Velocity Financial(US:VEL)2024-03-08 15:55Financial Data and Key Metrics Changes - The company reported a core net income increase of 77% year-over-year, marking a record quarter and the best year in its history [32][38] - The total loan portfolio reached $4.1 billion, a 5% increase from Q3 and a 16% increase year-over-year [11][12] - The net interest margin (NIM) increased by 18 basis points from Q3 and 68 basis points year-over-year, reflecting strong growth in originations and improved portfolio yield [13][36] Business Line Data and Key Metrics Changes - Loan production for Q4 was over $352 million, a 21% increase from $290 million in Q3 and a nearly 27% increase year-over-year [9][10] - The weighted average coupon for new originations remained constant at 11% throughout the year, with a weighted average loan-to-value (LTV) ratio of 65% in the last six months of 2023 [10][12] Market Data and Key Metrics Changes - The company noted that banks continue to be constrained in extending credit, which has allowed it to grow its portfolio with compelling risk-adjusted spreads [33][36] - The securitization market showed improvement, benefiting from lower base rates and tighter spreads, leading to a significant decrease in the cost of funds [35][36] Company Strategy and Development Direction - The company aims to grow its portfolio to at least $5 billion by 2025, focusing on delivering value to customers and shareholders [37][23] - The management emphasized the importance of maintaining credit discipline while pursuing growth opportunities [49][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market position, expecting strong demand and favorable asset resolutions in 2024 [22][23] - The company highlighted the ongoing stress in some segments of the larger commercial real estate markets but noted healthy demand in its niche [33][36] Other Important Information - The company completed a securitization deal in Q4 and issued $75 million of senior secured notes to support growth [20][21] - The nonperforming loan (NPL) rate decreased to 9.7% from 10.1% at the end of Q3, reflecting successful collection efforts [14][15] Q&A Session Summary Question: Outlook for production and funding in 2024 - Management indicated that production is expected to grow, with a mix of 1 to 4 family loans dominating, and they plan to securitize every 2 to 3 months [25][45] Question: Thoughts on the Century acquisition and fee income - Management expects significant fee income from the Century acquisition in the second half of the year, with a pipeline nearly 4 times larger than last year [26] Question: Risk management perspective on loan growth - Management emphasized the importance of maintaining credit discipline and not sacrificing margins for volume [48][49] Question: Expectations for quarterly production numbers - Management did not provide exact guidance but expected growth throughout the year, consistent with previous trends [51] Question: Capital growth support from recent fundraising - The recent capital raise provides a long runway for growth ambitions, with retained earnings also fueling expansion [52] Question: Success in asset resolution and delinquency management - Management attributed success to disciplined underwriting and a talented asset management team, with favorable resolution times varying by state [69][70]