10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission File Number: 001-39183

Velocity Financial, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	46-0659719
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2945 Townsgate Road, Suite 110 Westlake Village, California	91361
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (818) 532-3700

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class

     Trading
Symbol(s)

     Name of each exchange on which registered

     Common stock, par value $0.01 per share

     VEL

     The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2025, the registrant had 36,491,520 shares of common stock outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Changes in Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	61

SIGNATURES		63

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

VELOCITY FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)


	March 31, 2025			December 31, 2024
	(Unaudited)
ASSETS
Cash and cash equivalents	$	51,676		$	49,901
Restricted cash		22,785			20,929
Loans held for sale, at fair value		5,008			—
Loans held for investment, at amortized cost (net of allowance for credit losses of $5,017 and $4,174 as of March 31, 2025 and December 31, 2024, respectively)		2,322,009			2,420,116
Loans held for investment, at fair value		3,287,188			2,766,951
Total loans, net		5,614,205			5,187,067
Accrued interest receivables		38,460			35,235
Receivables due from servicers		120,016			123,494
Other receivables		3,599			1,359
Real estate owned, net		83,444			68,000
Property and equipment, net		1,592			1,650
Deferred tax asset		11,051			13,612
Mortgage servicing rights, at fair value		12,631			13,712
Goodwill		6,775			6,775
Other assets		5,296			5,674
Total assets	$	5,971,530		$	5,527,408

LIABILITIES
Accounts payable and accrued expenses	$	153,475		$	147,814
Secured financing, net		285,294			284,833
Securitized debt, at amortized cost		1,935,746			2,019,056
Securitized debt, at fair value		2,459,767			2,207,408
Warehouse and repurchase facilities, net		570,025			348,082
Derivative liability		1,004			—
Total liabilities		5,405,311			5,007,193
Commitments and contingencies
EQUITY
Common stock ($0.01 par value, 100,000,000 shares authorized; 35,715,905 and 33,761,147 shares issued, 35,384,747 and 33,545,585 shares outstanding as of March 31, 2025 and December 31, 2024, respectively)		359			339
Additional paid-in capital		353,446			322,954
Retained earnings		216,212			197,325
Treasury stock, at cost (331,158 and 215,562 common shares as of March 31, 2025 and December 31, 2024, respectively)		(5,031	)		(2,869	)
Accumulated other comprehensive loss		(1,799	)		(805	)
Total Velocity Financial, Inc. stockholders' equity		563,187			516,944
Noncontrolling interest in subsidiary		3,032			3,271
Total equity		566,219			520,215
Total liabilities and equity	$	5,971,530		$	5,527,408

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands)

The following table represents the assets and liabilities of consolidated variable interest entities as follows:


	March 31, 2025		December 31, 2024
	(Unaudited)
ASSETS
Restricted cash	$	8,679	$	9,847
Loans held for investment, at amortized cost		2,300,612		2,395,394
Loans held for investment, at fair value		2,507,591		2,264,641
Accrued interest and other receivables		143,884		145,891
Real estate owned, net		74,483		57,838
Deferred tax asset		382		272
Total assets	$	5,035,631	$	4,873,883

LIABILITIES
Accounts payable and accrued expenses	$	101,662	$	96,895
Securitized debt		4,395,513		4,226,464
Total liabilities	$	4,497,175	$	4,323,359

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2025			2024
Interest income	$	118,740		$	90,529
Interest expense — portfolio related		75,088			55,675
Net interest income — portfolio related		43,652			34,854
Interest expense — corporate debt		6,142			5,380
Net interest income		37,510			29,474
Provision for credit losses		1,872			1,002
Net interest income after provision for credit losses		35,638			28,472
Other operating income
Gain on disposition of loans		2,834			1,699
Unrealized gain on fair value loans		34,836			18,925
Unrealized loss on fair value securitized debt		(13,682	)		(2,318	)
Unrealized gain (loss) on mortgage servicing rights		(1,081	)		444
Origination fee income		8,679			4,986
Interest income on cash balance		1,339			1,631
Other income		521			408
Total other operating income		33,446			25,775
Operating expenses
Compensation and employee benefits		21,684			15,357
Origination expenses		838			646
Securitization expenses		4,043			2,874
Loan servicing		8,008			4,824
Professional fees		1,783			2,115
Rent and occupancy		275			498
Real estate owned, net		3,029			2,455
Other operating expenses		2,530			2,242
Total operating expenses		42,190			31,011
Income before income taxes		26,894			23,236
Income tax expense
Federal		5,850			4,162
State		2,396			1,741
Total income tax expense		8,246			5,903
Net income		18,648			17,333
Net income (loss) attributable to noncontrolling interest		(239	)		82
Net income attributable to Velocity Financial, Inc.	$	18,887		$	17,251
Less undistributed earnings attributable to unvested restricted stock awards		233			217
Net earnings attributable to common stockholders	$	18,654		$	17,034
Earnings per common share
Basic	$	0.55		$	0.52
Diluted	$	0.51		$	0.49
Weighted average common shares outstanding
Basic		33,687			32,541
Diluted		36,811			35,439

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2025			2024
Net income attributable to Velocity Financial, Inc.	$	18,887		$	17,251
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on cash flow hedges arising during the period		(1,056	)		1,891
Reclassification adjustments included in net income		62			113
Total other comprehensive income (loss), net of tax		(994	)		2,004
Total comprehensive income attributable to Velocity Financial, Inc.	$	17,893		$	19,255

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands, except share data)

(Unaudited)


	Common Stock - Number of Shares								Shareholders' Equity
	Shares Issued		Treasury Shares			Shares Outstanding			Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total Stockholders' Equity			Noncontrolling Interest			Total Equity
Balance – December 31, 2023		32,987,248		(121,412	)		32,865,836		$	331	$	306,736	$	128,906	$	(1,319	)	$	(1,210	)	$	433,444		$	3,429		$	436,873
Issuance of common stock		9,537		—			9,537			3		152		—		—			—			155			—			155
Shares surrendered for tax withholding on vested awards		—		(79,258	)		(79,258	)		—		—		—		(1,284	)		—			(1,284	)		—			(1,284	)
Restricted stock awarded and stock-based compensation expenses		189,679		—			189,679			—		1,371		—		—			—			1,371			—			1,371
Net income		—		—			—			—		—		17,251		—			—			17,251			82			17,333
Other comprehensive income		—		—			—			—		—		—		—			2,004			2,004			—			2,004
Balance – March 31, 2024		33,186,464		(200,670	)		32,985,794		$	334	$	308,259	$	146,157	$	(2,603	)	$	794		$	452,941		$	3,511		$	456,452

Balance – December 31, 2024		33,761,147		(215,562	)		33,545,585		$	339	$	322,954	$	197,325	$	(2,869	)	$	(805	)	$	516,944		$	3,271		$	520,215
Issuance of common stock		1,569,255		—			1,569,255			20		28,522		—		—			—			28,542			—			28,542
Shares surrendered for tax withholding on vested awards		—		(115,596	)		(115,596	)		—		—		—		(2,162	)		—			(2,162	)		—			(2,162	)
Restricted stock awarded and stock-based compensation expenses		385,503		—			385,503			—		1,970		—		—			—			1,970			—			1,970
Net income (loss)		—		—			—			—		—		18,887		—			—			18,887			(239	)		18,648
Other comprehensive loss		—		—			—			—		—		—		—			(994	)		(994	)		—			(994	)
Balance – March 31, 2025		35,715,905		(331,158	)		35,384,747		$	359	$	353,446	$	216,212	$	(5,031	)	$	(1,799	)	$	563,187		$	3,032		$	566,219

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Three Months Ended March 31,
	2025			2024
	(Unaudited)
Cash flows from operating activities:
Net income	$	18,648		$	17,333
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		138			182
Amortization of right-of-use assets		469			344
Provision for credit losses		1,872			1,002
Origination of loans held for sale		(4,886	)		—
Net accretion of discount on purchased loans and amortization of deferred loan origination costs		954			1,082
Provision for (reversal of) uncollectible borrower advances		627			(4	)
Gain on disposition of loans		—			(539	)
Real estate acquired through foreclosure in excess of recorded investment		(2,834	)		(1,160	)
Amortization of debt issuance discount and costs		2,894			3,284
Change in valuation of real estate owned		2,073			1,722
Change in valuation of fair value loans		(34,836	)		(18,925	)
Change in valuation of mortgage servicing rights		1,081			(444	)
Change in valuation of fair value securitized debt		13,682			2,318
Gain on sale of real estate owned		(300	)		(286	)
Stock-based compensation		1,970			1,371
Hedging activities		(1,552	)		675
Deferred tax expense		2,963			480
Change in operating assets and liabilities:
Accrued interest and other receivables		(5,004	)		407
Other assets		430			(921	)
Accounts payable and accrued expenses		5,147			2,660
Net cash provided by operating activities		3,536			10,581
Cash flows from investing activities:
Purchase of loans held for investment		—			(11,591	)
Origination of loans held for investment		(635,537	)		(378,671	)
Proceeds from sales of loans originally classified as held for investment		—			15,072
Payoffs of loans held for investment and loans at fair value		228,322			158,549
Proceeds from sale of real estate owned		8,019			5,741
Capitalized improvement on real estate held for sale		(19	)		—
Change in advances		(1,859	)		(1,503	)
Change in impounds and deposits		(259	)		(640	)
Purchase of property and equipment		(80	)		(41	)
Proceeds from sale of property and equipment		—			640
Net cash used in investing activities		(401,413	)		(212,444	)
Cash flows from financing activities:
Warehouse repurchase facilities advances		819,529			329,011
Warehouse repurchase facilities repayments		(597,740	)		(303,686	)
Proceeds from secured financing		—			74,311
Proceeds of securitized debt, net		415,680			229,368
Repayment of securitized debt		(262,319	)		(126,568	)
Debt issuance costs		(253	)		(2,326	)
Proceeds from issuance of common stocks, net		28,797			155
Tax withholding related to vesting of equity awards		(2,162	)		(1,284	)
Deferred stock issuance costs		(24	)		—
Net cash provided by financing activities		401,508			198,981
Net increase (decrease) in cash, cash equivalents, and restricted cash		3,631			(2,882	)
Cash, cash equivalents, and restricted cash at beginning of period		70,830			61,927
Cash, cash equivalents, and restricted cash at end of period	$	74,461		$	59,045

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)


	Three Months Ended March 31,
	2025		2024
	(Unaudited)
Supplemental cash flow information:
Cash paid during the period for interest	$	78,344	$	58,917
Cash paid during the period for income taxes, net		771		17
Noncash transactions from investing and financing activities:
Transfer of loans held for investment to real estate owned		22,384		8,029
Transfer of accrued interest to loans held for investment		699		219
Transfer of loans held for sale to held for investment		—		2,481
Recognition of new leases in exchange for lease obligations		814		—
Deferred stock issuance costs charged against additional paid-in capital		255		1

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1 — Organization and Description of Business

Velocity Financial, LLC (“VF” or “the Company”) was a Delaware limited liability company formed on July 9, 2012, for the purpose of acquiring all membership units in Velocity Commercial Capital, LLC (“VCC”). On January 16, 2020, Velocity Financial, LLC converted from a Delaware limited liability company to a Delaware corporation and changed its name to Velocity Financial, Inc. Upon completion of the conversion, Velocity Financial, LLC’s Class A equity units of 97,513,533 and Class D equity units of 60,193,989 were converted to 11,749,994 shares of Velocity Financial, Inc. common stock. On January 22, 2020, the Company completed its initial public offering of 7,250,000 shares of common stock at a price of $13.00 per share to the public. On January 28, 2020, the Company completed the sale of an additional 1,087,500 shares of its common stock, representing the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. The Company’s stock trades on The New York Stock Exchange under the symbol “VEL.”

VCC, a California LLC formed on June 2, 2004, is a mortgage lender that originates and acquires residential and commercial investor real estate loans, providing capital to the investor real estate loan market. The Company is licensed as a California Finance Lender and, as such, is required to maintain a minimum net worth of $250 thousand. The Company does not believe there is any potential risk of not being able to meet this regulatory requirement. The Company uses its equity capital and borrowed funds to originate and invest in investor real estate loans and seeks to generate income based primarily on the difference between the yield on its investor real estate loan portfolio and the cost of its borrowings. The Company may also sell loans from time to time. The Company does not originate or acquire investments outside of the United States of America.

The Company, through its wholly owned subsidiaries, is the sole beneficial owner of the Velocity Commercial Capital Loan Trusts, from the 2017-2 Trust through and including the 2025-1 Trust, all of which are New York common law trusts, with the exception of the VCC 2022-MC1 Trust, and VCC 2023-RTL1 Trust which are Delaware statutory trusts. The Trusts are bankruptcy remote, variable interest entities (“VIEs”) formed for the purpose of providing secured borrowings to the Company and are consolidated with the accounts of the Company.

On December 28, 2021, the Company acquired an 80% ownership interest in Century Health & Housing Capital, LLC (“Century”). Century is a licensed Government National Mortgage Association (“Ginnie Mae” or “GNMA”) 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 is a consolidated subsidiary of the Company as of completion of the acquisition. In addition, as a servicer of Ginnie Mae loans, Century is required to maintain a minimum net worth, and Century is in compliance with this requirement as of March 31, 2025.

Note 2 — Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited Consolidated Financial Statements as of and for the three months ended March 31, 2025 and 2024 have been prepared on a basis that is substantially consistent with the accounting principles applied to the Company’s audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal, recurring nature. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter or for the full year. The interim financial information should be read in conjunction with the Company’s audited Consolidated Financial Statements.

(a)

Use of Estimates

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of consolidated income and expenses during the reporting period.

(b)

Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 — Basis of Presentation and Summary of Significant Accounting Policies, of its audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the Securities and Exchange Commission (“SEC”).

There have been no material changes to the Company’s significant accounting policies as described in its 2024 Annual Report.

(c)

Principles of Consolidation

The principles of consolidation require management to determine and reassess the requirement to consolidate VIEs each reporting period, and therefore, the determination may change based on new facts and circumstances pertaining to each VIE. This could result in a material impact to the Company’s consolidated financial statements in subsequent reporting periods.

The Company consolidates the assets, liabilities, and remainder interests of the Trusts as management determined that VCC is the primary beneficiary of these entities. The Company’s ongoing asset management responsibilities provide the Company with the power to direct the activities that most significantly impact the VIE’s economic performance, and the remainder interests provide the Company with the right to receive benefits and the obligation to absorb losses, limited to its investment in the remainder interest of the Trusts.

The consolidated financial statements as of March 31, 2025 and December 31, 2024 include only those assets, liabilities, and results of operations related to the business of the Company, its subsidiaries, and VIEs.

(d)

Fair Value Option Accounting

The Company elected to apply fair value option (“FVO”) accounting to mortgage loans originated effective October 1, 2022. The fair value option loans are presented as a separate line item in the Consolidated Balance Sheets. Interest income on FVO loans is recorded on an accrual basis in the Consolidated Statements of Income under the heading “Interest income.” Changes in the fair value of the loans are recorded as “Unrealized gain (loss) on fair value of loans” in the Consolidated Statements of Income. The Company does not record a current expected credit loss (“CECL”) reserve on fair value option loans.

The Company elected to apply FVO accounting to securitized debt issued effective January 1, 2023 when the underlying collateral is also carried at fair value. The FVO securitized debt is presented as a separate line item in the Consolidated Balance Sheets. The Company reflects interest expense on the FVO securitized debt as “Interest expense – portfolio related” and presents the other fair value changes of the FVO securitized debt separately as “Unrealized gain (loss) on fair value securitized debt” in the Consolidated Statements of Income.

(e)

Derivative Instruments and Hedge Accounting

The Company issues fixed rate debt at regular intervals during the year through the securitization of its fixed rate mortgage assets. The Company is subject to interest rate risk on its forecasted debt issuances as these fixed rate debt issuances are priced at then-current market rates. The Company’s risk management objective is to hedge the risk of variability in its interest payment cash flows attributable to changes in the benchmark Secured Overnight Financing Rate (“SOFR”) between the time the fixed rate mortgages are originated and the fixed rate debt is issued. To accomplish this hedging strategy, the Company may from time to time enter into derivative instruments such as forward starting payer interest rate swaps or interest rate payer and receiver swaptions designated as cash flow hedges that are designed to be highly correlated to the underlying terms of the forecasted debt instruments. To qualify for hedge accounting, the Company formally documents its hedging relationships at inception, including the identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction at the time the derivative contract is executed. The Company also formally assesses effectiveness both at the hedge's inception and on an ongoing basis.

The Company's policy is to present all derivative balances on a gross basis, without regard to counterparty master netting agreements or similar arrangements. The fair value of the derivative instruments is recorded as a separate line item on the Consolidated Balance Sheets as an asset or liability with the related gains or losses reported as a component of Accumulated Other Comprehensive Income (“AOCI”). Beginning in the period in which the forecasted debt issuance occurs and the related derivative instruments are terminated, the gains or losses accumulated in AOCI are then reclassified into interest expense as a yield adjustment over the term of the related debt. If the Company determines it is not probable that the forecasted transaction will occur, gains and losses are reclassified immediately to earnings. The related cash flows are recognized on the cash flows from operating activities section on the Consolidated Statements of Cash Flows. The Company uses hedge accounting based on the exposure being hedged as cash flow hedges in operations.

(f)

Other Comprehensive Income

Other comprehensive income (“OCI”) is reported in the Consolidated Statements of Comprehensive Income. OCI is comprised of net income and the effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges, net of tax, less amounts reclassified into earnings.

Accumulated other comprehensive income represents the cumulative balance of OCI, net of tax, as of the end of the reporting period and relates to unrealized gains or losses on cash flow hedges, net of tax.

Note 3 — Current Accounting Developments

Recently Issued Accounting Standards

Debt with Conversion and Other Options

In November 2024, the FASB issued ASU 2024-04, “Debt - Debt With Conversion and Other Options (Subtopic 220-40),” which clarifies requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion rather than as debt extinguishments. The accounting update is effective January 1, 2026 for the Company. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

Expense Disaggregation

In January 2025, the FASB issued ASU 2025-01, “Income Statement - Reporting Comprehensive Income (Subtopic 220-40) Expense Disaggregation Disclosures,” clarifies for non-calendar year end entities the interim effective date of ASU 2024-03. All public business entities are required to adopt the guidance in the annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

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 Standards

Liabilities of Crypto-Assets

In March 2025, the FASB issued ASU 2025-02, “Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122,” which rescinds the interpretive guidance in Staff Accounting Bulletin No. 121 regarding the accounting for obligations to safeguard crypto-assets that an entity holds for platform users. The amendments in this ASU were effective immediately and on a fully retrospective basis to annual periods beginning after December 15, 2024. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements.

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.

Compensation

In March 2024, the FASB issued ASU 2024-01, “Compensation— Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards,” clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 - Compensation - Stock Compensation or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or non-employees in exchange for goods or services. ASU 2024-01 is effective January 1, 2025, for the Company. The Company adopted the provisions of ASU 2024-01 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,” which requires additional disclosure and disaggregated information in the Income Tax Rate reconciliation using both percentages and reporting currency amounts, with additional qualitative explanations of individually significant reconciling items. The updated guidance also requires disclosure of the amount of income taxes paid (net of refunds received) disaggregated by jurisdictional categories (federal (national), state, and foreign). 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 and related disclosures.

Note 4 — Cash, Cash Equivalents, and Restricted Cash

The Company is required to hold cash for potential future advances due to certain borrowers. In accordance with various mortgage servicing and related agreements, Century maintains escrow accounts for mortgage insurance premium, tax and insurance, working capital, sinking fund and other mortgage related escrows. The total escrow balances payable amounted to $85.5 million and $86.7 million as of March 31, 2025 and 2024, respectively. These amounts are not reflected on the Consolidated Balance Sheets of the Company.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company’s Consolidated Balance Sheets to the total of the same such amounts shown in the Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025		2024
	(In thousands)
Cash and cash equivalents	$	51,676	$	34,829
Restricted cash		22,785		24,216
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	74,461	$	59,045

Note 5 — Loans Held for Sale at Fair Value

The following table summarizes loans held for sale at fair value as of March 31, 2025 and December 31, 2024:


Loans Held for Sale, at Fair Value:	March 31, 2025		December 31, 2024
	(In thousands)
Unpaid principal balance	$	4,886	$	—
Valuation adjustments on FVO loans held for sale		122		—
Ending balance	$	5,008	$	—

Note 6 — Loans Held for Investment at Amortized Cost and Loans Held for Investment at Fair Value

The following tables summarize loans held for investment as of March 31, 2025 and December 31, 2024:


	March 31, 2025
	Loans Held for Investment, at Amortized Cost			Loans Held for Investment, at Fair Value		Total Loans Held for Investment
	(In thousands)
Unpaid principal balance	$	2,304,587		$	3,140,428	$	5,445,015
Valuation adjustments on FVO loans		—			146,760		146,760
Deferred loan origination costs		22,439			—		22,439
		2,327,026			3,287,188		5,614,214
Allowance for credit losses		(5,017	)		—		(5,017	)
Total loans held for investment	$	2,322,009		$	3,287,188	$	5,609,197


	December 31, 2024
	Loans Held for Investment, at Amortized Cost			Loans Held for Investment, at Fair Value		Total Loans Held for Investment
	(In thousands)
Unpaid principal balance	$	2,400,720		$	2,655,217	$	5,055,937
Valuation adjustments on FVO loans		—			111,734		111,734
Deferred loan origination costs		23,570			—		23,570
		2,424,290			2,766,951		5,191,241
Allowance for credit losses		(4,174	)		—		(4,174	)
Total loans held for investment	$	2,420,116		$	2,766,951	$	5,187,067

The following tables summarize the Unpaid Principal Balance (“UPB”) and amortized cost basis of loans in the Company's COVID-19 forbearance program for the three months ended March 31, 2025 and the year ended December 31, 2024:


	Three Months Ended March 31, 2025
	UPB			%	Amortized Cost			%
	($ in thousands)
Beginning balance	$	142,827			$	144,247
Foreclosures		(744	)			(752	)
Repayments		(5,941	)			(6,030	)
Ending balance	$	136,142			$	137,465

Performing/Accruing	$	99,448		73.0%	$	100,408		73.0%

Nonperforming/Nonaccrual	$	36,694		27.0%	$	37,057		27.0%


	Year Ended December 31, 2024
	UPB			%	Amortized Cost			%
	($ in thousands)
Beginning balance	$	174,571			$	176,515
Foreclosures		(5,292	)			(5,416	)
Repayments		(26,452	)			(26,852	)
Ending balance	$	142,827			$	144,247

Performing/Accruing	$	102,769		72.0%	$	103,790		72.0%

Nonperforming/Nonaccrual	$	40,058		28.0%	$	40,457		28.0%

Since April 1, 2020, the inception of the COVID-19 forbearance program, the Company has modified $413.6 million in UPB of loans, which includes capitalized interest of $15.5 million. As of March 31, 2025, $274.9 million in UPB of modified loans has been paid down, which includes $6.5 million of capitalized interest received.

Approximately 73.0% and 72.0% of the COVID forbearance loans in UPB were performing, and 27.0% and 28.0% were on nonaccrual status as of March 31, 2025 and December 31, 2024, respectively.

As of March 31, 2025 and December 31, 2024, the gross unpaid principal balances of loans held for investment pledged as collateral for the Company’s warehouse facilities and securitized debt issued were as follows:


	March 31, 2025		December 31, 2024
	(In thousands)
The 2013 repurchase agreement	$	243,152	$	133,577
The 2021/2024 repurchase agreements		221,369		148,676
The 2021 term repurchase agreement		100,622		74,324
The 2023 repurchase agreement		103,221		42,613
The 2024 bank credit agreement		52,464		23,330
Total pledged loans	$	720,828	$	422,520

2017-2 Trust	$	37,715	$	39,231
2018-1 Trust		26,892		28,564
2018-2 Trust		59,260		62,845
2019-1 Trust		65,774		71,521
2019-2 Trust		49,227		52,417
2019-3 Trust		49,166		52,177
2020-1 Trust		94,390		98,858
2021-1 Trust		156,984		162,750
2021-2 Trust		126,698		130,363
2021-3 Trust		133,911		136,891
2021-4 Trust		210,538		219,907
2022-1 Trust		215,826		222,909
2022-2 Trust		195,006		201,363
2022-MC1 Trust		57,283		58,133
2022-3 Trust		243,444		253,621
2022-4 Trust		247,792		254,668
2022-5 Trust		177,873		187,078
2023-1 Trust		174,100		180,941
2023-2 Trust		149,189		165,155
2023-3 Trust		187,286		200,943
2023-RTL1 Trust		67,256		85,530
2023-4 Trust		173,773		185,013
2024-1 Trust		169,770		188,638
2024-2 Trust		250,069		271,542
2024-3 Trust		196,175		198,640
2024-4 Trust		237,549		248,788
2024-5 Trust		287,824		293,881
2024-6 Trust		291,344		299,216
2025-1 Trust		350,700		—
Total	$	4,682,814	$	4,551,583

(a)

Nonaccrual Loans

The following tables present the amortized cost basis, or recorded investment, of the Company’s loans held for investment, excluding loans carried at fair value, that were nonperforming and on nonaccrual status as of March 31, 2025 and December 31, 2024.


	March 31, 2025
	Total Nonaccrual		Nonaccrual with No Allowance for Credit Losses		Nonaccrual with Allowance for Credit Losses		Allowance for Loans Individually Evaluated
	(In thousands)
Commercial - Purchase	$	33,954	$	32,958	$	996	$	85
Commercial - Refinance		96,686		90,394		6,292		1,105
Residential 1-4 Unit - Purchase		29,358		29,358		—		—
Residential 1-4 Unit - Refinance		115,903		110,962		4,941		193
Short Term 1-4 Unit - Purchase		2,595		2,595		—		—
Short Term 1-4 Unit - Refinance		17,465		17,327		138		46
Total	$	295,961	$	283,594	$	12,367	$	1,429


	December 31, 2024
	Total Nonaccrual		Nonaccrual with No Allowance for Credit Losses		Nonaccrual with Allowance for Credit Losses		Allowance for Loans Individually Evaluated
	(In thousands)
Commercial - Purchase	$	33,290	$	32,294	$	996	$	85
Commercial - Refinance		99,683		96,155		3,528		421
Residential 1-4 Unit - Purchase		29,573		29,573		—		—
Residential 1-4 Unit - Refinance		122,439		114,265		8,174		450
Short Term 1-4 Unit - Purchase		4,754		4,754		—		—
Short Term 1-4 Unit - Refinance		23,556		23,341		215		73
Total	$	313,295	$	300,382	$	12,913	$	1,029

The Company has made the accounting policy election not to measure an allowance for accrued interest receivables. The Company has also made the accounting policy election to write off accrued interest receivables by reversing interest income when loans are placed on nonaccrual status, or 90 days or more past due. Any future payments received for these loans will be recognized on a cash basis.

The following table presents the amortized cost basis in loans held for investment, excluding loans held for investment at fair value, as of March 31, 2025 and 2024, and the amount of accrued interest receivable written off by reversing interest income by portfolio segment of loans that have been placed on nonaccrual for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025				2024
	Amortized Cost		Interest Reversal		Amortized Cost		Interest Reversal
	(In thousands)
Commercial - Purchase	$	548,796	$	264	$	613,661	$	136
Commercial - Refinance		687,917		278		779,302		545
Residential 1-4 Unit - Purchase		400,778		141		495,611		264
Residential 1-4 Unit - Refinance		636,983		275		774,982		305
Short Term 1-4 Unit - Purchase		30,602		80		33,254		30
Short Term 1-4 Unit - Refinance		21,950		—		35,975		31
Total	$	2,327,026	$	1,038	$	2,732,785	$	1,311

The cash basis interest income recognized on nonaccrual loans, including loans held for investment at fair value, was $8.5 million and $7.3 million for the three months ended March 31, 2025 and 2024, respectively. No accrued interest income was recognized on nonaccrual loans for the three months ended March 31, 2025 and 2024. The average recorded investment of individually evaluated loans, computed using month-end balances, was $300.6 million and $325.0 million for the three months ended March 31, 2025 and 2024, respectively. There were no commitments to lend additional funds to debtors whose loans have been modified as of March 31, 2025 and 2024.

(b)

Allowance for Credit Losses

The following tables present the activity in the allowance for credit losses for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31, 2025
	Commercial Purchase			Commercial Refinance			Residential 1-4 Unit Purchase			Residential 1-4 Unit Refinance			Short Term 1-4 Unit Purchase			Short Term 1-4 Unit Refinance			Total
	(In thousands)
Allowance for credit losses:
Beginning balance - January 1, 2025	$	662		$	1,399		$	746		$	1,281		$	12		$	74		$	4,174
Provision for (reversal of) credit losses		(7	)		848			271			640			33			87			1,872
Charge-offs		—			(118	)		(177	)		(624	)		(7	)		(103	)		(1,029	)
Ending balance	$	655		$	2,129		$	840		$	1,297		$	38		$	58		$	5,017

Allowance related to:
Loans individually evaluated	$	85		$	1,105		$	—		$	193		$	—		$	46		$	1,429
Loans collectively evaluated	$	570		$	1,024		$	840		$	1,104		$	38		$	13		$	3,589
Amortized cost related to:
Loans individually evaluated	$	33,954		$	96,686		$	29,358		$	115,903		$	2,595		$	17,465		$	295,961
Loans collectively evaluated	$	514,842		$	591,231		$	371,420		$	521,080		$	28,007		$	4,485		$	2,031,065


	Three Months Ended March 31, 2024
	Commercial Purchase			Commercial Refinance			Residential 1-4 Unit Purchase			Residential 1-4 Unit Refinance			Short Term 1-4 Unit Purchase			Short Term 1-4 Unit Refinance		Total
	(In thousands)
Allowance for credit losses:
Beginning balance - January 1, 2024	$	935		$	1,805		$	585		$	1,256		$	23		$	165	$	4,769
Provision for (reversal of) credit losses		(74	)		91			684			120			93			88		1,002
Charge-offs		—			(2	)		(296	)		(107	)		(99	)		—		(504	)
Ending balance	$	861		$	1,894		$	973		$	1,269		$	17		$	253	$	5,267

Allowance related to:
Loans individually evaluated	$	130		$	642		$	185		$	253		$	—		$	221	$	1,431
Loans collectively evaluated	$	731		$	1,252		$	788		$	1,016		$	17		$	32	$	3,836
Amortized cost related to:
Loans individually evaluated	$	28,127		$	97,571		$	38,090		$	130,052		$	5,584		$	28,140	$	327,564
Loans collectively evaluated	$	585,534		$	681,731		$	457,521		$	644,930		$	27,670		$	7,835	$	2,405,221

(c)

Credit Quality Indicator

A credit quality indicator is a statistic used by the Company to monitor and assess the credit quality of loans held for investment, excluding loans held for investment at fair value. The Company monitors its charge-offs rate in relation to its nonperforming loans as a credit quality indicator. The annualized charge-offs rates were 1.38% and 0.63% of average nonperforming loans for the three months ended March 31, 2025 and 2024, respectively.

Other credit quality indicators include aging status and accrual status. Nonperforming loans are loans that are 90 or more days past due, in bankruptcy, in foreclosure, or not accruing interest. Past due status is based on the contractual terms of the loan. The following tables present the aging status of the amortized cost basis in the loans held for investment portfolio, which include $137.5 million and $144.2 million loans in the Company’s COVID-19 forbearance program, excluding loans held for investment at fair value, as of March 31, 2025 and December 31, 2024, respectively:



March 31, 2025	30–59 Days Past Due		60–89 Days Past Due		90+ Days Past Due(1)		Total Past Due		Current		Total Loans
	(In thousands)
Loans individually evaluated
Commercial - Purchase	$	1,666	$	1,021	$	31,267	$	33,954	$	—	$	33,954
Commercial - Refinance		4,246		3,751		88,689		96,686		—		96,686
Residential 1-4 Unit - Purchase		105		2,972		26,281		29,358		—		29,358
Residential 1-4 Unit - Refinance		3,528		1,749		110,626		115,903		—		115,903
Short Term 1-4 Unit - Purchase		—		—		2,595		2,595		—		2,595
Short Term 1-4 Unit - Refinance		—		—		17,465		17,465		—		17,465
Total loans individually evaluated	$	9,545	$	9,493	$	276,923	$	295,961	$	—	$	295,961
Loans collectively evaluated
Commercial - Purchase	$	25,245	$	8,648	$	—	$	33,893	$	480,949	$	514,842
Commercial - Refinance		34,802		14,938		—		49,740		541,491		591,231
Residential 1-4 Unit - Purchase		17,269		5,898		—		23,167		348,253		371,420
Residential 1-4 Unit - Refinance		26,126		15,226		—		41,352		479,728		521,080
Short Term 1-4 Unit - Purchase		—		—		—		—		28,007		28,007
Short Term 1-4 Unit - Refinance		—		—		—		—		4,485		4,485
Total loans collectively evaluated	$	103,442	$	44,710	$	—	$	148,152	$	1,882,913	$	2,031,065
Ending balance	$	112,987	$	54,203	$	276,923	$	444,113	$	1,882,913	$	2,327,026

(1)

Includes loans in bankruptcy and foreclosure less than 90 days past due.



December 31, 2024	30–59 Days Past Due		60–89 Days Past Due		90+ Days Past Due(1)		Total Past Due		Current		Total Loans
	(In thousands)
Loans individually evaluated
Commercial - Purchase	$	387	$	555	$	32,348	$	33,290	$	—	$	33,290
Commercial - Refinance		3,903		3,326		92,454		99,683		—		99,683
Residential 1-4 Unit - Purchase		606		957		28,010		29,573		—		29,573
Residential 1-4 Unit - Refinance		4,784		708		116,947		122,439		—		122,439
Short Term 1-4 Unit - Purchase		—		—		4,754		4,754		—		4,754
Short Term 1-4 Unit - Refinance		—		203		23,353		23,556		—		23,556
Total loans individually evaluated	$	9,680	$	5,749	$	297,866	$	313,295	$	—	$	313,295
Loans collectively evaluated
Commercial - Purchase	$	19,633	$	12,027	$	—	$	31,660	$	500,865	$	532,525
Commercial - Refinance		37,480		12,132		—		49,612		565,675		615,287
Residential 1-4 Unit - Purchase		16,040		7,479		—		23,519		367,015		390,534
Residential 1-4 Unit - Refinance		32,398		14,302		—		46,700		499,730		546,430
Short Term 1-4 Unit - Purchase		10,073		—		—		10,073		15,989		26,062
Short Term 1-4 Unit - Refinance		—		—		—		—		157		157
Total loans collectively evaluated	$	115,624	$	45,940	$	—	$	161,564	$	1,949,431	$	2,110,995
Ending balance	$	125,304	$	51,689	$	297,866	$	474,859	$	1,949,431	$	2,424,290

(1)

Includes loans in bankruptcy and foreclosure less than 90 days past due.

In addition to the aging status, the Company also evaluates credit quality by accrual status. The following tables present the amortized cost in loans held for investment, excluding loans held for investment at fair value, based on accrual status and by loan origination year as of March 31, 2025 and December 31, 2024.


	Term Loans Amortized Cost Basis by Origination Year
March 31, 2025:	2022		2021		2020		2019		Prior		Total
	(In thousands)
Commercial - Purchase
Payment performance
Performing	$	217,595	$	201,152	$	23,848	$	32,344	$	39,903	$	514,842
Nonperforming		11,305		11,085		4,990		4,723		1,851		33,954
Total Commercial - Purchase	$	228,900	$	212,237	$	28,838	$	37,067	$	41,754	$	548,796

Commercial - Refinance
Payment performance
Performing	$	199,926	$	162,099	$	40,187	$	74,561	$	114,458	$	591,231
Nonperforming		27,591		20,957		3,970		15,836		28,332		96,686
Total Commercial - Refinance	$	227,517	$	183,056	$	44,157	$	90,397	$	142,790	$	687,917

Residential 1-4 Unit - Purchase
Payment performance
Performing	$	165,196	$	159,072	$	8,034	$	17,078	$	22,040	$	371,420
Nonperforming		10,245		10,761		1,701		657		5,994		29,358
Total Residential 1-4 Unit - Purchase	$	175,441	$	169,833	$	9,735	$	17,735	$	28,034	$	400,778

Residential 1-4 Unit - Refinance
Payment performance
Performing	$	212,846	$	198,025	$	15,662	$	44,014	$	50,533	$	521,080
Nonperforming		45,313		31,433		7,461		14,989		16,707		115,903
Total Residential 1-4 Unit - Refinance	$	258,159	$	229,458	$	23,123	$	59,003	$	67,240	$	636,983

Short Term 1-4 Unit - Purchase
Payment performance
Performing	$	2,119	$	—	$	19,443	$	6,445	$	—	$	28,007
Nonperforming		2,012		—		583		—		—		2,595
Total Short Term 1-4 Unit - Purchase	$	4,131	$	—	$	20,026	$	6,445	$	—	$	30,602

Short Term 1-4 Unit - Refinance
Payment performance
Performing	$	4,485	$	—	$	—	$	—	$	—	$	4,485
Nonperforming		3,019		—		2,011		8,700		3,735		17,465
Total Short Term 1-4 Unit - Refinance	$	7,504	$	—	$	2,011	$	8,700	$	3,735	$	21,950

Total Portfolio	$	901,652	$	794,584	$	127,890	$	219,347	$	283,553	$	2,327,026

Gross charge-offs - quarter-ended March 31, 2025	$	566	$	241	$	28	$	75	$	119	$	1,029

Gross charge-offs - year-to-date March 31, 2025	$	566	$	241	$	28	$	75	$	119	$	1,029


	Term Loans Amortized Cost Basis by Origination Year
December 31, 2024	2022		2021		2020		2019		Prior		Total
	(In thousands)
Commercial - Purchase
Payment performance
Performing	$	223,564	$	210,742	$	24,253	$	33,505	$	40,461	$	532,525
Nonperforming		13,046		6,524		4,994		5,758		2,968		33,290
Total Commercial - Purchase	$	236,610	$	217,266	$	29,247	$	39,263	$	43,429	$	565,815

Commercial - Refinance
Payment performance
Performing	$	207,766	$	167,568	$	40,772	$	76,886	$	122,295	$	615,287
Nonperforming		26,624		19,172		4,305		18,708		30,874		99,683
Total Commercial - Refinance	$	234,390	$	186,740	$	45,077	$	95,594	$	153,169	$	714,970

Residential 1-4 Unit - Purchase
Payment performance
Performing	$	173,252	$	167,804	$	8,166	$	17,740	$	23,572	$	390,534
Nonperforming		9,724		12,384		1,704		657		5,104		29,573
Total Residential 1-4 Unit - Purchase	$	182,976	$	180,188	$	9,870	$	18,397	$	28,676	$	420,107

Residential 1-4 Unit - Refinance
Payment performance
Performing	$	226,187	$	201,247	$	16,116	$	46,487	$	56,393	$	546,430
Nonperforming		46,873		34,974		7,560		15,176		17,856		122,439
Total Residential 1-4 Unit - Refinance	$	273,060	$	236,221	$	23,676	$	61,663	$	74,249	$	668,869

Short Term 1-4 Unit - Purchase
Payment performance
Performing	$	2,044	$	—	$	17,985	$	6,033	$	—	$	26,062
Nonperforming		4,170		—		584		—		—		4,754
Total Short Term 1-4 Unit - Purchase	$	6,214	$	—	$	18,569	$	6,033	$	—	$	30,816

Short Term 1-4 Unit - Refinance
Payment performance
Performing	$	157	$	—	$	—	$	—	$	—	$	157
Nonperforming		8,293		—		2,186		9,042		4,035		23,556
Total Short Term 1-4 Unit - Refinance	$	8,450	$	—	$	2,186	$	9,042	$	4,035	$	23,713

Total Portfolio	$	941,700	$	820,415	$	128,625	$	229,992	$	303,558	$	2,424,290

Gross charge-offs - quarter-ended December 31, 2024	$	111	$	184	$	—	$	265	$	139	$	699

Gross charge-offs - year-ended December 31, 2024	$	1,132	$	219	$	—	$	265	$	152	$	1,768

Nonaccrual Loans - Loans Held for Investment at Fair Value

The following tables present the aggregate fair value of loans held for investment at fair value that are 90 days or more past due and/or in nonaccrual status, and the difference between the aggregate fair value and the aggregate unpaid principal balance as of March 31, 2025 and December 31, 2024 by loan segments:


	Fair Value						Unpaid Principal Balance						Difference
	Current–89 Days		90+ Days Past Due				Current–89 Days		90+ Days Past Due				90+ Days Past Due
March 31, 2025	Past Due		or Nonaccrual		Total		Past Due		or Nonaccrual		Total		or Nonaccrual
	(In thousands)
Commercial - Purchase	$	587,772	$	22,078	$	609,850	$	541,038	$	26,117	$	567,155	$	(4,039	)
Commercial - Refinance		885,183		35,558		920,741		811,158		42,983		854,141		(7,425	)
Residential 1-4 Unit - Purchase		413,102		32,346		445,448		394,026		39,258		433,284		(6,912	)
Residential 1-4 Unit - Refinance		1,001,273		129,914		1,131,187		945,912		157,254		1,103,166		(27,340	)
Short Term 1-4 Unit - Purchase		82,427		5,921		88,348		81,572		7,092		88,664		(1,171	)
Short Term 1-4 Unit - Refinance		73,331		18,283		91,614		71,722		22,296		94,018		(4,013	)
Ending balance	$	3,043,088	$	244,100	$	3,287,188	$	2,845,428	$	295,000	$	3,140,428	$	(50,900	)


	Fair Value						Unpaid Principal Balance						Difference
	Current–89 Days		90+ Days Past Due				Current–89 days		90+ Days Past Due				90+ Days Past Due
December 31, 2024	Past Due		or Nonaccrual		Total		past due		or Nonaccrual		Total		or Nonaccrual
	(In thousands)
Commercial - Purchase	$	505,244	$	15,636	$	520,880	$	466,526	$	18,586	$	485,112	$	(2,950	)
Commercial - Refinance		672,504		24,129		696,633		620,332		29,195		649,527		(5,066	)
Residential 1-4 Unit - Purchase		381,660		28,352		410,012		366,431		34,457		400,888		(6,105	)
Residential 1-4 Unit - Refinance		862,971		103,985		966,956		819,633		126,340		945,973		(22,355	)
Short Term 1-4 Unit - Purchase		78,863		3,981		82,844		78,207		4,854		83,061		(873	)
Short Term 1-4 Unit - Refinance		76,277		13,349		89,626		74,620		16,036		90,656		(2,687	)
Ending balance	$	2,577,519	$	189,432	$	2,766,951	$	2,425,749	$	229,468	$	2,655,217	$	(40,036	)

Note 7 — Receivables Due From Servicers

The following tables summarize receivables due from servicers as of March 31, 2025 and December 31, 2024:


	March 31, 2025
	Securitized Debt		Warehouse and Repurchase Facilities and Other		Total
	(In thousands)
Loan principal payments due from servicers	$	60,222	$	152	$	60,374
Other loan servicing receivables		14,831		6,337		21,168
Loan servicing receivables		75,053		6,489		81,542
Corporate and escrow advances receivable		34,417		4,057		38,474
Total receivables due from servicers	$	109,470	$	10,546	$	120,016


	December 31, 2024
	Securitized Debt		Warehouse and Repurchase Facilities and Other		Total
	(In thousands)
Loan principal payments due from servicers	$	61,907	$	1,695	$	63,602
Other loan servicing receivables		17,246		5,404		22,650
Loan servicing receivables		79,153		7,099		86,252
Corporate and escrow advances receivable		33,387		3,855		37,242
Total receivables due from servicers	$	112,540	$	10,954	$	123,494

Note 8 — Real Estate Owned, Net

As of March 31, 2025, the carrying value of real estate owned was $83.4 million, of which $8.9 million were pledged as collateral under a warehouse repurchase agreement. As of December 31, 2024, the carrying value of real estate owned was $68.0 million, of which $10.2 million were pledged as collateral under a warehouse repurchase agreement.

Note 9 — Mortgage Servicing Rights

Mortgage loans serviced are related to the Century business and not included in the Consolidated Balance Sheets. The unpaid principal balance of mortgage loans serviced for others amounted to $798.7 million and $485.9 million as of March 31, 2025 and 2024, respectively. The Company has elected to record its mortgage servicing rights using the fair value measurement method. Fair value adjustments recorded at the end of the current period reflect valuation changes from the prior period-end. Significant assumptions used in determining the fair value of servicing rights as of March 31, 2025, December 31, 2024 and March 31, 2024 include: (1) Weighted average discount rate of 8.0% for all three periods, and (2) Weighted average conditional prepayment rate of 5.2%, 5.1% and 6.0%, respectively.

The following table presents the Company's mortgage servicing rights activity during the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025			2024
	(In thousands)
Balance at the beginning of period	$	13,712		$	8,578
Fair value adjustments		(1,081	)		444
Balance at the end of period	$	12,631		$	9,022

Note 10 — Goodwill

The following table presents the activity for goodwill as of March 31, 2025 and December 31, 2024:


	March 31, 2025		December 31, 2024
	(In thousands)
Balance at the beginning of period	$	6,775	$	6,775
Balance at the end of period	$	6,775	$	6,775

Note 11 — Securitized Debt at Amortized Cost and Securitized Debt at Fair Value

As of March 31, 2025, the Company is the sole beneficial interest holder of twenty-nine Trusts, which are variable interest entities included in the consolidated financial statements. The securitization transactions are accounted for as secured borrowings under U.S. GAAP. The securities are subject to redemption by the Company 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 dates of the securities issued could be earlier than their respective stated maturity dates, ranging from July 2028 through February 2055.

The following tables summarize securitized debt at amortized cost and securitized debt at fair value as of March 31, 2025 and December 31, 2024:


Securitized Debt, at Amortized Cost	March 31, 2025			December 31, 2024
	(In thousands)
Unpaid principal balance	$	1,967,928		$	2,049,790
Deferred issuance costs and discounts		(32,182	)		(30,734	)
Total securitized debt, at amortized cost	$	1,935,746		$	2,019,056


Securitized Debt, at Fair Value	March 31, 2025			December 31, 2024
	(In thousands)
Unpaid principal balance	$	2,461,311		$	2,219,218
Adjustment at issuance to recognize fair value (1)		(21,647	)		(18,231	)
Fair value at issuance		2,439,664			2,200,987
Valuation adjustment subsequent to issuance (2)		20,103			6,421
Total securitized debt at fair value	$	2,459,767		$	2,207,408

(1)

Balance sheet adjustment to recognize fair value at issuance. This valuation adjustment is not recognized in net income.

(2)

Valuation adjustment recognized in net income. No valuation change is due to instrument specific credit risk as the Company’s (issuer) credit risk has not changed.

The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of securitized debt at fair value as of March 31, 2025 and December 31, 2024:


	Fair Value		Unpaid Principal Balance		Difference
	(In thousands)
March 31, 2025	$	2,459,767	$	2,461,311	$	(1,544	)
December 31, 2024		2,207,408		2,219,218		(11,810	)

The following table presents the effective interest rate of securitized debt at amortized cost and securitized debt at fair value for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025			2024
	($ in thousands)
Interest expense	$	66,582		$	49,283
Average outstanding unpaid principal balance		4,387,277			3,486,173
Effective interest rate (1)		6.07	%		5.65	%

(1)

Effective interest rate represents annualized interest expense divided by average gross outstanding balance, which includes average rates of 5.89% and 5.38%, and debt issuance cost amortization of 0.18% and 0.27% for the three months ended March 31, 2025 and 2024, respectively.

Note 12 — Other Debt

Secured financings and warehouse facilities are utilized to finance the origination and purchase of commercial real estate mortgage loans. Warehouse facilities are designated to fund mortgage loans that are purchased and originated within specified underwriting guidelines. Most of these lines of credit fund less than 100% of the principal balance of the mortgage loans originated and purchased, requiring the use of working capital to fund the remaining portion.

(a)

Secured Financing, Net (“Corporate Debt”)

On March 15, 2022, the Company entered into a five-year $215.0 million syndicated corporate debt agreement, the (“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 March 31, 2025 and December 31, 2024, the balance of the 2022 Term Loan was $215.0 million.

On February 5, 2024, the Company entered into a five-year $75.0 million syndicated corporate debt agreement, the (“the 2024 Term Loan”). The 2024 Term Loan bears interest at 9.875% and matures on February 15, 2029. Interest on the 2024 Term Loan is paid every six months. As of March 31, 2025 and December 31, 2024, the balance of the 2024 Term Loan was $75.0 million.

The total balance of the 2022 Term Loan and the 2024 Term Loan (“Corporate Debt”) in the Consolidated Balance Sheets is net of debt issuance costs and discount of $4.7 million and $5.2 million as of March 31, 2025 and December 31, 2024, respectively. The Corporate Debt is secured by substantially all assets of the Company not otherwise pledged under a securitized debt or warehouse facility and contains certain reporting and financial covenants. Should the Company fail to adhere to those covenants, the lenders have the right to demand immediate repayment that may require the Company to sell the collateral at less than the carrying amounts. As of March 31, 2025, the Company was in compliance with all covenants.

(b)

Warehouse Repurchase and Revolving Loan Facilities, Net

On January 4, 2011, Century entered into a Master Participation and Facility Agreement with a bank (“the September 2022 Term Repurchase Agreement”). The Facility Agreement has a current extended maturity date of July 31, 2025, and is a short-term borrowing facility, collateralized by performing loans, with a maximum capacity of $60.0 million, and bears interest at one-month SOFR plus 1.60% with a 0.25% floor.

On May 17, 2013, the Company entered into a Repurchase Agreement (“the 2013 Repurchase Agreement”) with a warehouse lender. The 2013 Repurchase Agreement is a modified mark-to-market agreement and has a current maturity date of September 25, 2025, and is a short-term borrowing facility, collateralized by a pool of performing loans, with a maximum capacity of $300.0 million, and bears interest at SOFR plus 3.00%. All borrower payments on loans financed under the warehouse repurchase facility are first used to pay interest on the facility.

On January 29, 2021, the Company entered into a non-mark-to-market Repurchase Agreement (“the 2021 Repurchase Agreement”) with a warehouse lender. The 2021 Repurchase Agreement has a current extended maturity date of May 20, 2025, and is a short-term borrowing facility, collateralized by a pool of loans. On July 25, 2024, the Company entered into a mark-to-market Repurchase Agreement (“the 2024 Repurchase Agreement”) with the same warehouse lender. The 2024 Repurchase Agreement also has a maturity date of May 20, 2025, and is a short-term borrowing facility, collateralized by a pool of loans. The maximum capacity under both agreements is $200.0 million individually and in the aggregate. The 2024 Repurchase Agreement includes a $75.0 million sublimit for nonperforming loans. Borrowings under these two facilities bear interest at SOFR plus a margin of 3.00% during the availability period and 4.00% during the amortization period. All borrower payments on loans financed under the warehouse repurchase facilities are first used to pay interest on the facilities.

On April 16, 2021, the Company entered into a non-mark-to-market Term Repurchase Agreement (“the 2021 Term Repurchase Agreement”) with a warehouse lender. The 2021 Term Repurchase Agreement has a maturity date of April 16, 2026, with an extended borrowing period through June 13, 2025. During the borrowing period, the Company can take loan advances from time to time subject to availability. Each loan advance bears interest at SOFR plus a margin of 3.10%. The maximum capacity under this facility is $100.0 million.

On December 27, 2023, the Company entered into a loan facility agreement (“the 2023 Repurchase Agreement”) with a bank. The 2023 Repurchase Agreement has a maturity date of December 27, 2026. During the borrowing period, the Company can take loan advances from time to time subject to availability. Each loan advance bears interest at SOFR plus 3.00%. The maximum loan amount under this facility is $75.0 million. During the quarter ended March 31, 2025, the bank temporarily increased the maximum loan amount to $100.0 million.

On November 7, 2024, the Company entered into a non-mark-to-market secured revolving loan facility agreement (“the 2024 Bank Credit Agreement”) with a bank. The 2024 Bank Credit Agreement has a current maturity date of May 7, 2027. The eligible mortgage loan advance rate for performing loans is 82.5%, and the eligible past due loan and REO property advance rate is 55.0%. Each loan advance bears interest at SOFR plus 3.50%, with a floor of 2.00%. The maximum loan amount under this facility is $50.0 million.

Certain loans are pledged as collateral under the warehouse repurchase facilities and the revolving loan facility, which contain covenants. Should the Company fail to adhere to those covenants or otherwise default under the facilities, the lenders have the right to terminate the facilities and demand immediate repayment that may require the Company to sell the collateral at less than the carrying amounts. As of March 31, 2025 and December 31, 2024, the Company was in compliance with all covenants.

The following table summarizes the maximum borrowing capacity, current gross balances outstanding, and effective interest rates of the Company’s warehouse facilities and loan agreements as of March 31, 2025 and December 31, 2024:


			March 31, 2025							December 31, 2024
	Contract Date	Maturity Date	Period End Balance (1)		Maximum Borrowing Capacity		Effective Interest Rate			Period End Balance (1)		Maximum Borrowing Capacity		Effective Interest Rate
			($ in thousands)
The September 2022 term repurchase agreement	01/04/11	07/31/25	$	4,886	$	60,000		6.1	%	$	—	$	60,000		6.5	%
The 2013 repurchase agreement	05/17/13	09/25/25		195,523		300,000		7.7			106,675		300,000		9.0
The 2021/2024 repurchase agreements	1/29/2021 7/25/2024	05/20/25		179,585		200,000		7.8			126,815		200,000		9.0
The 2021 term repurchase agreement	04/16/21	04/16/26		71,756		100,000		7.6			52,408		100,000		8.5
The 2023 repurchase agreement	12/27/23	12/27/26		76,800		100,000		8.3			44,900		75,000		9.7
The 2024 bank credit agreement	11/07/24	05/07/27		43,284		50,000		8.9			19,248		50,000		9.2
Total			$	571,834	$	810,000				$	350,046	$	785,000

(1)

Warehouse repurchase facilities amounts on the Consolidated Balance Sheets are net of debt issuance costs, amounting to $1.8 million and $2.0 million as of March 31, 2025 and December 31, 2024, respectively.

The following table provides an overview of the activity and effective interest rates of the Company’s warehouse facilities and loan agreements for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025			2024
	($ in thousands)
Average outstanding balance	$	433,790		$	267,559
Highest outstanding balance at any month-end		571,834			361,677
Effective interest rate (1)		7.84	%		9.56	%

(1)

Effective interest rate represents annualized interest expense divided by average gross outstanding balance. The rate includes average rate of 7.45% and 8.83%, and debt issuance cost amortization of 0.39% and 0.73%, for the three months ended March 31, 2025 and 2024, respectively.

The following table provides a summary of interest expense that includes interest, amortization of discount, and deal cost amortization of the Company’s warehouse facilities and loan agreements for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025		2024
	(In thousands)
Warehouse and repurchase facilities	$	8,505	$	6,392
Securitized debt		66,583		49,283
Interest expense — portfolio related		75,088		55,675
Interest expense — corporate debt		6,142		5,380
Total interest expense	$	81,230	$	61,055

Note 13 — Commitments and Contingencies

(a)

Repurchase Liability

When the Company sells loans, it is required to make normal and customary representations and warranties about the loans to the purchaser. The loan sale agreements generally require the Company to repurchase loans if the Company breaches a representation or warranty given to the loan purchaser. In addition, the Company may be required to repurchase loans as a result of borrower fraud or if a payment default occurs on a loan shortly after its sale.

The Company records a repurchase liability relating to representations and warranties and early payment defaults. The method used to estimate the liability for repurchase is a function of the representations and warranties given and considers a combination of factors, including, but not limited to, estimated future defaults and loan repurchase rates and the potential severity of loss in the event of defaults. The Company establishes a liability at the time loans are sold and continually updates the estimated repurchase liability. The level of the repurchase liability for representations and warranties and early payment default requires considerable management judgment.

The Company regularly evaluates the adequacy of repurchase reserves based on trends in repurchase, actual loss experience, estimated future loss exposure and other relevant factors including economic conditions. As of March 31, 2025 and December 31, 2024, the balance of repurchase liability was $144 thousand, and is included in “Accounts payable and accrued expenses” on the Consolidated Balance Sheets.

(b)

Legal Proceedings

The Company is a party to various legal proceedings in the normal course of business. The Company, after consultation with legal counsel, believes the disposition of all pending litigation will not have a material effect on the Company’s consolidated financial condition or results of operations as of March 31, 2025.

(c)

Employee Retention Credit

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020 and the subsequent extension of the CARES Act, the Company, with the guidance from a third-party specialist, determined it was eligible for a refundable employee retention credit (“ERC”) subject to certain criteria.

The Company applied for ERC for the first three quarters’ wages paid in calendar year 2021. During the second quarter of 2023, the Company received approximately $4.2 million of ERC. Due to the subjectivity of the credit, the Company elected to account for the ERC as a gain analogizing to ASC 450-30, Gain Contingencies. Accordingly, the $4.2 million ERC, net of the third-party specialist fees of $0.6 million, are deferred until the uncertainty surrounding them is resolved. The net amount is included in “Accounts payable and accrued expenses” on the Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024 .

Note 14 — Stock-Based Compensation

The Company’s Amended and Restated 2020 Omnibus Incentive Plan, or “the 2020 Plan,” authorizes grants of stock‑based compensation instruments including but not limited to non-qualified stock options, restricted stock awards (“RSAs”) and performance stock unit awards (“PSUs”) to certain employees and non-employee directors of the Company, to purchase or issue up to 2,770,000 shares of the Company's common stock.

Expenses related to the stock-based compensation instruments and Employee Stock Purchase Plan (“ESPP”) are included in “Compensation and employee benefits” and “Other operating expenses” on the Consolidated Statements of Income.

Below are summaries of the recognized and unrecognized stock-based compensation expense by instrument for the periods indicated:


	Three Months Ended March 31,
	2025		2024
	(In thousands)
Recognized compensation expense:
Options	$	129	$	2
RSAs		747		577
PSUs		907		547
ESPP		187		245
Total recognized compensation expense	$	1,970	$	1,371


	March 31, 2025		December 31, 2024
	(In thousands)
Unrecognized compensation expense:
Options	$	1,234	$	21
RSAs		5,836		4,617
PSUs		6,058		4,801
ESPP		189		210
Total unrecognized compensation expense	$	13,317	$	9,649
Weighted average period expected to be recognized (in years)
Options		2.4		2.5
RSAs		2.3		2.3

Stock Options

Stock option awards provide for the option to purchase the Company's common stock. From the date of the grant, the stock options generally vest ratably over a service period of three years and are exercisable for a period up to ten years.

The Company uses the Black-Scholes option pricing model to value stock options in determining the stock-based compensation expense. Compensation expense is recognized over the three-year vesting period using the straight-line method. Forfeitures are recognized as they occur. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. The expected dividend yield is zero as the Company does not expect to pay dividends in the foreseeable future. Expected volatility is based on historical volatilities of the Company’s common stock.

The table below summarizes stock option activity for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025		2024
	($ in thousands, except per share amounts)
Number of shares:
Options outstanding at beginning of period		1,065,772		752,964
Granted		—		100
Options outstanding at end of period		1,065,772		753,064
Options exercisable at end of period		749,344		747,500
Options expected to vest (1)		316,428		5,564
Weighted average exercise price per share:
Options outstanding at beginning of period	$	14.46	$	12.88
Granted		—		15.86
Options outstanding at end of period	$	14.46	$	12.88
Options exercisable at end of period		12.88		12.89
Options expected to vest (1)		18.19		12.89
Aggregate Intrinsic value (2):
Options outstanding at end of period	$	4,538	$	3,857
Options exercisable at end of period		4,365		3,822
Options expected to vest (1)		173		35
Weighted average remaining contractual life (in years):
Options outstanding at end of period		6.2		5.8
Options exercisable at end of period		4.8		5.8
Options expected to vest (1)		9.4		9.5

(1)

The number of options expected to vest reflects no expected forfeiture.

(2)

The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the “in-the-money” option exercise price.

RSAs

The fair value of RSAs is determined based on the fair market value of the Company's common shares on the grant date. The estimated fair value of RSA awards is amortized as an expense over the three-year requisite service period. The Company has elected to recognize forfeitures as they occur rather than estimating service-based forfeitures over the requisite service period.

The table below summarizes RSA activity for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025								2024
	Employee			Non-Employee Director		Total			Employee			Non-Employee Director		Total
Number of shares:
Unvested at beginning of period		355,505			47,430		402,935			409,137			61,276		470,413
Granted		180,003			—		180,003			189,679			—		189,679
Vested		(163,779	)		—		(163,779	)		(248,796	)		—		(248,796	)
Unvested at end of period		371,729			47,430		419,159			350,020			61,276		411,296

Weighted average grant date fair value per share:
Unvested at beginning of period	$	13.52		$	12.03	$	13.34		$	9.39		$	9.31	$	9.38
Granted		18.82			—		18.82			15.86			—		15.86
Vested		12.92			—		12.92			8.61			—		8.61
Unvested at end of period	$	16.35		$	12.03	$	15.86		$	13.45		$	9.31	$	12.83

PSUs

In February 2022, the Company began granting PSUs to certain employees, including named executive officers under the 2020 Plan. PSUs are linked to the average core net income annual growth over the three-year period from the year of grant. Settlement of vested PSUs will be made on the date that the Compensation Committee certifies the average core net income annual growth for the three-year period. PSUs are subject to forfeiture until predetermined performance conditions have been achieved. The number of shares issued at the end of any performance period could range between 0% and 200% of the original target award amount. Compensation expense related to PSUs is based on the fair value of the underlying stock on the award date and is recognized over the vesting period using an estimate of the probability of achieving the performance target. Adjustments to compensation expense are made each year based on changes in estimate of the number of PSUs that are probable of vesting.

The table below summarizes PSU activity for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025						2024
	Number of Shares				Weighted Average Grant Date Fair Value Per Share		Number of Shares			Weighted Average Grant Date Fair Value Per Share
Outstanding at beginning of period, unvested		517,131			$	12.83		256,387	(1)	$	11.05
Granted		155,165		(1)		18.82		157,994	(1)		15.86
Performance adjustment		153,637				10.00		—			—
Vested		(205,500	)			12.63		—			—
Outstanding at end of period, unvested		620,433			$	13.69		414,381		$	12.88

(1)

The number of PSUs are presented at 100% of the specified target shares.

ESPP

In July 2022, the Company initiated an ESPP which allows permitted eligible employees to purchase shares of the Company's common stock through payroll deductions of up to 15% of their eligible compensation, subject to certain limitations. The purchase price of the shares under the ESPP equals 85% of the lower of the fair market value of the Company's common stock on either the first or last day of each offering period. Compensation expense for the ESPP is calculated as of the beginning of the offering period as the fair value of the employees’ purchase rights utilizing the Black-Scholes option valuation model and is recognized as a compensation expense over the offering period.

Treasury Stock

Treasury stock represents shares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting or exercise of stock-based awards. During the quarters ended March 31, 2025 and 2024, shares withheld were 115,596 and 79,258, at an average price of $18.70 and $16.20 per share, respectively.

Note 15 — Earnings Per Share

The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock and resulted in the issuance of common stock that shared in earnings.

The following table presents the basic and diluted earnings per share calculations for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025		2024
	(In thousands, except per share data)
Basic EPS:
Net income attributable to common shareholders	$	18,887	$	17,251
Less: undistributed earnings attributable to unvested restricted stock awards		233		217
Net earnings attributable to common shareholders	$	18,654	$	17,034
Weighted average common shares outstanding		33,687		32,541
Basic earnings per common share	$	0.55	$	0.52
Diluted EPS:
Net income attributable to common stockholders	$	18,887	$	17,251
Weighted average common shares outstanding		33,687		32,541
Add dilutive effects for warrants		2,434		2,344
Add dilutive effects for stock options		237		157
Add dilutive effects of unvested restricted stock awards		128		151
Add dilutive effects of unvested performance-based stock units		322		246
Add dilutive effects of employee stock purchase plan		3		—
Weighted average diluted common shares outstanding		36,811		35,439
Diluted earnings per common share	$	0.51	$	0.49

The following table sets forth the number of shares excluded from the computation of diluted earnings per share, as their inclusion would have been anti-dilutive:


	Three Months Ended March 31,
	2025(1)		2024
	(In thousands)
Stock options		313		108
Unvested restricted stock awards		180		190
Share equivalents excluded from EPS		493		298

(1)

Weighted average.

Note 16 — Warrants and Related Party Transactions

On April 7, 2020, the Company issued and sold in a private placement 45,000 newly issued shares of Series A Convertible Preferred Stock, par value $0.01 per share (the “Preferred”), at a price per share of $1,000, plus warrants (the “Warrants”) to purchase an aggregate of 3,013,125 shares of the Company’s common stock to funds affiliated with TruArc Partners (“TruArc”), formerly Snow Phipps, and a fund affiliated with Pacific Investment Management Company LLC (“TOBI”). TruArc and TOBI are considered affiliates and, therefore, are related parties to the Company. The awards were treated as equity awards at the date of issuance.

On October 8, 2021, the Company exercised its option to convert all of its 45,000 outstanding shares of Series A Convertible Preferred Stock into 11,688,310 shares of its common stock.

The Warrants are exercisable at the warrant holder’s option at any time and from time to time, in whole or in part, until the extended date of May 7, 2025 at an exercise price of $2.96 per share of common stock, with respect to 2,008,749 of the Warrants, and at an exercise price of $4.94 per share of common stock, with respect to 1,004,375 of the Warrants. The exercise price and the number of shares of common stock issuable upon exercise of the Warrants are subject to customary anti-dilution adjustments and certain issuances of common stock (or securities convertible into or exercisable for common stock) at a price (or having a conversion or exercise price) that is less than the then current exercise price. The Company is not required to effect an exercise of the Warrants, if after giving effect to the issuance of common stock upon exercise of such Warrants, such warrant holder together with its affiliates would beneficially own 49% or more of the Company’s outstanding common stock. The Company’s related parties have not exercised any warrants as of March 31, 2025. See Note 21 – Subsequent Events.

In the ordinary course of business, the Company sells held for sale loans, and issues securitized debt to various financial institutions and investors through a market bidding process. As a result of this process, the Company may sell held for sale loans and/or issue securitized debt to an affiliate. No loans were sold nor securitized debt issued to any affiliate for the three months ended March 31, 2025 and 2024.

Note 17 — Derivative Instruments

In September 2023, the Company began utilizing derivative instruments designated as cash flow hedges to manage the exposure to interest rate volatility related to its forecasted issuances of fixed-rate debt through its securitization process. The derivative instruments include forward starting interest rate swaps or interest rate payer and receiver swaptions. The Company’s risk management objective is to hedge the risk of variability in its interest payment cash flows attributable to changes in the benchmark SOFR between the time the fixed rate mortgages are originated and the fixed rate debt is issued. As of March 31, 2025, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed four years.

The gains or losses on the derivative instruments that are designated and qualify as cash flow hedges are reported as a component of AOCI. Beginning in the period in which the forecasted debt is issued and the related derivative instruments are terminated, the accumulated gains or losses associated with the terminated derivatives are then reclassified into interest expense as a yield adjustment over the term of the related debt. For the quarters ended March 31, 2025 and 2024, $62 thousand and $113 thousand, respectively, of after-tax net losses on terminated derivative instruments were reclassified from AOCI to interest expense. As of March 31, 2025 and 2024, the Company had $1.8 million in after-tax net unrealized loss and $0.8 million in after-tax net unrealized gain, respectively, associated with cash flow hedging instruments recorded in AOCI. As of March 31, 2025, the Company expects to reclassify an estimated $0.3 million of after-tax net unrealized loss on derivative instruments designated as cash flow hedges from AOCI into earnings over the next 12 months.

The following table presents the fair value of the Company’s derivative financial instruments on a gross basis, as well as its classification on the Company’s Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024:


		March 31, 2025
Derivatives designated as hedging instruments:	Balance Sheet Location	Notional Amount		Fair Value (1)
Cash flow hedges:		(In thousands)
Interest rate payer and receiver swaptions	Derivative liability	$	341,000	$	1,004


		December 31, 2024
Derivatives designated as hedging instruments:	Balance Sheet Location	Notional Amount		Fair Value (1)
Cash flow hedges:		(In thousands)
Forward starting payer interest rate swaps	Derivative liability	$	—	$	—

(1)

Fair value reported is exclusive of collateral held and pledged, related to derivative exposure between the Company and its derivative counterparty. As of March 31, 2025, collateral pledged to its derivative counterparty was $1.2 million. As of December 31, 2024, no collateral was pledged to its derivative counterparty. These amounts were included in “Other receivables” on the Consolidated Balance Sheets.

The counterparty to the financial derivatives that the Company enters into is a major institution. The Company is exposed to credit-related losses in the event of non-performance by the counterparty. This credit risk is generally limited to the unrealized gains in such contracts, less collateral held, should the counterparty fail to perform as contracted.

Note 18 — Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in the components of accumulated other comprehensive income (loss) balances for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025			2024
	(In thousands)
Beginning balance	$	(805	)	$	(1,210	)
Net unrealized gain (loss) on cash flow hedges arising during the period, net of tax		(1,056	)		1,891
Reclassification adjustments included in net income		62			113
Ending balance	$	(1,799	)	$	794

The following table presents the components of other comprehensive income (loss) and the related tax effect for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
	2025									2024
	Before-Tax			Tax Effect			Net-of-Tax			Before-Tax		Tax Effect			Net-of-Tax
	(In thousands)
Cash flow hedges:
Interest rate swaps/swaptions:
Net unrealized gain (loss) arising during the period	$	(1,488	)	$	432		$	(1,056	)	$	2,627	$	(736	)	$	1,891
Reclassification adjustments included in net income		88			(26	)		62			155		(42	)		113
Other comprehensive income (loss)	$	(1,400	)	$	406		$	(994	)	$	2,782	$	(778	)	$	2,004

Note 19 — Fair Value Measurements

Fair Value Determination

ASC Topic 820, “Fair Value Measurement,” defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and requires disclosures about fair value measurements. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. The hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

Level 1 - Valuation is based on quoted prices for identical instruments traded in active markets.

Level 2 - Valuation is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.

Level 3 - Valuation is based on significant unobservable inputs for determining the fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.

Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period in which a change in valuation technique or methodology occurs. Given the nature of some of the Company’s assets and liabilities, clearly determinable market-based valuation inputs are often not available; therefore, these assets and liabilities are valued using internal estimates. As subjectivity exists with respect to the valuation estimates used, the fair values disclosed may not equal prices that can ultimately be realized if the assets are sold or the liabilities are settled with third parties.

Below is a description of the valuation methods for the assets and liabilities recorded at fair value on either a recurring or nonrecurring basis and for estimating fair value of financial instruments not recorded at fair value for disclosure purposes. While management believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the measurement date.

Cash and Cash Equivalents and Restricted Cash

Cash and restricted cash are recorded at historical cost. The carrying amount is a reasonable estimate of fair value as these instruments have short-term maturities and interest rates that approximate market, a Level 1 measurement.

Loans Held for Investment, at Amortized Cost and Loans Held for Investment, at Fair Value

The Company uses a third-party loan valuation specialist to estimate the fair value of its nonperforming mortgage loans, a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the Company’s nonperforming mortgage loans are interest rates, market yield requirements, the probability of default, loss given default, voluntary prepayment speed and loss timing. The Company uses a third-party loan valuation model to estimate the fair value of its performing mortgage loans, a Level 3 measurement. The significant unobservable inputs used in the fair value measurement of the Company’s performing mortgage loans are discount rate, constant prepayment rate, constant default rate, and loss severity rate. Significant changes in any of those inputs in isolation could result in a significant change to the mortgage loans’ fair value measurement.

Collateral Dependent or Loans Individually Evaluated

Nonaccrual loans held for investment are evaluated individually and are adjusted to the fair value of the collateral when the fair value of the collateral is below the carrying value of the loan. To the extent such a loan is collateral dependent, the Company determines the allowance for credit losses based on the estimated fair value of the underlying collateral. The fair value of each loan’s collateral is generally based on appraisals or broker price opinions obtained, less estimated costs to sell, a Level 3 measurement.

Loans Held for Sale, at Fair Value

The Company elected to account for certain loans originated with the intent to sell at fair value using FASB ASC Topic 825, Financial Instruments (ASC 825). The FVO loans held for sale are measured based a discounted cash flow model, or on the fair value of securities backed by similar mortgage loans, adjusted for certain factors to approximate the fair value, including the value attributable to mortgage servicing and credit risk, and current commitments to purchase loans, a Level 2 measurement. Management identified all loans to be accounted for at estimated fair value at the instrument level. Changes in fair value are reflected in income as they occur.

Real Estate Owned, Net (“REO”)

Real estate owned, net is initially recorded at the property’s estimated fair value, based on appraisals or broker price opinions obtained, less estimated costs to sell at acquisition date, a Level 3 measurement. From time to time, nonrecurring fair value adjustments are made to real estate owned, net based on the current updated appraised value of the property, or management’s judgment and estimation of value based on recent market trends or negotiated sales prices with potential buyers.

Mortgage Servicing Rights

The Company determined the fair values based on a third-party valuation specialist using a model that calculates the present value of estimated future net servicing income, a Level 3 measurement.

Derivative Instruments

Derivative financial instruments are measured at fair value using readily observable market inputs and the overall fair value measurement is classified as Level 2.

Secured Financing, Net (“Corporate Debt”)

The Company determined the fair values estimate of the secured financing using the estimated cash flows discounted at an appropriate market rate, a Level 3 measurement.

Warehouse Repurchase Facilities, Net

Warehouse repurchase facilities are recorded at historical cost. The carrying amount is a reasonable estimate of fair value as these instruments have short-term maturities of one-year or less and interest rates that approximate market plus a spread, a Level 2 measurement.

Securitized Debt, at Amortized Cost and Securitized Debt, at Fair Value

The Company obtains the fair value estimates at instrument level from a third-party broker dealer based on trader input on benchmark securities. The fair values take into consideration input factors such as bond structure and collateral characteristics, and performance and pricing factors such as yield, spread, average life, prepayment speeds, default rate, and severity. The fair values are considered a Level 2 measurement. Significant changes in any of the input factors in isolation could result in a significant change to securitized debt’s fair value measurement.

Accrued Interest Receivable and Accrued Interest Payable

The carrying amounts of accrued interest receivable and accrued interest payable approximate fair value due to the short-term nature of these instruments, a Level 1 measurement.

The Company does not have any off-balance sheet financial instruments.

Receivables Due From Servicers

The carrying amounts of receivables due from servicers approximate fair value due to the short-term nature of these instruments, a Level 1 measurement.

Fair Value Disclosures

The following tables present information on assets and liabilities measured and recorded at fair value as of March 31, 2025 and December 31, 2024, by level, in the fair value hierarchy:


	Fair Value Measurements Using						Total at
March 31, 2025	Level 1		Level 2		Level 3		Fair Value
	(In thousands)
Assets:
Nonrecurring fair value measurements:
Individually evaluated loans requiring specific allowance, net	$	—	$	—	$	10,938	$	10,938
Real estate owned, net		—		—		83,444		83,444
Total nonrecurring fair value measurements		—		—		94,382		94,382
Recurring fair value measurements:
Loans held for sale, at fair value		—		5,008		—		5,008
Loans held for investment, at fair value		—		—		3,287,188		3,287,188
Mortgage servicing rights		—		—		12,631		12,631
Total recurring fair value measurements		—		5,008		3,299,819		3,304,827
Total assets	$	—	$	5,008	$	3,394,201	$	3,399,209

Liabilities:
Recurring fair value measurements:
Securitized debt, at fair value	$	—	$	2,459,767	$	—	$	2,459,767
Derivative liability		—		1,004		—		1,004
Total recurring fair value measurements		—		2,460,771		—		2,460,771
Total liabilities	$	—	$	2,460,771	$	—	$	2,460,771


	Fair Value Measurements Using						Total at
December 31, 2024	Level 1		Level 2		Level 3		Fair Value
	(In thousands)
Assets:
Nonrecurring fair value measurements:
Individually evaluated loans requiring specific allowance, net	$	—	$	—	$	11,884	$	11,884
Real estate owned, net		—		—		68,000		68,000
Total nonrecurring fair value measurements		—		—		79,884		79,884
Recurring fair value measurements:
Loans held for investment, at fair value		—		—		2,766,951		2,766,951
Mortgage servicing rights		—		—		13,712		13,712
Total recurring fair value measurements		—		—		2,780,663		2,780,663
Total assets	$	—	$	—	$	2,860,547	$	2,860,547

Liabilities:
Recurring fair value measurements:
Securitized debt, at fair value	$	—	$	2,207,408	$	—	$	2,207,408
Total recurring fair value measurements		—		2,207,408		—		2,207,408
Total liabilities	$	—	$	2,207,408	$	—	$	2,207,408

The following table presents gains and losses recognized on assets measured on a nonrecurring basis for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
Gain (Loss) on Assets Measured on a Nonrecurring Basis	2025			2024
	(In thousands)
Real estate owned, net	$	(2,073	)	$	(1,722	)
Individually evaluated loans requiring specific allowance, net		(400	)		(457	)
Total net loss	$	(2,473	)	$	(2,179	)

The following tables present the primary valuation techniques and unobservable inputs related to Level 3 assets that are recorded on a recurring and nonrecurring basis as of March 31, 2025 and December 31, 2024:

          
         March 31, 2025

         Asset Category

         Fair Value

         Primary
Valuation
Technique

         Unobservable
Input

         Range

         Weighted
Average (1)

          
         ($ in thousands)

         Nonrecurring:

Individually evaluated
   loans requiring specific
   allowance, net

10,938

Market comparables

Selling costs

8.0%

8.0%

Real estate owned, net

83,444

Market comparables

Selling costs

8.0%

8.0%

         Recurring:

Loans held for investment,
   at fair value

3,287,188

Discounted cash flow

Discount rate

8.0%

8.0%

          
         Prepayment rate

         0.0% to 50.0%

         8.6%

          
         Default rate

         0.1% to 2.2%

         0.7%

          
         Loss severity rate

         0.0% to 11.7%

         2.9%

Mortgage servicing rights

12,631

Discounted cash flow

Discount rate

8.0%

8.0%

          
         Prepayment rate

         2.2% to 11.9%

         5.2%

(1)

Individually evaluated loans requiring specific allowance, net is weighted by collateral value; real estate owned, net is weighted by selling price; loans held for investment at fair value and mortgage servicing rights are weighted by UPB.

          
         December 31, 2024

         Asset Category

         Fair Value

         Primary
Valuation
Technique

         Unobservable
Input

         Range

         Weighted
Average (1)

          
         ($ in thousands)

         Nonrecurring:

Individually evaluated
   loans requiring specific
   allowance, net

11,884

Market comparables

Selling costs

8.0%

8.0%

Real estate owned, net

68,000

Market comparables

Selling costs

8.0%

8.0%

         Recurring:

Loans held for investment,
   at fair value

2,766,951

Discounted cash flow

Discount rate

8.4%

8.4%

          
         Prepayment rate

         0.0% to 30.0%

         9.0%

          
         Default rate

         0.1% to 2.8%

         1.0%

          
         Loss severity rate

         0% to 10.5%

         1.0%

Mortgage servicing rights

13,712

Discounted cash flow

Discount rate

8.0%

8.0%

          
         Prepayment rate

         2.2% to 11.7%

         5.1%

(1)

The following is a roll-forward of loans held for investment that are measured at estimated fair value on a recurring basis for the periods indicated:


	Three Months Ended March 31,
	2025			2024
	(In thousands)
Beginning balance	$	2,766,951		$	1,306,072
Originations		635,537			378,671
Loans liquidated		(132,710	)		(61,753	)
Acquisition		—			11,591
REO transfer		(6,529	)		(925	)
Principal paydowns		(10,775	)		(6,069	)
Total unrealized gain included in net income		34,714			19,472
Loans transferred from held for sale		—			2,481
Ending balance	$	3,287,188		$	1,649,540

The following is a roll-forward of loans held for sale that are measured at estimated fair value on a recurring basis for the periods indicated:


	Three Months Ended March 31,
	2025		2024
	(In thousands)
Beginning balance	$	—	$	17,590
Originations		4,886		—
Loans liquidated		—		(14,533	)
Principal paydowns		—		(29	)
Total unrealized gain (loss) included in net income		122		(547	)
Loans transferred to held for investment		—		(2,481	)
Ending balance	$	5,008	$	—

The following is a roll-forward of securitized debt measured and recorded at estimated fair value on a recurring basis for the periods indicated:


	Three Months Ended March 31,
	2025			2024
Beginning balance	$	2,207,408		$	877,417
Additions		374,360			229,368
Paydowns and payoffs		(135,683	)		(35,260	)
Total unrealized loss included in net income		13,682			2,318
Ending balance	$	2,459,767		$	1,073,843

The Company estimates the fair value of certain financial instruments on a quarterly basis. These instruments are recorded at fair value using a valuation allowance only if they are individually evaluated. As described above, these adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets. As of March 31, 2025 and December 31, 2024, financial assets and liabilities measured at fair value include loans held for investment at fair value, loans held for sale at fair value, mortgage servicing rights, derivative instruments, and securitized debt at fair value. Financial assets measured at the lower of cost or estimated fair value include certain individually evaluated loans held for investment and REO, which are measured using unobservable inputs, including appraisals and broker price opinions on the values of the underlying collateral. Individually evaluated loans requiring an allowance were carried at approximately $10.9 million and $11.9 million as of March 31, 2025 and December 31, 2024, respectively, net of specific allowance for credit losses of approximately $1.4 million and $1.0 million, respectively.

A financial instrument is cash, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity on potentially favorable terms. The methods and assumptions used in estimating the fair values of the Company’s financial instruments are described above.

The following tables present carrying amounts and estimated fair values of certain financial instruments as of the dates indicated:


	March 31, 2025
	Carrying								Estimated
Asset Category	Value		Level 1		Level 2		Level 3		Fair Value
	(In thousands)
Assets:
Cash	$	51,676	$	51,676	$	—	$	—	$	51,676
Restricted cash		22,785		22,785		—		—		22,785
Loans held for sale, at fair value		5,008		—		5,008		—		5,008
Loans held for investment, at amortized cost		2,322,009		—		—		2,242,198		2,242,198
Loans held for investment, at fair value		3,287,188		—		—		3,287,188		3,287,188
Accrued interest receivables		38,460		38,460		—		—		38,460
Mortgage servicing rights		12,631		—		—		12,631		12,631

Liabilities:
Secured financing, net	$	285,294	$	—	$	—	$	289,075	$	289,075
Warehouse and repurchase facilities, net		570,025		—		570,025		—		570,025
Securitized debt, at amortized cost		1,935,746		—		1,775,083		—		1,775,083
Securitized debt, at fair value		2,459,767		—		2,459,767		—		2,459,767
Derivative liability		1,004		—		1,004		—		1,004
Accrued interest payable		27,929		27,929		—		—		27,929


	December 31, 2024
	Carrying								Estimated
Asset Category	Value		Level 1		Level 2		Level 3		Fair Value
	(In thousands)
Assets:
Cash	$	49,901	$	49,901	$	—	$	—	$	49,901
Restricted cash		20,929		20,929		—		—		20,929
Loans held for investment, at amortized cost		2,420,116		—		—		2,321,141		2,321,141
Loans held for investment, at fair value		2,766,951		—		—		2,766,951		2,766,951
Accrued interest receivable		35,235		35,235		—		—		35,235
Mortgage servicing rights		13,712		—		—		13,712		13,712

Liabilities:
Secured financing, net	$	284,833	$	—	$	—	$	287,970	$	287,970
Warehouse repurchase facilities, net		348,082		—		348,082		—		348,082
Securitized debt, at amortized cost		2,019,056		—		1,820,945		—		1,820,945
Securitized debt, at fair value		2,207,408		—		2,207,408		—		2,207,408
Derivative liability		28,028		28,028		—		—		28,028

Note 20 — Segment Information

The Company operates as a single reportable segment, conducting its business activities within the United States. The Company's chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The CODM regularly reviews net income as presented on the Company’s Consolidated Statements of Income for purposes of assessing performance and making decisions about resource allocation. Items regularly reviewed by the CODM include those line items reported on the Company’s Consolidated Statements of Income, the most significant of which include net interest income, unrealized gain (loss) on fair value loans, unrealized gain (loss) on fair value securitized debt, origination fee income, and compensation and benefits. See Consolidated Statements of Income.

Note 21 — Subsequent Events

On April 2, 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.

The Company has evaluated events that have occurred subsequent to March 31, 2025 through the issuance of the accompanying consolidated financial statements and has concluded there are no other subsequent events that would require recognition or disclosure in the accompanying consolidated financial statements.

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, 2024, 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 primarily originate and manage investor loans secured by 1-4 unit residential rental and commercial properties, which we refer to collectively as investor real estate loans. We originate loans nationwide across our extensive network of independent mortgage brokers which we have built and refined over the 21 years since our inception. Our objective is to be the preferred and one of the most recognized brands in our core market, particularly within our network of mortgage brokers.

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, 2025, has an average balance of approximately $393.0 thousand. As of March 31, 2025, our loan portfolio totaled $5.4 billion of UPB on properties in 47 states and the District of Columbia. The total portfolio had a weighted average loan-to-value ratio, or LTV at origination, of 66.1%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 51.4% of the UPB. For the three months ended March 31, 2025, the annualized yield on our total portfolio was 9.11%.

We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, corporate debt, and equity. The securitized debt market is our primary source of long-term financing. We have successfully executed 38 securitized debt transactions, resulting in a total of over $8.3 billion in gross debt proceeds from May 2011 through March 2025. We may also continue to 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. For both the three months ended March 31, 2025 and 2024, our annualized portfolio related net interest margin was 3.35%. 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 three months ended March 31, 2025 and 2024, including net income attributable to noncontrolling interest, we generated pre-tax income of $26.9 million and $23.2 million, and net income of $18.6 million and $17.3 million, respectively.

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.

Recent Developments

Securitized Debt

In March 2025, we collapsed the 2023-1R Trust and redeemed the remaining outstanding balance of securitized debt.

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, 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 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, 2024, 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 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, 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 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, an expected recession, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

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 and terms and other services.

Availability and Cost of Funding

Our primary funding sources have historically included cash from operations, warehouse facilities, term securitized 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 Offering 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 adversely affect financial results.

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.

Portfolio and Asset Quality

Key Portfolio Statistics


	March 31, 2025			December 31, 2024			March 31, 2024
	($ in thousands)
Total loans	$	5,449,901		$	5,055,937		$	4,281,533
Loan count		13,858			12,932			11,013
Average loan balance	$	393		$	391		$	389
Weighted average loan-to-value		66.1	%		66.6	%		67.6	%
Weighted average coupon		9.6	%		9.5	%		9.1	%
Nonperforming loans (UPB) (A)	$	587,811		$	539,438		$	432,560
Nonperforming loans (% of total) (A)		10.8	%		10.7	%		10.1	%

(A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $36.7 million, $40.1 million, and $45.1million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of March 31, 2025, December 31, 2024, and March 31, 2024, 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.

Originations and Acquisitions

The following table presents new loan originations 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)
Three Months Ended March 31, 2025:
Loan originations — held for investment		1,513	$	635,537	$	420		10.51	%		62.6	%
Loan originations — held for sale		1		4,886		4,886		5.70	%		19.9	%
Total loan originations		1,514	$	640,423	$	423		10.47	%		62.3	%
Three Months Ended December 31, 2024:
Loan originations — held for investment		1,285	$	558,876	$	435		10.78	%		62.9	%
Loan originations — held for sale		1		4,607		4,607		4.99	%		57.9	%
Total loan originations		1,286	$	563,483	$	438		10.73	%		62.9	%
Three Months Ended March 31, 2024:
Loan originations — held for investment		958	$	378,671	$	395		11.06	%		63.8	%
Loan acquisitions — held for investment		31		12,270		396		11.48	%		59.2	%
Total loans originated and acquired		989	$	390,941	$	395		11.07	%		63.7	%

During the first quarter of 2025, loan originations increased $76.9 million and $261.8 million from the quarters ended December 31, 2024 and March 31, 2024, respectively.

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:


	March 31, 2025			December 31, 2024
	(In thousands)
Unpaid principal balance	$	5,445,015		$	5,055,937
Valuation adjustments on FVO loans		146,760			111,734
Deferred loan origination costs		22,439			23,570
Total loans held for investment, gross		5,614,214			5,191,241
Allowance for credit losses		(5,017	)		(4,174	)
Loans held for investment, net	$	5,609,197		$	5,187,067

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


	March 31, 2025					December 31, 2024
	UPB		%			UPB		%
	($ in thousands)
Loans due in less than one year	$	162,661		3.0	%	$	157,521		3.1	%
Loans due in one to five years		85,600		1.6			83,993		1.7
Loans due in more than five years		5,196,754		95.4			4,814,423		95.2
Total loans held for investment	$	5,445,015		100.0	%	$	5,055,937		100.0	%

Charge-offs, Gain (Loss) on REO

Our actual charge-offs have been minimal as a percentage of nonperforming loans held for investment. 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:


	Three Months Ended
	March 31, 2025				December 31, 2024				March 31, 2024
	($ in thousands)
Average nonperforming loans for the period (1)	$	297,380			$	314,511			$	321,442
Charge-offs		1,029				699				504
Charge-offs / Average nonperforming loans for the period (1)		1.38	%	(2)		0.89	%	(2)		0.63	%	(2)
Gain on REO:
Gain on transfer to REO	$	2,834			$	2,382			$	1,160
REO valuation gain (loss), net		(2,073	)			(2,217	)			286
Gain (loss) on sale of REO		300				3,411				(1,722	)
Total gain (loss) on REO	$	1,061			$	3,576			$	(276	)

(1)

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

(2)

Reflects annualized charge-offs to average nonperforming loans held for investment, excluding FVO loans, for the period.

Allowance for Credit Losses

For the March 31, 2025 current expected credit loss (“CECL”) estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the announced tariffs and federal government layoffs, contributing to a forecasted decreasing GDP and rising unemployment.

For the December 31, 2024 CECL estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a decreasing forecasted GDP, unstable labor market, and geopolitical risk.

Our allowance for credit losses as of March 31, 2025 was $5.0 million compared to $5.3 million as of March 31, 2024. The decrease in allowance for credit losses from March 31, 2024 was primarily due to a decrease in the baseline allowance component of the reserve. Our overall expected credit loss reserves range from 0.15% to 0.20% of loans held for investment, excluding FVO loans. 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, is subject to change as conditions in the market change and our ability to forecast as economic events evolve.

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:


	Three Months Ended
	March 31, 2025				December 31, 2024				March 31, 2024
Allowance for credit losses:	($ in thousands)
Beginning balance	$	4,174			$	4,851			$	4,769
Provision for credit losses		1,872				22				1,002
Charge-offs		(1,029	)			(699	)			(504	)
Ending balance	$	5,017			$	4,174			$	5,267
Total UPB(1)	$	2,304,587			$	2,400,720			$	2,705,612
Nonperforming loans UPB	$	292,811			$	309,970			$	324,106
Nonperforming loans UPB / Total UPB(1)		12.7	%			12.9	%			11.98	%
Allowance for credit losses / Total UPB(1)		0.22	%			0.17	%			0.19	%
Charge-offs / Total UPB(1)		0.18	%	(2)		0.12	%	(2)		0.07	%	(2)

(1)

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

(2)

Annualized.

The allowance for credit losses was 0.22% of total UPB of loans held for investment carried at amortized cost as of March 31, 2025. Although slightly higher than our expected range of 0.15% to 0.20%, the 0.22% reserve is reasonable given the current market uncertainty. Nonperforming loans were 12.71% of total UPB of loans held for investment carried at amortized cost as of March 31, 2025. We believe the allowance for credit losses is adequate because 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. Historically, our actual annual charge-offs rate is 0.06% over the last seven years.

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:


	March 31, 2025 (A)				COVID-19 Forbearance		December 31, 2024 (A)				COVID-19 Forbearance		March 31, 2024 (A)				COVID-19 Forbearance
	($ in thousands)
Performing/Accruing:
Current	$	4,504,854	82.7	%	$	88,462	$	4,169,830	82.5	%	$	82,459	$	3,517,715	82.2	%	$	94,404
30-59 days past due		239,547	4.4			9,186		241,300	4.7			19,452		239,493	5.6			21,886
60-89 days past due		112,803	2.1			1,800		105,369	2.1			858		91,765	2.1			3,787
Total Performing Loans		4,857,204	89.2			99,448		4,516,499	89.3			102,769		3,848,973	89.9			120,077
Nonperforming/Nonaccrual:
<90 days past due		33,488	0.6			3,189		23,697	0.5			2,787		20,473	0.5			909
90+ days past due		46,545	0.9			205		51,144	1.0			2,237		27,919	0.7			1,587
Bankruptcy		76,606	1.4			3,688		60,042	1.2			3,895		45,471	1.1			4,046
In foreclosure		431,172	7.9			29,612		404,555	8.0			31,139		338,697	7.8			38,522
Total nonperforming loans		587,811	10.8			36,694		539,438	10.7			40,058		432,560	10.1			45,064
Total loans held for investment	$	5,445,015	100.0	%	$	136,142	$	5,055,937	100.0	%	$	142,827	$	4,281,533	100.0	%	$	165,141

(A)

Balance includes $136.1 million UPB of loans held for investment at amortized cost as of March 31, 2025, $142.8 million as of December 31, 2024, and $165.1 million as of March 31, 2024 in our COVID-19 forbearance program.

Loans that are 90+ days past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $587.8 million, or 10.8% of our held for investment loan portfolio as of March 31, 2025, compared to $539.4 million, or 10.7% as of December 31, 2024, and $432.6 million, or 10.1% as of March 31, 2024. The increase in total nonperforming loans as of March 31, 2025 compared to December 31, 2024 and March 31, 2024 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.

Resolutions of Nonperforming Assets

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 $76.4 million of long-term and short-term nonperforming assets for the quarter ended March 31, 2025, which was lower compared to $79.4 million for the quarter ended December 31, 2024, and higher compared to $54.5 million for the quarter ended March 31, 2024. From these resolution activities, we realized net gains of $1.9 million, $5.6 million, and $1.3 million for the quarters ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. This is largely the result of collecting default interest and prepayment penalties in excess of the contractual principal and interest due on loans.

The table below includes resolutions of our long-term nonperforming loans and REOs for the periods indicated:


	Three Months Ended
Long-Term Nonperforming Assets	March 31, 2025					December 31, 2024					March 31, 2024
	UPB		Gain / (Loss)			UPB		Gain / (Loss)			UPB		Gain / (Loss)
	($ in thousands)
Resolved — loans paid in full	$	20,589	$	989		$	32,078	$	1,810		$	16,563	$	798
Resolved — loans paid current		30,563		375			19,830		182			27,494		164
Resolved — REO sold		4,541		337			4,822		3,243			3,888		224
Total resolutions	$	55,693	$	1,701		$	56,730	$	5,235		$	47,945	$	1,186
Recovery rate on resolved nonperforming assets				103.1	%				109.2	%				102.5	%

Short-term loans, or loans with a maturity of two-year 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 table below includes resolutions of our short-term nonperforming loans and REOs, and loans granted a COVID-19 forbearance in 2020, for the periods indicated:


	Three Months Ended
Short-Term and Forbearance Nonperforming Assets	March 31, 2025					December 31, 2024					March 31, 2024
	UPB		Gain / (Loss)			UPB		Gain / (Loss)			UPB		Gain / (Loss)
	($ in thousands)
Resolved — loans paid in full	$	5,341	$	182		$	9,858	$	171		$	2,496	$	—
Resolved — loans paid current		11,845		14			7,536		1			2,927		25
Resolved — REO sold		3,558		(37	)		5,233		168			1,161		62
Total resolutions	$	20,744	$	159		$	22,627	$	340		$	6,584	$	87
Recovery rate on resolved nonperforming assets				100.8	%				101.5	%				101.3	%

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. Positive adjustments at the time of foreclosure are recognized in other operating income. 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 March 31, 2025, our REO included 157 properties with a lower of cost or estimated fair value of $83.4 million compared to 129 properties with a lower of cost or estimated fair value of $68.0 million as of December 31, 2024, and 76 properties with a lower of cost or estimated fair value of $46.3 million as of March 31, 2024.

Concentrations – Loans Held for Investment

As of March 31, 2025, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 51.4% of the UPB. Mixed use properties represented 11.1% 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 21.2% in California, 15.3% in New York, 12.8% in Florida, 7.4% in New Jersey, and 5.6% in Texas.


Property Type	March 31, 2025
	Loan Count		UPB		% of Total UPB
	($ in thousands)
Investor 1-4		8,600	$	2,799,451		51.4	%
Mixed use		1,425		605,722		11.1
Retail		1,038		522,400		9.6
Office		975		421,389		7.7
Multifamily		682		397,842		7.3
Warehouse		605		367,289		6.8
Other (1)		532		330,922		6.1
Total loans held for investment		13,857	$	5,445,015		100.0	%

(1)

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


Geography (State)	March 31, 2025
	Loan Count		UPB		% of Total UPB
	($ in thousands)
California		1,673	$	1,154,551		21.2	%
New York		1,572		834,106		15.3
Florida		1,713		697,072		12.8
New Jersey		1,085		401,524		7.4
Texas		847		305,671		5.6
Other (1)		6,967		2,052,091		37.7
Total loans held for investment		13,857	$	5,445,015		100	%

(1)

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

Key Performance Metrics


	Three Months Ended
	March 31, 2025 (1)			December 31, 2024 (1)			March 31, 2024 (1)
	($ in thousands)
Average loans	$	5,214,186		$	4,858,939		$	4,159,412
Portfolio yield		9.11	%		9.34	%		8.71	%
Average debt — portfolio related		4,821,067			4,459,108			3,753,732
Average debt — total company		5,111,067			4,749,108			4,015,283
Cost of funds — portfolio related		6.23	%		6.14	%		5.93	%
Cost of funds — total company		6.36	%		6.29	%		6.08	%
Net interest margin — portfolio related		3.35	%		3.70	%		3.35	%
Net interest margin — total company		2.88	%		3.20	%		2.83	%
Charge-offs/Average loans held for investment at amortized cost		0.18	%		0.11	%		0.07	%
Pre-tax return on average equity		20.11	%		25.69	%		20.77	%
Return on average equity		13.94	%		16.68	%		15.49	%

(1)

Percentages are annualized.

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 for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily driven by the increase in weighted average loan coupons. Our portfolio yield for the three months ended March 31, 2025 decreased as compared to the three months ended December 31, 2024, primarily due to less default interest and cash interest received on nonperforming loans.

Average Debt — Portfolio Related and Total Company

Portfolio-related debt consists of borrowings related directly to financing our loan portfolio, which includes our warehouse 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 6.23% for the three months ended March 31, 2025 from 6.14% for the prior quarter and increased from 5.93% for the three months ended March 31, 2024. The increase was primarily due to higher securitized debt interest expense.

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 in the table below, portfolio related net interest margin remained consistent at 3.35% for the three months ended March 31, 2025 and 2024, but decreased from 3.70% for the three months ended December 31, 2024 primarily due to less cash interest received on nonperforming loans during the three months ended March 31, 2025 and higher securitized debt interest expense.

Total company net interest margin of 2.88% for the three months ended March 31, 2025 increased from 2.83% for the three months ended March 31, 2024. The increase in total company net interest margin was primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of funds. Total company net interest margin for the three months ended March 31, 2025 decreased from 3.20% for the three months ended December 31, 2024 primarily due to less cash interest received on nonperforming loans during the three months ended March 31, 2025 and higher securitized debt interest expense.

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:


	Three Months Ended
	March 31, 2025							December 31, 2024							March 31, 2024
			Interest		Average					Interest		Average					Interest		Average
	Average		Income /		Yield /			Average		Income /		Yield /			Average		Income /		Yield /
	Balance		Expense		Rate (1)			Balance		Expense		Rate (1)			Balance		Expense		Rate (1)
	($ in thousands)
Loan portfolio:
Loans held for sale	$	998						$	3,145						$	9,662
Loans held for investment		5,213,188							4,855,794							4,149,750
Total loans	$	5,214,186	$	118,740		9.11	%	$	4,858,939	$	113,484		9.34	%	$	4,159,412	$	90,529		8.71	%

Debt:
Warehouse facilities	$	433,790	$	8,505		7.84	%	$	341,596	$	7,178		8.41	%	$	267,559	$	6,392		9.56	%
Securitized debt		4,387,277		66,583		6.07	%		4,117,512		61,306		5.96	%		3,486,173		49,283		5.65	%
Total debt - portfolio related		4,821,067		75,088		6.23	%		4,459,108		68,484		6.14	%		3,753,732		55,675		5.93	%
Corporate debt		290,000		6,142		8.47	%		290,000		6,143		8.47	%		261,552		5,380		8.23	%
Total debt	$	5,111,067	$	81,230		6.36	%	$	4,749,108	$	74,627		6.29	%	$	4,015,284	$	61,055		6.08	%

Net interest spread - portfolio related (2)						2.88	%						3.20	%						2.77	%
Net interest margin - portfolio related						3.35	%						3.70	%						3.35	%

Net interest spread - total company (3)						2.75	%						3.06	%						2.62	%
Net interest margin - total company						2.88	%						3.20	%						2.83	%

(1)

Annualized.

(2)

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.

(3)

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

Our annualized charge-offs rate over average loans held for investment carried at amortized cost for the three months ended March 31, 2025 remained minimal at 0.18% as compared to 0.11% and 0.07% for the three months ended December 31, 2024 and March 31, 2024, respectively. The charge-offs rate reflects year-to-date annualized charge-offs as a percentage of average loans held for investment at amortized cost, for the respective quarters. We do not record charge-offs on loans carried at estimated fair value and loans held for sale.

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 decreased during the quarter ended March 31, 2025 as compared to the quarters ended December 31, 2024 and March 31, 2024 and was impacted by the increase in average stockholders' equity resulting from 1,569,255 shares issued under the ATM program for net proceeds of $28.8 million during the quarter ended March 31, 2025.


	Three Months Ended
	March 31, 2025			December 31, 2024			March 31, 2024
	($ in thousands)
Income before income taxes (A)	$	26,893		$	32,038		$	23,236
Net income (B)		18,648			20,805			17,333

Monthly average balance:
Stockholders' equity (C)		534,940			498,887			447,613

Pre-tax return on average equity (A)/(C) (1)		20.1	%		25.7	%		20.8	%

Return on average equity (B)/(C) (1)		13.9	%		16.7	%		15.5	%

(1)

Annualized.

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 on 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.

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, 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 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 loans and their respective carrying values. 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.

Unrealized Gain (Loss) on Fair Value Loans. We have elected to apply 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. The Company has elected to record its 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 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.

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:


	Three Months Ended March 31,
	2025			2024
	(In thousands)
Interest income	$	118,740		$	90,529
Interest expense - portfolio related		75,088			55,675
Net interest income - portfolio related		43,652			34,854
Interest expense - corporate debt		6,142			5,380
Net interest income		37,510			29,474
Provision for credit losses		1,872			1,002
Net interest income after provision for credit losses		35,638			28,472
Other operating income		33,446			25,775
Total operating expenses		42,190			31,011
Income before income taxes		26,894			23,236
Income tax expense		8,246			5,903
Net income		18,648			17,333
Net income (loss) attributable to noncontrolling interest		(239	)		82
Net income attributable to Velocity Financial, Inc.	$	18,887		$	17,251

Net Interest Income — Portfolio Related


	Three Months Ended March 31,
	2025		2024		$ Change
	(In thousands)
Interest income	$	118,740	$	90,529	$	28,211
Interest expense - portfolio related		75,088		55,675		19,413
Net interest income - portfolio related	$	43,652	$	34,854	$	8,798

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased to $43.7 million from $34.9 million for the three months ended March 31, 2025 and 2024, respectively.

Interest Income. Interest income increased by $28.2 million to $118.7 million for the three months ended March 31, 2025, compared to $90.5 million for the three months ended March 31, 2024, attributable to higher average loan portfolio balances and yield. For the three months ended March 31, 2025, the average loan yield was 9.11% compared to 8.71% for the three months ended March 31, 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 a change in annualized yield (rate) for the three months ended March 31, 2025 and 2024.


	Average Loans		Interest Income		Average Yield(1)
	(In thousands)
Three months ended March 31, 2025	$	5,214,186	$	118,740		9.11	%
Three months ended March 31, 2024		4,159,412		90,529		8.71	%
Volume variance		1,054,774		22,957
Rate variance				5,254		0.40	%
Total interest income variance				28,211

(1)

Annualized

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased to $75.1 million for the three months ended March 31, 2025 from $55.7 million for the three months ended March 31, 2024, primarily attributable to a higher loan portfolio being financed and increased interest rates.

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 change in cost of funds (rate) for the three months ended March 31, 2025 and 2024.


	Average Debt(1)		Interest Expense		Cost of Funds(2)
	(In thousands)
Three months ended March 31, 2025	$	4,821,067	$	75,088		6.23	%
Three months ended March 31, 2024		3,753,732		55,675		5.93	%
Volume variance		1,067,335		15,831
Rate variance				3,582		0.30	%
Total interest expense variance				19,413

(1)

Includes securitized debt and warehouse agreements

(2)

Annualized

Net Interest Income After Provision for Credit Losses


	Three Months Ended March 31,
	2025		2024		$ Change
	(In thousands)
Net interest income - portfolio related	$	43,652	$	34,854	$	8,798
Interest expense - corporate debt		6,142		5,380		762
Net interest income		37,510		29,474		8,036
Provision for credit losses		1,872		1,002		870
Net interest income after provision for credit losses	$	35,638	$	28,472	$	7,166

Interest Expense — Corporate Debt. Corporate debt interest expense increased to $6.1 million for the three months ended March 31, 2025, compared to $5.4 million for the three months ended March 31, 2024, primarily due to the issuance of $75.0 million of additional secured debt in February 2024.

Provision for Credit Losses. Our provision for credit losses increased to $1.9 million for the three months ended March 31, 2025 from $1.0 million for the three months ended March 31, 2024 primarily due to higher reserves for nonperforming loans and an increase in macroeconomic reserves.

Other Operating Income

The $7.7 million increase in total other operating income for the three months ended March 31, 2025 was mainly due to increased origination fee income and the net increase in unrealized gains from fair value marks.


	Three Months Ended March 31,
	2025			2024			$ Change
	(In thousands)
Gain on disposition of loans	$	2,834		$	1,699		$	1,135
Unrealized gain on fair value loans		34,836			18,925			15,911
Unrealized loss on fair value securitized debt		(13,682	)		(2,318	)		(11,364	)
Unrealized gain (loss) on mortgage servicing rights		(1,081	)		444			(1,525	)
Origination fee income		8,679			4,986			3,693
Interest income on cash balance		1,339			1,631			(292	)
Other income		521			408			113
Total other operating income	$	33,446		$	25,775		$	7,671

Gain on Disposition of Loans. Gain on disposition of loans increased by $1.1 million to $2.8 million for the three months ended March 31, 2025 compared to $1.7 million for the three months ended March 31, 2024 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 $15.9 million to $34.8 million for the three months ended March 31, 2025 compared to $18.9 million for the three months ended March 31, 2024. The increase was mainly driven by new loan originations.

Unrealized Loss on Fair Value Securitized Debt. Unrealized loss on fair value securitized debt increased by $11.4 million to $13.7 million for the three months ended March 31, 2025 from $2.3 million for the three months ended March 31, 2024. The increase in unrealized loss on fair value securitized debt was primarily attributable to a decrease in market interest rates.

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized loss on mortgage servicing rights was $1.1 million for the three months ended March 31, 2025 as compared to an unrealized gain of $0.4 million for the three months ended March 31, 2024. The increase in unrealized loss on mortgage servicing rights was mainly driven by a decrease in the loan servicing portfolio resulting from loan payoffs and paydowns, and an increase in prepayment rate from December 31, 2024.

Origination Fee Income. Origination fee income increased by $3.7 million to $8.7 million for the three months ended March 31, 2025 compared to $5.0 million for the three months ended March 31, 2024. The increase was primarily due to higher loan originations.

Interest Income on Cash Balance. Interest income on cash balance decreased by $0.3 million to $1.3 million for the three months ended March 31, 2025 compared to $1.6 million for the three months ended March 31, 2024. The decrease was primarily attributable to a decrease in interest rates.

Other Income. Other income increased to $0.5 million for the three months ended March 31, 2025 compared to $0.4 million for the three months ended March 31, 2024. The increase was driven by higher servicing fee income from an increase in our loan servicing portfolio.

Operating Expenses

Operating expenses are presented in the following table. Changes in operating expenses comparing to the same period prior year are discussed below.


	Three Months Ended March 31,
	2025		2024		$ Change
	(In thousands)
Compensation and employee benefits	$	21,684	$	15,357	$	6,327
Origination expenses		838		646		192
Securitization expenses		4,043		2,874		1,169
Loan servicing		8,008		4,824		3,184
Professional fees		1,783		2,115		(332	)
Rent and occupancy		275		498		(223	)
Real estate owned, net		3,029		2,455		574
Other operating expenses		2,530		2,242		288
Total operating expenses	$	42,190	$	31,011	$	11,179

Compensation and Employee Benefits. Compensation and employee benefits increased by $6.3 million to $21.7 million for the three months ended March 31, 2025 compared to $15.4 million for the three months ended March 31, 2024. The increase was mainly driven by higher commissions expense as our loan originations increased.

Origination Expenses. Origination expenses increased by $0.2 million to $0.8 million for the three months ended March 31, 2025 from $0.6 million for the three months ended March 31, 2024. The increase in origination expenses was due to higher loan originations in the three months ended March 31, 2025.

Securitization Expenses. Securitization expenses were $4.0 million for the three months ended March 31, 2025 compared to $2.9 million for the three months ended March 31, 2024. The increase in securitization expenses resulted from higher issuance costs associated with a larger securitization in the first quarter of 2025 as compared to the same period prior year.

Loan Servicing. Loan servicing expenses increased to $8.0 million for the three months ended March 31, 2025 from $4.8 million for the three months ended March 31, 2024 primarily due to servicing advance expenses and the growth in our portfolio.

Professional Fees. Professional fees decreased to $1.8 million for the three months ended March 31, 2025 compared to $2.1 million for the three months ended March 31, 2024 primarily due to a decrease in legal expenses.

Rent and Occupancy. Rent and occupancy expenses decreased to $0.3 million for the three months ended March 31, 2025 compared to $0.5 million for the three months ended March 31, 2024 as a result of new leases.

Real Estate Owned, Net. Net expenses of real estate owned increased to $3.0 million for the three months ended March 31, 2025 from $2.5 million for the three months ended March 31, 2024, mainly due to the increase in REOs and higher valuation adjustments.

Other Operating Expenses. Other operating expenses increased to $2.5 million for the three months ended March 31, 2025 from $2.2 million for the three months ended March 31, 2024 mainly due to increases in information technology maintenance, marketing, and travel expenses.

Income Tax Expense. Income tax expense was $8.2 million and $5.9 million for the three months ended March 31, 2025 and 2024, respectively. Our annual consolidated effective tax rates were 30.4% and 28.4% for the years 2025 and 2024, respectively.

Quarterly Results of Operations

The following table sets forth certain unaudited financial information for each of the last eight completed fiscal 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 Quarterly Report. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.


	Three Months Ended
	March 31, 2025			December 31, 2024			September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023
	($ in thousands)
	(Unaudited)
Interest income	$	118,740		$	113,484		$	105,070		$	97,760		$	90,529		$	86,269		$	79,088		$	74,897
Interest expense - portfolio related		75,088			68,484			63,871			59,188			55,675			51,405			47,583			45,451
Net interest income - portfolio related		43,652			45,000			41,199			38,572			34,854			34,864			31,505			29,446
Net interest margin - portfolio related		3.35	%		3.70	%		3.60	%		3.54	%		3.35	%		3.52	%		3.34	%		3.24	%
Interest expense - corporate debt		6,142			6,143			6,143			6,155			5,380			4,140			4,138			4,139
Net interest income		37,510			38,857			35,056			32,417			29,474			30,724			27,367			25,307
Net interest margin - total company		2.88	%		3.20	%		3.06	%		2.98	%		2.83	%		3.10	%		2.90	%		2.78	%
Provision for (reversal of) credit losses		1,872			22			(69	)		218			1,002			827			154			298
Net interest income after provision for (reversal of) credit losses		35,638			38,835			35,125			32,199			28,472			29,897			27,213			25,009
Other operating income		33,446			32,330			20,732			22,561			25,775			21,670			17,360			14,037
Operating expenses		42,190			39,127			34,613			34,887			31,011			29,260			27,334			22,222
Income before income taxes		26,894			32,038			21,244			19,873			23,236			22,307			17,239			16,824
Income tax expense		8,246			11,233			5,627			5,162			5,903			5,141			5,070			4,602
Net income		18,648			20,805			15,617			14,711			17,333			17,166			12,169			12,222
Net income (loss) attributable to noncontrolling interest		(239	)		218			(186	)		(67	)		82			(189	)		83			39
Net income attributable to Velocity Financial, Inc.	$	18,887		$	20,587		$	15,803		$	14,778		$	17,251		$	17,355		$	12,086		$	12,183

Liquidity and Capital Resources

Sources and Uses of Liquidity

We fund our lending activities primarily through borrowings under our warehouse repurchase facilities, securitized 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.

Cash and Cash Equivalents

Our total liquidity plus available warehouse capacity, including Century's revolving credit line, was $313.8 million as of March 31, 2025, comprised of $238.2 million in available warehouse capacity, $51.7 million in cash, and $23.9 million in available borrowings from unencumbered loans.

We had cash of $51.7 million and $34.8 million, excluding restricted cash of $22.8 million and $24.2 million as of March 31, 2025 and 2024, respectively.

Cash Flows

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


	Three Months Ended
	March 31, 2025			March 31, 2024
	(In thousands)
Cash provided by (used in):
Operating activities	$	3,536		$	10,581
Investing activities		(401,413	)		(212,444	)
Financing activities		401,508			198,981
Net change in cash, cash equivalents, and restricted cash	$	3,631		$	(2,882	)

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 three months ended March 31, 2025, our net cash provided by operating activities consisted mainly of $18.6 million in net income and $13.7 million change in valuation of securitized debt at fair value, offset by $34.8 million change in valuation of loans carried at fair value.

For the three months ended March 31, 2025, our net cash used in investing activities consisted mainly of $635.5 million in cash used to originate loans held for investment at fair value, partially offset by $228.3 million in cash received from payoffs of loans held for investment.

For the three months ended March 31, 2025, our net cash provided by financing activities consisted mainly of $819.5 million in borrowings from our warehouse and repurchase facilities, $415.7 million in proceeds from issuing securitized debt and $28.8 million in net proceeds from issuance of common stocks. The cash generated was offset by repayments of $597.7 million and $262.3 million, on our warehouse and repurchase facilities and securitized debt, respectively.

During the three months ended March 31, 2025 and 2024, we generated approximately $3.6 million and used $2.9 million, respectively, of net cash and cash equivalents on operating, investing and financing activities.

Warehouse Facilities

As of March 31, 2025, we had five non-mark-to-market warehouse facilities, one mark-to-market warehouse facility, and one modified mark-to-market warehouse facility to support our loan origination and acquisition facilities. 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 $571.8 million with $238.2 million of available capacity as of March 31, 2025.

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 March 31, 2025, we were in compliance with these covenants.

Securitized debt

From May 2011 through March 2025, we have completed 38 transactions, issuing $8.3 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. The following table summarizes the securities issued, securities retained by us at the time of the securitization, and as of March 31, 2025 and December 31, 2024, and the stated maturity for each securitized debt. 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.


			Securities Retained as of
Trusts	Securities Issued		Issuance Date		March 31, 2025		December 31, 2024		Stated Maturity Date
	(In thousands)
2017-2 Trust	$	245,601	$	12,927	$	2,416	$	2,416	October 2047
2018-1 Trust		176,816		9,308		1,602		1,602	April 2048
2018-2 Trust		307,988		16,210		2,656		2,698	October 2048
2019-1 Trust		235,580		12,399		2,482		—	March 2049
2019-2 Trust		207,020		10,901		2,109		—	July 2049
2019-3 Trust		154,419		8,127		2,091		—	October 2049
2020-1 Trust		248,700		13,159		4,252		—	February 2050
2021-1 Trust		251,301		13,227		7,594		—	May 2051
2021-2 Trust		194,918		10,260		—		—	August 2051
2021-3 Trust		204,205		—		—		—	October 2051
2021-4 Trust		319,116		—		—		—	December 2051
2022-1 Trust		273,594		5,015		3,691		3,876	February 2052
2022-2 Trust		241,388		11,202		9,246		9,246	March 2052
2022-MC1 Trust		84,967		40,911		48,899		47,936	May 2047
2022-3 Trust		296,323		18,914		18,379		15,489	May 2052
2022-4 Trust		308,357		25,190		19,744		10,362	July 2052
2022-5 Trust		188,754		65,459		16,443		12,649	October 2052
2023-1 Trust		198,715		41,593		22,589		4,043	December 2052
2023-1R Trust (1)		64,833		66,228		—		66,228	October 2025
2023-2 Trust		202,210		24,229		3,357		6,714	April 2053
2023-RTL1 Trust		81,608		4,296		4,296		4,296	July 2028
2023-3 Trust		234,741		28,718		—		9,146	July 2053
2023-4 Trust		202,890		26,623		3,995		3,995	November 2053
2024-1 Trust		209,862		11,278		—		11,229	January 2054
2024-2 Trust		286,235		8,853		8,767		8,767	April 2054
2024-3 Trust		204,599		5,255		5,211		5,211	June 2054
2024-4 Trust		253,612		3,080		3,064		3,064	July 2054
2024-5 Trust		292,880		7,510		7,481		7,481	October 2054
2024-6 Trust		293,895		7,690		7,627		7,687	December 2054
2025-1 Trust		342,791		8,790		8,779		—	February 2055
Total	$	6,807,918	$	517,352	$	216,770	$	244,135

(1)

2023-1R was collapsed in March 2025, the Company continued to retain the securities owned by this trust after the outstanding debt balance was paid off.

The following table summarizes outstanding bond balances for each securitized debt as of March 31, 2025 and December 31, 2024:


	March 31, 2025		December 31, 2024
	(In thousands)
2017-2 Trust	$	31,786	$	33,012
2018-1 Trust		23,452		24,482
2018-2 Trust		55,604		59,091
2019-1 Trust		57,696		60,459
2019-2 Trust		44,334		46,872
2019-3 Trust		44,746		46,827
2020-1 Trust		88,265		91,135
2021-1 Trust		146,536		152,995
2021-2 Trust		120,071		125,391
2021-3 Trust		132,082		136,510
2021-4 Trust		204,304		214,284
2022-1 Trust		207,933		217,190
2022-2 Trust		188,190		191,764
2022-MC1 Trust		6,031		12,041
2022-3 Trust		226,040		234,647
2022-4 Trust		221,499		232,064
2022-5 Trust		169,359		132,519
2023-1 Trust		148,803		144,724
2023-1R Trust (1)		—		38,508
2023-2 Trust		150,964		157,198
2023-RTL1 Trust		63,163		81,608
2023-3 Trust		186,260		195,799
2023-4 Trust		168,737		181,307
2024-1 Trust		172,104		178,234
2024-2 Trust		244,591		260,500
2024-3 Trust		187,913		191,583
2024-4 Trust		231,625		243,945
2024-5 Trust		279,527		290,552
2024-6 Trust		285,272		293,767
2025-1 Trust		342,353		—
Total	$	4,429,240	$	4,269,008

(1)

The outstanding bond balance associated with 2023-1R was paid off when it was collapsed in March 2025.

As of March 31, 2025 and December 31, 2024, the weighted average rates on the securities and certificates for the Trusts were as follows:


	March 31, 2025			December 31, 2024
2017-2 Trust		4.14	%		4.09	%
2018-1 Trust		4.28			4.13
2018-2 Trust		4.49			4.47
2019-1 Trust		4.13			4.07
2019-2 Trust		3.45			3.41
2019-3 Trust		3.27			3.30
2020-1 Trust		2.88			2.88
2021-1 Trust		1.76			1.76
2021-2 Trust		2.03			2.04
2021-3 Trust		2.47			2.47
2021-4 Trust		3.27			3.25
2022-1 Trust		3.93			3.94
2022-2 Trust		5.07			5.06
2022-MC1 Trust		6.85			6.90
2022-3 Trust		5.70			5.72
2022-4 Trust		6.21			6.21
2022-5 Trust		7.11			7.04
2023-1 Trust		7.08			7.02
2023-1R Trust (1)		13.75			7.57
2023-2 Trust		7.64			7.33
2023-RTL1 Trust		8.29			8.24
2023-3 Trust		8.04			7.94
2023-4 Trust		8.30			8.33
2024-1 Trust		7.93			7.75
2024-2 Trust		7.11			7.11
2024-3 Trust		7.22			7.20
2024-4 Trust		7.29			7.08
2024-5 Trust		6.15			6.14
2024-6 Trust		6.15			5.92
2025-1 Trust		6.73			—

(1)

The higher weighted average rate for the three months ended March 31, 2025 resulted from expenses paid to collapse 2023-1R in March 2025.

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), agreements, warehouse 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.

Secured Financing (Corporate Debt)

On March 15, 2022, we entered into a five-year $215.0 million syndicated corporate debt agreement, the (“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.

On February 5, 2024, the Company entered into a five-year $75.0 million syndicated corporate debt agreement, (“the 2024 Term Loan”). The 2024 Term Loan bears interest at 9.875% and matures on February 15, 2029. Interest on the 2024 Term Loan is paid every six months.

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.

For the three months ended March 31, 2025 and 2024, 1,569,255 and 9,537 shares of common stock were sold under the ATM Program for net proceeds of $28.8 million and $154.1 thousand, respectively.

Contractual Obligations and Commitments

As of March 31, 2025, we maintained warehouse facilities to finance our investor real estate loans and had approximately $571.8 million in outstanding borrowings with $238.2 million of available capacity under our warehouse and repurchase facilities.

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.

Forward-Looking Statements

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. All statements (other than statements of historical facts) in this Quarterly Report regarding the prospects of the industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “plan,” “believe,” “predict,” “potential” or “continue” or the negatives of these terms or variations of them or similar terminology. Forward-looking statements may contain expectations regarding our operations, including our loan originations, our ability to resolve non-performing loans and avoid losses on non-performing loans and the disposition of REOs and other results, and may include statements of future performance, plans and objectives. Forward looking statements also include statements pertaining to our strategies for future funding and development of our business and products, including the future results of our at-the-market equity offering program. Although we believe that the expectations reflected in these forward-looking statements have a reasonable basis, we cannot provide any assurance that these expectations will prove to be correct. Such statements reflect the current views of our management with respect to our operations, results of operations and future financial performance. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Information regarding important factors that could cause actual results to differ, perhaps materially, from those in our forward-looking statements is contained in this Quarterly Report and other documents we file. You should read and interpret any forward-looking statement together with these documents, including the following:

•

the description of our business contained in our Annual Report on Form 10-K for the year ended December 31, 2024 and filed with the Securities and Exchange Commission on March 12, 2025

•

the discussion of our analysis of financial condition and results of operations contained in this Quarterly Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

•

the notes to the consolidated financial statements contained in this Quarterly Report

•

cautionary statements we make in our public documents, reports and announcements

Any forward-looking statement speaks only as of the date on which that statement is made. We will not update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as required by applicable law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Intentionally omitted pursuant to smaller reporting company reduced disclosure requirements.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In accordance with Rule 13a-15(b) of the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report and has concluded that our disclosure controls and procedures, as of such date, were effective to accomplish their objectives at a reasonable assurance level. Management concluded that the consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Changes in Internal Control over Financial Reporting.

During the period to which this report relates, there have not been any changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or that are reasonably likely to materially affect, such controls.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, in the ordinary course of business, we are involved in various judicial, regulatory or administrative claims, proceedings and investigations. These proceedings and actions may include, among other things, allegations of violation of banking and other applicable regulations, competition law, labor laws and consumer protection laws, as well as claims or litigation relating to intellectual property, securities, breach of contract and tort. Although occasional adverse decisions or settlements may occur, our management does not believe that the final disposition of any currently pending or threatened matter will have a material adverse effect on our business, financial position, results of operations or cash flows.

Item 1A. Risk Factors.

Intentionally omitted pursuant to smaller reporting company reduced disclosure requirements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On March 27, 2025, warrants to purchase an aggregate of 1,339,166 shares of our common stock were exercised on a net settlement basis, and settled on April 2, 2025, resulting in a net issuance of 1,080,338 shares of our common stock after the withholding and transfer of an aggregate of 258,828 shares of our common stock into our treasury account. The number of shares of our common stock netted was determined using the last sale price of our common stock on March 27, 2025 pursuant to the terms of such warrants. Of such exercised warrants, 892,777 had an exercise price of $2.96 per share and 446,389 had an exercise price of $4.94 per share. The issuance of common stock upon exercise of the warrants was conducted in reliance upon exemptions from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) and Section 4(a)(2) thereof, based on the terms of the exercise and other relevant facts.

The following table provides information on common stock purchases made by us during the three months ended March 31, 2025.


Period	Total Number of Shares Purchased (1)(2)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
January 2025		99,355	$	18.72		—	$	—
February 2025		16,241		18.56		—		—
March 2025		—		—		—		—
Total		115,596	$	18.70		—	$	—

(2)

Shares purchased during the period represents shares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting or exercise of stock-based awards.

(3)

The Company currently does not have a common stock repurchase program.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Insider Trading Arrangements and Policies

On March 18, 2025, Jeffrey T. Taylor, our Executive Vice President, Capital Markets, adopted a Rule 10b5-1 trading arrangement (as such term is defined in Item 408(a) of Regulation S-K) intended to satisfy the affirmative defense of Rule 10b5-1(c) with respect to the sale of up to an aggregate of 21,250 shares of our common stock. The plan will expire June 30, 2026, subject to early termination for certain specified events as set forth in the plan.

On March 20, 2025, Mark R. Szczepaniak, our Chief Financial Officer, adopted a Rule 10b5-1 trading arrangement (as such term is defined in Item 408(a) of Regulation S-K) intended to satisfy the affirmative defense of Rule 10b5-1(c) with respect to the sale of up to an aggregate of 18,870 shares of our common stock. The plan will expire June 30, 2026, subject to early termination for certain specified events as set forth in the plan.

Item 6. Exhibits.

The exhibits below are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.


		Incorporated by Reference
Exhibit Number	Exhibit Title	Form	File No.	Exhibit	Filing Date

3.1	Certificate of Conversion	8-K	001-39183	3.1	1/22/2020

3.2	Restated Certificate of Incorporation of Velocity Financial, Inc.	8-K	001-39183	3	5/23/2022

3.3	Amended and Restated Bylaws of Velocity Financial, Inc.	8-K	001-39183	3.2	3/25/2022

4.1	Form of Stock Certificate for Common Stock	S-1	333-234250	4.1	10/18/2019

4.2	Form of Warrant to Purchase Common Stock	8-K	001-39183	4.1	4/7/2020

4.3	Description of the Registrant’s Securities	10K	001-39183	4.3	4/7/2020

10.1	Stockholders Agreement, dated as of January 16, 2020	10-K	001-39183	10.1	4/7/2020

10.2	Registration Rights Agreement, dated as of January 16, 2020	10-K	001-39183	10.2	4/7/2020

10.3	Registration Rights Agreement, dated as of April 7, 2020	8-K	333-234250	10.1	4/7/2020

10.4	Securities Purchase Agreement among Velocity Financial, Inc. and the Purchasers Party thereto dated April 5, 2020	8-K	001-39183	10.1	4/6/2020

10.5	Velocity Financial, Inc. Employee Stock Purchase Plan*	DEF 14A	001-39183	AII	4/8/2022

10.6	Amended and Restated Velocity Financial, Inc. 2020 Omnibus Incentive Plan*	DEF 14A	001-39183	AI	4/8/2022

10.7	Form of Nonqualified Stock Option Award Notice and Agreement under the 2020 Omnibus Incentive Plan*	S-1/A	333-234250	10.6	1/6/2020

10.8	Form of Nonqualified Stock Option Award Notice and Agreement (Director Grant-IPO) under the 2020 Omnibus Incentive Plan*	S-1/A	333-234250	10.7	1/6/2020

10.9	Form of Nonqualified Stock Option Award Notice and Agreement (Executive Officer Grant-IPO) under the 2020 Omnibus Incentive Plan*	S-1/A	333-234250	10.8	1/6/2020

10.10	Form of Restricted Stock Unit Grant and Agreement (Director Grant) under the 2020 Omnibus Incentive Plan*	S-1/A	333-234250	10.9	1/6/2020

10.11	Form of Restricted Stock Unit Grant and Agreement (Standard Grant) under the 2020 Omnibus Incentive Plan*	S-1/A	333-234250	10.10	1/6/2020

10.12	Form of Restricted Stock Grant and Agreement under the 2020 Omnibus Incentive Plan*	S-1/A	333-234250	10.11	1/6/2020

10.13	Velocity Financial 2025 Annual Cash Incentive and Performance Stock Units Programs for Messrs. Farrar, Szczepaniak and Taylor*	8-K	001-39183	-	1/22/2025

10.14	Form of Equity Distribution Agreement, dated May 3, 2024	8-K	001-39183	1.1	5/3/2024

10.15	Form of Amendment No. 1 to Equity Distribution Agreement, dated December 12, 2024	10-K	001-39183	10.15	3/12/2025

10.16	Form of Officer and Director Indemnity Agreement*	S-1/A	333-234250	10.37	11/6/2019

10.17	Form of Performance Stock Unit Grant and Agreement*	10-K	001-39183	10.16	3/15/2024

10.18	Note Purchase Agreement Dated as of March 15, 2022, among Velocity Financial, Inc., Velocity Commercial Capital, LLC, U.S. Bank Trust Company, National Association, as collateral agent, and the respective purchasers of the Notes.	8-K	001-39183	10.1	3/16/2022

10.19	Security Agreement, dated as of March 15, 2022, among Velocity Financial, Inc., Velocity Commercial Capital, LLC and U.S. Bank Trust Company, National Association, as collateral agent.	8-K	001-39183	10.2	3/16/2022

10.20	Velocity Financial, Inc. Incentive Compensation Clawback Policy*	8-K	001-39183	99	2/7/2024


10.21	Form of Note Purchase Agreement, dated as of February 5, 2024, among Velocity Financial, Inc., Velocity Commercial Capital, LLC, U.S. Bank Trust Company, National Association, as Collateral Agent and the respective purchasers of the Notes.	8-K	001-39183	10.1	2/6/2024

10.22	Security Agreement, dated as of February 5, 2024, among Velocity Financial, Inc., Velocity Commercial Capital, LLC and U.S. Bank Trust Company, National Association.	8-K	001-39183	10.2	2/6/2024

10.23	Equal Priority Intercreditor Agreement, dated as of February 5, 2024, among Velocity Financial, Inc., Velocity Commercial Capital, LLC, U.S. Bank Trust Company, National Association as the 2027 Notes Collateral Agent and U.S. Bank Trust Company, National Association as the 2029 Notes Collateral Agent.	8-K	001-39183	10.3	2/6/2024

10.24	Form of Amendment No. 2 to Equity Distribution Agreement, dated April 11, 2025	-	-	-	-

19.1	Securities Trading Policy	10-K	001-39183	19.1	3/12/2025

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+

32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+

101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024 (ii) the Consolidated Statements of Income for the three months ended March 31, 2025 and 2024, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024, (iv) the Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 and (v) the Notes to unaudited Consolidated Financial Statements.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema with Embedded Linkbases Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

* Management contract or compensatory plan or arrangement.

+ This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	VELOCITY FINANCIAL, INC.

Date: May 1, 2025	By:	/s/ Christopher D. Farrar
		Christopher D. Farrar
		Chief Executive Officer

Date: May 1, 2025	By:	/s/ Mark R. Szczepaniak
		Mark R. Szczepaniak
		Chief Financial Officer