To estimate the allowance for credit losses in our portfolio of loans held for investment carried at amortized cost, we follow a detailed internal review process, considering a number of different factors including, but not limited to, our ongoing analyses of loans, historical loss rates, relevant environmental factors, relevant market research, trends in delinquencies, effects and changes in credit concentrations, and ongoing evaluation of fair values.

The following table illustrates the activity in our allowance for credit losses of loans held for investment, excluding loans held for investment at fair value, over the periods indicated:

December 31,

2025

2024

2023

Allowance for credit losses:

($ in thousands)

Beginning balance

$

4,174

$

4,769

$

4,893

Provision for credit losses

5,805

1,173

1,915

Charge-offs

(5,458

)

(1,768

)

(2,039

)

Ending balance

$

4,521

$

4,174

$

4,769

Total UPB(1)

$

2,013,514

$

2,400,720

$

2,804,541

Nonperforming loans UPB

$

234,490

$

309,970

$

321,785

Nonperforming loans UPB / Total UPB(1)

11.6

%

12.9

%

11.5

%

Allowance for credit losses / Total UPB(1)

0.22

%

0.17

%

0.17

%

Charge-offs / Total UPB(1)

0.27

%

0.07

%

0.07

%

(1)
Reflects the UPB of loans held for investment at amortized cost.

The allowance for credit losses was 0.22% of total UPB of loans held for investment carried at amortized cost as of December 31, 2025. Nonperforming loans were 11.6% of total UPB of loans held for investment carried at amortized cost as of December 31, 2025. We believe the allowance for credit losses is adequate because historically most loans that become nonperforming either paid off or paid current, resulting in an overall gain. This is due to low LTVs at origination and our active management of the portfolio. Our actual 2025 charge-offs were higher mainly due to two unusually large losses on a couple of legacy loan types on which we no longer lend and have no additional such loan types in our portfolio. Our average annual charge-off rate has historically been low at 0.10% over the last four years.

44

Credit Quality – Loans Held for Investment

The following table provides delinquency information on our loans held for investment by UPB as of the dates indicated:

December 31, 2025 (A)

COVID-19

Forbearance

December 31, 2024 (A)

COVID-19

Forbearance

December 31, 2023 (A)

COVID-19

Forbearance

($ in thousands)

Performing/Accruing:

Current

$

5,432,204

83.7

%

$

90,159

$

4,169,830

82.5

%

$

82,459

$

3,354,197

82.7

%

$

116,060

30-59 days past due

296,100

4.6

3,377

241,300

4.7

19,452

231,590

5.7

11,993

60-89 days past due

208,494

3.2

3,040

105,369

2.1

858

75,587

1.9

4,336

Total performing loans

5,936,798

91.5

96,576

4,516,499

89.3

102,769

3,661,374

90.3

132,389

Nonperforming/Nonaccrual:

90 days past due

41,296

0.6

3,242

23,697

0.5

2,787

17,746

0.4

1,562

90+ days past due

71,985

1.1

—

51,144

1.0

2,237

24,398

0.6

—

Bankruptcy

57,919

0.9

5,945

60,042

1.2

3,895

35,993

0.9

3,705

In foreclosure

383,340

5.9

20,379

404,555

8.0

31,139

316,425

7.8

36,915

Total nonperforming loans

554,540

8.5

29,566

539,438

10.7

40,058

394,562

9.7

42,182

Total loans held for investment

$

6,491,338

100.0

%

$

126,142

$

5,055,937

100.0

%

$

142,827

$

4,055,936

100.0

%

$

174,571

(A)
Balance includes $126.1 million, $142.8 million and $174.6 million UPB of loans held for investment at amortized cost as of December 31, 2025, 2024 and 2023, respectively, in our COVID-19 forbearance program.

Loans that are 90 days or more past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $554.5 million, or 8.5% of our held for investment loan portfolio as of December 31, 2025, compared to $539.4 million, or 10.7% as of December 31, 2024, and $394.6 million, or 9.7% of the loan portfolio as of December 31, 2023. The increase in total nonperforming loans as of December 31, 2025 compared to December 31, 2024 and 2023 was due to an increase in the size of our portfolio and management’s decision to move loans into foreclosure early in the delinquency process.

Resolution of Nonperforming Loans

Historically, most loans that become nonperforming resolve prior to converting to REO. This is due to low LTVs at origination and our active management of the portfolio. The following tables summarize the resolution activities of loans that became nonperforming prior to the beginning of the periods indicated or became nonperforming and subsequently resolved during the periods indicated. We resolved $331.5 million, $253.4 million and $206.1 million of long-term and short-term nonperforming loans during the years ended December 31, 2025, 2024 and 2023, respectively. We recovered total revenue of $30.0 million, $22.3 million and $19.1 million for the years ended December 31, 2025, 2024 and 2023, respectively. This was largely the result of collecting all regular accrued interest, default interest, and prepayment penalties in excess of the principal on loans.

The tables below include resolutions of our long-term nonperforming loans during the periods indicated. Historically, we have resolved our nonperforming loans at a gain over and above contractual interest due. Below is a breakout of the net gains, regular accrued interest income and expense recognized with the resolution of these nonperforming loans. Total nonperforming loans recovered include default interest, prepayment penalty, and contractual regular interest received, and any servicing advance recovered or written off:

Twelve Months Ended December 31, 2025

Long-Term Nonperforming Loans

UPB

Default

Interest

Prepayment

Penalty

Net Gain

Regular

Accrued

Interest

Servicing Advances Write-Offs

Total Recovered

($ in thousands)

Resolved — loans paid off

$

126,215

$

3,949

$

2,643

$

6,592

$

11,464

$

(1,381

)

$

16,675

Resolved — loans paid current

156,067

1,571

13

1,584

8,138

(100

)

9,622

Total resolutions

$

282,282

$

5,520

$

2,656

$

8,176

$

19,602

$

(1,481

)

$

26,297

Recovery rate

102.9

%

109.3

%

45

Twelve Months Ended December 31, 2024

Long-Term Nonperforming Loans

UPB

Default

Interest

Prepayment

Penalty

Net Gain

Regular

Accrued

Interest

Servicing Advances Recoveries (Write-Offs)

Total Recovered

($ in thousands)

Resolved — loans paid off

$

98,635

$

2,136

$

2,230

$

4,366

$

9,396

$

(964

)

$

12,798

Resolved — loans paid current

117,572

1,073

28

1,101

4,880

7

5,988

Total resolutions

$

216,207

$

3,209

$

2,258

$

5,467

$

14,276

$

(957

)

$

18,786

Recovery rate

102.5

%

108.7

%

Twelve Months Ended December 31, 2023

Long-Term Nonperforming Loans

UPB

Default

Interest

Prepayment

Penalty

Net Gain

Regular

Accrued

Interest

Servicing Advances Recoveries

Total Recovered

($ in thousands)

Resolved — loans paid off

$

67,769

$

1,635

$

1,546

$

3,181

$

7,301

$

71

$

10,553

Resolved — loans paid current

101,224

925

—

925

4,026

154

5,105

Total resolutions

$

168,993

$

2,560

$

1,546

$

4,106

$

11,327

$

225

$

15,658

Recovery rate

102.4

%

109.3

%

Short-term loans, or loans with a maturity of two years or less, do not require prepayment fees and usually result in a lower gain when paid in full, as compared to long-term loans. The tables below include resolutions of our short-term nonperforming loans and loans granted a COVID-19 forbearance in 2020, for the periods indicated:

Twelve Months Ended December 31, 2025

Short-Term and Forbearance Nonperforming Loans

UPB

Default

Interest

Prepayment

Penalty

Net Gain

Regular

Accrued

Interest

Servicing Advances Write-Offs

Total Recovered

($ in thousands)

Resolved — loans paid off

$

25,685

$

1,042

$

26

$

1,068

$

2,167

$

(248

)

$

2,987

Resolved — loans paid current

23,579

135

—

135

638

(56

)

717

Total resolutions

$

49,264

$

1,177

$

26

$

1,203

$

2,805

$

(304

)

$

3,704

Recovery rate

102.4

%

107.5

%

Twelve Months Ended December 31, 2024

Short-Term and Forbearance Nonperforming Loans

UPB

Default

Interest

Prepayment

Penalty

Net Gain

Regular

Accrued

Interest

Servicing Advances Write-Offs

Total Recovered

($ in thousands)

Resolved — loans paid off

$

21,873

$

399

$

16

$

415

$

3,138

$

(562

)

$

2,991

Resolved — loans paid current

15,273

35

—

35

492

(5

)

522

Total resolutions

$

37,146

$

434

$

16

$

450

$

3,630

$

(567

)

$

3,513

Recovery rate

101.2

%

109.5

%

Twelve Months Ended December 31, 2023

Short-Term and Forbearance Nonperforming Loans

UPB

Default

Interest

Prepayment

Penalty

Net Gain

Regular

Accrued

Interest

Servicing Advances Recoveries

Total Recovered

($ in thousands)

Resolved — loans paid off

$

18,301

$

723

$

18

$

741

$

1,895

$

71

$

2,707

Resolved — loans paid current

18,775

111

—

111

554

30

695

Total resolutions

$

37,076

$

834

$

18

$

852

$

2,449

$

101

$

3,402

Recovery rate

102.3

%

109.2

%

46

Real Estate Owned, Net (“REO”)

REO includes real estate we acquire through foreclosure or by deed-in-lieu of foreclosure. REO assets are initially recorded at fair value, less estimated costs to sell on the date of foreclosure. Adjustments that reduce the carrying value of the loan to the fair value of the real estate at the time of foreclosure are recognized as charge-offs in the allowance for credit losses for loan carried at amortized cost. Gains at the time of foreclosure are recognized in other operating income. The difference between the carrying value of the FVO loan and the REO fair value less estimated costs to sell, is recorded as unrealized gain or loss on fair value loans. After foreclosure, we periodically obtain new valuations and any subsequent changes to fair value, less estimated costs to sell, are reflected as valuation adjustments, included in “Real estate owned, net” in the Consolidated Statements of Income.

As of December 31, 2025, our REO included 254 properties with a carrying value of $118.3 million compared to 129 properties with a carrying value of $68.0 million as of December 31, 2024. The increase in REO assets was primarily due to an increase in the size of our portfolio.

Concentrations – Loans Held for Investment

As of December 31, 2025, our held for investment loan portfolio was concentrated in investor 1-4 loans, representing 48.1% of the UPB. Mixed-use properties and retail properties represented 10.9% and 10.7% , respectively, of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio. Geographically, the principal balance of our loans held for investment were concentrated 20.3% in California, 13.8% in New York, 12.0% in Florida, 7.6% in New Jersey, and 6.1% in Texas.

Property Type

December 31, 2025

Loan Count

UPB

% of Total

UPB

($ in thousands)

Investor 1-4

10,297

$

3,125,346

48.1

%

Mixed use

1,660

709,131

10.9

Retail

1,326

691,683

10.7

Office

1,154

542,556

8.4

Multifamily

776

461,666

7.1

Warehouse

705

454,527

7.0

Other (1)

734

506,429

7.8

Total loans held for investment

16,652

$

6,491,338

100.0

%

(1)
All other properties individually comprise less than 5.0% of the total unpaid principal balance.

Geography (State)

December 31, 2025

Loan Count

UPB

% of Total

UPB

($ in thousands)

California

1,896

$

1,315,462

20.3

%

New York

1,686

895,520

13.8

Florida

1,945

780,200

12.0

New Jersey

1,245

492,020

7.6

Texas

1,088

395,586

6.1

Other (1)

8,792

2,612,550

40.2

Total loans held for investment

16,652

$

6,491,338

100.0

%

(1)
All other states individually comprise less than 5.0% of the total unpaid principal balance.

47

Key Performance Metrics

Year Ended December 31,

2025

2024

2023

($ in thousands)

Average loans

$

5,828,360

$

4,488,301

$

3,725,197

Portfolio yield

9.45

%

9.06

%

8.34

%

Average debt — portfolio related

5,455,250

4,076,596

3,341,411

Average debt — total company

5,745,250

4,359,484

3,556,411

Cost of funds — portfolio related

6.24

%

6.06

%

5.58

%

Cost of funds — total company

6.35

%

6.22

%

5.71

%

Net interest margin — portfolio related

3.61

%

3.56

%

3.34

%

Net interest margin — total company

3.19

%

3.03

%

2.89

%

Charge-offs/Average loans held for investment at amortized cost

0.25

%

0.07

%

0.07

%

Pre-tax return on average equity

24.4

%

20.3

%

17.5

%

Return on average equity

17.5

%

14.4

%

12.8

%

Average Loans

Average loans reflects the daily average of total outstanding loans, including both loans held for investment and loans held for sale, as measured by UPB, over the specified time period.

Portfolio Yield

Portfolio yield is an annualized measure of the total interest income earned on our loan portfolio as a percentage of average loans over the given period. Interest income includes interest earned on performing loans, cash interest received on nonperforming loans, default interest and prepayment fees. The increase in our portfolio yield over the periods shown was primarily driven by the increase in the weighted average coupon.

Average Debt — Portfolio Related and Total Company

Portfolio-related debt consists of borrowings related directly to financing our loan portfolio, which includes our warehouse repurchase facilities and securitized debt. Total company debt consists of portfolio-related debt and corporate debt. The measures presented here reflect the monthly average of all portfolio-related and total company debt, as measured by outstanding principal balance, over the specified time period.

Cost of Funds — Portfolio Related and Total Company

Portfolio related cost of funds is an annualized measure of the interest expense incurred on our portfolio-related debt as a percentage of average portfolio-related debt outstanding over the given period. Total company cost of funds is an annualized measure of the interest expense incurred on our portfolio-related debt and corporate debt outstanding over the given period. Interest expense includes the amortization of expenses incurred in connection with our portfolio related financing activities and corporate debt. Through the issuance of long-term securitized debt, we have been able to fix a significant portion of our borrowing costs over time. The strong credit performance on our securitized debt has allowed us to issue debt at attractive rates.

Our portfolio related cost of funds increased to 6.24% for the year ended December 31, 2025 from 6.06% and 5.58% for the years ended December 31, 2024 and 2023, respectively. The increases were driven by higher market interest rates.

Net Interest Margin — Portfolio Related and Total Company

Portfolio related net interest margin measures the difference between the interest income earned on our loan portfolio and the interest expense paid on our portfolio-related debt as a percentage of average loans over the specified time period. Total company net interest margin measures the difference between the interest income earned on our loan portfolio and the interest expense paid on our portfolio-related debt and corporate debt as a percentage of average loans over the specified time period.

Over the periods shown below, our portfolio related net interest margin increased to 3.61% for the year ended December 31, 2025 compared to 3.56% and 3.34% for the years ended December 31, 2024 and 2023, respectively. The increases in portfolio related net interest margin from the years ended December 31, 2024 and 2023 were

48

primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of portfolio related funds.

Total company net interest margin of 3.19% for the year ended December 31, 2025 increased from 3.03% and 2.89% for the years ended December 31, 2024, and 2023, respectively. The increases in total company net interest margin from the years ended December 31, 2024 and 2023 were primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of total company funds.

The following table shows the average outstanding balance of our loan portfolio and portfolio-related debt, together with interest income and the corresponding yield earned on our portfolio, and interest expense and the corresponding rate paid on our portfolio-related debt for the periods indicated:

Year Ended December 31,

2025

2024

2023

Average Balance

Interest Income / Expense

Average Yield / Rate

Average Balance

Interest Income / Expense

Average Yield / Rate

Average Balance

Interest Income / Expense

Average Yield / Rate

($ in thousands)

Loan portfolio:

Loans held for sale

$

3,549

$

6,488

$

8,615

Loans held for investment

5,824,811

4,481,813

3,716,582

Total loans

$

5,828,360

$

550,829

9.45

%

$

4,488,301

$

406,843

9.06

%

$

3,725,197

$

310,775

8.34

%

Debt:

Warehouse and repurchase facilities

$

401,320

$

31,976

7.97

%

$

295,936

$

26,790

9.05

%

$

227,911

$

21,726

9.53

%

Securitized debt

5,053,930

308,501

6.10

%

3,780,660

220,428

5.83

%

3,113,500

164,742

5.29

%

Total debt - portfolio related

5,455,250

340,477

6.24

%

4,076,596

247,218

6.06

%

3,341,411

186,468

5.58

%

Corporate debt

290,000

24,571

8.47

%

282,888

23,821

8.42

%

215,000

16,556

7.70

%

Total debt

$

5,745,250

$

365,048

6.35

%

$

4,359,484

$

271,039

6.22

%

$

3,556,411

$

203,024

5.71

%

Net interest spread -

   portfolio related (1)

3.21

%

3.00

%

2.76

%

Net interest margin -

   portfolio related

3.61

%

3.56

%

3.34

%

Net interest spread -

   total company (2)

3.10

%

2.85

%

2.63

%

Net interest margin -

   total company

3.19

%

3.03

%

2.89

%

(1)
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.

(2)
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.

Charge-Offs

The charge-offs ratio reflects charge-offs as a percentage of average loans held for investment carried at amortized cost over the specific time period. We do not record charge-offs on loans carried at estimated fair value and loans held for sale. The charge-offs ratio was 0.25% for the year ended December 31, 2025 and 0.07% for the years ended December 31, 2024 and 2023.

49

Return on Average Equity

Pre-tax return on average equity and return on average equity reflect income before income taxes and net income including income attributable to noncontrolling interest, respectively, as a percentage of the monthly average total stockholders’ equity including noncontrolling interest over the specified period. Pre-tax return on average equity and return on average equity increased for the year ended December 31, 2025 as compared to 2024 and 2023 due to the increases in income before income taxes and net income resulting from the increases in net interest income, gain on sale of loans, and valuation gains in 2025.

Year Ended December 31,

2025

2024

2023

($ in thousands)

Income before income taxes (A)

$

146,240

$

96,391

$

71,127

Net income (B)

104,983

68,466

52,293

Monthly average balance:

Stockholders’ / Members’ equity (C)

599,586

474,942

407,305

Pre-tax return on average equity (A)/(C)

24.4

%

20.3

%

17.5

%

Return on average equity (B)/(C)

17.5

%

14.4

%

12.8

%

Components of Results of Operations

Interest Income

We accrue interest on the UPB of our loans in accordance with the individual terms and conditions of each loan, discontinuing interest and reversing previously accrued interest once a loan becomes 90 days or more past due (nonaccrual status). When a loan is placed on nonaccrual status, the accrued and unpaid interest is reversed as a reduction to interest income and accrued interest receivable. Interest income is subsequently recognized only to the extent that cash payments are received or when the loan has returned to accrual status. Payments received on nonaccrual loans are first applied to interest due, then principal. Interest accrual resumes once a borrower has made all principal and interest payments due, bringing the loan back to current status.

Interest income on loans held for investment is comprised of interest income on loans and prepayment fees less the amortization of deferred net costs related to the origination of loans carried at amortized cost. Interest income on loans held for sale is comprised of interest income earned on loans prior to their sale. The net fees and costs associated with loans held for sale carried at the lower of cost or fair value, are deferred as part of the carrying value of the loan and recognized as a gain or loss upon the sale of the loan. The fees and costs associated with loans carried at fair value are recognized and expensed as incurred.

Interest Expense — Portfolio Related

Portfolio related interest expense is incurred on the debt we obtained to fund our loan origination and portfolio activities and consists of our warehouse facilities and securitized debt. Portfolio related interest expense also includes the amortization of other comprehensive income or loss from terminated derivative instruments, amortization of expenses incurred as a result of issuing the debt when the debt is carried at amortized cost. Other comprehensive income or loss, and deferred debt issuance costs are amortized using the level yield method. Key drivers of interest expense include the debt amounts outstanding, interest rates, other comprehensive income or loss from terminated derivative instruments, and the mix of our securitized debt and warehouse liabilities.

Net Interest Income — Portfolio Related

Portfolio related net interest income represents the difference between interest income and portfolio related interest expense.

50

Interest Expense — Corporate Debt

Interest expense on corporate debt primarily consists of interest expense paid with respect to the 2022 Term Loan and the 2024 Term Loan (“Corporate Debt”), as reflected in “Secured financing, net” on our Consolidated Balance Sheets, and the related amortization of deferred debt issuance costs.

Net Interest Income

Net interest income represents the difference between portfolio related net interest income and interest expense on corporate debt.

Provision for Credit Losses

Under the CECL methodology, the allowance for credit losses is calculated using a third-party model with our historical loss rates by segment, loan position as of the balance sheet date, and assumptions from us. We do not record provision for credit losses on loans held for sale, or loans carried at fair value.

Other Operating Income

Gain (Loss) on Disposition of Loans. When we sell a loan held for sale, we record a gain or loss that reflects the difference between the proceeds received for the sale of the loan and its respective carrying value. The gain or loss that we ultimately realize on the sale of our loans held for sale is primarily determined by the terms of the originated loans, current market interest rates and the sale price of the loans. In addition, when we transfer a loan to REO, we record the REO at its fair value, less estimated costs to sell at the time of the transfer. The difference between the fair value of the real estate and the carrying value of the loan is recorded as a gain or a loan charge-off.

Gain on Sale of Loans to a Related Party. Gain related to sale of loans to a related party. The gain reflects the difference between the proceeds received for the loans sold and their respective carrying values.

Unrealized Gain (Loss) on Fair Value Loans. We have elected to apply the fair value option accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022. We have elected to account for certain purchased distressed loans at fair value using FASB ASC Topic 825, Financial Instruments (ASC 825). We regularly estimate the fair value of these loans. Changes in fair value, subsequent to initial recognition of fair value loans are reported as “Unrealized gain (loss) on fair value loans”, a component of other operating income within the Consolidated Statements of Income.

Unrealized Gain (Loss) on Mortgage Servicing Rights. We have elected to record our mortgage servicing rights using the fair value measurement method. Changes in fair value are reported as “Unrealized gain (loss) on mortgage servicing rights”, a component of other operating income within the Consolidated Statements of Income.

Unrealized Gain (Loss) on Fair Value Securitized Debt. We have elected to apply the fair value option accounting to securitized debt issued effective January 1, 2023 when the underlying collateral is also carried at fair value. We regularly estimate the fair value of securitized debt. Changes in fair value subsequent to initial recognition of fair value securitized debt are reported as “Unrealized gain (loss) on fair value securitized debt”, a component of other operating income within the Consolidated Statements of Income.

Origination Income. Fee income related to our loan origination activities.

Interest Income on cash balance. Interest income on bank balances.

Other Income. Other income primarily consists of servicing fee income and other miscellaneous income. Century earns servicing fees for servicing mortgage loans for others.

Operating Expenses

Compensation and Employee Benefits. Costs related to employee compensation, commissions and related employee benefits, such as health, retirement, and payroll taxes.

Origination Expenses. Costs related to our loan origination activities.

Securitization Expenses. Costs related to issuance of our securitized debt.

Loan Servicing. Costs related to our third-party servicers.

51

Professional Fees. Costs related to professional services, such as external audits, legal fees, tax, compliance and outside consultants.

Rent and Occupancy. Costs related to occupying our locations, including rent, maintenance and property taxes.

Real Estate Owned, Net. Costs related to our real estate owned, net, including gains (losses) on disposition of REO, maintenance of REO properties, and taxes and insurance.

Other Operating Expenses. Other operating expenses consist of general and administrative costs such as travel and entertainment, marketing, data processing, insurance and office equipment.

Provision for Income Taxes

The provision for income taxes consists of the current and deferred U.S. federal and state income taxes we expect to pay, currently and in future years, with respect to the net income for the year. The amount of the provision is derived by adjusting our reported net income with various permanent differences. The tax-adjusted net income amount is then multiplied by the applicable federal and state income tax rates to arrive at the provision for income taxes.

Consolidated Results of Operations

The following table summarizes our consolidated results of operations for the periods indicated:

Year Ended December 31,

2025

2024

2023

(In thousands, except per share amounts)

Interest income

$

550,829

$

406,843

$

310,775

Interest expense - portfolio related

340,477

247,218

186,468

 Net interest income - portfolio related

210,352

159,625

124,307

Interest expense - corporate debt

24,571

23,821

16,556

Net interest income

185,781

135,804

107,751

Provision for credit losses

5,805

1,173

1,915

Net interest income after provision for credit losses

179,976

134,631

105,836

Other operating income

163,619

101,398

65,910

Total operating expenses

197,355

139,638

100,619

Income before income taxes

146,240

96,391

71,127

Income tax expense

41,257

27,925

18,834

Net income

104,983

68,466

52,293

Net income (loss) attributable to noncontrolling interest

(71

)

47

20

Net income attributable to Velocity Financial, Inc.

105,054

68,419

52,273

Less undistributed earnings attributable to participating securities

1,348

837

753

Net income allocated to common shareholders

$

103,706

$

67,582

$

51,520

Earnings per common share

Basic

$

2.81

$

2.07

$

1.60

Diluted

$

2.75

$

1.91

$

1.52

Weighted average common shares outstanding

Basic

36,850

32,653

32,206

Diluted

38,178

35,760

34,484

52

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Net Interest Income — Portfolio Related

Year Ended December 31,

2025

2024

$ Change

% Change

($ in thousands)

Interest income

$

550,829

$

406,843

$

143,986

35.4

%

Interest expense - portfolio related

340,477

247,218

93,259

37.7

Net interest income - portfolio related

$

210,352

$

159,625

$

50,727

31.8

%

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased to $210.4 million from $159.6 million for the years ended December 31, 2025 and 2024, respectively.

Interest Income. Interest income increased by $144.0 million, or 35.4%, to $550.8 million for the year ended December 31, 2025, compared to $406.8 million for the year ended December 31, 2024. The increase was primarily attributable to higher average portfolio balances and average yield. The average yield increased to 9.45% for the year ended December 31, 2025 from 9.06% for the year ended December 31, 2024. Average loans increased $1.3 billion, or 29.9% to $5.8 billion for the year ended December 31, 2025 from $4.5 billion for the year ended December 31, 2024. The increase in average yield was attributable to the overall higher interest rate environment in 2025.

The following table distinguishes between the change in interest income attributable to change in average loan balance (volume) and the change in interest income attributable to change in annualized yield (rate) for the years ended December 31, 2025 and 2024.

Average

Loans

Interest

Income

Average

Yield

($ in thousands)

Year ended December 31, 2025

$

5,828,360

$

550,829

9.45

%

Year ended December 31, 2024

4,488,301

406,843

9.06

%

Volume variance

1,340,059

121,470

Rate variance

22,516

0.39

%

Total interest income variance

$

143,986

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased by $93.3 million, or 37.7%, to $340.5 million for the year ended December 31, 2025, from $247.2 million for the year ended December 31, 2024. The increase in portfolio related interest expense in 2025 was primarily attributable to a higher loan portfolio being financed and increased interest rates.

The following table presents information regarding portfolio related interest expense and distinguishes between the change in interest expense attributable to change in the average outstanding debt balance (volume) and change in cost of funds (rate) for the years ended December 31, 2025 and 2024.

Average

Debt (1)

Interest

Expense

Cost of

Funds

($ in thousands)

Year ended December 31, 2025

$

5,455,250

$

340,477

6.24

%

Year ended December 31, 2024

4,076,596

247,218

6.06

%

Volume variance

1,378,654

83,606

Rate variance

9,653

0.18

%

Total interest expense variance

$

93,259

(1)
Includes securitized debt and warehouse agreements.

53

Net Interest Income After Provision for Credit Losses

Net interest income after provision for credit losses increased 33.7% over the prior year driven by our growth in the portfolio.

Year Ended December 31,

2025

2024

$ Change

% Change

($ in thousands)

Net interest income - portfolio related

$

210,352

$

159,625

$

50,727

31.8

%

Interest expense - corporate debt

24,571

23,821

750

3.1

Net interest income

185,781

135,804

49,977

36.8

Provision for credit losses

5,805

1,173

4,632

394.9

Net interest income after provision for credit losses

$

179,976

$

134,631

$

45,345

33.7

%

Interest Expense — Corporate Debt. Corporate debt interest expense increased by $0.8 million to $24.6 million for the year ended December 31, 2025 from $23.8 million for the year ended December 31, 2024 due to the addition of a $75.0 million financing in February 2024 and its related debt issuance costs amortization. The corporate debt balance was $290.0 million as of December 31, 2025 and 2024.

Provision for Credit Losses. Our provision for credit losses increased by approximately $4.6 million to $5.8 million for the year ended December 31, 2025 from $1.2 million for the year ended December 31, 2024. The increase in provision for credit losses was primarily attributable to the higher charge-offs mainly due to two unusually large losses on a couple of legacy loan types on which we no longer lend and have no additional such loan types in our portfolio.

Other Operating Income

The table below presents the various components of other operating income for the years ended December 31, 2025 and 2024. The $62.2 million net increase was primarily driven by higher net unrealized gain on valuation of fair value instruments, gain on disposition of loans and origination fee income.

Year Ended December 31,

2025

2024

$ Change

% Change

($ in thousands)

Gain on disposition of loans

$

16,910

$

9,940

$

6,970

70.1

%

Gain on sale of loans to a related party

19,344

—

19,344

100.0

Unrealized gain on fair value loans

116,853

55,857

60,996

109.2

Unrealized gain (loss) on fair value securitized debt

(30,454

)

2,581

(33,035

)

1,279.9

Unrealized gain (loss) on mortgage servicing rights

(998

)

375

(1,373

)

366.1

Origination fee income

33,982

24,007

9,975

41.6

Interest income on cash balance

5,856

6,490

(634

)

(9.8

)

Other income

2,126

2,148

(22

)

(1.0

)

Total other operating income

$

163,619

$

101,398

$

62,221

61.4

%

Gain (Loss) on Disposition of Loans. Gain on disposition of loans increased by $7.0 million to $16.9 million for the year ended December 31, 2025 compared to $9.9 million for the year ended December 31, 2024. The increase was primarily due to the gain from the sale of nonperforming loans in December 2025 and an increase in gain on transfer to REO upon foreclosure.

Gain on Sale of Loans to a Related Party. Gain related to the sale of nonperforming loans to a related party was $19.4 million for the year ended December 31, 2025.

Unrealized Gain (Loss) on Fair Value Loans. Unrealized gain on fair value loans increased by $61.0 million to $116.9 million for the year ended December 31, 2025 compared to $55.9 million for the year ended December 31, 2024. The increase in unrealized gain was mainly driven by gains from record new loan originations.

54

Unrealized Gain (Loss) on Fair Value Securitized Debt. Unrealized loss on fair value securitized debt was $30.5 million for the year ended December 31, 2025, a decrease of $33.0 million compared to an unrealized gain of $2.6 million for the year ended December 31, 2024. The increase in unrealized loss was primarily attributable to a decrease in interest rates.

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized loss on mortgage servicing rights was $1.0 million for the year ended December 31, 2025 compared to an unrealized gain of $0.4 million for the year ended December 31, 2024. The loss was mainly attributable to the decrease in the average service fee rate.

Origination Fee Income. Origination fee income increased by $10.0 million to $34.0 million for the year ended December 31, 2025 compared to $24.0 million for the year ended December 31, 2024. The increase was primarily due to record loan originations.

Interest Income on Cash Balance. Interest income on cash balance decreased by $0.6 million to $5.9 million for the year ended December 31, 2025 compared to $6.5 million for the year ended December 31, 2024. The decrease was primarily due to the decrease in bank interest rates.

Other Income. Other income was $2.1 million for each of the years ended December 31, 2025 and 2024.

Operating Expenses

Gross revenue consists of interest income and other operating income. Total operating expense represents 27.6% and 27.5% of gross revenue for the years ended December 31, 2025 and 2024, respectively. The table below presents the various components of operating expenses for the years ended December 31, 2025 and 2024. Total operating expenses increased by 41.3%, or $57.7 million to $197.4 million for the year ended December 31, 2025 from $139.6 million for the year ended December 31, 2024.

Year Ended December 31,

2025

2024

$ Change

% Change

($ in thousands)

Compensation and employee benefits

$

90,217

$

69,589

$

20,628

29.6

%

Origination expenses

4,466

3,077

1,389

45.1

Securitization expenses

28,284

19,396

8,888

45.8

Loan servicing

33,409

22,388

11,021

49.2

Professional fees

6,098

7,616

(1,518

)

(19.9

)

Rent and occupancy

1,122

1,929

(807

)

(41.8

)

Real estate owned, net

22,909

6,030

16,879

279.9

Other operating expenses

10,850

9,613

1,237

12.9

Total operating expenses

$

197,355

$

139,638

$

57,717

41.3

%

Compensation and Employee Benefits. Compensation and employee benefits increased to $90.2 million for the year ended December 31, 2025 from $69.6 million for year ended December 31, 2024. The increase was mainly driven by higher headcount and commissions expense in 2025 as our loan originations increased.

Origination Expenses. Origination expenses increased to $4.5 million for the year ended December 31, 2025 from $3.1 million for the year ended December 31, 2024. The increase of $1.4 million was primarily due to higher loan originations in 2025.

Securitization Expenses. Securitization expenses were $28.3 million and $19.4 million for the years ended December 31, 2025 and 2024, respectively. The $8.9 million increase in securitization expenses for the year ended December 31, 2025 was due to the higher amount of securitized debt issued as compared to the prior year.

Loan Servicing. Loan servicing expenses increased to $33.4 million for the year ended December 31, 2025 from $22.4 million for the year ended December 31, 2024. The $11.0 million increase for the year ended December 31, 2025 was mainly due to the increase in our total loan portfolio and related advance expenses.

Professional Fees. Professional fees decreased to $6.1 million for the year ended December 31, 2025 from $7.6 million for the year ended December 31, 2024 primarily due to a decrease in legal expenses.

55

Rent and Occupancy. Rent and occupancy expenses were $1.1 million and $1.9 million for the year ended December 31, 2025 and 2024, respectively. The decrease resulted from the relocation to offices with less space and lower rent expense.

Real Estate Owned, Net. Net expenses of real estate owned increased to $22.9 million for the year ended December 31, 2025 from $6.0 million for the year ended December 31, 2024 driven by the increases in REO properties and valuation adjustments.

Other Operating Expenses. Other operating expenses increased to $10.9 million for the year ended December 31, 2025 from $9.6 million for the year ended December 31, 2024, driven by higher data processing expenses.

Income Tax Expense. Income tax expense was $41.3 million and $27.9 million for the years ended December 31, 2025 and 2024, respectively. Our consolidated effective tax rate as a percentage of pre-tax income for 2025 was 28.2%, compared to 29.0% for 2024. The 2025 effective tax rate differed from the federal statutory rate of 21.0% principally because of state taxes.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net Interest Income — Portfolio Related

Year Ended December 31,

2024

2023

$ Change

% Change

($ in thousands)

Interest income

$

406,843

$

310,775

$

96,068

30.9

%

Interest expense - portfolio related

247,218

186,468

60,750

32.6

Net interest income - portfolio related

$

159,625

$

124,307

$

35,318

28.4

%

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased to $159.6 million from $124.3 million for the years ended December 31, 2024 and 2023, respectively.

Interest Income. Interest income increased by $96.1 million, or 30.9%, to $406.8 million for the year ended December 31, 2024, compared to $310.8 million for the year ended December 31, 2023. The increase was primarily attributable to higher average portfolio balances and average yield. The average yield increased to 9.06% for the year ended December 31, 2024 from 8.34% for the year ended December 31, 2023. Average loans increased $763.1 million, or 20.5%, to $4.5 billion for the year ended December 31, 2024, from $3.7 billion for the year ended December 31, 2023. The increase in average yield was attributable to the overall higher interest rate environment in 2024.

The following table distinguishes between the change in interest income attributable to change in average loan balance (volume) and the change in interest income attributable to change in annualized yield (rate) for the years ended December 31, 2024 and 2023.

Average

Loans

Interest

Income

Average

Yield

($ in thousands)

Year ended December 31, 2024

$

4,488,301

$

406,843

9.06

%

Year ended December 31, 2023

3,725,197

310,775

8.34

%

Volume variance

763,104

63,662

Rate variance

32,406

0.72

%

Total interest income variance

$

96,068

Interest Expense — Portfolio Related. Portfolio related interest expense consists of interest incurred on our warehouse facilities and securitized debt, increased by $60.7 million, or 32.6%, to $247.2 million for the year ended December 31, 2024, from $186.5 million for the year ended December 31, 2023. The increase in portfolio related interest expense in 2024 was primarily attributable to a higher loan portfolio being financed and increased interest rates.

56

The following table presents information regarding the portfolio related interest expense and distinguishes between the change in interest expense attributable to changes in the average outstanding debt balance (volume) and the change in cost of funds (rate) for the years ended December 31, 2024 and 2023.

Average

Debt (1)

Interest

Expense

Cost of

Funds

($ in thousands)

Year ended December 31, 2024

$

4,076,596

$

247,218

6.06

%

Year ended December 31, 2023

3,341,411

186,468

5.58

%

Volume variance

735,185

41,027

Rate variance

19,723

0.48

%

Total interest expense variance

$

60,750

(1)
Includes securitized debit and warehouse agreements.

Net Interest Income After Provision for Credit Losses

Net interest income after provision for credit losses increased 27.2% over the prior year driven by our growth in the portfolio.

Year Ended December 31,

2024

2023

$ Change

% Change

($ in thousands)

Net interest income - portfolio related

$

159,625

$

124,307

$

35,318

28.4

%

Interest expense - corporate debt

23,821

16,556

7,265

43.9

Net interest income

135,804

107,751

28,053

26.0

Provision for credit losses

1,173

1,915

(742

)

(38.7

)

Net interest income after provision for credit losses

$

134,631

$

105,836

$

28,795

27.2

%

Interest Expense — Corporate Debt. Corporate debt interest expense increased by $7.2 million to $23.8 million for the year ended December 31, 2024 from $16.6 million for the year ended December 31, 2023 due to the addition of a $75.0 million financing and its related debt issuance costs amortization. The corporate debt balance was $290.0 million and $215.0 million as of December 31, 2024 and 2023, respectively.

Provision for Credit Losses. Our provision for credit losses decreased by approximately $0.7 million to $1.2 million for the year ended December 31, 2024 from $1.9 million for the year ended December 31, 2023. The decrease in provision for credit losses was primarily attributable to the decrease in our loans held at amortized cost resulting from loan paydowns and payoffs.

57

Other Operating Income

The table below presents the various components of other operating income for the year ended December 31, 2024 and 2023. The $35.5 million net increase was primarily driven by higher unrealized gains on valuation of securitized debt at fair value, origination fee income, and unrealized gains on valuation of fair value loans.

Year Ended December 31,

2024

2023

$ Change

% Change

($ in thousands)

Gain on disposition of loans

$

9,940

$

8,238

$

1,702

20.7

%

Unrealized gain on fair value loans

55,857

47,850

8,007

16.7

Unrealized gain (loss) on fair value securitized debt

2,581

(9,002

)

11,583

128.7

Unrealized gain (loss) on mortgage servicing rights

375

(660

)

1,035

156.8

Origination fee income

24,007

12,450

11,557

92.8

Interest income on cash balance

6,490

5,194

1,296

25.0

Other income

2,148

1,840

308

16.7

Total other operating income

$

101,398

$

65,910

$

35,488

53.8

%

Gain on Disposition of Loans. Gain on disposition of loans increased by $1.7 million to $9.9 million for the year ended December 31, 2024 compared to $8.2 million for the year ended December 31, 2023. The increase was primarily due to an increase in gain on transfer to REO upon foreclosure.

Unrealized Gain on Fair Value Loans. Unrealized gain on fair value loans increased by $8.0 million to $55.9 million for the year ended December 31, 2024 compared to $47.9 million for the year ended December 31, 2023. The increase in unrealized gain was mainly driven by gains from new loan originations and improved credit markets.

Unrealized Gain/Loss on Fair Value Securitized Debt. Unrealized gain on fair value securitized debt increased by $11.6 million to $2.6 million for the year ended December 31, 2024 compared to an unrealized loss of $9.0 million for the year ended December 31, 2023. The increase in unrealized gain was primarily attributable to improved securitization execution.

Unrealized Gain/Loss on Mortgage Servicing Rights. Unrealized gain on mortgage servicing rights was $0.4 million for the year ended December 31, 2024 compared to an unrealized loss of $0.7 million for the year ended December 31, 2023. The increase was mainly attributable to the increase in Century's loan servicing portfolio.

Origination Fee Income. Origination fee income increased by $11.6 million to $24.0 million for the year ended December 31, 2024 compared to $12.5 million for the year ended December 31, 2023. The increase was primarily due to higher loan originations.

Interest Income on Cash Balance. Interest income on cash balance increased by $1.3 million to $6.5 million for the year ended December 31, 2024 compared to $5.2 million for the year ended December 31, 2023. The increase was primarily due to higher interest earning cash balances.

Other Income. Other income increased to $2.1 million for the year ended December 31, 2024 compared to $1.8 million for the year ended December 31, 2023 due to higher loan extension fees collected on short-term loan extensions.

58

Operating Expenses

Gross revenue consists of interest income and other operating income. Total operating expense represents 27.5% and 26.7% of gross revenue for the years ended December 31, 2024 and 2023, respectively. The table below presents the various components of operating expenses for the years ended December 31, 2024 and 2023. Total operating expenses increased by 38.8%, or $39.0 million to $139.6 million for the year ended December 31, 2024 from $100.6 million for the year ended December 31, 2023.

Year Ended December 31,

2024

2023

$ Change

% Change

($ in thousands)

Compensation and employee benefits

$

69,589

$

48,344

$

21,245

43.9

%

Origination expenses

3,077

518

2,559

494.0

Securitization expenses

19,396

12,923

6,473

50.1

Loan servicing

22,388

17,631

4,757

27.0

Professional fees

7,616

4,599

3,017

65.6

Rent and occupancy

1,929

1,927

2

0.1

Real estate owned, net

6,030

6,153

(123

)

(2.0

)

Other operating expenses

9,613

8,524

1,089

12.8

Total operating expenses

$

139,638

$

100,619

$

39,019

38.8

%

Compensation and Employee Benefits. Compensation and employee benefits increased to $69.6 million for the year ended December 31, 2024 from $48.3 million for the year ended December 31, 2023. The increase was mainly driven by higher commissions expense in 2024 as our loan originations increased.

Origination Expenses. Origination expenses increased to $3.1 million for the year ended December 31, 2024 from $0.5 million for the year ended December 31, 2023. The increase of $2.6 million was primarily due to higher loan originations in 2024.

Securitization Expenses. Securitization expenses were $19.4 million and $12.9 million for the years ended December 31, 2024 and 2023, respectively. The $6.5 million increase in securitization expenses for the year ended December 31, 2024 was due to the higher amount of securitized debt issued as compared to the prior year

Loan Servicing. Loan servicing expenses increased to $22.4 million for the year ended December 31, 2024 from $17.6 million for the year ended December 31, 2023. The $4.8 million increase for the year ended December 31, 2024 was mainly due to the increase in our total loan portfolio.

Professional Fees. Professional fees increased to $7.6 million for the year ended December 31, 2024 from $4.6 million for the year ended December 31, 2023 primarily due to an increase in legal expenses.

Rent and Occupancy. Rent and occupancy expenses remained relatively consistent at $1.9 million for both years ended December 31, 2024 and 2023.

Real Estate Owned, Net. Net expenses of real estate owned decreased slightly to $6.0 million for the year ended December 31, 2024 from $6.2 million for the year ended December 31, 2023 driven by favorable asset management.

Other Operating Expenses. Other operating expenses increased to $9.6 million for the year ended December 31, 2024 from $8.5 million for the year ended December 31, 2023 mainly due to decreases in marketing and data processing expenses.

Income Tax Expense. Income tax expense was $27.9 million and $18.8 million for the years ended December 31, 2024 and 2023, respectively. Our annual consolidated effective rate as a percentage of pre-tax income for 2024 was 29.0%, compared to 25.2% for 2023. The 2024 effective tax rate differed from the federal statutory rate of 21.0% principally because of state taxes.

59

Quarterly Results of Operations

The following table sets forth certain unaudited financial information for each of the last eight completed quarters. The quarterly information has been prepared on the same basis as the consolidated financial statements and includes all adjustments (consisting of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of the information presented. This information should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full year.

Three Months Ended

December 31,

2025

September 30,

2025

June 30,

2025

March 31,

2025

December 31,

2024

September 30,

2024

June 30,

2024

March 31,

2024

($ in thousands)

(unaudited)

Interest income

$

152,403

$

144,119

$

135,567

$

118,740

$

113,484

$

105,070

$

97,760

$

90,529

Interest expense - portfolio related

94,652

88,899

81,838

75,088

68,484

63,871

59,188

55,675

Net interest income - portfolio related

57,751

55,220

53,729

43,652

45,000

41,199

38,572

34,854

Net interest margin - portfolio related

3.59

%

3.65

%

3.82

%

3.35

%

3.70

%

3.60

%

3.54

%

3.35

%

Interest expense - corporate debt

6,142

6,144

6,143

6,142

6,143

6,143

6,155

5,380

Net interest income

51,609

49,076

47,586

37,510

38,857

35,056

32,417

29,474

Net interest margin - total company

3.21

%

3.25

%

3.39

%

2.88

%

3.20

%

3.06

%

2.98

%

2.83

%

Provision for (reversal of) credit losses

1,954

381

1,598

1,872

22

(69

)

218

1,002

Net interest income after provision for (reversal of) credit losses

49,655

48,695

45,988

35,638

38,835

35,125

32,199

28,472

Other operating income

53,249

37,077

39,847

33,446

32,330

20,732

22,561

25,775

Operating expenses

52,855

50,397

51,913

42,190

39,127

34,613

34,887

31,011

Income before income taxes

50,049

35,375

33,922

26,894

32,038

21,244

19,873

23,236

Income tax expense

15,296

9,963

7,752

8,246

11,233

5,627

5,162

5,903

Net income

34,753

25,412

26,170

18,648

20,805

15,617

14,711

17,333

Net income (loss) attributable to noncontrolling interest

(44

)

39

173

(239

)

218

(186

)

(67

)

82

Net income attributable to Velocity Financial, Inc.

$

34,797

$

25,373

$

25,997

$

18,887

$

20,587

$

15,803

$

14,778

$

17,251

Liquidity and Capital Resources

Sources and Uses of Liquidity

We fund our lending activities primarily through borrowings under our warehouse repurchase facilities, securitized debt, unsecured debt, other corporate-level debt, equity and debt securities, and net cash provided by operating activities to manage our business. We use cash to originate and acquire investor real estate loans, repay principal and interest on our borrowings, fund our operations and meet other general business needs.

Warehouse Facilities

As of December 31, 2025, we had five non-mark-to-market warehouse facilities, one modified mark-to-market warehouse facility and one mark-to-market NPL warehouse facility to support our loan origination and acquisition activities. The maturity of our warehouse facilities ranges from one to three years. The borrowings are collateralized primarily by performing loans. All warehouse facilities are based on SOFR, plus margins ranging from 1.60% to 4.00%. Borrowing under these facilities was $310.4 million with $624.6 million of available capacity as of December 31, 2025.

As of December 31, 2024, we had five non-mark-to-market warehouse facilities and one modified mark-to-market warehouse facility to support our loan origination and acquisition activities. The maturity of our warehouse facilities ranges from one to three years. The borrowings are collateralized primarily by performing loans. All warehouse facilities are based on SOFR, plus margins ranging from 1.60% to 4.50%. Borrowing under these facilities was $350.0 million with $435.0 million of available capacity under our warehouse and repurchase facilities as of December 31, 2024.

60

Six warehouse facilities fund less than 100% and one warehouse facility funds at 100% of the principal balance of the mortgage loans we own, requiring us to use working capital to fund the remaining portion. We may need to use additional working capital if loans become delinquent, because the amount permitted to be financed by the facilities may change based on the delinquency performance of the pledged collateral.

All borrower payments on loans financed under the warehouse facilities are segregated into pledged accounts with the loan servicer. All principal amounts in excess of the interest due are applied to reduce the outstanding borrowings under the warehouse facilities. The warehouse facilities also contain customary covenants, including financial covenants that require us to maintain minimum liquidity, a minimum net worth, a maximum debt-to-net worth ratio and a ratio of a minimum earnings before interest, taxes, depreciation and amortization of interest expense. If we fail to meet any of the covenants, or otherwise default under the facilities, the lenders have the right to terminate their facility and require immediate repayment, which may require us to sell our loans at less than optimal terms. As of December 31, 2025, we were in compliance with these covenants.

Securitized Debt

From May 2011 through December 2025, we have completed 46 transactions, issuing $10.6 billion in principal amount of securities to third parties. All borrower payments are segregated into remittance accounts at the primary servicer and remitted to the trustee of each trust monthly. We are the sole beneficial interest holder of the applicable trusts, which are variable interest entities included in our consolidated financial statements. The transactions are accounted for as secured borrowings under U.S. GAAP. Tables summarizing the investor real estate loans securitized, securities issued, securities retained by the Company at the time of the securitization, and our accumulated interest as of December 31, 2025 and 2024, the stated maturity for each securitized debt, the outstanding bond balances, and the weighted average rate on the securities for the Trusts as of December 31, 2025 and 2024, are included in Item 15. Exhibits, Financial Statement Schedules. The securities are callable by us when the stated principal balance is less than a certain percentage, ranging from 10% to 30% of the original stated principal balance of loans at issuance. As a result, the actual maturity date of the securities issued will likely be earlier than their respective stated maturity date.

Our intent is to use the proceeds from the issuance of new securities primarily to repay our warehouse borrowings and originate new investor real estate loans in accordance with our underwriting guidelines, as well as for general corporate purposes. Our financing sources may include borrowings in the form of additional bank credit facilities (including term loans and revolving credit facilities), repurchase agreements, warehouse repurchase facilities and other sources of private financing. We also plan to continue using securitized debt as long-term financing for our portfolio, and we do not plan to structure any securitized debt as sales or utilize off-balance-sheet vehicles. We believe any financing of assets and/or securitized debt we may undertake will be sufficient to fund our working capital requirements.

Cash and Cash Equivalents

Our total liquidity was $116.8 million as of December 31, 2025, comprised of $92.1 million in cash and $24.7 million in borrowings from available warehouse capacity on unencumbered loans. Our additional available warehouse capacity as of December 31, 2025 was $599.9 million, bringing total liquidity plus available warehouse capacity to $716.7 million.

Our total liquidity plus available warehouse capacity was $530.9 million as of December 31, 2024, comprised of $435.0 million of available warehouse capacity, $49.9 million in cash, and $46.0 million of available borrowings for unencumbered loan.

During the years ended December 31, 2025 and 2024, we generated approximately $178.4 million and $8.9 million, respectively, of net cash and cash equivalents from operations, investing and financing activities.

61

Cash Flows

The following table summarizes the net cash provided by (used in) operating activities, investing activities and financing activities for the periods indicated:

For The Year Ended December 31,

2025

2024

2023

(In thousands)

Cash provided by (used in):

Operating activities

$

18,161

$

37,755

$

48,835

Investing activities

(1,521,782

)

(1,045,082

)

(584,732

)

Financing activities

1,682,028

1,016,230

535,768

Net change in cash, cash equivalents, and restricted cash

$

178,407

$

8,903

$

(129

)

Operating Activities

Cash flows from operating activities primarily includes net income adjusted for: (1) cash used for origination of held for sale loans and the related cash proceeds from the sales of such loans, (2) non-cash items including valuation changes, provision for credit losses, discount accretion, and amortization of debt issuance discount and costs, and (3) changes in the balances of operating assets and liabilities.

For the year ended December 31, 2025, our net cash provided by operating activities of $18.2 million consisted mainly of $105.0 million in net income, and $50.9 million proceeds from sales of loans held for sale, offset by $86.4 million of net valuation gain and $49.7 million on originations of loans held for sale.

For the year ended December 31, 2024, our net cash provided by operating activities of $37.8 million consisted mainly of $68.5 million in net income, and $24.0 million proceeds from sales of loans held for sale, offset by $55.9 million of valuation gains and $23.6 million on originations of loans held for sale.

For the year ended December 31, 2023, our net cash provided by operating activities of $48.8 million consisted mainly of $52.3 million in net income, and $25.8 million proceeds from sales of loans held for sale, offset by $38.2 million of valuation gains.

Investing Activities

For the year ended December 31, 2025, our net cash used in investing activities of $1.5 billion consisted mainly of $2.7 billion in cash used to originate held for investment loans, offset by $963.8 million in cash received in payments on held for investment loans.

For the year ended December 31, 2024, our net cash used in investing activities of $1.0 billion consisted mainly of $1.8 billion in cash used to originate held for investment loans, offset by $723.0 million in cash received in payments on held for investment loans.

For the year ended December 31, 2023, our net cash used in investing activities of $584.7 million consisted mainly of $1.1 billion in cash used to originate held for investment loans, offset by $459.7 million in cash received in payments on held for investment loans.

Financing Activities

For the year ended December 31, 2025, our net cash provided by financing activities of $1.7 billion consisted mainly of $2.7 billion in securitized debt issued and $2.6 billion in borrowings from our warehouse and repurchase facilities. The cash generated was offset by payments we made of $2.7 billion and $971.7 million on our warehouse and repurchase facilities and securitized debt, respectively.

For the year ended December 31, 2024, our net cash provided by financing activities of $1.0 billion consisted mainly of $1.9 billion in borrowings from our warehouse and repurchase facilities and $1.6 billion in securitized debt issued. The cash generated was offset by payments we made of $1.9 billion and $666.3 million on our warehouse and repurchase facilities and securitized debt issued, respectively.

62

For the year ended December 31, 2023, our net cash provided by financing activities of $535.8 million consisted mainly of $1.2 billion in borrowings from our warehouse and repurchase facilities and $1.0 billion in securitized debt issued. The cash generated was offset by payments we made of $1.2 billion and $438.8 million on our warehouse and repurchase facilities and securitized debt issued, respectively.

April 2020 Preferred Stocks and Warrants

On April 7, 2020, we sold 45,000 shares of Series A Convertible Preferred Stock and Warrants to purchase 3,013,125 shares of our common stock in a private placement to two of our largest stockholders. On October 8, 2021, we exercised our option to convert all of the 45,000 outstanding shares of Series A Convertible Preferred Stock into 11,688,310 shares of our common stock.

The warrants were exercisable at any time and from time to time, in whole or in part, by the holders until April 7, 2025 at an exercise price of $2.96 per share of common stock with respect to 2,008,750 of warrants, and at an exercise price of $4.94 per share of common stock with respect to 1,004,374 of warrants.

In April 2025, three funds affiliated with a related party of the Company completed the exercise of their Warrants to purchase an aggregate 1,339,166 shares of the Company's common stock, resulting in the Company issuing net shares of 1,080,338 common stock after the withholding and transfer of an aggregate of 258,828 shares of common stock into the Company’s treasury account. In May 2025, a related party of the Company completed the exercise of their Warrants to purchase an aggregate 1,673,958 shares of the Company's common stock. Net proceeds from warrants exercised amounted to $10.9 million. As of June 30, 2025, we had no warrants outstanding as they were all exercised by the respective holders.

At-The-Market Equity Offering Program

On September 3, 2021, we entered into separate Equity Distribution Agreements with counterparties to establish an at-the-market equity offering program (“ATM Program”) where we may issue and sell, from time to time, shares of our common stock. Our ATM Program allows for aggregate gross sales of our common stock of up to $50,000,000 provided that the number of shares sold under the ATM Program does not exceed 4,000,000.

On May 3, 2024, we entered into separate Equity Distribution Agreements, each as amended by Amendment No. 1 to such agreement, dated December 12, 2024, with counterparties to establish a successor ATM Program, with substantially the same terms as the prior Equity Distribution Agreements noted above, under which we may issue and sell, from time to time, shares of our common stock up to $50,000,000 provided that the number of shares sold under the ATM Program does not exceed 4,000,000.

On April 11, 2025, we entered into separate Amendment No. 2 (the “Amendments”) to the Equity Distribution Agreements, each dated as of May 3, 2024, each as amended by Amendment No. 1 thereto, each dated December 12, 2024. The Amendments increased the maximum aggregate offering amount of shares of the Company’s common stock that may be sold pursuant to the Equity Distribution Agreements, from $50,000,000 to $100,000,000, and increased the maximum number of shares that may be sold pursuant to the Equity Distribution Agreements from 4,000,000 to 6,000,000.

The following table summarizes the activity in our ATM Program for the periods indicated:

Years Ended December 31,

2025

2024

2023

(In thousands, except per share amount)

Number of shares sold

2,067

388

29

Net sale proceeds

$

38,120

$

7,679

$

349

Weighted average price per share

$

18.74

$

20.19

$

12.12

Contractual Obligations and Commitments

On March 15, 2022, we entered into a five-year $215.0 million syndicated corporate debt agreement (“the 2022 Term Loan”). The 2022 Term Loan bears interest at a fixed rate of 7.125% and matures on March 15, 2027. Interest on the 2022 Term Loan is paid every six months. As of December 31, 2025 and 2024, the balance of the

63

2022 Term Loan was $215.0 million. The 2022 Term Loan was paid off on January 30, 2026 with proceeds from the issuance and sale of $500 million Senior Notes (“the 2026 Term Notes”).

On February 5, 2024, we entered into a five-year $75.0 million syndicated corporate debt agreement, (“the 2024 Term Loan”), which bears interest at 9.875% and matures on February 15, 2029. Interest on the 2024 Term Loan is paid every six months. The net proceeds from the 2024 Term Loan was used for loan originations and general corporate purposes. As of December 31, 2025 and 2024, the balance of the 2024 Term Loan was $75.0 million.

Velocity Commercial Capital, LLC is the borrower of the 2022 Term Loan and 2024 Term Loan, which are secured by substantially all of the borrower’s non-warehoused assets, with a guarantee from Velocity Financial, Inc., that is secured by the equity interests of the borrower. The syndicated corporate debt agreement contains customary affirmative and negative covenants, including financial maintenance covenants and limitations on dividends by the borrower.

As of December 31, 2025, we maintained warehouse facilities to finance our investor real estate loans and had approximately $310.4 million in outstanding borrowings with $624.6 million of available capacity under our warehouse and repurchase facilities. The warehouse and repurchase facilities have maturity dates ranging from May 2026 to April 2028.

The following table illustrates our contractual obligations existing as of December 31, 2025:

January 1, 2026 -

January 1, 2027-

December 31, 2026

December 31, 2028

Thereafter

Total

(In thousands)

Warehouse and repurchase

   facilities

$

262,212

$

48,227

$

—

$

310,439

(1)

Notes payable (corporate

   debt)

—

215,000

75,000

290,000

Leases payments under

   noncancelable operating

   leases

994

1,975

1,206

4,175

Total

$

263,206

$

265,202

$

76,206

$

604,614

(1)
Amount represents gross warehouse borrowing. Balance of $308.5 million in the Consolidated Balance Sheets as of December 31, 2025 is net of $1.9 million debt issuance costs.

Off-Balance-Sheet Arrangements

At no time have we maintained any relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance, or special-purpose or variable interest entities, established for the purpose of facilitating off-balance-sheet arrangements or other contractually narrow or limited purposes. Further, we have never guaranteed any obligations of unconsolidated entities or entered into any commitment or intent to provide funding to any such entities.

New Accounting Standards

Codification Improvements

In December 2025, the FASB issued ASU 2025-12 “Codification Improvements” to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to U.S. GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. The amendments make the Codification easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

Interim Reporting

In December 2025, the FASB issued ASU No. 2025-11 “Interim Reporting (Topic 270): Narrow-Scope Improvements” (“ASU 2025-11”). ASU 2025-11 clarifies the applicability of interim reporting guidance, types of interim reporting, and the form and content of interim financial statements in accordance with United States

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generally accepted accounting principles (“GAAP”). ASU 2025-11 does not change the fundamental nature of interim reporting or modify the scope of current interim disclosure requirements, but clarifies and improves the navigability of existing interim reporting requirements. This guidance is effective for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. Upon adoption, ASU 2025-11 may be applied prospectively or retrospectively to any or all periods presented in the interim financial statements. We are currently evaluating the impact ASU 2025-11 will have on our financial statements and related disclosures.

Derivatives and Hedging

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815), Hedge Accounting Improvements, which aligns financial reporting with the economics of some of an entity's risk management activities by updating similar risk assessment for cash flow hedges, hedging interest payments on choose-your-rate debt, cash flow hedges of nonfinancial forecasted transactions, net written options as hedging instruments, and foreign currency-denominated debt designated as a hedging instrument and a hedged item. The amendments in ASU 2025-09 are effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods and applied on a prospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

Expense Disaggregation

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income (Subtopic 220-40) Expense Disaggregation Disclosures”, which requires specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively will need to be disclosed. The accounting update is effective January 1, 2027 for the Company. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

Recently Adopted Accounting Standard

Codification Improvements

In March 2024, the FASB issued ASU 2024-02, “Codification Improvements—Amendments to Remove References to the Concepts Statements,” which amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. ASU 2024-02 is effective January 1, 2025, for the Company. The Company adopted the provisions of ASU 2024-02 effective January 1, 2025, and the adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 240): Improvements to Income Tax Disclosures.” The amendments in this update require entities to disclose specific categories in the effective tax rate reconciliation and provide additional information for reconciling items where the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income/loss by the applicable statutory income tax rate. In addition, entities are required to disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by jurisdictions. The Company adopted the provisions of ASU 2023-09 effective January 1, 2025, and the adoption of this standard did not have a material impact on the Company's consolidated financial statements but resulted in expanded disclosures in Note 19 — Income Taxes to the consolidated financial statements. The Company prospectively adopted the provisions of this ASU.