Velocity Financial Reverses Second-Quarter Production Decline

The Tip Desk · November 11, 2026 · 3 min read

Core net income rose to $30.0 million as third-quarter loan production reached $911.3 million.

Velocity Financial, Inc. (VEL), a vertically integrated real estate finance company that originates business-purpose loans, reported core net income of $30.0 million for the third quarter of 2026, up 11.5% from $26.9 million a year earlier. Core diluted earnings were $0.76 a share.

GAAP net income was $26.4 million, or $0.67 a share. Pretax income was $38.3 million.

The quarter’s defining turn was in origination volume. Loan production totaled $911.3 million, including $7.0 million of construction advances, up from $739.0 million in the third quarter of 2025. That followed a second-quarter production figure of $672.6 million, which had declined from $725.4 million a year earlier. Unit production rose 12.0% versus the year-ago third quarter, with an average loan balance of $457 thousand. The company said the volume was driven primarily by demand for government-insured multifamily and traditional commercial products. Government-insured multifamily originations were $154.9 million, compared with $25.9 million a year earlier; traditional commercial originations were $422.5 million. Investor 1-4 family production was $318.3 million. Short-term originations were $15.5 million.

Portfolio net interest margin widened to 3.78% from 3.65% a year earlier. The company attributed the lift to a lower average cost of securitized debt and rate discipline on new production, with a weighted-average coupon of 10.12% on held-for-investment loans produced in the third quarter. Portfolio-related debt cost was 6.04%. Total-company NIM was 2.97%.

Net interest income was $53.5 million. After a $0.5 million provision for credit losses, net interest income after provision was $53.0 million. Other operating income was $49.2 million, which the company said was driven primarily by higher originations and origination fee income. Net revenue was $102.1 million.

Operating expenses were $63.9 million, lifting the operating expense ratio to 29.2% from 27.8%. Compensation was $29.2 million as headcount increased, the company said. Loan servicing expense was $9.1 million. Real estate owned, net, was $10.6 million. Securitization expense was $5.6 million on two deals. Other operating expenses were $9.4 million, which the company said included higher merger-acquisition-related costs. Excluding $2.4 million of those merger-related costs, the operating expense ratio would have been 28.1%. Core adjustments also included equity-award and ESPP expenses and potential M&A due diligence.

The loan book stood at $7.5 billion in unpaid principal balance as of September 30, 2026, up 18.8% from $6.3 billion a year earlier. Loan count was 19,481. Weighted-average loan-to-value was 64.5%. UPB of held-for-investment fair-value loans was $5.7 billion, or 76.5% of total HFI loans. Prepayments were $261.9 million in UPB.

Nonperforming loans were $756.5 million in UPB, or 10.1% of HFI loans, compared with $614.2 million and 9.8% a year earlier. NPL resolutions totaled $90.0 million in UPB, with a total recovery rate of 108.2%, or $7.4 million of UPB resolved including accrued interest. Charge-offs were $0.3 million. The CECL reserve was $5.3 million. Total loss on existing REO was $8.8 million.

The company completed two securitizations totaling $516.0 million of securities issued. Liquidity was $193.4 million, consisting of $86.8 million in unrestricted cash and $106.6 million in available borrowings from unpledged loans. Total available warehouse line capacity was $425.4 million. Diluted book value per common share was $19.23.

President and CEO Chris Farrar said third-quarter results were driven by consistent portfolio NIM and strong production volume, and that financing demand remained strong as evidenced by an expanding pipeline of new applications. The company said it remains confident in long-term growth prospects and its ability to sustain profitable market-share growth.