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 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.

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 September 30, 2025, has an average balance of approximately $393 thousand. As of September 30, 2025, our loan portfolio totaled $6.3 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 65.5%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 49.2% of the UPB. For the three and nine months ended September 30, 2025, the annualized yields on our total portfolio were 9.54% and 9.44%, 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 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.

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 44 securitized debt transactions, resulting in a total of over $9.9 billion in gross debt proceeds from May 2011 through September 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 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.

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 nine months ended September 30, 2025, our annualized portfolio related net interest margin were 3.65% and 3.62%, respectively, compared to 3.60% and 3.50% for the three and nine months ended September 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 nine months ended September 30, 2025, including net income attributable to noncontrolling interest, we generated pre-tax income of $35.4 million and $96.2 million, and net income of $25.4 million and $70.2 million, respectively. For the three and nine months ended September 30, 2024, including net income attributable to noncontrolling interest, we generated pre-tax income of $21.2 million and $64.4 million, and net income of $15.8 million and $47.8 million, respectively.

Previous wording

Our operational and financial performance will depend on certain market developments, including the impact of tariffs, the actions of the Federal Reserve, the Russia/Ukraine war, the ongoing conflicts in the Middle East, a possible global recession, heightened stress in the real estate and corporate debt markets, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.

Current wording

Our operational and financial performance will depend on certain market developments, including the impact of tariffs, the actions of the Federal Reserve, the Russia/Ukraine war, the ongoing conflicts in the Middle East, the prolonged government shutdown, heightened stress in the real estate and corporate debt markets, 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 $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.

Current wording

(A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $31.6 million, $31.7 million and $43.2 million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of September 30, 2025, June 30, 2025, and September 30, 2024, respectively.

Previous wording

The following table presents new loan originations and acquisitions and includes average loan size, weighted average coupon and weighted average loan-to-value for the periods indicated:

Current wording

The following table presents new loan originations including unfunded commitments and acquisitions and includes average loan size, weighted average coupon and weighted average loan-to-value for the periods indicated:

Previous 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.

Current wording

During the third quarter of 2025, loan originations including unfunded commitments increased $13.6 million and $262.2 million from the quarters ended June 30, 2025 and September 30, 2024, respectively.

Previous wording

For the June 30, 2025 current expected credit loss (“CECL”) estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the announced tariffs and federal government layoffs, contributing to a forecasted decreasing GDP and rising unemployment.

Current wording

For the June 30, 2025 CECL estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the announced tariffs and federal government layoffs, contributing to a forecasted decreasing GDP and rising unemployment.

Previous wording

For the March 31, 2025 current expected credit loss (“CECL”) estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the announced tariffs and federal government layoffs, contributing to a forecasted decreasing GDP and rising unemployment.

Current wording

For the March 31, 2025 CECL estimate, we considered a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. Management concluded that applying the severe stress scenario was appropriate and reflected the uncertainties of a volatile market in light of the announced tariffs and federal government layoffs, contributing to a forecasted decreasing GDP and rising unemployment.

Previous 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.

Current wording

Our allowance for credit losses as of September 30, 2025 was $4.6 million compared to $4.9 million as of September 30, 2024. The decrease in allowance for credit losses from September 30, 2024 was primarily due to a decrease in the amortized cost loan portfolio subject to CECL, and the removal of COVID pandemic era data from the macroeconomic forecasts in the latest CECL model update. 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 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.

Current wording

The allowance for credit losses was 0.22% of total UPB of loans held for investment carried at amortized cost as of September 30, 2025. Nonperforming loans were 12.3% of total UPB of loans held for investment carried at amortized cost as of September 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 six years.

Previous 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.

Current wording

Balance includes $129.3 million UPB of loans held for investment at amortized cost as of September 30, 2025, $130.5 million as of June 30, 2025, and $153.9 million as of September 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 $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.

Current wording

Loans that are 90+ days past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $614.2 million, or 9.8% of our held for investment loan portfolio as of September 30, 2025, compared to $601.8 million, or 10.3% as of June 30, 2025, and $503.9 million, or 10.6% as of September 30, 2024. The increase in total nonperforming loans as of September 30, 2025 compared to June 30, 2025 and September 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 $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.

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 $108.0 million of long-term and short-term nonperforming assets for the quarter ended September 30, 2025, which was higher compared to $104.0 million for the quarter ended June 30, 2025, and $68.6 million for the quarter ended September 30, 2024. From these resolution activities, we realized net gains of $2.8 million, $3.6 million, and $2.3 million for the quarters ended September 30, 2025, June 30, 2025, and September 30, 2024, respectively. This is largely the result of collecting default interest and prepayment penalties in excess of the principal on loans and selling our REOs at prices higher than their carrying value.

Previous 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.

Current wording

As of September 30, 2025, REO included 223 properties with a lower of cost or estimated fair value of $113.7 million compared to 175 properties with a lower of cost or estimated fair value of $93.4 million as of June 30, 2025, and 112 properties with a lower of cost or estimated fair value of $62.4 million as of September 30, 2024.

Previous 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.

Current wording

As of September 30, 2025, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 49.3% of the UPB. Mixed use and Retail properties represented 10.7% and 10.2%, respectively, 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 21.1% in California, 13.8% in New York, 12.3% in Florida, 7.4% in New Jersey, and 6.0% 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 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.

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 September 30, 2025 as compared to the three months ended September 30, 2024 was primarily driven by the increase in weighted average loan coupons. Portfolio yield for the three months ended September 30, 2025 decreased slightly from three months ended June 30, 2025 mainly attributable to less interest income and default interest collected on nonperforming loans.

Previous 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.

Current wording

Our portfolio related cost of funds slightly increased to 6.27% for the three months ended September 30, 2025 from 6.24% for the prior quarter and 6.15% for the three months ended September 30, 2024. The increase was primarily due to higher securitized debt interest expense.

Previous wording

Over the periods shown in the tables below, portfolio related net interest margin increased to 3.82% for the three months ended June 30, 2025 from 3.54% for the three months ended June 30, 2024. Portfolio related net interest margin increased to 3.60% for the six months ended June 30, 2025 from 3.45% for the six months ended June 30, 2024. The increases were primarily due to higher average yields and average balances.

Current wording

Over the periods shown in the tables below, portfolio related net interest margin increased to 3.65% for the three months ended September 30, 2025 from 3.60% for the three months ended September 30, 2024. Portfolio related net interest margin increased to 3.62% for the nine months ended September 30, 2025 from 3.50% for the nine months ended September 30, 2024. The increases were primarily due to higher average yields and balances.

Previous 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.

Current wording

Total company net interest margin of 3.25% for the three months ended September 30, 2025 increased from 3.06% for the three months ended September 30, 2024. Total company net interest margin of 3.18% for the nine months ended September 30, 2025 increased from 2.96% for the nine months ended September 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

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.

Current wording

Our annualized charge-offs rate over average loans held for investment carried at amortized cost for the three months ended September 30, 2025 decreased to 0.13% as compared to 0.31% for the three months ended June 30, 2025 and increased from 0.05% for the three months ended September 30, 2024. 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 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.

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 decreased during the quarter ended September 30, 2025 as compared to the quarter ended June 30, 2025 primarily due to a higher tax rate and the higher average shareholders' equity. Pre-tax return on average equity and return on average equity increased as compared to the quarter ended September 30, 2024 primarily due to improved operating margins.

Previous 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.

Current wording

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased 34.0% to $55.2 million from $41.2 million for the three months ended September 30, 2025 and 2024, respectively. Our portfolio related net interest income increased 33.1% to $152.6 million from $114.6 million for the nine months ended September 30, 2025 and 2024, respectively.

Previous 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.

Current wording

Interest Income. Interest income increased by $39.0 million to $144.1 million for the three months ended September 30, 2025, compared to $105.1 million for the three months ended September 30, 2024, attributable to higher average loan portfolio balances and yield. For the three months ended September 30, 2025, the average loan yield was 9.54% compared to 9.18% for the three months ended September 30, 2024. Interest income increased by $105.1 million to $398.4 million for the nine months ended September 30, 2025, compared to $293.4 million for the nine months ended September 30, 2024. The increase in interest income for the nine months ended September 30, 2025 was primarily attributable to higher portfolio balances due to loan originations and higher average loan yield.

Previous 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.

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 nine months ended September 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 $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.

Current wording

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased to $88.9 million for the three months ended September 30, 2025 from $63.9 million for the three months ended September 30, 2024. Portfolio related interest expense increased to $245.8 million for the nine months ended September 30, 2025 from $178.7 million for the nine months ended September 30, 2024. The increases were primarily attributable to a higher loan portfolio being financed and increased interest rates.

Previous 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.

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 nine months ended September 30, 2025 and 2024.

Previous 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.

Current wording

Interest Expense — Corporate Debt. Corporate debt interest expense remained consistent at $6.1 million for each of the three months ended September 30, 2025 and 2024. Corporate debt interest expense increased to $18.4 million for the nine months ended September 30, 2025, compared to $17.7 million for the nine months ended September 30, 2024, primarily due to the issuance of $75.0 million of additional secured debt in February 2024.

Previous wording

Provision for Credit Losses. Our provision for credit losses increased to $1.6 million for the three months ended June 30, 2025 from $0.2 million for the three months ended June 30, 2024. Our provision for credit losses increased to $3.5 million for the six months ended June 30, 2025 from $1.2 million for the six months ended June 30, 2024. The increased provision for credit losses was primarily attributable to a $1.4 million charge-off taken during the quarter ended June 30, 2025.

Current wording

Provision for Credit Losses. Our provision for credit losses increased to $0.4 million for the three months ended September 30, 2025 from a $0.1 million reversal of provision for the three months ended September 30, 2024, due mainly to an increase in individually-assessed allowance. Our provision for credit losses increased to $3.9 million for the nine months ended September 30, 2025 from $1.2 million for the nine months ended September 30, 2024. The increased provision for credit losses was primarily attributable to charge-offs taken during the quarter ended June 30, 2025 and an increase in the individually-assessed allowance.

Previous 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.

Current wording

Gain on Disposition of Loans. Gain on disposition of loans increased by $2.3 million to $4.6 million for the three months ended September 30, 2025 compared to $2.3 million for the three months ended September 30, 2024. Gain on disposition of loans increased by $6.5 million to $13.7 million for the nine months ended September 30, 2025 compared to $7.2 million for the nine months ended September 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 $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.

Current wording

Unrealized Gain on Fair Value Loans. Unrealized gain on fair value loans decreased by $4.5 million to $31.0 million for the three months ended September 30, 2025 compared to $35.5 million for the three months ended September 30, 2024. The decrease was mainly driven by a higher nonperforming loan balance. Unrealized gain on fair value loans increased by $24.1 million to $95.7 million for the nine months ended September 30, 2025 compared to $71.6 million for the nine months ended September 30, 2024. The increase was mainly driven by new loan originations.

Previous 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.

Current wording

Unrealized Loss on Fair Value Securitized Debt. Unrealized loss on fair value securitized debt decreased by $15.0 million to $10.0 million for the three months ended September 30, 2025 from $25.0 million for the three months ended September 30, 2024. Unrealized loss on fair value securitized debt decreased by $0.7 million to $31.3 million for the nine months ended September 30, 2025 from $32.0 million for the nine months ended September 30, 2024. The decreases in unrealized loss on fair value securitized debt were primarily attributable to the decrease in market interest rates and spreads.

Previous 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.

Current wording

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized loss on mortgage servicing rights was $0.3 million for the three months ended September 30, 2025 as compared to $1.0 million for the three months ended September 30, 2024. The decrease in unrealized loss on mortgage servicing rights was mainly driven by an increase in the loan servicing portfolio. Unrealized loss on mortgage servicing rights was $1.1 million for the nine months ended September 30, 2025 as compared to $0.9 million for the nine months ended September 30, 2024. The increase in unrealized loss on mortgage servicing rights resulted from an increase in prepayment rate.

Previous 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.

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Origination Fee Income. Origination fee income increased by $3.0 million to $9.7 million for the three months ended September 30, 2025 compared to $6.7 million for the three months ended September 30, 2024. Origination fee income increased by $10.6 million to $27.3 million for the nine months ended September 30, 2025 compared to $16.8 million for the nine months ended September 30, 2024. The increases were driven by higher loan originations.

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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.

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Interest Income on Cash Balance. Interest income on cash balance decreased by $0.1 million to $1.6 million for the three months ended September 30, 2025 compared to $1.7 million for the three months ended September 30, 2024. Interest income on cash balance decreased by $0.6 million to $4.4 million for the nine months ended September 30, 2025 compared to $5.0 million for the nine months ended September 30, 2024. The decreases were attributable to a decrease in interest rates.

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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.

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Other Income. Other income was $0.6 million and $0.5 for the three months ended September 30, 2025 and 2024, respectively. Other income increased to $1.6 million for the nine months ended September 30, 2025 compared to $1.4 million for the nine months ended September 30, 2024. The increase was mainly driven by higher servicing fee income from the increase in our loan servicing portfolio.

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Compensation and Employee Benefits. Compensation and employee benefits increased by $6.0 million to $22.6 million for the three months ended June 30, 2025 compared to $16.6 million for the three months ended June 30, 2024. Compensation and employee benefits increased by $12.4 million to $44.3 million for the six months ended June 30, 2025 compared to $31.9 million for the six months ended June 30, 2024. The increases were mainly driven by an increase in headcount and higher commissions expense as our loan originations increased.

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Compensation and Employee Benefits. Compensation and employee benefits increased by $5.7 million to $23.3 million for the three months ended September 30, 2025 compared to $17.6 million for the three months ended September 30, 2024. Compensation and employee benefits increased by $18.1 million to $67.6 million for the nine months ended September 30, 2025 compared to $49.5 million for the nine months ended September 30, 2024. The increases were mainly driven by higher headcount and commissions expense as loan originations increased.

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Origination Expenses. Origination expenses increased by $0.4 million to $1.2 million for the three months ended June 30, 2025 from $0.7 million for the three months ended June 30, 2024. Origination expenses increased by $0.6 million to $2.0 million for the six months ended June 30, 2025 from $1.4 million for the six months ended June 30, 2024. The increases in origination expenses were due to higher loan originations.

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Origination Expenses. Origination expenses increased by $0.3 million to $1.2 million for the three months ended September 30, 2025 from $0.9 million for the three months ended September 30, 2024. Origination expenses increased by $0.9 million to $3.2 million for the nine months ended September 30, 2025 from $2.3 million for the nine months ended September 30, 2024. The increases in origination expenses were due to higher loan originations.

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Securitization Expenses. Securitization expenses were $11.5 million for the three months ended June 30, 2025 compared to $6.2 million for the three months ended June 30, 2024. Securitization expenses were $15.6 million for the six months ended June 30, 2025 compared to $9.1 million for the six months ended June 30, 2024. The increases in securitization expenses resulted from more securitization transactions and securitized debt issued in 2025 as compared to the prior year.

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Securitization Expenses. Securitization expenses were $6.4 million for the three months ended September 30, 2025 compared to $3.2 million for the three months ended September 30, 2024. Securitization expenses were $22.0 million for the nine months ended September 30, 2025 compared to $12.3 million for the nine months ended September 30, 2024. The increases in securitization expenses resulted from more securitization transactions and securitized debt issued in 2025 as compared to the prior year.

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Loan Servicing. Loan servicing expenses increased to $8.2 million for the three months ended June 30, 2025 from $5.2 million for the three months ended June 30, 2024. Loan servicing expenses increased to $16.2 million for the six months ended June 30, 2025 from $10.0 million for the six months ended June 30, 2024. The increases were primarily attributable to the growth of our loan portfolio.

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Loan Servicing. Loan servicing expenses increased to $7.7 million for the three months ended September 30, 2025 from $5.7 million for the three months ended September 30, 2024. Loan servicing expenses increased to $24.0 million for the nine months ended September 30, 2025 from $15.6 million for the nine months ended September 30, 2024. The increases were primarily attributable to the growth of our loan portfolio.