Velocity Financial(US:VEL)2022-08-06 00:55Financial Data and Key Metrics Changes - The company reported strong earnings of $10.6 million for Q2 2022, showing a healthy year-over-year increase, although slightly down from Q1 due to fewer loan sales [12][11] - Net interest income increased by almost 25% year-over-year, driven by portfolio growth and a notable NPL recovery rate of 111% [13][14] - Core diluted earnings per share for Q2 was $0.31, reflecting a 50% increase compared to $0.45 for the first six months of 2021 [32] Business Line Data and Key Metrics Changes - Loan production for the first half of 2022 exceeded $1 billion, a 110% increase compared to the same period in 2021, with Q2 production at $445 million [20][23] - The total loan portfolio grew to $3.1 billion, up 7% from Q1 and 49% year-over-year [23] - The weighted average coupon for new originations increased to 7.53%, up from 7.50% in Q1 [23] Market Data and Key Metrics Changes - The non-performing loan (NPL) rate decreased to 8.2% in Q2 2022, down from 15.3% in Q2 2021, indicating effective asset resolution strategies [33] - The company completed three securitizations in Q2, totaling $896 million for the year, with strong investor demand [37][40] Company Strategy and Development Direction - The company plans to capitalize on opportunities arising from market volatility, particularly in acquiring assets from distressed operators [10][11] - There is a focus on maintaining liquidity and managing capital deployment carefully as market conditions evolve [11][40] - The company aims to continue its unique portfolio approach to maximize shareholder returns with limited volatility [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to grow and deliver strong returns despite recent market headwinds [11] - The outlook remains positive with expectations of continued strong demand for products and plans for two more securitizations in 2022 [46][45] Other Important Information - The company increased its warehouse capacity by $100 million during the quarter, enhancing its liquidity position [41] - The charge-offs remained low, with the most recent quarter showing charge-offs under $38,000, reflecting strong asset resolutions [36] Q&A Session Summary Question: What level of production is expected in the second half of the year? - Management indicated that production levels are expected to remain consistent with Q2 levels for the next few quarters [49] Question: How have recent securitizations been pricing compared to earlier ones? - Recent securitizations are pricing wider than in 2021, with margins not as strong as before, but management feels confident about the pipeline [50] Question: What opportunities are being considered in the current market? - Management noted both asset and strategic opportunities are being explored, with potential for future product expansion [58]