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What changed in Velocity Financial, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Velocity Financial, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+235 added−216 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-12)

Top changes in Velocity Financial, Inc.'s 2025 10-K

235 paragraphs added · 216 removed · 186 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeExpand Our Network with New Mortgage Brokers We believe that our targeted sales effort, combined with consistent high-quality execution, positions us well to continue adding to the network of mortgage brokers that rely on us to serve their borrower clients. 3 Despite the adverse macroeconomic conditions caused by inflation and rising interest rates, we funded 4,328 loans sourced by 1,415 different mortgage brokers during the year ended December 31, 2024.
Biggest changeWe believe this presents a compelling opportunity for us to capture incremental volume from our existing broker network. Expand Our Network with New Mortgage Brokers We believe that our targeted sales effort, combined with consistent high-quality execution, positions us well to continue adding to the network of mortgage brokers that rely on us to serve their borrower clients.
The size of the mortgage broker market presents an attractive opportunity for us to capture significant growth with very small increases in the share of mortgage brokers that recognize our platform capabilities and utilize us as a preferred lender in our core market. Develop New Products Our primary product is a 30-year fixed-rate amortizing term loan.
The size of the mortgage broker market presents an attractive opportunity for us to capture significant growth with very small increases in the share of mortgage brokers that recognize our platform capabilities and utilize us as a preferred lender in our core market. 3 Develop New Products Our primary product is a 30-year fixed-rate amortizing term loan.
However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. Some of our competitors may be better positioned to market their services and financing programs because of their ability to offer more favorable rates and terms and other services.
However, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. Some of our 6 competitors may be better positioned to market their services and financing programs because of their ability to offer more favorable rates and terms and other services.
Such rates may be impacted by the competitor’s size, cost of funds, and access to funding sources that are not available to us. 6 Government Regulation Certain states in which we conduct business require approval, registration or licensing.
Such rates may be impacted by the competitor’s size, cost of funds, and access to funding sources that are not available to us. Government Regulation Certain states in which we conduct business require approval, registration or licensing.
Our internet website and the information contained therein or connected to or linked from our internet web site are not incorporated information and do not constitute a part of this Annual Report or any amendment thereto.
Our internet website and the information contained therein or connected to or linked from our internet web site are not incorporated information and do not constitute a part of this Annual Report or any amendment thereto. 7
We primarily originate investor loans secured by 1-4 unit residential rental properties, as well as loans for multi-family, mixed use and commercial properties. We originate loans nationwide across our extensive network of independent mortgage brokers and direct borrower relationships, which we have built and refined over the 20 years since our inception.
We primarily originate investor loans secured by 1-4 unit residential rental properties, as well as loans for multi-family, mixed use and commercial properties. We originate loans nationwide across our extensive network of independent mortgage brokers and direct borrower relationships, which we have built and refined over the 21 years since our inception.
Our primary growth strategy is predicated on organically continuing to serve and build loyalty within our network of mortgage brokers, while also expanding our network with new mortgage brokers through targeted marketing and improved brand awareness. We believe our reputation and 20-year history within our core market position us well to capture future growth opportunities.
Our primary growth strategy is predicated on organically continuing to serve and build loyalty within our network of mortgage brokers, while also expanding our network with new mortgage brokers through targeted marketing and improved brand awareness. We believe our reputation and 21-year history within our core market position us well to capture future growth opportunities.
Our Experienced Management Team Led by co-founder and Chief Executive Officer Christopher Farrar, our management team averages more than 26 years of experience in the financial services and real estate lending industries, including extensive experience in commercial and residential lending, structured finance and capital markets.
Our Experienced Management Team Led by co-founder and Chief Executive Officer Christopher Farrar, our management team averages more than 27 years of experience in the financial services and real estate lending industries, including extensive experience in commercial and residential lending, structured finance and capital markets.
Our access to 20 years of proprietary data allows us to perform analytics that inform our lending decisions efficiently and effectively, which we believe is a strong competitive advantage. 2 Large In-Place Portfolio with Attractive, Long-Term Financing We believe our in-place portfolio provides a significant and stable income stream for us to invest in future earnings growth.
Our access to 21 years of proprietary data allows us to perform analytics that inform our lending decisions efficiently and effectively, which we believe is a strong competitive advantage. Large In-Place Portfolio with Attractive, Long-Term Financing We believe our in-place portfolio provides a significant and stable income stream for us to invest in future earnings growth.
All our securitizations are issued as private placements pursuant to Rule 144A under the Securities Act and utilize a REMIC structure except for the 2022 MC1 and 2023-RTL1 transactions which were issued as bonds treated as debt for tax purposes. The REMIC transactions can create significant U.S. Generally Accepted Accounting Principles (“GAAP”) versus tax differences. The U.S.
All our securitizations are issued as private placements pursuant to Rule 144A under the Securities Act and utilize a REMIC structure except for the 2025 MC1 and 2025-RTL1 transactions which were issued as bonds treated as debt for tax purposes. The REMIC transactions can create significant U.S. Generally Accepted Accounting Principles (“GAAP”) versus tax differences. The U.S.
Shares of our common stock trade on the New York Stock Exchange under the symbol “VEL.” Our corporate office is located at 2945 Townsgate Road, Suite 110, Westlake Village, California 91361, and the telephone number of our office is (818) 532-3700. Our internet address is www.velfinance.com.
Shares of our common stock trade on the New York Stock Exchange and NYSE Texas, Inc. under the symbol “VEL.” Our corporate office is located at 2945 Townsgate Road, Suite 110, Westlake Village, California 91361, and the telephone number of our office is (818) 532-3700. Our internet address is www.velfinance.com.
As of December 31, 2024, substantially all our employees have been able, and continue, to work remotely. We and our employees are also committed to improving the communities in which we work and live.
As of December 31, 2025, substantially all our employees have been able and continue to work remotely. We and our employees are also committed to improving the communities in which we work and live.
Our Portfolio Loans Held for Investment Our typical investor real estate loan is secured by a first lien on the underlying property with the added protection of a personal guarantee and, based on the loans in our portfolio as of December 31, 2024, has an average balance of approximately $391 thousand.
Our Portfolio Loans Held for Investment Our typical investor real estate loan is secured by a first lien on the underlying property with the added protection of a personal guarantee and, based on the loans in our portfolio as of December 31, 2025, has an average balance of approximately $390 thousand.
While we have not adopted any diversity quotas, 62% of our employees are men and 38% are women. We are committed to the health, safety, and wellness of our employees, through implementing precautionary policies and significant operational changes to protect and support our employees, including remote work.
While we have not adopted any diversity quotas, 63% of our employees are men and 37% are women. We are committed to the health, safety, and wellness of our employees, through implementing precautionary policies and significant operational changes to protect and support our employees, including remote work.
Century is a consolidated subsidiary of the Company as of completion of the acquisition. In addition, as a servicer of Ginnie Mae loans, Century is required to maintain a minimum net worth; and was in compliance with this requirement as of December 31, 2024.
Century is a consolidated subsidiary of the Company as of completion of the acquisition. In addition, as a 1 servicer of Ginnie Mae loans, Century is required to maintain a minimum net worth, and is in compliance with this requirement as of December 31, 2025.
These loans comprised 85.2% of our loan originations during the year ended December 31, 2024. This product is used by borrowers to finance stabilized long-term real estate investments. We believe this product has strong receptivity in our market, as evidenced by our success in growing loan originations over time.
These loans comprised 87.9% of our loan originations during the year ended December 31, 2025. This product is used by borrowers to finance stabilized long-term real estate investments. We believe this product has strong receptivity in our market, as evidenced by our success in growing loan originations over time.
For example, in 2013, in response to the increased demand for rental properties, we moved aggressively into the market for 1-4 unit residential rental loans, which comprised 52.5% of our held for investment loan portfolio as of December 31, 2024.
For example, in 2013, in response to the increased demand for rental properties, we moved aggressively into the market for 1-4 unit residential rental loans, which comprised 48.1% of our held for investment loan portfolio as of December 31, 2025.
There is significant opportunity for us to further penetrate the approximately 3,770 mortgage brokers with whom we have done business over the last five years. Approximately 89% of loan originators originated five or fewer loans with us during the year ended December 31, 2024.
There is significant opportunity for us to further penetrate the approximately 3,789 mortgage brokers with whom we have done business over the last five years. Approximately 80% of loan originators originated five or fewer loans with us during the year ended December 31, 2025.
During the years ended December 31, 2024 and 2023, we originated 4,532 and 2,955 loans to be held for investment totaling $1.8 billion and $1.1 billion, respectively. As of December 31, 2024, 91.4% of our loans held for investment, as measured by UPB, were fully-amortizing over 30 years.
During the years ended December 31, 2025 and 2024, we originated 6,636 and 4,532 loans to be held for investment totaling $2.7 billion and $1.8 billion, respectively. As of December 31, 2025, 91.4% of our loans held for investment, as measured by UPB, were fully-amortizing over 30 years.
We have been originating and acquiring loans in our core market since our inception in 2004, making us a recognizable brand with a proven ability to execute. Additionally, we have successfully executed 37 securitizations of our investor real estate loans, issuing $8.0 billion in principal amount of securities between 2011 and the year ended December 31, 2024.
We have been originating and acquiring loans in our core market since our inception in 2004, making us a recognizable brand with a proven ability to execute. Additionally, we have successfully executed 46 securitizations of our investor real estate loans, issuing $10.6 billion in principal amount of securities between 2011 and the year ended December 31, 2025.
We are the sole beneficial interest holder of each of the trusts, through our wholly-owned subsidiaries. Proceeds from the issuance of the securities are then used to pay down the balances on our warehouse facilities. As of December 31, 2024, we had successfully executed 37 securitizations of our investor real estate loans, issuing $8.0 billion in principal amount of securities.
We are the sole beneficial interest holder of each of the trusts, through our wholly-owned subsidiaries. Proceeds from the issuance of the securities are then used to pay down the balances on our warehouse facilities. As of December 31, 2025, we had successfully executed 46 securitizations of our investor real estate loans, issuing $10.6 billion in principal amount of securities.
We believe that represents a small portion of the mortgage originators in the United States, which consisted of approximately 848,067 state-licensed mortgage originators as of September 30, 2024, according to the Nationwide Multistate Licensing System.
We believe that represents a small portion of the mortgage originators in the United States, which consisted of approximately 904,145 state-licensed mortgage originators as of September 30, 2025, according to the Nationwide Multistate Licensing System.
Market Uncertainties Our operational and financial performance will depend on certain market developments, including the actions of the Federal Reserve, the ongoing Russia/Ukraine war and conflicts in the Middle East, a possible global recession, heightened stress in the real estate and corporate debt markets, macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance.
Market Uncertainties Our operational and financial performance will depend on certain market developments, including the impact of tariffs, the actions of the Federal Reserve, the ongoing Russia/Ukraine war, conflicts in the Middle East, the recent U.S. 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.
As of December 31, 2024, our portfolio of loans held for investment totaled $5.1 billion of unpaid principal balance, or UPB, on properties in 45 states and the District of Columbia.
As of December 31, 2025, our portfolio of loans held for investment totaled $6.5 billion of unpaid principal balance, or UPB, on properties in 48 states and the District of Columbia.
The 2022 Term Loan bears interest at a fixed rate of 7.125% and matures on March 15, 2027. In August 2023, we completed our first securitization collateralized by our short-term loan product with $81.6 million in securities issued. In February 2024, we entered into a five-year $75.0 million syndicated corporate debt agreement (“the 2024 Term Loan”).
In August 2023, we completed our first securitization collateralized by our short-term loan product with $81.6 million in securities issued. In February 2024, we entered into a five-year $75.0 million syndicated corporate debt agreement (“the 2024 Term Loan”). The 2024 Term Loan bears interest at 9.875% and matures on February 15, 2029.
We have a keen understanding of this securitization market, including complicated structural issues, investor expectations and rating agency requirements. We executed our thirty-second through thirty-seventh securitizations in 2024.
We have a keen understanding of this securitization market, including complicated structural issues, investor expectations and rating agency requirements. We executed our thirty-eighth through forty-sixth securitizations in 2025.
Of the 12,932 loans held for investment as of December 31, 2024, 99.5% of the portfolio, as measured by UPB, was attributable to our loan origination business, while the remaining 0.5% of the portfolio, or 68 loans, totaling $35.4 million in UPB, was related to acquisitions.
Of the 16,652 loans held for investment as of December 31, 2025, 99.7% of the portfolio, as measured by UPB, was attributable to our loan origination business, while the remaining 0.3% of the portfolio, or 51 loans, totaling $27.3 million in UPB, was related to acquisitions.
Additionally, as of December 31, 2024, borrowers personally guaranteed 100.0% of the loans in our held for investment portfolio and had a weighted average credit score at origination of 704, excluding the 1.3% of loans for which a credit score is not available.
Additionally, as of December 31, 2025, borrowers personally guaranteed 100% of the loans in our held for investment portfolio and had a weighted average credit score at origination of 700, excluding the 1.3% of loans for which a credit score is not available. 4 The following charts illustrate the composition of our loans held for investment as of December 31, 2025: (*) Percentages may not sum to 100% due to rounding.
Our failure to maintain or obtain licenses may restrict our investment options and could harm our business. Human Capital Resources As of December 31, 2024, we had a total of 309 employees, an increase of 22% from the prior year . None of our employees are represented by a labor union.
Our failure to maintain or obtain licenses may restrict our investment options and could harm our business. Human Capital Resources As of December 31, 2025, we had a total of 371 employees, an increase of 20% from the prior year . The increase in our employees was a result of growing the business.
Century is a licensed Government National Mortgage Association (“Ginnie Mae” or “GNMA”) issuer/servicer that provides government-insured Federal Housing Administration (“FHA”) mortgage financing for multifamily housing, senior housing and long-term care/assisted living facilities.
On December 28, 2021, the Company acquired an 80% ownership interest in Century Health & Housing Capital, LLC (“Century”) . Century is a licensed Government National Mortgage Association (“Ginnie Mae” or “GNMA”) issuer/servicer that provides government-insured Federal Housing Administration (“FHA”) mortgage financing for multifamily housing, senior housing and long-term care/assisted living facilities.
(2) Represents LTV at origination for population of loans held for investment as of December 31, 2024. In instances where LTV at origination is not available for an acquired loan, the LTV reflects our best estimate of value at time of acquisition. (3) Approximately 2% of our loans held for investment have an LTV greater than 75%.
(1) Portfolio stratifications based on unpaid principal balance for loans held for investment as of December 31, 2025. (2) Represents LTV at origination for population of loans held for investment as of December 31, 2025. In instances where LTV at origination is not available for an acquired loan, the LTV reflects our best estimate of value at time of acquisition.
Our In-House Asset Management Results in Successful Loss Mitigation Direct management of individual loans is critical to avoiding or minimizing credit losses and we work with our third-party primary servicers with whom we have developed strong relationships to emphasize disciplined loan monitoring and early contact with delinquent borrowers to resolve delinquencies.
We generated $210.4 million in portfolio related net interest income for the year ended December 31, 2025, representing a 3.61% net interest margin during the year. 2 Our In-House Asset Management Results in Successful Loss Mitigation Direct management of individual loans is critical to avoiding or minimizing credit losses and we work with our third-party primary servicers with whom we have developed strong relationships to emphasize disciplined loan monitoring and early contact with delinquent borrowers to resolve delinquencies.
The loans are mainly financed with long-term fixed-rate debt, resulting in a spread that could increase over time, but not decrease. As a result, our in-place portfolio spread generally benefits from rising interest rates. We generated $159.6 million in portfolio related net interest income for the year ended December 31, 2024, representing a 3.56% net interest margin during the year.
The loans are mainly financed with long-term fixed-rate debt, resulting in a spread that could increase over time, but not decrease. As a result, our in-place portfolio spread generally benefits from rising interest rates.
The 2024 Term Loan bears interest at 9.875% and matures on February 15, 2029. Depending on market conditions, we may increase leverage on our investments with an amount of debt we deem prudent, subject to applicable risk retention rules.
Depending on market conditions, we may increase leverage on our investments with an amount of debt we deem prudent, subject to applicable risk retention rules.
Census Bureau, the U.S. home rentership rate (the inverse of the home ownership rate) has averaged approximately 34%. According to an estimate published by Redfin in August 2024, the value of the U.S. residential housing sector is over $49 trillion. Ownership of residential properties for rent has historically been concentrated among smaller investors.
Census Bureau, the U.S. home rentership rate (the inverse of the home ownership rate) has averaged approximately 34.3%. According to a press release by Zillow on Sep 8, 2025, the U.S. housing market is worth a record $55.1 trillion. Ownership of residential properties for rent has historically been concentrated among smaller investors.
We believe that fully-amortizing loans face a lower risk of default than balloon loans, as the final payment due under the balloon loan may require the borrower to refinance or sell the property. 4 We target investor real estate loans with loan-to-value ratios, or LTVs, between 60% and 75% at origination as we believe that borrower equity of 25% to 40% provides significant protection against credit losses.
We believe that fully-amortizing loans face a lower risk of default than balloon loans, as the final payment due under the balloon loan may require the borrower to refinance or sell the property.
On January 22, 2020, we completed the initial public offering (“IPO”) of our common stock, par value $0.01 per share (our “common stock”). Shares of our common stock trade on the New York Stock Exchange under the symbol “VEL.” 1 On December 28, 2021, the Company acquired an 80% ownership interest in Century Health & Housing Capital, LLC (“Century”) .
On January 22, 2020, we completed the initial public offering (“IPO”) of our common stock, par value $0.01 per share (our “common stock”). Shares of our common stock trade on the New York Stock Exchange under the symbol “VEL.” The Company's stock also trades on the NYSE Texas, Inc. under the same symbol “VEL” starting August 2025.
The increase in our employees was a result of growing the business. A driving force in our ability to generate revenue comes from the work of our Account Executives, or AEs. Our AEs generate business for us through their relationships with third-party brokers. Our ability to retain and attract AEs is essential to the growth of our business.
Full-time employees were 364 or 98% of our workforce as of December 31, 2025 . None of our employees are represented by a labor union. A driving force in our ability to generate revenue comes from the work of our Account Executives, or AEs. Our AEs generate business for us through their relationships with third-party brokers.
A significant number of our employees are AEs, representing 30% of our workforce at year-end.
Our ability to retain and attract AEs is essential to the growth of our business. A significant number of our employees are AEs, representing 29% of our workforce at year-end.
We typically do not lend on any property located in a city with a population less than 25,000 and outside a 25-mile radius of a city with a population in excess of 100,000. We generally prefer to lend in larger metropolitan statistical areas. 5 Our Financing Strategy We typically finance our new loan originations using warehouse facilities.
We generally prefer to lend in larger metropolitan statistical areas. 5 Our Financing Strategy We typically finance our new loan originations using warehouse facilities.
Removed
According to data published by the Urban Institute in April and September 2023, an estimated 95% of investors own properties with one to four units and an estimated 98% of investors own 10 or fewer units, while institutional ownership comprises less than 4% of the market.
Added
According to data published by CNBC on Oct 7, 2025, more than 90% of small investors own 10 properties or less, while the largest investors, those with 1,000 or more properties, comprise 2% of all investor-owned homes.
Removed
We believe this presents a compelling opportunity for us to capture incremental volume from our existing broker network.
Added
Despite the adverse macroeconomic conditions caused by inflation and rising interest rates, we funded 6,336 loans sourced by 1,777 different mortgage brokers during the year ended December 31, 2025.
Removed
As of December 31, 2024, our loans held for investment had a weighted average LTV at origination of 66.6%.
Added
We target investor real estate loans with loan-to-value ratios, or LTVs, between 60% and 75% at origination as we believe that borrower equity of 25% to 40% provides significant protection against credit losses. As of December 31, 2025, our loans held for investment had a weighted average LTV at origination of 65.2%.
Removed
The following charts illustrate the composition of our loans held for investment as of December 31, 2024: (*) Percentages may not sum to 100% due to rounding. (1) Portfolio stratifications based on unpaid principal balance for loans held for investment as of December 31, 2024.
Added
(3) Approximately 2% of our loans held for investment have an LTV greater than 75%. We typically do not lend on any property located in a city with a population less than 25,000 and outside a 25-mile radius of a city with a population in excess of 100,000.
Added
The 2022 Term Loan had a fixed interest rate of 7.125% and a maturity date of March 15, 2027. The 2022 Term Loan was paid off on January 30, 2026 with proceeds from the issuance and sale of $500 million Senior Notes issued in January 2026.
Added
In January 2026, we entered into a five-year $500.0 million publicly rated syndicated corporate debt agreement (“the 2026 Term Notes”). The 2026 Term Notes bear interest at 9.375% and is guaranteed by us on an unsecured basis.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Information Officer (the “CIO”) is primarily responsible for this cybersecurity component, reporting directly to the Chief Executive Officer, who periodically reports to our Board of Directors. To date, risks from cybersecurity threats or incidents have not materially affected our company.
Biggest changeOur interim Chief Information Officer (the “CIO”) is primarily responsible for this cybersecurity component, reporting directly to the Chief Executive Officer, who periodically reports to our Board of Directors. Our interim CIO has over 10 years of prior work experience in cybersecurity. To date, risks from cybersecurity threats or incidents have not materially affected us.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough occasional adverse decisions or settlements may occur, our management does not believe that the final disposition of any currently pending or threatened matter will have a material adverse effect on our business, financial position, results of operations or cash flows. Item 4. Mine Saf ety Disclosures. Not applicable. 8 PART II
Biggest changeAlthough occasional adverse decisions or settlements may occur, our management does not believe that the final disposition of any currently pending or threatened matter will have a material adverse effect on our business, financial position, results of operations or cash flows. Item 4. Mine Saf ety Disclosures. Not applicable. 33 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on The New York Stock Exchange under the symbol VEL. As of March 1, 2025, there were approximately 3,056 beneficial holders of our common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the New York Stock Exchange and NYSE Texas, Inc. under the symbol “VEL.” As of February 27, 2026, there were approximately 8,250 beneficial holders of our common stock.
Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered equity securities sales nor were there any repurchases of common stock, which have not been previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K during the period covered by this report. Item 6. [Reserved] 9
Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered equity securities sales nor were there any repurchases of common stock, which have not been previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K during the period covered by this report. Item 6. [Reserved] 34

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe table below includes resolutions of our long-term nonperforming loans and REOs during the periods indicated: Long-Term Loans December 31, 2024 December 31, 2023 December 31, 2022 UPB Gain / (Loss) UPB Gain / (Loss) UPB Gain / (Loss) ($ in thousands) Resolved — paid in full $ 98,635 $ 4,366 $ 67,769 $ 3,181 $ 50,441 $ 5,073 Resolved — paid current 117,572 1,101 101,224 925 46,062 449 Resolved — REO sold 18,001 3,555 13,335 57 10,204 1,602 Total resolutions $ 234,208 $ 9,022 $ 182,328 $ 4,163 $ 106,707 $ 7,124 Recovery rate on resolved nonperforming UPB 103.9 % 102.3 % 106.7 % Short-term loans, or loans with a maturity of two years or less, do not require prepayment fees and usually result in a lower gain when paid in full, as compared to long-term loans.
Biggest changeTotal nonperforming loans recovered include default interest, prepayment penalty, and contractual regular interest received, and any servicing advance recovered or written off: Twelve Months Ended December 31, 2025 Long-Term Nonperforming Loans UPB Default Interest Prepayment Penalty Net Gain Regular Accrued Interest Servicing Advances Write-Offs Total Recovered ($ in thousands) Resolved — loans paid off $ 126,215 $ 3,949 $ 2,643 $ 6,592 $ 11,464 $ (1,381 ) $ 16,675 Resolved — loans paid current 156,067 1,571 13 1,584 8,138 (100 ) 9,622 Total resolutions $ 282,282 $ 5,520 $ 2,656 $ 8,176 $ 19,602 $ (1,481 ) $ 26,297 Recovery rate 102.9 % 109.3 % 45 Twelve Months Ended December 31, 2024 Long-Term Nonperforming Loans UPB Default Interest Prepayment Penalty Net Gain Regular Accrued Interest Servicing Advances Recoveries (Write-Offs) Total Recovered ($ in thousands) Resolved — loans paid off $ 98,635 $ 2,136 $ 2,230 $ 4,366 $ 9,396 $ (964 ) $ 12,798 Resolved — loans paid current 117,572 1,073 28 1,101 4,880 7 5,988 Total resolutions $ 216,207 $ 3,209 $ 2,258 $ 5,467 $ 14,276 $ (957 ) $ 18,786 Recovery rate 102.5 % 108.7 % Twelve Months Ended December 31, 2023 Long-Term Nonperforming Loans UPB Default Interest Prepayment Penalty Net Gain Regular Accrued Interest Servicing Advances Recoveries Total Recovered ($ in thousands) Resolved — loans paid off $ 67,769 $ 1,635 $ 1,546 $ 3,181 $ 7,301 $ 71 $ 10,553 Resolved — loans paid current 101,224 925 — 925 4,026 154 5,105 Total resolutions $ 168,993 $ 2,560 $ 1,546 $ 4,106 $ 11,327 $ 225 $ 15,658 Recovery rate 102.4 % 109.3 % Short-term loans, or loans with a maturity of two years or less, do not require prepayment fees and usually result in a lower gain when paid in full, as compared to long-term loans.
Compensation and employee benefits increased to $69.6 million for the year ended December 31, 2024 from $48.3 million for year ended December 31, 2023. The increase was mainly driven by higher commissions expense in 2024 as our loan originations increased. Origination Expenses .
Compensation and employee benefits increased to $69.6 million for the year ended December 31, 2024 from $48.3 million for the year ended December 31, 2023. The increase was mainly driven by higher commissions expense in 2024 as our loan originations increased. Origination Expenses .
Financing Activities For the year ended December 31, 2024, our net cash provided by financing activities of $1.0 billion consisted mainly of $1.9 billion in borrowings from our warehouse and repurchase facilities and $1.6 billion in securitized debt issued.
For the year ended December 31, 2024, our net cash provided by financing activities of $1.0 billion consisted mainly of $1.9 billion in borrowings from our warehouse and repurchase facilities and $1.6 billion in securitized debt issued.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income (Subtopic 220-40) Expense Disaggregation Disclosures”, which requires specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization.
Expense Disaggregation In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income (Subtopic 220-40) Expense Disaggregation Disclosures”, which requires specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization.
However, some of our competitors may be better positioned to market their services and financing programs because of their ability to offer more favorable rates, terms, and other services. Availability and Cost of Funding Our primary funding sources have historically included cash from operations, warehouse facilities, term securitized debt, corporate debt, and equity.
However, some of our competitors may be better positioned to market their services and financing programs because of their ability to offer more favorable rates, terms, and other services. Availability and Cost of Funding Our primary funding sources have historically included cash from operations, warehouse facilities, term securitized debt, unsecured debt, corporate debt, and equity.
Unrealized gain on fair value securitized debt increased by $11.6 million to $2.6 million for the year ended December 31, 2024 compared to an unrealized loss of $9.0 million for the year ended December 31, 2023. The increase in unrealized gain was primarily attributable to improved securitization execution. 28 Unrealized Gain/Loss on Mortgage Servicing Rights .
Unrealized gain on fair value securitized debt increased by $11.6 million to $2.6 million for the year ended December 31, 2024 compared to an unrealized loss of $9.0 million for the year ended December 31, 2023. The increase in unrealized gain was primarily attributable to improved securitization execution. Unrealized Gain/Loss on Mortgage Servicing Rights .
Portfolio related interest expense, which consists of interest incurred on our warehouse facilities and securitized debt, increased by $60.7 million, or 32.6%, to $247.2 million for the year ended December 31, 2024, from $186.5 million for the year ended December 31, 2023.
Portfolio related interest expense consists of interest incurred on our warehouse facilities and securitized debt, increased by $60.7 million, or 32.6%, to $247.2 million for the year ended December 31, 2024, from $186.5 million for the year ended December 31, 2023.
This information should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year.
This information should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report. Operating results for interim periods are not necessarily indicative of the results that may be expected for a full year.
We are the sole beneficial interest holder of the applicable trusts, which are variable interest entities included in our consolidated financial statements. The transactions are accounted for as a secured borrowings under U.S. GAAP.
We are the sole beneficial interest holder of the applicable trusts, which are variable interest entities included in our consolidated financial statements. The transactions are accounted for as secured borrowings under U.S. GAAP.
Nonperforming loans are considered collateral dependent. Using the practical expedient, the fair value of the underlying collateral, less estimated selling costs, is compared to the carrying value of the loan in the determination of a credit loss.
Nonperforming loans (“NPLs”) are considered collateral dependent. Using the practical expedient, the fair value of the underlying collateral, less estimated selling costs, is compared to the carrying value of the loan in the determination of a credit loss.
The gains or losses on forward starting interest rate derivative instruments that are designated and qualify as cash flow hedges are reported as a component of accumulated other comprehensive income. Fair Value Option (“FVO”) Accounting We made an election to apply FVO accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022.
The gains or losses on these interest rate derivative instruments that are designated and qualify as cash flow hedges are reported as a component of accumulated other comprehensive income. Fair Value Option (“FVO”) Accounting We made an election to apply FVO accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022.
Key drivers of interest expense include the debt amounts outstanding, interest rates, other comprehensive income loss from terminated derivative instruments, and the mix of our securitized debt and warehouse liabilities.
Key drivers of interest expense include the debt amounts outstanding, interest rates, other comprehensive income or loss from terminated derivative instruments, and the mix of our securitized debt and warehouse liabilities.
Macroeconomic conditions can, however, impact credit trends in our core market and have an adverse impact on financial results. 15 Macroeconomic Conditions The investor real estate loan market may be impacted by a wide range of macroeconomic factors such as interest rates, residential and commercial real estate prices, home ownership and unemployment rates, and availability of credit, among others.
Macroeconomic conditions can, however, impact credit trends in our core market and have an adverse impact on financial results. 40 Macroeconomic Conditions The investor real estate loan market may be impacted by a wide range of macroeconomic factors such as interest rates, residential and commercial real estate prices, home ownership and unemployment rates, and availability of credit, among others.
If we fail to meet any of the covenants, or otherwise default under the facilities, the lenders have the right to terminate their facility and require immediate repayment, which may require us to sell our loans at less than optimal terms. As of December 31, 2024, we were in compliance with these covenants.
If we fail to meet any of the covenants, or otherwise default under the facilities, the lenders have the right to terminate their facility and require immediate repayment, which may require us to sell our loans at less than optimal terms. As of December 31, 2025, we were in compliance with these covenants.
Our critical accounting estimates are summarized below. 11 Allowance for Credit Losses For our loans held for investment where we have not elected FVO accounting, we calculate an allowance for credit losses. Under the current expected credit loss (“CECL”) methodology, the allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.
Our critical accounting estimates are summarized below. 36 Allowance for Credit Losses For our loans held for investment where we have not elected FVO accounting, we calculate an allowance for credit losses. Under the current expected credit loss (“CECL”) methodology, the allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.
We use a discounted cash flow methodology, that forecasts contractual cash flows, adjusting for projected prepayments and defaults, and discounting these cash flows back to a present value, using a reasonable discount rate. 13 How We Assess Our Business Performance Net income is the primary metric by which we assess our business performance.
We use a discounted cash flow methodology, that forecasts contractual cash flows, adjusting for projected prepayments and defaults, and discounting these cash flows back to a present value, using a reasonable discount rate. 38 How We Assess Our Business Performance Net income is the primary metric by which we assess our business performance.
Costs related to issuance of our securitized debt. 25 Loan Servicing. Costs related to our third-party servicers. Professional Fees. Costs related to professional services, such as external audits, legal fees, tax, compliance and outside consultants. Rent and Occupancy. Costs related to occupying our locations, including rent, maintenance and property taxes. Real Estate Owned, Net.
Costs related to issuance of our securitized debt. Loan Servicing. Costs related to our third-party servicers. 51 Professional Fees. Costs related to professional services, such as external audits, legal fees, tax, compliance and outside consultants. Rent and Occupancy. Costs related to occupying our locations, including rent, maintenance and property taxes. Real Estate Owned, Net.
The warrants are exercisable at any time and from time to time, in whole or in part, by the holders until April 7, 2025 at an exercise price of $2.96 per share of common stock with respect to 2,008,750 of warrants, and at an exercise price of $4.94 per share of common stock with respect to 1,004,374 of warrants.
The warrants were exercisable at any time and from time to time, in whole or in part, by the holders until April 7, 2025 at an exercise price of $2.96 per share of common stock with respect to 2,008,750 of warrants, and at an exercise price of $4.94 per share of common stock with respect to 1,004,374 of warrants.
Other operating expenses increased to $9.6 million for the year ended December 31, 2024 from $8.5 million for the year ended December 31, 2023, mainly due to increases in marketing and data processing expenses. Income Tax Expense. Income tax expense was $27.9 million and $18.8 million for the years ended December 31, 2024 and 2023, respectively.
Other Operating Expenses . Other operating expenses increased to $9.6 million for the year ended December 31, 2024 from $8.5 million for the year ended December 31, 2023 mainly due to decreases in marketing and data processing expenses. Income Tax Expense. Income tax expense was $27.9 million and $18.8 million for the years ended December 31, 2024 and 2023, respectively.
The prepayment penalty terms differ between the short-term and long-term loans, and we have developed a CPR curve for our short-term loans (two-year or less) and one for our long-term loans (30-year). Data from 2012-2024 is used to develop prepayment rates for our long-term loans.
The prepayment penalty terms differ between the short-term and long-term loans, and we have developed a CPR curve for our short-term loans (two-year or less) and one for our long-term loans (30-year). Data from 2012-2025 is used to develop prepayment rates for our long-term loans.
The increases in total company net interest margin from the years ended December 31, 2023 and 2022 were primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of funds.
The increases in total company net interest margin from the years ended December 31, 2024 and 2023 were primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of total company funds.
We do not record charge-offs on loans carried at fair value and loans held for sale.
We do not record charge-offs on loans carried at estimated fair value and loans held for sale.
The following table presents information regarding the portfolio related interest expense and distinguishes between the change in interest expense attributable to change in the average outstanding debt balance (volume) and change in cost of funds (rate) for the years ended December 31, 2024 and 2023.
The following table presents information regarding portfolio related interest expense and distinguishes between the change in interest expense attributable to change in the average outstanding debt balance (volume) and change in cost of funds (rate) for the years ended December 31, 2025 and 2024.
The fair value option securitized debt is presented as a separate line item in the Consolidated Balance Sheets. 10 Income Taxes Our REMIC transactions can create significant U.S. GAAP versus tax differences. The U.S.
The fair value option securitized debt is presented as a separate line item in the Consolidated Balance Sheets. 35 Income Taxes Our REMIC transactions can create significant U.S. GAAP versus tax differences. The U.S.
April 2020 Preferred Stocks and Warrants On April 5, 2020, we sold 45,000 shares of Series A Convertible Preferred Stock and Warrants to purchase 3,013,125 shares of our common stock in a private placement to two of our largest stockholders.
April 2020 Preferred Stocks and Warrants On April 7, 2020, we sold 45,000 shares of Series A Convertible Preferred Stock and Warrants to purchase 3,013,125 shares of our common stock in a private placement to two of our largest stockholders.
We use cash to originate and acquire investor real estate loans, repay principal and interest on our borrowings, fund our operations and meet other general business needs. Warehouse Facilities As of December 31, 2024, we had five non-mark-to-market warehouse facilities and one modified mark-to-market warehouse facility to support our loan origination and acquisition activities.
We use cash to originate and acquire investor real estate loans, repay principal and interest on our borrowings, fund our operations and meet other general business needs. Warehouse Facilities As of December 31, 2025, we had five non-mark-to-market warehouse facilities, one modified mark-to-market warehouse facility and one mark-to-market NPL warehouse facility to support our loan origination and acquisition activities.
The decrease in provision for credit losses was primarily attributable to the decrease in our loans held at amortized cost resulting from loan paydowns and payoffs. Other Operating Income The table below presents the various components of other operating income for the years ended December 31, 2024 and 2023.
The decrease in provision for credit losses was primarily attributable to the decrease in our loans held at amortized cost resulting from loan paydowns and payoffs. 57 Other Operating Income The table below presents the various components of other operating income for the year ended December 31, 2024 and 2023.
The measures presented here reflects the monthly average of all portfolio-related and total company debt, as measured by outstanding principal balance, over the specified time period.
The measures presented here reflect the monthly average of all portfolio-related and total company debt, as measured by outstanding principal balance, over the specified time period.
REO assets are initially recorded at fair value, less estimated costs to sell on the date of foreclosure. Adjustments that reduce the carrying value of the loan to the fair value of the real estate at the time of foreclosure are recognized as charge-offs in the allowance for credit losses.
REO assets are initially recorded at fair value, less estimated costs to sell on the date of foreclosure. Adjustments that reduce the carrying value of the loan to the fair value of the real estate at the time of foreclosure are recognized as charge-offs in the allowance for credit losses for loan carried at amortized cost.
The increase in portfolio related interest expense in 2023 was primarily attributable to a higher loan portfolio being financed and increased interest rates. 30 The following table presents information regarding the portfolio related interest expense and distinguishes between the change in interest expense attributable to changes in the average outstanding debt balance (volume) and the change in cost of funds (rate) for the years ended December 31, 2023 and 2022.
The increase in portfolio related interest expense in 2024 was primarily attributable to a higher loan portfolio being financed and increased interest rates. 56 The following table presents information regarding the portfolio related interest expense and distinguishes between the change in interest expense attributable to changes in the average outstanding debt balance (volume) and the change in cost of funds (rate) for the years ended December 31, 2024 and 2023.
We believe our fully amortizing loan structures and avoidance of large balloon payments for long term loans, coupled with meaningful borrower equity in properties, limit the probability of losses, and that our proven in-house asset management capability allows us to minimize potential losses in situations where there is insufficient equity in the property.
We believe our fully amortizing loan structures and avoidance of large balloon payments, coupled with meaningful borrower equity in properties, limit the probability of losses and that our proven in-house asset management capability allows us to minimize potential losses in situations where there is insufficient equity in the property.
Net Interest Income — Portfolio Related Portfolio related net interest income represents the difference between interest income and portfolio related interest expense. 24 Interest Expense — Corporate Debt Interest expense on corporate debt primarily consists of interest expense paid with respect to the 2022 Term Loan and the 2024 Term Loan, as reflected in “Secured financing, net” on our Consolidated Balance Sheets, and the related amortization of deferred debt issuance costs.
Net Interest Income — Portfolio Related Portfolio related net interest income represents the difference between interest income and portfolio related interest expense. 50 Interest Expense — Corporate Debt Interest expense on corporate debt primarily consists of interest expense paid with respect to the 2022 Term Loan and the 2024 Term Loan (“Corporate Debt”), as reflected in “Secured financing, net” on our Consolidated Balance Sheets, and the related amortization of deferred debt issuance costs.
The increase in portfolio related interest expense in 2024 was primarily attributable to a higher loan portfolio being financed and increased interest rates.
The increase in portfolio related interest expense in 2025 was primarily attributable to a higher loan portfolio being financed and increased interest rates.
The increase in total nonperforming loans as of December 31, 2024 compared to December 31, 2023 and 2022 was due to an increase in the size of our portfolio and management’s decision to move loans into foreclosure early in the delinquency process. Resolutions of Nonperforming Loans Historically, most loans that become nonperforming resolve prior to converting to REO.
The increase in total nonperforming loans as of December 31, 2025 compared to December 31, 2024 and 2023 was due to an increase in the size of our portfolio and management’s decision to move loans into foreclosure early in the delinquency process. Resolution of Nonperforming Loans Historically, most loans that become nonperforming resolve prior to converting to REO.
Cash and Cash Equivalents Our total liquidity plus available warehouse capacity was $530.9 million as of December 31, 2024 comprised of $435.0 million of available warehouse capacity, $49.9 million in cash, and $46.0 million of available borrowings for unencumbered loans.
Our total liquidity plus available warehouse capacity was $530.9 million as of December 31, 2024, comprised of $435.0 million of available warehouse capacity, $49.9 million in cash, and $46.0 million of available borrowings for unencumbered loan.
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 December 31, 2024, has an average balance of approximately $391 thousand.
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 December 31, 2025, has an average balance of approximately $390 thousand.
For the year ended December 31, 2024, our portfolio related net interest margin was 3.56%. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt, provision for credit losses and operating expenses.
For the year ended December 31, 2025, our portfolio related net interest margin was 3.61%. We generate profits to the extent that our portfolio related net interest income exceeds our interest expense on corporate debt, provision for credit losses and operating expenses.
Tables summarizing the investor real estate loans securitized, securities issued, securities retained by the Company at the time of the securitization, and as of December 31, 2024 and 2023, the stated maturity for each securitized debt, the outstanding bond balances, and the weighted average rate on the securities for the Trusts as of December 31, 2024 and 2023, are included in Item 15.
Tables summarizing the investor real estate loans securitized, securities issued, securities retained by the Company at the time of the securitization, and our accumulated interest as of December 31, 2025 and 2024, the stated maturity for each securitized debt, the outstanding bond balances, and the weighted average rate on the securities for the Trusts as of December 31, 2025 and 2024, are included in Item 15.
For the year ended December 31, 2024, the yield on our total portfolio was 9.06%. We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, corporate debt and equity. The securitized debt market is our primary source of long-term, non-recourse financing.
For the year ended December 31, 2025, the yield on our total portfolio was 9.45%. We fund our portfolio primarily through a combination of committed and uncommitted secured warehouse facilities, securitized debt, unsecured debt, corporate debt and equity. The securitized debt market is our primary source of long-term, non-recourse financing.
Our consolidated effective tax rate as a percentage of pre-tax income for 2024 was 29.0%, compared to 25.2% for 2023. The 2024 effective tax rate differed from the federal statutory rate of 21.0% principally because of state taxes.
Our consolidated effective tax rate as a percentage of pre-tax income for 2025 was 28.2%, compared to 29.0% for 2024. The 2025 effective tax rate differed from the federal statutory rate of 21.0% principally because of state taxes.
Investing Activities For the year ended December 31, 2024, our net cash used in investing activities of $1.0 billion consisted mainly of $1.8 billion in cash used to originate held for investment loans, offset by $723.0 million in cash received in payments on held for investment loans. 35 For the year ended December 31, 2023, our net cash used in investing activities of $584.7 million consisted mainly of $1.1 billion in cash used to originate held for investment loans, offset by $459.7 million in cash received in payments on held for investment loans.
For the year ended December 31, 2024, our net cash used in investing activities of $1.0 billion consisted mainly of $1.8 billion in cash used to originate held for investment loans, offset by $723.0 million in cash received in payments on held for investment loans.
Our portfolio related cost of funds increased to 6.06% for the year ended December 31, 2024 from 5.58% and 4.64% for the years ended December 31, 2023 and 2022, respectively. The increases were driven by higher market interest rates.
Our portfolio related cost of funds increased to 6.24% for the year ended December 31, 2025 from 6.06% and 5.58% for the years ended December 31, 2024 and 2023, respectively. The increases were driven by higher market interest rates.
One of our core profitably measurements is our portfolio related net interest margin, which measures the difference between interest income earned on our loan portfolio and interest expense paid on our portfolio-related debt, relative to the amount of loans outstanding over the period. Our portfolio-related debt consists of our warehouse facilities and securitized debt and excludes our corporate debt.
Besides net income, another core profitably measurement 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.
The fair value option loans are presented as a separate line item in the Consolidated Balance Sheets. We do not record a CECL reserve on fair value option loans. The FVO accounting for our securitized debt is on a case-by-case basis effective January 1, 2023.
The fair value option loans are presented as a separate line item in the Consolidated Balance Sheets. We do not record an allowance for credit losses on fair value option loans. The FVO accounting for our securitized debt is on a case-by-case basis effective January 1, 2023.
As of December 31, 2024, our loan portfolio totaled $5.1 billion of UPB on properties in 45 states and the District of Columbia. The total portfolio had a weighted average loan-to-value ratio, or LTV at origination, of 66.6%, and was concentrated in 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, representing 52.5% of UPB.
As of December 31, 2025, our loan portfolio totaled $6.5 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 65.2%, and was concentrated in 1-4 unit residential rental loans, which we refer to as investor 1-4 loans, representing 48.1% of UPB.
Unrealized Gain (Loss) on Fair Value Loans. We have elected to apply the fair value option accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022. We have elected to account for certain purchased distressed loans at fair value using FASB ASC Topic 825, Financial Instruments (ASC 825).
We have elected to apply the fair value option accounting to all our originated mortgage loans on a go-forward basis beginning October 1, 2022. We have elected to account for certain purchased distressed loans at fair value using FASB ASC Topic 825, Financial Instruments (ASC 825). We regularly estimate the fair value of these loans.
The syndicated corporate debt agreement contains customary affirmative and negative covenants, including financial maintenance covenants and limitations on dividends by the borrower. As of December 31, 2024, we maintained warehouse facilities to finance our investor real estate loans and had approximately $350.0 million in outstanding borrowings with $435.0 million of available capacity under our warehouse and repurchase facilities.
The syndicated corporate debt agreement contains customary affirmative and negative covenants, including financial maintenance covenants and limitations on dividends by the borrower. As of December 31, 2025, we maintained warehouse facilities to finance our investor real estate loans and had approximately $310.4 million in outstanding borrowings with $624.6 million of available capacity under our warehouse and repurchase facilities.
Securitized Debt From May 2011 through December 2024, we have completed 37 transactions, issuing $8.0 billion in principal amount of securities to third parties. All borrower payments are segregated into remittance accounts at the primary servicer and remitted to the trustee of each trust monthly.
Securitized Debt From May 2011 through December 2025, we have completed 46 transactions, issuing $10.6 billion in principal amount of securities to third parties. All borrower payments are segregated into remittance accounts at the primary servicer and remitted to the trustee of each trust monthly.
Nonperforming loans were $539.4 million, or 10.7% of our held for investment loan portfolio as of December 31, 2024, compared to $394.6 million, or 9.7% as of December 31, 2023, and $292.8 million, or 8.3% of the loan portfolio as of December 31, 2022.
Nonperforming loans were $554.5 million, or 8.5% of our held for investment loan portfolio as of December 31, 2025, compared to $539.4 million, or 10.7% as of December 31, 2024, and $394.6 million, or 9.7% of the loan portfolio as of December 31, 2023.
Year Ended December 31, 2024 2023 2022 ($ in thousands) Income before income taxes (A) $ 96,391 $ 71,127 $ 44,552 Net income (B) 68,466 52,293 32,519 Monthly average balance: Stockholders’ / Members’ equity (C) 474,942 407,305 364,282 Pre-tax return on average equity (A)/(C) 20.3 % 17.5 % 12.2 % Return on average equity (B)/(C) 14.4 % 12.8 % 8.9 % Components of Results of Operations Interest Income We accrue interest on the UPB of our loans in accordance with the individual terms and conditions of each loan, discontinuing interest and reversing previously accrued interest once a loan becomes 90 days or more past due (nonaccrual status).
Year Ended December 31, 2025 2024 2023 ($ in thousands) Income before income taxes (A) $ 146,240 $ 96,391 $ 71,127 Net income (B) 104,983 68,466 52,293 Monthly average balance: Stockholders’ / Members’ equity (C) 599,586 474,942 407,305 Pre-tax return on average equity (A)/(C) 24.4 % 20.3 % 17.5 % Return on average equity (B)/(C) 17.5 % 14.4 % 12.8 % Components of Results of Operations Interest Income We accrue interest on the UPB of our loans in accordance with the individual terms and conditions of each loan, discontinuing interest and reversing previously accrued interest once a loan becomes 90 days or more past due (nonaccrual status).
The charge-offs ratio remained minimal at 0.07% for the years ended December 31, 2024 and 2023, and 0.02% for the year ended December 31, 2022. 23 Return on Average Equity Pre-tax return on average equity and return on average equity reflect income before income taxes, and net income including net income attributable to noncontrolling interest, respectively, as a percentage of the monthly average total stockholders’ equity including noncontrolling interest over the specified period.
The charge-offs ratio was 0.25% for the year ended December 31, 2025 and 0.07% for the years ended December 31, 2024 and 2023. 49 Return on Average Equity 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.
Other Operating Income Gain on Disposition of Loans. When we sell a loan held for sale, we record a gain or loss that reflects the difference between the proceeds received for the sale of the loan and its respective carrying value.
When we sell a loan held for sale, we record a gain or loss that reflects the difference between the proceeds received for the sale of the loan and its respective carrying value.
Borrowing under these facilities was $336.4 million with $554.2 million of available capacity under our warehouse and repurchase facilities as of December 31, 2023. Six warehouse facilities fund less than 100% and one warehouse facility funds at 100% of the principal balance of the mortgage loans we own, requiring us to use working capital to fund the remaining portion.
Borrowing under these facilities was $350.0 million with $435.0 million of available capacity under our warehouse and repurchase facilities as of December 31, 2024. 60 Six warehouse facilities fund less than 100% and one warehouse facility funds at 100% of the principal balance of the mortgage loans we own, requiring us to use working capital to fund the remaining portion.
To determine the loss rates using the open pool method, we start with our historical database of losses, segmenting the loans by loan purpose, product type and repayment period.
We use an open pool loss rate methodology to model expected credit losses. To determine the loss rates using the open pool method, we start with our historical database of losses, segmenting the loans by loan purpose, product type and repayment period.
The cash generated was offset by payments we made of $1.7 billion and $543.6 million on our warehouse and repurchase facilities and securitized debt issued, respectively.
The cash generated was offset by payments we made of $2.7 billion and $971.7 million on our warehouse and repurchase facilities and securitized debt, respectively.
For the year ended December 31, 2023, our net cash provided by financing activities of $535.8 million consisted mainly of $1.2 billion in borrowings from our warehouse and repurchase facilities and $1.0 billion in securitized debt issued.
Financing Activities For the year ended December 31, 2025, our net cash provided by financing activities of $1.7 billion consisted mainly of $2.7 billion in securitized debt issued and $2.6 billion in borrowings from our warehouse and repurchase facilities.
While we have been successful at managing these elements in the past, there are certain circumstances beyond our control, including the ongoing Russia/Ukraine war and conflicts in the Middle East, an expected recession, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance. 14 Origination Volume Portfolio related net interest income is the largest contributor to our net income.
While we have been successful at managing these elements in the past, there are certain circumstances beyond our control, including the ongoing Russia/Ukraine war and conflicts in the Middle East, the implementation of tariffs, the recent U.S. government shutdown, heightened stress in the real estate and corporate debt markets, an expected recession, and macroeconomic conditions and market fundamentals, which can all affect each of these factors and potentially impact our business performance. 39 Origination Volume Portfolio related net interest income is the largest contributor to our net income.
Concentrations – Loans Held for Investment As of December 31, 2024, our held for investment loan portfolio was concentrated in investor 1-4 loans, representing 52.5% of the UPB and mixed-use properties representing 11.1% of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio.
Concentrations – Loans Held for Investment As of December 31, 2025, our held for investment loan portfolio was concentrated in investor 1-4 loans, representing 48.1% of the UPB. Mixed-use properties and retail properties represented 10.9% and 10.7% , respectively, of the UPB. No other property type represented more than 10.0% of our held for investment loan portfolio.
The maturity of our warehouse facilities ranges from one to three years. The borrowings are collateralized primarily by performing loans. All warehouse facilities are based on SOFR, plus margins ranging from 1.60% to 4.50%. Borrowing under these facilities was $350.0 million with $435.0 million of available capacity under our warehouse and repurchase facilities as of December 31, 2024.
The maturity of our warehouse facilities ranges from one to three years. The borrowings are collateralized primarily by performing loans. All warehouse facilities are based on SOFR, plus margins ranging from 1.60% to 4.00%. Borrowing under these facilities was $310.4 million with $624.6 million of available capacity as of December 31, 2025.
We regularly estimate the fair value of these loans. Changes in fair value, subsequent to initial recognition of fair value loans are reported as “Unrealized gain (loss) on fair value loans”, a component of other operating income within the Consolidated Statements of Income. Unrealized Gain (Loss) on Mortgage Servicing Rights.
Changes in fair value, subsequent to initial recognition of fair value loans are reported as “Unrealized gain (loss) on fair value loans”, a component of other operating income within the Consolidated Statements of Income. Unrealized Gain (Loss) on Mortgage Servicing Rights. We have elected to record our mortgage servicing rights using the fair value measurement method.
The table below shows our actual charge-offs, gain on transfer of nonperforming loans to REO, net valuation adjustments on REO, and gain on sale of REO, for the periods indicated: Year Ended December 31, 2024 2023 2022 ($ in thousands) Average nonperforming loans for the period (1) $ 318,858 $ 328,105 $ 266,129 Charge-offs 1,768 2,039 521 Charge-offs / Average nonperforming loans for the period (1) 0.55 % 0.62 % 0.20 % Gain on REO: Gain on transfer to REO $ 8,704 $ 7,412 $ 3,408 REO valuations, net (6,121 ) (3,903 ) (364 ) Gain on sale of REO 4,275 568 2,939 Total gain on REO (2) $ 6,858 $ 4,077 $ 5,983 (1) Reflects the monthly average of nonperforming loans held for investment, excluding FVO loans, during the period.
The table below shows our actual charge-offs, gain on transfer of nonperforming loans to REO, net valuation adjustments on REO, and gain on sale of REO, for the periods indicated: Year Ended December 31, 2025 2024 2023 ($ in thousands) Average nonperforming loans for the period (1) $ 274,372 $ 318,858 $ 328,105 Charge-offs (3) 5,458 1,768 2,039 Charge-offs / Average nonperforming loans for the period (1) 1.99 % 0.55 % 0.62 % Gain (loss) on REO: Gain on transfer to REO $ 15,653 $ 8,704 $ 7,412 REO valuations, net (17,520 ) (6,121 ) (3,903 ) Gain on sale of REO 1,445 4,275 568 Total gain (loss) on REO (2) $ (422 ) $ 6,858 $ 4,077 (1) Reflects the monthly average of nonperforming loans held for investment, excluding FVO loans, during the period.
Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels, or term, as well as for changes in environmental conditions, such as unemployment rates, property values and changes in the competitive or regulatory environment. 12 We use an open pool loss rate methodology to model expected credit losses.
Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels, or term, as well as for changes in environmental conditions, such as unemployment rates, property values and changes in the competitive or regulatory environment.
Over the periods shown below, our portfolio related net interest margin increased to 3.56% for the year ended December 31, 2024 compared to the 3.34% for the year ended December 31, 2023, and decreased from 3.64% for the year ended December 31, 2022.
Over the periods shown below, our portfolio related net interest margin increased to 3.61% for the year ended December 31, 2025 compared to 3.56% and 3.34% for the years ended December 31, 2024 and 2023, respectively.
The increase in portfolio related net interest margin from the year ended 22 December 31, 2023 was primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of funds.
The increases in portfolio related net interest margin from the years ended December 31, 2024 and 2023 were 48 primarily due to a higher increase in the average yield on our loan portfolio than the increase in our average cost of portfolio related funds.
Portfolio and Asset Quality Key Portfolio Statistics December 31, 2024 2023 2022 ($ in thousands) Total loans $ 5,055,937 $ 4,072,890 $ 3,512,486 Loan count 12,932 10,477 8,893 Average loan balance $ 391 $ 389 $ 395 Weighted average loan-to-value 66.6 % 67.8 % 68.2 % Weighted average coupon 9.53 % 8.88 % 7.95 % Nonperforming loans (UPB) (A) $ 539,438 $ 394,562 $ 292,789 Nonperforming loans (% of total) (A) 10.67 % 9.69 % 8.34 % (A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status.
Portfolio and Asset Quality Key Portfolio Statistics December 31, 2025 2024 2023 ($ in thousands) Total loans (UPB) $ 6,491,338 $ 5,055,937 $ 4,072,890 Loan count 16,652 12,932 10,477 Average loan balance $ 390 $ 391 $ 389 Weighted average loan-to-value 65.2 % 66.6 % 67.8 % Weighted average coupon 9.74 % 9.53 % 8.88 % Nonperforming loans (UPB) (A) $ 554,540 $ 539,438 $ 394,562 Nonperforming loans (% of total) (A) 8.5 % 10.7 % 9.7 % (A) Reflects the UPB of loans 90 days or more past due or placed on nonaccrual status.
Other income increased to $2.1 million for the year ended December 31, 2024 compared to $1.8 million for the year ended December 31, 2023 due to higher loan extension fees collected on short-term loan extensions. Operating Expenses The table below presents the various components of operating expenses for the years ended December 31, 2024 and 2023.
Other income increased to $2.1 million for the year ended December 31, 2024 compared to $1.8 million for the year ended December 31, 2023 due to higher loan extension fees collected on short-term loan extensions. 58 Operating Expenses Gross revenue consists of interest income and other operating income.
Loan-to-value, or LTV, reflects the ratio of the original loan amount to the appraised value of the underlying property at the time of origination. In instances where the LTV at origination is not available for an acquired loan, the LTV reflects our best estimate of value at the time of acquisition.
In instances where the LTV at origination is not available for an acquired loan, the LTV reflects our best estimate of value at the time of acquisition.
The allowance for credit losses was 0.17% of total UPB of loans held for investment carried at amortized cost as of December 31, 2024. Nonperforming loans were 12.91% of total UPB of loans held for investment carried at amortized cost as of December 31, 2024.
The allowance for credit losses was 0.22% of total UPB of loans held for investment carried at amortized cost as of December 31, 2025. Nonperforming loans were 11.6% of total UPB of loans held for investment carried at amortized cost as of December 31, 2025.
The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities.
The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. ASU 2024-02 is effective January 1, 2025, for the Company.
The following table illustrates the activity in our allowance for credit losses of loans held for investment, excluding loans held for investment at fair value, over the periods indicated: December 31, 2024 2023 2022 Allowance for credit losses: ($ in thousands) Beginning balance $ 4,769 $ 4,893 $ 4,262 Provision for credit losses 1,173 1,915 1,152 Charge-offs (1,768 ) (2,039 ) (521 ) Ending balance $ 4,174 $ 4,769 $ 4,893 Total UPB (1) $ 2,400,720 $ 2,804,541 $ 3,243,854 Nonperforming loans UPB $ 309,970 $ 321,785 $ 291,882 Nonperforming loans UPB / Total UPB 12.91 % 11.47 % 9.00 % Allowance for credit losses / Total UPB 0.17 % 0.17 % 0.15 % Charge-offs / Total UPB (1) 0.07 % 0.07 % 0.02 % (1) Reflects the UPB of loans held for investment at amortized cost.
The following table illustrates the activity in our allowance for credit losses of loans held for investment, excluding loans held for investment at fair value, over the periods indicated: December 31, 2025 2024 2023 Allowance for credit losses: ($ in thousands) Beginning balance $ 4,174 $ 4,769 $ 4,893 Provision for credit losses 5,805 1,173 1,915 Charge-offs (5,458 ) (1,768 ) (2,039 ) Ending balance $ 4,521 $ 4,174 $ 4,769 Total UPB (1) $ 2,013,514 $ 2,400,720 $ 2,804,541 Nonperforming loans UPB $ 234,490 $ 309,970 $ 321,785 Nonperforming loans UPB / Total UPB (1) 11.6 % 12.9 % 11.5 % Allowance for credit losses / Total UPB (1) 0.22 % 0.17 % 0.17 % Charge-offs / Total UPB (1) 0.27 % 0.07 % 0.07 % (1) Reflects the UPB of loans held for investment at amortized cost.
The increase in average yield is attributable to the overall higher interest rate environment in 2023. The following table distinguishes between the change in interest income attributable to change in average loan balance (volume) and the change in interest income attributable to change in annualized yield (rate) for the years ended December 31, 2023 and 2022.
The following table distinguishes between the change in interest income attributable to change in average loan balance (volume) and the change in interest income attributable to change in annualized yield (rate) for the years ended December 31, 2025 and 2024.
The various scenarios, the weighting of scenarios, as well as the forecast period and reversion to historical loss, is subject to change as conditions in the market change and the Company’s ability to forecast economic events evolves. 18 To estimate the allowance for credit losses in our portfolio of loans held for investment carried at amortized cost, we follow a detailed internal process, considering a number of different factors including, but not limited to, our ongoing analyses of loans, historical loss rates, relevant environmental factors, relevant market research, trends in delinquencies, effects and changes in credit concentrations, and ongoing evaluation of fair values.
To estimate the allowance for credit losses in our portfolio of loans held for investment carried at amortized cost, we follow a detailed internal review process, considering a number of different factors including, but not limited to, our ongoing analyses of loans, historical loss rates, relevant environmental factors, relevant market research, trends in delinquencies, effects and changes in credit concentrations, and ongoing evaluation of fair values.
Average Debt (1) Interest Expense Cost of Funds ($ in thousands) Year ended December 31, 2024 $ 4,076,596 $ 247,218 6.06 % Year ended December 31, 2023 3,341,411 186,468 5.58 % Volume variance 735,185 41,027 Rate variance 19,723 0.48 % Total interest expense variance $ 60,750 (1) Includes securitized debt and warehouse agreements. 27 Net Interest Income After Provision for Credit Losses Net interest income after provision for credit losses increased 27.2% over the prior year driven by our growth in the portfolio.
Average Debt (1) Interest Expense Cost of Funds ($ in thousands) Year ended December 31, 2024 $ 4,076,596 $ 247,218 6.06 % Year ended December 31, 2023 3,341,411 186,468 5.58 % Volume variance 735,185 41,027 Rate variance 19,723 0.48 % Total interest expense variance $ 60,750 (1) Includes securitized debit and warehouse agreements.
Significant variables or assumptions incorporated in the macroeconomic forecasts include U.S. unemployment, U.S. real gross domestic product (“GDP”), treasury yields, and U.S. real estate housing prices. We consider multiple scenarios from different macroeconomic forecasts and use different forecast and reversion periods for estimating lifetime expected credit losses.
Significant variables or assumptions incorporated in the macroeconomic forecasts include U.S. unemployment, U.S. real gross domestic product (“GDP”) index, real disposable personal income (“DPI”) index, and consumer price index (“CPI”). We 37 consider multiple scenarios from different macroeconomic forecasts and use different forecast and reversion periods for estimating lifetime expected credit losses.
Exhibits, Financial Statement Schedules. The securities are callable by us when the stated principal balance is less than a certain percentage, ranging from 10% to 30% of the original stated principal balance of loans at issuance.
Exhibits, Financial Statement Schedules. The securities are callable by us when the stated principal balance is less than a certain percentage, ranging from 10% to 30% of the original stated principal balance of loans at issuance. As a result, the actual maturity date of the securities issued will likely be earlier than their respective stated maturity date.
The warehouse and repurchase facilities have maturity dates ranging from May 2025 to May 2027.
The warehouse and repurchase facilities have maturity dates ranging from May 2026 to April 2028.
We have successfully executed 37 securitized debt offerings, issuing $8.0 billion in principal amount of securities from May 2011 through December 2024.
We have successfully executed 46 securitized debt offerings, issuing $10.6 billion in principal amount of securities from May 2011 through December 2025.
Pre-tax return on average equity and return on average equity increased for the year ended December 31, 2024 as compared to 2023 and 2022 due to the increases in income before income taxes and net income.
Pre-tax return on average equity and return on average equity increased for the year ended December 31, 2025 as compared to 2024 and 2023 due to the increases in income before income taxes and net income resulting from the increases in net interest income, gain on sale of loans, and valuation gains in 2025.
We grew our portfolio related net interest income by $35.3 million or 28.4% to $159.6 million for the year ended December 31, 2024 from $124.3 million for the year ended December 31, 2023.
We grew our portfolio related net interest income by $50.7 million or 31.8% to $210.4 million for the year ended December 31, 2025 from $159.6 million for the year ended December 31, 2024.
The Company has elected to record its mortgage servicing rights using the fair value measurement method. Changes in fair value are reported as “Unrealized gains (losses) on mortgage servicing rights”, a component of other operating income within the Consolidated Statements of Income. Unrealized Gain (Loss) on Fair Value Securitized Debt.
Changes in fair value are reported as “Unrealized gain (loss) on mortgage servicing rights”, a component of other operating income within the Consolidated Statements of Income. Unrealized Gain (Loss) on Fair Value Securitized Debt.

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