Velocity Financial’s Q2 2025 Earnings Call Highlights

Velocity Financial, Inc. ((VEL)) has held its Q2 earnings call. Read on for the main highlights of the call.

Velocity Financial’s recent earnings call for Q2 2025 painted a picture of robust growth and strategic success, despite some challenges. The company reported significant increases in net income, loan production, and portfolio expansion, driven by an effective securitization strategy that enhanced liquidity. While the high nonperforming loan rate and increased prepayment activity present challenges, the overall sentiment was optimistic, reflecting strong performance and a positive outlook.

Record Quarterly Results

Velocity Financial achieved record quarterly results, with net income soaring by 76% and new loan production increasing by 72% compared to the same period in the previous year. This substantial growth underscores the company’s strong operational performance and strategic execution.

Revenue and Pretax Income Growth

The company reported a $31 million increase in revenue and a $14 million rise in pretax income, which significantly boosted the core pretax return on equity to 24%. These figures highlight Velocity Financial’s ability to generate substantial returns and improve profitability.

Portfolio Expansion

Velocity Financial’s portfolio expanded by nearly $1.4 billion year-over-year, with commercial properties contributing $770 million and residential properties adding $600 million. This expansion reflects the company’s successful efforts in growing its asset base and diversifying its holdings.

Securitization Activity

The completion of four securitizations, issuing just under $1 billion in securities, improved the company’s liquidity to $139 million. This strategic move has strengthened Velocity Financial’s financial position and provided additional capital for future growth.

Loan Production and Portfolio Growth

In Q2, Velocity Financial achieved record loan production of over $725 million in unpaid principal balance (UPB), marking a 13.3% increase from the previous quarter. This contributed to a 30.8% year-over-year growth in the company’s portfolio, showcasing its ability to scale operations effectively.

Net Interest Margin (NIM) Increase

The net interest margin for the quarter increased to 3.82%, a 47 basis point rise from the previous quarter. This improvement was largely driven by the recapture of delinquent interest on nonperforming loans, indicating effective management of loan assets.

Nonperforming Asset Resolution

The asset management team successfully resolved over $100 million of UPB, achieving gains of $3.6 million. This demonstrates Velocity Financial’s capability in managing and resolving delinquent loans efficiently.

High Nonperforming Loan Rate

Despite a slight decrease from previous quarters, the nonperforming loan rate remains high at 10.3%. This continues to be a challenge for the company, requiring ongoing attention and management.

Concerns About Prepayment Rates

An increase in prepayment rates was observed, which, while typical for the business, could potentially impact future interest income. This is an area of concern that the company will need to monitor closely.

Forward-Looking Guidance

Velocity Financial’s forward-looking guidance remains optimistic, with expectations of continued growth in net income and loan production. The company aims to maintain its robust underwriting standards, reflected in the low weighted average loan-to-value (LTV) of 62.7% for new originations. With enhanced liquidity and strategic capital market transactions, Velocity Financial is well-positioned for future expansion.

In summary, Velocity Financial’s Q2 2025 earnings call highlighted a strong performance with significant growth in key financial metrics. Despite challenges such as a high nonperforming loan rate and increased prepayment activity, the company’s strategic initiatives and effective management have resulted in a positive outlook. Investors can look forward to continued growth and robust financial health in the coming quarters.