Velocity Financial shares surge after record 2025 results
Real estate lender reports 53% annual income jump on record originations and improving credit quality
Velocity Financial Inc. delivered preliminary fourth-quarter and full-year 2025 results that blew past analyst expectations, sending shares of the real estate lender higher on what executives called an "exceptional year" driven by record loan production and substantial credit quality improvements.
The Westlake Village, California-based company reported fourth-quarter earnings per share of 90 cents, crushing analyst estimates of 63 cents by nearly 43%. Net income in the quarter jumped at least 70% year-over-year to $35 million, while full-year income surged 53% to exceed $105 million, according to the company's preliminary results announcement.
The standout performance was anchored in record loan originations, which reached $2.72 billion for the year—a 48% increase from 2024. The company's portfolio, measured by unpaid principal balance, grew 28% to $6.49 billion by year-end. Perhaps most encouraging for investors, Velocity Financial's nonperforming loan ratio improved dramatically to between 8.5% and 8.6%, down from 10.7% previously, indicating sustained progress in managing credit risk.
The credit quality improvement builds on strategic actions Velocity took throughout 2025, including a December agreement to sell $133.2 million in nonperforming loans at a premium to their balance sheet value. That transaction, which also established a third-party servicing arrangement, was designed to optimize the company's earning asset base and free capital for continued portfolio growth, according to Jeff Taylor, executive vice president of capital markets.
Velocity Financial operates in a specialized niche of the real estate finance market, providing business-purpose loans secured by residential rental and small commercial properties to investors who often don't qualify for traditional bank financing. The company uses a vertically integrated platform, managing the entire loan lifecycle from origination through servicing, which allows for greater control over credit quality and operational costs. Loans are originated through a nationwide network of independent mortgage brokers across 45 states and Washington, D.C.
The company's business model relies on generating revenue primarily from the spread between interest earned on its loan portfolio and funding costs, supplemented by fees and gains from loan origination and resolution. Velocity Financial also utilizes a securitization platform to access capital markets, having completed five securitizations in the first half of 2025 and 42 since 2011, according to company materials.
Credit rating agencies have taken notice of the improving portfolio quality. In July 2025, Kroll Bond Rating Agency affirmed ratings on 344 tranches and upgraded 14 tranches across 26 of Velocity Commercial Capital's outstanding securitizations, reflecting stable collateral performance, increased credit support, and minimal losses. Cumulative loss levels in Velocity's outstanding securitizations ranged from 0.00% to 0.58% as of July, with 13 out of 26 securitizations experiencing no losses since issuance.
The strong preliminary results position Velocity Financial well as it moves toward releasing complete fourth-quarter and full-year financials. The company's 2025 performance demonstrates the benefits of its disciplined underwriting approach and active management of nonperforming assets at a time when the broader real estate finance sector faces ongoing economic uncertainty.
Analysts currently have an average target price of $21.67 on Velocity Financial shares, according to market data, implying upside from current levels around $19.39. The stock has traded between $16.12 and $21.39 over the past 52 weeks, with the company maintaining a market capitalization of approximately $754 million.
Looking ahead, investors will be watching whether Velocity Financial can sustain its record origination pace and continue improving credit quality in 2026, particularly as interest rate dynamics and real estate market conditions evolve. The company's ability to access capital markets through its established securitization platform and its focus on underserved market segments may provide competitive advantages in the coming year.