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]