Velocity Financial(US:VEL)2025-11-06 22:47Loan Portfolio and Performance - As of September 30, 2025, the company's loan portfolio totaled $6.3 billion with an average loan balance of approximately $393 thousand[155]. - The annualized yield on the total portfolio for the three months ended September 30, 2025, was 9.54%, while for the nine months it was 9.44%[155]. - The portfolio-related net interest margin for the three months ended September 30, 2025, was 3.65%, an increase from 3.60% in the same period of 2024[157]. - For the three months ended September 30, 2025, the company generated pre-tax income of $35.4 million, compared to $21.2 million for the same period in 2024, representing a 67% increase[157]. - The total loans (UPB) increased from $4.75 billion as of September 30, 2024, to $6.28 billion as of September 30, 2025, reflecting a growth of approximately 32%[175]. - Nonperforming loans as a percentage of total loans decreased from 10.6% as of September 30, 2024, to 9.8% as of September 30, 2025[175]. - The weighted average loan-to-value ratio at origination for the portfolio was 65.5% as of September 30, 2025[175]. - Total loan originations including unfunded commitments increased to $738.96 million for the three months ended September 30, 2025, up $13.6 million from the previous quarter and $262.2 million from the same quarter last year[179]. - The unpaid principal balance of loans held for investment as of September 30, 2025, was $6.27 billion, an increase from $5.06 billion as of December 31, 2024[181]. - Nonperforming loans represented 12.3% of the total unpaid principal balance of loans held for investment as of September 30, 2025[190]. - Total loans held for investment amounted to $6.27 billion as of September 30, 2025, with 90.2% classified as performing loans[191]. - Loans due in more than five years accounted for 95.9% of the total loans held for investment as of September 30, 2025[181]. Financial Results and Income - The company reported a total gain on real estate owned (REO) of $3.26 million for the nine months ended September 30, 2025[183]. - The company resolved $108.0 million of nonperforming assets in Q3 2025, up from $104.0 million in Q2 2025 and $68.6 million in Q3 2024, with net gains of $2.8 million, $3.6 million, and $2.3 million for the respective quarters[193]. - The recovery rate on resolved nonperforming assets was 102.7% for Q3 2025, compared to 103.4% for Q2 2025 and 103.0% for Q3 2024[194]. - The company generated approximately $47.0 million in net cash and cash equivalents from operating, investing, and financing activities during the nine months ended September 30, 2025, compared to $5.3 million in 2024[275]. - Net income attributable to Velocity Financial, Inc. was $25.4 million for the three months ended September 30, 2025, compared to $15.8 million in 2024, and $70.3 million for the nine months ended September 30, 2025, compared to $47.8 million in 2024[233]. - Interest income increased by $39.0 million to $144.1 million for the three months ended September 30, 2025, compared to $105.1 million for the same period in 2024, driven by higher average loan portfolio balances and yield[235]. - Net interest income - portfolio related rose 34.0% to $55.2 million for the three months ended September 30, 2025, up from $41.2 million in 2024, and increased 33.1% to $152.6 million for the nine months ended September 30, 2025, compared to $114.6 million in 2024[234]. Operating Expenses - Total operating expenses increased to $50.4 million for the three months ended September 30, 2025, from $34.6 million in 2024, and to $144.5 million for the nine months ended September 30, 2025, from $100.5 million in 2024[233]. - Provision for credit losses increased to $0.4 million for the three months ended September 30, 2025, from a reversal of $0.1 million in 2024, and to $3.9 million for the nine months ended September 30, 2025, from $1.2 million in 2024[245]. - Compensation and employee benefits increased by $5.7 million to $23.3 million for the three months ended September 30, 2025, compared to $17.6 million for the same period in 2024, mainly due to higher headcount and commissions[255]. - Securitization expenses increased to $6.4 million for the three months ended September 30, 2025, from $3.2 million for the same period in 2024, resulting from more securitization transactions[257]. - Loan servicing expenses increased to $7.7 million for the three months ended September 30, 2025, from $5.7 million for the same period in 2024, primarily due to the growth of the loan portfolio[258]. Debt and Liquidity - The company completed 44 securitization transactions from May 2011 through September 2025, issuing $9.9 billion in principal amount of securities[281]. - Outstanding bond balances for securitized debt as of September 30, 2025, totaled $5.55 billion, an increase from $4.27 billion as of December 31, 2024[284]. - The company had five non-mark-to-market warehouse facilities and one mark-to-market facility as of September 30, 2025, with borrowings of $334.7 million and $600.3 million of available capacity[276]. - Total liquidity as of September 30, 2025, was $143.5 million, consisting of $99.0 million in cash and $44.5 million in borrowings from available warehouse capacity[269]. - As of September 30, 2025, the company had $555.8 million in additional available warehouse capacity, bringing total liquidity plus available warehouse capacity to $699.3 million[269]. - The company entered into a five-year $215.0 million syndicated corporate debt agreement on March 15, 2022, with a fixed interest rate of 7.125% maturing on March 15, 2027[288]. - A second five-year $75.0 million syndicated corporate debt agreement was established on February 5, 2024, with an interest rate of 9.875% maturing on February 15, 2029[289]. Market Conditions and Future Outlook - Market uncertainties, including geopolitical conflicts and macroeconomic conditions, may impact the company's operational and financial performance[160]. - The company is applying a severe stress scenario for its current expected credit loss (CECL) estimate, reflecting economic uncertainties[185]. - Forward-looking statements indicate expectations regarding loan originations and strategies for future funding and development of business and products[301]. - The company does not plan to structure any securitized debt as sales or utilize off-balance-sheet vehicles, ensuring sufficient funding for working capital requirements[287]. - The company has never maintained relationships with unconsolidated entities for off-balance-sheet arrangements, ensuring transparency in financial commitments[299].