Velocity Financial, Inc.

Good afternoon and welcome to the Velocity Financial Inc. Third Quarter 2022 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 telephone keypad. To explore your question, please press star then two. Please note, This event is being recorded. I'd now like to turn the conference over to Chris Altman, Treasurer. Please go ahead.

Thank you, Ari. Hello, everyone, and thank you for joining us today for the discussion of Velocity Financial's third quarter 2022 results. Joining me today are Chris Farrar, Velocity's President and Chief Executive Officer, and Mark Spaniak, Velocity's Chief Financial Officer. Earlier this afternoon, we released our third quarter 2022 press release. and the accompanying 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 Securities and Exchange Commission. Please 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 reserve to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials in our investor relations website. Finally, today's call is being recorded and will be available on the company's website later today. And with that, I will now turn the call over to Chris Farrar.

Thanks, Chris, and we appreciate everyone joining the call today. After the close, we reported another very strong quarter of performance despite continued market headwinds. Our originations were consistent with the prior quarter as we continued to raise rates based on the general rise in our underlying benchmarks. Our delinquency level has returned to a more typical range, and we're still recognizing impressive gains from resolved assets by our special servicing team. Real estate markets softening to a more balanced level as investors adjust to the change in Federal Reserve policy. Unlike many originators, a large portion of our earnings come from our in-place portfolio, which allows us to manage origination volumes appropriately. We're still experiencing strong borrower demand for new loans, but have recently begun to tighten our credit policy as we can be choosy about deploying our capital. We look forward. We plan to intentionally slow originations a bit and take a slightly defensive posture until we have more certainty about Federal Reserve policy, especially as it relates to inflation and the terminal Fed funds rate. Our balance sheet is strong from a liquidity standpoint and earnings perspective. Our lenders are very supportive and we're in a good position to operate in this volatile environment. This year has been very challenging and I'm very proud of how well our team has responded. We're prepared to successfully navigate our way forward and will always remain focused on our goal of enhancing shareholder value. That concludes my prepared remarks and we'll turn over to the materials on the presentation starting on page 3. Very good earnings, growth in the portfolio NIM as we grew the portfolio, And as I mentioned before, a very strong NPL recovery rate of almost over and above contractual interest in principle. From a production perspective, as I mentioned, 34% increase over the prior year's quarter, very healthy levels into a rising rate environment. And then interestingly there for the nine months of 22, almost 50 percent increase over the prior period. I mentioned October, that would be slowing originations. October originations came out at 105 million. We absolutely had an ability to do more than that. There was plenty of demand, but we, as I mentioned, tightened our box and have been cautious here I want to see better clarity out of the Fed before we get more aggressive. From a non-performing loan perspective, you can see prior year we've had a nice improvement in the trend there and feel like we're stabilizing and settling into a more historical level of where we typically see NPLs. From the financing and capital perspective, completed one securitization in August and an additional securitization October totaling six deals for the year our liquidity is very strong at 96 million at the end of September and we have plenty of warehouse capacity so we've got lots of room for growth and additional fundings there and getting great support from all of our warehouse lenders on page four A very simple slide just to show that, you know, we're continuing to execute on our strategy of growing book value by retaining earnings. And we saw a nice positive pickup there in the quarter consistent with many prior quarters. That's my overview on the first two slides, and I'll turn it over to Mark on page five.