Velocity Financial, Inc. Reports First Quarter 2023 Results

First Quarter Highlights:

  • Net income of $10.6 million and diluted earnings per share (EPS) of $0.31, compared to $3.1 million and $0.09 per share, respectively, for 1Q22
  • Core net income(1) of $11.4 million and core diluted EPS(1) of $0.33, compared to $12.4 million and $0.36 per share, respectively, for 1Q22
  • Loan production volume of $217.0 million in unpaid principal balance (UPB), a decrease of 62.7% from 1Q22
    • Primarily due to management’s strategic decision to reduce volume
  • Total loan portfolio of $3.6 billion as of March 31, 2023, an increase of 25.0% from March 31, 2022
  • Nonperforming loans as a percentage of Held for Investment (HFI) loans was 8.7% as of March 31, 2023, a decrease from 9.8% as of March 31, 2022
  • Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled $38.7 million in UPB, realizing gains of $1.3 million or 103.5% of UPB resolved
  • Portfolio net interest margin (NIM) of 3.23%, compared to 4.25% for 1Q22
  • Completed the VCC 2023-1 securitization totaling $198.7 million of securities issued
  • Liquidity(2) of $45.3 million as of March 31, 2023
  • Book value per common share of $12.18 as of March 31, 2023, an increase from $10.90 as of March 31, 2022

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $10.6 million and core net income of $11.4 million for 1Q23, compared to net income of $3.1 million and core net income of $12.4 million in 1Q22. Earnings and core earnings per diluted share were $0.31 and $0.33, respectively, for 1Q23, compared to $0.09 and $0.36, for 1Q22.

“Velocity’s first quarter results demonstrate the resiliency of our business model and our ability to deliver strong results in dynamic market conditions,” said Chris Farrar, President and CEO. “Our first quarter results included strong portfolio income and improved fundamentals, setting the stage for continued solid performance in 2023. Net interest margin increased by 39 basis points on a sequential-quarter basis, and gains from nonperforming loan resolutions returned to more normalized levels, resulting in solid net income growth. We continued to enjoy support from the capital markets with the April issuance of our VCC 2023-1R securitization collateralized by retained tranches of previous VCC securitizations. This transaction provides a new source of non-mark-to-market liquidity for the company at cost-effective levels and enhances our ability to capitalize on opportunities for growth. We expect to increase production from first quarter levels for the remainder of 2023 and are optimistic regarding our ability to deliver strong earnings growth in the future.”

(1) Core income and Core EPS are a non-GAAP measures that exclude nonrecurring and unusual activities from GAAP net income.

(2) Liquidity includes unrestricted cash reserves of $39.4 million and available liquidity in unfinanced loans of $5.9 million.

First Quarter Operating Results

KEY PERFORMANCE INDICATORS
($ in thousands)

1Q 2023

1Q 2022

$ Variance

% Variance

Pretax income

$

14,757

 

$

4,021

 

$

10,736

 

267.0

%

Net income

$

10,649

 

$

3,121

 

$

7,528

 

241.2

%

Diluted earnings per share

$

0.31

 

$

0.09

 

$

0.22

 

242.7

%

Core net income(a)

$

11,376

 

$

12,407

 

$

(1,031

)

(8.3

)%

Core diluted earnings per share(a)

$

0.33

 

$

0.36

 

$

(0.03

)

(7.9

)%

Pretax return on equity

 

15.27

%

 

4.55

%

n.a.

235.6

%

Core pretax return on equity(a)

 

16.20

%

 

19.02

%

n.a.

(14.8

)%

Net interest margin - portfolio

 

3.23

%

 

4.25

%

n.a.

(23.9

)%

Net interest margin - total company

 

2.76

%

 

1.69

%

n.a.

63.3

%

Average common equity

$

386,935

 

$

353,635

 

$

33,300

 

9.4

%

 
(a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.

Discussion of results:

  • Net income in 1Q23 was $10.6 million, compared to $3.1 million for 1Q22
    • Driven by higher net interest income resulting from increased loan yields and portfolio growth
    • Net income in 1Q22 includes $12.8 million of deal cost write-off related to the refinancing of the Company’s corporate debt
    • Other operating income in 1Q23 was $12.5 million, compared to $5.6 million for 1Q22
  • Core net income(1) was $11.4 million, compared to $12.4 million for 1Q22
    • 1Q22 core net income reflects after-tax adjustments of $9.3 million from the write-off of costs related to the refinancing of the Company’s corporate debt in 1Q22
  • Portfolio NIM in 1Q23 was 3.23%, compared to 4.25% for 1Q22, resulting from increased interest expense, partially offset by increased portfolio yields due to higher loan coupons on recent loan production
  • The GAAP pretax return on equity was 15.26% in 1Q23
TOTAL LOAN PORTFOLIO
($ of UPB in millions)

1Q 2023

1Q 2022

$ Variance

% Variance

Held for Investment
Investor 1-4 Rental

$

1,905

 

$

1,319

 

$

586

 

44.4

%

Mixed Use

 

450

 

 

380

 

 

70

 

18.4

%

Multi-Family

 

304

 

 

279

 

 

25

 

9.0

%

Retail

 

308

 

 

278

 

 

30

 

10.8

%

Warehouse

 

221

 

 

201

 

 

20

 

10.1

%

All Other

 

391

 

 

343

 

 

48

 

13.9

%

Total

$

3,579

 

$

2,800

 

 

779

 

27.8

%

Held for Sale
Multi-Family

$

17

 

$

77

 

$

(59

)

(77.4

)%

Total Managed Loan Portfolio UPB

$

3,596

 

$

2,877

 

$

719

 

25.0

%

Key loan portfolio metrics:
Total loan count

 

9,147

 

 

7,365

 

Weighted average loan to value

 

68.1

%

 

67.9

%

Weighted average coupon

 

8.15

%

 

7.50

%

Weighted average total portfolio yield

 

8.00

%

 

7.76

%

Weighted average portfolio debt cost

 

5.33

%

 

4.00

%

 

Discussion of results:

  • Velocity’s total loan portfolio was $3.6 billion in UPB as of March 31, 2023, an increase of 25.0% from $2.9 billion in UPB as of March 31, 2022
    • Primarily driven by growth in loans collateralized by Investor 1-4 Rental and Multifamily Properties
    • Loan prepayments totaled $86.9 million, a 3.1% Q/Q increase, and a 37.3% decrease Y/Y
  • The UPB of FVO loans was $436.6 million in UPB, or 12.2% of total HFI loans, as of March 31, 2023, an increase from $1.3 million in UPB, or 0.05% as of March 31, 2022
    • The company elected fair value accounting treatment for new HFI loan originations effective October 1, 2022
  • The weighted average portfolio loan-to-value ratio was 68.1% as of

    March 31, 2023, consistent with the 67.9% as of March 31, 2022, and the five-quarter trailing average of 68.2%
  • The weighted average total portfolio yield was 8.00% in 1Q23, an increase of 24 bps from 1Q22, driven by higher loan coupons
  • Portfolio-related debt cost in 1Q23 was 5.33%, an increase of 133 bps from 1Q22 driven by higher interest rates
LOAN PRODUCTION VOLUMES
($ in millions)

1Q 2023

1Q 2022

$ Variance

% Variance

Investor 1-4 Rental

$

116

$

293

$

(177

)

(60.4

)%

Traditional Commercial

 

80

 

272

 

(192

)

(70.6

)%

Short-term loans

 

21

 

16

 

5

 

28.1

%

Total loan production

$

217

$

581

$

(364

)

(62.7

)%

 
Acquisitions

$

-

$

4

Discussion of results:

  • Loan production in 1Q23 totaled $217.0 million in UPB, a 62.7% decrease from

    $581.4 million in UPB in 1Q22
    • Driven by management’s strategic decision to reduce volume
  • The weighted average coupon (WAC) on 1Q23 HFI loan production was 11.1%, an increase of 473 bps from 1Q22
HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS
($ in thousands)

1Q 2023

1Q 2022

$ Varience

$ Varience

Nonperforming loans(a)

$

309,937

 

$

275,487

 

$

34,450

12.5

%

Average Nonperforming Loans

$

298,703

 

$

278,349

 

$

20,354

7.3

%

Nonperforming loans % total HFI Loans

 

8.7

%

 

9.8

%

n.a.

(12.0

)%

Total Charge Offs

$

484

 

$

328

 

$

156

47.5

%

Charge-offs as a % of Avg. Nonperforming Loans(b)

 

0.65

%

 

0.47

%

n.a.

n.m
Loan Loss Reserve

$

5,045

 

$

4,664

 

$

381

8.2

%

 
(a) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual.
(b) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period.
n.m. - non meaningful

Discussion of results:

  • Nonperforming loans (NPL) totaled $309.9 million in UPB as of March 31, 2023, or 8.7% of loans HFI, compared to $278.3 million and 9.8%, respectively, as of March 31, 2022
  • Charge-offs in 1Q23 totaled $484.2 thousand, compared to $328.1 thousand in 1Q22
    • The trailing five-quarter charge-off average was $200.8 thousand
  • The loan loss reserve totaled $5.0 million as of March 31, 2023, an 8.2% increase from $4.7 million as of March 31, 2022
    • The Q/Q increase resulted from modest growth in the reserve’s macroeconomic component, partially offset by run-off of the amortized cost HFI loan portfolio
    • Loans carried at fair value are not subject to a CECL reserve
NET REVENUES
($ in thousands)

1Q 2023

1Q 2022

$ Variance

% Variance

Interest income

$

70,521

 

$

52,049

 

$

18,472

 

35.5

%

Interest expense - portfolio related

 

(42,029

)

 

(23,556

)

 

(18,473

)

78.4

%

Net Interest Income - portfolio related

 

28,492

 

 

28,493

 

 

(1

)

(0.0

)%

Interest expense - corporate debt

 

(4,139

)

 

(17,140

)

 

13,001

 

(75.9

)%

Net Interest Income

$

24,353

 

$

11,353

 

$

13,000

 

114.5

%

Loan loss provision

 

(636

)

 

(730

)

 

94

 

(12.9

)%

Gain on disposition of loans

 

1,913

 

 

4,540

 

 

(2,627

)

(57.9

)%

Unrealized gain on fair value loans

 

7,354

 

 

11

 

 

7,343

 

n.m
Unrealized loss on fair securitizations

 

(170

)

 

-

 

 

(170

)

n.m
Other operating income (expense)

 

3,460

 

 

1,097

 

 

2,363

 

215.4

%

Net Revenue

$

36,275

 

$

16,271

 

$

20,004

 

122.9

%

n.m. - non meaningful

Discussion of results:

  • Net Revenue in 1Q23 was $36.3 million, compared to $16.3 million for 1Q22
  • Total net interest income, including corporate debt interest expense, increased by

    $13.0 million from 1Q22
    • Net Interest income was $28.5 million in 1Q23, essentially unchanged from 1Q22
    • 1Q22 corporate debt interest expense includes $12.8 million of deal cost write-off related to the corporate debt refinancing
  • Total other operating income, includes gains on disposition of loans, unrealized gain/(loss) on fair value loans, and other operating income, and totaled $12.6 million in 1Q23 compared to $5.6 million in 1Q22
    • Gain on disposition of loans includes gains from loan sales and transfer of loans. In 1Q23, gains on transfer to REO totaled $1.2 million, and loan sales realized gains of $679.7 thousand on $20.8 million in UPB sold
    • Other operating income in 1Q23 totaled $3.3 million, compared to $1.1 million for 1Q22, driven by a $2.1 million increase in origination fees and $0.95 million increase in bank deposit earnings. Origination fees were deferred prior to our election of fair value accounting treatment for new HFI loan originations, effective October 1, 2022.
OPERATING EXPENSES
($ in thousands)

1Q 2023

1Q 2022

$ Variance % Variance
Compensation and employee benefits

$

10,008

 

$

5,323

 

$

4,685

 

88.0

%

Origination (income)/expense

 

(334

)

 

310

 

 

(644

)

n.m
Securitization issuance expense

 

2,584

 

 

-

 

 

2,584

 

n.m
Rent and occupancy

 

446

 

 

442

 

 

4

 

1.0

%

Loan servicing

 

3,828

 

 

2,450

 

 

1,378

 

56.2

%

Professional fees

 

955

 

 

1,362

 

 

(407

)

(29.8

)%

Real estate owned, net

 

1,829

 

 

(175

)

 

2,004

 

n.m
Other expenses

 

2,202

 

 

2,227

 

 

(25

)

(1.1

)%

Total operating expenses

$

21,518

 

$

12,250

 

$

9,268

 

75.7

%

n.m. - non meaningful

Discussion of results:

  • Operating expenses totaled $21.5 million in 1Q23, an increase of 75.7% from 1Q22. The variance to prior year results is mostly attributable to our FVO accounting election
    • Compensation expense totaled $10.0 million, compared to $5.3 million for 1Q22. In 1Q23, compensation expense related to loan originations was expensed as incurred under fair value accounting rather than deferred over the life of the loan under amortized cost accounting in 1Q22.
    • Origination (income)/expenses improved by $644 thousand compared to the prior year resulting from the election of fair value accounting
    • Securitization issuance costs in 1Q23 totaled $2.6 million. Securitization issuance costs are now expensed under fair value accounting and were previously deferred
    • Loan servicing expense growth was driven by the increase in securitizations outstanding to $2.9 billion as of March 31, 2023, from $2.1 billion as of March 31, 2022
SECURITIZATIONS
($ in thousands) Securities Balance at Balance at
Trusts Issued 3/31/2023 W.A. Rate 3/31/2022 W.A. Rate
2015-1 Trust

 

285,457

 

-

$

14,407

7.21

%

2016-1 Trust

 

319,809

 

19,896

8.85

%

 

32,518

8.10

%

2017-2 Trust

 

245,601

 

55,981

3.95

%

 

75,303

3.36

%

2018-1 Trust

 

176,816

 

41,239

4.01

%

 

57,284

4.04

%

2018-2 Trust

 

307,988

 

91,189

4.50

%

 

123,854

4.31

%

2019-1 Trust

 

235,580

 

87,832

4.08

%

 

115,299

3.95

%

2019-2 Trust

 

207,020

 

81,096

3.41

%

 

114,665

3.45

%

2019-3 Trust

 

154,419

 

65,757

3.28

%

 

90,919

3.27

%

2020-1 Trust

 

248,700

 

128,280

2.84

%

 

162,092

2.85

%

2020-2 Trust

 

96,352

 

57,239

4.60

%

 

73,750

4.36

%

2020-MC1 Trust

 

179,371

 

-

-

 

 

12,842

4.57

%

2021-1 Trust

 

251,301

 

186,986

1.75

%

 

228,015

1.74

%

2021-2 Trust

 

194,918

 

161,511

2.01

%

 

191,183

2.01

%

2021-3 Trust

 

204,205

 

172,915

2.45

%

 

199,381

2.46

%

2021-4 Trust

 

319,116

 

266,076

3.19

%

 

305,530

3.16

%

2022-1 Trust

 

273,594

 

250,986

3.93

%

 

270,642

3.94

%

2022-2 Trust

 

241,388

 

231,171

5.09

%

2022-MC1 Trust

 

84,967

 

48,298

6.88

%

2022-3 Trust

 

296,323

 

277,038

5.67

%

2022-4 Trust

 

308,357

 

297,702

6.24

%

2022-5 Trust

 

188,754

 

184,213

7.08

%

2023-1 Trust

 

198,715

 

195,999

7.01

%

$

5,018,751

$

2,901,403

4.29

%

$

2,067,684

3.12

%

 

Discussion of results

  • Completed the VCC 2023-1 securitization totaling $198.7 million of securities issued in January, comprised of long-term business-purpose loans
  • The weighted average rate on Velocity’s outstanding securitizations was 4.29% as of March 31, 2023, an increase of 117 bps from March 31, 2022, driven by higher rates
  • After quarter end, the Company completed the issuance of the VCC 2023-1R totaling $64.8 million of securities issued, collateralized by retained tranches from previous VCC securitizations
RESOLUTION ACTIVITIES
LONG-TERM LOANS
 
RESOLUTION ACTIVITY FIRST QUARTER 2023 FIRST QUARTER 2022
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

11,274

$

632

 

$

9,144

$

474

 

Paid current

 

18,477

 

233

 

 

7,597

 

117

 

REO sold (a)

 

570

 

137

 

 

2,522

 

469

 

Total resolutions

$

30,321

$

1,002

 

$

19,263

$

1,060

 

 
Resolutions as a % of nonperforming UPB

 

103.3

%

 

105.5

%

 
SHORT-TERM AND FORBEARANCE LOANS
 
RESOLUTION ACTIVITY FIRST QUARTER 2023 FIRST QUARTER 2022
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

5,560

$

348

 

$

13,820

$

646

 

Paid current

 

1,633

 

9

 

 

3,783

 

39

 

REO sold

 

1,209

 

(21

)

 

503

 

35

 

Total resolutions

$

8,402

$

336

 

$

18,106

$

720

 

 
Resolutions as a % of nonperforming UPB

 

104.0

%

 

104.0

%

 
Grand total resolutions

$

38,723

$

1,338

 

$

37,369

$

1,780

 

 
Grand total resolutions as a % of nonperforming UPB

 

103.5

%

 

104.8

%

Discussion of results:

  • Total NPL and REO resolution activities in 1Q23 totaled $38.7 million in UPB and realized net gains of $1.3 million, or 103.5% of UPB resolved, compared to $37.4 million in UPB and net gains of $1.8 million, or 104.8% of UPB resolved in 1Q22
    • Long-term loan and REO resolutions in 1Q23 totaled $30.3 million in UPB and realized gains of $1.0 million, compared to $19.3 million in UPB and realized gains of $1.1 million in 1Q22
    • Short-term loan and REO resolutions in 1Q23 totaled $8.4 million in UPB and realized gains of $0.3 million, compared to $18.1 million in UPB and realized gains of $0.7 million in 1Q22
  • The UPB of loan resolutions in 1Q23 were in line with the recent five-quarter resolution average of $39.4 million in UPB

Velocity’s executive management team will host a conference call and webcast to review 1Q23 financial results on May 4th, 2023, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please go to Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website following the completion of the conference call.

Conference Call Information

To participate by phone, please dial-in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to join the Velocity Financial, Inc. conference call.

A replay of the call will be available through midnight on May 31, 2023, and can be accessed by dialing 1-877-344-7529 in the U.S. and 855-669-9658 in Canada or 1-412-317-0088 internationally. The passcode for the replay is #4004772. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages business purpose loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 19 years.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.

Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs incurred from activities that are not normal recurring operating expenses, such as COVID-stressed charges and recoveries of loan loss provision, nonrecurring debt amortization, the impact of operational measures taken to address the COVID-19 pandemic and workforce reduction costs, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted-average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.

We have included non-GAAP core net income and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” ”position,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, including the risk of recession (3) regulatory and/or legislative changes, (4) our customers' continued interest in loans and doing business with us, (5) market conditions and investor interest in our future securitizations, and (6) the continued conflict in Ukraine and (7) changes in federal government fiscal and monetary policies.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors” in our Form 10-Q filed with the SEC on May 14, 2020, as well as other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.

Velocity Financial, Inc.

Consolidated Statements of Financial Condition

 
Quarter Ended
3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Unaudited Audited Unaudited Unaudited Unaudited
(In thousands)
Assets
Cash and cash equivalents

$

39,397

 

$

45,248

 

$

26,372

 

$

46,250

 

$

36,629

Restricted cash

 

16,636

 

 

16,808

 

 

14,533

 

 

9,217

 

 

10,837

 

Loans held for sale, net

 

-

 

 

-

 

 

-

 

 

-

 

 

77,503

 

Loans held for sale, at fair value

 

18,081

 

 

-

 

 

16,569

 

 

-

 

 

-

 

Loans held for investment, at fair value

 

450,732

 

 

276,095

 

 

926

 

 

1,351

 

 

1,352

Loans held for investment

 

3,169,280

 

 

3,272,390

 

 

3,445,563

 

 

3,118,799

 

 

2,828,302

Total loans, net

 

3,638,093

 

 

3,548,485

 

 

3,463,058

 

 

3,120,150

 

 

2,907,157

Accrued interest receivables

 

20,931

 

 

20,463

 

 

18,333

 

 

15,820

 

 

14,169

 

Receivables due from servicers

 

64,133

 

 

65,644

 

 

66,992

 

 

75,688

 

 

78,278

 

Other receivables

 

2,188

 

 

1,075

 

 

1,962

 

 

1,320

 

 

4,527

Real estate owned, net

 

21,778

 

 

13,325

 

 

13,188

 

 

19,218

 

 

16,177

Property and equipment, net

 

3,209

 

 

3,356

 

 

3,495

 

 

3,632

 

 

3,690

Deferred tax asset

 

2,543

 

 

5,033

 

 

4,337

 

 

15,195

 

 

16,477

 

Mortgage Servicing Rights, at fair value

 

9,143

 

 

9,238

 

 

9,868

 

 

8,438

 

 

7,661

Goodwill

 

6,775

 

 

6,775

 

 

6,775

 

 

6,775

 

 

6,775

 

Other assets

 

12,268

 

 

13,525

 

 

18,453

 

 

11,036

 

 

7,345

Total Assets

$

3,837,094

 

$

3,748,975

 

$

3,647,366

 

$

3,332,739

 

$

3,109,722

 

 
Liabilities and members' equity
Accounts payable and accrued expenses

$

84,976

 

$

91,525

 

$

75,150

 

$

78,384

 

$

92,768

Secured financing, net

 

210,155

 

 

209,846

 

 

209,537

 

 

209,227

 

 

208,956

Securitizations, net

 

2,657,469

 

 

2,736,290

 

 

2,651,895

 

 

2,477,226

 

 

2,035,374

Securitizations at Fair Value

 

194,941

 

 

-

 

 

-

 

 

-

 

 

-

 

Warehouse & repurchase facilities

 

298,313

 

 

330,814

 

 

340,050

 

 

208,390

 

 

424,692

 

Total Liabilities

 

3,445,854

 

 

3,368,475

 

 

3,276,632

 

 

2,973,227

 

 

2,761,790

 

 
Stockholders' Equity
Stockholders' equity

 

387,624

 

 

376,811

 

 

366,810

 

 

355,895

 

 

344,441

 

Noncontrolling interest in subsidiary

 

3,616

 

 

3,689

 

 

3,924

 

 

3,617

 

 

3,491

Total equity

 

391,240

 

 

380,500

 

 

370,734

 

 

359,512

 

 

347,932

Total Liabilities and members' equity

$

3,837,094

 

$

3,748,975

 

$

3,647,366

 

$

3,332,739

 

$

3,109,722

 

 
Book value per share

$

12.18

 

$

11.89

 

$

11.61

 

$

11.26

 

$

10.90

 

 
Shares outstanding

 

32,112(1)

 

31,996(2)

 

31,922(3)

$

31,922(4)

$

31,913(5)

(1)

Based on 32,111,906 common shares outstanding as of March 31, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 490,526.

(2)

Based on 31,955,730 common shares outstanding as of December 31, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.

(3)

Based on 31,921,721 common shares outstanding as of September 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.

(4)

Based on 31,921,721 common shares outstanding as of June 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.

(5)

Based on 31,912,884 common shares outstanding as of March 31, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 505,408.

Velocity Financial, Inc.

Consolidated Statements of Income (Quarters)

 
Quarter Ended
($ in thousands) 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Revenues
Interest income

$

70,521

 

$

65,632

 

$

63,419

 

$

59,243

 

$

52,049

 

Interest expense - portfolio related

 

42,029

 

 

40,854

 

 

34,561

 

 

28,752

 

 

23,556

 

Net interest income - portfolio related

 

28,492

 

 

24,778

 

 

28,858

 

 

30,491

 

 

28,493

 

Interest expense - corporate debt

 

4,139

 

 

4,139

 

 

4,011

 

 

4,182

 

 

17,140

 

Net interest income

 

24,353

 

 

20,639

 

 

24,847

 

 

26,309

 

 

11,353

 

Provision for loan losses

 

636

 

 

(437

)

 

580

 

 

279

 

 

730

 

Net interest income after provision for loan losses

 

23,717

 

 

21,076

 

 

24,267

 

 

26,030

 

 

10,623

 

Other operating income
Gain on disposition of loans

 

1,913

 

 

391

 

 

399

 

 

1,776

 

 

4,540

 

Unrealized gain on fair value loans

 

7,354

 

 

7,795

 

 

453

 

 

6

 

 

11

 

Unrealized loss on fair securitizations

 

(170

)

 

-

 

 

-

 

 

-

 

 

-

 

Other income (expense)

 

3,461

 

 

2,842

 

 

1,657

 

 

1,257

 

 

1,097

 

Total other operating income

 

12,558

 

 

11,029

 

 

2,509

 

 

3,039

 

 

5,648

 

Net revenue

 

36,275

 

 

32,105

 

 

26,776

 

 

29,070

 

 

16,271

 

 
Operating expenses
Compensation and employee benefits

 

10,008

 

 

11,793

 

 

6,788

 

 

6,553

 

 

5,323

 

Origination (income)/expense

 

(334

)

 

937

 

 

(309

)

 

951

 

 

310

 

Securitization issuance expense

 

2,584

 

 

-

 

 

-

 

 

-

 

 

-

 

Rent and occupancy

 

446

 

 

435

 

 

445

 

 

426

 

 

442

 

Loan servicing

 

3,828

 

 

3,244

 

 

3,314

 

 

3,290

 

 

2,450

 

Professional fees

 

955

 

 

1,091

 

 

664

 

 

1,062

 

 

1,362

 

Real estate owned, net

 

1,829

 

 

552

 

 

(195

)

 

(251

)

 

(175

)

Other operating expenses

 

2,202

 

 

2,360

 

 

2,020

 

 

2,248

 

 

2,538

 

Total operating expenses

 

21,518

 

 

20,413

 

 

12,727

 

 

14,279

 

 

12,250

 

Income before income taxes

 

14,757

 

 

11,692

 

 

14,049

 

 

14,790

 

 

4,021

 

Income tax expense

 

4,021

 

 

3,465

 

 

3,759

 

 

4,019

 

 

790

 

Net income

 

10,736

 

 

8,227

 

 

10,290

 

 

10,771

 

 

3,231

 

Net income attributable to noncontrolling interest

 

87

 

 

(235

)

 

307

 

 

126

 

 

110

 

Net income attributable to Velocity Financial, Inc.

 

10,649

 

 

8,462

 

 

9,983

 

 

10,645

 

 

3,121

 

Less undistributed earnings attributable to participating securities

 

160

 

 

127

 

 

152

 

 

164

 

 

48

 

Net earnings attributable to common shareholders

$

10,489

 

$

8,335

 

$

9,831

 

$

10,481

 

$

3,073

 

 
Basic earnings (loss) per share

$

0.33

 

$

0.26

 

$

0.31

 

$

0.33

 

$

0.10

 

 
Diluted earnings (loss) per common share

$

0.31

 

$

0.25

 

$

0.29

 

$

0.31

 

$

0.09

 

 
Basic weighted average common shares outstanding

 

32,098

 

 

31,923

 

 

31,922

 

 

31,917

 

 

31,892

 

 
Diluted weighted average common shares outstanding

 

34,052

 

 

34,063

 

 

34,199

 

 

34,057

 

 

34,204

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

Quarters:

 
Quarter Ended March 31, 2023 Quarter Ended December 31, 2022 Quarter Ended March 31, 2022
Interest Average Interest Average Interest Average
Average Income / Yield / Average Income / Yield / Average Income / Yield /
($ in thousands) Balance Expense Rate(1) Balance Expense Rate(1) Balance Expense Rate(1)
Loan portfolio:
Loans held for sale

$

12,896

$

64,699

$

69,092

Loans held for investment

 

3,512,133

 

3,430,296

 

2,613,759

Total loans

$

3,525,029

$

70,521

8.00

%

$

3,494,995

$

65,632

7.51

%

$

2,682,851

$

52,049

7.76

%

 
Debt:
Warehouse and repurchase facilities

$

225,497

 

4,833

8.57

%

$

286,094

 

5,776

8.08

%

$

338,247

 

3,764

4.45

%

Securitizations

 

2,926,153

 

37,196

5.08

%

 

2,838,315

 

35,078

4.94

%

 

2,018,186

 

19,791

3.92

%

Total debt - portfolio related

 

3,151,650

 

42,029

5.33

%

 

3,124,409

 

40,854

5.23

%

 

2,356,433

 

23,555

4.00

%

Corporate debt

 

215,000

 

4,139

7.70

%

 

215,000

 

4,139

7.70

%

 

178,915

 

17,141

38.32

%

Total debt

$

3,366,650

$

46,168

5.49

%

$

3,339,409

$

44,993

5.39

%

$

2,535,348

$

40,696

6.42

%

 
Net interest spread - portfolio related (2)

2.67

%

2.28

%

3.76

%

Net interest margin - portfolio related

3.23

%

2.84

%

4.25

%

 
Net interest spread - total company (3)

2.52

%

2.11

%

1.34

%

Net interest margin - total company

2.76

%

2.36

%

1.69

%

(1)

Annualized.

(2)

Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt.

(3)

Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)

 

Quarters:

 
Core Net Income
Quarter Ended
3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
 
Net Income

$

10,649

$

8,462

$

9,983

$

10,645

$

3,121

Corporate debt refinancing costs

 

-

 

-

 

-

 

-

$

9,286

Equity award & ESPP costs

$

728

$

656

 

-

 

-

$

-

Core Net Income

$

11,376

$

9,118

$

9,983

$

10,645

$

12,407

 
Diluted weighted average common shares outstanding

 

34,052

 

34,063

 

34,199

 

34,057

 

34,204

Core diluted earnings per share

$

0.33

$

0.27

$

0.29

$

0.31

$

0.36

 

 

Contacts

Investors and Media:

Chris Oltmann

(818) 532-3708

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