Velocity Financial, Inc. ((VEL)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Velocity Financial, Inc. recently held its earnings call, revealing a generally positive sentiment despite some concerns. The company celebrated record pretax earnings, robust production volumes, and a successful securitization partnership. However, there were some worries about increased net loss from loan charge-offs and REO activities. Overall, the positive aspects of the earnings call significantly overshadowed the negatives.
Record Pretax Earnings
Velocity Financial achieved a remarkable increase in pretax earnings, rising by 66.5% in the third quarter of 2025. This record-breaking performance underscores the company’s strong financial health and ability to generate substantial profits.
Significant Growth in Production Volumes
The company reported production volumes of $739 million, setting a new record and highlighting the continued strong demand for their products. This growth is a testament to Velocity Financial’s market position and operational efficiency.
Stable Portfolio with Attractive Risk-Adjusted Spreads
Velocity Financial maintained a stable portfolio with a weighted average loan-to-value ratio declining to 65.5% and coupons remaining on target at 10.5%. This stability resulted in a net interest margin of 360 basis points, reflecting the company’s effective risk management strategies.
Successful Securitization Partnership
In a strategic move, Velocity Financial closed its first-ever single counterparty securitization with a top-tier money manager. This partnership reduced transaction costs and diversified the company’s funding options, marking a significant milestone in its financial strategy.
Strong Year-Over-Year Portfolio Growth
The company’s overall loan portfolio saw a substantial increase of 32% year-over-year, reaching just under $6.3 billion in unpaid principal balance. This growth highlights Velocity Financial’s robust market presence and successful expansion efforts.
Increased Net Loss from Loan Charge-Offs and REO Activities
Despite the positive highlights, the company reported a net loss of $1.6 million, primarily due to REO valuations. This marks a reversal from previous gains and indicates areas where the company needs to address challenges.
Concerns Over REO Valuation Adjustments
REO valuation adjustments had a negative impact of $6.3 million, attributed to changes in property conditions and market valuations. This concern underscores the need for careful monitoring and management of real estate-owned assets.
Forward-Looking Guidance
Looking ahead, Velocity Financial provided optimistic guidance with significant growth metrics and positive financial performance. The company expects continued strong pretax earnings growth, stable loan-to-value ratios, and a robust return on equity. With a stable nonperforming loan rate and new funding avenues from securitization, Velocity Financial is well-positioned for future success.
In conclusion, Velocity Financial’s earnings call painted a picture of a company with strong financial performance and strategic growth initiatives. While there are some challenges to address, particularly in REO valuations, the overall sentiment remains positive. Investors can look forward to continued growth and stability from Velocity Financial, Inc.