Velocity Financial, Inc. Q3 FY2025 earnings call

• Achieved record pretax earnings up 66.5%, with production volumes at $739 million and new applications over $1.4 billion. - Credit disciplined with weighted average portfolio loan-to-value at 65.5% and coupons at 10.5%, resulting in NIM of 3.65% and core pretax ROE of 24.1%. - Asset managers resolved NPAs above par for net positive gains. - Closed first single counterparty securitization of new production with a top-tier money manager, with a second transaction closing in early October. - Q3 loan production was $739 million, with 1,778 loans originated, weighted average coupon on new held for investment originations at 10.5%, and weighted average loan-to-value at 62.8%. - Loan portfolio growth: over $6.3 billion in UPB as of 9/30, a 7.1% increase from Q2 and 32% year-over-year net of prepayments. - Portfolio NIM stable at 3.65%, portfolio yield 9.54%, and cost of funds 6.27%. - Nonperforming loan rate at end of Q3 was 9.8%, down from Q2 and year-over-year. - NPA resolution gains averaged 3.8% quarterly over the last 5 quarters. - Liquidity position: just under $144 million, available warehouse capacity over $600 million, max line capacity $935 million.

Loan production for the quarter was $739 million, with new applications exceeding $1.4 billion. The total loan portfolio as of September 30 was just under $6.3 billion in UPB, a 7.1% increase from Q2 and 32% year-over-year net of prepayments. The weighted average coupon on the total portfolio was 9.74%, and the weighted average loan-to-value was 65.5%. Portfolio NIM was 3.65% in Q3. The nonperforming loan rate at the end of Q3 was 9.8%, down from Q2. NPA resolution gains in Q3 totaled $2.8 million. Liquidity at the end of Q3 was just under $144 million, with available warehouse capacity over $600 million.

• Markets remain strong with momentum continuing into Q4. - Expect earnings to continue growing and positive results going forward.

Q: Concern about REO valuations and charge-offs.

A: Explained that REO valuations are timing issues, with initial gains on transfer to REO and subsequent adjustments based on market feedback.

Q: Headcount at 9/30.

A: 347 people, up about 82 heads over the last year.