Velocity Financial(US:VEL)2022-05-07 17:21Financial Data and Key Metrics Changes - Velocity Financial reported a net income of $3 million on a core basis, translating to $0.36 per share, with core EPS growth of 23% from the prior quarter [10] - The company achieved a 43% increase in portfolio-related net interest income compared to Q1 2021, resulting in a 14% return on equity (ROE) on a core earnings basis for the quarter [8][10] - The net interest margin (NIM) remained stable at 4.25%, compared to 4.27% in the previous quarter [24] Business Line Data and Key Metrics Changes - Loan production reached a record $581 million in Q1, marking a 16.8% increase sequentially and a 150% increase year-over-year [8][11][17] - The total loan portfolio grew to $2.9 billion, reflecting an 11% increase from year-end [20] - The weighted average coupon (WAC) on new applications increased to 8.1% in April, aligning with historical averages [11][19] Market Data and Key Metrics Changes - The delinquency rate continued to decline, reaching 9.8% by the end of Q1, down from a high of 17% during the pandemic [25] - The company reported a recovery rate of 104.8% on non-performing loans (NPLs), indicating successful resolutions [27] Company Strategy and Development Direction - Velocity Financial's strategy focuses on maintaining strong customer relationships while adapting to changing market conditions, which has allowed for record loan production [8][9] - The company aims to provide durable and stable earnings across various market environments, with a cautiously optimistic outlook despite rising interest rates [9][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by increased short-term rates and market volatility but expressed confidence in the company's ability to navigate these conditions [7][9] - The outlook remains positive, with strong demand from customers and expectations for continued growth in the loan portfolio [33] Other Important Information - The company successfully refinanced its corporate debt, lowering the coupon by approximately 200 basis points and fixing the debt for five years [12][30] - Velocity Financial completed two securitization deals in Q1 and early April, although the execution was not as strong as in previous periods [13][29] Q&A Session Summary Question: Clarification on whole loan sales gains - A participant sought clarification on the reported gains from whole loan sales, noting a discrepancy in the figures presented [38] - The CFO clarified that the reported number may have been affected by tax considerations, confirming the company operates as a C-corp [39][40] Question: Future market conditions and NIM - A participant inquired about the conditions necessary for the securitization markets to stabilize and the impact on the company's NIM [41] - Management responded that a combination of higher coupons and clearer guidance from the Federal Reserve would be essential for market recalibration [42]