VEL - Earnings call transcript Q3 2021 | Velocity Financial, Inc.

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Operator

Good day and welcome to the Velocity Financial Inc.

Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to Officer. conference like Oltmann, to now Accounting Chief would turn over the Chris I ahead. go Please

Christopher Oltmann

Thank you, Financial's everyone, for results. Glenn. Hello, the us for discussion today joining of Velocity third XXXX and quarter thank you

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

other time-sensitive factors conference forward-looking results, see statements. Also note, do call. our SEC. with disclosed measures update this factors any that For to filings that other also of and shareholders, contains and duty today, as not factors the a the is in discussion could this the including on please and some undertake we We content our call risk in statements with risks only of accurate of made to information cautionary risk communications the affect non-GAAP certain refer of may that the

non-GAAP later call the website being company's Farrar. is recorded For will to the be should finally, today's on over Relations I these you the call reconciliations earnings of Chris Investor now refer and measures, And materials on to website. our today. available turn will

Christopher Farrar

I driven are hard the lately. day in as records. People our work seeing call. today. by BPL fantastic to demand team thank estate highly welcome we and engaged is really we're quarter demand results been supply, we we And imbalance, segment, just results had in environment, every a securitization numerous especially the so all our to quarter everyone have very who markets, my for enjoy Chris, broke customers achieve Thanks, reflected want helping are real And members our historical a of which and to products, that Obviously, excellent which first operating off, strong succeed. seeing and third a large healthy all announced the

just in originations, beating funded our million in million, new quarter terms which $XXX In over was in record obviously of of pandemic. $XXX the we QX, pre of loans old funded XXXX, fourth

rising we're Our has Recently, applications and rising automation before, sequentially in building. amount new us rate pleased dollar become September systems million October, through new been portal is the lot historical efficient over to investments of of and been report and in empowered than months $XXX there for have to coming with million in environments. that historical continue experience set and our to mortgage of momentum new pre-COVID broker in rates, record as our the breaking again, press about our October, $XXX a more a of submitted of XXXX. loans ever has increase, past were record applications October

trend continued of loans non-performing REO. well before resolved a we few see special working are team done and to asset becoming to servicing loans reduced very customers has also Most the job final issues. and quality, with with we're resolve loans, Turning foreclosure, pleased our delinquent great

pace benefiting expenses capital these fourth there third a with On obviously year in team deal very are with our side new the markets has our planned in of business, the closing costs been the securitizations. from keeping interest lower originations of December, our financing securitization busy and October,

week. that excited by Our goal next goal that will was new for in loans dollars I'm XXXX billion a to pass fund and

help investors learn value. and to levels, to challenging ultimate and on focused opportunities real highly their shareholder with customer improving portfolio grow continue our our finance market to we estate are enhancing people As take goal service share developing the we of new

press is from team market sector, the and to are dynamics ability continued that we're out earnings I down off on Starting clear to our favorable make the our one focus little previous are the confident about -- We very sales. of Obviously, us $X.X million that loan great like all our million And the support from that unique to our in earned capitalize primarily will of those release And to was on to now we quarter. prepared sold off earnings quarter. in the review Our more and appreciate we grow on point an just presentation slightly we and in I'd third earnings QX materials of off stakeholders from business. did kick well page in our in quarter. detail. we've perspective, about three, core thing a tried the $X.X here.

about when sold had from about try and although we would higher. periods. whole talked those pace sell so so And kept that we is and will obviously sale in loan evaluate be in not a securitize gains, picked our have potential we know, that past earnings, Obviously and decisions, to in up securitize. much recognized the loans, at be bias loans home you we future those we this We've opportunistic quarter our been much, and to core obviously

loans. XXX growing mentioned interest out and income is good really NPLs with added as drove very portfolio production down come earnings quarter. the obviously points nicely. record quarter-over-quarter. pleased new And importantly, strong, we came The which perspective, in From basis So NIM growth how I

said seeing there So, we've backlog well. just slowly as stuff and performance eroding that related as we're before, of good COVID

upsize on And period. continue financing facilities our in as ATM it $XXX have market period then to grow. a be all did We just very us to here of small that been sure mentioned, plumbing extended $XXX the a two-year strong. in stock us. work has securitization we one program. and and million establish sell good still did And million to make it's a amount of good we the see On pleased to we're did an to from and place, the that renewal finally, to have continuing up place we we three, very side, to so And to I capital for to program slide that

got and a the page the of very shares. capital perspective. in good we've the from So conversion announced position subsequent financing end, On good previously support to four, a quarter we preferred

I up potentially that we that's we've that could there's out third mention, then hanging closed there securitization did what in cleaned So there. good, no uncertainty and happen finally, And October. about

in of turn this has all, walk to I'll Mark And that, over with presentation. all it So you to great been the rest the momentum. through

Mark Szczepaniak

Good unusual page income core income quarter. five book was the and On so value million for And there good for growth, our afternoon. evening, same income really Chris. GAAP $X no items, the everybody. QX were Thanks, and core

an come As more Chris we QX had that's of loans, because QX, in loans on hold NIM down. we only in sale and couple two out did of a comparable to because gain mentioned, we of a cost the QX. for had core has we to in sell Where about $X.X about sale see, But on because of decision income $X.X overall securitization next into the gain a million million. conscious made put slides, securitizations our $XXX,XXX we'll has more widened them as our originated

basis. did loans our normalized locked you forward that of on build So into that in securitizations and income actually in basis we go kind thought a QX and the gain put per Than put take was run had QX $X.X and just it But rate to more that NIM company very out in on about a we million core than basis $XXX,XXX if it on higher normalized the spread. just prudent like QX, value in share. pure book QX a XX%,

share $XX.XX quarter. increased at the quarter-over-quarter from $XX.XX that see end third to can a You it's of

of loan loan production, production. at is company Looking under QX, hit for $XXX again, we a in which production, record the million

we So single little very hit a in just for a month. production That's strong. is for record October, company the $XXX million a And the over of month. bit actually

there, appetite great production is mentioned, is we're Chris our numbers. very as and seeing So real product estate for market strong, the out the

the our very average of LTVs balances more taking than products. XX%. across $XXX,XXX. kind for growth portfolio, throughout And growth at quarters any five off our has all it's you the or you growing that around all see XX% portfolio, are ended at last consistent under the experiencing compared and It's loan loan other, good the of the staying our been we've $X.X the billion, in the can the gives And one around right the QX. in-place good our been On quarter four holding to production product that the that slide, are just growth And while billion we're $X.X right not of portfolio this look we about products. bottom

and everything's same at terms to and So quality good been but production. the our the the time staying growing same of credit, in commitment LTV

was increase the about XX so Our net driven basis interest That Net the third by interest quarter margin X.XX%, of point mainly over cost of talk margin was X.XX%. funds. QX. for

cost at X.XX% X.XX%. from QX average If you our declined right of to hand QX funds side, from look to the

So out see lower cost And as complete we for and we're the XX% $XX.X securitizations, total continue putting million, NIM. QX to on about was increase reducing these compared the of million for interest you'd widening income there. QX net funds $XX.X cost our entire

things towards we that some loan compared of to the as of go if we end working the of very special a to of department that last program, the that's these and our year, our XX.X% loan non-performing you with at COVID, getting up mentioned, Our at and investment experienced all with the portfolio ended Chris COVID resolved off performance rate, we're XX.X% continuously non-performing the XX.X%. the of been during end And we've the drop forbearance QX servicing and at successful heat higher year ratios successfully. back quarter end

fees. collection current still prepayment by very you loans at success there. working mind working at the above what's and loans. the We're with painful maintaining Keep low on great and collected non-performing long-term table, contractual off that that in very we're UPD the by either the out paying interest fees, REO. paying interest the going that by can successful on default non-performing successful paid positive but months current. the to foreclosure And to due the happening next default XX.X%. to gains the loans loans end nine of at coming this to the prepayment over off make And these loans if we're We’ve the And little term see off short again, in activity short in high the slide, So principal subject you of of non-resolution very in terms look or term interest. and and we continuing

overall see loans. these gain making a can on nice you resolution So still the on

around or right were QX slide $X just XX, was Next to for we the CECL At reserve fairly our XX QX reserve stayed due height, million like that XX to and it level. comfortable like XX forecast. million XX feel seesaw very points. around its that basis And was macroeconomic points, mark constant under with the basis

our a in very height heavily, that of into If macro-economic the during the COVID forecasts you scenario and the that all CECL factors recall, stress forecasts reserve model. course, And went stressed go macroeconomic pandemic, we use COVID the economic up. of are

Now factors or severe macroeconomic a to have requirements. with that status back close more at normal returned to same those less of forecast normal. economic comes type reserve And much least

around end So of of that as a andXX, couple a or XXXX, XX now around right points. are the pre-COVID we comparison, running because XX we basis saw at XX we're

our pre-COVID. So was we're down, even what X.X reserve bringing times, still it running

about you're And to it's as over starting the because coming turn you, as the $XXX,XXX is see that charge-offs you'll you well. quarter, our loan for you we business. to next what down our if go-forward closer charge-off is rate back for kind charge-offs on I’ll coming coming for down see for come production back I so years the those very non-performing down Chris grow. charge-offs again, expect, quarter outlook go several to $XXX,XXX $XXX,XXX quarter, back think kind if to rate with low the of right slide, loss around that, very So per to normal comfortable of continues

Christopher Farrar

of Great, activity clients as thanks, think ways up to we of often Mark. focus up terms originating strength. summing actually that XX types our and alternative we of to help kind good the and mortgage in Mentioned rates here end seeing that rising very tend look revenue addressable there us on. for generate just the market, loans

think of And there demand. give there in just so good us number factors terms in a are we lot a the forward-outlook of that of confidence out

on but stable earnings rates think we such working obviously, And we and just then down still we've slow side, having the delinquency. down access again, securitization. level, to taken, is improvement That expect And high to going and performance, that should still as perspective, more stream and and we continue levels from keep that financial grow because to the the different short portfolio steps in On our from building then add a loans. came get lastly, from sometime to the capital year. capital then the term back next we from but warehouse both liquidity capital, markets normal longer the through we've the got the mentioned, to term

book our about is value economic was the mentioned introduced feeling XX, capital position. this So final last last The good of we time equity.

cost. fair do value know accounting, we As our we amortized loans carry you most use at our not competitors of a

we some to try of that of would there the fair presentation, to obviously it, important impact it's type we balance were do if feel value our type we sheet. presentation think So layout to

to So embedded seen got only last around portfolio of well up not or of the couple value annual in production more level. build as a trade The but fully quarter of as in platforms value. XX% gains again, equity, so, sort we've that of the here premium, there the the diluted platform the

very So book up under plus think method. fair a there's the in we value this equity can is XXX see of value. significant pretty platform And pick you million for

open So and presentation, wrap up up formal that'll now. questions for our we'll it

Operator

Please from Instructions] with [Operator comes go Laws question today Raymond First Stephen ahead. James.

Stephen Laws

your the there's XX decline delinquencies on notice loans. that and continued progress also performing of in Fantastic afternoon. day good Hi, NPLs

that of quarters? you how think glide coming So it a but type of about of making kind you there a the the NPL at? right headway normalized Kind seems do public there. any like, target to COVID before came of lot what's look we level unfortunate path Is guys timing, and over hit,

Christopher Farrar

Sure. Hi, Steven.

XX to So kind X% the we a been roadshow range X% of years. for it's guided over folks that's last where on delinquency, the to historically

So up. that's end good making to progress there. where We're we expect

system. having aren't court for or or to We running any delays closing problems through this

we trend pleased. of be this we'll people we of decision. back difficult It's we'll by week, to continue But range. it's that long year, make see predict and a way, So off forcing normalized think just on sometimes could the latter of a to most two. quarter that matter that a sort or into them be But importantly, half running clock going next to as be and out as by that

Stephen Laws

in you are quarter. Great, cost could a deal thanks, Can that and you've that reduce financing re-securitize and the mix down How done legacy higher portfolio? them? costs loans see release, attached further those of deals saw the you've there, And Chris. new another about to rates continue that financing QX. to as any the I paying some increased those NIM, collapse the opportunities progress have of thinking about those talk lot to guess, on the you've made that's in widened securitizations the side, of again this especially start

Christopher Farrar

Sure. Yes.

And call fourth deals, right of we different working now a We each be call has able call quarter. next that of the probably monitoring level. year, couple one in a to we'll on them we're are a all more. And we few think constantly can then those

we to But So we make and intend line do that. sure check definitely have -- up. boxes we all everything to the

portion Even there. be pretty though the some these it'll a financing, these there's older significant a savings think of of deals are meaningful I still smaller pickup. some overall

us as next we to year the that well. quarters, yes, So next few over expect help definitely

Stephen Laws

question for last afternoon. Great. this And

all? too sheets? bigger ability since maybe your BPL of on how at you to Industry, just material certainly other last larger platforms it a pricing lot the as landscape has are changed soon get transactions some pressure? the balance now those in Or have to change people Does being some of the seen fund of page, volumes? looking Have tell, of those many to that competitive of You've in into competition platforms cited space, origination occurred? the transactions the acquired Is

Christopher Farrar

of Yes, different forms, constantly type on play, amazing pressure a is up our of little in the sort these lot how changing. I'm it's we sure landscape But haven't niches. any we pricing. seen competitive end they

our a I really people and now. that And small lot don't so amount of right after a and on know have we're toes very flip the we space, of anybody going fix stepping doing that.

that not So the I forcing think But anything where feeling pressure that's or see I of in we where most but competition, to competition. pricing terms we're irrational. act of amount land, have us always is we any

Stephen Laws

Great, thanks afternoon. for the comments this

Christopher Farrar

Thank you.

Operator

please Fandetti question next with Don ahead. go from Wells Fargo, Our comes

Donald Fandetti

are terms ramp year Obviously, next increase you to just the in doing over trying very What broaden a so? larger continue marketing than to I had for nicely. and that originations question. just originations your of or internally

Christopher Farrar

initiatives of We're We've a of our marketing our hi, undertaken doing it's team shows. presentations, driving doing and trade virtual leads. Yes, website has to doing good got a number Don, question. job driving we're and that great traffic

number our adding to markets trying doing there we get in name also less a executives we're to of expand. things out have different We're penetrations. where continue and to expand So and account

all year working combined, we So results. those well. And things are that'll up showing our think continue in next as and obviously

Donald Fandetti

yield kind we currently. a when that's markets, last volumes origination in that it, they're go types just year? something hot not just But Okay, next you that assume we you're to for will should Typically, these know I all and and follow-up compression, strong, are as of should is question. do prepare your see happen? into that something then of we seeing

Christopher Farrar

we rate our for really not and know We're the that'll the whether our market, where predict model. happen. how broader capital execute pricing. our in markets, forecasting securitization not sheet it that and drives based to price don't can I Yes. on We or

come to of competition to don't I a because is see opposed any and competitors our I I offer in lower. start on. just mostly tend bunch of lot a of don't kind know see out focus think so there driving we'll yields what if crazy we what as products, So

gorillas the or two market are don't share. use And trying on so just I to that see, to buy big pricing gain

spreads So over we it the years. think we last can We've forward. going maintain our XX done

continue. it'll think I

Donald Fandetti

Thank you.

Operator

JMP from ahead. securities. Next DeLaney with Steve go comes question Please

Stephen DeLaney

everyone. Hi

sound target page is off you how may course modest in the markets and that Chris like, hey, you being us. of mention XX% to But talked up. also and more are. jumps it's think a the that just just highlight happening that is market. On team said probably about adding in this sure is you're just sure strong hell is growth volume, and from effort I page, good about commentary the I'm do of a I'm the sequential your that's than about, Of you and everybody really the a strong six, you XX% you vibrant resulted almost lot

introduction lending bring you Thanks. help mention the you you So, Could growth and products. going think the or of have out new will but might comment to contributed didn't you on forward? did to what that highlight market

Christopher Farrar

Sure. Absolutely.

there's Number people to work guess tricky Don's question that. would they're that's from one, successfully, is and about hard this don't lot earlier you're after driver. right. absolutely it Number it's this going one so really you're A a go our is the main say space, people, get of heavy on very right, absolutely lifting difficult And just say into, two niche work. hard and I to do of to I So things amount two, competition. tremendous and

kind off. point effort better I them. this term I In client our programs all it's to them combined salesperson But of a of that level some or say, just speak you introduce that landing can you the we helps, a think these a the open more of tweaked really It's, to purely and what a more is to haven't terms hard XX% our that to have up increase chance drove for business short with and that work some can did whatever. paying of products, of of opportunities options, we give of products and

Stephen DeLaney

the clearly and chart, it's one there's really look it. bar Yes, four, driving at to investor just in the

and needle. work, are kind So if not marginal energy much you you've create moving that the cute, want spend little, really to and distractions too with things that but don't of got maybe

Christopher Farrar

That's right.

Stephen DeLaney

If I'm know, comment the it borrowers, used last look about that talk the that work just broker, to made of the guys do this is just directory, a I basically to say, build guy's hey, more near was no the business. out with, for you just brainer amount, years two the to competition, Is my network this higher busy and rental customers, time for, that else borrowers, call got broker your and loan lunch terms phone time this loan agency I'm somewhere and wonderful with and matter You before back to I in reifies. crushing going marginally reifies and do game of pumping think with capacity of and that these, reifies, rates, slowed having something and the these space. prime good a the even just has I'm taking about a, who to about taking and to just I a try up? for

Christopher Farrar

can some highly you product, product, number an revenue opportunity market our marketing and on and and other good And they clients marketing our lot those exclusively many there. when would we previous create can a it's you if of they're another look no, just they I frankly, is spot successful, all slow business. to times they generate Yes, property, customers. need loan of of premise literally how the own generate no situations, that and down, right, they applications, a I just and starts And back amazing on they their phone add, go piece you're guess your to to turn quite start those on, have

can marketing and their how them in we grow So show this our to space. and direct this effectively materials they provide dollars brokers

grow another our that's to continue way to So pipe.

Stephen DeLaney

that insane. is like product, and caps, do the it's agency think for But do you? plenty FHFA reverse And there's going think business the you she the product there other looked agency cap on an agency that and documentation things and on I your box, off just differentiated lowest the everything easier. guess, GSEs is than in. there's executed? investor the be your they product you But, make the of coupon. the when borrower take a a an has But your easier to took was there Thompson process Maybe are you your with enough, guide tight possible go product, obviously,

Christopher Farrar

Yes, going do the want attention Because was absolutely. That's point, all on. the they're you of much can really to to us damage and spot not your it. if it never going We through they our if have nailed business for thought cap they the much really -- to never to and anyways. qualifications, to paid the go come to they brain

served tell And market. our from now we we've they're offer. different have executives can slice more what that I cold to the calling So to always a to of broker talking hearing account a about open

think opening as on mentioned, So things side like a are changing minds that I because you bit. see I

Stephen DeLaney

the it. and appreciate stay Well, well. I Great. good color. Enjoy conversation

Christopher Farrar

Thank, you too, Steve.

Operator

[Operator Instructions] question will with ahead. come go Please Our from Cyganovich, Arren Citi. next

Arren Cyganovich

does helping would and any the your point what also price negative? Thanks. of family by A of on is past of At single the issue? loans kind depreciation, rising become loans. little home of an The the rising increasing HPA needed for helping in twofold a imagine do net bit size rental of your I resolutions you

Christopher Farrar

problem. up think because that clip, hot best a I type think for hope it the flat too get I of kind I kind me, for or go doesn't Personally it those are create of market markets market, a could question. cold. continues healthiest soft just for good very X% everybody If Arren, too hi, this to at Yes,

we've of Just slowing. perspective. across the And where for of that will though, pockets is definitely affordability acceleration number rate U.S. a say I seen

couple So year. I that a for continues think sign that that's have definitely double watch everybody. to if see But next years, more where in problem. would goes think actually, digits a it I be and healthy We'll for

Arren Cyganovich

continue some securitizations the to you'll a more some make new funds, to competitive at more you environment new that cost acquire, the Okay, to new Or attractive to just more and product then Is see? the or it as of do of lower borrowers? pricing? you issue that pass is attractive your of of function get expectation on

Christopher Farrar

in that Yes, execute. shows on. And we sheet on we definitely our up it how rate pass depending

are rates adjusted So competitors need a capital. or figure lower, from on our and just where higher be have it. that's in and perspective we we to where be targets sure our spread we feel out, risk and so and if set our absolutely, are we are right like where the returns make that ROE we be to our We disciplined

definitely our deliver So we those to benefits customers.

Arren Cyganovich

Okay, and me maybe this then lastly, Mark one. with can help

us metric you'll You're and about much terms equity how small be of be in via should how you'll your guide need a much that amount ATM, issuing issuing? equity a we think is at the of of cetera to leverage there looking that equity et that kind can

Mark Szczepaniak

period. we in September one, of had left became trading days in we trading Out only our four like issue ATM five because or didn't much number when ATM, the functional open

We have blackout of periods, course.

super with like we days. trading average that average average our watch liquidity off the moves of then volume. it closely ATM or XX or maybe So set the of based depending really But of the shares. I XX,XXX certain like the the kind issue We how percent it trading average of trading of goes very along volume, volume. issuances average five issues large why kind volume, we the in trading obviously the a watch don't we stock had volume think trading That's want four percentage trading we to

as preferred And added a the lot we So conversion of more then to buying trading again, just that’s how the shares, a depends well. goes. on the so common

there So we've out got now. common more shares

to So see trading volume. the to plays need it we that average of what out does kind how

Arren Cyganovich

trying kind any you is metrics of that guiding help from us And can perspective? is that or modeling within are kind factor there to leverage of stay a a

Christopher Farrar

Yes, I'll take that one.

X.X% I stay like talking to X.X% on be kind where grow. we two we close We'll today. where depending bit think think we we bankers of leverage little are where the need level want to to to to add a looks, in equity, think balance we to and we we've on just type depending of little how We'd and somewhere that is range, been debt, are of bit but I how of a sit. the sheet

Mark Szczepaniak

I X% say X.X%. X.X% right agree, to Perfect. just going around I Yes. to

Arren Cyganovich

right. Okay, so All much. Thanks perfect.

Operator

answer and back Farrar, this over gentlemen, will conclude conference for turn any to remarks. the and to question Ladies CEO would like closing I our Chris session.

Christopher Farrar

to to listen you all for to story. look Thanks, of the And end Great, talking I forward taking time to everybody the the thank it. our year. after everyone. appreciate We

Operator

now Thank you for conference attending today's The presentation. has concluded.

You disconnect. may now

Velocity Financial (VEL) 6 Nov 212021 Q3 Earnings call transcript