Velocity Financial, Inc. Reports First Quarter 2023 Results
First Quarter Highlights:
-
Net income of
$10.6 million $0.31 $3.1 million $0.09 -
Core net income(1) of
$11.4 million $0.33 $12.4 million $0.36 -
Loan production volume of
$217.0 million 62.7% from 1Q22- Primarily due to management’s strategic decision to reduce volume
-
Total loan portfolio of
$3.6 billion 25.0% from March 31, 2022 -
Nonperforming loans as a percentage of Held for Investment (HFI) loans was
8.7% as of March 31, 2023, a decrease from9.8% as of March 31, 2022 -
Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled
$38.7 million $1.3 million 103.5% of UPB resolved -
Portfolio net interest margin (NIM) of
3.23% , compared to4.25% for 1Q22 -
Completed the VCC 2023-1 securitization totaling
$198.7 million -
Liquidity(2) of
$45.3 million -
Book value per common share of
$12.18 $10.90
“Velocity’s first quarter results demonstrate the resiliency of our business model and our ability to deliver strong results in dynamic market conditions,” said Chris Farrar, President and CEO. “Our first quarter results included strong portfolio income and improved fundamentals, setting the stage for continued solid performance in 2023. Net interest margin increased by 39 basis points on a sequential-quarter basis, and gains from nonperforming loan resolutions returned to more normalized levels, resulting in solid net income growth. We continued to enjoy support from the capital markets with the April issuance of our VCC 2023-1R securitization collateralized by retained tranches of previous VCC securitizations. This transaction provides a new source of non-mark-to-market liquidity for the company at cost-effective levels and enhances our ability to capitalize on opportunities for growth. We expect to increase production from first quarter levels for the remainder of 2023 and are optimistic regarding our ability to deliver strong earnings growth in the future.”
(1) Core income and Core EPS are a non-GAAP measures that exclude nonrecurring and unusual activities from GAAP net income.
(2) Liquidity includes unrestricted cash reserves of
First Quarter Operating Results
| KEY PERFORMANCE INDICATORS | |||||||||||||
| ($ in thousands) | 1Q 2023 |
1Q 2022 |
$ Variance |
% Variance |
|||||||||
| Pretax income | $ |
14,757 |
|
$ |
4,021 |
|
$ |
10,736 |
|
267.0 |
% |
||
| Net income | $ |
10,649 |
|
$ |
3,121 |
|
$ |
7,528 |
|
241.2 |
% |
||
| Diluted earnings per share | $ |
0.31 |
|
$ |
0.09 |
|
$ |
0.22 |
|
242.7 |
% |
||
| Core net income(a) | $ |
11,376 |
|
$ |
12,407 |
|
$ |
(1,031 |
) |
(8.3 |
)% |
||
| Core diluted earnings per share(a) | $ |
0.33 |
|
$ |
0.36 |
|
$ |
(0.03 |
) |
(7.9 |
)% |
||
| Pretax return on equity |
|
15.27 |
% |
|
4.55 |
% |
n.a. | 235.6 |
% |
||||
| Core pretax return on equity(a) |
|
16.20 |
% |
|
19.02 |
% |
n.a. | (14.8 |
)% |
||||
| Net interest margin - portfolio |
|
3.23 |
% |
|
4.25 |
% |
n.a. | (23.9 |
)% |
||||
| Net interest margin - total company |
|
2.76 |
% |
|
1.69 |
% |
n.a. | 63.3 |
% |
||||
| Average common equity | $ |
386,935 |
|
$ |
353,635 |
|
$ |
33,300 |
|
9.4 |
% |
||
| (a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release. | |||||||||||||
Discussion of results:
-
Net income in 1Q23 was
$10.6 million $3.1 million - Driven by higher net interest income resulting from increased loan yields and portfolio growth
-
Net income in 1Q22 includes
$12.8 million -
Other operating income in 1Q23 was
$12.5 million $5.6 million
-
Core net income(1) was
$11.4 million $12.4 million -
1Q22 core net income reflects after-tax adjustments of
$9.3 million
-
1Q22 core net income reflects after-tax adjustments of
-
Portfolio NIM in 1Q23 was
3.23% , compared to4.25% for 1Q22, resulting from increased interest expense, partially offset by increased portfolio yields due to higher loan coupons on recent loan production -
The GAAP pretax return on equity was
15.26% in 1Q23
| TOTAL LOAN PORTFOLIO | |||||||||||||
| ($ of UPB in millions) | 1Q 2023 |
1Q 2022 |
$ Variance |
% Variance |
|||||||||
| Held for Investment | |||||||||||||
| Investor 1-4 Rental | $ |
1,905 |
|
$ |
1,319 |
|
$ |
586 |
|
44.4 |
% |
||
| Mixed Use |
|
450 |
|
|
380 |
|
|
70 |
|
18.4 |
% |
||
| Multi-Family |
|
304 |
|
|
279 |
|
|
25 |
|
9.0 |
% |
||
| Retail |
|
308 |
|
|
278 |
|
|
30 |
|
10.8 |
% |
||
| Warehouse |
|
221 |
|
|
201 |
|
|
20 |
|
10.1 |
% |
||
| All Other |
|
391 |
|
|
343 |
|
|
48 |
|
13.9 |
% |
||
| Total | $ |
3,579 |
|
$ |
2,800 |
|
|
779 |
|
27.8 |
% |
||
| Held for Sale | |||||||||||||
| Multi-Family | $ |
17 |
|
$ |
77 |
|
$ |
(59 |
) |
(77.4 |
)% |
||
| Total Managed Loan Portfolio UPB | $ |
3,596 |
|
$ |
2,877 |
|
$ |
719 |
|
25.0 |
% |
||
| Key loan portfolio metrics: | |||||||||||||
| Total loan count |
|
9,147 |
|
|
7,365 |
|
|||||||
| Weighted average loan to value |
|
68.1 |
% |
|
67.9 |
% |
|||||||
| Weighted average coupon |
|
8.15 |
% |
|
7.50 |
% |
|||||||
| Weighted average total portfolio yield |
|
8.00 |
% |
|
7.76 |
% |
|||||||
| Weighted average portfolio debt cost |
|
5.33 |
% |
|
4.00 |
% |
|||||||
Discussion of results:
-
Velocity’s total loan portfolio was
$3.6 billion 25.0% from$2.9 billion - Primarily driven by growth in loans collateralized by Investor 1-4 Rental and Multifamily Properties
-
Loan prepayments totaled
$86.9 million 3.1% Q/Q increase, and a37.3% decrease Y/Y
-
The UPB of FVO loans was
$436.6 million 12.2% of total HFI loans, as of March 31, 2023, an increase from$1.3 million 0.05% as of March 31, 2022- The company elected fair value accounting treatment for new HFI loan originations effective October 1, 2022
-
The weighted average portfolio loan-to-value ratio was
68.1% as of
March 31, 2023, consistent with the67.9% as of March 31, 2022, and the five-quarter trailing average of68.2% -
The weighted average total portfolio yield was
8.00% in 1Q23, an increase of 24 bps from 1Q22, driven by higher loan coupons -
Portfolio-related debt cost in 1Q23 was
5.33% , an increase of 133 bps from 1Q22 driven by higher interest rates
| LOAN PRODUCTION VOLUMES | |||||||||||
| ($ in millions) | 1Q 2023 |
1Q 2022 |
$ Variance |
% Variance |
|||||||
| Investor 1-4 Rental | $ |
116 |
$ |
293 |
$ |
(177 |
) |
(60.4 |
)% |
||
| Traditional Commercial |
|
80 |
|
272 |
|
(192 |
) |
(70.6 |
)% |
||
| Short-term loans |
|
21 |
|
16 |
|
5 |
|
28.1 |
% |
||
| Total loan production | $ |
217 |
$ |
581 |
$ |
(364 |
) |
(62.7 |
)% |
||
| Acquisitions | $ |
- |
$ |
4 |
|||||||
Discussion of results:
-
Loan production in 1Q23 totaled
$217.0 million 62.7% decrease from$581.4 million - Driven by management’s strategic decision to reduce volume
-
The weighted average coupon (WAC) on 1Q23 HFI loan production was
11.1% , an increase of 473 bps from 1Q22
| HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS | ||||||||||||
| ($ in thousands) | 1Q 2023 |
1Q 2022 |
$ Varience |
$ Varience |
||||||||
| Nonperforming loans(a) | $ |
309,937 |
|
$ |
275,487 |
|
$ |
34,450 |
12.5 |
% |
||
| Average Nonperforming Loans | $ |
298,703 |
|
$ |
278,349 |
|
$ |
20,354 |
7.3 |
% |
||
| Nonperforming loans % total HFI Loans |
|
8.7 |
% |
|
9.8 |
% |
n.a. |
(12.0 |
)% |
|||
| Total Charge Offs | $ |
484 |
|
$ |
328 |
|
$ |
156 |
47.5 |
% |
||
| Charge-offs as a % of Avg. Nonperforming Loans(b) |
|
0.65 |
% |
|
0.47 |
% |
n.a. |
n.m | ||||
| Loan Loss Reserve | $ |
5,045 |
|
$ |
4,664 |
|
$ |
381 |
8.2 |
% |
||
| (a) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual. | ||||||||||||
| (b) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period. | ||||||||||||
| n.m. - non meaningful | ||||||||||||
Discussion of results:
-
Nonperforming loans (NPL) totaled
$309.9 million 8.7% of loans HFI, compared to$278.3 million 9.8% , respectively, as of March 31, 2022 -
Charge-offs in 1Q23 totaled
$484.2 thousand $328.1 thousand -
The trailing five-quarter charge-off average was
$200.8 thousand
-
The trailing five-quarter charge-off average was
-
The loan loss reserve totaled
$5.0 million 8.2% increase from$4.7 million - The Q/Q increase resulted from modest growth in the reserve’s macroeconomic component, partially offset by run-off of the amortized cost HFI loan portfolio
- Loans carried at fair value are not subject to a CECL reserve
| NET REVENUES | |||||||||||||
| ($ in thousands) | 1Q 2023 |
1Q 2022 |
$ Variance |
% Variance |
|||||||||
| Interest income | $ |
70,521 |
|
$ |
52,049 |
|
$ |
18,472 |
|
35.5 |
% |
||
| Interest expense - portfolio related |
|
(42,029 |
) |
|
(23,556 |
) |
|
(18,473 |
) |
78.4 |
% |
||
| Net Interest Income - portfolio related |
|
28,492 |
|
|
28,493 |
|
|
(1 |
) |
(0.0 |
)% |
||
| Interest expense - corporate debt |
|
(4,139 |
) |
|
(17,140 |
) |
|
13,001 |
|
(75.9 |
)% |
||
| Net Interest Income | $ |
24,353 |
|
$ |
11,353 |
|
$ |
13,000 |
|
114.5 |
% |
||
| Loan loss provision |
|
(636 |
) |
|
(730 |
) |
|
94 |
|
(12.9 |
)% |
||
| Gain on disposition of loans |
|
1,913 |
|
|
4,540 |
|
|
(2,627 |
) |
(57.9 |
)% |
||
| Unrealized gain on fair value loans |
|
7,354 |
|
|
11 |
|
|
7,343 |
|
n.m | |||
| Unrealized loss on fair securitizations |
|
(170 |
) |
|
- |
|
|
(170 |
) |
n.m | |||
| Other operating income (expense) |
|
3,460 |
|
|
1,097 |
|
|
2,363 |
|
215.4 |
% |
||
| Net Revenue | $ |
36,275 |
|
$ |
16,271 |
|
$ |
20,004 |
|
122.9 |
% |
||
| n.m. - non meaningful | |||||||||||||
Discussion of results:
-
Net Revenue in 1Q23 was
$36.3 million $16.3 million -
Total net interest income, including corporate debt interest expense, increased by
$13.0 million -
Net Interest income was
$28.5 million -
1Q22 corporate debt interest expense includes
$12.8 million
-
Net Interest income was
-
Total other operating income, includes gains on disposition of loans, unrealized gain/(loss) on fair value loans, and other operating income, and totaled
$12.6 million $5.6 million -
Gain on disposition of loans includes gains from loan sales and transfer of loans. In 1Q23, gains on transfer to REO totaled
$1.2 million $679.7 thousand $20.8 million -
Other operating income in 1Q23 totaled
$3.3 million $1.1 million $2.1 million $0.95 million
-
Gain on disposition of loans includes gains from loan sales and transfer of loans. In 1Q23, gains on transfer to REO totaled
| OPERATING EXPENSES | |||||||||||||
| ($ in thousands) | 1Q 2023 |
1Q 2022 |
$ Variance | % Variance | |||||||||
| Compensation and employee benefits | $ |
10,008 |
|
$ |
5,323 |
|
$ |
4,685 |
|
88.0 |
% |
||
| Origination (income)/expense |
|
(334 |
) |
|
310 |
|
|
(644 |
) |
n.m | |||
| Securitization issuance expense |
|
2,584 |
|
|
- |
|
|
2,584 |
|
n.m | |||
| Rent and occupancy |
|
446 |
|
|
442 |
|
|
4 |
|
1.0 |
% |
||
| Loan servicing |
|
3,828 |
|
|
2,450 |
|
|
1,378 |
|
56.2 |
% |
||
| Professional fees |
|
955 |
|
|
1,362 |
|
|
(407 |
) |
(29.8 |
)% |
||
| Real estate owned, net |
|
1,829 |
|
|
(175 |
) |
|
2,004 |
|
n.m | |||
| Other expenses |
|
2,202 |
|
|
2,227 |
|
|
(25 |
) |
(1.1 |
)% |
||
| Total operating expenses | $ |
21,518 |
|
$ |
12,250 |
|
$ |
9,268 |
|
75.7 |
% |
||
| n.m. - non meaningful | |||||||||||||
Discussion of results:
-
Operating expenses totaled
$21.5 million 75.7% from 1Q22. The variance to prior year results is mostly attributable to our FVO accounting election-
Compensation expense totaled
$10.0 million $5.3 million -
Origination (income)/expenses improved by
$644 thousand -
Securitization issuance costs in 1Q23 totaled
$2.6 million -
Loan servicing expense growth was driven by the increase in securitizations outstanding to
$2.9 billion $2.1 billion
-
Compensation expense totaled
| SECURITIZATIONS | ||||||||||||
| ($ in thousands) | Securities | Balance at | Balance at | |||||||||
| Trusts | Issued | 3/31/2023 | W.A. Rate | 3/31/2022 | W.A. Rate | |||||||
| 2015-1 Trust |
|
285,457 |
|
- |
$ |
14,407 |
7.21 |
% |
||||
| 2016-1 Trust |
|
319,809 |
|
19,896 |
8.85 |
% |
|
32,518 |
8.10 |
% |
||
| 2017-2 Trust |
|
245,601 |
|
55,981 |
3.95 |
% |
|
75,303 |
3.36 |
% |
||
| 2018-1 Trust |
|
176,816 |
|
41,239 |
4.01 |
% |
|
57,284 |
4.04 |
% |
||
| 2018-2 Trust |
|
307,988 |
|
91,189 |
4.50 |
% |
|
123,854 |
4.31 |
% |
||
| 2019-1 Trust |
|
235,580 |
|
87,832 |
4.08 |
% |
|
115,299 |
3.95 |
% |
||
| 2019-2 Trust |
|
207,020 |
|
81,096 |
3.41 |
% |
|
114,665 |
3.45 |
% |
||
| 2019-3 Trust |
|
154,419 |
|
65,757 |
3.28 |
% |
|
90,919 |
3.27 |
% |
||
| 2020-1 Trust |
|
248,700 |
|
128,280 |
2.84 |
% |
|
162,092 |
2.85 |
% |
||
| 2020-2 Trust |
|
96,352 |
|
57,239 |
4.60 |
% |
|
73,750 |
4.36 |
% |
||
| 2020-MC1 Trust |
|
179,371 |
|
- |
- |
|
|
12,842 |
4.57 |
% |
||
| 2021-1 Trust |
|
251,301 |
|
186,986 |
1.75 |
% |
|
228,015 |
1.74 |
% |
||
| 2021-2 Trust |
|
194,918 |
|
161,511 |
2.01 |
% |
|
191,183 |
2.01 |
% |
||
| 2021-3 Trust |
|
204,205 |
|
172,915 |
2.45 |
% |
|
199,381 |
2.46 |
% |
||
| 2021-4 Trust |
|
319,116 |
|
266,076 |
3.19 |
% |
|
305,530 |
3.16 |
% |
||
| 2022-1 Trust |
|
273,594 |
|
250,986 |
3.93 |
% |
|
270,642 |
3.94 |
% |
||
| 2022-2 Trust |
|
241,388 |
|
231,171 |
5.09 |
% |
||||||
| 2022-MC1 Trust |
|
84,967 |
|
48,298 |
6.88 |
% |
||||||
| 2022-3 Trust |
|
296,323 |
|
277,038 |
5.67 |
% |
||||||
| 2022-4 Trust |
|
308,357 |
|
297,702 |
6.24 |
% |
||||||
| 2022-5 Trust |
|
188,754 |
|
184,213 |
7.08 |
% |
||||||
| 2023-1 Trust |
|
198,715 |
|
195,999 |
7.01 |
% |
||||||
$ |
5,018,751 |
$ |
2,901,403 |
4.29 |
% |
$ |
2,067,684 |
3.12 |
% |
|||
Discussion of results
-
Completed the VCC 2023-1 securitization totaling
$198.7 million -
The weighted average rate on Velocity’s outstanding securitizations was
4.29% as of March 31, 2023, an increase of 117 bps from March 31, 2022, driven by higher rates -
After quarter end, the Company completed the issuance of the VCC 2023-1R totaling
$64.8 million
| RESOLUTION ACTIVITIES | ||||||||||||
| LONG-TERM LOANS | ||||||||||||
| RESOLUTION ACTIVITY | FIRST QUARTER 2023 | FIRST QUARTER 2022 | ||||||||||
| ($ in thousands) | UPB $ | Gain / (Loss) $ | UPB $ | Gain / (Loss) $ | ||||||||
| Paid in full | $ |
11,274 |
$ |
632 |
|
$ |
9,144 |
$ |
474 |
|
||
| Paid current |
|
18,477 |
|
233 |
|
|
7,597 |
|
117 |
|
||
| REO sold (a) |
|
570 |
|
137 |
|
|
2,522 |
|
469 |
|
||
| Total resolutions | $ |
30,321 |
$ |
1,002 |
|
$ |
19,263 |
$ |
1,060 |
|
||
| Resolutions as a % of nonperforming UPB |
|
103.3 |
% |
|
105.5 |
% |
||||||
| SHORT-TERM AND FORBEARANCE LOANS | ||||||||||||
| RESOLUTION ACTIVITY | FIRST QUARTER 2023 | FIRST QUARTER 2022 | ||||||||||
| ($ in thousands) | UPB $ | Gain / (Loss) $ | UPB $ | Gain / (Loss) $ | ||||||||
| Paid in full | $ |
5,560 |
$ |
348 |
|
$ |
13,820 |
$ |
646 |
|
||
| Paid current |
|
1,633 |
|
9 |
|
|
3,783 |
|
39 |
|
||
| REO sold |
|
1,209 |
|
(21 |
) |
|
503 |
|
35 |
|
||
| Total resolutions | $ |
8,402 |
$ |
336 |
|
$ |
18,106 |
$ |
720 |
|
||
| Resolutions as a % of nonperforming UPB |
|
104.0 |
% |
|
104.0 |
% |
||||||
| Grand total resolutions | $ |
38,723 |
$ |
1,338 |
|
$ |
37,369 |
$ |
1,780 |
|
||
| Grand total resolutions as a % of nonperforming UPB |
|
103.5 |
% |
|
104.8 |
% |
||||||
Discussion of results:
-
Total NPL and REO resolution activities in 1Q23 totaled
$38.7 million $1.3 million 103.5% of UPB resolved, compared to$37.4 million $1.8 million 104.8% of UPB resolved in 1Q22-
Long-term loan and REO resolutions in 1Q23 totaled
$30.3 million $1.0 million $19.3 million $1.1 million -
Short-term loan and REO resolutions in 1Q23 totaled
$8.4 million $0.3 million $18.1 million $0.7 million
-
Long-term loan and REO resolutions in 1Q23 totaled
-
The UPB of loan resolutions in 1Q23 were in line with the recent five-quarter resolution average of
$39.4 million
Velocity’s executive management team will host a conference call and webcast to review 1Q23 financial results on May 4th, 2023, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.
Webcast Information
The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please go to Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website following the completion of the conference call.
Conference Call Information
To participate by phone, please dial-in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the
A replay of the call will be available through midnight on May 31, 2023, and can be accessed by dialing 1-877-344-7529 in the
About Velocity Financial, Inc.
Based in
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with
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
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 | |||||||||||||||||||
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | |||||||||||||||
| Unaudited | Audited | Unaudited | Unaudited | Unaudited | |||||||||||||||
| (In thousands) | |||||||||||||||||||
| Assets | |||||||||||||||||||
| Cash and cash equivalents | $ |
39,397 |
|
$ |
45,248 |
|
$ |
26,372 |
|
$ |
46,250 |
|
$ |
36,629 |
|||||
| Restricted cash |
|
16,636 |
|
|
16,808 |
|
|
14,533 |
|
|
9,217 |
|
|
10,837 |
|
||||
| Loans held for sale, net |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
77,503 |
|
||||
| Loans held for sale, at fair value |
|
18,081 |
|
|
- |
|
|
16,569 |
|
|
- |
|
|
- |
|
||||
| Loans held for investment, at fair value |
|
450,732 |
|
|
276,095 |
|
|
926 |
|
|
1,351 |
|
|
1,352 |
|||||
| Loans held for investment |
|
3,169,280 |
|
|
3,272,390 |
|
|
3,445,563 |
|
|
3,118,799 |
|
|
2,828,302 |
|||||
| Total loans, net |
|
3,638,093 |
|
|
3,548,485 |
|
|
3,463,058 |
|
|
3,120,150 |
|
|
2,907,157 |
|||||
| Accrued interest receivables |
|
20,931 |
|
|
20,463 |
|
|
18,333 |
|
|
15,820 |
|
|
14,169 |
|
||||
| Receivables due from servicers |
|
64,133 |
|
|
65,644 |
|
|
66,992 |
|
|
75,688 |
|
|
78,278 |
|
||||
| Other receivables |
|
2,188 |
|
|
1,075 |
|
|
1,962 |
|
|
1,320 |
|
|
4,527 |
|||||
| Real estate owned, net |
|
21,778 |
|
|
13,325 |
|
|
13,188 |
|
|
19,218 |
|
|
16,177 |
|||||
| Property and equipment, net |
|
3,209 |
|
|
3,356 |
|
|
3,495 |
|
|
3,632 |
|
|
3,690 |
|||||
| Deferred tax asset |
|
2,543 |
|
|
5,033 |
|
|
4,337 |
|
|
15,195 |
|
|
16,477 |
|
||||
| Mortgage Servicing Rights, at fair value |
|
9,143 |
|
|
9,238 |
|
|
9,868 |
|
|
8,438 |
|
|
7,661 |
|||||
| Goodwill |
|
6,775 |
|
|
6,775 |
|
|
6,775 |
|
|
6,775 |
|
|
6,775 |
|
||||
| Other assets |
|
12,268 |
|
|
13,525 |
|
|
18,453 |
|
|
11,036 |
|
|
7,345 |
|||||
| Total Assets | $ |
3,837,094 |
|
$ |
3,748,975 |
|
$ |
3,647,366 |
|
$ |
3,332,739 |
|
$ |
3,109,722 |
|
||||
| Liabilities and members' equity | |||||||||||||||||||
| Accounts payable and accrued expenses | $ |
84,976 |
|
$ |
91,525 |
|
$ |
75,150 |
|
$ |
78,384 |
|
$ |
92,768 |
|||||
| Secured financing, net |
|
210,155 |
|
|
209,846 |
|
|
209,537 |
|
|
209,227 |
|
|
208,956 |
|||||
| Securitizations, net |
|
2,657,469 |
|
|
2,736,290 |
|
|
2,651,895 |
|
|
2,477,226 |
|
|
2,035,374 |
|||||
| Securitizations at Fair Value |
|
194,941 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
||||
| Warehouse & repurchase facilities |
|
298,313 |
|
|
330,814 |
|
|
340,050 |
|
|
208,390 |
|
|
424,692 |
|
||||
| Total Liabilities |
|
3,445,854 |
|
|
3,368,475 |
|
|
3,276,632 |
|
|
2,973,227 |
|
|
2,761,790 |
|
||||
| Stockholders' Equity | |||||||||||||||||||
| Stockholders' equity |
|
387,624 |
|
|
376,811 |
|
|
366,810 |
|
|
355,895 |
|
|
344,441 |
|
||||
| Noncontrolling interest in subsidiary |
|
3,616 |
|
|
3,689 |
|
|
3,924 |
|
|
3,617 |
|
|
3,491 |
|||||
| Total equity |
|
391,240 |
|
|
380,500 |
|
|
370,734 |
|
|
359,512 |
|
|
347,932 |
|||||
| Total Liabilities and members' equity | $ |
3,837,094 |
|
$ |
3,748,975 |
|
$ |
3,647,366 |
|
$ |
3,332,739 |
|
$ |
3,109,722 |
|
||||
| Book value per share | $ |
12.18 |
|
$ |
11.89 |
|
$ |
11.61 |
|
$ |
11.26 |
|
$ |
10.90 |
|
||||
| Shares outstanding |
|
32,112(1) |
|
31,996(2) |
|
31,922(3) |
$ |
31,922(4) |
$ |
31,913(5) |
|||||||||
(1) |
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. |
|
(2) |
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. |
|
(3) |
Based on 31,921,721 common shares outstanding as of September 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139. |
|
(4) |
Based on 31,921,721 common shares outstanding as of June 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139. |
|
(5) |
Based on 31,912,884 common shares outstanding as of March 31, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 505,408. |
Velocity Financial, Inc. Consolidated Statements of Income (Quarters) |
|||||||||||||||||||
| Quarter Ended | |||||||||||||||||||
| ($ in thousands) | 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||||||||||
| Revenues | |||||||||||||||||||
| Interest income | $ |
70,521 |
|
$ |
65,632 |
|
$ |
63,419 |
|
$ |
59,243 |
|
$ |
52,049 |
|
||||
| Interest expense - portfolio related |
|
42,029 |
|
|
40,854 |
|
|
34,561 |
|
|
28,752 |
|
|
23,556 |
|
||||
| Net interest income - portfolio related |
|
28,492 |
|
|
24,778 |
|
|
28,858 |
|
|
30,491 |
|
|
28,493 |
|
||||
| Interest expense - corporate debt |
|
4,139 |
|
|
4,139 |
|
|
4,011 |
|
|
4,182 |
|
|
17,140 |
|
||||
| Net interest income |
|
24,353 |
|
|
20,639 |
|
|
24,847 |
|
|
26,309 |
|
|
11,353 |
|
||||
| Provision for loan losses |
|
636 |
|
|
(437 |
) |
|
580 |
|
|
279 |
|
|
730 |
|
||||
| Net interest income after provision for loan losses |
|
23,717 |
|
|
21,076 |
|
|
24,267 |
|
|
26,030 |
|
|
10,623 |
|
||||
| Other operating income | |||||||||||||||||||
| Gain on disposition of loans |
|
1,913 |
|
|
391 |
|
|
399 |
|
|
1,776 |
|
|
4,540 |
|
||||
| Unrealized gain on fair value loans |
|
7,354 |
|
|
7,795 |
|
|
453 |
|
|
6 |
|
|
11 |
|
||||
| Unrealized loss on fair securitizations |
|
(170 |
) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
||||
| Other income (expense) |
|
3,461 |
|
|
2,842 |
|
|
1,657 |
|
|
1,257 |
|
|
1,097 |
|
||||
| Total other operating income |
|
12,558 |
|
|
11,029 |
|
|
2,509 |
|
|
3,039 |
|
|
5,648 |
|
||||
| Net revenue |
|
36,275 |
|
|
32,105 |
|
|
26,776 |
|
|
29,070 |
|
|
16,271 |
|
||||
| Operating expenses | |||||||||||||||||||
| Compensation and employee benefits |
|
10,008 |
|
|
11,793 |
|
|
6,788 |
|
|
6,553 |
|
|
5,323 |
|
||||
| Origination (income)/expense |
|
(334 |
) |
|
937 |
|
|
(309 |
) |
|
951 |
|
|
310 |
|
||||
| Securitization issuance expense |
|
2,584 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
||||
| Rent and occupancy |
|
446 |
|
|
435 |
|
|
445 |
|
|
426 |
|
|
442 |
|
||||
| Loan servicing |
|
3,828 |
|
|
3,244 |
|
|
3,314 |
|
|
3,290 |
|
|
2,450 |
|
||||
| Professional fees |
|
955 |
|
|
1,091 |
|
|
664 |
|
|
1,062 |
|
|
1,362 |
|
||||
| Real estate owned, net |
|
1,829 |
|
|
552 |
|
|
(195 |
) |
|
(251 |
) |
|
(175 |
) |
||||
| Other operating expenses |
|
2,202 |
|
|
2,360 |
|
|
2,020 |
|
|
2,248 |
|
|
2,538 |
|
||||
| Total operating expenses |
|
21,518 |
|
|
20,413 |
|
|
12,727 |
|
|
14,279 |
|
|
12,250 |
|
||||
| Income before income taxes |
|
14,757 |
|
|
11,692 |
|
|
14,049 |
|
|
14,790 |
|
|
4,021 |
|
||||
| Income tax expense |
|
4,021 |
|
|
3,465 |
|
|
3,759 |
|
|
4,019 |
|
|
790 |
|
||||
| Net income |
|
10,736 |
|
|
8,227 |
|
|
10,290 |
|
|
10,771 |
|
|
3,231 |
|
||||
| Net income attributable to noncontrolling interest |
|
87 |
|
|
(235 |
) |
|
307 |
|
|
126 |
|
|
110 |
|
||||
| Net income attributable to Velocity Financial, Inc. |
|
10,649 |
|
|
8,462 |
|
|
9,983 |
|
|
10,645 |
|
|
3,121 |
|
||||
| Less undistributed earnings attributable to participating securities |
|
160 |
|
|
127 |
|
|
152 |
|
|
164 |
|
|
48 |
|
||||
| Net earnings attributable to common shareholders | $ |
10,489 |
|
$ |
8,335 |
|
$ |
9,831 |
|
$ |
10,481 |
|
$ |
3,073 |
|
||||
| Basic earnings (loss) per share | $ |
0.33 |
|
$ |
0.26 |
|
$ |
0.31 |
|
$ |
0.33 |
|
$ |
0.10 |
|
||||
| Diluted earnings (loss) per common share | $ |
0.31 |
|
$ |
0.25 |
|
$ |
0.29 |
|
$ |
0.31 |
|
$ |
0.09 |
|
||||
| Basic weighted average common shares outstanding |
|
32,098 |
|
|
31,923 |
|
|
31,922 |
|
|
31,917 |
|
|
31,892 |
|
||||
| Diluted weighted average common shares outstanding |
|
34,052 |
|
|
34,063 |
|
|
34,199 |
|
|
34,057 |
|
|
34,204 |
|
||||
Velocity Financial, Inc. Net Interest Margin ‒ Portfolio Related and Total Company (Unaudited) |
||||||||||||||||||||||||||
Quarters: |
||||||||||||||||||||||||||
| Quarter Ended March 31, 2023 | Quarter Ended December 31, 2022 | Quarter Ended March 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 | $ |
12,896 |
$ |
64,699 |
$ |
69,092 |
||||||||||||||||||||
| Loans held for investment |
|
3,512,133 |
|
3,430,296 |
|
2,613,759 |
||||||||||||||||||||
| Total loans | $ |
3,525,029 |
$ |
70,521 |
8.00 |
% |
$ |
3,494,995 |
$ |
65,632 |
7.51 |
% |
$ |
2,682,851 |
$ |
52,049 |
7.76 |
% |
||||||||
| Debt: | ||||||||||||||||||||||||||
| Warehouse and repurchase facilities | $ |
225,497 |
|
4,833 |
8.57 |
% |
$ |
286,094 |
|
5,776 |
8.08 |
% |
$ |
338,247 |
|
3,764 |
4.45 |
% |
||||||||
| Securitizations |
|
2,926,153 |
|
37,196 |
5.08 |
% |
|
2,838,315 |
|
35,078 |
4.94 |
% |
|
2,018,186 |
|
19,791 |
3.92 |
% |
||||||||
| Total debt - portfolio related |
|
3,151,650 |
|
42,029 |
5.33 |
% |
|
3,124,409 |
|
40,854 |
5.23 |
% |
|
2,356,433 |
|
23,555 |
4.00 |
% |
||||||||
| Corporate debt |
|
215,000 |
|
4,139 |
7.70 |
% |
|
215,000 |
|
4,139 |
7.70 |
% |
|
178,915 |
|
17,141 |
38.32 |
% |
||||||||
| Total debt | $ |
3,366,650 |
$ |
46,168 |
5.49 |
% |
$ |
3,339,409 |
$ |
44,993 |
5.39 |
% |
$ |
2,535,348 |
$ |
40,696 |
6.42 |
% |
||||||||
| Net interest spread - portfolio related (2) | 2.67 |
% |
2.28 |
% |
3.76 |
% |
||||||||||||||||||||
| Net interest margin - portfolio related | 3.23 |
% |
2.84 |
% |
4.25 |
% |
||||||||||||||||||||
| Net interest spread - total company (3) | 2.52 |
% |
2.11 |
% |
1.34 |
% |
||||||||||||||||||||
| Net interest margin - total company | 2.76 |
% |
2.36 |
% |
1.69 |
% |
||||||||||||||||||||
(1) |
Annualized. | ||||||||||||
(2) |
Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt. | ||||||||||||
(3) |
Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt. | ||||||||||||
Velocity Financial, Inc. Adjusted Financial Metric Reconciliation to GAAP Net Income (Unaudited) |
||||||||||||||
Quarters: |
||||||||||||||
| Core Net Income | ||||||||||||||
| Quarter Ended | ||||||||||||||
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||||||
| Net Income | $ |
10,649 |
$ |
8,462 |
$ |
9,983 |
$ |
10,645 |
$ |
3,121 |
||||
| Corporate debt refinancing costs |
|
- |
|
- |
|
- |
|
- |
$ |
9,286 |
||||
| Equity award & ESPP costs | $ |
728 |
$ |
656 |
|
- |
|
- |
$ |
- |
||||
| Core Net Income | $ |
11,376 |
$ |
9,118 |
$ |
9,983 |
$ |
10,645 |
$ |
12,407 |
||||
| Diluted weighted average common shares outstanding |
|
34,052 |
|
34,063 |
|
34,199 |
|
34,057 |
|
34,204 |
||||
| Core diluted earnings per share | $ |
0.33 |
$ |
0.27 |
$ |
0.29 |
$ |
0.31 |
$ |
0.36 |
||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20230504005760/en/
Investors and Media:
Chris Oltmann
(818) 532-3708
Source: Velocity Financial, Inc.
