Velocity Financial, Inc.

Good afternoon and welcome to the Velocity Financial Q2 2024 conference call. All participants will be in the 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 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 Mr. Chris Altman. Please go ahead.

Thank you, Rachel. Hello, everyone, and thank you for joining us today for the discussion of Velocity's second quarter 2024 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 second quarter results, and you can find this press release and accompanying presentation that we will refer to today during this call on our investor relations website at www.vellfinance.com. I'd like 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 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 and are following 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 would like to turn the call over to Chris Farrar.

Thanks, Chris, and thank you all for joining our second quarter earnings call. After the close, we reported another great quarter as our business continues to perform well across all segments. Our net revenue increased 41% over the prior year's quarter, resulting in a 23% increase in core earnings. Our originations were healthy with a 63 percent increase in volume versus Q2 23. And importantly, we maintained our margins and credit standards. Our portfolio is performing well, and our special servicing team continues to do a great job of resolving delinquent assets favorably. Our charge-offs remain low, and we realized over $2 million in net gain from our REO activity this quarter. As a result of our increased originations, We issued two securitizations in April and June. Both deals priced well and saw strong demand from our bond investors. As a reminder, we're required to expense all issuance costs associated with those deals in the current period, which is a drag on current period earnings, but the tradeoff is increased spreads going forward as we have no amortization expense to recognize on this debt. Real estate market is performing well for us, and we continue to see strong demand for financing from our borrowers. Banks are still constrained, and we're starting to see the market price in future rate cuts, both of which should be a tailwind for us going forward. I want to congratulate all my team members on another great quarter, as I truly appreciate their commitment to excellence. We will continue to execute our five by 25 growth strategy to reach five billion in UP by 2025 with the ultimate goal of rewarding all shareholders. That concludes my prepared remarks and we'll turn over to page three in the earnings presentation to go through some of the numbers. As I mentioned, good, strong growth in core earnings, up to 45 cents a share for the quarter. The NIM widened out from earlier 2Q of 23 by 30 BIPs, again, showing up as a result of the increased WAC from new originations. In terms of loan production, $422 million in UPB, and total portfolio growth on a year-over-year basis of 20%. The NPL loans were up slightly to 10.5%, and we continue to still see positive resolutions on those NPLs and expect to do that going forward. In terms of the financing capital, I mentioned earlier that we had done two securitizations during the quarter. We highlighted here that there was a a six cent per share drag on current period earnings from that second securitization as compared to prior periods where we were typically issuing just one securitization. And as I said, that's sort of a timing issue. It will depend on going forward each quarter how many deals we issue, but should also help in terms of the NIM going forward. Century Health and Housing acquired $3.6 million in MSRs from a bank that originated some recent Ginnie Mae loans. That was a great trade for us because we're continuing to build out the platform and establish new relationships with new borrowers for more business. In terms of liquidity, Uh, we're in a strong position there. You can see, um, just under $84 million at the end of the quarter with plenty of warehouse capacity to go forward on, uh, on page four, we, uh, break out the core adjustments here. Um, and then also on the right hand side, um, as most of you remember, there's a buildup here to our adjusted book value per share. I will point out that we had a typo there in the far right. If you add the 239 to the 1452 of book value, it should be 1691, not 1681. So we're correcting that as we hold the call, and that'll be on the website shortly. But again, continuing to grow book value nicely as we execute on our growth strategy and retain earnings. on a go-forward basis. So that covers it for me, and I'll turn it over to Mark on page five.