Velocity Financial, Inc.
For the period ended Sep 30, 2026. Filed Nov 6, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 6, 2026
VEL$17.63+1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0001193125-26-335807
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-06.
0001193125-26-450404
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 232 previous paragraphs and 247 current paragraphs.
165 unchanged; 61 reworded; 21 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 36 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Pending Acquisition
Current report
On August 26, 2026, the Company, through its wholly owned subsidiary Velocity Commercial Capital, LLC, entered into an agreement to acquire the loan origination platform of Toorak Capital LLC (the “Toorak Acquisition”) for a base purchase price of approximately $62.0 million subject to certain adjustments. The Toorak Acquisition is subject to customary closing conditions, including the receipt of required regulatory approvals and the completion of a related acquisition by a third party of certain loan assets and securitization equity interests of Toorak Capital LLC or its subsidiaries, and is expected to close in the fourth quarter of 2026. There can be no assurance that the Toorak Acquisition will be completed on the anticipated terms or timeline, or at all. For additional information, see Note 23 — Pending Acquisition to the consolidated financial statements.
Current report
The Company expects to fund the purchase price for the Toorak Acquisition with cash.
Current report
Operating expenses for the three and nine months ended September 30, 2026 included $2.4 million and $7.2 million, respectively, of acquisition-related costs associated with the pending Toorak Acquisition.
Current report
In July 2026, we completed the securitization of $378.7 million of investor real estate loans, as measured by UPB, through a consolidated VIE.
Current report
In August 2026, we completed the securitization of $175.1 million of investor real estate loans, as measured by UPB, through a consolidated VIE.
Current report
Our other operating income is all our non-interest income. It is mostly derived from loan origination business and fair-value accounting on our loans and securitized debt.
Current report
Components of other operating income include gain on disposition of loans, unrealized gain (loss) on fair value loans, unrealized gain (loss) on fair value securitized debt, unrealized gain (loss) on mortgage servicing rights, origination fee income, interest income on cash balances, and other income.
Current report
Loans held for investment, at amortized cost, decreased $272.1 million, or 13.4%, to $1.8 billion as of September 30, 2026 from $2.0 billion as of December 31, 2025, mainly due to principal repayments and loans sold in connection with the VCC 2026-MC2 securitization.
Current report
Loans held for investment, at fair value, increased $1.2 billion, or 24.9%, to $5.9 billion as of September 30, 2026 from $4.7 billion as of December 31, 2025, mainly due to loan originations of $2.0 billion, partially offset by principal repayments and loans sold in connection with the VCC 2026-MC2 securitization of $0.7 billion during the nine months ended September 30, 2026.
Current report
For the September 30, 2026 CECL estimate, we applied a severe stress scenario with a seven-quarter reasonable and supportable forecast period followed by a three-quarter straight-line reversion period. We concluded that the severe stress scenario was appropriate and reflected the economic uncertainty associated with the ongoing conflict in the Middle East, an unstable labor market, and elevated inflation.
Current report
(A)
Current report
Unrealized Gain (Loss) on Retained Securities. We have elected to apply fair value option accounting for our retained securities, or Trust Certificate using FASB ASC Topic 825-10, Financial Instruments (ASC 825). We regularly estimate the fair value of these retained securities. Changes in fair value, subsequent to initial recognition of fair value retained securities are reported as “Unrealized gain (loss) on retained securities,” a component of other operating income within the Consolidated Statements of Income.
Current report
Unrealized Gain (Loss) on Fair Value Loans. Unrealized loss on fair value loans was $64.8 million for the three months ended September 30, 2026 compared to $31.0 million of unrealized gain for the three months ended September 30, 2025. Unrealized loss on fair value loans was $39.2 million for the nine months ended September 30, 2026 compared to $95.7 million unrealized gain for the nine months ended September 30, 2025. The decreases were mainly driven by the increase in market interest rates.
Current report
Unrealized Gain (Loss) on Retained Securities. Unrealized loss on retained securities was $0.6 million for the three and nine months ended September 30, 2026.
Current report
Origination Fee Income. Origination fee income increased to $10.4 million for the three months ended September 30, 2026 compared to $9.7 million for the three months ended September 30, 2025. Origination fee income increased to $30.5 million for the nine months ended September 30, 2026 compared to $27.3 million for the nine months ended September 30, 2025. The increases were primarily attributable to higher upfront fees and interest rate buydowns on loans originated during the 2026 periods.
Current report
Cash, Cash Equivalents, and Restricted Cash
Current report
Restricted cash decreased $134.6 million to $22.5 million as of September 30, 2026 from $157.1 million as of December 31, 2025, primarily due to the release of loan sale proceeds that were held in securitization trust accounts as of December 31, 2025. Combined with the decrease in cash and cash equivalents, cash, cash equivalents, and restricted cash decreased $140.0 million during the nine months ended September 30, 2026.
Current report
Pending Acquisition
Current report
As described under “Pending Acquisition” in “Recent Developments,” we expect to fund the purchase price of approximately $62.0 million for the Toorak Acquisition with cash. We believe that our available liquidity, together with net cash provided by operating activities, will be sufficient to fund the Toorak Acquisition.
Current report
Securitized debt increased $255.3 million, or 4.3%, to $6.2 billion as of September 30, 2026 from $5.9 billion as of December 31, 2025, primarily due to $1.4 billion of new securitizations, accounted for under the fair value option, partially offset by $1.1 billion of repayments. Securitized debt at amortized cost decreased $228.8 million, reflecting repayments on securitized debt issued prior to our election of the fair value option.
Removed paragraphs (6)
Previous report
For the December 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. The severe stress scenario was applied to reflect the uncertainties in the market with the tariffs, change in immigration policy, and unstable inflation rates.
Previous report
Other Operating Income
Previous report
Other Operating Income
Previous report
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 report
Origination Fee Income. Origination fee income increased by $3.2 million to $12.2 million for the three months ended June 30, 2026 compared to $8.9 million for the three months ended June 30, 2025. Origination fee income increased by $2.5 million to $20.1 million for the six months ended June 30, 2026 compared to $17.6 million for the six months ended June 30, 2025. The increases were primarily attributable to interest rate buy downs in the current quarter.
Previous report
Cash and Cash Equivalents
Reworded paragraphs (61)
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, 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.
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, 2026, has an average balance of approximately $383 thousand. As of September 30, 2026, our loan portfolio totaled $7.5 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 64.5%, of which the 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, represented 44.7% of the UPB. For the three and nine months ended September 30, 2026, the annualized yields on our total portfolio were 9.41% and 9.31%, 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 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.
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 51 securitized debt transactions, resulting in a total of approximately $12.0 billion in gross debt proceeds from May 2011 through September 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 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.
Current wording
One of our core profitability 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 nine months ended September 30, 2026, our annualized portfolio related net interest margin was 3.78% and 3.67%, respectively, compared to 3.65% and 3.62% for the three and nine months ended September 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 nine months ended September 30, 2026, including net income attributable to noncontrolling interest, we generated pre-tax income of $38.3 million and $104.4 million, and net income of $27.2 million and $75.3 million, respectively. 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.
Previous wording
All our warehouse repurchase and revolving loan facilities have interest payment obligations tied to the Secured Overnight Offering Rate (“SOFR”).
Current wording
All our warehouse repurchase and revolving loan facilities have interest payment obligations tied to the Secured Overnight Financing Rate (“SOFR”).
Previous 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.
Current wording
Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status. Includes $25.3 million, $26.2 million and $31.6 million of COVID-19 forbearance-granted loans 90 days or more past due or placed on nonaccrual status as of September 30, 2026, June 30, 2026, and September 30, 2025, respectively.
Previous 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.
Current wording
During the third quarter of 2026, loan originations including unfunded commitments increased $238.7 million and $172.3 million from the quarters ended June 30, 2026 and September 30, 2025, respectively.
Previous wording
For the June 30, 2026 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 economic uncertainties due to the ongoing conflict in Iran, unstable labor market, and softening economic conditions.
Current wording
For the June 30, 2026 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 economic uncertainties due to the ongoing conflict in the Middle East, unstable labor market, and higher inflation.
Previous 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.
Current wording
Our allowance for credit losses as of September 30, 2026 was $5.3 million compared to $4.6 million as of September 30, 2025. The increase in allowance for credit losses from September 30, 2025 was primarily due to higher baseline reserves on our loans held for investment at amortized cost, driven by an increased weighted average life resulting from a slower prepayment rate, as well as an increase in the loss severity rate assumption. 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 and economic events evolve.
Previous 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.
Current wording
The allowance for credit losses was 0.30% of total UPB of loans held for investment carried at amortized cost as of September 30, 2026. Nonperforming loans were 10.0% of total UPB of loans held for investment carried at amortized cost as of September 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 $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.
Current wording
Balance includes $114.7 million UPB of loans held for investment at amortized cost as of September 30, 2026, $116.7 million as of June 30, 2026, and $129.3 million as of September 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 $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.
Current wording
Loans that are 90+ days past due, in bankruptcy, in foreclosure, or not accruing interest are considered nonperforming loans. Nonperforming loans were $756.5 million, or 10.1% of our held for investment loan portfolio as of September 30, 2026, compared to $673.3 million, or 9.6% as of June 30, 2026, and $614.2 million, or 9.8% as of September 30, 2025. The increase in total nonperforming loans as of September 30, 2026 compared to June 30, 2026 and September 30, 2025 was primarily attributable to the 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 $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.
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 $90.0 million of long-term and short-term nonperforming loans for the quarter ended September 30, 2026, compared to $90.5 million for the quarter ended June 30, 2026, and $94.7 million for the quarter ended September 30, 2025. We recovered total revenue of $7.4 million, $6.9 million and $8.4 million for the quarters ended September 30, 2026, June 30, 2026, and September 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
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.
Current wording
As of September 30, 2026, REO included 302 properties with a lower of cost or estimated fair value of $154.6 million compared to 286 properties with a lower of cost or estimated fair value of $142.1 million as of June 30, 2026, and 223 properties with a lower of cost or estimated fair value of $113.7 million as of September 30, 2025.
Previous wording
The table below shows our initial REO gain (loss) upon transfer from loans, for the periods indicated:
Current wording
The table below shows our initial REO gain upon transfer from loans, for the periods indicated:
Previous 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.
Current wording
As of September 30, 2026, our held for investment loan portfolio was concentrated in Investor 1-4 loans, representing 44.9% of the UPB. Retail and mixed use properties represented 11.7% and 10.8%, respectively, of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio.
Previous wording
Geographically, the principal balance of our loans held for investment were concentrated 19.7% in California, 13.1% in New York, 11.5% in Florida, 7.9% in New Jersey, and 6.3% in Texas as of June 30, 2026.
Current wording
Geographically, the principal balance of our loans held for investment were concentrated 19.6% in California, 12.6% in New York, 11.4% in Florida, 7.8% in New Jersey, and 6.6% in Texas as of September 30, 2026.
Previous wording
Non-GAAP financial measure. Refer to the Return on Average Equity section on Page 52.
Current wording
Refer to the Return on Average Equity section on Page 55.
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 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.
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 September 30, 2026 as compared to the three months ended September 30, 2025 was primarily driven by resolutions of nonperforming loans. Portfolio yield for the three months ended September 30, 2026 increased from the three months ended June 30, 2026 mainly attributable to more interest income and default interest collected on resolutions of nonperforming loans.
Previous 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.
Current wording
Our portfolio related cost of funds was 6.04% for the three months ended September 30, 2026, a decrease from 6.09% for the prior quarter and 6.27% for the three months ended September 30, 2025. The decreases were primarily due to lower average cost of securitized debt.
Previous 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.
Current wording
Over the periods shown in the tables below, portfolio related net interest margin increased to 3.78% for the three months ended September 30, 2026 from 3.65% for the three months ended September 30, 2025. Portfolio related net interest margin increased to 3.67% for the nine months ended September 30, 2026 from 3.62% for the nine months ended September 30, 2025. The increases were primarily due to lower average cost of securitized debt.
Previous 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.
Current wording
Total company net interest margin of 2.97% for the three months ended September 30, 2026 decreased from 3.25% for the three months ended September 30, 2025. Total company net interest margin of 2.82% for the nine months ended September 30, 2026 decreased from 3.18% for the nine months ended September 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 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.
Current wording
The average yield of 14.64% 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 10.04% 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%.
Current wording
The average yield of 10.01% 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 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.
Current wording
Our annualized charge-offs rate over average loans held for investment carried at amortized cost for the three months ended September 30, 2026 decreased to 0.07% as compared to 0.16% for the three months ended June 30, 2026 and from 0.13% for the three months ended September 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 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.
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 increased during the quarter ended September 30, 2026 as compared to the quarter ended June 30, 2026 primarily due to higher income before income taxes and net income. Return on average equity decreased slightly during the quarter ended September 30, 2026 as compared to the quarter ended June 30, 2026. Pre-tax return on average equity and return on average equity decreased as compared to the quarter ended September 30, 2025 primarily due to higher average stockholders' equity for the three months ended September 30, 2026.
Previous 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.
Current wording
Portfolio related net interest income is the largest contributor to our net income. Our portfolio related net interest income increased 23.1% to $68.0 million from $55.2 million for the three months ended September 30, 2026 and 2025, respectively. Our portfolio related net interest income increased 24.8% to $190.4 million from $152.6 million for the nine months ended September 30, 2026 and 2025, respectively.
Previous 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.
Current wording
Interest Income. Interest income increased by $25.3 million or 17.6% to $169.5 million for the three months ended September 30, 2026, compared to $144.1 million for the three months ended September 30, 2025, primarily attributable to higher average loan portfolio balances. For the three months ended September 30, 2026, the average loan yield was 9.41% compared to 9.54% for the three months ended September 30, 2025. Interest income increased by $85.1 million to $483.5 million for the nine months ended September 30, 2026, compared to $398.4 million for the nine months ended September 30, 2025. The increase in interest income for the nine months ended September 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 and six months ended June 30, 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 nine months ended September 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 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.
Current wording
Interest Expense — Portfolio Related. Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased 14.2% to $101.5 million for the three months ended September 30, 2026 from $88.9 million for the three months ended September 30, 2025. Portfolio related interest expense increased to $293.1 million for the nine months ended September 30, 2026 from $245.8 million for the nine months ended September 30, 2025. The increases were primarily attributable to a higher loan portfolio being financed, offset 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 and six months ended June 30, 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 nine months ended September 30, 2026 and 2025.
Previous 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.
Current wording
Interest Expense — Corporate Debt. Corporate debt interest expense increased to $14.5 million from $6.1 million for the three months ended September 30, 2026 and 2025, respectively. Corporate debt interest expense increased to $44.1 million for the nine months ended September 30, 2026, compared to $18.4 million for the nine months ended September 30, 2025. The increases in corporate debt interest expense were primarily due to the issuance of $500.0 million unsecured senior notes in January 2026.
Previous 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.
Current wording
Provision for Credit Losses. Our provision for credit losses increased slightly to $0.5 million for the three months ended September 30, 2026 from $0.4 million for the three months ended September 30, 2025. Our provision for credit losses decreased to $3.2 million for the nine months ended September 30, 2026 from $3.9 million for the nine months ended September 30, 2025. The decrease resulted from the decrease in loans carried at amortized cost subject to the CECL allowance methodology.
Previous 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.
Current wording
The $12.1 million increase in total other operating income from the three months ended September 30, 2025 to the three months ended September 30, 2026 was primarily due to higher gain on disposition of Century multifamily originations of $8.2 million, net unrealized gain of $1.0 million on fair value instruments and unrealized gain of $1.4 million on mortgage servicing rights. The $28.8 million increase from the nine months ended September 30, 2025 to the nine months ended September 30, 2026 was mainly due to higher net unrealized gain of $11.6 million on fair value instruments, $6.0 million in gain on disposition of loans, $3.2 million in origination fee income, unrealized gain of $2.9 million on mortgage servicing rights, and $2.4 million employee retention credit as other income in the first quarter of 2026.
Previous wording
Gain on Disposition of Loans. Gain on disposition of loans decreased to $4.0 million for the three months ended June 30, 2026 compared to $6.3 million for the three months ended June 30, 2025. Gain on disposition of loans decreased by $2.3 million to $6.9 million for the six months ended June 30, 2026 compared to $9.1 million for the six months ended June 30, 2025 primarily due to less gain recognized upon disposition of loans in 2026.
Current wording
Gain on Disposition of Loans. Gain on disposition of loans increased to $12.8 million for the three months ended September 30, 2026 compared to $4.6 million for the three months ended September 30, 2025. Gain on disposition of loans increased by $6.0 million to $19.7 million for the nine months ended September 30, 2026 compared to $13.7 million for the nine months ended September 30, 2025 primarily due to gain recognized upon disposition of Century multifamily originations in 2026.
Previous 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.
Current wording
Unrealized Gain (Loss) on Fair Value Securitized Debt. Unrealized gain on fair value securitized debt was $87.4 million for the three months ended September 30, 2026, compared to $10.0 million of unrealized loss for the three months ended September 30, 2025. Unrealized gain on fair value securitized debt increased by $147.2 million to $115.9 million for the nine months ended September 30, 2026 from $31.3 million unrealized loss for the nine months ended September 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 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.
Current wording
Unrealized Gain (Loss) on Mortgage Servicing Rights. Unrealized gain on mortgage servicing rights was $1.0 million for the three months ended September 30, 2026 as compared to unrealized loss of $0.3 million for the three months ended September 30, 2025. Unrealized gain on mortgage servicing rights was $1.8 million for the nine months ended September 30, 2026 as compared to an unrealized loss of $1.1 million for the nine months ended September 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 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.
Current wording
Interest Income on Cash Balance. Interest income on cash balance decreased to $1.3 million for the three months ended September 30, 2026 compared to $1.6 million for the three months ended September 30, 2025. Interest income on cash balance decreased to $4.1 million for the nine months ended September 30, 2026 compared to $4.4 million for the nine months ended September 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 $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.
Current wording
Other Income. Other income was $1.6 million and $0.6 million for the three months ended September 30, 2026 and 2025, respectively. Other income increased to $7.0 million for the nine months ended September 30, 2026 compared to $1.6 million for the nine months ended September 30, 2025, primarily attributable to the recognition of $2.4 million employee retention credit as other income in March 2026, $1.8 million in higher servicing fee income from the new loan servicing portfolio serviced for others, $0.8 million in interest earned on funds from a note paydown and $0.3 million of paid-in-kind interest on a note receivable.
Previous 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.
Current wording
Compensation and Employee Benefits. Compensation and employee benefits increased by $5.9 million to $29.2 million for the three months ended September 30, 2026 compared to $23.3 million for the three months ended September 30, 2025. Compensation and employee benefits increased by $10.6 million to $78.2 million for the nine months ended September 30, 2026 compared to $67.6 million for the nine months ended September 30, 2025. The increases were primarily attributable to the increase in headcount to support future growth in loan production.
Previous 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.
Current wording
Origination Expenses. Origination expenses increased by $0.5 million to $1.7 million for the three months ended September 30, 2026 from $1.2 million for the three months ended September 30, 2025. Origination expenses increased by $1.0 million to $4.2 million for the nine months ended September 30, 2026 from $3.2 million for the nine months ended September 30, 2025. The increase in origination expenses was due to higher third party fees paid on increased originations.
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