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Here is a brief analogy for Velocity Financial (VEL):

• Rocket Mortgage for real estate investors.

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• Business Purpose Loans (BPLs): Financial services offering mortgage loans to real estate investors for the acquisition, renovation, or construction of residential investment properties, primarily focused on fix-and-flip, rental, and new construction projects.

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Velocity Financial (symbol: VEL) is a real estate finance company that originates and manages a portfolio of loans secured by 1-4 unit residential investment properties. Its customers are primarily individuals or small businesses investing in real estate, rather than large public companies.

The company primarily serves the following categories of customers:

1. "Fix-and-Flip" Investors: These customers acquire residential properties, often in need of rehabilitation, with the intention of renovating them and selling them quickly for a profit. Velocity Financial provides bridge loans tailored for these short-term investment strategies.
2. "Buy-and-Hold" Landlords/Investors: This category includes individuals or small entities that purchase residential properties to generate rental income and benefit from long-term property appreciation. Velocity Financial offers rental property loans designed for this purpose.
3. Portfolio Investors: Experienced real estate investors who own multiple rental properties or are looking to expand their real estate portfolios. They may seek refinancing for existing properties or financing for new acquisitions across several units.

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• Barclays Bank PLC (BCS)
• UBS AG (UBS)
• New York Community Bancorp, Inc. (NYCB)
• Texas Capital Bancshares Inc. (TCBI)
• Bank of America Corporation (BAC)

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Christopher D. Farrar, Chief Executive Officer and Director

Mr. Farrar has served as Chief Executive Officer for Velocity Financial since co-founding the Company in June 2004 and has also been a member of its Board of Directors since the initial public offering in January 2020. He brings extensive experience in finance, lending, capital raising, and business operations. Prior to co-founding Velocity, Mr. Farrar formed and served as Chief Credit Officer for Worth Funding, a mortgage banking firm. He also served as Senior Vice President of Production at Weyerhaeuser Mortgage Company and as a Vice President for Namco Capital Group, Inc., originating commercial real estate loans. Velocity Financial received significant investment from private equity firm Snow Phipps Group before going public.

Mark R. Szczepaniak, Chief Financial Officer

Mr. Szczepaniak has served as Velocity Financial's Chief Financial Officer since May 2017. He possesses over 35 years of industry experience in the real estate and financial services sectors, holding various senior positions with both publicly and privately-held finance companies. Previously, Mr. Szczepaniak was the Managing Director of Finance, SOX, & Tax at PennyMac Financial Services Inc. from 2013 until joining Velocity in 2017. From 2009 to 2012, he served as Chief Financial Officer of Prospect Mortgage. His experience also includes serving as Chief Financial Officer and Vice President of Finance for the Federal Home Loan Bank of Seattle from 2004 to 2007, and as Senior Vice President and Corporate Controller at the Federal Home Loan Bank of Chicago from 1996 to 2004. Mr. Szczepaniak is a Certified Public Accountant, licensed in California, and a Chartered Global Management Accountant.

Jeffrey T. Taylor, Executive Vice President, Capital Markets

Mr. Taylor has served as Velocity Financial's Executive Vice President, Capital Markets since 2004, having co-founded the Company in June 2004. He has over 30 years of experience in the secondary mortgage market. His prior roles include working for opportunity funds that acquired Resolution Trust Corporation and FDIC loan portfolios, serving as Vice President of Operations for 2dmkt.com (an internet start-up), and as a Vice President with BayView Financial Trading Group L.P. He also served as a Transaction Manager at Countrywide Securities Corporation.

Roland T. Kelly, Chief Legal Officer, General Counsel and Corporate Secretary

Mr. Kelly has served as Velocity Financial's Chief Legal Officer since March 2021 and as General Counsel and Corporate Secretary since July 2020. He has a career spanning more than 25 years on Wall Street, focusing on corporate, regulatory, governance, and capital markets matters. Before joining Velocity, Mr. Kelly was a Managing Director and Associate General Counsel for Jefferies Financial Group Inc. He also previously worked for the law firm of Morgan, Lewis & Bockius and as a regulator with the U.S. Securities and Exchange Commission.

Joseph A. Cowell, Chief Operating Officer, Velocity Commercial Capital LLC

Mr. Cowell has served as Chief Operating Officer of Velocity Commercial Capital LLC, an operating subsidiary of Velocity Financial, since April 1, 2016. He brings over 20 years of experience in real estate finance and mortgage lending operations. Mr. Cowell has held various roles at Velocity Commercial Capital since joining in 2004, including Chief Credit Officer, Senior Vice President of Whole Loan Acquisitions, and Vice President of Production and Operations. Before Velocity, he worked at BayView Financial Trading Group as a capital markets analyst and an account executive for a Bayview subsidiary company, Interbay Funding.

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1. Vulnerability to Real Estate Market Downturns: The company's financial performance is highly correlated with the conditions of the real estate market. A softening housing market or an economic contraction could lead to increased loan defaults, reduced revenue, and a decrease in mortgage origination volume. This directly impacts the demand for their core product—investor loans secured by residential rental and small commercial properties.
2. Sensitivity to Interest Rate Fluctuations: Velocity Financial's net interest margin, a primary driver of its revenue, is significantly vulnerable to changes in interest rates. Rapid increases in short-term rates, potentially outpacing long-term rates, can lead to margin compression and negatively impact profitability. Furthermore, shifts in interest rates can reduce demand for their mortgage products and affect refinancing activity.
3. Credit Quality and High Leverage: Although Velocity Financial has shown improvements in its non-performing loan ratio, it remains a critical area of focus. A deterioration in the credit quality of its loan portfolio or an increase in non-performing loans could adversely affect financial performance and raise concerns about the company's underwriting standards. Compounding this, Velocity Financial has been noted for its high leverage, with a reported debt-to-equity ratio of 9.7, which indicates a poor financial strength rating and could amplify the impact of adverse market conditions.

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Here are 3-5 expected drivers of future revenue growth for Velocity Financial (VEL) over the next 2-3 years:

1. Increased Loan Production and Portfolio Growth: Velocity Financial has consistently reported record quarterly loan production and significant year-over-year increases in its total loan portfolio. The company's management expresses confidence in continued growth in originations and portfolio expansion. This is further supported by their ambitious target of reaching a $10 billion portfolio by 2030, which is predicated on increased origination volume.
2. Sustained Demand in Key Markets: Strong and sustained demand for financing, particularly in the traditional commercial and 1-4 family residential rental property markets, is a significant driver. Velocity Financial's expansion is fueled by investors finding substantial value in smaller commercial properties, a trend the company is actively capitalizing on. The undersupplied US housing market and shifting demographics are also strengthening demand for Velocity's investor mortgage products.
3. Profitable Market Share Expansion: Velocity Financial's leadership has stated their optimism about long-term growth prospects and their ability to maintain profitable market share expansion, especially within their niche. This indicates a strategic focus on growing their customer base and increasing their penetration in the business purpose loan market.
4. Strategic Funding Diversification through Securitizations: The company has been actively engaging in strategic partnerships, such as closing single counterparty securitizations. This initiative aims to diversify long-term funding options and reduce transaction costs, which in turn enables more loan production and supports future growth. Velocity anticipates the securitization market to remain supportive with growing investor demand.
5. Stable Net Interest Margin (NIM) and Interest Income Growth: Velocity Financial has demonstrated a stable and healthy portfolio net interest margin (NIM), often above its target, and aims for strong interest income growth. By maintaining rate discipline on new originations, the company expects to sustain or improve its NIM, thereby contributing to revenue growth.

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Share Issuance

• Velocity Financial completed its initial public offering (IPO) on January 22, 2020, raising net proceeds of $100.7 million from the sale of common stock.
• An additional 1,087,500 shares were sold on January 28, 2020, at $13.00 per share, totaling approximately $14.1 million, through the full exercise of the underwriters' option.
• In 2024, the company issued $7.3 million in new common equity through its At The Market (ATM) program.

Outbound Investments

• On December 29, 2021, Velocity Financial acquired a majority stake in Century Health & Housing Capital.
• This acquisition was intended to accelerate the growth of Velocity's commercial mortgage product offerings, add a new channel and products to its broker network, diversify revenues, and lead to higher return on equity (ROE).

Capital Expenditures

• Capital expenditures for Velocity Financial were reported at -$322,000 in the last 12 months (prior to November 2025).
• Quarterly capital expenditures for June 2025 were $78,000.
• As a real estate finance company, Velocity Financial's primary business of loan origination and management is not typically capital expenditure-intensive.