Velocity Financial, Inc.

Welcome to the Velocity Financial first quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Chris Oltmann. Please go ahead.

Thank you, Betsy. Hello, everyone, and thanks for participating in Velocity Financial's first quarter 2021 earnings call. Joining me today are Chris Farrar, Velocity's president and chief executive officer, and Mark Szczepaniak, Velocity's chief financial officer. Earlier this afternoon, we released our first quarter 2021 press release. and the accompanying earnings presentation, which are available on our investor relations website. I'd like to remind everybody that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results may differ materially. For discussion of some of the risks and other factors that could affect results, please see the risk factors and other cautionary statements made in our communications with shareholders, including the risk factors disclosed in our filings with the Securities and Exchange Commission. Also note that the content of this conference call contains time-sensitive information that is accurate only as of today, and we do not undertake any duty to update forward-looking statements. We may also refer to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials on our investor relations website. Finally, today's call is being recorded and will be available on the company's website later today. I will now turn the call over to Chris Farrar for opening remarks. Chris.

Great. Thank you, Chris, and welcome everyone to the 2021 Q1 call. Our team is very pleased with the results we presented today as our business continues to perform very well. Originations were up from the prior quarter, and our pipeline for the second quarter continues to grow. This is especially impressive for two reasons. First, we produced almost the same volume in Q1 versus last year, without offering any short-term loans, which were about 30% of last year's Q1 volume. Second, we accomplished this with fewer team members, which obviously indicates significant operating efficiency. Clearly, things are going well on the origination front. In terms of our portfolio, our special servicing team had another very strong quarter of recoveries as we continue to resolve delinquent loans profitably. I think it's important to highlight Thank you for joining us. From a financial reporting perspective, most other lenders use fair value accounting, and we choose to use an amortized cost method, which reduces quarterly volatility. As a result, we have significant embedded gains in the business that are not readily apparent. We plan to develop an economic book value in future quarters to easily identify the inherent unreported value we've created, which is significant and hopefully helpful to investors when comparing our company to others. On the ESG front, we are compiling a study that demonstrates the impact our lending has on underserved populations nationwide. We think this is an important attribute of our unique niche as we're fulfilling our mission to finance communities where people live, work, and play. Early results show that we have an impressive footprint in diverse neighborhoods across the US. In summary, We're fortunate to have strong demand, healthy capital markets, and engaged team members to maximize our opportunities. As always, we appreciate your continued support and we're energized to continue growing our company. That concludes my prepared remarks and we'll turn over to the PowerPoint presentation with the earnings highlights. On page three, at a high level, just going through kind of some of the items in the quarter, net income on a core basis 20 cents a share. The real adjustment there is the cost associated with refinancing our long-term debt. Net interest margin is very solid at 4.1% and continues to impress, as I mentioned, with all of the recoveries that were made on non-performing loans. And then from a book value perspective, obviously Nice trajectory there as well. From a production perspective, $233 million originated in the first quarter, a 30% Q over Q increase. Everyone on the operations and sales team did a great job, and we're seeing tremendous demand there. In terms of NPLs, total recoveries of 1027, again, Showing gains over and above our normal contractual interest, and we'll have some more details on that later on. NPLs starting to trend down slightly. It takes time, and it's kind of a slow-moving ship, but we're seeing progress there. And very pleased to see that charge-offs continue to remain extremely low. From a financing and capital perspective, we've already previously announced a $175 million debt facility, which we drew down fully during the quarter to continue to fund growth. And then lastly, I'd just add here that we added another non-market warehouse facility with a very large bank in the quarter for another $100 million debt. We've got plenty of capacity and all done on a non-mark-to-market basis. All those things put together make us very optimistic about the quarters ahead. With that, I will turn it over to Mark to take us through the details.