Velocity Financial Inc Reports Soaring Earnings Amidst Market Challenges
Net Income: $52.3 million for full-year 2023, a significant increase from $32.2 million in 2022.
Diluted Earnings Per Share: $1.52 for full-year 2023, up from $0.94 in the previous year.
Loan Portfolio Growth: Total managed loan portfolio UPB grew by 16% to $4.07 billion in 4Q 2023.
Net Interest Margin: Increased to 3.52% for the portfolio, reflecting a 24% improvement.
Pretax Income: Jumped by 91% to $22.3 million in 4Q 2023 compared to 4Q 2022.
Capital Raise: Announced a $75 million capital raise to support further growth and a $5 billion loan portfolio by 2025.
On March 7, 2024, Velocity Financial Inc (NYSE:VEL) released its 8-K filing, detailing a year of robust financial growth and strategic achievements despite a challenging economic environment. Velocity Financial Inc is a leading real estate finance company in the United States, known for originating and managing investor loans secured by residential rental and small commercial properties. The company operates across various states, including New York, California, and Florida, earning revenue primarily through interest income.
Financial Highlights and Challenges
For the full-year 2023, Velocity Financial Inc reported a net income of $52.3 million and core net income of $53.4 million, marking a substantial improvement from the $32.2 million net income and $42.2 million core net income in 2022. The company's earnings per diluted share reached $1.52, a notable increase from $0.94 in the previous year. These results underscore the company's resilience and strategic prowess in navigating the headwinds of higher interest rates and rising inflation that have posed significant challenges for the mortgage market.
President and CEO Chris Farrar highlighted the company's record earnings for both the fourth quarter and the full year, attributing the success to strategic portfolio growth and proactive asset management. The company's ability to increase loan production each quarter while raising mortgage coupons by 86 basis points from the average rate for 4Q22 played a crucial role in expanding net interest margins by 68 basis points from 4Q22.
I am pleased to announce that Velocity delivered record earnings for the fourth quarter and full year 2023, driven by strategic portfolio growth and proactive asset management," said Chris Farrar, President and CEO.
Operational and Financial Achievements
The company's total managed loan portfolio unpaid principal balance (UPB) grew by 16% to $4.07 billion in the fourth quarter of 2023, compared to $3.51 billion in the same period of the previous year. This growth is a testament to Velocity Financial Inc's effective expansion strategy and its ability to capitalize on market opportunities.
The fourth quarter also saw impressive year-over-year increases in key performance indicators, with pretax income surging by 91% to $22.3 million, net income climbing by 105% to $17.4 million, and diluted earnings per share doubling to $0.50. The net interest margin for the portfolio improved by 24% to 3.52%, reflecting the company's efficient interest income management.
Velocity Financial Inc's financial achievements are particularly significant for a company in the banking industry, where net interest margins are a critical measure of profitability. The company's ability to raise capital, as evidenced by the recent $75 million capital raise, positions it well for continued growth and the pursuit of its "5X25" goal of a $5 billion loan portfolio by 2025.
Analysis and Outlook
The company's performance in 2023 demonstrates a strong operational foundation and a strategic approach to growth that has allowed it to thrive despite economic pressures. The increase in loan production, coupled with effective asset management, has led to a robust increase in net income and earnings per share, which are vital metrics for investors.
Looking ahead, Velocity Financial Inc's capital raise and growth trajectory suggest a positive outlook for the company's future. The management's commitment to achieving the "5X25" goal indicates a forward-looking strategy that could further enhance shareholder value.
For more detailed information on Velocity Financial Inc's financial results and operational strategies, investors and interested parties are encouraged to review the full 8-K filing and attend the upcoming conference call and webcast.
Explore the complete 8-K earnings release (here) from Velocity Financial Inc for further details.
This article first appeared on GuruFocus.
