Fourth Quarter Highlights:
- Net income of $17.4 million, up 105.1% from $8.5 million for
4Q22. Diluted EPS of $0.50, up $0.25 from $0.25 per share for
4Q22
- Core net income(1) of $16.2 million, up 77.2% from $9.1 million
for 4Q22. Core diluted EPS(1) of $0.46, up $0.19 from $0.27 per
share for 4Q22
- Loan production of $352.1 million in UPB, a 21.2% increase from
3Q23 and 26.8% from 4Q22
- Year-to-date 2024 loan production through February 2024 totaled
$254.4 million with an 11.1% weighted average coupon (WAC)
- Nonperforming loans as a percentage of Held for Investment
(HFI) loans was 9.7%, a decrease from 10.1% as of September 30,
2023, and an increase from 8.3% as of December 31, 2022
- Resolutions of nonperforming loans (NPL) and real estate owned
(REO) totaled $70.9 million in UPB,
- Realizing gains of $1.5 million or 102.2% of UPB resolved
- Portfolio net interest margin (NIM) of 3.52%, up 18 bps Q/Q and
an increase of 68 bps from 2.84% for 4Q22
- Completed the VCC 2023-4 securitization totaling $202.9 million
of securities issued
- Liquidity(2) of $63.2 million as of December 31, 2023
- Non-recourse debt to equity ratio of 1.2 times
- Book value per common share of $13.49 as of December 31, 2023,
an increase from $13.00 as of September 30, 2023
Full-Year 2023 Highlights:
- Total loan portfolio of $4.1 billion in UPB, an increase of
16.0% from December 31, 2022
- Loan production volume of $1.1 billion in unpaid principal
balance (UPB), a decrease from $1.8 billion for FY 2022
- Net income of $52.3 million, compared to $32.2 million for FY
2022. Diluted earnings per share (EPS) of $1.52 in 2023, compared
to $0.94 per share for FY 2022
- Core Net Income(1) totaled $53.4 million in 2023, compared to
$42.2 million for FY 2022. Core diluted EPS(1) of $1.54, compared
to $1.24 per share for FY 2022
- Net charge-off and gain/(loss) on REO activity for FY 2023 was
a gain of $2.0 million, compared to a gain of $5.5 million for FY
2022
- Portfolio NIM of 3.34%, compared to 3.64% for FY 2022
- Pretax return on equity of 17.5%, an increase from 12.2% for FY
2022
Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company),
a leader in business purpose loans, reported net income of $52.3
million and core net income of $53.4 million for full-year 2023,
compared to net income of $32.2 million and core net income of
$42.2 million for the full-year 2022. Earnings and core earnings
per diluted share were $1.52 and $1.54, respectively, for the
full-year 2023, compared to $0.94 and $1.24 for the full-year
2022.
“I am pleased to announce that Velocity delivered record
earnings for the fourth quarter and full year 2023, driven by
strategic portfolio growth and proactive asset management,” said
Chris Farrar, President and CEO. “While higher interest rates and
rising inflation presented significant challenges for the mortgage
market last year, our dedicated and experienced team turned these
challenges into opportunities and delivered strong financial and
operational results. We successfully increased loan production each
quarter in 2023, while also increasing mortgage coupons by 86 basis
point from the average rate for 4Q22. As a result, our net interest
margins increased 68 basis points from 4Q22, and our asset
management team continued to enhance shareholder value with
positive recovery rates. Recently, we announced a $75 million
capital raise we are deploying into accretive investments to fuel
additional growth and attain our “5X25” goal of a $5 billion loan
portfolio by 2025.”
Fourth Quarter
Operating Results
KEY PERFORMANCE INDICATORS ($ in thousands)
4Q 2023
4Q 2022
$ Variance
% Variance
Pretax income
$
22,307
$
11,692
$
10,615
91
%
Net income
$
17,355
$
8,462
$
8,892
105
%
Diluted earnings per share
$
0.50
$
0.25
$
0.25
100
%
Core net income(a)
$
16,161
$
9,118
$
7,043
77
%
Core diluted earnings per share(a)
$
0.46
$
0.27
$
0.19
73
%
Pretax return on equity
20.66
%
12.37
%
n.a.
67
%
Core pretax return on equity(a)
20.84
%
13.61
%
n.a.
53
%
Net interest margin - portfolio
3.52
%
2.84
%
n.a.
24
%
Net interest margin - total company
3.10
%
2.36
%
n.a.
31
%
Average common equity
$
431,891
$
378,007
$
53,884
14
%
(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. n.a.-
not applicable
Discussion of results:
- Net income in 4Q23 was $17.4 million, compared to $8.5 million
for 4Q22
- Driven by FV gains on new production and a 48.9% increase in
net interest income
- Core net income(1) was $16.2 million, compared to $9.1 million
for 4Q22
- 4Q23 Core adjustments include a California apportionment tax
liability reduction, incentive compensation expenses and costs
related to the Company’s employee stock purchase plan (ESPP)
- Portfolio NIM in 4Q23 was 3.52%, compared to 2.84% for 4Q22, a
24.0% Y/Y increase driven by an increased average portfolio yield
from higher loan coupons on recent loan production and growth in
NPL resolution gains, partially offset by higher funding costs
- The GAAP pretax return on equity was 20.7% for 4Q23, compared
to 12.37% for 4Q22
TOTAL LOAN PORTFOLIO ($ of UPB in millions)
4Q 2023
4Q 2022
$ Variance
% Variance
Held for Investment Investor
1-4 Rental
$
2,225
$
1,852
$
373
20
%
Mixed Use
475
443
32
7
%
Multi-Family
316
301
15
5
%
Retail
344
305
39
13
%
Warehouse
265
223
42
19
%
All Other
431
388
43
11
%
Total
$
4,056
$
3,512
$
543
15
%
Held for Sale Investor 1-4
Rental
$
17
$
-
$
17
n.m. Multi-Family
-
-
-
n.m. Warehouse
-
-
-
n.m. All Other
-
-
-
n.m.
Total Managed Loan Portfolio UPB
$
4,073
$
3,512
$
560
16
%
Key loan portfolio metrics: Total loan count
10,477
8,893
Weighted average loan to value
67.8
%
68.2
%
Weighted average coupon
8.88
%
7.95
%
Weighted average total portfolio yield
8.70
%
7.51
%
Weighted average portfolio debt cost
5.75
%
5.23
%
n.m. - non meaningful
Discussion of results:
- Velocity’s total loan portfolio was $4.1 billion in UPB as of
December 31, 2023, an increase of 16.0% from $3.5 billion in UPB as
of December 31, 2022
- The UPB of Fair Value (FVO) loans was $1.27 billion, or 31.1%
of total HFI loans, as of December 31, 2023, an increase from
$268.6 million in UPB and 7.6%, as of December 31, 2022
- The company elected fair value accounting treatment for new
loan originations effective October 1, 2022
- The weighted average portfolio loan-to-value ratio was 67.8% as
of December 31, 2023, down from 68.2% as of December 31, 2022, and
consistent with the five-quarter trailing average of 68.8%
- The weighted average total portfolio yield was 8.70% for 4Q23,
an increase of 119 bps from 4Q22, driven by a 93 bps increase in
average loan coupons from 4Q22
- Portfolio-related debt cost for 4Q23 was 5.75%, an increase of
52 bps from 4Q22, driven by higher interest rates on 2023
securitizations and warehouse financing
LOAN PRODUCTION VOLUMES ($ in millions)
4Q 2023
4Q 2022
$ Variance % Variance Investor 1-4 Rental
$
183
$
169
$
14
9
%
Traditional Commercial
130
83
47
57
%
Short-term loans
39
26
13
49
%
Total loan production
$
352
$
278
$
74
27
%
Acquisitions
$
-
$
-
n.m. - non meaningful
Discussion of results:
- Loan production for 4Q23 totaled $352.1 million in UPB, a 26.8%
increase from $277.8 million in UPB for 4Q22
- Driven by continued strong demand for business-purpose loans.
On a Q/Q basis, production volume rose 21.2% from 3Q23.
- The weighted average coupon (WAC) on 4Q23 HFI loan production
was 11.2%, an increase of 86 bps from the WAC for 4Q22
HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS ($ in thousands)
4Q 2023
4Q 2022
$ Variance % Variance Nonperforming loans(a)
$
394,562
$
292,789
$
101,773
35
%
Average Nonperforming Loans
$
332,971
$
279,224
$
53,748
19
%
Nonperforming loans % total HFI Loans
9.7
%
8.3
%
n.a.
17
%
Total Charge Offs
$
744
$
-
$
744
n.a. Charge-offs as a % of Avg. Nonperforming Loans(b)
0.89
%
0.00
%
n.a. n.a. Loan Loss Reserve
$
4,769
$
4,893
$
(124
)
(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. n.a.- not applicable
Discussion of results:
- Nonperforming loans (NPL) totaled $394.6 million in UPB as of
December 31, 2023, or 9.7% of loans HFI, compared to $279.2 million
and 8.3% as of December 31, 2022
- NPLs as a percentage of HFI loans decreased 32 bps from 10.1%
as of September 30, 2023, driven by portfolio growth and a
significant slowdown in the pace of loans transitioning to
foreclosure
-
On a year-over-year basis, NPL growth was driven by the older,
legacy amortized cost portfolio, and the Company’s collection
philosophy that places loans in foreclosure quickly for early
delinquencies
- Charge-offs for 4Q23 totaled $744.0 thousand, compared to no
charge-offs for 4Q22
- The trailing five-quarter charge-off average was $408.0
thousand
- The loan loss reserve totaled $4.8 million as of December 31,
2023, a 2.5% decrease from $4.9 million as of December 31, 2022
NET REVENUES ($ in thousands)
4Q 2023
4Q 2022
$ Variance % Variance Interest income
$
86,269
$
65,632
$
20,638
31
%
Interest expense - portfolio related
(51,405
)
(40,854
)
(10,551
)
26
%
Net Interest Income - portfolio related
34,864
24,777
10,087
41
%
Interest expense - corporate debt
(4,140
)
(4,139
)
(1
)
0
%
Loan loss provision
(828
)
437
(1,264
)
(290
)%
Net interest income after provision for loan losses
$
29,897
$
21,076
$
8,821
42
%
Gain on disposition of loans
1,482
391
1,091
279
%
Unrealized (loss) gain on fair value loans
39,367
7,795
31,572
405
%
Unrealized gain (loss) on fair value of securitized debt
(24,085
)
-
(24,085
)
n.m. Unrealized gain/(loss) on mortgage servicing rights
(1,208
)
(630
)
(578
)
92
%
Origination income
3,981
3,521
461
13
%
Bank interest income
1,716
-
1,716
n.m. Other operating income (expense)
418
(288
)
706
(245
)%
Total Other operating income (expense)
$
21,670
$
10,789
$
10,881
101
%
Net Revenue
$
51,567
$
32,302
$
19,265
60
%
n.m. - non meaningful
Discussion of results:
- Net Revenue in 4Q23 was $51.6 million, an increase of 59.6%
compared to $32.3 million for 4Q22
- Total net interest income, including corporate debt interest
expense and loan loss provision, was $29.9 million for 4Q23, a
41.9% increase from $21.1 million for 4Q22
- Portfolio net Interest income was $34.9 million for 4Q23, an
increase of 40.7% from 4Q22 resulting from the increased size of
our portfolio and a 68 bps increase in NIM
- Total other operating income was $21.7 million for 4Q23 as
compared to $10.8 million for 4Q22 driven largely by the FVO gains
from 4Q23 originations
- Gain on disposition of loans totaled $1.5 million for 4Q23,
primarily resulting from loans transferred to REO
-
Net FVO marks on loans and securitized debt were $15.3 million
as a result of new 4Q23 loan production and the decrease in
Treasury rates during 4Q23
-
Origination income totaled $4.0 million, resulting from fee
income realized on loans originated in 4Q23
OPERATING EXPENSES ($ in thousands)
4Q 2023
4Q 2022
$ Variance % Variance Compensation and employee
benefits
$
15,143
$
11,793
$
3,350
28
%
Origination (income)/expense
173
1,328
(1,156
)
(87
)%
Securitization expenses
2,709
-
2,709
n.m. Rent and occupancy
551
435
116
27
%
Loan servicing
4,636
3,244
1,392
43
%
Professional fees
1,733
1,091
642
59
%
Real estate owned, net
2,068
552
1,516
275
%
Other expenses
2,248
2,360
(112
)
(5
)%
Total operating expenses
$
29,260
$
20,804
$
8,456
41
%
n.m. - non meaningful
Discussion of results:
- Operating expenses totaled $29.3 million for 4Q23, an increase
of 40.7% from 4Q22, driven by higher compensation expenses from
headcount growth and securitization expenses driven by impacts
attributable to our fair value accounting election
- Compensation expense totaled $15.1 million, compared to $11.8
million for 4Q22
-
Securitization expenses totaled $2.7 million, resulting from the
issuance of the VCC 2023-4 securitization during the quarter.
Securitization issuance costs are now expensed under fair value
accounting and were deferred in 4Q22.
-
Loan servicing expense totaled $4.6 million, a 42.9% increase
from $3.2 million for 4Q22, driven by the increase in our portfolio
balance and nonperforming loans
-
REO expense increased totaled $2.1, an increase from $0.6
million for 4Q22, driven by increased valuation-related
expenses
SECURITIZATIONS ($ in thousands)
Securities
Balance at Balance at Trusts Issued
12/31/2023 W.A. Rate 12/31/2022 W.A.
Rate 2016-1 Trust
319,809
$
-
0.00
%
$
22,369
8.59
%
2017-2 Trust
245,601
45,869
3.97
%
59,183
3.92
%
2018-1 Trust
176,816
33,505
4.03
%
43,596
4.05
%
2018-2 Trust
307,988
76,871
4.48
%
93,792
4.46
%
2019-1 Trust
235,580
76,391
4.07
%
91,167
4.06
%
2019-2 Trust
207,020
66,340
3.42
%
82,508
3.46
%
2019-3 Trust
154,419
58,089
3.29
%
67,899
3.25
%
2020-1 Trust
248,700
106,976
2.85
%
136,643
2.89
%
2020-2 Trust
96,352
45,180
4.61
%
60,445
4.60
%
2021-1 Trust
251,301
171,748
1.76
%
196,969
1.73
%
2021-2 Trust
194,918
143,797
2.02
%
170,072
2.02
%
2021-3 Trust
204,205
158,043
2.46
%
178,038
2.44
%
2021-4 Trust
319,116
244,919
3.22
%
273,489
3.20
%
2022-1 Trust
273,594
236,358
3.93
%
256,667
3.93
%
2022-2 Trust
241,388
210,217
5.07
%
233,045
5.07
%
2022-MC1 Trust
84,967
31,508
6.90
%
54,528
6.91
%
2022-3 Trust
296,323
257,047
5.70
%
280,066
5.67
%
2022-4 Trust
308,357
274,419
6.24
%
301,856
6.23
%
2022-5 Trust
188,754
162,925
7.06
%
186,577
7.10
%
2023-1 Trust
198,715
177,250
7.02
%
2023-1R Trust
64,833
58,237
7.68
%
2023-2 Trust
202,210
188,805
7.19
%
2023-RTL1 Trust
81,608
81,608
8.24
%
2023-3 Trust
234,741
227,228
7.82
%
2023-4 Trust
202,890
201,813
8.38
%
$
5,340,205
$
3,335,143
5.22
%
$
2,788,909
4.27
%
Discussion of results
- The company completed one securitization during 4Q23 totaling
$202.9 million of securities issued
- The weighted average rate on Velocity’s outstanding
securitizations was 5.22% as of December 31, 2023, an increase of
94 bps from December 31, 2022
RESOLUTION ACTIVITIES LONG-TERM
LOANS RESOLUTION ACTIVITY FOURTH
QUARTER 2023 FOURTH QUARTER 2022 ($ in thousands)
UPB
$ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full
$
22,342
$
826
$
8,188
$
329
Paid current
36,026
206
9,648
21
REO sold (a)
1,588
140
2,404
67
Total resolutions
$
59,956
$
1,172
$
20,240
$
417
Resolutions as a % of nonperforming UPB
102.0
%
102.1
%
SHORT-TERM AND FORBEARANCE
LOANS RESOLUTION ACTIVITY FOURTH
QUARTER 2023 FOURTH QUARTER 2022 ($ in thousands)
UPB
$ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full
$
2,770
$
37
$
4,092
$
82
Paid current
7,560
13
457
-
REO sold
604
316
529
74
Total resolutions
$
10,934
$
366
$
5,078
$
156
Resolutions as a % of nonperforming UPB
103.3
%
103.1
%
Grand total resolutions
$
70,890
$
1,538
$
25,318
$
572
Grand total resolutions as a % of nonperforming UPB
102.2
%
102.3
%
Discussion of results:
- NPL resolution totaled 70.9 million in UPB, realizing 102.2% of
UPB resolved compared to $25.3 million in UPB and realization of
102.3% of UPB resolved for 4Q22
- 4Q23 NPL resolutions represented 18.3% of nonperforming loan
UPB as of September 30, 2023
- The UPB of loan resolutions in 4Q23 was 41.4% higher than the
recent five-quarter resolution average of $50.1 million in UPB
Full-Year 2023
Operating Results
FULL-YEAR OPERATING RESULTS ($ in thousands)
FY 2023
FY 2022 $ Variance % Variance Investor 1-4
Rental
$
617
$
994
$
(377
)
(38
)%
Traditional Commercial
381
652
(271
)
(42
)%
Short-term loans
120
116
4
4
%
Total Loan production
$
1,118
$
1,762
$
(644
)
(37
)%
Net Interest Margin - Portfolio
3.34
%
3.64
%
n.a.
(8
)%
Average Nonperforming Loans
$
328,105
$
266,129
$
61,976
23
%
Total Net Interest Income(a)
105,836
81,996
$
23,840
29.1
%
Total Other Income
65,910
24,320
41,590
171.0
%
Total Expenses
119,472
74,106
45,365
61.2
%
Net Income
$
52,273
$
32,211
$
20,062
62
%
Diluted EPS
$
1.52
$
0.94
$
0.57
61
%
Core Income(b)
$
53,384
$
42,153
$
11,231
26.6
%
Core Diluted EPS(b)
$
1.54
$
1.24
$
0.30
24.5
%
Pretax Return on Equity
17.5
%
12.2
%
n.a.
42.8
%
(a) After provision for loan losses. (b) Core income is a non-GAAP
measure. Please see the reconciliation to GAAP net income at the
end of this release. n.a.- not applicable
CHARGE-OFFS,
GAIN/(LOSS) ON REO ($ in thousands)
FY 2023 FY
2022 $ Variance % Variance Average nonperforming
loans for the period (a)
$
328,105
$
266,129
$
61,976
23
%
Charge-offs
(2,039
)
(521
)
$
(1,518
)
291
%
Charge-offs / Average nonperforming loans for the period (1)
-0.62
%
-0.20
%
$
(0
)
217
%
Gain on transfer of REO
7,412
3,408
$
4,004
117
%
Gain on sale of REO
568
2,939
$
(2,371
)
(81
)%
REO valuations, net
(3,903
)
(364
)
$
(3,539
)
972
%
Total gain/(loss) on REO
$
2,038
$
5,462
$
(3,424
)
(63
)%
(a) Reflects the monthly average of nonperforming loans held for
investment during the period.
Discussion of results:
- Loan production in FY 2023 totaled $1.1 billion in UPB, a 36.5%
decrease from $1.8 billion in UPB for 2022
- Driven by higher interest rates throughout most of FY 2023
- Net interest margin (NIM) was 3.34% for FY 2023, a 30 bps
decrease from 3.64% for FY 2022
- Average NPLs were $328.1 million for FY 2023, an increase of
23.3% from the FY 2022 average of $266.1 million
- Average NPLs as a percentage of average loans HFI were 8.7% for
FY 2023, compared to 8.6% for FY 2022
- Net charge-off and gain/(loss) on REO activity for FY 2023 was
a gain of $2.0 million, compared to a gain of $5.5 million for FY
2022
- Net income totaled 52.3 million for FY 2023, a 62.3% increase
from 32.2 million for FY 2022
- Net interest income (after corporate interest expense and
provision for loan losses) totaled $105.8 million, a 29.1% increase
from $82.0 million in FY 2022, driven by HFI portfolio growth and
higher coupons on FY 2023 loan production
-
Other income totaled $65.9 million, a 171.0% increase from $24.3
million in FY 2022, driven by the net impact of the Company’s fair
value accounting election for loan production originated after
October 1, 2022, and unrealized fair value losses on securitized
debt
-
Expenses totaled $119.5 million, a 61.2% increase from $74.1
million in FY 2022, driven by an increase in compensation expense
related to the Company’s fair value accounting election and
securitization costs resulting from the issuance of six VCC
securitizations in 2023. Under fair value accounting,
securitization costs are expensed as incurred, whereas previously
they were deferred and amortized over the life of the
securitization.
- Core net income(1) totaled $53.4 million, a 26.6% increase from
$42.2 million for FY 2022
- Pretax return on equity was 17.5%, a 42.8% increase from 12.2%
for FY 2022
Velocity’s executive management team will host a conference call
and webcast to review 4Q23 and Full-Year 2023 financial results on
March 7th, 2024, 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 visit 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 March
14, 2024, 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 #7107943. The replay will also be
available on the Investor Relations section of the Company's
website under "Events and Presentations.”
About Velocity Financial, Inc.
Based in Westlake Village, California, Velocity is a vertically
integrated real estate finance company that primarily originates
and manages business purpose loans secured by 1-4-unit residential
rental and small commercial properties. Velocity originates loans
nationwide across an extensive network of independent mortgage
brokers built and refined over 19 years.
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance
with United States generally accepted accounting principles (GAAP),
the Company uses non-GAAP core net income and core diluted EPS,
which are non-GAAP financial measures.
Non-GAAP core net income and non-GAAP core diluted EPS are
non-GAAP financial measures that represent our net income (loss)
and net income (loss) per diluted share, adjusted to eliminate the
effect of certain costs incurred from activities that are not
normal recurring operating expenses, such as COVID-stressed charges
and recoveries of loan loss provision, nonrecurring debt
amortization, the impact of operational measures taken to address
the COVID-19 pandemic and workforce reduction costs, and costs
associated with acquisitions. To calculate non-GAAP core diluted
EPS, we use the weighted-average number of shares of common stock
outstanding that is used to calculate net income per diluted share
under GAAP.
We have included non-GAAP core net income and non-GAAP core
diluted EPS because they are key measures used by our management to
evaluate our operating performance, generate future operating
plans, and make strategic decisions, including those relating to
operating expenses and the allocation of internal resources.
Accordingly, we believe that non-GAAP core net income and non-GAAP
core diluted EPS provide useful information to investors and others
in understanding and evaluating our operating results in the same
manner as our management and board of directors. In addition, they
provide useful measures for period-to-period comparisons of our
business, as they remove the effect of certain items that we expect
to be nonrecurring.
These non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. These non-GAAP financial measures
are not based on any standardized methodology prescribed by GAAP
and are not necessarily comparable to similarly titled measures
presented by other companies.
For more information on Core Income, please refer to the section
of this press release below titled “Adjusted Financial Metric
Reconciliation to GAAP Net Income” at the end of this press
release.
Forward-Looking Statements
Some of the statements contained in this press release may
constitute forward-looking statements within the meaning of the
federal securities laws. Forward-looking statements relate to
anticipated results, expectations, projections, plans and
strategies, anticipated events or trends, and similar expressions
concerning matters that are not historical facts. In some cases,
you can identify forward-looking statements by the use of
forward-looking terminology such as “may,” “will,” “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “goal,” ”position,” or “potential” or the negative of
these words and phrases or similar words or phrases that are
predictions of or indicate future events or trends and which do not
relate solely to historical matters. You can also identify
forward-looking statements by discussions of strategy, plans, or
intentions.
The forward-looking statements contained in this press release
reflect our current views about future events and are subject to
numerous known and unknown risks, uncertainties, assumptions, and
changes in circumstances that may cause actual results to differ
significantly from those expressed or contemplated in any
forward-looking statement. While forward-looking statements reflect
our good faith projections, assumptions, and expectations, they are
not guarantees of future results. Furthermore, we disclaim any
obligation to publicly update or revise any forward-looking
statement to reflect changes in underlying assumptions or factors,
new information, data or methods, future events, or other changes,
except as required by applicable law. Factors that could cause our
results to differ materially include, but are not limited to, (1)
the continued course and severity of the COVID-19 pandemic and its
direct and indirect impacts, (2) general economic and real estate
market conditions, including the risk of recession (3) regulatory
and/or legislative changes, (4) our customers' continued interest
in loans and doing business with us, (5) market conditions and
investor interest in our future securitizations, and (6) the
continued conflict in Ukraine and (7) changes in federal government
fiscal and monetary policies.
Additional information relating to these and other factors that
could cause future results to differ materially from those
expressed or contemplated in any forward-looking statements can be
found in the section titled ‘‘Risk Factors” in our Form 10-Q filed
with the SEC on May 14, 2020, as well as other cautionary
statements we make in our current and periodic filings with the
SEC. Such filings are available publicly on our Investor Relations
web page at www.velfinance.com.
Velocity Financial,
Inc.
Consolidated Statements of
Financial Condition
Quarter Ended 12/31/2023 9/30/2023
6/30/2023 3/31/2023 12/31/2022 Audited
Unaudited Unaudited Unaudited Audited
(In thousands)
Assets Cash and cash equivalents
$
40,566
$
29,393
$
33,987
$
39,397
$
45,248
Restricted cash
21,361
17,703
16,786
16,636
16,808
Loans held for sale, at fair value
17,590
19,536
-
18,081
-
Loans held for investment, at fair value
1,306,072
951,990
705,330
450,732
276,095
Loans held for investment
2,828,123
2,945,840
3,057,940
3,169,280
3,272,390
Total loans, net
4,151,785
3,917,366
3,763,270
3,638,093
3,548,485
Accrued interest receivables
27,028
24,756
22,602
20,931
20,463
Receivables due from servicers
85,077
70,139
63,896
64,133
65,644
Other receivables
8,763
236
1,306
2,188
1,075
Real estate owned, net
44,268
29,299
20,388
21,778
13,325
Property and equipment, net
2,785
2,861
3,023
3,209
3,356
Deferred tax asset
2,339
705
1,878
2,543
5,033
Mortgage Servicing Rights, at fair value
8,578
9,786
9,445
9,143
9,238
Derivative assets
-
1,261
-
-
-
Goodwill
6,775
6,775
6,775
6,775
6,775
Other assets
5,248
7,028
7,789
12,268
13,525
Total Assets
$
4,404,573
$
4,117,308
$
3,951,145
$
3,837,094
$
3,748,975
Liabilities and members' equity Accounts payable and
accrued expenses
$
121,969
$
97,869
$
95,344
$
84,976
$
91,525
Secured financing, net
211,083
210,774
210,464
210,155
209,846
Securitized debt, net
2,418,811
2,504,334
2,622,547
2,657,469
2,736,290
Securitized debt, at fair value
877,417
669,139
381,799
194,941
-
Warehouse & repurchase facilities
334,755
215,176
235,749
298,313
330,814
Derivative liability
3,665
-
-
-
-
Total Liabilities
3,967,700
3,697,292
3,545,903
3,445,854
3,368,475
Stockholders' Equity Stockholders' equity
433,444
416,398
401,707
387,624
376,811
Noncontrolling interest in subsidiary
3,429
3,618
3,535
3,616
3,689
Total equity
436,873
420,016
405,242
391,240
380,500
Total Liabilities and members' equity
$
4,404,573
$
4,117,308
$
3,951,145
$
3,837,094
$
3,748,975
Book value per share
$
13.49
$
13.00
$
12.57
$
12.18
$
11.89
Shares outstanding
32,395(1)
32,314(2)
32,239(3)
32,112(4)
31,996(5)
(1) Based on 32,395,423 common shares outstanding as of December
31, 2023, and excludes unvested shares of common stock authorized
for incentive compensation totaling 470,413. (2) Based on
32,313,744 common shares outstanding as of September 30, 2023, and
excludes unvested shares of common stock authorized for incentive
compensation totaling 589,634. (3) Based on 32,238,715 common
shares outstanding as of June 30, 2023, and excludes unvested
shares of common stock authorized for incentive compensation
totaling 502,913. (4) Based on 32,111,906 common shares outstanding
as of March 31, 2023, and excludes unvested shares of common stock
authorized for incentive compensation totaling 490,526. (5) Based
on 31,955,730 common shares outstanding as of December 31, 2022,
and excludes unvested shares of common stock authorized for
incentive compensation totaling 494,139..
Velocity Financial,
Inc.
Consolidated Statements of
Income (Quarters)
Quarter Ended ($ in thousands)
12/31/2023
9/30/2023 6/30/2023 3/31/2023
12/31/2022 Unaudited Unaudited
Unaudited Unaudited Unaudited Revenues
Interest income
$
86,269
$
79,088
$
74,897
$
70,521
$
65,632
Interest expense - portfolio related
51,405
47,583
45,451
42,029
40,854
Net interest income - portfolio related
34,864
31,505
29,446
28,492
24,778
Interest expense - corporate debt
4,140
4,138
4,139
4,139
4,139
Net interest income
30,724
27,367
25,307
24,353
20,639
Provision for loan losses
828
154
298
636
(437
)
Net interest income after provision for loan losses
29,897
27,213
25,009
23,717
21,076
Other operating income Gain on disposition of loans
1,482
3,606
1,237
1,913
391
Unrealized gain (loss) on fair value loans
39,367
(1,284
)
2,413
7,354
7,795
Unrealized gain (loss) on fair value securitized debt
(24,085
)
9,692
5,560
(170
)
-
Origination income
3,981
3,323
2,735
2,411
3,521
Bank interest income
1,716
1,342
1,188
948
-
Other income (expense)
418
340
601
482
(288
)
Total other operating income
21,670
17,360
14,036
12,842
11,419
Net revenue
51,567
44,573
39,046
36,560
32,495
Operating expenses Compensation and employee benefits
15,143
12,523
10,670
10,008
11,793
Origination expenses
173
273
123
(50
)
1,328
Securitizations expenses
2,709
4,930
2,699
2,584
-
Rent and occupancy
551
472
458
446
435
Loan servicing
4,636
4,901
4,267
3,828
3,244
Professional fees
1,733
854
1,056
955
1,091
Real estate owned, net
2,068
1,239
1,018
1,829
552
Other operating expenses
2,248
2,142
1,931
2,202
2,360
Total operating expenses
29,260
27,334
22,222
21,802
20,804
Income before income taxes
22,307
17,239
16,824
14,757
11,692
Income tax expense
5,141
5,070
4,602
4,021
3,465
Net income
17,166
12,169
12,222
10,736
8,227
Net income attributable to noncontrolling interest
(189
)
83
39
87
(235
)
Net income attributable to Velocity Financial, Inc.
17,355
12,086
12,183
10,649
8,462
Less undistributed earnings attributable to participating
securities
225
183
185
160
127
Net earnings attributable to common shareholders
$
17,130
$
11,903
$
11,998
$
10,489
$
8,335
Basic earnings (loss) per share
$
0.53
$
0.37
$
0.37
$
0.33
$
0.26
Diluted earnings (loss) per common share
$
0.50
$
0.35
$
0.36
$
0.31
$
0.25
Basic weighted average common shares outstanding
32,326
32,275
32,122
32,098
31,923
Diluted weighted average common shares outstanding
34,991
34,731
34,140
34,052
34,063
Velocity Financial,
Inc.
Consolidated Statements of
Income (Years)
Year Ended ($ in thousands)
12/31/2023
12/31/2022 Audited Audited Revenues
Interest income
$
310,776
$
240,343
Interest expense - portfolio related
186,468
127,723
Net interest income - portfolio related
124,308
112,620
Interest expense - corporate debt
16,556
29,472
Net interest income
107,750
83,148
Provision for loan losses
1,915
1,152
Net interest income after provision for loan losses
105,836
81,996
Other operating income Gain on disposition of loans
8,238
7,107
Unrealized gain (loss) on fair value loans
47,850
8,265
Unrealized gain (loss) on fair value securitized debt
(9,002
)
-
Origination income
12,450
5,225
Bank interest income
5,194
-
Other income (expense)
1,840
1,637
Total other operating income
65,910
24,320
Net revenue
171,745
106,316
Operating expenses Compensation and employee benefits
48,344
30,458
Origination expenses
518
3,985
Securitizations expenses
12,923
-
Rent and occupancy
1,927
1,748
Loan servicing
17,631
12,298
Professional fees
4,599
4,179
Real estate owned, net
6,153
(70
)
Other operating expenses
8,524
9,166
Total operating expenses
100,618
61,764
Income before income taxes
71,127
44,553
Income tax expense
18,834
12,033
Net income
52,293
32,519
Net income attributable to noncontrolling interest
19
308
Net income attributable to Velocity Financial, Inc.
52,273
32,211
Less undistributed earnings attributable to participating
securities
753
491
Net earnings attributable to common shareholders
$
51,520
$
31,720
Basic earnings (loss) per share
$
1.60
$
0.99
Diluted earnings (loss) per common share
$
1.52
$
0.94
Basic weighted average common shares outstanding
32,206
31,913
Diluted weighted average common shares outstanding
34,484
34,131
Velocity Financial, Inc.
Net Interest Margin ‒ Portfolio Related and
Total Company
(Unaudited)
Quarters:
Quarter Ended December 31, 2023 Quarter Ended September
30, 2023 Quarter Ended December 31, 2022 Interest
Average Interest Average Interest
Average Average Income / Yield /
Average Income / Yield / Average
Income / Yield / ($ in thousands)
Balance Expense Rate(1) Balance
Expense Rate(1) Balance Expense
Rate(1) Loan portfolio: Loans held for sale
$
14,918
$
3,170
$
64,699
Loans held for investment
3,949,642
3,770,460
3,430,296
Total loans
$
3,964,560
$
86,268
8.70
%
$
3,773,631
$
79,088
8.38
%
$
3,494,995
$
65,632
7.51
%
Debt: Warehouse and repurchase facilities
$
255,266
6,040
9.46
%
$
192,855
4,943
10.25
%
$
286,094
5,776
8.08
%
Securitizations
3,320,467
45,365
5.46
%
3,186,756
42,640
5.35
%
2,838,315
35,078
4.94
%
Total debt - portfolio related
3,575,733
51,405
5.75
%
3,379,610
47,583
5.63
%
3,124,409
40,854
5.23
%
Corporate debt
215,000
4,138
7.70
%
215,000
4,138
7.70
%
215,000
4,139
7.70
%
Total debt
$
3,790,733
$
55,543
5.86
%
$
3,594,610
$
51,721
5.76
%
$
3,339,409
$
44,993
5.39
%
Net interest spread - portfolio related (2)
2.95
%
2.75
%
2.28
%
Net interest margin - portfolio related
3.52
%
3.34
%
2.84
%
Net interest spread - total company (3)
2.84
%
2.63
%
2.11
%
Net interest margin - total company
3.10
%
2.90
%
2.36
%
(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.
Years:
Year Ended December 31, 2023 Year Ended December 31,
2022 Year Ended December 31, 2021 Interest
Average Interest Average Interest
Average Average Income / Yield /
Average Income / Yield / Average
Income / Yield / ($ in thousands)
Balance Expense Rate Balance
Expense Rate Balance Expense
Rate Loan portfolio: Loans held for sale
$
8,615
$
49,194
$
15,794
Loans held for investment
3,716,582
3,043,003
2,110,053
Total loans
$
3,725,197
$
310,775
8.34
%
$
3,092,198
$
240,343
7.77
%
$
2,125,847
$
181,968
8.56
%
Debt: Warehouse and repurchase facilities
$
227,911
21,726
9.53
%
$
292,490
17,454
5.97
%
$
183,663
9,706
5.28
%
Securitizations
3,113,500
164,742
5.29
%
2,458,332
110,269
4.49
%
1,630,385
75,680
4.64
%
Total debt - portfolio related
3,341,411
186,468
5.58
%
2,750,822
127,723
4.64
%
1,814,048
85,386
4.71
%
Corporate debt
215,000
16,556
7.70
%
205,979
29,472
14.31
%
154,890
20,609
13.31
%
Total debt
$
3,556,411
$
203,024
5.71
%
$
2,956,801
$
157,195
5.32
%
$
1,968,938
$
105,995
5.38
%
Net interest spread - portfolio related (1)
2.76
%
3.13
%
3.85
%
Net interest margin - portfolio related
3.34
%
3.64
%
4.54
%
Net interest spread - total company (2)
2.63
%
2.46
%
3.18
%
Net interest margin - total company
2.89
%
2.69
%
3.57
%
(1) 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. (2) Net interest
spread — total company is the difference between the rate earned on
our loan portfolio and the interest rates paid on our total debt.
Velocity Financial, Inc. Adjusted
Financial Metric Reconciliation to GAAP Net Income
(Unaudited)
Quarters:
Core Net Income Quarter Ended 12/31/2023
9/30/2023 6/30/2023 3/31/2023
12/31/2022 Net Income
$
17,355
$
12,086
$
12,183
$
10,649
$
8,462
Tax liability reduction
(1,866
)
-
-
-
-
Equity award & ESPP costs
673
832
745
728
656
Core Net Income
$
16,161
$
12,918
$
12,928
$
11,376
$
9,118
Diluted weighted average common shares outstanding
34,991
34,731
34,140
34,052
34,063
Core diluted earnings per share
$
0.46
$
0.37
$
0.38
$
0.33
$
0.27
Years:
Core Net Income Year Ended 12/31/2023
12/31/2022 Net Income
$
52,273
$
32,211
Corporate debt refinancing costs
-
$
9,286
Tax liability reduction
(1,866
)
-
Equity award & ESPP costs
2,977
656
Core Net Income
$
53,384
$
42,153
Diluted weighted average common shares outstanding
$
34,484
$
34,131
Core diluted earnings per share
$
1.54
$
1.24
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240307284451/en/
Investors and Media: Chris Oltmann (818) 532-3708
Velocity Financial (NYSE:VEL)
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