VEL Velocity Financial Inc

Second Quarter Highlights:

• Net income of $10.6 million and diluted earnings per share (EPS) of $0.31, compared to $9.5 million and $0.28 per share, respectively, for 2Q21
• Core net income(1) of $10.6 million and core diluted EPS(1) of $0.31, compared to $8.5 million and $0.25 per share, respectively, for 2Q21
• Loan production volume of $445.4 million in unpaid principal balance (UPB), an increase of 73.6% from 2Q21
• Loan production volume for the first half of 2022 was over $1.0 billion in UPB, more than twice the amount originated over the same period in 2021
• Total loan portfolio UPB of $3.1 billion as of June 30, 2022, an increase of 49.3% from June 30, 2021
• Nonaccrual loans as a percentage of Held for Investment (HFI) loans was 8.2% as of June 30, 2022, down from 15.3% as of June 30, 2021
• Resolutions of nonperforming loans (NPL) totaled $50.5 million in UPB, realizing gains of $5.7 million or 111.4% of UPB resolved
• Portfolio net interest margin (NIM) of 4.10%, compared to 4.83% in 2Q21
• Completed three VCC securitizations in 2Q22 totaling $622.7 million
• Total liquidity(2) of $134.0 million as of June 30, 2022
• Book value per common share of $11.26 as of June 30, 2022

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company) reported net income and core net income of $10.6 million for 2Q22, compared to net income of $9.5 million and core net income of $8.5 million for 2Q21. Earnings and core earnings per diluted share were $0.31 for 2Q22, compared to $0.28 and $0.25 per share, respectively, for 2Q21.

“Velocity’s second quarter results reflect our unique portfolio model, solid market position and operational expertise,” said Chris Farrar, President and CEO. “Our investment loan portfolio has grown more than 49% over the past twelve months, driven by robust origination volumes that contributed to solid earnings growth.”

Mr. Farrar continued, “During the second quarter we issued three new securitizations totaling $622.7 million, demonstrating Velocity’s differentiation in today’s market resulting from our extensive securitization track record and reputation for high-quality loan collateral. These securitizations allowed us to further optimize non-recourse leverage and enhance our liquidity position. While financing costs have increased along with market volatility, we have been able to successfully increase rates on new production while maintaining solid volume levels.”

Second Quarter Operating Results

KEY PERFORMANCE INDICATORS ($ in thousands)

2Q 2022

2Q 2021

$ Variance

% Variance

Pretax income(a)

$

14,664

 

$

12,885

 

$

1,779

14

%

Net income

$

10,645

 

$

9,453

 

$

1,192

13

%

Diluted earnings per share

$

0.31

 

$

0.28

 

$

0.0

11

%

Core net income(b)

$

10,645

 

$

8,453

 

$

2,192

25.9

%

Core diluted earnings per share(b)

$

0.31

 

$

0.25

 

$

0.1

26

%

Pretax return on equity

 

16.42

%

 

22.57

%

n.a.

(27

)%

Core pretax return on equity(b)

 

16.42

%

 

20.19

%

n.a.

(19

)%

Net interest margin - portfolio

 

4.10

%

 

4.83

%

n.a.

3

%

Net interest margin - total company

 

3.54

%

 

3.98

%

n.a.

(35

)%

Average common equity

$

357,218

 

$

228,314

 

$

128,903

59

%

(a) Prextax income less net income attributable to noncontrolling interests (b) 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 2Q22 was $10.6 million, compared to $9.5 million in 2Q21.

‒ 2Q22 net income was driven by an increase in interest income from our loan portfolio, in addition to default interest and fees realized from the resolution of nonperforming loans

• Core net income(1) was $10.6 million, an increase of 25.9% from $8.5 million in 2Q21
• Portfolio NIM in 2Q22 was 4.10%, compared to 4.83% from 2Q21, resulting from a decrease in the weighted average portfolio yield from lower interest rates on loan production in recent prior quarters, partially offset by a decrease in the weighted average cost of funds from lower securitization and warehouse financing rates
• The GAAP pretax return on equity was 16.42% in 2Q22, compared to 22.57% in 2Q21

‒ Driven by higher equity balance in 2Q22

TOTAL LOAN PORTFOLIO

($ of UPB in millions)

2Q 2022

2Q 2021

 

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

$

1,517

 

$

1,019

 

$

499

 

49

%

Mixed Use

 

410

 

 

293

 

 

117

 

40

%

Multi-Family

 

289

 

 

184

 

 

105

 

57

%

Retail

 

298

 

 

183

 

 

115

 

63

%

Warehouse

 

217

 

 

131

 

 

86

 

65

%

All Other

 

359

 

 

253

 

 

106

 

42

%

Total

$

3,090

 

$

2,062

 

$

1,028

 

50

%

Held for Sale Investor 1-4 Rental

$

-

 

$

8

 

$

(8

)

n.m. Total Managed Loan Portfolio UPB

$

3,090

 

$

2,070

 

$

1,020

 

49

%

Key loan portfolio metrics: Total loan count

 

7,779

 

 

6,125

 

Weighted average loan to value

 

68.16

%

 

66.70

%

Weighted average total portfolio yield

 

7.97

%

 

8.90

%

Weighted average portfolio debt cost

 

4.34

%

 

4.81

%

Discussion of results:

• Velocity’s total loan portfolio was $3.1 billion in UPB as of June 30, 2022, an increase of 49.3% from $2.1 billion in UPB as of June 30, 2021

‒ Portfolio growth was driven by record loan production volume over the prior twelve months ‒ Payoff activity totaled $142.8 million in UPB in 2Q22, compared to $131.8 million in 2Q21

• The weighted average loan-to-value of the portfolio was 68.2% as of June 30, 2022, largely consistent with the 66.7% as of June 30, 2021, and the five-quarter trailing average of 67.5%
• The weighted average total portfolio yield was 7.97% in 2Q22, a 93 bps year-over-year decrease driven by lower interest rates on new loan production over the period and payoff of older, higher-rate loans
• Portfolio-related debt cost in 2Q22 was 4.34%, a decrease of 47 bps from 2Q21, driven by the collapse of older, higher-cost securitizations and lower rates on the securitizations issued in the second half of 2021

LOAN PRODUCTION VOLUMES

($ in millions)

2Q 2022

2Q 2021

$ Variance % Variance Investor 1-4 Rental

$

254

$

147

$

106

72

%

Traditional Commercial

 

164

 

95

 

69

73

%

Short-term loans

 

28

 

15

 

13

90

%

Total loan production

$

445

$

257

$

189

74

%

Discussion of results:

• Loan production in 2Q22 totaled $445.4 million in UPB, compared to $256.5 million in UPB in 2Q21

‒ The year-over-year increase of 73.6% resulted from balanced growth of Investor 1-4 and Traditional Commercial long-term loan production

• Loan production volume for the first half of 2022 was over $1.0 billion in UPB, more than twice the amount originated over the same period in 2021
• The weighted average note rate on 2Q22 loan production was 7.75%, an increase of 43 bps from 2Q21

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS ($ in thousands)

2Q 2022

2Q 2021

$ Variance % Variance Nonperforming loans(a)

$

252,253

 

$

315,542

 

$

(63,290

)

(20

)%

Average Nonperforming Loans

$

257,646

 

$

274,112

 

$

(16,466

)

(6

)%

Nonperforming loans % total HFI Loans

 

8.2

%

 

15.3

%

n.a.

(47

)%

Total Charge Offs

$

37

 

$

918

 

$

(881

)

(96

)%

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

 

0.06

%

 

1.34

%

n.m.

(96

)%

Loan Loss Reserve

$

4,905

 

$

3,963

 

$

942

 

24

%

(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 $252.3 million in UPB as of June 30, 2022, or 8.2% of loans HFI, compared to $315.5 million and 15.3%, respectively, as of June 30, 2021

‒ The year-over-year reduction in NPL loans was driven by the post-pandemic economic recovery and successful loss mitigation activities by Velocity’s in-house special servicing team

• Charge-offs in 2Q22 totaled $37.0 thousand compared to $917.6 thousand in 2Q21

‒ 2Q22 charge-offs were significantly lower than the trailing five-quarter average of $350.7 thousand per quarter

• The loan loss reserve totaled $4.9 million as of June 30, 2022, a 23.8% increase from $4.0 million as of June 30, 2021, driven mainly by portfolio growth
• Capitalized interest recovered on COVID forbearance loans granted a deferral totaled $3.8 million since the program's inception in April 2020, with a remaining balance of $7.1 million as of June 30, 2022. None of the capitalized interest has been forgiven.

NET REVENUES ($ in thousands)

2Q 2022

2Q 2021

$ Variance % Variance Interest income

$

59,243

 

$

44,978

 

$

14,265

 

32

%

Interest expense - portfolio related

 

(28,752

)

 

(20,566

)

 

(8,186

)

40

%

Net Interest Income - portfolio related

 

30,491

 

 

24,412

 

 

6,079

 

25

%

Interest expense - corporate debt

 

(4,182

)

 

(4,309

)

 

127

 

(3

)%

Net Interest Income

$

26,310

 

$

20,103

 

$

6,207

 

31

%

Loan loss provision

 

(279

)

 

1,000

 

 

(1,279

)

(128

)%

Gain on disposition of loans

 

1,776

 

 

2,391

 

 

(615

)

(26

)%

Other operating income (expense)

 

1,263

 

 

41

 

 

1,222

 

n.m Total Net Revenues

$

29,069

 

$

23,535

 

$

5,534

 

24

%

Discussion of results:

• Total net interest income, including corporate debt interest expense, increased by $6.2 million, or 30.9% from 2Q21

‒ Portfolio-related net interest income (excluding corporate debt interest expense) totaled $30.5 million, an increase of 24.9% from 2Q21, driven by higher net interest income resulting from portfolio growth and the continued realization of default interest and fees from NPL resolutions

• Gain on the disposition of loans totaled $1.8 million in 2Q22, compared to $2.4 million in 2Q21
• Other operating income growth in 2Q22 was driven by valuation gains in our mortgage servicing right (MSR) asset, driven by the rise in interest rates during the quarter

OPERATING EXPENSES ($ in thousands)

2Q 2022

2Q 2021

$ Variance % Variance Compensation and employee benefits

$

6,553

 

$

4,546

$

2,007

 

44

%

Rent and occupancy

 

426

 

 

430

 

(4

)

(1

)%

Loan servicing

 

3,290

 

 

1,922

 

1,368

 

71

%

Professional fees

 

1,062

 

 

795

 

267

 

34

%

Real estate owned, net

 

(251

)

 

1,039

 

(1,290

)

(124

)%

Other expenses

 

3,199

 

 

1,918

 

1,281

 

67

%

Total operating expenses

$

14,279

 

$

10,650

$

3,629

 

34

%

Discussion of results:

• Operating expenses totaled $14.3 million in 2Q22, an increase of 34.1% from 2Q21

‒ Higher compensation expense resulting from salesforce and production operations growth ‒ Servicing expense growth was driven by the increase in securitizations outstanding to 17 as of June 30, 2022, from 13 as of June 30, 2021

SECURITIZATIONS ($ in thousands) Securities Balance at Balance at Trusts Issued 6/30/2022 W.A. Rate 6/30/2021 W.A. Rate 2014-1 Trust

$

161,076

 

-

-

 

$

19,973

7.86

%

2015-1 Trust

 

285,457

$

-

-

 

 

24,852

7.63

%

2016-1 Trust

 

319,809

 

28,021

8.24

%

 

43,925

8.12

%

2017-2 Trust

 

245,601

 

68,749

3.59

%

 

101,179

3.33

%

2018-1 Trust

 

176,816

 

52,281

3.95

%

 

79,377

4.02

%

2018-2 Trust

 

307,988

 

108,845

4.36

%

 

175,943

4.48

%

2019-1 Trust

 

235,580

 

103,860

3.92

%

 

159,345

4.06

%

2019-2 Trust

 

207,020

 

98,792

3.37

%

 

141,446

3.51

%

2019-3 Trust

 

154,419

 

81,996

3.10

%

 

112,848

3.28

%

2020-1 Trust

 

248,700

 

149,646

2.84

%

 

199,267

2.86

%

2020-2 Trust

 

96,352

 

67,446

4.59

%

 

97,601

4.44

%

2020-MC1 Trust

 

179,371

 

-

-

 

 

84,454

4.43

%

2021-1 Trust

 

251,301

 

214,835

1.74

%

 

250,109

1.73

%

2021-2 Trust

 

194,918

 

185,448

2.01

%

2021-3 Trust

 

204,205

 

195,308

2.46

%

2021-4 Trust

 

319,116

 

291,181

3.14

%

2022-1 Trust

 

273,594

 

264,936

3.91

%

2022-2 Trust

 

241,388

 

240,076

5.08

%

2022-MC1 Trust

 

84,967

 

80,931

6.94

%

2022-3 Trust

 

296,323

 

294,768

5.67

%

$

4,322,925

$

2,527,119

3.77

%

$

1,580,407

3.83

%

 

Discussion of results:

• The outstanding balance of Velocity’s securitizations as of June 30, 2022, totaled $2.5 billion, up from $1.6 billion as of June 30, 2022
• Completed three VCC securitizations in 2Q22, totaling $622.7 million

‒ The VCC 2022-2 securitization totaling $241.4 million in April ‒ The VCC 2022-MC1 securitization totaling $85.0 million in May ‒ The VCC 2022-3 securitization totaling $296.3 million in June

• The weighted average rate on Velocity’s outstanding securitizations decreased 5bps from June 30, 2021, primarily driven by the collapse of older, higher-cost securitizations and the lower rates on securitizations issued in 2021, partially offset by the increased cost of securitizations issued in 2Q22

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

$

16,934

$

3,303

 

$

21,925

$

1,446

 

Paid current

 

17,407

 

129

 

 

14,949

 

219

 

REO sold

 

2,107

 

816

 

 

947

 

(2

)

Total resolutions

$

36,448

$

4,248

 

$

37,821

$

1,663

 

  Resolutions as a % of nonperforming UPB

 

111.7

%

 

104.4

%

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

$

9,913

$

976

 

$

13,517

$

682

 

Paid current

 

2,877

 

22

 

 

7,794

 

59

 

REO sold

 

1,262

 

500

 

 

164

 

(73

)

Total resolutions

$

14,052

$

1,498

 

$

21,475

$

668

 

  Resolutions as a % of nonperforming UPB

 

110.7

%

 

103.1

%

  Grand total resolutions

$

50,500

$

5,746

 

$

59,296

$

2,331

 

  Grand total resolutions as a % of nonperforming UPB

 

111.4

%

 

103.9

%

Discussion of results:

• Total NPL resolution activities in 2Q22 totaled $50.5 million in UPB and realized net gains of $5.7 million, or 111.4% of UPB resolved, compared to $59.3 million in UPB and net gains of $2.3 million, or 103.9% of UPB resolved in 2Q21

‒ Long-term loan resolutions in 2Q22 totaled $36.4 million in UPB and realized gains of $4.2 million, compared to $37.8 million in UPB and realized gains of $1.7 million in 2Q21 ‒ Short-term loan resolutions in 2Q22 totaled $14.1 million in UPB and realized gains of $1.5 million, compared to $21.5 million in UPB and realized gains of $0.67 million in 2Q21

_____________________________________________

(1)

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

(2)

Available liquidity includes unrestricted cash reserves of $46.2 million and available liquidity in unfinanced loans of $87.8 million as of June 30, 2022.

Velocity’s executive management team will host a conference call and webcast to review 2Q22 financial results on August 4th, 2022, at 3:00 p.m. Pacific Time / 6:00 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. earnings call.

A replay of the call will be available through midnight on August 29, 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 #9239674. 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, Inc.

Consolidated Statements of Financial Condition

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

$

46,250

$

36,629

$

35,965

$

35,497

$

27,741

Restricted cash

 

9,217

 

10,837

 

11,639

 

9,586

 

7,921

Loans held for sale, net

 

0

 

77,503

 

87,908

 

0

 

7,916

Loans held for investment, at fair value

 

1,351

 

1,352

 

1,359

 

1,360

 

1,370

Loans held for investment

 

3,084,045

 

2,793,968

 

2,494,204

 

2,265,922

 

2,057,046

Net deferred loan costs

 

34,755

 

34,334

 

33,360

 

29,775

 

26,707

Total loans, net

 

3,120,150

 

2,907,157

 

2,616,831

 

2,297,057

 

2,093,039

Accrued interest receivables

 

15,820

 

14,169

 

13,159

 

11,974

 

11,094

Receivables due from servicers

 

75,688

 

78,278

 

74,330

 

57,058

 

73,517

Other receivables

 

1,320

 

4,527

 

1,812

 

870

 

10,169

Real estate owned, net

 

19,218

 

16,177

 

17,557

 

17,905

 

20,046

Property and equipment, net

 

3,632

 

3,690

 

3,830

 

3,348

 

3,625

Deferred tax asset

 

15,195

 

16,477

 

16,604

 

17,026

 

13,196

Mortgage Servicing Rights, at fair value

 

8,438

 

7,661

 

7,152

 

-

 

-

Goodwill

 

6,775

 

6,775

 

6,775

 

-

 

-

Other assets

 

11,036

 

7,345

 

6,824

 

6,843

 

7,257

Total Assets

$

3,332,739

$

3,109,722

$

2,812,478

$

2,457,164

$

2,267,605

  Liabilities and members' equity Accounts payable and accrued expenses

$

78,384

$

92,768

$

92,195

$

79,360

$

70,049

Secured financing, net

 

209,227

 

208,956

 

162,845

 

163,449

 

164,053

Securitizations, net

 

2,477,226

 

2,035,374

 

1,911,879

 

1,623,674

 

1,558,163

Warehouse & repurchase facilities

 

208,390

 

424,692

 

301,069

 

258,491

 

151,872

Total Liabilities

 

2,973,227

 

2,761,790

 

2,467,988

 

2,124,974

 

1,944,137

  Mezzanine Equity Series A Convertible preferred stock

 

-

 

-

 

-

 

90,000

 

90,000

Stockholders' Equity Stockholders' equity

 

355,895

 

344,441

 

341,109

 

242,190

 

233,468

Noncontrolling interest in subsidiary

 

3,617

 

3,491

 

3,381

 

-

 

-

Total equity

 

359,512

 

347,932

 

344,490

 

242,190

 

233,468

Total Liabilities and members' equity

$

3,332,739

$

3,109,722

$

2,812,478

$

2,457,164

$

2,267,605

    Book value per share

$

11.26

$

10.90

$

10.84

$

12.05

$

11.62

  Shares outstanding

 

31,922

 

31,913

 

31,787

 

20,098

 

20,087

Velocity Financial, Inc.

Consolidated Statements of Income (Quarterly)

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

$

59,243

 

$

52,049

 

$

49,360

$

46,923

$

44,978

 

Interest expense - portfolio related

 

28,752

 

 

23,556

 

 

23,666

 

20,321

 

20,566

 

Net interest income - portfolio related

 

30,491

 

 

28,493

 

 

25,694

 

26,602

 

24,412

 

Interest expense - corporate debt

 

4,182

 

 

17,140

 

 

4,462

 

4,488

 

4,309

 

Net interest income

 

26,309

 

 

11,353

 

 

21,232

 

22,114

 

20,103

 

Provision for loan losses

 

279

 

 

730

 

 

377

 

228

 

(1,000

)

Net interest income after provision for loan losses

 

26,030

 

 

10,623

 

 

20,855

 

21,886

 

21,103

 

Other operating income Gain on disposition of loans

 

1,776

 

 

4,540

 

 

2,357

 

306

 

2,391

 

Unrealized gain/(loss) on fair value loans

 

6

 

 

11

 

 

11

 

0

 

20

 

Other income (expense)

 

1,257

 

 

1,097

 

 

249

 

33

 

21

 

Other operating income (expense)

 

3,039

 

 

5,648

 

 

2,617

 

339

 

2,432

 

Total net revenues

 

29,070

 

 

16,271

 

 

23,472

 

22,225

 

23,535

 

  Operating expenses Compensation and employee benefits

 

6,553

 

 

5,323

 

 

4,720

 

4,738

 

4,546

 

Rent and occupancy

 

426

 

 

442

 

 

429

 

447

 

430

 

Loan servicing

 

3,290

 

 

2,450

 

 

2,480

 

2,014

 

1,922

 

Professional fees

 

1,062

 

 

1,362

 

 

1,716

 

736

 

795

 

Real estate owned, net

 

(251

)

 

(175

)

 

417

 

1,186

 

1,039

 

Other operating expenses

 

3,199

 

 

2,848

 

 

2,333

 

2,177

 

1,918

 

Total operating expenses

 

14,279

 

 

12,250

 

 

12,095

 

11,298

 

10,650

 

Income before income taxes

 

14,790

 

 

4,021

 

 

11,377

 

10,927

 

12,885

 

Income tax expense

 

4,019

 

 

790

 

 

3,024

 

2,905

 

3,432

 

Net income

 

10,771

 

 

3,231

 

 

8,353

 

8,022

 

9,453

 

Net income attributable to noncontrolling interest

 

126

 

 

110

 

 

-

 

-

 

-

 

Net income attributable to Velocity Financial, Inc.

 

10,645

 

 

3,121

 

 

8,353

 

8,022

 

9,453

 

Less undistributed earnings attributable to participating securities

 

164

 

 

48

 

 

362

 

3,030

 

3,571

 

Net earnings attributable to common stockholders

$

10,481

 

$

3,073

 

$

7,991

$

4,992

$

5,882

 

  Basic earnings (loss) per share

$

0.33

 

$

0.10

 

$

0.26

$

0.25

$

0.29

 

  Diluted earnings (loss) per common share

$

0.31

 

$

0.09

 

$

0.24

$

0.23

$

0.28

 

  Basic weighted average common shares outstanding

 

31,917

 

 

31,892

 

 

30,897

 

20,090

 

20,087

 

  Diluted weighted average common shares outstanding

 

34,057

 

 

34,204

 

 

34,257

 

34,212

 

33,960

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

  Quarter Ended June 30, 2022 Quarter Ended June 30, 2021 Interest Average Interest Average Average Income / Yield / Average Income / Yield / ($ in thousands) Balance Expense Rate(1) Balance Expense Rate(1) Loan portfolio: Loans held for sale

$

62,987

$

11,524

Loans held for investment

 

2,910,693

 

2,010,962

Total loans

$

2,973,680

$

59,243

7.97

%

$

2,022,486

$

44,978

8.90

%

  Debt: Warehouse and repurchase facilities

$

318,960

 

4,115

5.16

%

$

166,981

 

2,361

5.66

%

Securitizations

 

2,332,340

 

24,637

4.23

%

 

1,543,295

 

18,205

4.72

%

Total debt - portfolio related

 

2,651,300

 

28,752

4.34

%

 

1,710,276

 

20,566

4.81

%

Corporate debt

 

215,000

 

4,182

7.78

%

 

166,335

 

4,309

10.36

%

Total debt

$

2,866,300

$

32,934

4.60

%

$

1,876,611

$

24,875

5.30

%

  Net interest spread - portfolio related (2)

3.63

%

4.08

%

Net interest margin - portfolio related

4.10

%

4.83

%

  Net interest spread - total company (3)

3.37

%

3.59

%

Net interest margin - total company

3.54

%

3.98

%

(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)

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

$

10,645

$

3,121

$

8,353

$

8,022

$

9,453

 

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

 

-

 

-

 

-

 

Core Income

$

10,645

$

12,407

$

10,081

$

8,022

$

8,453

 

  Diluted weighted average common shares outstanding

 

34,057

 

34,204

 

34,257

 

34,212

 

33,960

 

Core diluted earnings per share

$

0.31

$

0.36

$

0.29

$

0.23

$

0.25

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005753/en/

Investors and Media: Chris Oltmann (818) 532-3708