Velocity Financial(US:VEL)2020-11-12 04:16Financial Data and Key Metrics Changes - The company reported a significant increase in net income, primarily driven by a return to normalized provision expenses [14] - Provision expenses returned to a normalized level in Q3, reflecting better-than-expected economic performance [11][28] - The net interest margin (NIM) expanded due to fewer non-performing loans (NPLs) [24] Business Line Data and Key Metrics Changes - The company restarted originations in Q3, with new applications returning to pre-COVID levels and a rapidly expanding pipeline [7] - Approximately $335 million of loans in the forbearance program were brought current, indicating strong recovery [16] - The company experienced strong asset resolution activity, with good performance expected to continue [19] Market Data and Key Metrics Changes - The company noted that real estate markets are performing better than anticipated, contributing to strong recovery rates [10][29] - There has been no significant change in geographic demand for loan applications, with a focus on liquid markets [37] Company Strategy and Development Direction - The company is focused on expanding financing capacity and eliminating mark-to-market risk [30][31] - There is an intention to maintain a higher level of one-to-four rental production while reducing exposure to small commercial loans [36] - The company plans to return to pre-COVID origination levels by Q2 of the following year [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ability to liquidate delinquent assets and the overall stability of real estate values [29] - The company is working on new agreements that have non mark-to-market provisions, aiming for a securitization in Q1 [17][47] - Management highlighted that the economic environment has been performing better than the adverse scenarios previously modeled [28] Other Important Information - The company underwent a workforce reduction at the end of September, which was deemed necessary for future growth [9] - The CECL reserve is well-preserved at around 29 basis points, reflecting a cautious approach to potential future losses [28] Q&A Session Summary Question: What is the production run rate for October and the focus on one-to-four rental loans? - Management indicated that the $63 million production in October is not the run rate, expecting an increase over the quarter, with a focus on one-to-four rental loans continuing [35][36] Question: Have there been changes in demand based on geographic shifts? - Management noted that there have not yet been significant changes in demand geographically, with a continued focus on liquid markets [37] Question: Can you explain the other income line item of $1.3 million for the quarter? - The $1.3 million in other income was primarily due to the reversal of a valuation allowance related to loans that were moved from held-for-sale to held-for-investment [38][41] Question: What are the current yields on new originations compared to pre-COVID levels? - Management reported that coupons are about 75 basis points lower than pre-COVID levels, but they expect spreads to return to normal levels [49] Question: What is the current full-time headcount after the reduction in force? - The current full-time headcount is approximately 180-182, reflecting a reduction of 60 employees [54][56]