Velocity Financial, Inc.

Good day and welcome to the Velocity Financial second quarter 2025 conference call. All participants will be in the 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 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 Chris Oltman, Director of Investor Relations. Please go ahead.

Thanks, Danielle. Hello, everyone, and thank you for joining us today for the discussion of Velocity's second quarter 2025 results. Joining me today are Chris Farrar, Velocity's President and Chief Executive Officer, and Mark Cepanian, Velocity's Chief Financial Officer. Earlier this afternoon, we released a press release with our second quarter results. And you can find that press release and an accompanying presentation that we will refer to during this call on our investor relations website at www.zellfinance.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 a discussion of some of the risks 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.

Thanks, Chris, and welcome, everyone, to our second quarter earnings call. After the close today, we reported record quarterly results with net income increasing 76% and new loan production up 72% versus Q2 24%. Obviously, our business is performing exceptionally well across the board. I believe our people are our most important asset, and they deserve the credit for delivering this outstanding performance. We grew revenue by $31 million, managed expenses carefully, and saw pre-tax income increase by $14 million. As operating leverage boosted, our core pre-tax return on equity to 24%. With respect to our end markets, we saw a pickup in transactions during Q2, and investors are quite active, especially within our niche. Year over year, we increased the portfolio by just under $1.4 billion, with commercial properties representing approximately $770 million of the increase, and residential properties, the other $600 million. Our ability to finance a broad range of property types is a unique strength that differentiates us from other mortgage lenders. We expect strong growth from each of these categories going forward. In terms of the portfolio, our asset management team did a fantastic job of curing delinquent loans, which drove our NIM expansion and resolved NPAs with significant gains. This team knows our asset class well, and they continue to drive exceptional performance. From a capital markets perspective, this is our busiest quarter ever, completing four securitizations, issuing just under $1 billion in securities. The strong support for our program and robust market conditions are important tailwinds which fuel our growth. As we look forward, the pipeline for new loans is very strong, and we expect continued growth and originations as we take market share. Our team is very proud of the earnings growth and the predictability of our unique business model, and we know that the value proposition for our investors is outstanding. That concludes my prepared remarks, and we'll turn to the presentation starting with page three. In terms of earnings, as I mentioned, core net income, $27.5 million, or 73 cents a share, new all-time record for the company. And NIM for the quarter was up to 3.82%, up 47 bps from just last quarter. And the large driver of that was really, as I mentioned earlier, the recapture of delinquent interest on non-performing loans. So our team did a great job on those recoveries. In terms of the portfolio, I mentioned the record production and saw the portfolio grow by 30.8% on a year-over-year basis. In terms of the non-performing loans, those ticked down slightly to 10.3% as we continued to work hard to resolve delinquent borrowers. Most importantly, probably from the portfolio perspective, continued to see very positive gains of $3.6 million on just over $100 million of UPB that was resolved. In terms of financing and capital, I mentioned the four securitizations. The most significant securitization we did was our MC25-1, and that transaction freed up about $53.5 million of cash to continue to grow the portfolio. So that was really an important transaction for us, and Jeff and team did a great job from a capital markets perspective of getting great execution on that transaction. That increase in cash obviously drove strong results in our liquidity up to $139 million, so we've got lots of liquidity to continue to fund our growth and plenty of warehouse capacity. Turning to page four, this is a new slide that we're presenting, something that we haven't presented before, but we really wanted to highlight the unique business structure being a C-Corp that retains our earnings, which allows us to grow book value and our earnings as we reinvest those earnings back into new assets. We really feel like we're unique and unlike a lot of other mortgage lenders that are out there. You can see that there's tremendous performance here in all categories with earnings growing, equity growing, and ROE increasing, which is obviously pretty impressive to grow that ROE as much as we did with the equity base continuing to increase. So we're very pleased with those results, and based on all these things, we really feel like there's a tremendous value in the shares and that we trade, in our view, at a very low P.E. based on our growth profile and our ability to continue growing not only earnings but the portfolio as well. Turning to the next slide on page five, we've seen this one before, again, continuing to highlight how our strategy builds book value as we retain those earnings and put them back into the business for future growth. All the way to the far right is our adjusted book value, which represents the total value we think of our assets if we were allowed to mark everything to fair value. And I think from our perspective, from management's perspective, we view this $1,760 a share really as a floor in terms of valuation. We feel like that's the minimum that our company should ever trade for because that's really the NPV of what's on the balance sheet as of today and doesn't take into account the value of the platform and any future earnings or growth in the business. As we grow this book value, we expect to reward shareholders, but really feel like this puts a nice floor in terms of valuation. So with that, I'll turn it back over to Mark to continue.