Velocity Financial(US:VEL)2024-05-03 16:18Financial Data and Key Metrics Changes - The core EPS reached an all-time high of $0.51 per share, driven by fair value gains from new originations and net interest margin improvements [25][31] - Total loan portfolio as of March 31 was nearly $4.3 billion, reflecting a 5.1% increase from Q4 of the previous year and over a 19% increase year-over-year [9][70] - Nonperforming loan (NPL) rate at the end of Q1 was 10.1%, up from 9.7% in Q4 of last year and 8.7% year-over-year [10][71] - Total liquidity as of March 31 was approximately $79 million, consisting of about $35 million in cash and cash equivalents and $44 million in available liquidity [11][29] Business Line Data and Key Metrics Changes - Loan production for Q1 was almost $379 million in UPB, a 7.5% increase from $352 million in Q4 and nearly a 75% increase year-over-year [69][86] - The weighted average coupon on the total portfolio as of March 31 was 9.07%, which is 19 basis points higher than the end of last year and 92 basis points higher year-over-year [70] - The CECL Loan Loss Reserve as of March 31 was $5.3 million, or 19 basis points of the outstanding non-fair value loans held for investment portfolio, within the expected range of 15 to 20 basis points [29] Market Data and Key Metrics Changes - The securitization market remains supportive, with spreads tightening more than the rise in base rates, leading to improved execution in the company's second deal in April [5][30] - The company issued a record $2 billion worth of Letters of Intent (LOIs) in April, with the highest number of new applications in over two years at just under $400 million in combined UPB [6][69] Company Strategy and Development Direction - The company aims to increase its portfolio to $5 billion in UPB by 2025, supported by strong liquidity and capital retention strategies [87] - The management is focused on taking market share while maintaining healthy margins and deploying capital efficiently [75][67] - The company is targeting larger metropolitan statistical areas (MSAs) for its portfolio strategy, avoiding rural and tertiary markets to ensure quicker asset turnover [35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing healthy employment levels and a stable economy as positive indicators [73][31] - The company is seeing increased demand as banks tighten lending, allowing it to capture more market share [14][5] - Management noted that the delinquency rates will largely depend on the overall economy moving forward [75] Other Important Information - The company completed a $75 million five-year senior secured note in February to support growth [30] - The average loan-to-value ratio for the portfolio declined slightly to 67.6% as of March 31, compared to 67.8% at the end of the previous year [70] Q&A Session Summary Question: Trends on REO sales and exiting assets at a gain - Management indicated that they are disciplined in pricing REOs to avoid distressed perceptions, which helps in achieving better recovery rates [83] Question: Comfort level with liquidity position - Management expressed confidence in their liquidity position of around $80 million, indicating strong visibility well into the next year [49][40] Question: Growth in broker relationships - The company is actively growing its number of approved brokers, currently having over 2,000 and adding to that list quarterly [100]