Velocity Financial, Inc. Q3 FY2024 earnings call

• Strong loan origination: Origination volumes grew 64% YOY, net portfolio growth $876 million (22% UPB). Closed ~1,200 loans, weighted average LTV dropped to 63%. • Financials: Net interest income up 29%, NIM up 26 bps, earnings up 31%. • Credit performance: Special servicing team resolved delinquent assets favorably, healthy real estate markets. • Financing: Well-positioned to fund growth, recent securitization oversubscribed (6x oversubscribed AAA bonds, ~6% cost of funds), collapsed 2020-2 securitization to redeploy $25 million equity. • Pipeline: Healthy pipeline with over 900 applications for over $450 million UPB in October, ahead of portfolio goal of $5 billion UPB by 2025.

Loan production for Q3 was almost $477 million in UPB, a ~13% increase from Q2's $422 million. There were over 1,100 loans funded. The total loan portfolio as of September 30th was almost $4.8 billion, a 6.1% increase from Q2 and 22.6% YOY. Net interest margin increased 6 bps Q/Q and 26 bps YOY. Non-performing loan rate was 10.6% in Q3, relatively flat to Q2. Q3 NPL resolution gains were $2.3 million (3.4% of total UPB).

• Expect market to remain healthy and functioning well. • Continue to grow earnings as they continue to grow the business. • On track to exceed portfolio goal of $5 billion UPB by 2025.

• Interest rate volatility, though hedged to dampen impact. • Foreclosure timeline risk varying by state, potential asset deterioration. • Competitive dynamics with fragmented market, though niche with barriers to entry.

Q: Stephen Laws asked about recent rate volatility, pipeline, government insured multi-loans, and collapse of 2020-2.

A: Velocity's niche is stable in rates to end user, hedges production to dampen volatility. October had strong pipeline with over 900 applications. Government insured multi-loans have healthy pipeline with potential $150M+ origination next year. Collapsing 2020-2 had positive lift to earnings, but most deals not material for earnings delta.

Q: Don Fandetti asked about competitive dynamics.

A: Heard rumblings of new players but no material competitors with exact niche program. Banks are cautious, giving runway to grow.

Q: Steve Delaney asked about borrower rate sensitivity and applications.

A: Borrowers less rate sensitive, changed rates once in quarter. October had new record 900 applications for over $450 million UPB.

Q: Eric Hagen asked about NPL foreclosure timeline and resolution counterparties.

A: Foreclosure timeline varies by state (60 days to 2-3 years), weighted average ~9-10 months. Special servicing team manages assets. One to four properties can be bought by families or investors; demand for resolving NPLs remains durable.