VEL - Earnings call transcript Q2 2020 | Velocity Financial, Inc.

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Operator

Good afternoon everyone and welcome to the Velocity Financial Incorporated Second Quarter 2020 Earnings Conference Call. All participants are currently in a listen-only mode. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Chris Oltmann, Chief Accounting Officer. Sir, please go ahead.

Chris Oltmann

Jamie. you, Thank thank quarter and participating Velocity in Hello earnings you call. second XXXX Financial everyone for

material. Joining are Financial Officer XXXX and afternoon, me Chief released press Mark and today we accompanying Szczepaniak, of Investor Chris results presentation, release Farrar, and include are which Velocity's forward-looking earnings second our I'd the control everybody actual Relations' outside Chief and company's our which Officer. the differ are this available President that remind Earlier may statements, uncertain website. quarter Velocity's Executive on today's may and call

For Also not is our other as with see communications discussion affect accurate to any recent call more statements of the the some quarterly that recent please our of in of content in and did shareholders, conference the only update including cautionary that looking -- risks most we results, contains other undertake made factors annual and the information and risk note that risk time-sensitive and statements. factors duty disclosed forward today could reports. of this factors

to non-GAAP We refer certain also measures call. on will this

our reconciliations Relations' non-GAAP of should on you to website. press For release presentation earnings measures, the and refer these Investor

company's today. and recorded be Finally, is remarks. to opening today's call call being Chris I turn over available website on the will now the later will Farrar for

Chris Farrar

we've managed manage business very and three, successful long-term goals. on then the two, three one, I'm to this say of just healthy last all joining guide outlined the our protect refresher, through pandemic. I call. I all executing our overriding and a everyone liquidity families well. on safe everyone as and crisis; us that Chris. three shareholders; Appreciate that it. these and and for And to will our call, Thanks Thanks proud hope that are through capital of success. ensure been us help earnings is small principles our owners employees On carefully your as

and We are employees our live. our part still and we communities protect have done to working remotely our work and where

shareholders, balance sheet to to of the terms continue business our manage In we create value. long-term and our

worst flow. we by plans cash many the of their to bridge Secondly, forbearance them help borrowers manage helped offering the shutdown

able long-term lines we very which through loans all eliminated attractive strong proud that previously to our Lastly, mark-to-market we also enjoy securitization our issue for to support debt to pledged faced. very cycles. all at the were risk continue that we warehouse from We're terms, market investors

team we'll resume our and the customers growth and to is forward, demand accept preparations Looking and to for that, new navigate final investors, successfully want thank With employees, programs, this making vision lending loan Together, the quarter. continued for eager I to plans our turn our indicating support. our applications third in presentation the industry the over all to materials. future. strong we are environment for your our our achieve and execute will partners

to off highlights, we've As X walk deck, the turn Chris through Mark over it just page the mentioned, to got some me kind and results, on of back then I'll us to of kick and start then to some and close. earnings with and

transaction to common in the Mark the we result which transaction, stock, bit. as the adjustment details Mark reflects extremely will on of walk challenging EPS common business mechanics, through temporary topic core a share. Later the through of and will in $X.XX net a X, the of from to deemed equity for resilient non-cash pipe you declared income think quarter We in you and obviously equity, but dividend all First of model walk $X.X we million page a results this a a results, had times. preferred the that on, a

good see in recoveries strong production crisis. In the the of of we're depths continued to seeing there and of even loans, portfolio terms resolutions the delinquent

we on our type bit terms the a little was of loans forbearance were to was a surprised see of on how at quarter. post-forbearance, full. in importantly folks second by $XXX made about very we're obviously some the their much loan those or monitoring an for forbearance either July, going and we've plan plan of little activity folks of a been in And And everyone. and of Also, us, So, are the over million still end of strange how going market. paid active payments to do time month XX% those for

was to So we borrowers it period, tricky were coming and and through thing really get pleased a very with we right forbearance of a helped time. the do out think the the of performance lot

those did In on our long-term it's two debt We see from reduction actually interest non-accrual total a loans, margin, there terms offset the interest was portfolio, yields the of there washed. proceeds, we an savings IPO so because quarter-over-quarter. in down but essentially of from with up paid our net that

that folks know issued stock capital, to that mentioned warehouse paid financing we well to sheet. $XX And of of all million securitizations announcements the you terms I lines then the that put balance as our good strengthen earlier. In and was on about really we off preferred convertible

the the I of Again, This It transaction. the if dividend, Turning don't just dilution. convertible to page bridge dividend, mark GAAP be preferred is will value. surprised do a material essentially anyone kind the was result clear to to did deemed loss think And from X. a share. core just just stock a per preferred What that its to redemption of we the most will. or is you earnings common real by transfer be essentially full as that's

period. pretty longer a the And is down the We model. COVID-XX that through this on dividend.” We new and look severe rigorous reserve. run So model item driving what's economic updated we The that's came for a slide mentioned a as other downturn and back. the That team the “deemed is results. forecast a more essentially sat for

a goes two out it think little years. over I

we're got of terms be in and that So, CECL. look a to did quarter. going think reserve for But increased in we've some we very results where at safe the

perspective, the the in non I other two some be with business right page summing to for over will again, Turning negotiations now are mentioned it from before new just five, we securitizations, counterparties mark-to-market. Mark, That warehouse all up hand of to financing. kind

So, now; on want basis, we significant closed the forward a very go business. in risk quarter. to to here that dialogue the have right third take facilities have we And of going out good expect

efficient the some for, of We our think, this only spent streamlined coming a not more little as terms process out of of the a operations our customers, more that will our got our internal we In IT processes. of better crisis production, downtime some reworking and but well. we've folks, and be

accepting all on those We back on loans early of performing. forbearances large, and quarter are the mention by loss that forbearance issue kind of applications now, September, plans third some did we're end But offering new excited changes over. to preparing new get to We forbearance spilled at hump. early stopped and right are plans the that I retraining the start so did then, in June. some We over into mit, origination mode very of again. lastly, those And and

what be pretty comparison As, basis, go to we've do small and already we forward a minor relatively done. that on should anything in

you the back see September. in that And the happy but we that forward loans. those goes if of, August refocusing we're very snake, new with and the only folks happen managing folks on, forward, hump we'll process. should through And looking making on their will. be and getting obviously, see their here, sort to we, pig feet to and, again, So, And resuming not over payments going

to over the Mark through I'll rest So to it with take the that, deck. of hand you

Mark Szczepaniak

masks Chris are good and pandemic staying I you all and, safe echo, good families I to a so. for outside change looking Thanks, go to like comments. and hope being your during this everyone. Chris's evening, like, afternoon, am of to able forward I'd opening COVID without

page of more that. go kind we per adjustment loss give on loss was $X.XX deck, kind per little to common of just follow-up share accounting the GAAP of the GAAP the the or explanation U.S. Chris I a or on want detail mentioning, to Before or share. and what common posted six into

when company have The that keep in an operating loss operating an to QX. it not mind, is have you in not loss. see loss, did We word

income QX; $X.X we its for net QX, that million $X.X million net to add was income Our year-to-date.

It's So stock U.S. it an a back there's is, has could happened has redemption there was called that feature, a future a precludes classifying went feature. this. embedded dividend, equity, no preferred deemed What because also stock preferred as us embedded out at get because, P&L cash no of together result hit put permanent the it a from GAAP transaction, the chance, company. When as the in of putting date. transaction redemption

above Equity, Temporary or below Equity Mezzanine our called category sheet. and is a in equity. balance liabilities It's goes it So which on common

Mezzanine to called has Equity. what's redemption when a required redemption preferred value. at its carry into their full goes stock And value, it it you’re So really

So redemption as June the $XX of the full million. of value is XX stock

was $XX common is because The – to proceeds. only proceeds permanent exercised receive warrants, $XX of not are allocated They're and stock equity, million stock stock in part preferred common the be books we warrants warrants are stock. the the actually that say So Remember, to in warrants. like million. on we buy those those around But because to can got redeemable.

up the warrants was stock XX the had that value million, to is redemption million carrying increase a preferred we the XX of value. to the it So million, less which XX

So deal it's million, that cost. XX XX million, another actually

sheet is That’s P&L. that of permanent said, temporary the equity, why balance at a loss capital XX permanent temporary through the up re-class didn't reclassification truly into stock really go not million, equity. and preferred XX. a million equity It's on just because our XX into P&L, out in carries So the a equity I

GAAP out dividend. per is of share temporary based any called into – However, the earnings it's deemed didn’t that shares stock, a was common out calculating of on income actual have meaning X.X reclassification cash to permanent the we And calculate share, you into per common temporary. But quarter, under equity of when have amount out door. common said that came deemed for quarter. when or the the what's the for it dividend, a go million equity off you're take to you classification And which you the by reduce earnings earnings statement earnings

saying divided the loss. we've reclassified, XX – So a you're got XX you $X.XX XX got XXX negative less X There's outstanding. million, your that say – million of by then take shares million XX million share million,

The have resulting classify. There loss. was a of So in result a and the It's of to thing accounting have ask perspective. no keep it's kind operations. operations, FASB to you more of operating you GAAP company does an the not where you loss as requires loss,

and pipe $X.XX, transaction that. so that on something the clear that's is So the --

originations payments we remember, much downs at our HFI happening loan little combination see look portfolio, no look XX portfolio back portfolio of million. fairly QX going QX deck flat. and HFS end crisis the we billion, a is We the was or now Page suspended composition the on hundred couple in the you of compared QX, X.X, a take the in over – HFI. is HFI the loan of little because the the left-hand – X billion well. Obviously, total so to was just operations you June there's and billion. which Now portfolio, at to the out $X.X taking were HFS on side, very and COVID again under is smaller as ended should of portion as imagine had of the a at But a a $X $X.X pay The portfolio

X, you of see at kind just the our our look right-hand So income portfolio we the net that waterfall. shows stay pretty portfolio And flat, about interest interest margin. X%. then the Page side could and net On related decrease

up, yield, the weighted the income interest the low you top the did NIM, the compared in the also if hand $XX.X debt and side, mentioned yield X.XX%. decrease the our up, side, And had for to due again, decrease pickup was the a we of yield decrease non-performing the side, going first for that $XX.X the QX, though margin average going non-performing on to net is million, right we portfolio X.XX%, look quarter. was in loans compared of earlier, -- get because Chris margin in to the the is Our is million so down, a as our And right-hand cost. but at amount as QX our primarily

debt due mentioned of coming down, kind to it's been a we pro So, cost of the structures. rata has lot

debt So, cost. picking those if do we pay the of in going sequential could down, more the on to up we're be

over down the cost You happening, three that has well last due see the quarters. down in yield to non-performing. debt the going increase is is trended But as

look down you the is compared take biggest the loan if at HFI page On eight, So, portfolio, a have the QX. we to portfolio. margin

non-accrual quarter the the to X% non-accrual we non-performing XX% ended at In under about of terms compared end loans the of loans, with just QX. of

keep which has held LTV we've So, LTV, The guarantees, as charge-offs you stay a lot charge-off FICO rate low to very those and average, XX% score charge-off to One do thing borrower continue consistently. we to in said non-performing. lot said non-performing historically, mind, low that has our we've to of is see high personal reasons there of been it good on low is the up. low. the compared A is always the with very,

a on in quarters. look quarterly under you the hand basis any right three in one charge-offs basis, XX quarters, for those at If the of points side, last

ratcheted charge-offs of And past be going forward our has remain low. the based consistent our non-performing kind on charge-off the the we've had are to we're and kind structured. although up, rate way expecting hopefully So, in of what loans

on CECL the reserve, take we reserve page QX. loan to was for loss has Going of The did increase part our the the nine, mentioned due biggest Chris an forecasts. to to of terms economic in reserve that

$XXX,XXX re-close the businesses imagine it we economic I'm now that second during the a and think the of reopening and increased bit that end QX that QX, forecast kind piece about the the I piece by stress period a resurgence the of scenario as COVID use little for used were of at COVID, we mentioned stress and scenario QX, the kind scenario was wave to of QX, CECL just we a again for in on use QX. virus, can QX the COVID at because model of of CECL had to stress you again. we end adverse was we of longer sorry -- COVID And the COVID more to experienced recovery that model the

So the model we reflected that. use that

of where an it was it hit of the -- instead so the inverted peak a and And kind extended a came more down of curve little peak of then the quickly, it was was -- more an little U, bit longer. that V, more where of kind inverted

QX based felt we on provision need additional to so that And model. the take an for

million of points. $X.X loss the portfolio end QX, at at basis of So say now points, a at full XX we at the last loan the end where of we're or reserve were on our year basis XX

in resolution So, over that, we've sufficiently second kind reserve asset that to to a at position go of the that that where we turn it's to we've on on it And and a Chris, scenario based good adverse quarter feel based run. with now is activity. through increased that you COVID I'll

Chris Farrar

Great. more Back resolutions. Thanks little that. Mark. XX, just Appreciate on a detail around

but the Mark really were to the how mentioned, focus we On back, current we penalties. as that will out as we quarters with be on, into all We get that of as lower will of emphasized yields, contractual pushed get is the some that our and interest thing future that non-accrual well higher resolutions main roadshow, the just recoveries those critical us loans. anticipation

recoveries So, QX, really here. of out report it recoveries us. I’m in important for pleased again And kind strong are in laid detail to a in

being had week seeing and in the special perform our to are for really the the was California XXX% refinancing, up, was servicing and values the held that's borrowers a off, think bidder a continue some much we lot just us, by it with They're last speaking there. courthouse full just of good see very have XX, for than borrowers paying to estate markets it foreclosure know, quarter. wrapping times up to recovery properties and in strange real On helped kind markets those paid went in the team. I healthy a of off that feared you So, anecdotally even better shown, us people steps that all gains, in

on starting continue markets see to and And so, things perform. to par

department. good special staff So we enhanced the in our think for servicing that's We've resolutions.

growth, this on some resolve as and increase and to income Opportunistically, profitability in lower higher of drive this there opportunities speaking good coupons. we prepared handle here in think all we can working well to them and and of higher – is delinquency, to and assets continue are assets LTVs again. And favorably. with originate those we of through borrowers to think to terms lastly, and then at to start we blend we're those We environment expect top

rich, perspective, think I it's ROE attractive. very its an probably very So, from

out start it risk so we a return standpoint, here. but of how forward. removed very lastly, But I then we can to key we're and capital we our things want optimistic mark-to-market goes good lot put And And for as customers. work demand roll see already we'll from hearing that going operational to pro just we're good the that very again, mentioned,

So we're as less that and completed well. about less very getting excited in business the and volatility risk

So think that presentation it up deck. And open our up wraps now. I questions for can the of we

Operator

begin at from gentlemen, first question-and-answer with [Operator comes and Fandetti this today Ladies question. Wells Please the from we'll ahead your session. Instructions] Don go time Fargo. question Our

Don Fandetti

residential your worked How about more being out? being certainly materialize to out didn't historical? non-accruals, Can you housing expect up see clearly, know, is the into I not refinancing. larger that those more up a there will on well, get if you sales, those I Chris, would charge-offs. sounds how market so quarter, talk really just be really the holding worked you versus mean, you like little this bit think and it do Yes.

Chris Farrar

And hear sure think, very the to markets. would to see between folks to you're similarly – is expect, through through come work goes and we'd to tend time to work how historically we that view from help at but it robust the that, we off, each it it we've will by, Good off, backlog to that guess, it, Don. the doesn't some as get overnight, folks selling past many has it's you. so that, – I that. think of tried sort think and looking one in can XX-XX will divide properties. pretty get four I in portfolio, stable, be Yeah. for Yeah, But take investor declining. -- Sure. resolve their so off as Hi, take doesn't we'll I work our refinances it to And you right I three, going to quarters it month

Don Fandetti

you any thoughts not outlook So point? the accruals have Mark, do NIM in I have this peaked on not am at near-term, sure,

Mark Szczepaniak

and in where hi. decline is around portfolio our and peak well, around of at our start XX.X% more to Yes, July, hear a one thinking Nice loan, taking see is kind on like now way, you've it's again. level at way like we'll was of focus you, as entire queue, look our By XX.X% a like that metric – if looked we're in going right actually QX. over probably done. and XX.X% forecast it’s HFI the end the XX.X%. going slide, like you we're to is one look a like We're the XX% it's or know We overall there HFS the taken take where well at to out and XX%, it XX% to

that our forecast. we to and see would decline start to be start already you're So gradually going that's decline think some to

Don Fandetti

on get advance new And then obviously, be? do bank the enough you cash, how you you'll those pay could material to I originations the mean as do going How lastly, are pay just mean start again, expect but rates for to you you good loans, have a I Okay. downs? originate

Mark Szczepaniak

going going race the out not we question. back We're good to start Yeah, slow gate, coming of to where were. to we're

with do So figure kind and expect our demand we to then interests, yes, retained grow the see from as and warehouse also go to provide we'll have cash should out, want in of enough as our the we are resume, talks, that in as as there and capital that. levels waters to we're as well. but banks of to coming flow and some cash have forward, positive originations. to We we we investment well, providers And capital test so financing mentioned I have where

room combination for of us So of give growth those the capital. should plenty

Don Fandetti

Got it. Thank you.

Operator

Stephen your Our question. next from comes go Raymond with Laws question from Please James. ahead

Stephen Laws

around reevaluating Good performance bit, the Chris, well. hope that afternoon. product noticed Mark, liked you you both and hear seeing offerings. your deck due offer? and COVID about little I certain can of in geographies maybe maybe you. a that product give talk little in longer Page first, impact? being good that outlook is from no you're post I made you Is with there portfolio? something a color guess I going what in on us it X, are types specific you Yeah, what or Hi, about the Chris, to it guidelines Can products maybe changes more an to to talks you the COVID

Chris Farrar

then to just more going at the evaluating performance we're see our opportunities. we where looking we've Yes, team, FICO lower scores. and delinquency definitely Sure. – We been with see at

So, But a raise out be to basis, are see that businesses area. a much to going with property then going types minimum careful we've property going or on that'll certainly there. the across forward And on to paying, our go key those what's make be probably going looked the we're score, portfolio, we're initially FICO to sure tenants don't lending there.

thing I on that a specific aware to and have there would that of same we be thing then, adjust to I a if will walking we mess. like there's just that as going in COVID we say, the geography that what's need or will And to into something of -- think, happening municipality for. with overlays the question at asset So, sure just, a really where well little make and bit want it, understand type be of any feel

probably core XX-year of loan to We offer short-term our won't going of product. and of right that go gate with That's initially the gate, broadly I bridge out bread our in speaking, So, but traditional we're out add butter. think time that as progresses. kind the

off have sustains which to the just of fortunately just if into coming our see back will the kind we're go. toe dip So you portfolio, going the and we water it earnings us, so

Stephen Laws

do level the be that originations and so business costs expect things new to get today, all to thinking those where and ago? and -- financing compare think characteristic just about your higher in markets with Chris, take that move XX how finance meet when those of on about six and to to certainly you risk pricing what those Securitization how do ROE you Great. their higher to the or non-mark to new maybe costs loans how months here, market order in that and maybe it does to heightened then for targets, rates are facilities.

Chris Farrar

question. Yeah, good

market make expense it's that aggregate in also lower impact but cost, a those at far any the really look Yes, loan much We securitization economics peace execute we mind more the ROE, and more important we on true we benefits we any haircut, favorable. quickly is huge have the fairly that those in the that outweigh we of structural is big the or more for and just can don't non-mark aggregation of are of marginal where so facilities securitized IRR we facilities, driver the think have have market. we that way to period, on and not interest it during So really lower think a of an aggregation ROE. factor

margin it ROEs and XX% price think on north with securitize we we can stuff. at So, new product of the

I there the so determine so markets QX have And backwards the we pricing about very And saw just very returns look those ROEs. from work if healthy securitization strong conservative I we like. and in are what markets securitization guess was back exit the think quickly, they in very to But will I from today will execution and ROE. bounced that where we're being think, are

Stephen Laws

helpful. That's very for afternoon. Have that. Great. good a Thanks much

Chris Farrar

Thanks.

You you. too. Good to talking

Operator

question. ahead from comes Securities. go Please your Our next DeLaney Steve question JMP from with

Steve DeLaney

and you deck of everyone clarifications Good afternoon Thanks. for on the your this a detailed thank complicated and quarter. things couple

that above not certainly the above certainly basis enough of that -- factoring well we in I windage XX so there non-accrual -- applying mean floating But say for a loans it the because say. in were good I high assumption, you your over is as held As I far loans increase to XX. non-accruals, in that guess for we investment impact the consensus in like high points, really to portfolio, rate is Should no -- would would increase the is the Chris? assume not material

Chris Farrar

is. That Yes. That is.

Just debt, there so is to all at loans say the related large and non-accrual. the fixed very remember, I a be to majority very, all, of are it's underlying so would interest should no rate factor

Steve Delaney

Great.

of the Okay. And quarter. that course was a meaningful chunk in

Chris Farrar

Yes.

Steve Delaney

in the -- quarter. then day, economics not to accounting you -- able second its the of we rules There's the end recognize and at has that the economics rules, non-accrual were okay interest,

about resolution interest, As workout but possibly penalty is due look quarter. I talking be recovery had correct? some right just you principle, all in your I'm at second about assuming XXX% in And would you through you're including that go the that not that process. talking interests we you believe you're

Chris Farrar

That's correct.

Mark Szczepaniak

is X% that we of interest back whatever. principal of and interest, saying that XXX% and our principal contractual got or gain actually The on all either default and prepayment or top also made interest, a across

Steve Delaney

Great, yeah.

to one entitled entitled So two under of everything principle, you're you're the a but deed not or just trust.

important least know meaningful, have that look trade road, thanks you for the it's or assuming the at temporarily recognizing, credit very the we recognize also to as this and but doesn't NIM Okay, we'll due COVID and and just of trend at record clarification. to is get or then when it's a it's levered it a at than track that you to carry helpful and quarter, something worse that isn't the thanks potential that's income spread, related, look have But you this because but down eventually you look think. that certainly that at something

Chris Farrar

if your point and to non-performing on definitely hand that's the right that's hand why, that accounting hand for to the the high is at on the sides And historically we for at the side it side your was days because left standard. low due But point, right economically, that's very hand gap industry left side, economics. for one it's the losses been past the and charge-off kind And XX can look non-accrual well. and slide that charge-offs of right you side put QX the that's hand non-accrual, low and you see it were gap as the taking actual

Steve Delaney

Yeah.

securitization and at July June million loans of the Okay. -- pushed we $XXX are think. into on Great. on mixed or get securitization, around still XX, stand Thanks. the I that loans there, for sale held where any I those those do this had Are in HFS kind did point? at those in collateral And did you a of then know the

Mark Szczepaniak

securitized So, so HFI. as be the and everything will loans HFS QX all move held for so all into HFI of got Stevens, it'll just

Steve Delaney

Great.

very good. Okay,

that's have -- category, we So, won't forward. going that

Okay, great. my last-- And then

Chris Farrar

a probably were loans. little don't exact so, but kind I color the just short-term or very of And there. large a -- Right. portion, number, I'd say have XX% the

Steve Delaney

I'm what -- That's

Chris Farrar

think So they're core than our other they'll expectation but product. in I faster our pay is that securitization, off long-term much

Steve Delaney

it. Got

Okay.

Mark Szczepaniak

short-term what, $XXX about, so was Yes, million -- $XXX that million securitization the was and the about

Steve Delaney

that’s MC and I -- the that’s had Yes. I that for assume something or stand mix collateral ticker notice

Chris Farrar

That's exactly.

Mark Szczepaniak

Exactly right, right. exactly

Steve Delaney

That value into but, being the your guess. if-converted, account preferred $XX.XX XX and March and on dilution with the lastly, value and $X.XX. the of book Alrighty. taken was had to taken respect impact actually offline, this the accounting down or $XX.XX. handled best at Mark, to book We the had and my And preferred, then maybe

holders a a to there now much and say, that don't but go be how that's this. basis So you're $XX if, just within Series is that common question that number But go issued. were you build like of implied A think there's is Then Is my you know was the going mind the that week an in your they about going common. the I equity to there answer next assumed there would to they convert analysis in would forgot decided if let's dividend because that $XX can shock, into showing that Of that, is I XX.X that we $XX.XX then Is if-converted had not like, Pref million share? in. a in my simple a equity million, on -- got and convert. dividend number shares have million -- in to as -- to

Mark Szczepaniak

right Yes, show the let financials now, -- me well, you'll the see the tomorrow. in way Q and

million go and those into it shareholders point, But of was equity came temporary and $XX like million dividend $XX tomorrow back in to that your up all $XX $XX.X the million, out down a common temporary. common entire preferred million got -- if converted common roughly deemed equity would $XX stock. to You into

Steve Delaney

of the dividends, for period So $X-plus forward some value took account time. for theoretically a going for we hit account to to future dividend book just the stream

Mark Szczepaniak

hit book, We to took a hit. We to common -- equity careful, took not total common. no, really book because to Be value,

Steve Delaney

hit why I the That's common exactly.

Mark Szczepaniak

Yes.

equity. So $XX.XX net $XX.XX the with the whereas -- is common the that

you're on full the because It's They a stock, the put equity, value. the common a to redemption at like that reserve. Once hit back. is to at reserving company basically the no put time common chance can't it to put, stock common up equity in took right? some they’ll temporary back we covert is So there

Steve Delaney

right. That's

Mark Szczepaniak

That into and stock. deemed common all back dividend goes

Steve Delaney

Very Okay. good.

if theoretically in at that -- equity. recoverable So, some you is common into $X it's loss will, book value, point

Mark Szczepaniak

Yeah.

Steve Delaney

great. Okay. That's

value. dividend, different the that resolution, same had non-accrual So get We as the I well get on that potentially back back question we and this in about interest. deemed

both I'm good with with those good I'm so of So, -- things.

Mark Szczepaniak

why That's have of and way, on as the be trying clear term is, well to stock, share loss I’m very I've clear call. Yeah. is to per it common to gap gap... because be for you to call put say, a that had I the This this what on it's

Steve Delaney

I understand.

Mark Szczepaniak

But if through it’s conversion just cash loss. happens, reserve. in the happen, your that operating was future. It’s went the comes out no It's a something point, nothing loss all the went permanently. into away, door. There a in a back the company, case But reserve goes should in everything redemption to P&L; no

Steve Delaney

comments. your both you Thank Great. for

Mark Szczepaniak

Sure.

Steve Delaney

helpful. Very

Mark Szczepaniak

Sure. Thank you.

Operator

Arren go question ahead Citi. Instructions] from [Operator comes question. Our next Cyganovich with from Please your

Arren Cyganovich

Thanks.

kind In of in one this, terms investor small of – of you're kind you you've terms are mentioned ticket that seeing the and but of theory? other to difference the your already any versus four maybe seeing is non-accrual

Chris Farrar

versus It's commercial, a the massive to Hi, small the call to Arren, not outperformance not materially one the Chris. pretty the It's would I on but Yeah. slight four and consistent something portfolio. We saw different. that weightings in

Arren Cyganovich

for Okay. theory. have many terms you a on shut ticket customers in Do to don't – of feel Whether been the small planning know, not are this, And keep lot folks PPP loans? of base the a were I if the the the you from much impact small pandemic. but going? have able customer how feel on those of or doors about businesses or to There's discussion of for access

Chris Farrar

see don't aggregate all any with of kind that asset I team. the are we tenants we way that that say, We're share say, We're data And seeing asset paying I'm at to in. everybody's people Unfortunately, – up can our have managers trends our while and in seeing put of shut my you. the head speaking don't out servicing loan don't fine. the do our the special with and We seeing we're and everything Yeah. board. across her – level, everything folks literally

there report theme too of widespread common real kind data. give it's that I you So, to could any any

Arren Cyganovich

any Okay. seeing and in change credit trends through Are July August? in you into

Chris Farrar

Yeah.

with into see just as month work experience. they how for we've on past probably through the was for forbearance to stabilize Mark do, to make how -- the So XX%, pay, the based stabilize the delinquency we'll will payment it as see down assets basically interesting downtrend and and be takes second go be have who if are we'll those we we mentioned, to they just far, how buckets we're roll that way out. they on well, slightly. to miss we The And of July, it rest if it next and that few so a It obviously or foreclosure, – thing that saw first didn't note straight so off. But through as now. slight these performed going planning quarters up ticked time plans to these seen it them delinquency shakes through that work where

Arren Cyganovich

terms Okay. the toe be of originating your continue mentioned And then you'll to originations, your the to as able modestly? we think portfolio the in new actually to portfolio dipping expect decline you lastly just should had grow loans on, you in water or do

Chris Farrar

Yeah. going able see But – back get expand. be acceleration – by And back start tell are. we'll a real XXXX, and into We see time then see definitely think, forward we think as I to be is point QX. expectation see, obviously, where our to we out to grow will the – portfolio there we'll We'll where the there.

Arren Cyganovich

much. so Great. Thanks Okay.

Chris Farrar

Thank you.

Operator

time, And at remarks. gentlemen floor turn like additional management this I’d ladies to no for closing any questions. and showing to the back it’s over

Chris Farrar

Nothing else for Thank taking joining call. the cover? you for me. the Mark you we time. Anything And appreciate all to wanted you

Mark Szczepaniak

for too, it just transaction questions hopefully there a but Again, No. out It's bit little thank explained is and good you, very hope properly out everybody. we there. for us a bit tight little

for you time. your So thank

Operator

call. gentlemen, conclude and you Ladies that, with for joining. today's We thank conference we’ll

You may lines. now your disconnect

Velocity Financial (VEL) 12 Aug 202020 Q2 Earnings call transcript