Velocity Financial Q3 Profit Rises to $26.4 Million, NPLs Hit 10.1%
Velocity Financial earned $26.4 million in Q3, up 4.1%, as loan production rose to $911.3 million and nonperforming loans climbed to 10.1%.
Why it matters
- Velocity Financial's net income rose 4.1% to $26.4 million, or $0.67 a share, in the third quarter, and core net income rose 11.5% to $30.0 million, or $0.76 a share.
- The business-purpose lender produced $911.3 million of loans, up from $739.0 million a year earlier, at a 10.12% weighted average coupon on loans held for investment, down from 10.48%.
- Nonperforming loans rose to $756.5 million, or 10.1% of loans held for investment, from 9.8% a year earlier, while portfolio debt cost fell to 6.04%.
Velocity Financial earned $26.4 million, or $0.67 a diluted share, in the third quarter, up 4.1% from $25.4 million a year earlier, the business-purpose lender said after the market close on Wednesday, Nov. 4. Loan production rose to $911.3 million from $739.0 million, but nonperforming loans climbed to 10.1% of loans held for investment, according to the company's results release on Business Wire.
Velocity (NYSE: VEL), based in Westlake Village, California, lends on 1-to-4 unit rental homes and small commercial properties through independent mortgage brokers. Core net income, a non-GAAP measure, rose 11.5% to $30.0 million, or $0.76 a share, from $26.9 million, or $0.69. Pretax income rose 8.2% to $38.3 million.
What rates is Velocity charging on new loans?
The weighted average coupon on loans it made to hold for investment was 10.12% in the third quarter, down 0.36 percentage point from 10.48% a year earlier. Velocity said the decline reflected a different product mix. The coupon across its whole portfolio was 9.75% on a weighted average basis, against 9.74% a year earlier. For how those figures compare with prime, SOFR and other lenders' disclosures, see hard money and private lending rates today.
| Measure | Q3 2026 | Q3 2025 |
|---|---|---|
| Loan production | $911.3 million | $739.0 million |
| Coupon on new loans held for investment | 10.12% | 10.48% |
| Total portfolio yield | 9.41% | 9.54% |
| Portfolio cost of debt | 6.04% | 6.27% |
| Portfolio net interest margin | 3.78% | 3.65% |
| Nonperforming loans, share of loans held for investment | 10.1% | 9.8% |
| Total loans (unpaid principal) | $7.46 billion | $6.28 billion |
Source: Velocity Financial third-quarter 2026 results release. Loan totals are as of Sept. 30 each year.
Traditional commercial loans led production at $422.5 million, followed by investor 1-to-4 loans at $318.3 million. Government-insured multifamily loans, made by its Century Health & Housing Capital subsidiary, jumped to $154.9 million from $25.9 million. Short-term loans fell 57.0% to $15.5 million.
How is Velocity's credit holding up?
Nonperforming loans rose 23.2% to $756.5 million of unpaid principal from $614.2 million a year earlier. Velocity resolved $90.0 million of them in the quarter and recovered 108.2% of the principal resolved, or $7.4 million, including accrued interest received. Charge-offs were $0.3 million. Its credit loss reserve was $5.3 million, or 0.30% of loans subject to that accounting. Losses on existing foreclosed property totaled $8.8 million, up from $6.2 million.
How does Velocity fund its loans?
Through securitizations and warehouse lines, according to the release. It completed two in the quarter, totaling $516.0 million of securities, and its portfolio-related debt cost fell 0.23 point to 6.04% on lower rates for securitized debt. It reported $425.4 million of available warehouse line capacity and $193.4 million of liquidity, including $86.8 million of unrestricted cash. Our warehouse line of credit guide explains how lenders use those lines before a securitization.
Operating expenses rose 26.7% to $63.9 million, including $2.4 million of merger and acquisition costs. The release did not name the deal. In August, Velocity agreed to buy entities from Toorak Capital for a base price of about $62 million plus estimated tangible book value, according to an SEC filing. Velocity's third-quarter earnings presentation says the Toorak acquisition remains on track to close in the fourth quarter of 2026, subject to customary closing conditions. Diluted book value was $19.23 a share, up 17.9% from a year earlier.
"Our third quarter results were driven by our consistent portfolio NIM and strong production volume," Chief Executive Chris Farrar said in the release. Velocity scheduled a call for 5 p.m. ET on Nov. 4. For how lenders size rental-property loans like these, see our explainer on how DSCR loans are sized.
Updated Nov. 5, 2026: Rechecked against the release and Velocity's earnings presentation; added the presentation's Toorak closing timeline and clarified funding sources. No figures changed.
Updated Nov. 6, 2026: Added the company's Form 8-K exhibits, filed with the SEC late on Nov. 5; every figure matches the filed release.
Sources
- Velocity Financial, Inc., Third-quarter 2026 results release, Exhibit 99.1 to Form 8-K (filed Nov. 5, 2026)
- Velocity Financial, Inc., Third-quarter 2026 earnings presentation, Exhibit 99 to Form 8-K (filed Nov. 5, 2026)
- Velocity Financial, Inc., Velocity Financial, Inc. Reports Third Quarter 2026 Results, Business Wire (Nov. 4, 2026); full text as syndicated by StockTitan
- Velocity Financial, Inc., Form 8-K on the Toorak Capital equity purchase agreement (filed Aug. 27, 2026)
- Velocity Financial, Inc., Third-quarter 2026 earnings presentation (Nov. 4, 2026)
- SEC EDGAR, Velocity Financial filing index (checked Nov. 6, 2026)
