false 0001692376 0001692376 2024-03-07 2024-03-07

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 7, 2024

 

 

Velocity Financial, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

 

Delaware   001-39183   46-0659719

(State or Other Jurisdiction

of Incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

30699 Russell Ranch Road, Suite 295

Westlake Village, California

     91362
(Address of Principal Executive Offices)     (Zip Code)

Registrant’s Telephone Number, Including Area Code: (818) 532-3700

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading
Symbol(s)

  

Name of each exchange
on which registered

Common stock, par value $0.01 per share   VEL   The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 2.02 Results of Operations and Financial Condition.

On March 7, 2024, we issued a press release announcing financial results for the quarter and year ended December 31, 2023. The press release is attached as Exhibit 99 and is incorporated herein by reference.

The information provided in Item 2.02, including Exhibit 99, is intended to be furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.

Item 9.01 Exhibits.

 

Exhibit
Number		   

Description

99    Press Release dated March 7, 2024
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    Velocity Financial, Inc.
Date: March 8, 2024     By:  

/s/ Roland T. Kelly

      Roland T. Kelly
      Chief Legal Officer and General Counsel

Exhibit 99

 

LOGO

 

     

Investors and Media:

Chris Oltmann

(818) 532-3708

Velocity Financial, Inc. Reports

Fourth Quarter and Full-Year 2023 Results

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

 

  •  

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

 

(1) 

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

(2) 

Liquidity includes unrestricted cash reserves of $40.7 million and available liquidity in unfinanced loans of $22.5 million.

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Fourth Quarter and Full-Year 2023 Results

 

 

  •  

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

Westlake Village, CA – March 7, 2024 – 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.

 

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Fourth Quarter and Full-Year 2023 Results

 

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

 

  •  

Primarily driven by 20.2% Y/Y growth in loans collateralized by Investor 1-4 Rental properties and a combined 15.2% Y/Y growth in loans collateralized by Retail and Warehouse properties

 

  •  

Loan prepayments totaled $118.0 million, an increase of 13.0% Q/Q and 35.7% Y/Y

 

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Fourth Quarter and Full-Year 2023 Results

 

  •  

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

 

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Fourth Quarter and Full-Year 2023 Results

 

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

 

  •  

Resulting from the continued run-off of the amortized cost HFI loan portfolio

 

  •  

Loans carried at fair value are not subject to a CECL reserve

 

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

 

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Fourth Quarter and Full-Year 2023 Results

 

  •  

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 loan production

 

  •  

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

 

  •  

Compensation growth was driven by hires of sales account executives and operational staff, in addition to commissions paid on higher loan production

 

  •  

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 totaled $2.1 million, an increase from $0.6 million for 4Q22, driven by increased valuation-related expenses

 

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Fourth Quarter and Full-Year 2023 Results

 

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

 

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Fourth Quarter and Full-Year 2023 Results

 

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

 

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Fourth Quarter and Full-Year 2023 Results

 

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    Year Ended               

($ 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

 

  •  

Driven by higher securitization and warehouse financing costs

 

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Fourth Quarter and Full-Year 2023 Results

 

  •  

Partially offset by a higher weighted average coupon on FY 2023 loan production of 11.1% compared to 8.0% 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

 

  •  

Core income adjustments totaled $1.1 million, compared to $9.9 million for FY 2022

 

  •  

Core diluted EPS was $1.54 per share, a 24.5% increase from $1.24 per share for FY 2022

 

  •  

Pretax return on equity was 17.5%, a 42.8% increase from 12.2% for FY 2022

 

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Fourth Quarter and Full-Year 2023 Results

 

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.

 

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Fourth Quarter and Full-Year 2023 Results

 

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

 

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Fourth Quarter and Full-Year 2023 Results

 

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, (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.

 

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Fourth Quarter and Full-Year 2023 Results

 

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.

 

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Fourth Quarter and Full-Year 2023 Results

 

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  
  

 

 

    

 

 

    

 

 

     

 

 

    

 

 

  

 

15 | Page

LOGO   

 

Fourth Quarter and Full-Year 2023 Results

 

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  
  

 

 

    

 

 

  

 

16 | Page

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Fourth Quarter and Full-Year 2023 Results

 

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  
($ in thousands)    Average
Balance		      Interest
Income /
Expense		      Average
Yield /
Rate(1)		     Average
Balance		      Interest
Income /
Expense		      Average
Yield /
Rate(1)		     Average
Balance		      Interest
Income /
Expense		      Average
Yield /
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  
($ in thousands)    Average
Balance		      Interest
Income /
Expense		      Average
Yield /
Rate		     Average
Balance		      Interest
Income /
Expense		      Average
Yield /
Rate		     Average
Balance		      Interest
Income /
Expense		      Average
Yield /
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.

 

17 | Page

LOGO   

 

Fourth Quarter and Full-Year 2023 Results

 

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)

Quarters:

 

Core Net Income

                                  
     Quarter Ended  
($ in thousands)    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  
($ in thousands)    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  

 

18 | Page

v3.24.0.1
Document and Entity Information
Mar. 07, 2024
Cover [Abstract]  
Amendment Flag false
Entity Central Index Key 0001692376
Document Type 8-K
Document Period End Date Mar. 07, 2024
Entity Registrant Name Velocity Financial, Inc.
Entity Incorporation State Country Code DE
Entity File Number 001-39183
Entity Tax Identification Number 46-0659719
Entity Address, Address Line One 30699 Russell Ranch Road
Entity Address, Address Line Two Suite 295
Entity Address, City or Town Westlake Village
Entity Address, State or Province CA
Entity Address, Postal Zip Code 91362
City Area Code (818)
Local Phone Number 532-3700
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Common stock, par value $0.01 per share
Trading Symbol VEL
Security Exchange Name NYSE
Entity Emerging Growth Company false
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