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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 Q3 2025 Earnings: A Strong Performance

Velocity Financial reported a robust financial performance in Q3 2025, with a 66.5% increase in pretax earnings. The company's actual EPS came out at $0.69, beating estimates of $0.63. The total loan portfolio grew by 7.1% to $6.3 billion, with a weighted average coupon of 9.74%. The production volumes reached $739 million, and new applications totaled $1.4 billion.

Publication Date: Nov -30

📋 Highlights
  • 66.5% Pretax Earnings Growth:: Pretax earnings surged 66.5% year-over-year.
  • $739M Production Volumes:: Achieved $739 million in production volumes during Q3 2025.
  • $1.4B New Applications:: Generated $1.4 billion in new loan applications.
  • 7.1% Loan Portfolio Growth:: Total loan portfolio increased by 7.1% to $6.3 billion.
  • 82-Headcount Increase:: Employee count rose by 82 to 347 by September 30, 2025.
  • 66.5% Pretax Earnings Growth:: Pretax earnings surged 66.5% year-over-year.
  • $739M Production Volumes:: Achieved $739 million in production volumes during Q3 2025.
  • $1.4B New Applications:: Generated $1.4 billion in new loan applications.
  • 7.1% Loan Portfolio Growth:: Total loan portfolio increased by 7.1% to $6.3 billion.
  • 82-Headcount Increase:: Employee count rose by 82 to 347 by September 30, 2025.

Loan Portfolio Performance

The company's discipline in maintaining a weighted average portfolio loan-to-value of 65.5% and a coupon of 10.5% generated attractive risk-adjusted spreads, as highlighted by Chris Farrar, President and CEO. The nonperforming loan rate decreased to 9.8%, and NPA resolution gains totaled $2.8 million.

Operational Highlights

The headcount increased by 82 people to 347 at the end of September, as replied by Chris Farrar to Steven Delaney from Citizens. The company successfully completed a single counterparty securitization transaction, reducing transaction costs and diversifying funding options.

Valuation and Outlook

Analysts estimate next year's revenue growth at 27.3%. With a Price-to-Tangible Book Value not available, we can look at the Price-to-Book Ratio, which stands at 1.16. The ROE is at 15.52%, indicating a relatively healthy profitability level. The current valuation multiples suggest that the market has a relatively optimistic view of the company's prospects. The Free Cash Flow Yield is at 7.4%, which is a positive sign.

Key Drivers and Challenges

The company's performance was driven by its ability to maintain a strong loan portfolio and generate attractive risk-adjusted spreads. However, the REO valuations posed a challenge, resulting in a $6.3 million loss due to the sale of properties at lower values than initially expected. As Mark Szczepaniak emphasized, the overall gain on resolution was still positive despite the timing adjustment.

3. NewsRoom

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Velocity Financial, Inc. (VEL) Q3 2025 Earnings Call Transcript

Nov -07

Source: seekingalpha.com

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Velocity Financial, Inc. Reports Third Quarter 2025 Results

Nov -06

Source: businesswire.com

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Velocity Financial, Inc. Announces Date of Third Quarter 2025 Financial Results Webcast and Conference Call

Oct -23

Source: businesswire.com

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Velocity Financial, Inc. Announces Dual Listing on NYSE Texas

Aug -13

Source: businesswire.com

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Velocity Financial, Inc. (VEL) Q2 2025 Earnings Call Transcript

Aug -09

Source: seekingalpha.com

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Velocity Financial, Inc. Announces Date of Second Quarter 2025 Financial Results Webcast and Conference Call

Jul -22

Source: businesswire.com

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Velocity Commercial Capital Securitization Ratings Affirmed and Upgraded by Kroll Bond Rating Agency

Jul -09

Source: businesswire.com

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Velocity Financial: Another Good Performance And Potential Acquisition Target

Jun -23

Source: seekingalpha.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
Greystone Housing Impact Investors

A-Score: 6.3/10

Value: 7.0

Growth: 4.2

Quality: 6.4

Yield: 10.0

Momentum: 1.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Guild

A-Score: 5.5/10

Value: 5.1

Growth: 3.8

Quality: 4.2

Yield: 8.0

Momentum: 8.0

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
Security National Financial

A-Score: 4.9/10

Value: 8.6

Growth: 5.0

Quality: 6.5

Yield: 0.0

Momentum: 3.0

Volatility: 6.0

1-Year Total Return ->

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Stock-Card
Velocity Financial

A-Score: 4.9/10

Value: 5.2

Growth: 7.1

Quality: 5.5

Yield: 0.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
UWM Holdings

A-Score: 4.5/10

Value: 2.2

Growth: 3.0

Quality: 4.2

Yield: 10.0

Momentum: 3.5

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
loanDepot

A-Score: 3.9/10

Value: 6.4

Growth: 2.3

Quality: 3.9

Yield: 2.0

Momentum: 8.0

Volatility: 1.0

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

18.85$

Current Price

18.85$

Potential

-0.00%

Expected Cash-Flows