Velocity Financial, Inc.

Velocity reported core net income of $27.9 million in Q2 2026. Pre-tax income was $35.2 million, up 3.9% year over year, while the company said GAAP net income and EPS were modestly lower mainly because of a higher effective tax rate. Diluted book value per share increased to $18.43, up nearly $2.81 from a year ago. Loan production was $672.6 million, versus $725 million a year ago and $639 million in Q1. Total loan portfolio ended the quarter at about $7 billion in UPB, up 19% year over year and 2.2% sequentially. Portfolio NIM was 366 basis points, compared with 356 basis points in Q1, and the weighted average coupon on new HFI originations was about 10.0%, with a 5-quarter average of 10.2%. The weighted average LTV on Q2 production was 61.1%. Non-performing loans were 9.6% of HFI loans, down 70 basis points year over year; the company resolved almost $91 million of NPLs, with total recoveries of 107.7% and net gains of 102.7% in the CEO’s prepared remarks. Q2 liquidity was $240 million, including about $76 million of cash and cash equivalents, and available warehouse capacity was just under $662 million out of a $975 million maximum. Management said it expects origination volumes to increase for the rest of 2026, and reiterated that it expects to continue achieving above 3.5% NIM and good growth going forward.

Chris Farrar framed the quarter as a continuation of the company’s existing strategy: grow deliberately, keep credit tight, and use special servicing to maximize recoveries. He emphasized that demand remained healthy across commercial and 1-4 family rental markets, that the pipeline was robust, and that he expects origination volumes to increase for the rest of the year. His tone was confident and steady, with repeated comments that the credit book is performing and that the company is positioned well for the second half of 2026 and into 2027.

Mark Szczepaniak focused on the operating metrics behind the quarter. He highlighted $672.6 million of Q2 production, a 10.0% weighted average coupon on new HFI originations, 61.1% weighted average LTV, and a 366 basis point portfolio NIM, while noting the portfolio coupon stayed at 9.7%. On the balance sheet and funding side, he cited $240 million of liquidity, about $662 million of available warehouse capacity, recourse debt-to-equity of 1.2x, and total debt-to-equity of 9.7x including non-recourse securitizations. He also pointed to a $5.1 million CECL reserve on amortized cost loans, a $24.3 million valuation adjustment on fair value loans, and explained that the MC2 securitization sold loans out of the books and generated a little over $11 million in net proceeds.

Analysts focused on whether the jump in government-insured multifamily originations was a one-quarter anomaly and on how much faster loan growth could be in the second half. Management said the Century Health & Housing HUD multifamily business is naturally lumpy but now has a robust pipeline and should see similar levels going forward. On loan growth, management declined to give formal guidance but said July was the best month for submissions, the second half is seasonally strong, and they expect to beat last year’s volumes. A follow-up question on balance-sheet capacity drew the response that Velocity may tap equity or debt markets depending on growth and execution, but management said it does not want leverage to exceed about 10x.