Velocity Financial, Inc. Q4 FY2024 earnings call

• The company had a record quarter and year-end in 2024 with 64% growth in originations. - Maintained a disciplined credit process while preserving risk-adjusted margins at lower loan-to-values. - Special servicing team resolved non-performing loans (NPLs) and real estate owned (REO) assets for net gains. - Securitization market improved with tighter spreads and increased investor participation; two securitization deals in Q4 totaled over $586 million. - Issued below $7 million in new equity through the ATM program to increase float and broaden investor base. - Liquidity was nearly $96 million at year-end, providing ample capital for future growth.

In the fourth quarter, loan production was $563 million in UPB, an 18% sequential increase and 60% year-over-year. The portfolio exceeded $5 billion. Net revenue saw a 37% increase. Q4 pretax ROE was an impressive 26.8%. In Q4, non-performing loan resolution generated over $5.5 million in gains from resolved delinquent assets. The portfolio yield increased, and the cost of funds had some movements due to securitization market conditions.

• Expect healthy market conditions with positive credit outlook and continued favorable NPL resolution. - Strong securitization market acts as a tailwind for executing the business plan. - Anticipate growth in both production and earnings in 2025, feeling positive about the future.

Forward-looking statements have uncertainties outside the company's control. Risks are detailed in the company's communications with shareholders and SEC filings.

Q: Stephen Laws asked about 2025 production expectations and average loan balance mix.

A: Chris Farrar stated the current run rate is a good forward forecast with an upward slope due to strong demand, and the average loan balance increased due to more commercial assets.

Q: Steve Delaney inquired about borrower focus and NPL resolutions.

A: Chris Farrar explained borrowers focus on property management and accessing capital, and NPL resolutions are mostly borrowers paying current or refinancing, with some REO sales.

Q: Eric Hagen asked about CMBS market impact and NPL resolution visibility.

A: Chris Farrar said there was no impact on securitizations, and NPL resolutions are lumpy but historically have 2-3% average gains.