Financial Data and Key Metrics Changes - Velocity Financial, Inc. reported a 64% increase in originations for 2024, leading to a 37% increase in net revenue [8][9] - The Q4 pretax return on equity (ROE) was 26.8% [9] - Core earnings for Q4 were $0.60 per share, with full-year core earnings at $2.03 per share [13] Business Line Data and Key Metrics Changes - Total loan production for Q4 was $563.5 million, an 18.2% increase over Q3 and a 60% increase year-over-year [19] - The weighted average coupon on the total portfolio at year-end was 9.53%, a 16 basis points increase from Q3 [23] - The non-performing loan (NPL) rate at the end of Q4 was 10.7%, relatively flat compared to 10.6% for Q3 [25] Market Data and Key Metrics Changes - The total loan portfolio ended at $5.1 billion, a 6.4% increase from Q3 and over a 24% increase year-over-year [23] - The company experienced significant improvement in the capital markets post-presidential election, with tighter spreads for securitizations [11] Company Strategy and Development Direction - The company aims to continue capturing market share by lending to both residential and commercial real estate investors, addressing unmet needs in the market [7] - The strategy includes retaining earnings and building book value, with an adjusted book value estimated at $18.73 per share [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in another strong year of growth, citing healthy demand for their lending products [13][34] - The company is less sensitive to interest rate fluctuations compared to other mortgage segments, allowing it to continue providing capital to underserved borrowers [12] Other Important Information - The company reported $96 million in total liquidity at the end of Q4, with $50 million in cash and cash equivalents [31] - Non-performing loan resolution gains for Q4 were $5.6 million, with a total of $10.2 million for the year [27] Q&A Session Summary Question: Production expectations for 2025 - Management indicated that the current run rate is a good forecast for the rest of the year, with increasing demand expected [39] Question: Average loan balance increase - The increase in average loan balance is attributed to a higher commercial component rather than entering new markets [41][43] Question: Capital needs for growth - Current retained earnings and ATM issuance are sufficient for growth, but additional capital may be needed if growth accelerates significantly [45] Question: Borrower mindset amidst rate volatility - Borrowers focus on acquiring and managing properties rather than being overly concerned with interest rates [52][55] Question: NPL resolutions process - Most NPL resolutions involve borrowers either paying current or refinancing, with a small percentage going to foreclosure [66]

Financial Data and Key Metrics Changes - Velocity Financial, Inc. reported a 64% increase in originations for 2024, leading to a 37% increase in net revenue [8][9] - The Q4 pretax return on equity (ROE) was 26.8%, with core earnings of $0.60 per share for Q4 and $2.03 per share for the full year [13][14] - The total loan portfolio reached $5.1 billion, marking a 6.4% increase from Q3 and over 24% year-over-year growth [22][23] - The non-performing loan (NPL) rate was stable at 10.7%, consistent with the previous quarter [25] Business Line Data and Key Metrics Changes - Total loan production for Q4 was $563.5 million, an 18.2% increase from Q3 [19] - The weighted average coupon on the total portfolio was 9.53%, a 16 basis points increase from Q3 [23] - The net interest margin (NIM) for Q4 was 3.70%, reflecting a 10 basis points increase quarter-over-quarter [24] Market Data and Key Metrics Changes - The company experienced strong demand from borrowers, particularly in larger, more liquid metropolitan statistical areas (MSAs) [10] - The securitization market showed significant improvement post-presidential election, leading to tighter spreads and increased investor participation [11] Company Strategy and Development Direction - The company aims to continue capturing market share by lending to both residential and commercial real estate investors, addressing unmet needs in the market [7] - The strategy includes retaining earnings and building book value, with an adjusted book value estimated at $18.73 per share [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth for 2025, citing strong borrower demand and a favorable capital market environment [34] - The company remains less sensitive to interest rate fluctuations compared to other mortgage segments, focusing on delivering capital to underserved borrowers [12] Other Important Information - The company reported $96 million in liquidity at the end of Q4, with a maximum line capacity of $785 million [31][32] - Non-performing loan resolution gains for Q4 were $5.6 million, with a total of $10.2 million for the year [27][28] Q&A Session Summary Question: Production expectations for 2025 - Management indicated that the current run rate is a good forecast for the year, with potential for upward growth due to increasing demand [39] Question: Average loan balance increase - The increase in average loan balance is attributed to a higher commercial component rather than entering new markets [41][43] Question: Capital needs for growth - Current retained earnings and ATM issuance are sufficient for growth, but additional capital may be needed if growth accelerates significantly [45] Question: Borrower mindset amidst rate volatility - Borrowers focus on property management and acquisition rather than interest rates, valuing certainty of execution [55] Question: NPL resolutions process - Most NPL resolutions involve borrowers paying current or refinancing, with only a small percentage leading to foreclosure [66] Question: CMBS market response to volatility - The company has not seen significant volatility in its securitizations, which are more comparable to non-QM RMBS executions [73] Question: Visibility into NPL resolution pipeline - NPL resolutions are unpredictable and can vary significantly, but historical trends suggest a durable source of returns [75] Question: Composition of the portfolio - The portfolio is nearly evenly split between one to four rental properties and small commercial assets, with a focus on liquid and easily sellable REO [80]

Velocity Financial (VEL) came out with quarterly earnings of $0.60 per share, beating the Zacks Consensus Estimate of $0.47 per share. This compares to earnings of $0.46 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 27.66%. A quarter ago, it was expected that this company would post earnings of $0.47 per share when it actually produced earnings of $0.47, delivering no surprise.Over the last four quarters, the company has sur ...

Financial Performance - Net income for 4Q24 was $206 million, an increase of 186% compared to $174 million in 4Q23[7] - Core net income for 4Q24 increased by 346% to $218 million from $162 million in 4Q23[7] - Full year diluted EPS increased by $039 to $191, up from $152 in 2023[7] - GAAP book value per share as of December 31, 2024, was $1570, a 53% increase from September 30, 2024[13] - Adjusted book value per share as of December 31, 2024, was $1873[13] Loan Production and Portfolio - Loan production in 4Q24 reached $5635 million in UPB, an 182% increase from 3Q24 and a 600% increase from 4Q23[7, 15] - The total loan portfolio reached $51 billion in UPB as of December 31, 2024, a 241% increase from $41 billion in UPB as of December 31, 2023[7, 18] - The WAC of the portfolio was 953% as of December 31, 2024, an increase from 888% as of December 31, 2023[18] Asset Quality and Resolution - Nonperforming Loans (NPL) were 107% of HFI loans as of December 31, 2024[7, 25] - 4Q24 NPL resolutions realized gains of $56 million, or 1070%, of UPB resolved[7] - NPL resolution totaled $794 million in UPB, realizing 1070% of UPB resolved compared to $701 million in UPB and realization of 1022% of UPB resolved for 4Q23[30] Financing and Liquidity - Completed securitizations totaling $2929 million and $2939 million, respectively, of securities issued in 4Q24[7] - Liquidity of $959 million and total available warehouse line capacity of $4350 million as of December 31, 2024[8] - Two securitization completed during 4Q24, totaling $5868 million of securities issued with a weighted average rate of 60%[39]

Financial Data and Key Metrics Changes - The company released its Third Quarter 2024 results, which are available on its Investor Relations website [4] - The call may include forward-looking statements that are uncertain and outside of the company's control, with actual results potentially differing materially [5] Business Line Data and Key Metrics Changes - Specific details regarding changes in business line data and key metrics were not provided in the available content Market Data and Key Metrics Changes - Specific details regarding changes in market data and key metrics were not provided in the available content Company Strategy and Development Direction and Industry Competition - The company has not disclosed specific strategic initiatives or competitive positioning in the available content Management's Comments on Operating Environment and Future Outlook - Management has indicated that the content of the call contains time-sensitive information that is accurate only as of the date of the call, with no commitment to update forward-looking statements [5] Other Important Information - The call included a reminder about the potential risks and factors that could affect results, which are detailed in the company's filings with the Securities and Exchange Commission [5] Q&A Session All Questions and Answers - No specific questions and answers from the Q&A session were provided in the available content

Financial Performance - Net income for Q3 2024 was $15.8 million, a 30.8% increase from $12.1 million in Q3 2023, with diluted EPS rising to $0.44 from $0.35[2] - Core net income reached $16.9 million, up 31.2% from $12.9 million in Q3 2023, with core diluted EPS increasing to $0.47 from $0.37[2] - Net revenue for 3Q24 was $55.9 million, a 25.3% increase from $44.6 million in 3Q23, driven by strong portfolio growth[13] - Net interest income after provision for loan losses was $35.1 million, a 29.1% increase from $27.2 million in 3Q23[13] - Net income attributable to Velocity Financial, Inc. for Q3 2024 was $15,803, compared to $12,086 in Q3 2023, marking a 30.2% increase[36] - Core net income for Q3 2024 was $16,949, up from $12,918 in Q3 2023, indicating a year-over-year growth of 31.4%[38] Loan Production and Portfolio - Loan production totaled $476.8 million in UPB, marking a 64.1% increase from $290.6 million in Q3 2023[9] - Total loan portfolio reached $4.8 billion in UPB, a 22.6% increase from $3.9 billion in UPB as of September 30, 2023[8] - Total HFI loans increased to $4.73 billion, up 22.7% from $3.86 billion in the same quarter last year[10] - The average loan portfolio balance for Q3 2024 was $4,578,911, compared to $3,773,630 in Q3 2023, representing a year-over-year increase of 21.3%[37] - The company aims for a $5 billion loan portfolio by 2025, supported by strong production volume growth[4] Interest and Margins - The portfolio net interest margin (NIM) improved to 3.60%, a 26 basis points increase from 3.34% in Q3 2023[2] - The net interest margin for the total company improved to 3.06% in Q3 2024, compared to 2.90% in Q3 2023[37] - The weighted average total portfolio yield was 9.18%, an increase of 80 basis points from September 30, 2023[9] - Interest income for Q3 2024 reached $105,070, an increase of 32.8% compared to $79,088 in Q3 2023[36] Nonperforming Loans - Nonperforming loans as a percentage of Held for Investment (HFI) loans was 10.6%, slightly up from 10.1% in Q3 2023[2] - Nonperforming loans (NPL) reached $503.9 million as of September 30, 2024, representing 10.6% of total HFI loans, an increase from $387.7 million and 10.1% a year earlier[11] - Resolutions of nonperforming loans and real estate owned totaled $68.6 million in UPB, with realized gains of $2.3 million[2] - NPL resolution totaled $68.6 million in UPB for 3Q24, realizing 103.4% of UPB resolved compared to $65.7 million and 101.8% for 3Q23[21] Operating Expenses - Operating expenses totaled $34.6 million for 3Q24, a 26.6% increase from $27.3 million in 3Q23, primarily due to higher production volume[16] - Compensation and employee benefits rose to $17.6 million, a 40.4% increase from $12.5 million in 3Q23, driven by higher commissions[15] - Total operating expenses for Q3 2024 were $34,613, a slight increase from $27,334 in Q3 2023, representing a year-over-year increase of 26.8%[36] Assets and Liabilities - Total assets increased to $5,202,474 thousand as of September 30, 2024, up from $4,873,393 thousand as of June 30, 2024, representing a growth of 6.7%[35] - Total liabilities increased to $4,714,785 thousand, up from $4,398,646 thousand, reflecting a growth of 7.2%[35] - Stockholders' equity increased to $484,636 thousand, up from $471,323 thousand, marking a growth of 2.8%[35] Securitization and Other Income - The company completed one securitization during 3Q24, totaling $253.6 million of securities issued with a weighted average rate of 6.9%, down from 7.6% in 3Q23[18] - Total other operating income was $20.7 million for 3Q24, an increase from $17.4 million in 3Q23[14] - Gain on disposition of loans was $2.3 million for 3Q24, driven by loans transferred to Real Estate Owned (REO)[14] Future Outlook - The company will host a conference call on November 7, 2024, to review 3Q24 financial results[22]

Core Viewpoint - Velocity Financial reported quarterly earnings of $0.47 per share, matching the Zacks Consensus Estimate and showing an increase from $0.37 per share a year ago [1] - The company posted revenues of $35.06 million for the quarter ended September 2024, which was below the Zacks Consensus Estimate by 2.89% and up from $27.37 million year-over-year [2] Earnings Performance - The earnings surprise for the previous quarter was 4.65%, with actual earnings of $0.45 per share compared to an expected $0.43 [1] - Over the last four quarters, the company has exceeded consensus EPS estimates three times [1] Revenue Insights - Velocity Financial has topped consensus revenue estimates only once in the last four quarters [2] - The current consensus EPS estimate for the upcoming quarter is $0.48, with expected revenues of $37.8 million, and for the current fiscal year, the estimate is $1.91 on revenues of $135.8 million [7] Stock Performance - Since the beginning of the year, Velocity Financial shares have increased by approximately 13.8%, while the S&P 500 has gained 24.3% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Financial - Mortgage & Related Services industry, to which Velocity Financial belongs, is currently ranked in the top 8% of over 250 Zacks industries [8] - Historical data suggests that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [8]

Loan Portfolio and Performance - As of September 30, 2024, the company's loan portfolio totaled $4.8 billion, with an average loan balance of approximately $388.5 thousand[109]. - The annualized yield on the total portfolio for the three months ended September 30, 2024, was 9.18%[109]. - The portfolio-related net interest margin increased to 3.60% for the three months ended September 30, 2024, compared to 3.34% for the same period in 2023[109]. - Total loans originated in Q3 2024 reached $476.775 million, an increase from $422.226 million in Q2 2024 and $290.581 million in Q3 2023[122]. - The net loans held for investment as of September 30, 2024, amounted to $4.881 billion, up from $4.134 billion as of September 30, 2023[123]. - The weighted average loan-to-value ratio at origination was 67.0% as of September 30, 2024[121]. - The weighted average coupon for loans held for investment was 10.85% in Q3 2024, compared to 11.03% in Q2 2024[122]. - The average loan size for loans held for investment in Q3 2024 was $388,000, compared to $381,000 in Q2 2024[122]. Income and Expenses - For the three months ended September 30, 2024, the company generated pre-tax income of $21.2 million and net income of $15.8 million[109]. - Net income for the three months ended September 30, 2024, was $15,617 thousand, up from $12,169 thousand in the same period last year, representing a growth of 28.5%[150]. - Total operating expenses were $34.61 million for the three months ended September 30, 2024, compared to $27.33 million for the same period in 2023[160]. - Interest income increased by $25.98 million to $105.07 million for the three months ended September 30, 2024, compared to $79.09 million for the same period in 2023, primarily due to higher portfolio balances and average loan yield[161]. - Other operating income increased to $20.73 million for the three months ended September 30, 2024, from $17.36 million for the same period in 2023[160]. Nonperforming Loans and Credit Losses - Nonperforming loans as of September 30, 2024, amounted to $503.9 million, representing 10.6% of total loans[121]. - Nonperforming loans represented 12.5% of total UPB as of September 30, 2024, compared to 11.8% as of September 30, 2023[129]. - The allowance for credit losses as of September 30, 2024, was $4.9 million, compared to $4.7 million as of September 30, 2023, reflecting an increase in the individually-assessed component of the reserve[128]. - The charge-offs for Q3 2024 were $1.069 million, with a charge-off rate of 0.06% of total UPB for the nine months ended September 30, 2024[126]. - The recovery rate on resolved nonperforming loans was 103.0% for Q3 2024, compared to 101.1% for Q2 2024 and 102.1% for Q3 2023[132]. Debt and Financing - The company executed thirty-five securitized debt transactions, resulting in over $7.4 billion in gross debt proceeds from May 2011 through September 30, 2024[109]. - In February 2024, the company issued $75.0 million principal amount of five-year Senior Secured Notes bearing interest at 9.875%[110]. - Total debt for the company reached $4,442,040 thousand, an increase from $3,594,611 thousand year-over-year, indicating a growth of 23.6%[143]. - The total outstanding borrowings as of September 30, 2024, amounted to $3.86 billion, an increase from $3.34 billion as of December 31, 2023[180]. - The company entered into a five-year $215.0 million syndicated corporate debt agreement in March 2022, bearing interest at a fixed rate of 7.125%[182]. Market Conditions and Risks - The company operates in a highly fragmented market with substantial demand for financing and limited supply of institutional financing alternatives[109]. - The company anticipates continued economic challenges, including rising unemployment and geopolitical tensions, impacting future credit loss estimates[127]. - The primary market risk for the company is interest rate volatility, which impacts income and expenses recorded on assets and liabilities[187]. - Forward-looking statements regarding the company's future performance and strategies are subject to risks and uncertainties[186]. Cash and Liquidity - Cash and cash equivalents totaled $44.1 million as of September 30, 2024, up from $29.4 million in the same period last year[174]. - The total liquidity, including available warehouse capacity, was $442.1 million as of September 30, 2024[174]. - The company reported a net cash provided by operating activities of $4.5 million for the nine months ended September 30, 2024, down from $22.7 million for the same period in 2023[175].

Company Overview - Velocity Financial (NYSE: VEL) is a vertically integrated real estate finance company that generates revenue by originating, securitizing, and managing a portfolio of loans secured by real estate [2]. Investment Strategy - The company employs a buy and hold approach with tranche purchases of stocks of interest, focusing on small companies with high growth potential [2]. - The SHU Growth Portfolio service offers a portfolio and watchlist of similar high-growth potential stocks, along with buy alerts and market updates [2]. Analyst Background - The analyst behind the SHU Growth Portfolio has over 30 years of experience in financial markets and aims to identify small companies with multi-bagger potential while mitigating risks through a diversified portfolio approach [2].

Core Viewpoint - The article emphasizes the importance of value investing and highlights Velocity Financial (VEL) as a strong value stock based on its financial metrics and Zacks Rank [2][4][7] Company Metrics - Velocity Financial (VEL) has a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [4][7] - VEL's Forward P/E ratio is 10.17, significantly lower than the industry's average of 24.59, suggesting it may be undervalued [4] - The stock's Forward P/E has fluctuated between 7.14 and 11.88 over the past year, with a median of 10 [4] Valuation Ratios - VEL has a Price-to-Book (P/B) ratio of 1.38, which is favorable compared to the industry's average P/B of 2.41, indicating solid market value relative to book value [5] - The P/B ratio for VEL has ranged from 0.85 to 1.39 in the past year, with a median of 1.24 [5] - The Price-to-Cash Flow (P/CF) ratio for VEL is 9.01, well below the industry's average of 20.58, further supporting the notion of undervaluation [6] - VEL's P/CF has varied between 5.68 and 9.30 over the past year, with a median of 7.97 [6] Investment Outlook - The combination of VEL's favorable financial metrics and strong earnings outlook positions it as a compelling value stock in the current market [7]