Second Quarter Highlights:

Net income of $12.2 million and diluted earnings per share (EPS) of $0.36, compared to $10.6 million and $0.31 per share, respectively, for 2Q22
Core net income⁽¹⁾of $12.9 million and core diluted EPS⁽¹⁾of $0.38, compared to $10.6 million and $0.31 per share, respectively, for 2Q22
Loan production volume of $258.6 million in unpaid principal balance (UPB), a decrease of 41.9% from 2Q22
Total loan portfolio of $3.7 billion as of June 30, 2023, an increase of 20.4% from June 30, 2022
Nonperforming loans as a percentage of Held for Investment (HFI) loans was 10.0% as of June 30, 2023, an increase from 8.2% as of June 30, 2022
Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled $50.1 million in UPB, realizing gains of $1.5 million or 103.0% of UPB resolved
Portfolio net interest margin (NIM) of 3.24%, compared to 4.10% for 2Q22
Completed two securitizations in 2Q23. The VCC 2023-2 securitization totaling $202.2 million of securities issued, and the VCC 2023-1R (Re-REMIC) totaling $64.8 million of securities issued
Liquidity⁽²⁾ of $72.0 million as of June 30, 2023
Book value per common share of $12.57 as of June 30, 2023, an increase from $11.26 as of June 30, 2022

Velocity Financial, Inc. (NYSE:VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $12.2 million and core net income of $12.9 million for 2Q23, compared to net income of $10.6 million and core net income of $10.6 million in 2Q22. Earnings and core earnings per diluted share were $0.36 and $0.38, respectively, for 2Q23, compared to $0.31 and $0.31, for 2Q22.

"Velocity once again delivered strong quarterly earnings driven by 20% year-over-year portfolio growth," said Chris Farrar, President and CEO. "Our second quarter results included solid portfolio net interest income and strong growth in other operating income driven by fair value gains and fees from loan production activity. Production volumes rebounded in the second quarter as forecast, increasing 19% quarter-over-quarter, with a weighted average coupon of 11%. We have been successful in mitigating much of the impact of higher rates by increasing loan coupons and volume simultaneously this quarter, which is a testament to the strong demand for investor properties and the skill of our loan origination team."

⁽¹⁾Core income and Core EPS are a non-GAAP measures that exclude nonrecurring and unusual activities from GAAP net income.

⁽²⁾ Liquidity includes unrestricted cash reserves of $34.0 million and available liquidity in unfinanced loans of $38.0 million.

Second Quarter Operating Results

KEY PERFORMANCE INDICATORS
($ in thousands)	2Q 2023			2Q 2022			$ Variance		% Variance
Pretax income	$	16,824		$	14,790		$	2,034	14	%
Net income	$	12,183		$	10,645		$	1,538	14	%
Diluted earnings per share	$	0.36		$	0.31		$	0	14	%
Core net income^(a)	$	12,928		$	10,645		$	2,283	21	%
Core diluted earnings per share^(a)	$	0.38		$	0.31		$	0.07	21	%
Pretax return on equity		16.81	%		16.57	%	n.a.		1	%
Core pretax return on equity^(a)		17.79	%		16.57	%	n.a.		7	%
Net interest margin - portfolio		3.24	%		4.10	%	n.a.		(21	)%
Net interest margin - total company		2.78	%		3.54	%	n.a.		(21	)%
Average common equity	$	400,441		$	357,218		$	43,223	12	%

^(a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.
n.a.- not applicable

Discussion of results:

Net income in 2Q23 was $12.2 million, compared to $10.6 million for 2Q22
- Driven by continued strong portfolio growth, NPL resolution activity and higher other operating income, partially offset by securitization costs and higher operating expenses

Core net income⁽¹⁾ was $12.9 million, compared to $10.6 million for 2Q22
- Core adjustments included equity incentive compensation expenses and costs related to the Company's employee stock purchase plan (ESPP)
Portfolio NIMin 2Q23 was 3.24%, compared to 4.10% for 2Q22, resulting from increased funding costs, partially offset by rising portfolio yields from higher loan coupons on recent loan production
The GAAP pretax return on equity was 16.8% for 2Q23, compared to 16.6% for 2Q22

TOTAL LOAN PORTFOLIO
($ of UPB in millions)	2Q 2023			2Q 2022			$ Variance		% Variance
Held for Investment
Investor 1-4 Rental	$	2,016		$	1,517		$	499	33	%
Mixed Use		452			410			43	10	%
Multi-Family		304			289			14	5	%
Retail		322			298			24	8	%
Warehouse		235			217			19	9	%
All Other		391			359			32	9	%
Total	$	3,720		$	3,090			630	20	%
Held for Sale
Multi-Family	$	-		$	-		$	-	0	%
Total Managed Loan Portfolio UPB	$	3,720		$	3,090		$	630	20	%
Key loan portfolio metrics:
Total loan count		9,541			7,779
Weighted average loan to value		68.2	%		68.2	%
Weighted average coupon		8.40	%		7.53	%
Weighted average total portfolio yield		8.24	%		7.97	%
Weighted average portfolio debt cost		5.58	%		4.34	%

Discussion of results:

Velocity's total loan portfolio was $3.7 billion in UPB as of June 30, 2023, an increase of 20.4% from $3.1 billion in UPB as of June 30, 2022
- Primarily driven by 32.9% Y/Y growth in loans collateralized by Investor 1-4 Rental properties and secondarily 10.4% Y/Y growth in Mixed Use properties
- Approximately 75% of the loans in Velocity's HFI portfolio are collateralized by properties that have a housing component (Investor 1-4 Rental, Multifamily and Mixed Use)
- Loan prepayments totaled $105.8 million, a 21.6% Q/Q increase, and a 26.1% Y/Y decrease
The UPB of Fair Value (FVO) loans was $688.1 million in UPB, or 18.5% of total HFI loans, as of June 30, 2023, an increase from $1.3 million in UPB, or 0.05% as of June 30, 2022
- The company elected fair value accounting treatment for new HFI loan originations effective October 1, 2022
The weighted average portfolio loan-to-value ratio was 68.2% as of June 30, 2023, unchanged from 68.2% as of June 30, 2022, and consistent with the five-quarter trailing average of 68.3%
The weighted average total portfolio yield was 8.24% for 2Q23, an increase of 27 bps from 2Q22, driven by higher loan coupons on YTD 2023 loan production
Portfolio-related debt cost for 2Q23 was 5.58%, an increase of 124 bps from 2Q22, driven by higher interest rates on securitization and warehouse financing

LOAN PRODUCTION VOLUMES
($ in millions)	2Q 2023		2Q 2022		$ Variance			% Variance
Investor 1-4 Rental	$	163	$	254	$	(90	)	(36	)%
Traditional Commercial		73		164		(91	)	(55	)%
Short-term loans		22		28		(6	)	(21	)%
Total loan production	$	259	$	445	$	(187	)	(42	)%

Acquisitions	$	-	$	0.5

Discussion of results:

Loan production in 2Q23 totaled $258.6 million in UPB, a 41.9% decrease from $445.4 million in UPB in 2Q22
- Management's decision to reduce production, along with higher interest rates, decreased volume from year-ago levels. On a Q/Q basis, production volume rose 19.2% from 1Q23.
The weighted average coupon (WAC) on 2Q23 HFI loan production was 11.0%, an increase of 325 bps from 2Q22

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS
($ in thousands)	2Q 2023	2Q 2022	$ Variance	% Variance
Nonperforming loans^(a)	$ 371,154	$ 252,253	$ 118,901	47%
Average Nonperforming Loans	$ 328,897	$ 257,646	$ 71,251	28%
Nonperforming loans % total HFI Loans	10.0%	8.2%	n.a.	22%
Total Charge Offs	$ 717	$ 38	$ 679	n.m.
Charge-offs as a % of Avg. Nonperforming Loans^(b)	0.87%	0.06%	n.a.	n.m.
Loan Loss Reserve	$ 4,626	$ 4,905	$ (279)	(6)%

^(a) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual.
^(b) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period.
n.a.- not applicable, n.m. - non meaningful

Discussion of results:

Nonperforming loans (NPL) totaled $371.2 million in UPB as of June 30, 2023, or 10.0% of loans HFI, compared to $252.3 million and 8.2%, respectively, as of June 30, 2022
- NPL growth is driven by portfolio seasoning of prior year's originations and an aggressive collection philosophy that places loans in foreclosure quickly for early delinquencies
Charge-offs in 2Q23 totaled $716.6 thousand, compared to $37.8 thousand in 2Q22
- The trailing five-quarter charge-off average was $279.6 thousand
The loan loss reserve totaled $4.6 million as of June 30, 2023, a 5.7% decrease from $4.9 million as of June 30, 2022
- Resulting from the run-off of the amortized cost HFI loan portfolio and a modestly improved macroeconomic outlook.
- Loans carried at fair value are not subject to a CECL reserve

NET REVENUES
($ in thousands)	2Q 2023			2Q 2022			$ Variance			% Variance
Interest income	$	74,897		$	59,243		$	15,653		26	%
Interest expense - portfolio related		(45,451	)		(28,752	)		(16,699	)	58	%
Net Interest Income - portfolio related		29,446			30,491			(1,045	)	(3	)%
Interest expense - corporate debt		(4,139	)		(4,182	)		43		(1	)%
Net Interest Income	$	25,307		$	26,310		$	(1,003	)	(4	)%
Loan loss provision		(298	)		(279	)		(18	)	7	%
Gain on disposition of loans		1,237			1,777			(539	)	(30	)%
Unrealized gain on fair value loans		2,413			6			2,407		n.m.
Unrealized gain (loss) on fair value of securitized debt		5,560			-			5,560		n.m.
Origination income		2,735			553			2,182		395	%
Bank interest income		1,188			-			1,188		n.m.
Other operating income (expense)		903			1,257			(354	)	(28	)%
Total Other operating income (expense)	$	14,036		$	3,592			10,444		291	%
Net Revenue	$	39,046		$	29,622		$	9,423		32	%
n.m. - non meaningful

Discussion of results:

Net Revenue in 2Q23 was $39.0 million, an increase of 31.8% compared to $29.6 million for 2Q22
Total net interest income, including corporate debt interest expense, was $25.3 million for 2Q23, a 3.8% decrease from $26.3 million for 2Q22
- Portfolio net Interest income was $29.4 million for 2Q23, a decrease of 3.4% from 2Q22 resulting from a $16.7 million increase in interest expense, partially offset by $15.7 million of interest income growth
Total other operating income includes gains on the disposition of loans, unrealized gains/(losses) on fair value loans and securitized debt, origination income, bank interest income on deposits and other operating income, and totaled $14.0 million for 2Q23 compared to $3.6 million for 2Q22
- Gain on disposition of loans totaled $1.2 million for 2Q23, primarily resulting from gains on loans transferred to REO
- Unrealized gains on the fair value of loans totaled $2.4 million for 2Q23, primarily resulting from gains on 2Q23 new production, partially offset by valuation decreases on the existing FVO portfolio due to higher long-term interest rates
- Unrealized gains on the fair value of securitized debt totaled $5.6 million for 2Q23, primarily driven by an increase in long-term rates as of June 30, 2023
- Origination income totaled $2.7 million, driven by fee income realized on loans originated in 2Q23

OPERATING EXPENSES
($ in thousands)	2Q 2023		2Q 2022			$ Variance			% Variance
Compensation and employee benefits	$	10,670	$	6,553		$	4,116		63	%
Origination (income)/expense		122.8		1,504			(1,381	)	(92	)%
Securitization expenses		2,699		-			2,699		n.m	.
Rent and occupancy		458		426			32		7	%
Loan servicing		4,267		3,290			977		30	%
Professional fees		1,056		1,062			(6	)	(1	)%
Real estate owned, net		1,018		(251	)		1,269		(505	)%
Other expenses		1,931		2,248			(318	)	(14	)%
Total operating expenses	$	22,222	$	14,832		$	7,390		50	%
n.m. - non meaningful

Discussion of results:

Operating expenses totaled $22.2 million for 2Q23, an increase of 49.8% from 2Q22. The variance to prior year results is primarily attributable to our fair value accounting election in 4Q22.
- Compensation expense totaled $10.7 million, compared to $6.6 million for 2Q22. In 2Q23, compensation expense related to loan originations was expensed as incurred under fair value accounting rather than deferred over the life of the loan under amortized cost accounting for 2Q22.
- Origination (income)/expenses totaled $0.1 million, a $1.4 million improvement from 2Q22, resulting from successful initiatives to increase operational efficiencies
- Securitization expenses totaled $2.7 million. Securitization issuance costs are now expensed under fair value accounting and were deferred in 2Q22.
- Loan servicing expense totaled $4.3 million, an increase of $1.0 million from 2Q22, driven primarily by the increase in securitization debt outstanding to $3.1 billion as of June 30, 2023, from $2.5 billion as of June 30, 2022

SECURITIZATIONS
($ in thousands)	Securities		Balance at				Balance at
Trusts	Issued		6/30/2023		W.A. Rate		6/30/2022		W.A. Rate
2016-1 Trust		319,809	$	17,704	9.29	%	$	28,021	8.24	%
2017-2 Trust		245,601		51,930	3.95	%		68,749	3.59	%
2018-1 Trust		176,816		36,882	4.07	%		52,281	3.95	%
2018-2 Trust		307,988		87,984	4.51	%		108,845	4.36	%
2019-1 Trust		235,580		83,435	4.04	%		103,860	3.92	%
2019-2 Trust		207,020		76,284	3.45	%		98,792	3.37	%
2019-3 Trust		154,419		63,278	3.29	%		81,996	3.10	%
2020-1 Trust		248,700		121,074	2.86	%		149,646	2.84	%
2020-2 Trust		96,352		53,309	4.61	%		67,446	4.59	%
2021-1 Trust		251,301		183,089	1.76	%		214,835	1.74	%
2021-2 Trust		194,918		156,681	2.03	%		185,448	2.01	%
2021-3 Trust		204,205		167,652	2.46	%		195,308	2.46	%
2021-4 Trust		319,116		257,369	3.22	%		291,181	3.14	%
2022-1 Trust		273,594		246,883	3.93	%		264,936	3.91	%
2022-2 Trust		241,388		226,763	5.10	%		240,076	5.08	%
2022-MC1 Trust		84,967		39,862	6.90	%		80,931	6.94	%
2022-3 Trust		296,323		268,008	5.69	%		294,768	5.67	%
2022-4 Trust		308,357		289,929	6.25	%
2022-5 Trust		188,754		177,075	7.07	%
2023-1 Trust		198,715		189,763	7.02	%
2023-1R Trust		64,833		63,390	7.73	%
2023-2 Trust		202,210		199,864	7.17	%
	$	4,820,966	$	3,058,208	4.72	%	$	2,527,119	3.77	%

Discussion of results

Completed the VCC 2023-1R (Re-REMIC) totaling $64.8 million of securities issued in April, collateralized by retained tranches from previous VCC securitizations
Completed the VCC 2023-2 securitization totaling $202.2 million of securities issued in May, comprised of long-term business-purpose loans
The weighted average rate on Velocity's outstanding securitizations was 4.72% as of June 30, 2023, an increase of 95 bps from June 30, 2022

RESOLUTION ACTIVITIES
LONG-TERM LOANS

RESOLUTION ACTIVITY	SECOND QUARTER 2023					SECOND QUARTER 2022
($ in thousands)	UPB $		Gain / (Loss) $			UPB $		Gain / (Loss) $
Paid in full	$	13,485	$	965		$	16,934	$	3,303
Paid current		19,771		280			17,407		129
REO sold (a)		4,836		(382	)		2,107		816
Total resolutions	$	38,092	$	863		$	36,448	$	4,248

Resolutions as a % of nonperforming UPB				102.3	%				111.7	%

SHORT-TERM AND FORBEARANCE LOANS

RESOLUTION ACTIVITY	SECOND QUARTER 2023					SECOND QUARTER 2022
($ in thousands)	UPB $		Gain / (Loss) $			UPB $		Gain / (Loss) $
Paid in full	$	7,004	$	318		$	9,913	$	976
Paid current		3,290		89			2,877		22
REO sold		1,672		222			1,262		500
Total resolutions	$	11,966	$	629		$	14,052	$	1,498

Resolutions as a % of nonperforming UPB				105.3	%				110.7	%

Grand total resolutions	$	50,058	$	1,492		$	50,500	$	5,746

Grand total resolutions as a % of nonperforming UPB				103.0	%				111.4	%

Discussion of results:

2Q23 NPL resolutions represented 13.5% of nonperforming loan UPB as of March 31, 2023
The UPB of loan resolutions in 2Q23 was in line with the recent five-quarter resolution average of $42.0 million in UPB

Velocity's executive management team will host a conference call and webcast to review 2Q23 financial results on August 3^rd, 2023, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please visit Velocity's website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity's website following the completion of the conference call.

Conference Call Information

To participate by phone, please dial-in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing F1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to join the Velocity Financial, Inc. conference call.

A replay of the call will be available through midnight on August 31, 2023, and can be accessed by dialing 1-877-344-7529 in the U.S. and 855-669-9658 in Canada or 1-412-317-0088 internationally. The passcode for the replay is #7682506. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations."

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages business purpose loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 19 years.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.

Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs incurred from activities that are not normal recurring operating expenses, such as COVID-stressed charges and recoveries of loan loss provision, nonrecurring debt amortization, the impact of operational measures taken to address the COVID-19 pandemic and workforce reduction costs, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted-average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.

We have included non-GAAP core net income and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

For more information on Core Income, please refer to the section of this press release below titled "Adjusted Financial Metric Reconciliation to GAAP Net Income" at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "goal," "position," or "potential" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, including the risk of recession (3) regulatory and/or legislative changes, (4) our customers' continued interest in loans and doing business with us, (5) market conditions and investor interest in our future securitizations, and (6) the continued conflict in Ukraine and (7) changes in federal government fiscal and monetary policies.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors" in our Form 10-Q filed with the SEC on May 14, 2020, as well as other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.

Velocity Financial, LLC
Consolidated Statements of Financial Condition


	Quarter Ended
	6/30/2023			3/31/2023			12/31/2022			9/30/2022			6/30/2022
	Unaudited			Unaudited			Audited			Unaudited			Unaudited
(In thousands)
Assets
Cash and cash equivalents	$	33,987		$	39,397		$	45,248		$	26,372		$	46,250
Restricted cash		16,786			16,636			16,808			14,533			9,217
Loans held for sale, at fair value		-			18,081			-			16,569			-
Loans held for investment, at fair value		705,330			450,732			276,095			926			1,351
Loans held for investment		3,057,940			3,169,280			3,272,390			3,445,563			3,118,799
Total loans, net		3,763,270			3,638,093			3,548,485			3,463,058			3,120,150
Accrued interest receivables		22,602			20,931			20,463			18,333			15,820
Receivables due from servicers		63,896			64,133			65,644			66,992			75,688
Other receivables		1,306			2,188			1,075			1,962			1,320
Real estate owned, net		20,388			21,778			13,325			13,188			19,218
Property and equipment, net		3,023			3,209			3,356			3,495			3,632
Deferred tax asset		1,878			2,543			5,033			4,337			15,195
Mortgage Servicing Rights, at fair value		9,445			9,143			9,238			9,868			8,438
Goodwill		6,775			6,775			6,775			6,775			6,775
Other assets		7,789			12,268			13,525			18,453			11,036
Total Assets	$	3,951,145		$	3,837,094		$	3,748,975		$	3,647,366		$	3,332,739

Liabilities and members' equity
Accounts payable and accrued expenses	$	95,344		$	84,976		$	91,525		$	75,150		$	78,384
Secured financing, net		210,464			210,155			209,846			209,537			209,227
Securitized debt, net		2,622,547			2,657,469			2,736,290			2,651,895			2,477,226
Securitized debt, at fair value		381,799			194,941			-			-			-
Warehouse & repurchase facilities		235,749			298,313			330,814			340,050			208,390
Total Liabilities		3,545,903			3,445,854			3,368,475			3,276,632			2,973,227

Stockholders' Equity
Stockholders' equity		401,707			387,624			376,811			366,810			355,895
Noncontrolling interest in subsidiary		3,535			3,616			3,689			3,924			3,617
Total equity		405,242			391,240			380,500			370,734			359,512
Total Liabilities and members' equity	$	3,951,145		$	3,837,094		$	3,748,975		$	3,647,366		$	3,332,739

Book value per share	$	12.57		$	12.18		$	11.89		$	11.61		$	11.26

Shares outstanding		32,239⁽¹	⁾		32,112⁽²	⁾		31,996⁽³	⁾		31,922⁽⁴	⁾		31,922⁽⁵	⁾

⁽¹⁾		Based on 32,238,715 common shares outstanding as of June 30, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 502,913.
⁽²⁾		Based on 32,111,906 common shares outstanding as of March 31, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 490,526.
⁽³⁾		Based on 31,955,730 common shares outstanding as of December 31, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.
⁽⁴⁾		Based on 31,921,721 common shares outstanding as of September 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.
⁽⁵⁾		Based on 31,921,721 common shares outstanding as of June 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.

Velocity Financial, LLC
Consolidated Statements of Income (Quarters)


	Quarter Ended
($ in thousands)	6/30/2023		3/31/2023			12/31/2022			9/30/2022			6/30/2022
	Unaudited		Unaudited			Audited			Unaudited			Unaudited
Revenues
Interest income	$	74,897	$	70,521		$	65,632		$	63,419		$	59,243
Interest expense - portfolio related		45,451		42,029			40,854			34,561			28,752
Net interest income - portfolio related		29,446		28,492			24,778			28,858			30,491
Interest expense - corporate debt		4,139		4,139			4,139			4,011			4,182
Net interest income		25,307		24,353			20,639			24,847			26,309
Provision for loan losses		298		636			(437	)		580			279
Net interest income after provision for loan losses		25,009		23,717			21,076			24,267			26,030
Other operating income
Gain on disposition of loans		1,237		1,913			391			399			1,777
Unrealized gain on fair value loans		2,413		7,354			7,795			453			6
Unrealized gain (loss) on fair value securitizations		5,560		(170	)		-			-			-
Origination income		2,735		2,411			3,521			518			553
Bank interest income		1,188		948			-			0			0
Other income (expense)		903		386			(288	)		1,656			1,257
Total other operating income		14,036		12,842			11,419			3,027			3,592
Net revenue		39,046		36,560			32,495			27,294			29,622

Operating expenses
Compensation and employee benefits		10,670		10,008			11,793			6,788			6,553
Origination expenses		123		(50	)		1,328			209			1,504
Securitizations expenses		2,699		2,584			-			-			-
Rent and occupancy		458		446			435			445			426
Loan servicing		4,267		3,828			3,244			3,314			3,290
Professional fees		1,056		955			1,091			664			1,062
Real estate owned, net		1,018		1,829			552			(195	)		(251	)
Other operating expenses		1,931		2,202			2,360			2,020			2,248
Total operating expenses		22,222		21,802			20,804			13,245			14,832
Income before income taxes		16,824		14,757			11,692			14,049			14,790
Income tax expense		4,602		4,021			3,465			3,759			4,019
Net income		12,222		10,736			8,227			10,290			10,771
Net income attributable to noncontrolling interest		39		87			(235	)		307			126
Net income attributable to Velocity Financial, Inc.		12,183		10,649			8,462			9,983			10,645
Less undistributed earnings attributable to participating securities		185		160			127			152			164
Net earnings attributable to common shareholders	$	11,998	$	10,489		$	8,335		$	9,831		$	10,481

Basic earnings (loss) per share	$	0.37	$	0.33		$	0.26		$	0.31		$	0.33

Diluted earnings (loss) per common share	$	0.36	$	0.31		$	0.25		$	0.29		$	0.31

Basic weighted average common shares outstanding		32,122		32,098			31,923			31,922			31,917

Diluted weighted average common shares outstanding		34,140		34,052			34,063			34,199			34,057

Velocity Financial, Inc.
Net Interest Margin — Portfolio Related and Total Company
(Unaudited)

	Quarter Ended June 30, 2023						Quarter Ended March 31, 2023						Quarter Ended June 30, 2022
			Interest		Average				Interest		Average				Interest		Average
	Average		Income /		Yield /		Average		Income /		Yield /		Average		Income /		Yield /
($ in thousands)	Balance		Expense		Rate⁽¹⁾		Balance		Expense		Rate⁽¹⁾		Balance		Expense		Rate⁽¹⁾
Loan portfolio:
Loans held for sale	$	3,477					$	12,896					$	62,987
Loans held for investment		3,634,093						3,512,133						2,910,693
Total loans	$	3,637,570	$	74,897	8.24	%	$	3,525,029	$	70,521	8.00	%	$	2,973,680	$	59,243	7.97	%

Debt:
Warehouse and repurchase facilities	$	238,027		5,910	9.93	%	$	225,497		4,833	8.57	%	$	318,960		4,115	5.16	%
Securitizations		3,020,624		39,541	5.24	%		2,926,153		37,196	5.08	%		2,332,340		24,637	4.23	%
Total debt - portfolio related		3,258,651		45,451	5.58	%		3,151,650		42,029	5.33	%		2,651,300		28,752	4.34	%
Corporate debt		215,000		4,139	7.70	%		215,000		4,139	7.70	%		215,000		4,182	7.78	%
Total debt	$	3,473,651	$	49,590	5.71	%	$	3,366,650	$	46,168	5.49	%	$	2,866,300	$	32,934	4.60	%

Net interest spread - portfolio related⁽²⁾					2.66	%					2.67	%					3.63	%
Net interest margin - portfolio related					3.24	%					3.23	%					4.10	%

Net interest spread - total company⁽³⁾					2.53	%					2.52	%					3.37	%
Net interest margin - total company					2.78	%					2.76	%					3.54	%

⁽¹⁾ Annualized.
⁽²⁾ Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt.
⁽³⁾ Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)

Quarters:

Core Net Income

Quarter Ended

($ in thousands)

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

Net Income

12,183

10,649

8,462

9,983

10,645

Equity award & ESPP costs

745

728

656

Core Net Income

12,928

11,376

9,118

9,983

10,645

Diluted weighted average common shares outstanding

34,140

34,052

34,063

34,199

34,057

Core diluted earnings per share

0.38

0.33

0.27

0.29

0.31

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Velocity Financial, Inc. Reports Second Quarter 2023 Results