In This Article:
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Net Revenue Increase: 37% increase in net revenue.
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Pre-Tax ROE: 26.8% in Q4.
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Core Earnings: $0.60 in Q4 and $2.03 for the full year 2024.
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Loan Originations: $563.5 million in Q4, an 18.2% increase over Q3.
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Total Loan Portfolio: $5.1 billion as of December 31, 2024.
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Weighted Average Coupon: 9.53% on the total portfolio at year-end.
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Net Interest Margin: 3.70% in Q4, a 10 basis points increase from Q3.
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Non-Performing Loan Rate: 10.7% at the end of Q4.
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NPL Resolution Gains: $5.6 million in Q4.
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Liquidity: Just under $96 million at the end of Q4.
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Securitizations: Over $586 million in securities issued in Q4.
Release Date: March 06, 2025
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 and year-end results for 2024, with strong tailwinds supporting their business.
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The company experienced a 64% increase in originations, indicating strong demand from borrowers.
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Net revenue increased by 37%, and Q4 pre-tax ROE was an impressive 26.8%.
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The securitization market showed significant improvement, enabling high ROEs on invested capital.
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The company maintains a strong liquidity position with nearly $96 million available, supporting future growth.
Negative Points
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The company operates in a niche market that may be affected by broader economic conditions and regulatory changes.
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Non-performing loan (NPL) rate remains relatively high at 10.7%, consistent with previous quarters.
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The company's growth strategy may require additional capital, potentially leading to future equity or debt issuance.
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The business model is less sensitive to interest rates, which could be a disadvantage if rates decrease significantly.
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NPL resolutions are unpredictable and can be lumpy, impacting financial performance variability.
Q & A Highlights
Q: Can you discuss your production expectations for 2025, given the strong start with $430 million in production through January and February? A: Christopher Farrar, CEO: The current run rate feels good as a forecast for the rest of the year. We are seeing increasing demand, so while we don't formally forecast, the current run rate is a good forward forecast with a potential upward slope due to strong demand.
Q: The average loan balance has increased. Is this due to entering new markets or a shift in mix towards larger commercial loans? A: Christopher Farrar, CEO: The increase is due to a shift towards more commercial assets, which have larger balances. Banks remain tight, providing us opportunities with larger balances, driving the average loan size up.