Velocity Financial(US:VEL)2025-11-06 23:00Financial Data and Key Metrics Changes - The company achieved a record quarter with pre-tax earnings up 66.5% and net income up 60% year over year [4][6] - Production volumes reached $739 million, a 32% net increase in the portfolio year over year after netting out prepayments [4][10] - Core diluted EPS was reported at 69 cents per share, with a portfolio NIM stable at 360 basis points above the target of 3.5% [6][11] Business Line Data and Key Metrics Changes - Loan production for Q3 was $739 million, breaking the previous quarter's record of $725 million, with a total of 1,778 loans originated [9][10] - The weighted average coupon on new held-for-investment originations was strong at 10.5%, consistent with the last five quarters' average of 10.6% [9][10] - The total loan portfolio as of September 30 was just under $6.3 billion, reflecting a 7.1% increase from Q2 and a 32% increase year over year [10][11] Market Data and Key Metrics Changes - The weighted average loan-to-value for the quarter was at 62.8%, consistent with the last five quarters' average [10] - Non-performing loan rate at the end of Q3 was 9.8%, down from 10.6% in Q2 and 80 basis points year over year [11][12] - Total liquidity as of September 30 was just under $144 million, with over $600 million of warehouse capacity available [14] Company Strategy and Development Direction - The company emphasizes compounding earnings by reinvesting all earnings back into the platform and portfolio [7] - A strategic partnership was formed for the first-ever single counterparty securitization, aimed at reducing transaction costs and diversifying funding options [5][6] - The company plans to maximize opportunities in the supportive fixed income markets [5][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing healthy markets and strong credit performance [16] - The capital markets, especially in fixed income, are described as extremely robust, with expectations for continued earnings growth [16] Other Important Information - The company reported a net loss of $1.6 million in REO activities, primarily due to REO valuations [13] - The CECL loan loss reserve was $4.6 million, or 22 basis points, consistent over the last five quarters [13][14] Q&A Session Summary Question: Concerns about REO valuations and charge-offs - Management explained that the negative $6.3 million in REO valuations is primarily a timing issue, reflecting adjustments to market realities [20][22] - The REO is initially booked at fair value, and subsequent adjustments may reflect market conditions at the time of sale [22][24] Question: Current headcount and changes over the last year - The company reported a headcount of 347 as of September 30, an increase of about 82 employees year over year [30]