Velocity Financial(US:VEL)2024-03-15 19:40Loan Originations and Portfolio - The company originated 2,955 loans totaling $1.1 billion for investment in 2023, compared to 4,135 loans totaling $1.7 billion in 2022[45]. - The company funded 2,930 loans sourced by 1,046 different mortgage brokers in 2023, representing a small portion of the approximately 885,933 state-licensed mortgage originators in the U.S.[41]. - The primary product, a 30-year fixed-rate amortizing term loan, comprised 90.0% of loan originations in 2023, reflecting strong market demand[42]. - Total loans increased to $4,072.9 million in 2023 from $3,512.5 million in 2022, representing a growth of 16.0%[120]. - Total loan originations for 2023 were $1,117.8 million, a decrease of $644.0 million or 36.6% from $1,761.9 million in 2022[125]. - The company originated 2,965 loans in 2023, a decrease from 4,135 loans in 2022[125]. Loan Portfolio Performance - As of December 31, 2023, the company's portfolio of loans held for investment totaled $4.1 billion in unpaid principal balance, with an average loan balance of approximately $389,000[45]. - The weighted average loan-to-value (LTV) ratio at origination for loans held for investment was 67.7%, with borrower equity providing significant protection against credit losses[47]. - The loan portfolio totaled $4.1 billion with an average loan balance of approximately $389,000 and a weighted average loan-to-value ratio of 67.8%[79]. - Nonperforming loans increased to $394.6 million, accounting for 9.69% of total loans in 2023, up from 8.34% in 2022[120]. - As of December 31, 2023, nonperforming loans totaled $394.6 million, representing 9.7% of the held for investment loan portfolio, an increase from $292.8 million (8.3%) in 2022[134]. - The allowance for loan losses decreased to $4.8 million in 2023 from $4.9 million in 2022[128]. - The allowance for loan losses is maintained at a level deemed adequate by management to provide for expected losses in the portfolio at the balance sheet date[99]. Financial Performance - The company generated pre-tax income of $71.1 million and net income of $52.3 million for the year ended December 31, 2023[81]. - Net income rose to $52,293,000 in 2023, up from $32,519,000 in 2022, marking a growth of 60.9%[162]. - Earnings per common share increased to $1.60 for 2023, up from $0.99 in 2022[182]. - Interest income increased by $70.4 million, or 29.3%, to $310.8 million for the year ended December 31, 2023, compared to $240.3 million for 2022[184]. - Net interest income after provision for loan losses increased by 29.1% over the prior year, driven by higher net interest income[189]. - The company grew its portfolio-related net interest income by $11.7 million or 10.4%, from $112.6 million in 2022 to $124.3 million in 2023, primarily due to new loan originations[112]. Securitization Activities - The company executed 31 securitizations of investor real estate loans, issuing $6.4 billion in principal amount of securities from 2011 to 2023[30]. - In August 2023, the company completed its first securitization collateralized by its short-term loan product, issuing $81.6 million in securities[51]. - In January 2024, the company completed the securitization of $221.1 million of investor real estate loans and issued $75 million principal amount of five-year Senior Secured Notes at an interest rate of 9.875%[88]. Operating Expenses and Management - Total operating expenses increased by 62.9%, or $38.9 million, to $100.6 million during the year ended December 31, 2023, from $61.8 million in 2022[195]. - Compensation and employee benefits increased from $30.5 million in 2022 to $48.3 million in 2023, a rise of 58.7% driven by fair value option accounting on new loan originations[197]. - Origination expenses decreased significantly from $4.0 million in 2022 to $0.5 million in 2023, a reduction of 87.0% due to improved cost management[198]. - Loan servicing expenses rose from $12.3 million in 2022 to $17.6 million in 2023, an increase of 43.4% due to a larger loan portfolio[200]. Market Conditions and Competitive Landscape - The investor real estate loan market is highly competitive, impacting the company's profitability and growth, with competitors potentially offering more favorable rates and terms[114]. - The company anticipates that future performance will depend on growing origination/acquisition volume, leveraging its existing broker network while expanding with new brokers[112]. Debt and Interest Management - 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%[51]. - Corporate debt interest expense decreased to $16,556,000 in 2023 from $29,472,000 in 2022, indicating improved cost management[167]. - Total debt increased to $3,556,411,000 in 2023 from $2,956,801,000 in 2022, reflecting a growth of 20.3%[159]. - Cost of funds for the portfolio increased to 5.58% in 2023 from 4.64% in 2022, indicating rising borrowing costs[154]. Employee and Organizational Growth - As of December 31, 2023, the company had a total of 253 employees, reflecting a 30% increase from the prior year[58].