Velocity Financial, Inc.

Previous wording

Our primary source of revenue is interest income earned on our loan portfolio. Our typical loan is secured by a first lien on the underlying property with a personal guarantee, and based on all loans in our portfolio as of March 31, 2025, has an average balance of approximately $393.0 thousand. As of March 31, 2025, our loan portfolio totaled $5.4 billion of UPB on properties in 47 states and the District of Columbia. The total portfolio had a weighted average loan-to-value ratio, or LTV at origination, of 66.1%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 51.4% of the UPB. For the three months ended March 31, 2025, the annualized yield on our total portfolio was 9.11%.

Current wording

Our primary source of revenue is interest income earned on our loan portfolio. Our typical loan is secured by a first lien on the underlying property with a personal guarantee, and based on all loans in our portfolio as of June 30, 2025, has an average balance of approximately $394.0 thousand. As of June 30, 2025, our loan portfolio totaled $5.9 billion of UPB on properties in 48 states and the District of Columbia. The total portfolio had a weighted average loan-to-value ratio, or LTV at origination, of 65.8%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 50.4% of the UPB. For the three and six months ended June 30, 2025, the annualized yield on our total portfolio were 9.65% and 9.39%, respectively.

Previous wording

We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, corporate debt, and equity. The securitized debt market is our primary source of long-term financing. We have successfully executed 38 securitized debt transactions, resulting in a total of over $8.3 billion in gross debt proceeds from May 2011 through March 2025. We may also continue to sell loans from time to time for cash in lieu of holding the loans in our loan portfolio.

Current wording

We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, corporate debt, and equity. The securitized debt market is our primary source of long-term financing. We have successfully executed 42 securitized debt transactions, resulting in a total of over $9.3 billion in gross debt proceeds from May 2011 through June 2025. We may also continue to sell loans from time to time for cash in lieu of holding the loans in our loan portfolio.

Previous wording

One of our core profitably measurements is our portfolio related net interest margin, which measures the difference between interest income earned on loans and interest expense paid on portfolio-related debt, relative to the amount of loans outstanding over the period. Our portfolio-related debt consists of warehouse facilities and securitized debt and excludes corporate debt. For both the three months ended March 31, 2025 and 2024, our annualized portfolio related net interest margin was 3.35%. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt, provision for credit losses and operating expenses. For the three months ended March 31, 2025 and 2024, including net income attributable to noncontrolling interest, we generated pre-tax income of $26.9 million and $23.2 million, and net income of $18.6 million and $17.3 million, respectively.

Current wording

One of our core profitably measurements is our portfolio related net interest margin, which measures the difference between interest income earned on loans and interest expense paid on portfolio-related debt, relative to the amount of loans outstanding over the period. Our portfolio-related debt consists of warehouse facilities and securitized debt and excludes corporate debt. For the three and six months ended June 30, 2025, our annualized portfolio related net interest margin were 3.82% and 3.60%, respectively, compared to 3.54% and 3.45% for the three and six months ended June 30, 2024, respectively. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt, provision for credit losses and operating expenses. For the three and six months ended June 30, 2025, including net income attributable to noncontrolling interest, we generated pre-tax income of $33.9 million and $60.8 million, and net income of $26.2 million and $44.8 million, respectively. For the three and six months ended June 30, 2024, including net income attributable to noncontrolling interest, we generated pre-tax income of $19.9 million and $43.1 million, and net income of $14.7 million and $32.0 million, respectively.

Previous wording

In March 2025, we collapsed the 2023-1R Trust and redeemed the remaining outstanding balance of securitized debt.

Current wording

In April and May 2025, we collapsed and refinanced the 2023-RTL1 Trust and 2022-MC1 Trust, respectively, and redeemed the remaining outstanding balances of the securitized debt.

Previous wording

Our results of operations depend on, among other things, the level of our net interest income, the credit performance of our loan portfolio and the efficiency of our operating platform. These measures are affected by various factors, including the demand for investor real estate loans, the competitiveness of the market for originating or acquiring investor real estate loans, the cost of financing our portfolio, operating costs, the availability of funding sources and the underlying performance of the collateral supporting our loans. While we have been successful at managing these elements in the past, there are certain circumstances beyond our control, including the ongoing Russia/Ukraine war and conflicts in the Middle East, an expected recession, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

Current wording

Our results of operations depend on, among other things, the level of our net interest income, the credit performance of our loan portfolio and the efficiency of our operating platform. These measures are affected by various factors, including the demand for investor real estate loans, the competitiveness of the market for originating or acquiring investor real estate loans, the cost of financing our portfolio, operating costs, the availability of funding sources and the underlying performance of the collateral supporting our loans. While we have been successful at managing these elements in the past, there are certain circumstances beyond our control, including the ongoing geopolitical conflicts, the changing economic policies, an expected recession, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

Previous wording

(A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $36.7 million, $40.1 million, and $45.1million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of March 31, 2025, December 31, 2024, and March 31, 2024, respectively.

Current wording

(A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $31.7 million, $36.7 million and $40.7 million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of June 30, 2025, March 31, 2025, and June 30, 2024, respectively.

Previous wording

During the first quarter of 2025, loan originations increased $76.9 million and $261.8 million from the quarters ended December 31, 2024 and March 31, 2024, respectively.

Current wording

During the second quarter of 2025, loan originations increased $85.0 million and $303.2 million from the quarters ended March 31, 2025 and June 30, 2024, respectively.

Previous wording

Our total portfolio of loans held for investment consists of both loans held for investment carried at amortized cost and loans held for investment at fair value, which are presented in the Consolidated Balance Sheets as “Loans held for investment, at amortized cost” and “Loans held for investment, at fair value,” respectively. The following tables show the various components of loans held for investment as of the dates indicated:

Current wording

Our total portfolio of loans held for investment consists of both loans held for investment carried at amortized cost and loans held for investment at fair value, which are presented in the Consolidated Balance Sheets as “Loans held for investment, at amortized cost” and “Loans held for investment, at fair value,” respectively. The following table shows the various components of loans held for investment as of the dates indicated:

Previous wording

Our allowance for credit losses as of March 31, 2025 was $5.0 million compared to $5.3 million as of March 31, 2024. The decrease in allowance for credit losses from March 31, 2024 was primarily due to a decrease in the baseline allowance component of the reserve. Our overall expected credit loss reserves range from 0.15% to 0.20% of loans held for investment, excluding FVO loans. We strive to minimize actual credit losses through our rigorous screening and underwriting process, life of loan portfolio management and special servicing practices. Additionally, we believe borrower equity of 25% to 40% provides significant protection against credit losses. The various scenarios, the weighting of scenarios, as well as the forecast period and reversion to historical loss, is subject to change as conditions in the market change and our ability to forecast as economic events evolve.

Current wording

Our allowance for credit losses as of June 30, 2025 was $4.9 million compared to $5.2 million as of June 30, 2024. The decrease in allowance for credit losses from June 30, 2024 was primarily due to a decrease in the baseline allowance component of the reserve. Our overall expected credit loss reserves range from 0.15% to 0.20% of loans held for investment, excluding FVO loans. We strive to minimize actual credit losses through our rigorous screening and underwriting process, life of loan portfolio management and special servicing practices. Additionally, we believe borrower equity of 25% to 40% provides significant protection against credit losses. The various scenarios, the weighting of scenarios, as well as the forecast period and reversion to historical loss are subject to change as conditions in the market change and our ability to forecast as economic events evolve.

Previous wording

The allowance for credit losses was 0.22% of total UPB of loans held for investment carried at amortized cost as of March 31, 2025. Although slightly higher than our expected range of 0.15% to 0.20%, the 0.22% reserve is reasonable given the current market uncertainty. Nonperforming loans were 12.71% of total UPB of loans held for investment carried at amortized cost as of March 31, 2025. We believe the allowance for credit losses is adequate because historically, most loans that become nonperforming resolve prior to converting to REO. This is due to low LTVs at origination and our active management of the portfolio. Historically, our actual annual charge-offs rate is 0.06% over the last seven years.

Current wording

The allowance for credit losses was 0.22% of total UPB of loans held for investment carried at amortized cost as of June 30, 2025. Although slightly higher than our expected range of 0.15% to 0.20%, the 0.22% reserve is reasonable given the current market uncertainty. Nonperforming loans were 12.8% of total UPB of loans held for investment carried at amortized cost as of June 30, 2025. We believe the allowance for credit losses is adequate because historically, most loans that become nonperforming resolve prior to converting to REO. This is due to low LTVs at origination and active management of our portfolio. Historically, our actual annual charge-offs rate was 0.07% over the last eight years.

Previous wording

Balance includes $136.1 million UPB of loans held for investment at amortized cost as of March 31, 2025, $142.8 million as of December 31, 2024, and $165.1 million as of March 31, 2024 in our COVID-19 forbearance program.

Current wording

Balance includes $130.5 million UPB of loans held for investment at amortized cost as of June 30, 2025, $136.1 million as of March 31, 2025, and $158.2 million as of June 30, 2024 in our COVID-19 forbearance program.

Previous wording

Loans that are 90+ days past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $587.8 million, or 10.8% of our held for investment loan portfolio as of March 31, 2025, compared to $539.4 million, or 10.7% as of December 31, 2024, and $432.6 million, or 10.1% as of March 31, 2024. The increase in total nonperforming loans as of March 31, 2025 compared to December 31, 2024 and March 31, 2024 was due to an increase in the size of our portfolio and management’s decision to move loans into foreclosure early in the delinquency process.

Current wording

Loans that are 90+ days past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $601.8 million, or 10.3% of our held for investment loan portfolio as of June 30, 2025, compared to $587.8 million, or 10.8% as of March 31, 2025, and $470.6 million, or 10.5% as of June 30, 2024. The increase in total nonperforming loans as of June 30, 2025 compared to March 31, 2025 and June 30, 2024 was due to an increase in the size of our portfolio and management’s decision to move loans into foreclosure early in the delinquency process.

Previous wording

Historically, most loans that become nonperforming resolve prior to converting to REO. This is due to low LTVs at origination and our active management of the portfolio. The following tables summarize the resolution activities of loans that became nonperforming prior to the beginning of the periods indicated or became nonperforming and subsequently resolved during the periods indicated. We resolved $76.4 million of long-term and short-term nonperforming assets for the quarter ended March 31, 2025, which was lower compared to $79.4 million for the quarter ended December 31, 2024, and higher compared to $54.5 million for the quarter ended March 31, 2024. From these resolution activities, we realized net gains of $1.9 million, $5.6 million, and $1.3 million for the quarters ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. This is largely the result of collecting default interest and prepayment penalties in excess of the contractual principal and interest due on loans.

Current wording

Historically, most loans that become nonperforming resolve prior to converting to REO. This is due to low LTVs at origination and our active management of the portfolio. The following tables summarize the resolution activities of loans that became nonperforming prior to the beginning of the periods indicated or became nonperforming and subsequently resolved during the periods indicated. We resolved $104.0 million of long-term and short-term nonperforming assets for the quarter ended June 30, 2025, which was higher compared to $76.4 million for the quarter ended March 31, 2025, and higher compared to $80.7 million for the quarter ended June 30, 2024. From these resolution activities, we realized net gains of $3.6 million, $1.9 million, and $1.0 million for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. This is largely the result of collecting interest and prepayment penalties in excess of the principal on loans and selling our REOs at prices higher than their carrying value.

Previous wording

REO includes real estate we acquire through foreclosure or by deed-in-lieu of foreclosure. REO assets are initially recorded at fair value, less estimated costs to sell on the date of foreclosure. Adjustments that reduce the carrying value of the loan to the fair value of the real estate at the time of foreclosure are recognized as charge-offs in the allowance for credit losses. Positive adjustments at the time of foreclosure are recognized in other operating income. After foreclosure, we periodically obtain new valuations and any subsequent changes to fair value, less estimated costs to sell, are reflected as valuation adjustments, included in “Real estate owned, net” in the Consolidated Statements of Income.

Current wording

REO includes real estate we acquire through foreclosure or by deed-in-lieu of foreclosure. REO assets are initially recorded at fair value, less estimated costs to sell on the date of foreclosure. Adjustments that reduce the carrying value of the loan to the fair value of the real estate at the time of foreclosure are recognized as charge-offs in the allowance for credit losses. Gains at the time of foreclosure are recognized in other operating income. After foreclosure, we periodically obtain new valuations and any subsequent changes to fair value, less estimated costs to sell, are reflected as valuation adjustments, included in “Real estate owned, net” in the Consolidated Statements of Income.

Previous wording

As of March 31, 2025, our REO included 157 properties with a lower of cost or estimated fair value of $83.4 million compared to 129 properties with a lower of cost or estimated fair value of $68.0 million as of December 31, 2024, and 76 properties with a lower of cost or estimated fair value of $46.3 million as of March 31, 2024.

Current wording

As of June 30, 2025, our REO included 175 properties with a lower of cost or estimated fair value of $93.4 million compared to 157 properties with a lower of cost or estimated fair value of $83.4 million as of March 31, 2025, and 89 properties with a lower of cost or estimated fair value of $50.8 million as of June 30, 2024.

Previous wording

As of March 31, 2025, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 51.4% of the UPB. Mixed use properties represented 11.1% of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio. Geographically, the principal balance of our loans held for investment were concentrated 21.2% in California, 15.3% in New York, 12.8% in Florida, 7.4% in New Jersey, and 5.6% in Texas.

Current wording

As of June 30, 2025, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 50.4% of the UPB. Mixed use properties represented 10.8% of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio. Geographically, the principal balance of our loans held for investment were concentrated 20.9% in California, 14.3% in New York, 12.6% in Florida, 7.7% in New Jersey, and 5.8% in Texas.

Previous wording

Portfolio yield is an annualized measure of the total interest income earned on our loan portfolio as a percentage of average loans over the given period. Interest income includes interest earned on performing loans, cash interest received on nonperforming loans, default interest and prepayment fees. The increase in our portfolio yield for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily driven by the increase in weighted average loan coupons. Our portfolio yield for the three months ended March 31, 2025 decreased as compared to the three months ended December 31, 2024, primarily due to less default interest and cash interest received on nonperforming loans.

Current wording

Portfolio yield is an annualized measure of the total interest income earned on our loan portfolio as a percentage of average loans over the given period. Interest income includes interest earned on performing loans, cash interest received on nonperforming loans, default interest and prepayment fees. The increase in our portfolio yield for the three months ended June 30, 2025 as compared to the three months ended March 31, 2025 and June 30, 2024 was primarily driven by the increase in weighted average loan coupons.

Previous wording

Our portfolio related cost of funds increased to 6.23% for the three months ended March 31, 2025 from 6.14% for the prior quarter and increased from 5.93% for the three months ended March 31, 2024. The increase was primarily due to higher securitized debt interest expense.

Current wording

Our portfolio related cost of funds increased to 6.24% for the three months ended June 30, 2025 from 6.23% for the prior quarter and 6.01% for the three months ended June 30, 2024. The increase was primarily due to higher securitized debt interest expense.

Previous wording

Total company net interest margin of 2.88% for the three months ended March 31, 2025 increased from 2.83% for the three months ended March 31, 2024. The increase in total company net interest margin was primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of funds. Total company net interest margin for the three months ended March 31, 2025 decreased from 3.20% for the three months ended December 31, 2024 primarily due to less cash interest received on nonperforming loans during the three months ended March 31, 2025 and higher securitized debt interest expense.

Current wording

Total company net interest margin of 3.39% for the three months ended June 30, 2025 increased from 2.98% for the three months ended June 30, 2024. Total company net interest margin of 3.14% for the six months ended June 30, 2025 increased from 2.91% for the six months ended June 30, 2024. The increases were primarily due to the higher increase in the average yields on our loan portfolio than the increase in our average cost of funds.

Previous wording

The following table shows the average outstanding balance of our loan portfolio and portfolio-related debt, together with interest income and the corresponding yield earned on our portfolio, and interest expense and the corresponding rate paid on our portfolio-related debt for the periods indicated:

Current wording

The following tables show the average outstanding balance of our loan portfolio and portfolio-related debt, together with interest income and the corresponding yield earned on our portfolio, and interest expense and the corresponding rate paid on our portfolio-related debt for the periods indicated:

Previous wording

Our annualized charge-offs rate over average loans held for investment carried at amortized cost for the three months ended March 31, 2025 remained minimal at 0.18% as compared to 0.11% and 0.07% for the three months ended December 31, 2024 and March 31, 2024, respectively. The charge-offs rate reflects year-to-date annualized charge-offs as a percentage of average loans held for investment at amortized cost, for the respective quarters. We do not record charge-offs on loans carried at estimated fair value and loans held for sale.

Current wording

Our annualized charge-offs rate over average loans held for investment carried at amortized cost for the three months ended June 30, 2025 increased to 0.31% as compared to 0.18% and 0.04% for the three months ended March 31, 2025 and June 30, 2024, respectively. The charge-offs rate reflects year-to-date annualized charge-offs as a percentage of average loans held for investment at amortized cost, for the respective quarters. We do not record charge-offs on loans carried at estimated fair value and loans held for sale.

Previous wording

Pre-tax return on average equity and return on average equity reflect income before income taxes and net income including income attributable to noncontrolling interest, respectively, as a percentage of the monthly average total stockholders’ equity including noncontrolling interest over the specified period. Pre-tax return on average equity and return on average equity decreased during the quarter ended March 31, 2025 as compared to the quarters ended December 31, 2024 and March 31, 2024 and was impacted by the increase in average stockholders' equity resulting from 1,569,255 shares issued under the ATM program for net proceeds of $28.8 million during the quarter ended March 31, 2025.

Current wording

Pre-tax return on average equity and return on average equity reflect income before income taxes and net income including income attributable to noncontrolling interest, respectively, as a percentage of the monthly average total stockholders’ equity including noncontrolling interest over the specified period. Pre-tax return on average equity and return on average equity increased during the quarter ended June 30, 2025 as compared to the quarters ended March 31, 2025 and June 30, 2024 primarily due to the increase in income before income taxes and the increase in net income.

Previous wording

Interest expense on corporate debt primarily consists of interest expense paid with respect to the 2022 Term Loan and the 2024 Term Loan, as reflected in “Secured financing, net” on our Consolidated Balance Sheets, and the related amortization of deferred debt issuance costs.

Current wording

Interest expense on corporate debt primarily consists of interest expense paid with respect to the 2022 Term Loan and the 2024 Term Loan (“Corporate Debt”), as reflected in “Secured financing, net” on our Consolidated Balance Sheets, and the related amortization of deferred debt issuance costs.

Previous wording

Gain on Disposition of Loans. When we sell a loan held for sale, we record a gain or loss that reflects the difference between the proceeds received for the sale of the loans and their respective carrying values. The gain or loss that we ultimately realize on the sale of our loans held for sale is primarily determined by the terms of the originated loans, current market interest rates and the sale price of the loans. In addition, when we transfer a loan to REO, we record the REO at its fair value, less estimated costs to sell, at the time of the transfer. The difference between the fair value of the real estate and the carrying value of the loan is recorded as a gain or a loan charge-off.

Current wording

Gain (Loss) on Disposition of Loans. When we sell a loan held for sale, we record a gain or loss that reflects the difference between the proceeds received for the sale of the loans and their respective carrying values. The gain or loss that we ultimately realize on the sale of our loans held for sale is primarily determined by the terms of the originated loans, current market interest rates and the sale price of the loans. In addition, when we transfer a loan to REO, we record the REO at its fair value, less estimated costs to sell, at the time of the transfer. The difference between the fair value of the real estate and the carrying value of the loan is recorded as a gain or a loan charge-off.

Previous wording

Unrealized Gain (Loss) on Mortgage Servicing Rights. The Company has elected to record its mortgage servicing rights using the fair value measurement method. Changes in fair value are reported as “Unrealized gain (loss) on mortgage servicing rights,” a component of other operating income within the Consolidated Statements of Income.

Current wording

Unrealized Gain (Loss) on Mortgage Servicing Rights. We have elected to record our mortgage servicing rights using the fair value measurement method. Changes in fair value are reported as “Unrealized gain (loss) on mortgage servicing rights,” a component of other operating income within the Consolidated Statements of Income.

Previous wording

The following table summarizes our consolidated results of operations for the periods indicated:

Current wording

The following table summarizes our unaudited consolidated results of operations for the periods indicated:

Previous wording

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased to $43.7 million from $34.9 million for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased 39.3% to $53.7 million from $38.6 million for the three months ended June 30, 2025 and 2024, respectively. Our portfolio related net interest income increased 32.6% to $97.4 million from $73.4 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Interest Income. Interest income increased by $28.2 million to $118.7 million for the three months ended March 31, 2025, compared to $90.5 million for the three months ended March 31, 2024, attributable to higher average loan portfolio balances and yield. For the three months ended March 31, 2025, the average loan yield was 9.11% compared to 8.71% for the three months ended March 31, 2024.

Current wording

Interest Income. Interest income increased by $37.8 million to $135.6 million for the three months ended June 30, 2025, compared to $97.8 million for the three months ended June 30, 2024, attributable to higher average loan portfolio balances and yield. For the three months ended June 30, 2025, the average loan yield was 9.65% compared to 8.98% for the three months ended June 30, 2024. Interest income increased by $66.0 million to $254.3 million for the six months ended June 30, 2025, compared to $188.3 million for the six months ended June 30, 2024. The increase in interest income for the six months ended June 30, 2025 was primarily attributable to higher portfolio balances due to loan originations and higher average loan yield.

Previous wording

The following table distinguishes between the change in interest income attributable to change in average loan balance (volume) and the change in interest income attributable to a change in annualized yield (rate) for the three months ended March 31, 2025 and 2024.

Current wording

The following tables distinguish between the changes in interest income attributable to changes in average loan balance (volume) and the changes in interest income attributable to changes in annualized yield (rate) for the three and six months ended June 30, 2025 and 2024.

Previous wording

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased to $75.1 million for the three months ended March 31, 2025 from $55.7 million for the three months ended March 31, 2024, primarily attributable to a higher loan portfolio being financed and increased interest rates.

Current wording

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased to $81.8 million for the three months ended June 30, 2025 from $59.2 million for the three months ended June 30, 2024. Portfolio related interest expense increased to $156.9 million for the six months ended June 30, 2025 from $114.9 million for the six months ended June 30, 2024. The increases were primarily attributable to a higher loan portfolio being financed and increased interest rates.

Previous wording

The following table presents information regarding the portfolio related interest expense and distinguishes between the change in interest expense attributable to changes in the average outstanding debt balance (volume) and change in cost of funds (rate) for the three months ended March 31, 2025 and 2024.

Current wording

The following tables present information regarding portfolio related interest expense and distinguish between the changes in interest expense attributable to changes in the average outstanding debt balance (volume) and changes in cost of funds (rate) for the three and six months ended June 30, 2025 and 2024.

Previous wording

Interest Expense — Corporate Debt. Corporate debt interest expense increased to $6.1 million for the three months ended March 31, 2025, compared to $5.4 million for the three months ended March 31, 2024, primarily due to the issuance of $75.0 million of additional secured debt in February 2024.

Current wording

Interest Expense — Corporate Debt. Corporate debt interest expense remained consistent at $6.1 million for the three months ended June 30, 2025, compared to $6.2 million for the three months ended June 30, 2024. Corporate debt interest expense increased to $12.3 million for the six months ended June 30, 2025, compared to $11.5 million for the six months ended June 30, 2024, primarily due to the issuance of $75.0 million of additional secured debt in February 2024.

Previous wording

The $7.7 million increase in total other operating income for the three months ended March 31, 2025 was mainly due to increased origination fee income and the net increase in unrealized gains from fair value marks.

Current wording

The $17.3 million and $25.0 million increases in total other operating income for the three and six months ended June 30, 2025 were mainly due to the increased loan originations.

Previous wording

Gain on Disposition of Loans. Gain on disposition of loans increased by $1.1 million to $2.8 million for the three months ended March 31, 2025 compared to $1.7 million for the three months ended March 31, 2024 primarily due to an increase in gain on transfer to REO upon foreclosure.

Current wording

Gain on Disposition of Loans. Gain on disposition of loans increased by $3.1 million to $6.3 million for the three months ended June 30, 2025 compared to $3.2 million for the three months ended June 30, 2024. Gain on disposition of loans increased by $4.3 million to $9.1 million for the six months ended June 30, 2025 compared to $4.9 million for the six months ended June 30, 2024. The increases were primarily due to the increase in gain on transfer to REO upon foreclosure.

Previous wording

Unrealized Gain on Fair Value Loans. Unrealized gain on fair value loans increased by $15.9 million to $34.8 million for the three months ended March 31, 2025 compared to $18.9 million for the three months ended March 31, 2024. The increase was mainly driven by new loan originations.

Current wording

Unrealized Gain on Fair Value Loans. Unrealized gain on fair value loans increased by $12.8 million to $29.9 million for the three months ended June 30, 2025 compared to $17.1 million for the three months ended June 30, 2024. Unrealized gain on fair value loans increased by $28.7 million to $64.7 million for the six months ended June 30, 2025 compared to $36.0 million for the six months ended June 30, 2024. The increases were mainly driven by new loan originations.

Previous wording

Unrealized Loss on Fair Value Securitized Debt. Unrealized loss on fair value securitized debt increased by $11.4 million to $13.7 million for the three months ended March 31, 2025 from $2.3 million for the three months ended March 31, 2024. The increase in unrealized loss on fair value securitized debt was primarily attributable to a decrease in market interest rates.

Current wording

Unrealized Loss on Fair Value Securitized Debt. Unrealized loss on fair value securitized debt increased by $2.9 million to $7.6 million for the three months ended June 30, 2025 from $4.6 million for the three months ended June 30, 2024. Unrealized loss on fair value securitized debt increased by $14.3 million to $21.3 million for the six months ended June 30, 2025 from $7.0 million for the six months ended June 30, 2024. The increases in unrealized loss on fair value securitized debt were primarily attributable to the decrease in market interest rates.

Previous wording

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized loss on mortgage servicing rights was $1.1 million for the three months ended March 31, 2025 as compared to an unrealized gain of $0.4 million for the three months ended March 31, 2024. The increase in unrealized loss on mortgage servicing rights was mainly driven by a decrease in the loan servicing portfolio resulting from loan payoffs and paydowns, and an increase in prepayment rate from December 31, 2024.

Current wording

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized gain on mortgage servicing rights was $0.3 million for the three months ended June 30, 2025 as compared to an unrealized loss of $0.4 million for the three months ended June 30, 2024. The increase in unrealized gain on mortgage servicing rights was mainly driven by an increase in the loan servicing portfolio Unrealized loss on mortgage servicing rights was $0.8 million for the six months ended June 30, 2025 as compared to an unrealized gain of $0.1 million for the six months ended June 30, 2024. The increase in unrealized loss on mortgage servicing rights was mainly driven by a decrease in the loan servicing portfolio resulting from loan payoffs and paydowns, and an increase in prepayment rate in the first three months of 2025.

Previous wording

Origination Fee Income. Origination fee income increased by $3.7 million to $8.7 million for the three months ended March 31, 2025 compared to $5.0 million for the three months ended March 31, 2024. The increase was primarily due to higher loan originations.

Current wording

Origination Fee Income. Origination fee income increased by $3.9 million to $8.9 million for the three months ended June 30, 2025 compared to $5.1 million for the three months ended June 30, 2024. Origination fee income increased by $7.6 million to $17.6 million for the six months ended June 30, 2025 compared to $10.1 million for the six months ended June 30, 2024. The increases were driven by higher loan originations.

Previous wording

Interest Income on Cash Balance. Interest income on cash balance decreased by $0.3 million to $1.3 million for the three months ended March 31, 2025 compared to $1.6 million for the three months ended March 31, 2024. The decrease was primarily attributable to a decrease in interest rates.

Current wording

Interest Income on Cash Balance. Interest income on cash balance decreased by $0.2 million to $1.5 million for the three months ended June 30, 2025 compared to $1.7 million for the three months ended June 30, 2024. Interest income on cash balance decreased by $0.5 million to $2.8 million for the six months ended June 30, 2025 compared to $3.4 million for the six months ended June 30, 2024. The decreases were attributable to a decrease in interest rates and lower bank balances.

Previous wording

Other Income. Other income increased to $0.5 million for the three months ended March 31, 2025 compared to $0.4 million for the three months ended March 31, 2024. The increase was driven by higher servicing fee income from an increase in our loan servicing portfolio.

Current wording

Other Income. Other income was fairly consistent at $0.5 million for the three months ended June 30, 2025 and 2024. Other income increased to $1.0 million for the six months ended June 30, 2025 compared to $0.9 million for the six months ended June 30, 2024. The increase was driven by higher servicing fee income from the increase in our loan servicing portfolio.