Velocity Financial, Inc.

Good day and welcome to the Velocity Financial Inc. Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone 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 Holtman, Chief Accounting Officer. Please go ahead.

Thank you, Grant. Hello, everyone, and thank you for joining us today for the discussion of Velocity Financial's third quarter 2021 results. Joining me today on the call are Chris Farrar, Velocity's President and Chief Executive Officer, and Mark Sipaniak, Velocity's Chief Financial Officer. Earlier this afternoon, we released our third 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 risk 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 SEC. 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. And finally, today's call is being recorded and will be available on the company's website later today. I'll now turn the call over to Chris Farrar.

Thanks, Chris, and welcome, everyone, to the third quarter call. Obviously, we had a fantastic quarter as we broke numerous historical records. And first off, I just want to thank all my team members who work so hard every day to achieve the results that we've been seeing lately. People are highly engaged and enjoy helping our customers succeed, and we're seeing really strong demand for our products a very healthy real estate environment, especially in the BPL segment, which is driven by a large supply-demand imbalance, and excellent securitization markets, all of which are reflected in our operating results announced today. In terms of originations, we funded just over $340 million in new loans in Q3, beating our old record of $321 million funded in the fourth quarter of 2019, which was obviously pre-pandemic. Our investments in automation and systems have empowered us to become more efficient than ever before, and the momentum is building. Recently, there has been a lot of press about rising mortgage rates, and we're pleased to report that our new applications continue to increase as has been our historical experience in past rising rate environments. September and October were sequentially historical record months for the dollar amount of new loans submitted, with over $410 million of new applications coming through our broker portal in October, again breaking a pre-COVID record of $316 million set in October of 2019. Turning to asset quality, we're also pleased with the continued trend of reduced non-performing loans, and our special servicing team has done a great job working with customers to resolve issues. Most loans are resolved well before final foreclosure, and we see very few delinquent loans becoming REOs. On the financing side of the business, our capital markets team has been very busy keeping pace with our new originations, closing our third deal of the year in October. with a fourth securitization planned in December, and our interest expense is obviously benefiting from these lower-cost securitizations. Our goal for 2021 was to fund a billion dollars in new loans, and I'm excited that we'll pass that goal by next week. As we continue to take market share and grow our portfolio, we are highly focused on improving customer service levels, challenging our people to learn, and developing new opportunities to help investors finance their real estate with the ultimate goal of enhancing shareholder value. Our team is well prepared to capitalize on the favorable market dynamics that are unique to our sector, and we're confident in our ability to grow our business. We appreciate the continued support from all stakeholders, and we'll now review our earnings materials in more detail. Starting off on page three, I'll kick us off of the presentation here. Obviously, from an earnings perspective, a great quarter. I focus primarily on core earnings, and those are down just slightly from the previous quarter. And the one thing that I'd like to point out, we tried to make clear in our press release, was in Q2, we sold about $2.5 million We earned about $2.5 million off of whole loan sales, and we did very little of that in the third quarter. And so had we kept at that pace and sold loans, our core earnings obviously would have been much, much higher. We've talked about in the past that we evaluate those decisions and try to be opportunistic about when we sell whole loans and we securitize. Obviously, our bias is to securitized and so those gains although not recognized in this quarter from a potential whole loan sale will obviously be picked up in future periods so really pleased with with how earnings came out very strong obviously in them and good interest income growth as we added new loans from the production perspective I mentioned record quarter The portfolio is growing nicely, and importantly, we saw NPLs come down 260 basis points quarter over quarter. So as we've said before, we're slowly just eroding that backlog of COVID-related stuff and seeing good performance there as well. On the financing and capital side, I mentioned the securitization market has been very good to us, and we see it still continuing to be strong. We did establish an ATM program, and we're pleased to have that in place. We did sell a very small amount of stock just to make sure that all the plumbing worked, and so it's a good program to have in place for us as we continue to grow. And then finally here on slide three, we did upsize one of our facilities from $100 million to $200 million, and extended that renewal period out to a two-year period. So we've got very good support and in a good position from a financing capital perspective. On page four, subsequent to the quarter end, we previously announced the conversion of the preferred shares. So that's good. We've cleaned up that, and there's no uncertainty hanging out there about what could potentially happen there. And then finally, I did mention we closed that third securitization in October. So all in all, there's been great momentum. And with that, I'll turn it over to Mark to walk you through the rest of the presentation.