VEL Velocity Financial Inc

Third Quarter Highlights:

• Net income of $10.0 million and diluted earnings per share (EPS) of $0.29, compared to $8.0 million and $0.23 per share, respectively, for 3Q21
• Core net income(1) of $10.0 million and core diluted EPS(1) of $0.29, compared to $8.0 million and $0.23 per share, respectively, for 3Q21
• Loan production volume of $457.3 million in unpaid principal balance (UPB), an increase of 34.2% from 3Q21
• Total loan portfolio UPB of $3.4 billion as of September 30, 2022, an increase of 51.1% from September 30, 2021
• Nonaccrual loans as a percentage of Held for Investment (HFI) loans was 7.4% as of September 30, 2022, down from 12.7% as of September 30, 2021
• Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled $45.2 million in UPB, realizing gains of $2.7 million or 105.9% of UPB resolved
• Portfolio net interest margin (NIM) of 3.59%, compared to 4.97% in 3Q21
• Completed one VCC securitization in 3Q22 totaling $308.4 million of securities issued
• Liquidity(2) of $96.0 million as of September 30, 2022
• Book value per common share of $11.61 as of September 30, 2022

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company) reported net income and core net income of $10.0 million for 3Q22, compared to net income and core net income of $8.0 million for 3Q21. Earnings and core earnings per diluted share were $0.29 for 3Q22, compared to $0.23 for 3Q21.

“Velocity delivered strong earnings in the third quarter, over 30% year-over-year production growth, further improvement in our loan portfolio’s performance, and continued book value growth,” said Chris Farrar, President and CEO. “In the third quarter, loan demand remained robust despite higher interest rates, underscoring the strong desire of our borrowers to own tangible assets. While market volatility and uncertainty have increased, we have a solid balance sheet and strong liquidity that will enable us to navigate this period and position the Company for future success.”

Third Quarter Operating Results

KEY PERFORMANCE INDICATORS ($ in thousands)

 

3Q 2022

 

 

3Q 2021

 

$ Variance % Variance Pretax income

$

14,049

 

$

10,927

 

$

3,122

28.6

%

Net income

$

9,983

 

$

8,022

 

$

1,961

24.4

%

Diluted earnings per share

$

0.29

 

$

0.23

 

$

0.05

22.6

%

Core net income(a)

$

9,983

 

$

8,022

 

$

1,961

24.4

%

Core diluted earnings per share(a)

$

0.29

 

$

0.23

 

$

0.06

24.5

%

Pretax return on equity

 

15.26

%

 

18.23

%

n.a.

(16.3

)%

Core pretax return on equity(a)

 

15.26

%

 

18.23

%

n.a.

(16.3

)%

Net interest margin - portfolio

 

3.59

%

 

4.97

%

n.a.

(27.8

)%

Net interest margin - total company

 

3.09

%

 

4.13

%

n.a.

(25.3

)%

Average common equity

$

368,270

 

$

239,790

 

$

128,479

53.6

%

 

(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 3Q22 was $10.0 million, compared to $8.0 million in 3Q21

‒ The year-over-year increase in net income was driven by higher net interest income from strong HFI portfolio growth, the realization of interest and fees from the resolution of nonperforming loans, and MSR valuation gains.

• Core net income(1) was $10.0 million, an increase of 24.4% from $8.0 million in 3Q21
• Portfolio NIM in 3Q22 was 3.59% compared to 4.97% from 3Q21, driven by a decrease in portfolio yield and higher portfolio debt costs
• The GAAP pretax return on equity was 15.26% in 3Q22, compared to 18.23% in 3Q21

‒ Driven by a higher average equity balance in 3Q22

TOTAL LOAN PORTFOLIO ($ of UPB in millions)

 

3Q 2022

 

 

3Q 2021

 

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

$

1,777

 

$

1,150

 

$

627

55

%

Mixed Use

 

432

 

 

302

 

 

129

43

%

Multi-Family

 

297

 

 

203

 

 

94

46

%

Retail

 

304

 

 

197

 

 

107

54

%

Warehouse

 

228

 

 

151

 

 

77

51

%

All Other

 

379

 

 

268

 

 

111

41

%

Total

$

3,416

 

$

2,271

 

$

1,145

50.4

%

Held for Sale Multi-Family

$

16.57

 

$

-

 

$

17

n.m. Total Managed Loan Portfolio UPB

$

3,433

 

$

2,271

 

$

1,162

51.1

%

Key loan portfolio metrics: Total loan count

 

8,476

 

 

6,430

 

Weighted average loan to value

 

68.7

%

 

67.2

%

Weighted average total portfolio yield

 

7.88

%

 

8.77

%

Weighted average portfolio debt cost

 

4.81

%

 

4.48

%

Discussion of results:

• Velocity’s total loan portfolio was $3.4 billion in UPB as of September 30, 2022, an increase of 51.1% from $2.3 billion in UPB as of September 30, 2021

‒ Driven by record loan production volume

‒ Payoff activity totaled $110.9 million in UPB in 3Q22, a decrease of 11.9% from $125.5 million in 3Q21

• The weighted average portfolio loan-to-value ratio was 68.7% as of September 30, 2022, consistent with the 67.2% as of September 30, 2021, and the five-quarter trailing average of 67.9%
• The weighted average total portfolio yield was 7.88% in 3Q22, a decrease of 89 bps from 3Q21, driven by record loan production volume earlier this year in a lower interest rate environment
• Portfolio-related debt cost in 3Q22 was 4.81%, an increase of 33 bps from 3Q21 resulting from a higher interest rate environment

LOAN PRODUCTION VOLUMES ($ in millions)

3Q 2022

3Q 2021

$ Variance % Variance Investor 1-4 Rental

$ 278

$ 184

$ 94

50.9%

Traditional Commercial

133

131

2

1.7%

Short-term loans

46

25

21

82.2%

Total loan production

$ 457

$ 341

$ 117

34.2%

Discussion of results:

• Loan production in 3Q22 totaled $457.3 million in UPB, a 34.2% increase from $340.7 million in UPB in 3Q21

‒ Resulting primarily from 50.9% growth of Investor 1-4 long-term loan production

• The weighted average coupon (WAC) on 3Q22 HFI loan production was 8.89%, an increase of 114 bps from 2Q22 and 184 basis points from 3Q21
• October 2022 originations totaled $105.0 million in UPB with a WAC of 9.8%

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS ($ in thousands)

 

3Q 2022

 

 

3Q 2021

 

$ Variance % Variance Nonperforming loans(a)

$

253,341

 

$

288,436

 

$

(35,095)

(12.2

)%

Average Nonperforming Loans

$

249,297

 

$

288,778

 

$

(39,480)

(13.7

)%

Nonperforming loans % total HFI Loans

 

7.4

%

 

12.7

%

n.a.

(41.6

)%

Total Charge Offs

$

155

 

$

162

 

$

(7)

(4.3

)%

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

 

0.25

%

 

0.22

%

n.a.

10.9

%

Loan Loss Reserve

$

5,330

 

$

4,028

 

$

1,302

32.3

%

 

(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 $253.3 million in UPB as of September 30, 2022, or 7.4% of loans HFI, compared to $288.4 million and 12.7%, respectively, as of September 30, 2021

• Charge-offs in 3Q22 totaled $155.2 thousand compared to $162.1 thousand in 3Q21

‒ 3Q22 charge-offs were in-line with the trailing five-quarter average of $165.0 thousand per quarter

• The loan loss reserve totaled $5.3 million as of September 30, 2022, a 32.3% increase from $4.0 million as of September 30, 2021, driven primarily by portfolio growth
• Capitalized interest recovered on COVID forbearance loans totaled $4.1 million since the program's inception in April 2020, with a remaining balance of $6.9 million as of September 30, 2022. None of the capitalized interest has been forgiven.

NET REVENUES ($ in thousands)

 

3Q 2022

 

 

3Q 2021

 

$ Variance % Variance Interest income

$

63,419

 

$

46,923

 

$

16,496

 

35.2%

Interest expense - portfolio related

 

(34,561

)

 

(20,321

)

 

(14,240

)

70.1%

Net Interest Income - portfolio related

 

28,858

 

 

26,602

 

 

2,256

 

8.5%

Interest expense - corporate debt

 

(4,011

)

 

(4,488

)

 

477

 

(10.6)%

Net Interest Income

$

24,847

 

$

22,114

 

$

2,733

 

12.4%

Loan loss provision

 

(580

)

 

(228

)

 

(352

)

154.5%

Gain on disposition of loans

 

399

 

 

306

 

 

93

 

30.5%

Other operating income (expense)

 

2,111

 

 

33

 

 

2,078

 

n.m Total Net Revenues

$

26,777

 

$

22,225

 

$

4,552

 

20.5%

Discussion of results:

• Total net interest income, including corporate debt interest expense, increased by $2.7 million, or 12.4% from 3Q21

‒ Portfolio-related interest income increased 35.2% from 3Q21, resulting from strong portfolio growth driven by record production volumes

‒ Portfolio interest expense increased 70.1% from 3Q21, driven by higher costs on securitizations issued in 2022 as well as higher interest rates on warehouse financing

• Other operating income growth in 3Q22 was driven by valuation gains in our mortgage servicing right (MSR) asset of $1.4 million, driven by higher interest rates

OPERATING EXPENSES ($ in thousands)

 

3Q 2022

 

 

3Q 2021

$ Variance % Variance Compensation and employee benefits

$

6,788

 

$

4,738

$

2,050

 

43.3

%

Rent and occupancy

 

445

 

 

447

 

(2

)

(0.4

)%

Loan servicing

 

3,314

 

 

2,014

 

1,300

 

64.6

%

Professional fees

 

664

 

 

736

 

(72

)

(9.8

)%

Real estate owned, net

 

(195

)

 

1,186

 

(1,381

)

(116.4

)%

Other expenses

 

1,711

 

 

2,177

 

(466

)

(21.4

)%

Total operating expenses

$

12,727

 

$

11,298

$

1,429

 

12.6

%

Discussion of results:

• Operating expenses totaled $12.7 million in 3Q22, an increase of 12.6% from 3Q21

‒ Higher compensation and employee benefit expense resulted from increased commissions on higher loan volume and growth of the salesforce and loan operations staff

‒ Servicing expense growth was driven by the increase in securitizations outstanding from $1.6 billion as of September 30, 2021 to $2.7 billion as of September 30, 2022

‒ Real estate owned (REO), net in 3Q22 was revenue of $0.19 million compared to an expense of $1.9 million in 3Q21, primarily driven by realized gains on the disposition of REOs totaling $1.2 million in 3Q22

SECURITIZATIONS ($ in thousands) Securities Balance at Balance at Trusts Issued 9/30/2022 W.A. Rate 9/30/2021 W.A. Rate 2014-1 Trust

 

161,076

$

-

-

 

$

18,910

8.12

%

2015-1 Trust

 

285,457

 

-

-

 

 

21,161

7.57

%

2016-1 Trust

 

319,809

 

24,356

8.10

%

 

40,354

8.25

%

2016-2 Trust

 

166,853

 

-

-

 

 

29,207

7.54

%

2017-1 Trust

 

211,910

 

-

-

 

 

50,258

6.34

%

2017-2 Trust

 

245,601

 

61,224

3.75

%

 

94,486

3.45

%

2018-1 Trust

 

176,816

 

46,795

3.99

%

 

72,219

4.02

%

2018-2 Trust

 

307,988

 

99,151

4.49

%

 

156,587

4.34

%

2019-1 Trust

 

235,580

 

97,620

4.12

%

 

146,086

4.08

%

2019-2 Trust

 

207,020

 

90,165

3.39

%

 

130,198

3.44

%

2019-3 Trust

 

154,419

 

75,366

3.22

%

 

105,570

3.26

%

2020-1 Trust

 

248,700

 

141,423

2.87

%

 

186,400

2.86

%

2020-2 Trust

 

96,352

 

63,060

4.62

%

 

88,695

4.51

%

2020-MC1 Trust

 

179,371

 

-

-

 

 

57,111

4.51

%

2021-1 Trust

 

251,301

 

206,026

1.74

%

 

245,423

1.72

%

2021-2 Trust

 

194,918

 

177,993

2.02

%

 

203,743

1.77

%

2021-3 Trust

 

204,205

 

190,073

2.45

%

2021-4 Trust

 

319,116

 

282,567

3.18

%

2022-1 Trust

 

273,594

 

260,454

3.93

%

2022-2 Trust

 

241,388

 

236,918

5.09

%

2022-MC1 Trust

 

84,967

 

60,872

6.88

%

2022-3 Trust

 

296,323

 

285,847

5.64

%

2022-4 Trust

 

308,357

 

306,365

6.24

%

$

5,171,122

$

2,706,275

4.05

%

$

1,646,408

3.55

%

 

Discussion of results:

• Completed the VCC 2022-4 securitization totaling $308.7 million of securities issued in August, comprised of Investor 1-4 and Traditional Commercial long-term loans
• The weighted average rate on Velocity’s outstanding securitizations increased 50 bps from September 30, 2021, driven by higher rates on securitizations issued in 2022

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

$ 16,175

$ 967

$ 13,353

$ 1,251

Paid current

11,410

182

7,722

79

REO sold (a)

3,171

250

4,680

31

Total resolutions

$ 30,756

$ 1,399

$ 25,755

$ 1,361

  Resolutions as a % of nonperforming UPB

104.5%

105.3%

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

$ 8,691

$ 396

$ 8,960

$ 664

Paid current

2,075

-

25,141

29

REO sold

3,672

865

104

47

Total resolutions

$ 14,438

$ 1,261

$ 34,205

$ 740

  Resolutions as a % of nonperforming UPB

108.7%

102.2%

  Grand total resolutions

$ 45,194

$ 2,660

$ 59,960

$ 2,101

  Grand total resolutions as a % of nonperforming UPB

105.9%

103.5%

  (a) There was an REO property held since January 2019 that was sold during the quarter ended September 30, 2021, with a total lifetime loss of $1.7 million, all of which was recognized in prior periods.

Discussion of results:

• Total NPL and REO resolution activities in 3Q22 totaled $45.2 million in UPB and realized net gains of $2.7 million, or 105.9% of UPB resolved, compared to $60.0 million in UPB and net gains of $2.1 million, or 103.5% of UPB resolved in 3Q21

‒ Long-term loan and REO resolutions in 3Q22 totaled $30.8 million in UPB and realized gains of $1.4 million, compared to $25.8 million in UPB and realized gains of $1.4 million in 3Q21

‒ Short-term loan and REO resolutions in 3Q22 totaled $14.4 million in UPB and realized gains of $1.3 million, compared to $34.2 million in UPB and realized gains of $0.74 million in 3Q21

Velocity’s executive management team will host a conference call and webcast to review 3Q22 financial results on November 3rd, 2022, 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 November 30, 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 #9848120. 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,” ”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 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Unaudited Unaudited Unaudited Unaudited Unaudited (In thousands) Assets Cash and cash equivalents

$

26,372

$

46,250

$

36,629

$

35,965

$

35,497

Restricted cash

 

14,533

 

9,217

 

10,837

 

11,639

 

9,586

Loans held for sale, net

 

-

 

-

 

77,503

 

87,908

 

-

Loans held for sale, at fair value

 

16,569

 

-

 

-

 

-

 

-

Loans held for investment, at fair value

 

926

 

1,351

 

1,352

 

1,359

 

1,360

Loans held for investment

 

3,445,563

 

3,118,799

 

2,828,302

 

2,527,564

 

2,295,697

Total loans, net

 

3,463,058

 

3,120,149

 

2,907,156

 

2,616,831

 

2,297,056

Accrued interest receivables

 

18,333

 

15,820

 

14,169

 

13,159

 

11,974

Receivables due from servicers

 

66,992

 

75,688

 

78,278

 

74,330

 

57,058

Other receivables

 

1,962

 

1,320

 

4,527

 

1,812

 

870

Real estate owned, net

 

13,188

 

19,218

 

16,177

 

17,557

 

17,905

Property and equipment, net

 

3,495

 

3,632

 

3,690

 

3,830

 

3,348

Deferred tax asset

 

4,337

 

15,195

 

16,477

 

16,604

 

17,026

Mortgage Servicing Rights, at fair value

 

9,868

 

8,438

 

7,661

 

7,152

 

-

Goodwill

 

6,775

 

6,775

 

6,775

 

6,775

 

-

Other assets

 

18,453

 

11,036

 

7,345

 

6,824

 

6,843

Total Assets

$

3,647,366

$

3,332,738

$

3,109,721

$

2,812,478

$

2,457,163

  Liabilities and members' equity Accounts payable and accrued expenses

$

75,150

$

78,384

$

92,768

$

92,195

$

79,360

Secured financing, net

 

209,537

 

209,227

 

208,956

 

162,845

 

163,449

Securitizations, net

 

2,651,895

 

2,477,226

 

2,035,374

 

1,911,879

 

1,623,674

Warehouse & repurchase facilities

 

340,050

 

208,390

 

424,692

 

301,069

 

258,491

Total Liabilities

 

3,276,632

 

2,973,227

 

2,761,790

 

2,467,988

 

2,124,974

  Mezzanine Equity Series A Convertible preferred stock

 

-

 

-

 

-

 

90,000

Stockholders' Equity Stockholders' equity

 

366,810

 

355,895

 

344,441

 

341,109

 

242,190

Noncontrolling interest in subsidiary

 

3,924

 

3,617

 

3,491

 

3,381

 

-

Total equity

 

370,734

 

359,512

 

347,932

 

344,490

 

242,190

Total Liabilities and members' equity

$

3,647,366

$

3,332,739

$

3,109,722

$

2,812,478

$

2,457,164

    Book value per share

$

11.61

$

11.26

$

10.90

$

10.84

$

12.05

  Shares outstanding

 

31,922

 

31,922

 

31,913

 

31,787

 

20,098

 

Velocity Financial, Inc.

Consolidated Statements of Income (Quarterly)

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

$

63,419

 

$

59,243

 

$

52,049

 

$

49,360

$

46,923

Interest expense - portfolio related

 

34,561

 

 

28,752

 

 

23,556

 

 

23,666

 

20,321

Net interest income - portfolio related

 

28,858

 

 

30,491

 

 

28,493

 

 

25,694

 

26,602

Interest expense - corporate debt

 

4,011

 

 

4,182

 

 

17,140

 

 

4,462

 

4,488

Net interest income

 

24,847

 

 

26,309

 

 

11,353

 

 

21,232

 

22,114

Provision for loan losses

 

580

 

 

279

 

 

730

 

 

377

 

228

Net interest income after provision for loan losses

 

24,267

 

 

26,030

 

 

10,623

 

 

20,855

 

21,886

Other operating income Gain on disposition of loans

 

399

 

 

1,776

 

 

4,540

 

 

2,357

 

306

Unrealized gain/(loss) on fair value loans

 

453

 

 

6

 

 

11

 

 

11

 

0

Other income (expense)

 

1,657

 

 

1,257

 

 

1,097

 

 

249

 

33

Other operating income (expense)

 

2,509

 

 

3,039

 

 

5,648

 

 

2,617

 

339

Total net revenues

 

26,776

 

 

29,070

 

 

16,271

 

 

23,472

 

22,225

  Operating expenses Compensation and employee benefits

 

6,788

 

 

6,553

 

 

5,323

 

 

4,720

 

4,738

Rent and occupancy

 

445

 

 

426

 

 

442

 

 

429

 

447

Loan servicing

 

3,314

 

 

3,290

 

 

2,450

 

 

2,480

 

2,014

Professional fees

 

664

 

 

1,062

 

 

1,362

 

 

1,716

 

736

Real estate owned, net

 

(195

)

 

(251

)

 

(175

)

 

417

 

1,186

Other operating expenses

 

1,711

 

 

3,199

 

 

2,848

 

 

2,333

 

2,177

Total operating expenses

 

12,727

 

 

14,279

 

 

12,250

 

 

12,095

 

11,298

Income before income taxes

 

14,049

 

 

14,790

 

 

4,021

 

 

11,377

 

10,927

Income tax expense

 

3,759

 

 

4,019

 

 

790

 

 

3,024

 

2,905

Net income

 

10,290

 

 

10,771

 

 

3,231

 

 

8,353

 

8,022

Net income attributable to noncontrolling interest

 

307

 

 

126

 

 

110

 

 

-

 

-

Net income attributable to Velocity Financial, Inc.

 

9,983

 

 

10,645

 

 

3,121

 

 

8,353

 

8,022

Less undistributed earnings attributable to participating securities

 

152

 

 

164

 

 

48

 

 

362

 

3,030

Net earnings attributable to common stockholders

$

9,831

 

$

10,481

 

$

3,073

 

$

7,991

$

4,992

  Basic earnings (loss) per share

$

0.31

 

$

0.33

 

$

0.10

 

$

0.26

$

0.25

  Diluted earnings (loss) per common share

$

0.29

 

$

0.31

 

$

0.09

 

$

0.24

$

0.23

  Basic weighted average common shares outstanding

 

31,922

 

 

31,917

 

 

31,892

 

 

30,897

 

20,090

  Diluted weighted average common shares outstanding

 

34,199

 

 

34,057

 

 

34,204

 

 

34,257

 

34,212

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

  Quarter Ended September 30, 2022 Quarter Ended September 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

$

176

$

2,284

Loans held for investment

 

3,217,264

 

2,137,505

Total loans

$

3,217,440

$

63,419

7.88

%

$

2,139,789

$

46,923

8.77

%

  Debt: Warehouse and repurchase facilities

$

226,660

 

3,798

6.70

%

$

182,383

 

2,365

5.19

%

Securitizations

 

2,644,489

 

30,763

4.65

%

 

1,633,059

 

17,956

4.40

%

Total debt - portfolio related

 

2,871,149

 

34,561

4.81

%

 

1,815,442

 

20,321

4.48

%

Corporate debt

 

215,000

 

4,011

7.46

%

 

172,934

 

4,488

10.38

%

Total debt

$

3,086,149

$

38,572

5.00

%

$

1,988,376

$

24,809

4.99

%

  Net interest spread - portfolio related (2)

3.07

%

4.29

%

Net interest margin - portfolio related

3.59

%

4.97

%

  Net interest spread - total company (3)

2.88

%

3.78

%

Net interest margin - total company

3.09

%

4.13

%

 

(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) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021   Net Income

$

9,983

$

10,645

$

3,121

$

8,353

$

8,022

Deal cost write-off - collapsed securitizations

 

-

 

-

 

-

$

1,104

 

-

One-time Century Health & Housing Capital deal costs

 

-

 

-

 

-

$

624

 

-

Corporate debt refinancing costs

 

-

 

-

$

9,286

 

-

 

-

Core Income

$

9,983

$

10,645

$

12,407

$

10,081

$

8,022

  Diluted weighted average common shares outstanding

 

34,199

 

34,057

 

34,204

 

34,257

 

34,212

Core diluted earnings per share

$

0.29

$

0.31

$

0.36

$

0.29

$

0.23

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221103006097/en/

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