Velocity Financial (VEL) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $14.7 million, up 21.3% year-over-year; core net income reached $15.9 million, a 23.1% increase from Q2 2023; diluted EPS rose to $0.42, and core diluted EPS to $0.45.

• Loan originations totaled $422.2 million, up 63% year-over-year, with over 1,100 loans funded; total loan portfolio grew 20% to $4.5 billion UPB.

• Two securitizations were completed in Q2 2024 totaling $490.8 million, both well received by investors.

• Margins and credit standards were maintained, with low charge-offs and a net gain of over $2 million from REO activity.

• Operating expenses increased, mainly due to higher compensation and securitization costs.

Financial highlights

• Net revenue for Q2 2024 was $54.8 million, up 41% year-over-year; net interest margin (NIM) was 3.54%, up 30 bps year-over-year and 19 bps sequentially.

• Book value per share as of June 30, 2024, was $14.52, up 15.5% year-over-year; adjusted book value per share was $16.91.

• Liquidity at quarter-end was $83.8 million, with $646.5 million in available warehouse line capacity.

• Weighted average coupon on new originations held at 11% for five consecutive quarters.

• CECL loan loss reserve stood at $5.2 million, or 0.20% of the relevant portfolio.

Outlook and guidance

• Management expects continued growth in loan originations and portfolio size, with a year-end 2024 portfolio target of $5 billion in UPB.

• Positive outlook on real estate and borrower demand, with healthy securitization markets and anticipated Fed rate cut in 4Q24.

• Focus on maintaining higher loan coupons, stable NIM, and credit quality amid macroeconomic and geopolitical uncertainties.