Velocity Financial, Inc. (“Velocity” or the “Company”) (NYSE:
VEL), a leading provider of small balance investor loans, today
announced a preliminary financial and operational update for the
quarter ended December 31, 2021. The Company expects to release its
fourth quarter 2021 results after market close on March 10, 2022,
to be followed by a conference call and webcast hosted by the
Company to review its financial results at 2:00 p.m. Pacific Time /
5:00 p.m. Eastern Time on the same day.
Fourth Quarter Financial and Operational Estimates:
- Loan production volume is expected to be approximately $497.8
million in unpaid principal balance (UPB), the largest volume of
originations in a single quarter and a 46% increase from the prior
quarter.
- Net income is expected to be in the range of $8.2 million and
$8.6 million and non-GAAP core net income(1) is expected to be
between $9.8 and $10.3 million for the quarter ended December 31,
2021; and diluted EPS and non-GAAP core diluted EPS(1) is expected
to be in the range of $0.24 and $0.25 and $0.29 and $0.30,
respectively.
- Total loans held for investment are expected to total
approximately $2.5 billion in UPB as of December 31, 2021, an
increase from $2.3 billion in UPB as of September 30, 2021.
- Nonperforming loans are expected to range between 10.3% and
10.8% of total loans, as measured by unpaid principal balance, as
of December 31, 2021, compared to 12.7% as of September 30,
2021.
- Completed two new securitizations of Velocity’s business
purposed loans:
- VCC 2021-3, totaling $204.2 million in UPB.
- VCC 2021-4, totaling $319.1 million in UPB, comprised of $233.1
million of recently originated investor real estate loans and $86.0
million of loans that were previously included in our VCC 2014-1,
VCC 2016-2 and VCC 2017-1 securitizations , which were concurrently
collapsed. The total UPB loans for VCC 2014-1, VCC 2016-2 and
VCC2017-1 was approximately $109.1 million and outstanding bond
balances were approximately $90.8 million and carried a weighted
average coupon of 7.25%. Approximately $86.0 million in new bonds
were issued for the transferred loans and reduced our coupon to
approximately 3.2% in the December 2021 securitizations, which
resulted in an approximately four percentage point reduction in the
financing rate for those loans.
- Acquired a majority stake in Century Health & Housing
Capital (“Century”) for $12.8 million in cash. Century is a
licensed “Ginnie Mae” issuer/servicer that provides
government-insured Federal Housing Administration (FHA) mortgage
financing for multifamily housing, senior housing and long-term
care/assisted living facilities and services the loans through its
in-house servicing platform.
- We expect to report stockholders’ equity between $344.3 million
and $344.7 million as of December 31, 2021.
- The estimated range of stockholders’ equity as of December 31,
2021 includes the impact of the conversion of our outstanding
Series A Convertible Preferred Stock, with a liquidation preference
of $90 million as of September 30, 2021 and December 31, 2020, into
11,688,310 shares of common stock on October 8, 2021
- We expect to report stockholders’ equity per common share
between $10.83 per share and $10.84 per share as of December 31,
2021
The foregoing estimated amount of loans originated and estimated
range of net income, diluted EPS, non-GAAP core net income(1) and
non-GAAP core diluted EPS(1) for the quarter ended December 31,
2021 and estimated amount of total loans and estimated ranges of
nonperforming loans and stockholders’ equity as of December 31,
2021 are preliminary and subject to completion of financial and
operating closing procedures for the year ended December 31, 2021.
We have begun our normal annual closing and review procedures for
the year ended December 31, 2021; however, given the timing of
these estimates, the actual amounts of such measures may differ
materially, including as a result of our year-end closing
procedures, review adjustments and other developments that may
arise between now and the time our audited financial results for
the year ended December 31, 2021 are finalized. Therefore, you
should not place undue reliance on these estimates.
(1)
Core net income and core diluted
EPS are non-GAAP financial measures. For a reconciliation of GAAP
net income to non-GAAP core net income and GAAP diluted EPS and
non-GAAP core diluted EPS, please refer to the sections of this
press release titled “Non-GAAP Financial Measures.”
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 at
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 and to 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 prior to 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 be joined into the
Velocity Financial, Inc. earnings call.
A replay of the call will be available through midnight on March
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 #744168. 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 Financial, Inc.
(NYSE: VEL) is a vertically integrated real estate finance company
that originates and manages investor loans secured by 1-4 unit
residential rental and commercial properties. Velocity originates
loans nationwide across an extensive network of independent
mortgage brokers it has built and refined over 17 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 measure.
Non-GAAP core net income and non-GAAP core diluted EPS share 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.
Non-GAAP core net income for the quarter ended December 31, 2021
is calculated as net income for such period with adjustments of
approximately $0.6 million, or approximately $0.02 per diluted
share, in respect of expenses related to the Century acquisition
and approximately $1.1 million, or approximately $0.03 per diluted
share, in respect of the amortization of deal costs related to the
three securitizations that were collapsed as part of creation of
the December 2021 securitization described above.
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 non-recurring.
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.
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, which reflect management’s current views
and estimates regarding the prospects of the industry and our
prospects, plans, business, results of operations, financial
position, future financial performance and business strategy. These
forward-looking statements generally can be identified by the use
of forward-looking terminology such as “may,” “should,” “expect,”
“intend,” “will,” “would,” “estimate,” “anticipate,” “believe,”
“predict,” “potential,” “continue” or “illustrative” or the
negatives of these terms or variations of them or similar
terminology. Forward-looking statements include our expectations
regarding our financial and operational information as of and for
the quarter ended December 31, 2021 after the completion of our
closing procedures.
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, certainties, assumptions, and
changes in circumstances that may cause actual results to differ
significantly from those expressed or contemplated in any
forward-looking statement. Although we believe that the
expectations reflected in these forward-looking statements are
reasonable, we cannot provide any assurance that these expectations
will prove to be correct. The following factors are among those
that may cause actual results to differ materially from the forward
looking statements: the continued impact of the coronavirus,
COVID-19, or an outbreak of another highly infectious or contagious
disease; conditions in the real estate markets, the financial
markets and the economy generally; failure of a third-party
servicer or the failure of our own internal servicing system to
effectively service our portfolio of mortgage loans; the high
degree of risk involved in loans to small businesses, self-employed
borrowers, properties in transition, and certain portions of our
investment real estate portfolio; additional or increased risks if
we change our business model or create new or modified real estate
lending products; possibility of receiving inaccurate and/or
incomplete information from potential borrowers, guarantors and
loan sellers; deficiencies in appraisal quality in the mortgage
loan origination process; competition in the market for loan
origination and acquisition opportunities; risks associated with
our underwriting guidelines and our ability to change our
underwriting guidelines; loss of our key personnel or our inability
to hire and retain qualified account executives; any inability to
manage future growth effectively or failure to develop, enhance and
implement strategies to adapt to changing conditions in the real
estate and capital markets; risks associated with our ability to
successfully identify, acquire, and integrate companies and assets;
operational risks, including the risk of cyberattacks, or
disruption in the availability and/or functionality of our
technology infrastructure and systems; any inability of our
borrowers to generate net income from operating the property that
secures our loans; costs or delays involved in the completion of a
foreclosure or liquidation of the underlying property; lender
liability claims, requirements that we repurchase mortgage loans or
indemnify investors, or allegations of violations of predatory
lending laws; economic downturns or natural disasters in
geographies where our assets are concentrated; environmental
liabilities with respect to properties to which we take title;
inadequate insurance on collateral underlying mortgage loans and
real estate securities; use of incorrect, misleading or incomplete
information in our analytical models and data; failure to realize a
gain upon disposal of portfolio assets; any inability to
successfully complete additional securitization transactions on
attractive terms or at all; the termination of one or more of our
warehouse facilities; interest rate fluctuations or mismatches
between our loans and our borrowings; legal or regulatory
developments related to mortgage-related assets, securitizations or
state licensing and operational requirements; our ability to
maintain our exclusion under the Investment Company Act of 1940, as
amended; fiscal policies or inaction at the U.S. federal government
level, which may lead to federal government shutdowns or negative
impacts on the U.S. economy; cyber-attacks and our ability to
comply with laws, regulations and market standards regarding the
privacy, use, and security of customer information; the influence
of certain of our large stockholders over us; adverse legislative
or regulatory changes; and other factors described under “Risk
Factors” in our Quarterly Report on Form 10-Q filed with the SEC on
May 14, 2020, as well as other cautionary statements we make in our
current, periodic and other filings with the SEC. Our filings are
accessible on the SEC’s website at www.sec.gov or on our Investor
Relations web page at www.velfinance.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20220121005099/en/
Velocity Investors and Media: Chris Oltmann (818)
532-3708
Velocity Financial (NYSE:VEL)
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