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Velocity Financial, Inc. Reports First Quarter 2022 Results

First Quarter Highlights:

  • Net income of $3.1 million and diluted earnings per share (EPS) of $0.09, down from $8.4 million and $0.24 per share, respectively, for 4Q21
  • Core net income(1) of $12.4 million and core diluted EPS(1) of $0.36, up from $10.1 million and $0.29 per share, respectively, for 4Q21
  • Loan production volume of $581.4 million in unpaid principal balance (UPB), a third consecutive quarterly record and an increase of 16.8% from 4Q21
  • Loans held for investment (HFI) UPB of $2.8 billion as of March 31, 2022, an increase of 12.0% from December 31, 2021
  • Nonaccrual loans as a percentage of Held for Investment (HFI) loans was 9.8% as of March 31, 2022, down from 10.9% as of December 31, 2021
  • Resolutions of nonperforming loans (NPL) totaled $37.4 million in UPB, realizing gains of $1.8 million or 104.8% of UPB resolved
  • Portfolio net interest margin (NIM) of 4.25%, consistent with 4.27% in 4Q21
  • Refinanced and upsized our corporate debt, issuing $215.0 million in principal amount at a rate of 7.125% per annum and paid off higher-cost 9.00% corporate debt of $170.8 million in principal amount
  • Completed our VCC 2022-1 securitization totaling $273.6 million in UPB
  • Book value per common share of $10.90 as of March 31, 2022, an increase from $10.84 per share as of December 31, 2021

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company) reported net income of $3.1 million and core net income of $12.4 million for 1Q22, compared to net income of $8.4 million and core net income of $10.1 million in 4Q21. Earnings and core earnings per diluted share were $0.09 and $0.36, respectively, in 1Q22, compared to $0.24 and $0.29, respectively, in 4Q21.

“The first quarter’s performance demonstrated strong momentum in our business with record production volumes and strong financial results across the organization,” said Chris Farrar, President and CEO. “This quarter’s strong financial performance was driven by our investment loan portfolio of nearly $3 billion in UPB, which has grown at a compounded annual growth rate of 20% over the last four years from loan production sourced through our nationwide origination platform.”

Mr. Farrar continued, “While macroeconomic and geopolitical uncertainties have increased, our resilient business model has performed impressively through a variety of market environments. Going forward, we believe that Velocity’s opportunities for growth are robust. Our record production volume this quarter underscores the existence of significant investor demand for investor real estate loans, in addition to growing interest from mortgage brokers to offer commercial investor loan products to their clients. We are well-positioned to execute on these market opportunities as a result of our strong capital position, which was further improved this quarter by the advantageous refinancing of our corporate debt and continued strong investor demand for our securitizations. This capital will help us achieve our growth objectives and continue delivering strong returns for shareholders in the future.”

First Quarter Operating Results

KEY PERFORMANCE INDICATORS
($ in thousands)

 

1Q 2022

 

 

4Q 2021

 

$ Variance % Variance
Pretax income

$

3,911

 

$

11,377

 

$

(7,466

)

(65.6

)%

Net income

$

3,121

 

$

8,353

 

$

(5,232

)

(62.6

)%

Diluted earnings per share

$

0.09

 

$

0.24

 

$

(0.15

)

(62.6

)%

Core net income(a)

$

12,407

 

$

10,081

 

$

2,326

 

23.1

%

Core diluted earnings per share(a)

$

0.36

 

$

0.29

 

$

0.07

 

23.3

%

Pretax return on equity(b)

 

4.42

%

 

13.75

%

n.a.

(67.8

)%

Core pretax return on equity(a)

 

18.90

%

 

16.59

%

n.a.

13.9

%

Net interest margin - portfolio

 

4.25

%

 

4.27

%

n.a.

(0.6

)%

Net interest margin - total company

 

1.69

%

 

3.53

%

n.a.

(52.1

)%

Average common equity

$

353,635

 

$

330,968

 

$

22,667

 

6.8

%

 
(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.
(b) 1Q22 pretax ROE reflects deal cost write-off of $7.7 million and prepayment fees of $5.1 million related to refinancing the Company’s corporate debt in March.

Discussion of results:

  • Net income in 1Q22 was $3.1 million, down from $8.4 million in 4Q21 resulting from deal cost write-offs and prepayments fees of $12.8 million related to refinancing the Company’s corporate debt in March
  • Core net income(1) was $12.4 million in 1Q22, a 23.1% quarter-over-quarter increase from 4Q21. Core net income reflects after-tax adjustments of $9.3 million from the write-off of costs related to the refinancing of our corporate debt
  • Portfolio NIM in 1Q22 was 4.25%, consistent with the 4.27% from 4Q21.
  • The GAAP pretax return on equity was 4.42% in 1Q22, down from 13.8% in 4Q21. Adjusted for one-time debt issuance costs of $12.8 million, Core pretax return on equity was 18.90%.
TOTAL LOAN PORTFOLIO
($ of UPB in millions)

 

1Q 2022

 

 

4Q 2021

 

$ Variance % Variance
Held for Investment
Investor 1-4 Rental

$

1,319

 

$

1,225

 

$

94

 

7.7

%

Mixed Use

 

380

 

 

331

 

 

49

 

14.9

%

Multi-Family

 

279

 

 

228

 

 

51

 

22.5

%

Retail

 

278

 

 

234

 

 

44

 

18.6

%

Warehouse

 

201

 

 

173

 

 

28

 

16.3

%

All Other

 

343

 

 

309

 

 

34

 

10.9

%

Total

$

2,800

 

$

2,500

 

 

300

 

12.0

%

Held for Sale
Investor 1-4 Rental

$

77

 

$

87

 

$

(11

)

(12.1

)%

Total Managed Loan Portfolio UPB

$

2,877

 

$

2,587

 

$

290

 

11.2

%

Key loan portfolio metrics:
Total loan count

 

7,365

 

 

6,964

 

Weighted average loan to value

 

67.9

%

 

67.7

%

Weighted average total portfolio yield

 

7.76

%

 

8.21

%

Weighted average portfolio debt cost (a)

 

4.00

%

 

4.58

%

(a) 4Q21 weighted average portfolio debt cost includes one-time costs totaling $1.5 million related to the collapse of three VCC securitizations.
Adjusted for these costs, the 4Q21 weighted average cost of funds was 4.29%.

Discussion of results:

  • Velocity’s total loan portfolio was $2.9 billion in UPB as of March 31, 2022, an increase of 11.2% from $2.6 billion in UPB as of December 31, 2021

‒ Portfolio growth was driven by record loan production volume

‒ Payoff activity totaled $139.5 million in UPB, down 6.2% from $148.7 million in 4Q21

  • The weighted average loan-to-value of the portfolio was 67.9% as of March 31, 2022, consistent with 67.7% as of December 31, 2021, and the eight-quarter trailing average of 66.7%
  • The weighted average total portfolio yield was 7.76% in 1Q22, a 45 basis point (bps) quarter-over-quarter decrease driven by lower interest rates on recent production and payoff activity of older higher-rate loans
  • Portfolio related debt cost in 1Q22 was 4.00%, a decrease of 58 bps from 4Q21
LOAN PRODUCTION VOLUMES
($ in millions)

 

1Q 2022

 

4Q 2021

$ Variance % Variance
Investor 1-4 Rental

$

293

$

267

$

26

 

9.8

%

Traditional Commercial

 

272

 

203

 

68

 

33.5

%

Short-term loans

 

16

 

27

 

(11

)

(39.8

)%

Total loan production

$

581

$

498

$

84

 

16.8

%

Discussion of results:

  • Loan production in 1Q22 totaled $581.4 million in UPB, a new quarterly production record, and a 16.8% increase from the previous record of $497.8 million in UPB in 4Q21.

‒ Traditional Commercial production was up $68.2 million in UPB from 4Q21, a 33.5% quarter-over-quarter increase from 4Q21, driven by strong demand for multifamily and mixed-use properties

‒ Investor 1-4 Rental production was up $26.2 million in UPB from 4Q21, a 9.8% quarter-over-quarter increase from 4Q21

  • Increased the weighted average coupon to 8.10% on April new application volume of $338 million in UPB
HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS
($ in thousands)

 

1Q 2022

 

 

4Q 2021

 

$ Variance % Variance
Nonperforming loans(a)

$

275,487

 

$

273,100

 

$

2,387

0.9

%

Average Nonperforming Loans

$

278,349

 

$

274,112

 

1.5

%

Nonperforming loans % total HFI Loans

 

9.8

%

 

10.9

%

n.a.

(9.9

)%

Total Charge Offs

$

328

 

$

143

 

$

185

129.9

%

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

 

0.47

%

 

0.21

%

n.a.

126.4

%

Loan Loss Reserve

$

4,664

 

$

4,262

 

$

402

9.4

%

 
(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.

Discussion of results:

  • Nonperforming loans (NPL) totaled $275.5 million in UPB as of March 31, 2022, or 9.8% of loans HFI, compared to $273.1 million and 10.9%, respectively, as of December 31, 2021

‒ The modest growth in NPLs UPB was driven by a 3.0% increase in the UPB of loans in foreclosure from December 31, 2021

  • Charge-offs in 1Q22 totaled $328.1 thousand compared to $142.7 thousand in 4Q21

‒ 1Q22 charge-offs were consistent with the trailing five quarter charge-off average of $323.9 thousand per quarter

  • The loan loss reserve totaled $4.7 million as of March 31, 2022, a 9.4% increase from $4.3 million as of December 31, 2021, driven primarily by portfolio growth
  • Capitalized interest recovered on COVID forbearance loans granted a deferral totaled $3.3 million since the program's inception in April 2020, with a remaining balance of $7.2 million as of March 31, 2022. None of the capitalized interest has been forgiven.
NET REVENUES
($ in thousands)

 

1Q 2022

 

 

4Q 2021

 

$ Variance % Variance
Interest income

$

52,049

 

$

49,360

 

$

2,689

 

5.4

%

Interest expense - portfolio related(a)

 

(23,556

)

$

(23,666

)

 

110

 

(0.5

)%

Interest expense - corporate debt(b)

 

(17,140

)

$

(4,462

)

 

(12,678

)

284.1

%

Net Interest Income

$

11,353

 

$

21,232

 

$

(9,879

)

(46.5

)%

Loan loss provision

 

(730

)

 

(377

)

 

(353

)

93.6

%

Gain on disposition of loans

 

4,540

 

 

2,357

 

 

2,183

 

92.6

%

Other operating income (expense)

 

1,108

 

 

260

 

 

848

 

326.2

%

Total Net Revenues

$

16,271

 

$

23,472

 

$

(7,201

)

(30.7

)%

(a) Net interest expense - portfolio related in 4Q21 includes $1.5 million of one-time costs related to the collapse of our higher-cost securitizations.
(b) Net interest expense - corporate debt includes in 1Q22 includes $12.8 million of nonrecurring costs related to the refinance of Velocity's senior corporate debt.

Discussion of results:

  • Total net interest income, including corporate debt interest expense, decreased by $9.9 million, or 46.5% from 4Q21, driven by nonrecurring costs from the refinancing of our corporate debt

‒ Nonrecurring costs included debt issuance cost write-off of $7.7 million and prepayment fees of $5.1 million associated with the payoff of higher-cost floating-rate corporate debt with a principal balance totaling $170.8 million

‒ Excluding these costs, net interest income was $24.2 million

  • Portfolio-related net interest income (excluding corporate debt interest expense) totaled $28.5 million, an increase of 10.9% from 4Q21, resulting from portfolio growth and continued strong realization of default interest from NPL resolutions
  • Gain on the disposition of loans grew 92.6% quarter-over-quarter, resulting from the sale of loans in 1Q22 totaling $144.1 million in UPB
  • Other operating income growth from 4Q21 was primarily driven by a valuation gain in our servicing portfolio resulting from expected slower prepayment speeds in a rising interest-rate environment.
OPERATING EXPENSES
($ in thousands)

 

1Q 2022

 

 

4Q 2021

$ Variance % Variance
Compensation and employee benefits

$

5,323

 

$

4,720

$

603

 

12.8

%

Rent and occupancy

 

442

 

 

429

 

13

 

3.0

%

Loan servicing

 

2,450

 

 

2,480

 

(30

)

(1.2

)%

Professional fees

 

1,362

 

 

1,716

 

(354

)

(20.6

)%

Real estate owned, net

 

(175

)

 

417

 

(592

)

(142.0

)%

Other expenses

 

2,848

 

 

2,333

 

515

 

22.1

%

Total operating expenses

$

12,250

 

$

12,095

$

155

 

1.3

%

Discussion of results:

  • Operating expenses totaled $12.3 million in 1Q22, an increase of 1.3% from 4Q21, primarily driven by higher production-related compensation
SECURITIZATIONS
Securities Balance at Balance at
Trusts Issued 3/31/2022 W.A. Rate 12/31/2021 W.A. Rate
2015-1 Trust

$

285,457

$

14,407

7.21

%

$

17,536

7.22

%

2016-1 Trust

 

319,809

 

32,518

8.10

%

 

36,401

8.22

%

2017-2 Trust

 

245,601

 

75,303

3.36

%

 

86,497

3.37

%

2018-1 Trust

 

176,816

 

57,284

4.04

%

 

62,375

4.04

%

2018-2 Trust

 

307,988

 

123,854

4.31

%

 

143,152

4.39

%

2019-1 Trust

 

235,580

 

115,299

3.95

%

 

132,306

4.02

%

2019-2 Trust

 

207,020

 

114,665

3.45

%

 

122,205

3.44

%

2019-3 Trust

 

154,419

 

90,919

3.27

%

 

95,521

3.26

%

2020-1 Trust

 

248,700

 

162,092

2.85

%

 

174,550

2.82

%

2020-2 Trust

 

96,352

 

73,750

4.36

%

 

80,676

4.45

%

2020-MC1 Trust

 

179,371

 

12,842

4.57

%

 

35,711

4.42

%

2021-1 Trust

 

251,301

 

228,015

1.74

%

 

236,190

1.73

%

2021-2 Trust

 

194,918

 

191,183

2.01

%

 

197,744

2.28

%

2021-3 Trust

 

204,205

 

199,381

2.46

%

 

202,793

2.45

%

2021-4 Trust

 

319,116

 

305,530

3.16

%

 

315,489

3.11

%

2022-1 Trust

 

273,594

 

270,642

3.94

%

$

3,700,247

$

2,067,684

3.12

%

$

1,939,146

3.20

%

 

Discussion of results:

  • The weighted average rate on Velocity’s outstanding securitizations decreased 8bps from 4Q21, driven mainly by the collapse of higher-cost securitization in 4Q21 and issuance of $970 million of securitizations in 2021 at a weighted average rate of 2.42%

‒ Issued the VCC 2022-1 securitization in February 2022 with a balance of $273.6 million and a weighted average rate of 3.94% as of March 31, 2022. The higher rate reflects the rising interest-rate environment.

RESOLUTION ACTIVITIES
LONG-TERM LOANS
 
RESOLUTION ACTIVITY FIRST QUARTER 2022 FOURTH QUARTER 2021
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

9,144

$

474

 

$

11,464

$

614

 

Paid current

 

7,597

 

117

 

 

12,209

 

290

 

REO sold(a)

 

2,522

 

469

 

 

1,770

 

121

 

Total resolutions

$

19,263

$

1,060

 

$

25,443

$

1,025

 

 
Resolutions as a % of nonperforming UPB

 

105.5

%

 

104.0

%

 
 
 
SHORT-TERM AND FORBEARANCE LOANS
 
RESOLUTION ACTIVITY FIRST QUARTER 2022 FOURTH QUARTER 2021
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

13,820

$

646

 

$

12,567

$

623

 

Paid current

 

3,783

 

39

 

 

5,837

 

67

 

REO sold

 

503

 

35

 

 

266

 

48

 

Total resolutions

$

18,106

$

720

 

$

18,670

$

738

 

 
Resolutions as a % of nonperforming UPB

 

104.0

%

 

104.0

%

 
Grand total resolutions

$

37,369

$

1,780

 

$

44,113

$

1,763

 

 
Grand total resolutions as a % of nonperforming UPB

 

104.8

%

 

104.0

%

Discussion of results:

  • Total NPL resolution activities in 1Q22 totaled $37.4 million in UPB and realized net gains of $1.8 million, or 104.8% of UPB resolved, compared to $44.1 and $1.8 million, or 104.0% of UPB resolved, respectively in 4Q21

‒ Long-term loan resolutions in 1Q22 totaled $19.3 million in UPB and realized gains of $1.1 million compared to $25.4 million in UPB and realized gains of $1.0 million in 4Q21

‒ Short-term loan resolutions in 1Q22 totaled $18.1 million in UPB and realized gains of $0.72 million compared to $18.7 million in UPB and realized gains of $0.74 million, respectively, in 4Q21

_______________

(1) “Core” income is a non-GAAP measure that excludes nonrecurring and unusual activities from GAAP net income.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of Velocity Financial’s 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. earnings call.

A replay of the call will be available through midnight on May 31, 2022 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 #3636606. 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 investor 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 18 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,” 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, (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 contemplated securitization and (6) 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-K filed with the SEC on May 10, 2021, 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, LLC

Consolidated Statements of Financial Condition

 
 
Quarter Ended
3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021
Unaudited Audited Unaudited Unaudited Unaudited
(In thousands)
Assets
Cash and cash equivalents

$

36,629

$

35,965

$

35,497

$

27,741

$

20,434

Restricted cash

 

10,837

 

11,639

 

9,586

 

7,921

 

6,808

Loans held for sale, net

 

77,503

 

87,908

 

0

 

7,916

 

0

Loans held for investment, at fair value

 

1,352

 

1,359

 

1,360

 

1,370

 

1,364

Loans held for investment

 

2,793,968

 

2,494,204

 

2,265,922

 

2,057,046

 

1,983,435

Net deferred loan costs

 

34,334

 

33,360

 

29,775

 

26,707

 

25,070

Total loans, net

 

2,907,157

 

2,616,831

 

2,297,057

 

2,093,039

 

2,009,869

Accrued interest receivables

 

14,169

 

13,159

 

11,974

 

11,094

 

11,169

Receivables due from servicers

 

78,278

 

74,330

 

57,058

 

73,517

 

77,731

Other receivables

 

4,527

 

1,812

 

870

 

10,169

 

3,879

Real estate owned, net

 

16,177

 

17,557

 

17,905

 

20,046

 

14,487

Property and equipment, net

 

3,690

 

3,830

 

3,348

 

3,625

 

3,891

Deferred tax asset

 

16,477

 

16,604

 

17,026

 

13,196

 

9,246

Mortgage Servicing Rights, at fair value

 

7,661

 

7,152

 

-

 

-

 

-

Goodwill

 

6,775

 

6,775

 

-

 

-

 

-

Other assets

 

7,345

 

6,824

 

6,843

 

7,257

 

7,325

Total Assets

$

3,109,722

$

2,812,478

$

2,457,164

$

2,267,605

$

2,164,839

 
Liabilities and members' equity
Accounts payable and accrued expenses

$

92,768

$

92,195

$

79,360

$

70,049

$

65,003

Secured financing, net

 

208,956

 

162,845

 

163,449

 

164,053

 

129,666

Securitizations, net

 

2,035,374

 

1,911,879

 

1,623,674

 

1,558,163

 

1,453,386

Warehouse & repurchase facilities

 

424,692

 

301,069

 

258,491

 

151,872

 

203,314

Total Liabilities

 

2,761,790

 

2,467,988

 

2,124,974

 

1,944,137

 

1,851,369

 
Mezzanine Equity
Series A Convertible preferred stock

 

-

 

-

 

90,000

 

90,000

 

90,000

Stockholders' Equity
Stockholders' equity

 

344,441

 

341,109

 

242,190

 

233,468

 

223,470

Noncontrolling interest in subsidiary

 

3,491

 

3,381

 

-

 

-

 

-

Total equity

 

347,932

 

344,490

 

242,190

 

233,468

 

223,470

Total Liabilities and members' equity

$

3,109,722

$

2,812,478

$

2,457,164

$

2,267,605

$

2,164,839

 
 
Book value per share

$

10.90

$

10.84

$

12.05

$

11.62

$

11.12

 
Shares outstanding

 

31,913

 

31,787

 

20,098

 

20,087

 

20,087

 

Velocity Financial, LLC

Consolidated Statements of Income

 
 
Quarter Ended
($ in thousands) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021
Unaudited Audited Unaudited Unaudited Unaudited
Revenues
Interest income

$

52,049

 

$

49,360

$

46,923

$

44,978

 

$

40,707

 

Interest expense - portfolio related

 

23,556

 

 

23,666

 

20,321

 

20,566

 

 

20,832

 

Net interest income - portfolio related

 

28,493

 

 

25,694

 

26,602

 

24,412

 

 

19,875

 

Interest expense - corporate debt

 

17,140

 

 

4,462

 

4,488

 

4,309

 

 

7,350

 

Net interest income

 

11,353

 

 

21,232

 

22,114

 

20,103

 

 

12,525

 

Provision for loan losses

 

730

 

 

377

 

228

 

(1,000

)

 

105

 

Net interest income after provision for loan losses

 

10,623

 

 

20,855

 

21,886

 

21,103

 

 

12,420

 

Other operating income
Gain on disposition of loans

 

4,540

 

 

2,357

 

306

 

2,391

 

 

2,839

 

Unrealized gain/(loss) on fair value loans

 

11

 

 

11

 

0

 

20

 

 

(2

)

Other income (expense)

 

1,097

 

 

249

 

33

 

21

 

 

(36

)

Other operating income (expense)

 

5,648

 

 

2,617

 

339

 

2,432

 

 

2,801

 

Total net revenues

 

16,271

 

 

23,472

 

22,225

 

23,535

 

 

15,221

 

 
Operating expenses
Compensation and employee benefits

 

5,323

 

 

4,720

 

4,738

 

4,546

 

 

5,186

 

Rent and occupancy

 

442

 

 

429

 

447

 

430

 

 

463

 

Loan servicing

 

2,450

 

 

2,480

 

2,014

 

1,922

 

 

1,867

 

Professional fees

 

1,362

 

 

1,716

 

736

 

795

 

 

533

 

Real estate owned, net

 

(175

)

 

417

 

1,186

 

1,039

 

 

509

 

Other operating expenses

 

2,848

 

 

2,333

 

2,177

 

1,918

 

 

2,059

 

Total operating expenses

 

12,250

 

 

12,095

 

11,298

 

10,650

 

 

10,617

 

Income before income taxes

 

4,021

 

 

11,377

 

10,927

 

12,885

 

 

4,604

 

Income tax expense

 

790

 

 

3,024

 

2,905

 

3,432

 

 

1,208

 

Net income

 

3,231

 

 

8,353

 

8,022

 

9,453

 

 

3,396

 

Net income attributable to noncontrolling interest

 

110

 

 

-

 

-

 

-

 

 

-

 

Net income attributable to Velocity Financial, Inc.

 

3,121

 

 

8,353

 

8,022

 

9,453

 

 

3,396

 

Less undistributed earnings attributable to participating securities

 

48

 

 

362

 

3,030

 

3,571

 

 

1,281

 

Net earnings attributable to common stockholders

$

3,073

 

$

7,991

$

4,992

$

5,882

 

$

2,115

 

 
Basic earnings (loss) per share

$

0.10

 

$

0.26

$

0.25

$

0.29

 

$

0.11

 

 
Diluted earnings (loss) per common share

$

0.09

 

$

0.24

$

0.23

$

0.28

 

$

0.10

 

 
Basic weighted average common shares outstanding

 

31,892

 

 

30,897

 

20,090

 

20,087

 

 

20,087

 

 
Diluted weighted average common shares outstanding

 

34,204

 

 

34,257

 

34,212

 

33,960

 

 

33,407

 

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

 
Quarter Ended March 31, 2022 Quarter Ended December 31, 2021 Quarter Ended March 31, 2021
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

$

69,092

$

40,464

$

8,904

Loans held for investment

 

2,613,759

 

2,363,987

 

1,927,760

Total loans

$

2,682,851

$

52,049

7.76

%

$

2,404,451

$

49,360

8.21

%

$

1,936,664

$

40,707

8.41

%

 
Debt:
Warehouse and repurchase facilities

$

338,247

 

3,764

4.45

%

$

271,761

 

3,273

4.82

%

$

113,528

 

1,705

6.01

%

Securitizations

 

2,018,186

 

19,791

3.92

%

 

1,796,543

 

20,392

4.54

%

 

1,548,642

 

19,127

4.94

%

Total debt - portfolio related

 

2,356,433

 

23,555

4.00

%

 

2,068,304

 

23,665

4.58

%

 

1,662,170

 

20,832

5.01

%

Corporate debt

 

178,915

 

17,141

38.32

%

(4)

 

171,926

 

4,463

10.38

%

 

108,365

 

7,350

27.13

%

Total debt

$

2,535,348

$

40,696

6.42

%

$

2,240,230

$

28,128

5.02

%

$

1,770,535

$

28,182

6.37

%

 
Net interest spread - portfolio related (2)

3.76

%

3.63

%

3.39

%

Net interest margin - portfolio related

4.25

%

4.27

%

4.10

%

 
Net interest spread - total company (3)

1.34

%

3.19

%

2.04

%

Net interest margin - total company

1.69

%

3.53

%

2.59

%

(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.

(4)

 

Excluding the one-time debt issuance cost write-off of $7.7 million and prepayment penalties of $5.1 million associated with the $170.8 million payoff of our corporate debt in March 2022, the corporate debt average rate would have been 9.70%; net interest spread — total company would have been 3.36%; and net interest margin — total company would have been 3.60% for the three months ended March 31, 2022.

(5)

 

The debt issuance cost amortization was higher for the three months ended March 31, 2021, as a result of a lower average outstanding borrowing balance from a new financing facility.

(6)

 

Excluding the one-time debt issuance cost write-off of $2.9 million and prepayment penalties of $1.6 million associated with the $78.0 million payoff of our corporate debt in February 2021, the corporate debt average rate would have been 10.49%; net interest spread — total company would have been 3.06%; and net interest margin — total company would have been 3.52% for the three months ended March 31, 2021.

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)

 

Core Income

Quarter Ended
($ in thousands) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021
 
Net Income

$

3,121

$

8,353

$

8,022

$

9,453

 

$

3,396

Deal cost write-off - collapsed securitizations

$

1,104

 

-

 

-

 

 

-

One-time Century Health & Housing Capital deal costs

$

624

 

-

 

-

 

 

-

Recovery of Loan Loss Provision

 

-

 

-

$

(1,000

)

 

-

Corporate debt refinancing costs

$

9,286

 

-

 

-

 

-

 

 

3,326

Core Income

$

12,407

$

10,081

$

8,022

$

8,453

 

$

6,722

 
Diluted weighted average common shares outstanding

$

34,204

$

34,257

$

34,212

$

33,960

 

$

33,407

Core diluted earnings per share

$

0.36

$

0.29

$

0.23

$

0.25

 

$

0.20

 

Contacts

Investors and Media:

Chris Oltmann

(818) 532-3708

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