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1. Company Snapshot

1.a. Company Description

Velocity Financial, Inc.operates as a real estate finance company in the United States.It primarily originates and manages investor loans secured by 1–4 unit residential rental and small commercial properties.


The company offers its products through a network of independent mortgage brokers.Velocity Financial, Inc.was founded in 2004 and is headquartered in Westlake Village, California.

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1.b. Last Insights on VEL

Velocity Financial, Inc.'s recent performance was driven by robust loan origination momentum, with $640M in new loans in Q1/25, a record, up 13.7% quarter-over-quarter and 69% year-over-year. The company's Q2 2025 earnings call highlighted its strong financials. Additionally, Kroll Bond Rating Agency affirmed and upgraded ratings on 26 outstanding securitizations, with 344 rating affirmations and 14 upgrades. The company also announced a dual listing on NYSE Texas, expanding its trading presence.

1.c. Company Highlights

2. Velocity Financial’s Record-Breaking Q4 2025: 52% Net Income Surge

Velocity Financial reported a stellar year, with net income climbing 52% to $111 million, while EPS surpassed expectations at $0.93 versus the $0.67 forecast. Revenue growth of 20.2% is underpinned by a 47.5% uptick in loan originations and a 28.4% rise in the loan portfolio to $6.5 billion. The company’s margin discipline and credit management kept the gross loss ratio at 8.5%, with a CECL reserve of $4.5 million, or 22 bps of the amortized cost. The P/E ratio of 6.87 and EV/EBITDA of 14.1 reflect a valuation that rewards the firm’s strong profitability and low leverage (Net Debt/EBITDA 12.61).

Publication Date: Apr -15

📋 Highlights
  • Record Core Net Income:: Surged 52% to $111,000,000, achieving a 26% pretax ROE.
  • Loan Originations Growth:: Hit $2,700,000,000 (+49%), driven by account executive productivity.
  • Capital Markets Success:: Completed 9 securitizations and $2,600,000,000 in new issuance.
  • Strategic NPL Partnership:: Sold $129,000,000 of NPLs, retaining servicing rights for $30,000,000 net recoveries.
  • Liquidity Strengthening:: Unrestricted cash of $92,000,000 and $500,000,000 in unsecured debt issuance.

Core Financials

The core net income of $111 million marks a new high, driven by a 52% increase over the prior year. The company maintained a healthy gross margin while boosting loan production by 12.6% in Q4, and a 47.5% Y/Y increase for the full year. The weighted average coupon of 9.7% and WALA of 65% support robust interest income, and the 16.95% ROE underscores efficient capital use.

Originations & Capital Markets

Originations surged 49% to $2.7 billion, thanks to higher productivity from account executives. The capital markets team executed nine new securitizations and $2.6 billion in new issuance, expanding the company’s funding base. These actions support the firm’s ability to meet growing loan demand while keeping the weighted average coupon favorable.

Portfolio & Credit Quality

The portfolio grew 28% year-over-year to $6.5 billion, with a nonperforming loan rate falling to 8.5%. Asset management resolved $331 million in NPLs, recovering $30 million. The net gain from loan charge-offs and REO activities was $3.7 million, largely due to a few large legacy loan write‑offs, indicating disciplined loss provisioning.

Liquidity & Capital Position

Liquidity remains robust, with $92 million in unrestricted cash and warehouse capacity. The company issued its first rated unsecured debt offering of $500 million, reducing reliance on short‑term warehouse lines and providing flexibility for future growth. This capital infusion aligns with the long‑term plan to increase book value and maximize shareholder returns.

Strategic Partnerships & Growth Outlook

Velocity entered a transformative partnership, selling $129 million of NPLs while retaining servicing rights, which boosted earnings and freed working capital. The firm is poised to capitalize on potential rate cuts by offering mini‑perm or SOFR‑floater structures, as noted by CFO Farrar. Analysts project a 20.2% revenue growth next year, supported by a strong loan pipeline and disciplined credit policy.

3. NewsRoom

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Velocity Financial, Inc. (VEL) Q4 2025 Earnings Call Transcript

Mar -12

Source: seekingalpha.com

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Velocity Financial, Inc. Reports Fourth Quarter and Full-Year 2025 Results

Mar -11

Source: businesswire.com

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Velocity Financial, Inc. Announces Closing of Offering of $500 Million of Senior Notes Due 2031

Jan -30

Source: businesswire.com

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Velocity Financial, Inc. Announces Date of Fourth Quarter and Full Year 2025 Financial Results Webcast and Conference Call

Jan -29

Source: businesswire.com

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Velocity Financial, Inc. Announces Pricing of $500 Million of Senior Notes Due 2031

Jan -28

Source: businesswire.com

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Velocity Financial, Inc. Announces Proposed Offering of $500 Million of Senior Notes Due 2031

Jan -26

Source: businesswire.com

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Velocity Financial, Inc. Announces Preliminary Expected Fourth Quarter and Full-Year 2025 Results

Jan -26

Source: businesswire.com

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OSE Immunotherapeutics Welcomes FDA Orphan Drug Designation Granted to Pegrizeprument (VEL-101)

Jan -21

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.50%)

6. Segments

Investment and Related Activities

Expected Growth: 8.5%

Growing demand for mortgage-backed securities, increasing housing market activity, and low interest rates drive growth in Velocity Financial's investment and related activities.

7. Detailed Products

Velocity Community

A cloud-based platform that enables community banks and credit unions to offer a digital lending experience to their customers

Velocity Loan Origination

A loan origination system that streamlines the lending process, from application to closing, for mortgage, consumer, and commercial loans

Velocity Point of Sale

A point-of-sale system that enables lenders to originate loans digitally, providing a seamless customer experience

Velocity Digital Lending

A digital lending platform that enables lenders to offer a range of loan products, from application to funding

Velocity Analytics

A data analytics platform that provides insights and reporting for lenders to optimize their lending operations

8. Velocity Financial, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Velocity Financial, Inc. operates in a highly competitive industry, and there are many substitutes available to customers. However, the company's strong brand recognition and customer loyalty help to mitigate the threat of substitutes.

Bargaining Power Of Customers

Velocity Financial, Inc. has a large customer base, and customers have significant bargaining power due to the availability of alternatives. The company needs to focus on customer retention and satisfaction to maintain its market share.

Bargaining Power Of Suppliers

Velocity Financial, Inc. has a diversified supplier base, and suppliers have limited bargaining power. The company has a strong negotiating position, which helps to keep costs under control.

Threat Of New Entrants

The financial services industry has moderate barriers to entry, and new entrants can pose a threat to Velocity Financial, Inc. However, the company's established brand and customer base provide a competitive advantage.

Intensity Of Rivalry

The financial services industry is highly competitive, and Velocity Financial, Inc. faces intense rivalry from established players. The company needs to focus on differentiating itself through innovative products and services to maintain its market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 89.87%
Debt Cost 7.18%
Equity Weight 10.13%
Equity Cost 9.11%
WACC 7.38%
Leverage 886.70%

11. Quality Control: Velocity Financial, Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Guild

A-Score: 6.5/10

Value: 6.9

Growth: 3.8

Quality: 5.4

Yield: 8.0

Momentum: 9.0

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Velocity Financial

A-Score: 5.7/10

Value: 7.2

Growth: 7.1

Quality: 7.4

Yield: 0.0

Momentum: 5.0

Volatility: 7.7

1-Year Total Return ->

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Stock-Card
Greystone Housing Impact Investors

A-Score: 5.7/10

Value: 7.2

Growth: 4.2

Quality: 6.1

Yield: 10.0

Momentum: 0.5

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
UWM Holdings

A-Score: 4.9/10

Value: 4.1

Growth: 3.0

Quality: 5.4

Yield: 10.0

Momentum: 3.5

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
loanDepot

A-Score: 4.2/10

Value: 9.2

Growth: 2.2

Quality: 3.2

Yield: 2.0

Momentum: 7.5

Volatility: 1.0

1-Year Total Return ->

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Stock-Card
Security National Financial

A-Score: 4.0/10

Value: 9.0

Growth: 5.0

Quality: 3.1

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

19.14$

Current Price

19.14$

Potential

-0.00%

Expected Cash-Flows