Financial Data and Key Metrics Changes - The company reported a 19% increase in originations compared to the previous quarter, with net revenue growth of 6.8% quarter-over-quarter while holding operating expenses flat [7][12] - Earnings per share showed significant growth, with book value increasing to $12.57 on a GAAP basis [19] - The overall portfolio yield increased by 24 basis points year-over-year, reflecting higher coupon rates on new loans [13] Business Line Data and Key Metrics Changes - Total loan production for Q2 was approximately $258 million, a 19.2% increase from $217 million in Q1 [21] - The weighted average coupon for Q2 production was 11%, marking a 3.25% year-over-year increase [21] - The total loan portfolio as of June 30 was $3.7 billion, a 3.4% increase from Q1 and a 20% increase from Q4 of the previous year [22] Market Data and Key Metrics Changes - The non-performing loan (NPL) rate increased to 10% from 8.2% in the previous quarter, attributed to portfolio seasoning [15][24] - The company resolved over $50 million in non-performing UPB for a net gain of $1.5 million, maintaining a three-point gain on NPL resolutions [26] Company Strategy and Development Direction - The company is focused on growing assets and improving return on equity while maintaining a healthy origination pipeline [10][11] - Management emphasized the importance of creating attractive risk-adjusted deals as banks tighten lending activities, allowing the company to capture more opportunities [7][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the real estate market and anticipated continued positive resolutions in credit performance [33] - The company expects to grow earnings and maintain strong demand for its products, projecting an end-of-year origination volume around $1 billion [45] Other Important Information - The company has a total liquidity of $72 million, with $34 million in cash and cash equivalents, and $38 million in available liquidity on unfinanced finance loan collateral [30] - The CECL loan loss reserve stood at $4.6 million, consistent with previous quarters [27] Q&A Session Summary Question: Can you speak about the execution of securitization 2023-2 compared to 2023-1? - Management noted that while demand was not as strong as in 2023-1 due to tightening conditions, the execution was still oversubscribed and successful [35] Question: How is the competitive landscape from banks affecting your underwriting standards? - Management indicated that banks remain cautious, providing opportunities for the company to improve underwriting standards and capture business that may have previously gone to banks [42][43] Question: What is the outlook for origination volumes in the second half of the year? - Management projected that the current run rate is sustainable, expecting to end the year around $1 billion in origination volume [45]
Velocity Financial(VEL) - 2023 Q2 - Earnings Call Transcript