Velocity Financial, Inc. has recently released its 10-Q report, providing an insight into its operations and financial performance. The company operates as a real estate finance company in the United States, originating, securitizing, and managing a portfolio of loans secured by real estate, including residential rental properties and commercial properties. Velocity Financial primarily originates loans nationwide through an extensive network of independent mortgage brokers. As of March 31, 2025, the company's loan portfolio totaled $5.4 billion, with a weighted average loan-to-value ratio of 66.1%. The company's primary source of revenue is interest income earned on its loan portfolio, with a typical loan having an average balance of approximately $393,000.
Velocity Financial's revenue primarily comes from interest income earned on its loan portfolio. The company's annualized yield on its total portfolio for the three months ended March 31, 2025, was 9.11%. Velocity Financial funds its portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, corporate debt, and equity. The company has executed 38 securitized debt transactions, resulting in a total of over $8.3 billion in gross debt proceeds from May 2011 through March 2025.
One of the core profitability measurements for Velocity Financial is its 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. For both the three months ended March 31, 2025, and 2024, the company's annualized portfolio-related net interest margin was 3.35%. Velocity Financial generated pre-tax income of $26.9 million and $23.2 million for the three months ended March 31, 2025, and 2024, respectively.
In December 2021, the company acquired an 80% ownership interest in Century Health & Housing Capital, LLC, a licensed Ginnie Mae issuer/servicer that provides government-insured Federal Housing Administration mortgage financing for multifamily housing, senior housing, and long-term care/assisted living facilities.
Velocity Financial's business performance is primarily assessed based on net income, with net interest income being the largest contributor to its net income. The company closely monitors the yields on its loans, the costs of its funding sources, net interest spread, and net interest margin. Velocity Financial strives to minimize actual credit losses through its rigorous screening and underwriting process and closely monitors the credit performance of its loan portfolio.
The company operates in a highly competitive market for investor real estate loans, and its operational and financial performance is subject to market developments, including macroeconomic conditions, market uncertainties, and competition. Additionally, the availability and cost of funding, loan performance, and macroeconomic conditions are significant factors affecting Velocity Financial's results of operations.
As of March 31, 2025, Velocity Financial's total loans amounted to $5.4 billion, with a weighted average loan-to-value ratio of 66.1%. The company's nonperforming loans accounted for 10.8% of the total, reflecting the UPB of loans 90 days or more past due or placed on nonaccrual status, including COVID-19 forbearance-granted loans.
Following these announcements, the company's shares moved -1.4%, and are now trading at a price of $17.6. For more information, read the company's full 10-Q submission here.
