In This Article:
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Origination Volumes: Increased by 64% over the prior year quarter.
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Net Portfolio Growth: $876 million or 22% in total UPB.
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Net Interest Income: Increased by 29%.
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Net Interest Margin (NIM): Up 26 basis points to 3.6%.
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Earnings Growth: Increased by 31%.
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Loan Production for Q3: $476.8 million, a 13% increase over Q2.
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Total Loan Portfolio: Almost $4.8 billion, a 6.1% increase from Q2 and a 22.6% increase year over year.
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Weighted Average Coupon on Portfolio: 9.37%, a 12 basis point increase from Q2.
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Non-Performing Loan Rate: 10.6%, relatively flat to Q2.
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CECL Loan Loss Reserve: $4.9 million or 19 basis points of the outstanding non-fair value HFI portfolio.
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Total Liquidity: Almost $93 million, with $44 million in cash and cash equivalents.
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Warehouse Capacity: $349 million available at the end of the quarter.
Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Velocity Financial Inc (NYSE:VEL) reported a record quarter with origination volumes growing by 64% over the prior year quarter.
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Net interest income increased by 29%, and net interest margin (NIM) was up 26 basis points, contributing to a 31% growth in earnings.
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The company successfully resolved delinquent assets favorably, maintaining a healthy real estate market presence.
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The recent securitization deal was six times oversubscribed, allowing for an excellent cost of funds at approximately 6%.
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The loan production for Q3 was almost $477 million in UPB, marking a 13% increase over the previous quarter, with a strong weighted average coupon of 10.8%.
Negative Points
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Non-performing loan rate remains relatively high at 10.6%, consistent with the last five quarters.
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The CECL loan loss reserve was $4.9 million, indicating ongoing concerns about potential loan losses.
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The company faces potential risks from foreclosure timelines, especially in judicial foreclosure states where processes can extend up to 2-3 years.
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Despite strong performance, the market remains fragmented, and there are rumblings of new competitors entering the niche.
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The company is exposed to interest rate volatility, although it hedges production to mitigate this risk.
Q & A Highlights
Q: Can you discuss how recent volatility in interest rates might impact your origination pipeline? A: Christopher Farrar, CEO: Our niche market remains stable in terms of rates to the end user, with minimal rate changes. We hedge our production to manage interest rate volatility, which helps dampen its impact. Despite rate fluctuations, our October pipeline was strong, indicating continued robust origination levels.