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, 2026, has an average balance of approximately $388 thousand. As of March 31, 2026, our loan portfolio totaled $6.8 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 64.9%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 46.9% of the UPB. For the three months ended March 31, 2026, the annualized yield on our total portfolio was 9.23%.

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, 2026, has an average balance of approximately $383 thousand. As of June 30, 2026, our loan portfolio totaled $7.0 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 64.6%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 45.6% of the UPB. For the three and six months ended June 30, 2026, the annualized yields on our total portfolio were 9.29% and 9.26%, respectively.

Previous wording

We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, unsecured and secured debt, and equity. The securitized debt market is our primary source of long-term financing. We have successfully executed 48 securitized debt transactions, resulting in a total of over $11.1 billion in gross debt proceeds from May 2011 through March 2026. We may also 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, unsecured and secured debt, and equity. The securitized debt market is our primary source of long-term financing. We have successfully executed 49 securitized debt transactions, resulting in a total of approximately $11.5 billion in gross debt proceeds from May 2011 through June 2026. We may also 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 and unsecured debt. For the three months ended March 31, 2026, our annualized portfolio related net interest margin was 3.56%, compared to 3.35% for the three months ended March 31, 2025. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt and unsecured debt, provision for credit losses and operating expenses. For the three months ended March 31, 2026, including net income attributable to noncontrolling interest, we generated pre-tax income of $30.9 million, and net income of $22.4 million. For the three months ended March 31, 2025, including net income attributable to noncontrolling interest, we generated pre-tax income of $26.9 million, and net income of $18.9 million.

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 and unsecured debt. For the three and six months ended June 30, 2026, our annualized portfolio related net interest margin was 3.66% and 3.61%, respectively, compared to 3.82% and 3.60% for the three and six months ended June 30, 2025. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt and unsecured debt, provision for credit losses and operating expenses. For the three and six months ended June 30, 2026, including net income attributable to noncontrolling interest, we generated pre-tax income of $35.2 million and $66.1 million, and net income of $25.2 million and $47.5 million, respectively. 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 $26.0 million and $44.9 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, 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.

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, 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 $27.3 million, $29.6 million and $36.7 million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of March 31, 2026, December 31, 2025, and March 31, 2025, respectively.

Current wording

(A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $26.2 million, $27.3 million and $31.7 million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of June 30, 2026, March 31, 2026, and June 30, 2025, respectively.

Previous wording

During the first quarter of 2026, loan originations increased $4.8 million and decreased $1.1 million from the quarters ended December 31, 2025 and March 31, 2025, respectively.

Current wording

During the second quarter of 2026, loan originations increased $33.2 million and decreased $52.8 million from the quarters ended March 31, 2026 and June 30, 2025, respectively.

Previous wording

Our allowance for credit losses as of March 31, 2026 was $4.9 million compared to $5.0 million as of March 31, 2025. The decrease in allowance for credit losses from March 31, 2025 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. 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 June 30, 2026 was $5.1 million compared to $4.9 million as of June 30, 2025. The increase in allowance for credit losses from June 30, 2025 was primarily due to a higher loss rate driven by increased charge-off activity in recent periods. 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 0.25% of total UPB of loans held for investment carried at amortized cost as of March 31, 2026. Nonperforming loans were 12.3% of total UPB of loans held for investment carried at amortized cost as of March 31, 2026. Management believes the allowance for credit losses is adequate to absorb expected lifetime credit losses because historically, most loans that become nonperforming either paid off or paid current, resulting in an overall gain. This is due to low LTVs at origination and active management of our portfolio. Historically, our actual annual charge-offs rate was 0.11% over the last four years.

Current wording

The allowance for credit losses was 0.28% of total UPB of loans held for investment carried at amortized cost as of June 30, 2026. Nonperforming loans were 9.9% of total UPB of loans held for investment carried at amortized cost as of June 30, 2026. Management believes the allowance for credit losses is adequate to absorb expected lifetime credit losses because historically, most loans that become nonperforming either paid off or paid current, resulting in an overall gain. This is due to low LTVs at origination and active management of our portfolio. Historically, our actual annual charge-offs rate was 0.11% over the last five years.

Previous wording

Balance includes $120.9 million UPB of loans held for investment at amortized cost as of March 31, 2026, $126.1 million as of December 31, 2025, and $136.1 million as of March 31, 2025 in our COVID-19 forbearance program.

Current wording

Balance includes $116.7 million UPB of loans held for investment at amortized cost as of June 30, 2026, $120.9 million as of March 31, 2026, and $130.5 million as of June 30, 2025 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 $692.1 million, or 10.1% of our held for investment loan portfolio as of March 31, 2026, compared to $554.5 million, or 8.5% as of December 31, 2025, and $587.8 million, or 10.8% as of March 31, 2025. The increase in total nonperforming loans as of March 31, 2026 compared to December 31, 2025 and March 31, 2025 was primarily due to an increase in the size and aging of our portfolio.

Current wording

Loans that are 90+ days past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $673.3 million, or 9.6% of our held for investment loan portfolio as of June 30, 2026, compared to $692.1 million, or 10.1% as of March 31, 2026, and $601.8 million, or 10.3% as of June 30, 2025. The decrease in total nonperforming loans as of June 30, 2026 compared to March 31, 2026 and June 30, 2025 was primarily attributable to the sale of nonperforming loans into the securitization trust in connection with the 2026-MC2 Securitization offset by an increase in the size and aging of our portfolio.

Previous wording

Historically, most loans that become nonperforming resolve prior to converting to REO. 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 $70.1 million of long-term and short-term nonperforming loans for the quarter ended March 31, 2026, compared to $78.1 million for the quarter ended December 31, 2025, and $68.3 million for the quarter ended March 31, 2025. We recovered total revenue of $4.6 million, $5.2 million and $7.6 million for the quarters ended March 31, 2026, December 31, 2025, and March 31, 2025, respectively. This is largely the result of collecting all regular accrued interest, default interest, and prepayment penalties in excess of the principal on loans.

Current wording

Historically, most loans that become nonperforming resolve prior to converting to REO. 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 $90.5 million of long-term and short-term nonperforming loans for the quarter ended June 30, 2026, compared to $70.1 million for the quarter ended March 31, 2026, and $90.3 million for the quarter ended June 30, 2025. We recovered total revenue of $6.9 million, $4.6 million and $8.7 million for the quarters ended June 30, 2026, March 31, 2026, and June 30, 2025, respectively. This is largely the result of collecting all regular accrued interest, default interest, and prepayment penalties in excess of the principal on loans.

Previous wording

Short-term loans, or loans with a maturity of two-year or less, do not require prepayment fees and usually result in a lower gain when paid in full, as compared to long-term loans. The table below includes resolutions of our short-term nonperforming loans and loans granted a COVID-19 forbearance in 2020, for the periods indicated:

Current wording

Short-term loans, or loans with a maturity of two-year or less, do not require prepayment fees and usually result in a lower gain when paid in full, as compared to long-term loans. The tables below include resolutions of our short-term nonperforming loans and loans granted a COVID-19 forbearance in 2020, for the periods indicated:

Previous wording

As of March 31, 2026, REO included 259 properties with a lower of cost or estimated fair value of $131.8 million compared to 254 properties with a lower of cost or estimated fair value of $118.3 million as of December 31, 2025, and 157 properties with a lower of cost or estimated fair value of $83.4 million as of March 31, 2025.

Current wording

As of June 30, 2026, REO included 286 properties with a lower of cost or estimated fair value of $142.1 million compared to 259 properties with a lower of cost or estimated fair value of $131.8 million as of March 31, 2026, and 175 properties with a lower of cost or estimated fair value of $93.4 million as of June 30, 2025.

Previous wording

The table below shows the gain (loss) activity subsequent to the REO being record, for the periods indicated:

Current wording

The table below shows the gain (loss) activity subsequent to the REO being recorded, for the periods indicated:

Previous wording

As of March 31, 2026, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 46.9% of the UPB. Mixed use and Retail properties represented 10.8% and 10.8%, 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 19.6% in California, 13.6% in New York, 11.7% in Florida, 7.6% in New Jersey, and 6.3% in Texas.

Current wording

As of June 30, 2026, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 45.6% of the UPB. Retail and Mixed use properties represented 11.5% and 11.0%, respectively, of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio.

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, 2026 as compared to the three months ended March 31, 2025 was primarily driven by the increase in weighted average loan coupons. Portfolio yield for the three months ended March 31, 2026 decreased slightly from three months ended December 31, 2025 mainly attributable to less interest income and default interest collected 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 decrease in our portfolio yield for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 was primarily driven by lower average coupons. Portfolio yield for the three months ended June 30, 2026 increased slightly from the three months ended March 31, 2026 mainly attributable to more interest income and default interest collected on resolutions of nonperforming loans.

Previous wording

Our portfolio related cost of funds decreased to 6.09% for the three months ended March 31, 2026 from 6.23% for the prior quarter and 6.23% for the three months ended March 31, 2025. The decrease was primarily due to lower securitized debt interest expense.

Current wording

Our portfolio related cost of funds was relatively consistent at 6.09% for both the three months ended June 30, 2026 and the prior quarter, and decreased from 6.24% for the three months ended June 30, 2025. The decrease was primarily due to lower average cost of securitized debt.

Previous wording

Over the periods shown in the tables below, portfolio related net interest margin increased to 3.56% for the three months ended March 31, 2026 from 3.35% for the three months ended March 31, 2025, and decreased from 3.59% for the three months ended December 31, 2025. The increase from the three months ended March 31, 2025 was primarily due to higher average yield and balance. The decrease from the three month ended December 31, 2025 was primarily due to lower average yield.

Current wording

Over the periods shown in the tables below, portfolio related net interest margin decreased to 3.66% for the three months ended June 30, 2026 from 3.82% for the three months ended June 30, 2025. Portfolio related net interest margin increased slightly to 3.61% for the six months ended June 30, 2026 from 3.60% for the six months ended June 30, 2025. The decrease from the three months ended June 30, 2025 was primarily due to elevated yields on loans for the three months ended June 30, 2025 due to the timing of receipts of regular interest on a cash basis on past due loans, default interest, and prepayment fees.

Previous wording

Total company net interest margin of 2.65% for the three months ended March 31, 2026 decreased from 2.88% for the three months ended March 31, 2025, and decreased from 3.21% for the three months ended December 31, 2025. The decreases were primarily due to higher interest expense on our corporate debt due to expensing the non-cash unamortized debt issuance costs related to the payoff of our $215.0 million corporate debt in January 2025.

Current wording

Total company net interest margin of 2.82% for the three months ended June 30, 2026 decreased from 3.39% for the three months ended June 30, 2025. Total company net interest margin of 2.74% for the six months ended June 30, 2026 decreased from 3.14% for the six months ended June 30, 2025. The decreases were primarily due to higher interest expense on our corporate debt due to expensing the non-cash unamortized debt issuance costs related to the payoff of our $215.0 million corporate debt in January 2026.

Previous wording

The average yield of 18.81% for corporate secured debt reflects a lower average balance given that the $215.0 million secured debt was paid off at the end of January 2026, and interest expense also included $1.3 million write-off of debt issuance costs and $3.2 million interest expense for the quarter. Excluding these non-recurring costs, the adjusted average yield on the remaining secured debt would be 10.50% going forward.

Current wording

The average yield of 16.01% for corporate secured debt reflects a lower average balance given that the $215.0 million secured debt was paid off at the end of January 2026. Interest expense included $1.3 million write-off of debt issuance costs related to the 2022 Term Loan payoff in January 2026. Excluding these non-recurring costs, the adjusted average yield on the remaining secured debt would be approximately 10.50% going forward.

Previous wording

The average yield of 10.14% for corporate unsecured debt reflects a lower average balance given that the $500.0 million unsecured debt was not issued until the end of January 2026; on a full-quarter basis, the average yield would be 9.98%.

Current wording

The average yield of 10.04% for corporate unsecured debt reflects a lower average balance given that the $500.0 million unsecured debt was not issued until the end of January 2026; on a full-quarter basis, the average yield would be 9.97%.

Previous wording

Our annualized charge-offs rate over average loans held for investment carried at amortized cost for the three months ended March 31, 2026 decreased to 0.27% as compared to 0.39% for the three months ended December 31, 2025 and increased from 0.18% for the three months ended March 31, 2025. 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, 2026 decreased to 0.16% as compared to 0.27% for the three months ended March 31, 2026 and from 0.31% for the three months ended June 30, 2025. 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, 2026 as compared to the quarter ended December 31, 2025 primarily due to a gain of $19.7 million on sale of nonperforming loans in December 2025 and higher average shareholders' equity. Pre-tax return on average equity and return on average equity slightly decreased as compared to the quarter ended March 31, 2025 primarily due to non-recurring expenses during the quarter ended March 31, 2026.

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, 2026 as compared to the quarter ended March 31, 2026 primarily due to higher income before income taxes and net income. Pre-tax return on average equity and return on average equity decreased as compared to the quarter ended June 30, 2025 primarily due to higher average shareholders' equity for the three months ended June 30, 2026.

Previous wording

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased 35.3% to $59.1 million from $43.7 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased 17.9% to $63.4 million from $53.7 million for the three months ended June 30, 2026 and 2025, respectively. Our portfolio related net interest income increased 25.7% to $122.4 million from $97.4 million for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Interest Income. Interest income increased by $34.3 million or 28.9% to $153.1 million for the three months ended March 31, 2026, compared to $118.7 million for the three months ended March 31, 2025, attributable to higher average loan portfolio balances and yield. For the three months ended March 31, 2026, the average loan yield was 9.23% compared to 9.11% for the three months ended March 31, 2025.

Current wording

Interest Income. Interest income increased by $25.4 million or 18.8% to $161.0 million for the three months ended June 30, 2026, compared to $135.6 million for the three months ended June 30, 2025, primarily attributable to higher average loan portfolio balances. For the three months ended June 30, 2026, the average loan yield was 9.29% compared to 9.65% for the three months ended June 30, 2025. Interest income increased by $59.8 million to $314.1 million for the six months ended June 30, 2026, compared to $254.3 million for the six months ended June 30, 2025. The increase in interest income for the six months ended June 30, 2026 was primarily attributable to higher average portfolio balances due to loan originations.

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 months ended March 31, 2026 and 2025.

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, 2026 and 2025.

Previous wording

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased 25.2% to $94.0 million for the three months ended March 31, 2026 from $75.1 million for the three months ended March 31, 2025. The increase was primarily attributable to a higher loan portfolio being financed, offsets by lower portfolio cost of funds.

Current wording

Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased 19.3% to $97.6 million for the three months ended June 30, 2026 from $81.8 million for the three months ended June 30, 2025. Portfolio related interest expense increased to $191.7 million for the six months ended June 30, 2026 from $156.9 million for the six months ended June 30, 2025. The increases were primarily attributable to a higher loan portfolio being financed, offsets by lower portfolio cost of funds.

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 months ended March 31, 2026 and 2025.

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, 2026 and 2025.

Previous wording

Interest Expense — Corporate Debt. Corporate debt interest expense increased to $15.1 million from $6.1 million for the three months ended March 31, 2026 and 2025, respectively. The increase in corporate debt interest expense was primarily due to the issuance of $500.0 million unsecured senior notes in January 2026 and write-off of $1.3 million non-cash unamortized debt issuance costs related to the payoff of the $215.0 million secured corporate debt in January 2026.

Current wording

Interest Expense — Corporate Debt. Corporate debt interest expense increased to $14.5 million from $6.1 million for the three months ended June 30, 2026 and 2025, respectively. Corporate debt interest expense increased to $29.6 million for the six months ended June 30, 2026, compared to $12.3 million for the six months ended June 30, 2025. The increase in corporate debt interest expense was primarily due to the issuance of $500.0 million unsecured senior notes in January 2026 and write-off of $1.3 million non-cash unamortized debt issuance costs related to the payoff of the $215.0 million secured corporate debt in January 2026.

Previous wording

Provision for Credit Losses. Our provision for credit losses decreased to $1.7 million for the three months ended March 31, 2026 from $1.9 million for the three months ended March 31, 2025, primarily due to the decrease in loans carried at amortized cost subject to the CECL allowance methodology.

Current wording

Provision for Credit Losses. Our provision for credit losses decreased to $1.0 million for the three months ended June 30, 2026 from $1.6 million for the three months ended June 30, 2025. Our provision for credit losses decreased to $2.6 million for the six months ended June 30, 2026 from $3.5 million for the six months ended June 30, 2025. The decreases resulted from the decrease in loans carried at amortized cost subject to the CECL allowance methodology.

Previous wording

The $9.5 million increase in total other operating income from the three months ended March 31, 2025 to the three months ended March 31, 2026 was primarily due to a net unrealized gain of $6.1 million on loans and securitized debt and the recognition of $2.4 million employee retention credit as other income in the first quarter of 2026.

Current wording

The $7.2 million increase in total other operating income from the three months ended June 30, 2025 to the three months ended June 30, 2026 was primarily due to higher net unrealized gain of $4.5 million on loans and securitized debt and $3.2 million in origination fee income. The $16.7 million increase from the six months ended June 30, 2025 to the six months ended June 30, 2026 was mainly due to higher net unrealized gain of $10.6 million on loans and securitized debt, $2.5 million in origination fee income and $2.4 million employee retention credit as other income in the first quarter of 2026.

Previous wording

Unrealized Gain on Fair Value Loans. Unrealized gain on fair value loans decreased by $33.8 million to $1.0 million for the three months ended March 31, 2026 compared to $34.8 million for the three months ended March 31, 2025. The decrease was mainly driven by an increase in market interest rates and spreads.

Current wording

Unrealized Gain on Fair Value Loans. Unrealized gain on fair value loans decreased by $5.4 million to $24.5 million for the three months ended June 30, 2026 compared to $29.9 million for the three months ended June 30, 2025. Unrealized gain on fair value loans decreased by $39.2 million to $25.5 million for the six months ended June 30, 2026 compared to $64.7 million for the six months ended June 30, 2025. The decrease was mainly driven by an increase in market interest rates.

Previous wording

Unrealized Gain (Loss) on Fair Value Securitized Debt. Unrealized gain on fair value securitized debt was $26.3 million for the three months ended March 31, 2026, compared to $13.7 million of unrealized loss for the three months ended March 31, 2025. The increase in unrealized gain on fair value securitized debt was primarily attributable to the increase in market interest rates and spreads.

Current wording

Unrealized Gain (Loss) on Fair Value Securitized Debt. Unrealized gain on fair value securitized debt was $2.3 million for the three months ended June 30, 2026, compared to $7.6 million of unrealized loss for the three months ended June 30, 2025. Unrealized gain on fair value securitized debt increased by $49.8 million to $28.6 million for the six months ended June 30, 2026 from $21.3 million unrealized loss for the six months ended June 30, 2025. The increases in unrealized gain on fair value securitized debt were primarily attributable to the increase in market interest rates.

Previous wording

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized loss on mortgage servicing rights was $0.3 million for the three months ended March 31, 2026 as compared to $1.1 million for the three months ended March 31, 2025. The decrease in unrealized loss on mortgage servicing rights was primarily attributable to an increase in the servicing portfolio.

Current wording

Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized gain on mortgage servicing rights was $1.1 million for the three months ended June 30, 2026 as compared to $0.3 million for the three months ended June 30, 2025. Unrealized gain on mortgage servicing rights was $0.8 million for the six months ended June 30, 2026 as compared to an unrealized loss of $0.8 million for the six months ended June 30, 2025. The increases in unrealized gain on mortgage servicing rights were primarily attributable to new servicing rights on Century loan originations.

Previous wording

Interest Income on Cash Balance. Interest income on cash balance increased by $0.1 million to $1.4 million for the three months ended March 31, 2026 compared to $1.3 million for the three months ended March 31, 2025. The increase was primarily attributable to an overall higher cash balance.

Current wording

Interest Income on Cash Balance. Interest income on cash balance decreased by $0.2 million to $1.3 million for the three months ended June 30, 2026 compared to $1.5 million for the three months ended June 30, 2025. Interest income on cash balance decreased by $0.1 million to $2.7 million for the six months ended June 30, 2026 compared to $2.8 million for the six months ended June 30, 2025. The decreases were primarily attributable to a decrease in interest rates combined with a decrease in average bank balances.

Previous wording

Other Income. Other income was $3.7 million and $0.5 million for the three months ended March 31, 2026 and 2025, respectively. The increase was primarily attributable to the recognition of $2.4 million employee retention credit as other income in March 2026, and higher servicing fee income from the new loan servicing portfolio serviced for others.

Current wording

Other Income. Other income was $1.7 million and $0.5 million for the three months ended June 30, 2026 and 2025, respectively. Other income increased to $5.5 million for the six months ended June 30, 2026 compared to $1.0 million for the six months ended June 30, 2025, primarily attributable to the recognition of $2.4 million employee retention credit as other income in March 2026, and higher servicing fee income from the new loan servicing portfolio serviced for others.

Previous wording

Compensation and Employee Benefits. Compensation and employee benefits slightly increased by $1.8 million to $23.5 million for the three months ended March 31, 2026 compared to $21.7 million for the three months ended March 31, 2025. The increase was primarily attributable to the annual salary increases and increase in headcount to support future growth in loan production.

Current wording

Compensation and Employee Benefits. Compensation and employee benefits increased by $2.9 million to $25.5 million for the three months ended June 30, 2026 compared to $22.6 million for the three months ended June 30, 2025. Compensation and employee benefits increased by $4.7 million to $49.0 million for the six months ended June 30, 2026 compared to $44.3 million for the six months ended June 30, 2025. The increases were primarily attributable to the annual salary increases and increase in headcount to support future growth in loan production.

Previous wording

Origination Expenses. Origination expenses increased by $0.3 million to $1.2 million for the three months ended March 31, 2026 from $0.8 million for the three months ended March 31, 2025. The increase in origination expenses was due to higher third party fees paid.

Current wording

Origination Expenses. Origination expenses increased by $0.2 million to $1.4 million for the three months ended June 30, 2026 from $1.2 million for the three months ended June 30, 2025. Origination expenses increased by $0.5 million to $2.6 million for the six months ended June 30, 2026 from $2.0 million for the six months ended June 30, 2025. The increase in origination expenses was due to higher third party fees paid.

Previous wording

Professional Fees. Professional fees increased to $5.8 million for the three months ended March 31, 2026 compared to $1.8 million for the three months ended March 31, 2025. The increase was primarily attributable to higher legal fees related to potential merger and acquisition due diligence.

Current wording

Professional Fees. Professional fees increased to $2.2 million for the three months ended June 30, 2026 compared to $2.0 million for the three months ended June 30, 2025. Professional fees were $8.0 million for the six months ended June 30, 2026 compared to $3.8 million for the six months ended June 30, 2025. The increases were primarily attributable to higher legal fees related to potential merger and acquisition due diligence.

Previous wording

Rent and Occupancy. Rent and occupancy expenses remained relatively consistent at $0.3 million for the three months ended March 31, 2026 and the three months ended March 31, 2025.

Current wording

Rent and Occupancy. Rent and occupancy expenses slightly increased to $0.4 million for the three months ended June 30, 2026 and $0.3 million for the three months ended June 30, 2025. Rent and occupancy expenses increased to $0.7 million for the six months ended June 30, 2026 compared to $0.6 million for the six months ended June 30, 2025.