8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 2, 2024

Velocity Financial, Inc.

(Exact name of Registrant as Specified in Its Charter)

Delaware	001-39183	46-0659719
(State or Other Jurisdiction<br> <br>of Incorporation)	(Commission<br> <br>File Number)	(IRS Employer<br> <br>Identification No.)
30699 Russell Ranch Road, Suite 295<br> <br>Westlake Village, California	91362
---	---
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (818) 532-3700

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading<br>Symbol(s)	Name of each exchange<br> <br>on which registered
Common stock, par value $0.01 per share	VEL	The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

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. ☐

Item 2.02	Results of Operations and Financial Condition.

On May 2, 2024, we issued a press release announcing financial results for the quarter ended March 31, 2024. The press release is attached as Exhibit 99 and is incorporated herein by reference.

The information provided in Item 2.02, including Exhibit 99, is intended to be furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.

Item 9.01	Exhibits.
Exhibit<br> <br>Number	Description
---	---
99	Press Release dated May 2, 2024
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Velocity Financial, Inc.
Date: May 3, 2024	By:	/s/ Roland T. Kelly
		Roland T. Kelly
		Chief Legal Officer and General Counsel

EX-99

Exhibit 99

Investors and Media:<br> <br>Chris<br>Oltmann<br> <br>(818) 532-3708

Velocity Financial, Inc. Reports

First Quarter 2024 Results

FirstQuarter Highlights:

•	Net income of $17.3 million, up 62.0% from $10.6 million for 1Q23. Diluted EPS of $0.49, up $0.18 from<br>$0.31 per share for 1Q23
•	Core net income^(1)^ of $18.2 million, an increase of<br>60.4% from $11.4 million for 1Q23. Core diluted EPS^(1)^ of $0.51, up from $0.33 per share for 1Q23
---	---
•	Loan production of $378.7 million in UPB, a 7.5% increase from 4Q23 and 74.5% from 1Q23<br>
---	---
•	Loan production in April 2024 totaled $129.0 million with an 11.0% weighted average coupon (WAC)<br>
---	---
•	Nonperforming loans as a percentage of Held for Investment (HFI) loans was 10.1%, up slightly from the 9.7% as of<br>December 31, 2023, and an increase from 8.7% as of March 31, 2023
---	---
•	Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled $54.5 million in UPB<br>
---	---
•	Realized gains of $1.3 million or 102.3% of UPB resolved
---	---
•	Portfolio net interest margin (NIM) of 3.35%, a decrease of 17 bps Q/Q and an increase of 12 bps from 3.23% for<br>1Q23
---	---
•	Completed the VCC 2024-1 securitization totaling $209.9 million of<br>securities issued
---	---
•	Issued $75.0 million of senior secured notes to support ongoing investment portfolio growth<br>
---	---
•	Liquidity^(2)^ of $78.5 million as of March 31, 2024<br>
---	---
•	Recourse debt to equity ratio of 1.4x
---	---
•	GAAP Book value per common share of $14.01 as of March 31, 2024, an increase from $13.49 as of<br>December 31, 2023
---	---

Westlake Village, CA – May 2, 2024 – Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $17.3 million and core net income of $18.2 million for 1Q24, compared to net income of $10.6 million and core net income of $11.4 million for 1Q23. Earnings and core earnings per diluted share were $0.49 and $0.51, respectively, for 1Q24, compared to $0.31 and $0.33 for 1Q23.

^(1)^	Core income and Core EPS are non-GAAP measures that exclude<br>nonrecurring and unusual activities from GAAP net income.
^(2)^	Liquidity includes unrestricted cash reserves of $43.7 million and available liquidity in unfinanced loans<br>of $34.8 million.
---	---

“Velocity began 2024 with another quarter of strong production and loan portfolio growth, resulting in the second highest quarterly net earnings in the Company’s history.” said Chris Farrar, President and CEO. “We saw strong demand for financing to purchase real estate assets, particularly in traditional commercial properties, which equaled our 1-4 Investor loan volume this quarter and drove our production volume growth. While base rates increased during the first quarter, we continued to see an improvement of spreads in the securitization markets and robust investor demand for asset-backed securities. We remain on track to attain our “5X25” goal of a $5 billion loan portfolio by 2025 and deliver another year of solid financial performance.”

First Quarter Operating Results

KEY PERFORMANCE INDICATORS
($ in thousands)	1Q 2024			1Q 2023			Variance	% Variance
Pretax income	$	23,236		$	14,757				57	%
Net income	$	17,251		$	10,649				62	%
Diluted earnings per share	$	0.49		$	0.31				56	%
Core Pretax income	$	24,525		$	15,681				56	%
Core net income^(a)^	$	18,249		$	11,376				60	%
Core diluted earnings per share^(a)^	$	0.51		$	0.33				54	%
Pretax return on equity		20.76	%		15.27	%			36	%
Core pretax return on equity^(a)^		21.92	%		16.20	%			35	%
Net interest margin - portfolio		3.35	%		3.23	%			4	%
Net interest margin - total company		2.83	%		2.76	%			3	%
Average common equity	$	447,613		$	386,935				16	%

All values are in US Dollars.

^(a)^	Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.

n.a.- not applicable

Discussion ofresults:

•	Net income in 1Q24 was $17.3 million, compared to $10.6 million for 1Q23
•	Robust production volume with weighted average coupons of 11.1% drove strong fair market value gains<br>
---	---
•	Core net income^(1)^ was $18.2 million, compared to<br>$11.4 million for 1Q23
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•	1Q24 core adjustments include incentive compensation expenses and costs related to the Company’s employee<br>stock purchase plan (ESPP)
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•	Portfolio NIM for 1Q24 was 3.35%, compared to 3.23% for 1Q23, a 4.0% Y/Y increase driven by 11.1% average loan<br>coupons on recent loan production and continued NPL resolutions, partially offset by higher funding costs
---	---
•	The GAAP pretax return on equity was 20.77% for 1Q24, compared to 15.27% for 1Q23
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TOTAL LOAN PORTFOLIO
($ of UPB in millions)	1Q 2024			1Q 2023			Variance		% Variance
Held for Investment
Investor 1-4 Rental	$	2,337		$	1,905					23	%
Mixed Use		492			450					9	%
Multi-Family		323			304					6	%
Retail		364			308					18	%
Warehouse		276			221					25	%
All Other		489			391					25	%
Total	$	4,282		$	3,579					20	%
Held for Sale
Investor 1-4 Rental	$	—		$	—					n.m.
Multi-Family		—			17			)		n.m.
Warehouse		—			—					n.m.
All Other		—			—					n.m.
Total Managed Loan Portfolio UPB	$	4,282	****	$	3,596	****		****	****	19	%
Key loan portfolio metrics:
Total loan count		11,013			9,147
Weighted average loan to value		67.6	%		68.1	%
Weighted average coupon		9.07	%		8.15	%
Weighted average total portfolio yield		8.71	%		8.00	%
Weighted average portfolio debt cost		5.93	%		5.33	%

All values are in US Dollars.

n.m. - non meaningful

Discussion of results:

•	Velocity’s total loan portfolio was $4.3 billion in UPB as of March 31, 2024, an increase of 19.1%<br>from $3.6 billion in UPB as of March 31, 2023
•	Primarily driven by 22.7% Y/Y growth in loans collateralized by Investor<br>1-4 Rental properties and 25.1% Y/Y growth in loans collateralized by “Other” commercial properties
---	---
•	Loan prepayments totaled $142.0 million, an increase of 20.9% Q/Q and 64.1% Y/Y
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•	The UPB of Fair Value (FVO) loans was $1.58 billion, or 36.9% of total HFI loans, as of March 31, 2024,<br>an increase from $454.0 million in UPB and 12.6%, as of March 31, 2023
---	---
•	The weighted average portfolio<br>loan-to-value ratio was 67.6% as of March 31, 2024, down from 68.1% as of March 31, 2023, and consistent with the five-quarter trailing average of 67.9%<br>
---	---
•	The weighted average total portfolio yield was 8.71% for 1Q24, an increase of 71 bps from 1Q23, driven by a 93<br>bps increase in average loan coupons from 1Q23
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•	Portfolio-related debt cost for 1Q24 was 5.93%, an increase of 60 bps from 1Q23, driven by higher interest rates<br>on warehouse financing and recent securitizations
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LOAN PRODUCTION VOLUMES
($ in millions)	1Q 2024		1Q 2023		Variance	% Variance
Investor 1-4 Rental	$	167	$	116			44	%
Traditional Commercial		167		80			109	%
Short-term loans		45		21			115	%
Total loan production	$	379	$	217		****	75	%
Acquisitions	$	12	$	—

All values are in US Dollars.

Discussion of results:

•	Loan production for 1Q24 totaled $378.7 million in UPB, a 74.5% increase from $217.0 million in UPB for<br>1Q23
•	Driven by growing demand for Traditional Commercial financing. On a Q/Q basis, production volume rose 7.5%.<br>
---	---
•	The weighted average coupon (WAC) on 1Q24 HFI loan production was 11.1%, essentially unchanged from 1Q23<br>
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HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS			****
---	---	---	---	---	---	---	---	---	---	---
($ in thousands)	1Q 2024			1Q 2023			Variance	% Variance
Nonperforming loans^(a)^	$	432,560		$	309,937				40	%
Average Nonperforming Loans ^(b)^	$	321,442		$	298,703				8	%
Average Loan HFI	$	4,149,750		$	3,512,133				18	%
Nonperforming loans % total HFI Loans		10.1	%		8.7	%			17	%
Total Charge Offs	$	504		$	484				4	%
Charge-offs as a % of Avg. Nonperforming<br>Loans^(c)^		0.63	%		0.65	%			(3	)%
Loan Loss Reserve	$	5,267		$	5,045				4	%

All values are in US Dollars.

^(a)^	Total nonperforming/nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on<br>nonaccrual.
^(b)^	Reflects monthly average nonperforming loans held for investment, excluding FVO loans, during the<br>period.
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^(c)^	Reflects the annualized<br>quarter-to-date charge-offs to average nonperforming loans for the period.
---	---

n.a.- not applicable

Discussion of results:

•	Nonperforming loans (NPL) totaled $432.6 million in UPB as of March 31, 2024, or 10.1% of loans HFI,<br>compared to $309.9 million and 8.7% as of March 31, 2023
•	Driven by growth in loans transitioning to foreclosure
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•	Charge-offs for 4Q23 totaled $504.0 thousand, compared to $484.0 thousand for 1Q23<br>
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•	The trailing five-quarter charge-off average was $508.8 thousand<br>
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•	The loan loss reserve totaled $5.3 million as of March 31, 2024, a 4.4% increase from $5.0 million<br>as of March 31, 2023
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•	Primarily resulting from an increase in the individually-assessed reserve component
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•	Loans carried at fair value are not subject to a CECL reserve
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NET REVENUES
($ in thousands)	1Q 2024			1Q 2023			Variance		% Variance
Interest income	$	90,529		$	70,521					28	%
Interest expense - portfolio related		(55,675	)		(42,029	)		)		32	%
Net Interest Income - portfolio related		34,854			28,492					22	%
Interest expense - corporate debt		(5,380	)		(4,139	)		)		30	%
Loan loss provision		(1,002	)		(636	)		)		58	%
Net interest income after provision for loan losses	$	28,472	****	$	23,717	****		****	****	20	%
Gain on disposition of loans		1,699			1,913			)		(11	)%
Unrealized (loss) gain on fair value loans		18,925			7,354					157	%
Unrealized gain (loss) on fair value of securitized debt		(2,318	)		(170	)		)		n.m.
Unrealized gain/(loss) on mortgage servicing rights		444			(95	)				(567	)%
Origination income^(a)^		4,986			2,411					107	%
Bank interest income		1,631			948					n.m.
Other operating income (expense)		408			481			)		(15	)%
Total Other operating income (expense)	$	25,775	****	$	12,842	****		****		101	%
Net Revenue	$	54,247	****	$	36,560	****		****	****	48	%

All values are in US Dollars.

^(a)^	1Q23 includes a reclass of production fees to expenses

n.m. - non meaningful

Discussion ofresults:

•	Net Revenue for 1Q24 was $54.2 million, an increase of 48.4% compared to $36.6 million for 1Q23<br>
•	Driven primarily by $12.9 million Y/Y growth in other operating income and continued strong loan portfolio<br>performance from organically sourced production
---	---
•	Total net interest income for 1Q24, including corporate debt interest expense and loan loss provision, was<br>$28.5 million, a 20.0% increase from $23.7 million for 1Q23
---	---
•	Portfolio net Interest income was $34.9 million for 1Q24, an increase of 22.3% from 1Q23 resulting from<br>portfolio growth and a 12bps increase in NIM
---	---
•	Total other operating income was $25.8 million for 1Q24, an increase from $12.8 million for 1Q23,<br>driven by net fair value gains and origination fees on higher 1Q24 loan production
---	---
•	Net FVO gains on loans and securitized debt were $16.6 million, resulting primarily from fair value gains on<br>new 1Q24 loan production, partially offset by fair value losses on securitized debt
---	---
•	Origination income totaled $5.0 million, resulting from fee income realized on loans 1Q24 loan production<br>
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•	Gain on disposition of loans totaled $1.7 million for 1Q24, primarily driven by loans transferred to Real<br>Estate Owned (REO)
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OPERATING EXPENSES
($ in thousands)	1Q 2024		1Q 2023			Variance	% Variance
Compensation and employee benefits	$	15,357	$	10,008				53	%
Origination (income)/expense^(a)^		646		(50	)			n.m.
Securitization expenses		2,874		2,584				n.m.
Rent and occupancy		498		446				12	%
Loan servicing		4,824		3,828				26	%
Professional fees		2,115		955				121	%
Real estate owned, net		2,455		1,829				34	%
Other expenses		2,242		2,202				2	%
Total operating expenses	$	31,011	$	21,802	****		****	42	%

All values are in US Dollars.

^(a)^	1Q23 includes a reclass of production fees to expenses****

n.m. - non meaningful

Discussion of results:

•	Operating expenses totaled $31.0 million for 1Q24, an increase of 42.2% from 1Q23, driven by our growth in<br>originations and the portfolio
•	Compensation expense totaled $15.4 million, compared to $10.0 million for 1Q23
---	---
•	Compensation growth was driven by growth of the production team in addition to higher commissions expense from<br>increased origination volumes
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•	Securitization expenses totaled $2.9 million, resulting from the issuance of the VCC 2024-1 securitization during the quarter, in-line with securitization costs for 1Q23.
---	---
•	Loan servicing expense totaled $4.8 million, a 26.0% increase from $3.8 million for 1Q23, driven by<br>portfolio growth and nonperforming loan resolution costs
---	---
•	REO expense increased totaled $2.5 million, an increase from $1.8 million for 1Q23, driven by increased<br>valuation-related expenses
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SECURITIZATIONS

( in thousands)	Securities	****	Balance at				****	Balance at
Trusts		3/31/2024		W.A. Rate			3/31/2023		W.A. Rate
2016-1 Trust	319,809	$	—		0.00	%	$	19,896		8.85	%
2017-2 Trust	245,601		41,610		4.06	%		55,981		3.95	%
2018-1 Trust	176,816		31,981		4.09	%		41,239		4.01	%
2018-2 Trust	307,988		74,490		4.51	%		91,189		4.50	%
2019-1 Trust	235,580		70,253		4.06	%		87,832		4.08	%
2019-2 Trust	207,020		62,467		3.44	%		81,096		3.41	%
2019-3 Trust	154,419		54,912		3.30	%		65,757		3.28	%
2020-1 Trust	248,700		101,991		2.89	%		128,280		2.84	%
2020-2 Trust	96,352		42,088		4.57	%		57,239		4.60	%
2021-1 Trust	251,301		165,657		1.77	%		186,986		1.75	%
2021-2 Trust	194,918		141,057		2.03	%		161,511		2.01	%
2021-3 Trust	204,205		153,438		2.46	%		172,915		2.45	%
2021-4 Trust	319,116		237,277		3.25	%		266,076		3.19	%
2022-1 Trust	273,594		233,429		3.94	%		250,986		3.93	%
2022-2 Trust	241,388		205,358		5.07	%		231,171		5.09	%
2022-MC1 Trust	84,967		27,519		6.92	%		48,298		6.88	%
2022-3 Trust	296,323		251,143		5.71	%		277,038		5.67	%
2022-4 Trust	308,357		263,336		6.22	%		297,702		6.24	%
2022-5 Trust	188,754		154,783		7.01	%		184,213		7.08	%
2023-1 Trust	198,715		169,107		7.04	%		195,999		7.01	%
2023-1R Trust	64,833		54,342		7.63	%
2023-2 Trust	202,210		178,713		8.24	%
2023-RTL1 Trust	81,608		81,608		7.22	%
2023-3 Trust	234,741		220,689		7.87	%
2023-4 Trust	202,890		215,821		8.32	%
2024-1 Trust	209,862		207,855		7.91	%
	5,550,067	$	3,440,924	****	5.43	%	$	2,901,403	****	4.47	%

All values are in US Dollars.

Discussion of results

•	The company completed one securitization during 1Q24 totaling $209.9 million of securities issued<br>
•	The transaction execution improved significantly from the prior quarter
---	---
•	The weighted average rate on Velocity’s outstanding securitizations was 5.43% as of March 31, 2024, an<br>increase of 96 bps from March 31, 2023
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RESOLUTION ACTIVITIES

LONG-TERM LOANS

RESOLUTION ACTIVITY	FIRST QUARTER 2024			FIRST QUARTER 2023
($ in thousands)	UPB	Gain /(Loss)		UPB	Gain /(Loss)
Paid in full
Paid current
REO sold (a)
Total resolutions			****			****
Resolutions as a % of nonperforming UPB			%			%

All values are in US Dollars.

SHORT-TERM AND FORBEARANCE LOANS

RESOLUTION ACTIVITY	FIRST QUARTER 2024			FIRST QUARTER 2023
($ in thousands)	UPB	Gain /(Loss)		UPB	Gain /(Loss)
Paid in full
Paid current
REO sold						)
Total resolutions			****			****
Resolutions as a % of nonperforming UPB			%			%
Grand total resolutions			****			****
Grand total resolutions as a % of nonperforming UPB			%			%

All values are in US Dollars.

Discussion of results:

•	NPL resolution totaled $54.5 million in UPB, realizing 102.3% of UPB resolved compared to $38.7 million<br>in UPB and realization of 103.5% of UPB resolved for 1Q23
•	1Q24 NPL resolutions represented 13.8% of nonperforming loan UPB as of December 31, 2023<br>
---	---
•	The UPB of loan resolutions in 1Q24 were in-line with the recent<br>five-quarter resolution average of $55.9 million in UPB
---	---

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Velocity’s executive management team will host a conference call and webcast to review 1Q24 financial results on May 2^nd^, 2024, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please visit Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website following the completion of the conference call.

Conference Call Information

To participate by phone, please dial-in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to join the Velocity Financial, Inc. conference call.

A replay of the call will be available through midnight on May 24, 2024, and can be accessed by dialing 1-877-344-7529 in the U.S. and 855-669-9658 in Canada or 1-412-317-0088 internationally. The passcode for the replay is #3912582. The replay will also be available on the Investor Relations section of the Company’s website under “Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages business purpose loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 20 years.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.

Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs incurred from activities that are not normal recurring operating expenses, such as COVID-stressed charges and recoveries of loan loss provision, nonrecurring debt amortization, the impact of operational measures taken to address the COVID-19 pandemic and workforce reduction costs, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted-average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.

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We have included non-GAAP core net income and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” ”position,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, including the risk of recession (3) regulatory and/or legislative changes, (4) our customers’ continued interest in loans and doing business with us, (5) market conditions and investor interest in our future securitizations, and (6) the continued conflict in Ukraine and Israel and (7) changes in federal government fiscal and monetary policies.

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Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors” in our Form 10-Q filed with the SEC on May 14, 2020, as well as other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.

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Velocity Financial, Inc.

Consolidated Balance Sheet

	Quarter Ended
	3/31/2024			12/31/2023			9/30/2023			6/30/2023			3/31/2023
	Unaudited			Audited			Unaudited			Unaudited			Unaudited
(In thousands)
Assets
Cash and cash equivalents	$	34,829		$	40,566		$	29,393		$	33,987		$	39,397
Restricted cash		24,216			21,361			17,703			16,786			16,636
Loans held for sale, at fair value		—			17,590			19,536			—			18,081
Loans held for investment, at fair value		1,649,540			1,306,072			951,990			705,330			450,732
Loans held for investment		2,727,518			2,828,123			2,945,840			3,057,940			3,169,280
Total loans, net		4,377,058			4,151,785			3,917,366			3,763,270			3,638,093
Accrued interest receivables		29,374			27,028			24,756			22,602			20,931
Receivables due from servicers		87,523			85,077			70,139			63,896			64,133
Other receivables		2,113			8,763			236			1,306			2,188
Real estate owned, net		46,280			44,268			29,299			20,388			21,778
Property and equipment, net		2,013			2,785			2,861			3,023			3,209
Deferred tax asset		1,580			2,339			705			1,878			2,543
Mortgage Servicing Rights, at fair value		9,022			8,578			9,786			9,445			9,143
Derivative assets		1,967			—			1,261			—			—
Goodwill		6,775			6,775			6,775			6,775			6,775
Other assets		5,468			5,248			7,028			7,789			12,268
Total Assets	$	4,628,218	****	$	4,404,573	****	$	4,117,308	****	$	3,951,145	****	$	3,837,094	****
Liabilities and members’ equity
Accounts payable and accrued expenses	$	123,988		$	121,969		$	97,869		$	95,344		$	84,976
Secured financing, net		283,813			211,083			210,774			210,464			210,155
Securitized debt, net		2,329,906			2,418,811			2,504,334			2,622,547			2,657,469
Securitized debt, at fair value		1,073,843			877,417			669,139			381,799			194,941
Warehouse & repurchase facilities		360,216			334,755			215,176			235,749			298,313
Derivative liability		—			3,665			—			—			—
Total Liabilities		4,171,766			3,967,700			3,697,292			3,545,903			3,445,854
Stockholders’ Equity
Stockholders’ equity		452,941			433,444			416,398			401,707			387,624
Noncontrolling interest in subsidiary		3,511			3,429			3,618			3,535			3,616
Total equity		456,452			436,873			420,016			405,242			391,240
Total Liabilities and members’ equity	$	4,628,218	****	$	4,404,573	****	$	4,117,308	****	$	3,951,145	****	$	3,837,094	****
Book value per share	$	14.01		$	13.49		$	13.00		$	12.57		$	12.18
Shares outstanding		32,574	^(1)^		32,395	^(2)^		32,314	^(3)^		32,239	^(4)^		32,112	^(5)^
^(1)^	Based on 32,574,498 common shares outstanding as of March 31, 2024, and excludes unvested shares of common<br>stock authorized for incentive compensation totaling 411,296.
---	---
^(2)^	Based on 32,395,423 common shares outstanding as of December 31, 2023, and excludes unvested shares of<br>common stock authorized for incentive compensation totaling 470,413.
---	---
^(3)^	Based on 32,313,744 common shares outstanding as of September 30, 2023, and excludes unvested shares of<br>common stock authorized for incentive compensation totaling 589,634.
---	---
^(4)^	Based on 32,238,715 common shares outstanding as of June 30, 2023, and excludes unvested shares of common<br>stock authorized for incentive compensation totaling 502,913.
---	---
^(5)^	Based on 32,111,906 common shares outstanding as of March 31, 2023, and excludes unvested shares of common<br>stock authorized for incentive compensation totaling 490,526.
---	---

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Velocity Financial, Inc.

Consolidated Statements of Income (Quarters)

	Quarter Ended
($ in thousands)	3/31/2024			12/31/2023			9/30/2023			6/30/2023		3/31/2023
	Unaudited			Unaudited			Unaudited			Unaudited		Unaudited
Revenues
Interest income	$	90,529		$	86,269		$	79,088		$	74,897	$	70,521
Interest expense - portfolio related		55,675			51,405			47,583			45,451		42,029
Net interest income - portfolio related		34,854			34,864			31,505			29,446		28,492
Interest expense - corporate debt		5,380			4,140			4,138			4,139		4,139
Net interest income		29,473			30,724			27,367			25,307		24,353
Provision for loan losses		1,002			828			154			298		636
Net interest income after provision for loan losses		28,472			29,897			27,213			25,009		23,717
Other operating income
Gain on disposition of loans		1,699			1,482			3,606			1,237		1,913
Unrealized gain (loss) on fair value loans		18,925			39,367			(1,284	)		2,413		7,354
Unrealized gain (loss) on fair value securitized debt		(2,318	)		(24,085	)		9,692			5,560		(170	)
Unrealized gain/(loss) on mortgage servicing rights		444			(1,208	)		341			302		(95	)
Origination income		4,986			3,981			3,323			2,735		2,411
Bank interest income		1,631			1,716			1,342			1,188		948
Other income (expense)		408			418			340			601		481
Total other operating income		25,775			21,670			17,360			14,036		12,842
Net revenue		54,247			51,567			44,573			39,046		36,560
Operating expenses
Compensation and employee benefits		15,357			15,143			12,523			10,670		10,008
Origination expenses		646			173			273			123		(50	)
Securitizations expenses		2,874			2,709			4,930			2,699		2,584
Rent and occupancy		498			551			472			458		446
Loan servicing		4,824			4,636			4,901			4,267		3,828
Professional fees		2,115			1,733			854			1,056		955
Real estate owned, net		2,455			2,068			1,239			1,018		1,829
Other operating expenses		2,242			2,248			2,142			1,931		2,202
Total operating expenses		31,011			29,260			27,334			22,222		21,802
Income before income taxes		23,236			22,307			17,239			16,824		14,757
Income tax expense		5,903			5,141			5,070			4,602		4,021
Net income		17,333			17,166			12,169			12,222		10,736
Net income attributable to noncontrolling interest		82			(189	)		83			39		87
Net income attributable to Velocity Financial, Inc.		17,251			17,355			12,086			12,183		10,649
Less undistributed earnings attributable to participating securities		217			225			183			185		160
Net earnings attributable to common shareholders	$	17,034	****	$	17,130	****	$	11,903	****	$	11,998	$	10,489	****
Basic earnings (loss) per share	$	0.52	****	$	0.53	****	$	0.37	****	$	0.37	$	0.33	****
Diluted earnings (loss) per common share	$	0.49	****	$	0.50	****	$	0.35	****	$	0.36	$	0.31	****
Basic weighted average common shares outstanding		32,541			32,326			32,275			32,122		32,098
Diluted weighted average common shares outstanding		35,439			34,991			34,731			34,140		34,052

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Velocity Financial, Inc.

Net Interest Margin – Portfolio Related and Total Company

(Unaudited)

Quarters:

	Quarter Ended March 31, 2024							Quarter Ended March 31, 2023
			Interest		Average					Interest		Average
	Average		Income /		Yield /			Average		Income /		Yield /
($ in thousands)	Balance		Expense		Rate^(1)^			Balance		Expense		Rate^(1)^
Loan portfolio:
Loans held for sale	$	9,661						$	12,896
Loans held for investment		4,149,750							3,512,133
Total loans	$	4,159,412	$	90,529		8.71	%	$	3,525,029	$	70,521		8.00	%
Debt:
Warehouse and repurchase facilities	$	267,559		6,392		9.56	%	$	225,497		4,833		8.57	%
Securitizations		3,486,173		49,283		5.65	%		2,926,153		37,196		5.08	%
Total debt - portfolio related		3,753,732		55,675		5.93	%		3,151,650		42,029		5.33	%
Corporate debt		261,552		5,380		8.23	%		215,000		4,139		7.70	%
Total debt	$	4,015,284	$	61,055		6.08	%	$	3,366,650	$	46,168		5.49	%
Net interest spread - portfolio related^(2)^						2.77	%						2.67	%
Net interest margin - portfolio related						3.35	%						3.23	%
Net interest spread - total company^(3)^						2.62	%						2.52	%
Net interest margin - total company						2.83	%						2.76	%
^(1)^	Annualized.
---	---
^(2)^	Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio<br>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<br>the interest rates paid on our total debt.
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Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)

Quarters:

Core Net Income

	Quarter Ended
	3/31/2024		12/31/2023			9/30/2023		6/30/2023		3/31/2023
Net Income	$	17,251	$	17,355	****	$	12,086	$	12,183	$	10,649
Corporate debt refinancing costs		—		—			—		—		—
Tax liability reduction		—		(1,866	)		—		—		—
Equity award & ESPP costs		998		673			832		745		728
Core Net Income	$	18,249	$	16,161	****	$	12,918	$	12,928	$	11,376
Core diluted earnings per share	$	0.51	$	0.46	****	$	0.37	$	0.38	$	0.33

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