Velocity Financial, Inc.

Good day and welcome to the Velocity Financial fourth quarter and full year 2024 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 Altman, Director of Investor Relations. Please go ahead.

Thanks, Ashia. Hello, everyone, and thank you for joining us today for the discussion of Velocity's fourth quarter and for your 2024 results. Joining me today are Chris Farrar, Velocity's President and Chief Executive Officer, and Mark Cepaniat, Velocity's Chief Financial Officer. Earlier this afternoon, we released our fourth quarter results. And you can find the press release and accompanying presentation we will refer to during this call on our investor relations website at www.bellfinance.com. 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 a 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 Security 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.

Thanks, Chris, and welcome everyone to our fourth quarter earnings call. Our team is proud to announce another record quarter and year-end results for 2024. In short, the Velocity engine was firing on all cylinders last year, We have strong tailwinds supporting our business, and we're capitalizing on the unmet needs in our niche of the market. By lending to both residential and commercial real estate investors, we can serve a larger base of customers and provide capital to underserved people. Our customers tell us that banks are limiting their lending in our target niches, and we believe that will allow us to capture market share. We saw very strong demand from our borrowers in 2024 as evidenced by our 64% increase in originations, and that momentum is carried into the new year. Importantly, we remain disciplined in our credit process while preserving our risk-adjusted margins at lower loan values. Our portfolio growth led to a 37% increase in net revenue, and Q4 pre-tax ROE was an impressive 26.8%. In terms of our portfolio, our special servicing team did a great job resolving NPLs and REOs for net gains, and our nimble, hands-on approach consistently contributes to our earnings. As most of you know, we prefer to lend in larger, more liquid MSAs, and we still see healthy demand for the types of real estate we lend on. On a more somber note, we recently experienced devastating wildfires in Southern California, and all of us extend our deepest sympathies and concern for everyone impacted. From the business perspective, we were fortunate that only two of the properties backing our loans were destroyed and fully insured, so we expect no impact financially. On a more positive note, all Velocity team members are safe and healthy, and we will do our part to help those affected recover. From a capital markets perspective, we saw significant improvement post the presidential election, as evidenced by tighter spreads for our securitizations and increased investor participation, which enable us to achieve high ROEs on our invested capital. As we've explained before, our business is far less rate sensitive than other mortgage segments. And while much energy is spent by others prognosticating future Fed moves, we simply continued to deliver much needed capital to underserved borrowers. This is an important differentiator as we successfully originated loans over the last 20 years in both higher and lower rate environments. Looking forward, we can expect another strong year of growth and our team is engaged and proud to provide solutions for real estate investors nationwide as we look to create long-term shareholder value. With that, that concludes my prepared remarks and we'll turn over to the presentation materials starting with page three. Obviously from an earnings perspective, a fantastic year, 60 cents of core earnings in Q4 and a full year core earnings of 203. So fantastic earnings across all the different segments of the business. From production and portfolio perspective, another great quarter, 563 million TB, 18% increase sequentially over last quarter, and 60% year-over-year. The portfolio is just over $5 billion now. Non-performing loans is pretty steady with where it was from the last quarter. And impressively, in the fourth quarter, from an NPL resolution perspective, we had just over $5.5 million of gains from resolved delinquent assets. On the financing and capital side, I mentioned the securitization market, and we did a couple of deals in the fourth quarter that went off extremely well. We also issued a little over $7 million in new equity through the ATM program and the The strategy there is really just to continue to increase float and broaden out our investor base as best we can. From a capital and liquidity perspective, really great at year end, almost $96 million of liquidity, so we've got plenty of capital to fund future growth. Turning to page four. We outline our strategy here, just continuing to retain earnings and building book value. And you can see the bridge from 930 to 1231 there as we retain earnings and grow the book value. On the upper right-hand corner, we have two bars that take our gap book value at 1231. and adjust to what we call adjusted book value, and that's simply to reflect all of the assets that are carried at amortized cost. If GAAP allowed us to mark those assets to fair value, we think that adjusted book value would be about $18.73 a share. So there's tremendous value, we think, still in the platform that doesn't show up from a GAAP perspective. And with that, I will turn the presentation over to Mark on page five.