Velocity Financial's Q4 2024: Navigating Contradictions in Production, Loan Growth, and Capital Strategy

These are the key contradictions discussed in Velocity Financial's latest 2024Q4 earnings call, specifically including: Production Expectations, Average Loan Balance Growth, and Capital Adequacy for Growth:



Record Production and Revenue Growth:
- Velocity Financial reported a 64% increase in originations and a 37% increase in net revenue for 2024.
- The growth was driven by strong demand from borrowers and the company's ability to lend to both residential and commercial real estate investors.

Healthy Portfolio and Risk Management:
- The company's portfolio increased to over $5 billion, with a weighted average loan-to-value ratio of approximately 66.6%.
- Velocity managed risks through disciplined credit processes and maintained a low non-performing loan rate of 10.7%.

Strong Securitization Market and Capital Position:
- Velocity benefited from a significant improvement in the securitization market post the Presidential election, achieving tighter spreads and increased investor participation.
- The company ended the year with nearly $96 million in liquidity, ensuring ample capital to support future growth.

Effective NPL Resolution:
- Velocity achieved $5.6 million in NPL resolution gains in Q4, with an average quarterly gain of 3.3% over the last five quarters.
- Resolutions were primarily through borrowers paying off loans, with a smaller portion through foreclosures and REO sales.