Velocity Financial, Inc. Reports Robust Financial Results for the Fourth Quarter and Full Year 2024
Velocity Financial, Inc. (NYSE: VEL), a prominent player in the business purpose loan market, unveiled exceptional financial outcomes for the fourth quarter and the entirety of fiscal year 2024. The company reported a net income of $68.4 million, marking a 30.9% increase from $52.3 million in 2023, alongside core net income of $72.9 million, up 36.5% from $53.4 million in the previous year. This increase in profitability translates to earnings per diluted share of $1.91 and core earnings per diluted share of $2.03 for 2024, compared to $1.52 and $1.54, respectively, in 2023.
1. Key Highlights from the Fourth Quarter
Impressive Growth in Earnings
For the fourth quarter of 2024, Velocity achieved net income of $20.6 million, an 18.6% rise from $17.4 million in the prior year. Core net income surged to $21.8 million, a substantial increase of 34.6% from $16.2 million in Q4 2023. The company’s robust performance can be attributed to record production volumes and proactive loan resolution gains, as noted by Chris Farrar, President and CEO of Velocity Financial.
Record Loan Production
The fourth quarter saw Velocity's loan production escalate to $563.5 million, representing a remarkable 60% increase from $352.1 million in the same quarter of 2023. This growth was primarily driven by a 145.9% surge in traditional commercial financing demand, emphasizing Velocity’s strategic focus on the underserved commercial market.
Strong Portfolio Performance
As of December 31, 2024, Velocity’s total loan portfolio reached $5.1 billion, up 24.1% from $4.1 billion the previous year. The portfolio's net interest margin (NIM) improved to 3.70%, a notable increase from 3.52% in Q4 2023, reflecting the company's disciplined approach to maintaining strong loan coupons.
2. Financial Overview
Revenue and Operating Expenses
Velocity reported net revenues of $71.2 million for Q4 2024, a 38% increase from $51.6 million in Q4 2023. This growth is attributed to heightened production volumes, unrealized gains, and favorable resolutions of nonperforming loans. Operating expenses rose to $39.1 million, a 33.7% increase driven by higher compensation and securitization expenses associated with the company’s expansion.
Credit Performance Metrics
The nonperforming loans (NPL) stood at $539.4 million, constituting 10.7% of loans held for investment (HFI), compared to 9.7% a year earlier. Despite the uptick in NPLs, charge-offs decreased to $698.8 thousand in Q4 2024 from $743.5 thousand in the prior year, highlighting effective risk management strategies.
3. Full Year 2024 Performance
Velocity’s full-year performance showcased a remarkable 64.6% growth in loan production, totaling $1.84 billion, driven by the strategic enhancement of its origination platform. The company achieved a portfolio yield of 9.06%, up from 8.34% in 2023, demonstrating its ability to generate higher returns on its loan portfolio.
Future Outlook
Velocity's management expressed confidence in the company’s trajectory, with plans to build on its momentum to foster sustained earnings growth and enhance long-term shareholder value. The achievement of exceeding its 5x25 goal of reaching a $5 billion UPB loan portfolio by 2025 underscores the effectiveness of Velocity’s strategic initiatives.
Chris Farrar commented, “Our success resulted from ongoing initiatives to grow and streamline our loan production platform to capture a greater share of the large but fragmented business purpose loan market.”
4. Conclusion
Velocity Financial, Inc. has demonstrated resilience and significant growth throughout 2024, positioning itself as a leader in the business purpose loan sector. With a strong financial foundation and a clear strategic vision, the company is set to continue its upward trajectory in the coming years. Investors and stakeholders will be keen to follow Velocity's progress as it navigates the dynamic financial landscape.
For those interested, Velocity's executive management team will host a conference call to discuss these results on March 6, 2025, at 2:00 PM Pacific Time.
