Velocity Financial, Inc.

Good day and welcome to the Velocity Financial Q3 2023 conference call. All participants will be in a listen-only mode. Should you need any 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 withdraw your question, please press star then two. Please note this event is being recorded. I'll now like to turn the conference over to Mr. Chris Altman. Please go ahead.

Thanks, Rachel. Hello, everyone, and thank you for joining us today for the discussion of Velocity's third quarter 2023 results. Joining me today are Chris Farrar, Velocity's president and chief executive officer, and Mark Cepani, Velocity's chief financial officer. Earlier this afternoon, we released our third quarter 2023 results. and the press release and accompanying presentation are available on our Investor Relations website. I want to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results made different materially. For discussion of 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 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. And with that, I will now turn the call over to Chris Farrar.

Thank you, Chris, and I'd like to welcome everyone to our third quarter earnings call. Earlier today, we released the results from a strong quarter as we continue to execute very well on our growth strategy. Our core earnings increased 29% over the prior year quarter, which is quite impressive given the various headwinds we faced. Despite the uncertainty and various cross-currents, we expect to continue to take market share and expand our portfolio. One of the key themes we're experiencing is the tightening of credit from the banking system. We're seeing more high-quality borrowers that have been turned away by traditional lenders come our way. We expect this trend toward alternative credit to continue for a long time, and our team is well-positioned to capitalize as we've spent the last 19 years building our platform to shine in times like this. Currently, our pipeline is strong and growing, which allows us to be selective in extending credit as well as increase our coupon. In terms of our portfolio, we experienced minimal charge-offs this quarter and our special servicing team . Real estate markets in single-family rental and small-cap CRE are healthy in terms of valuation and outperforming cap segments. We believe our focus on small properties with neighborhoods serving essential services will continue strategy. Very busy in the capital markets, completing two securitizations in Q3, and we just priced our last deal of the year on Tuesday of this week. One of those securitizations is an inaugural transaction collateralized by our short-term loans with a revolving structure that allows us to replace loans that pay off with new similar production. We also collapsed the last of our older sequential pay deals during the quarter. Our track record of strong credit performance allows us to access the capital market sufficiently and enjoy support from a broad base of fixed income investors. The other significant policy change we made during the quarter was to hedge our future debt issuances backed by newly originated loans. We were very fortunate in our timing as we offset most of the move in the underlying base rate treasuries before we priced our deal earlier this week. Hedges are cash flow hedges that will accrete into our income statement over time in support of our strategy of achieving a stable, predictable NIM. We will continue to hedge future debt issuances before we securitize as a good risk management practice. Regardless of uncertainty about interest rates, the economy, and other events outside our control, we will grow and be opportunistic. Our strategy is to remain nimble and lean on our many years of experience to navigate whatever comes our way. I want to congratulate all our team members on another great quarter. Our people are our greatest asset, and we will continue to work hard for all shareholders. That concludes my prepared remarks, and I'll turn over to the earnings materials starting on page three. As I mentioned, strong growth in core net income, very, very positive quarter there. STABLE NIM, UP 10 BPS FROM THE PRIOR QUARTER. WE CONTINUE TO PUT ON NEW PRODUCTION, COUPONS THAT ARE ATTRACTIVE IN TERMS OF OUR HISTORICAL SPREADS. AND THEN I ALSO MENTIONED THE HEDGE STRATEGY WHICH DIDN'T AFFECT EARNINGS FOR Q3. IT WILL SHOW UP IN OUR FUTURE DEALS AS I MENTIONED OVER TIME. as we issue those transactions. In terms of production and the loan portfolio, October was a record month for production. All throughout the year we've seen volumes grow even while we're raising coupons. So we're very encouraged there and like the trends. In terms of NPLs, we were flat quarter over quarter and continue to realize positive gains as we resolve assets. Our team's doing a great job there. On financing and capital, I mentioned the two securitizations. We're excited on the short-term product to be able to term out those loans and create that revolving structure so we've got additional capacity to grow that product going forward. Warehouse and liquidity were in good position there to support future growth. Turning to page four, very nice build in book value per share. You can see we're up 43 cents Q over Q with a combination of portfolio earnings as well as other additional income generated in the quarter. Turning to page five, shown this slide for a number of quarters now and try to demonstrate that we believe there's a significant amount of embedded equity in the platform. And one of the changes you'll note if you compare this to the prior quarter is the embedded gain in the securitized portfolio has grown pretty significantly. And that's a result of us slowing our assumptions on prepay speeds. So we did that during the quarter. As we assume slower prepay speeds, it's obviously going to extend out the portfolio and increase future earnings. So we think there's a real good story here around the economic value of the equity that we've built in the platform. So with that, I'll turn it over to Mark to continue in the presentation.