Velocity Financial, Inc. Reports Second Quarter 2021 Results

Rhea-AI Summary

Velocity Financial, Inc. (NYSE: VEL) reported a strong financial performance for 2Q21, posting a net income of $9.45 million, a significant increase from $3.40 million in 1Q21. Core income rose to $8.45 million, up from $6.72 million. The diluted earnings per share reached $0.28, compared to $0.10 in the previous quarter. The company’s total loan portfolio grew to $2.07 billion, a 4% increase over the prior quarter. The net interest margin improved to 4.83%. However, the loan loss reserve decreased to $3.96 million, reflecting an optimistic economic outlook.

Positive

• Net income increased by 178% to $9.45 million from $3.40 million in 1Q21.
• Core income rose 26% to $8.45 million compared to $6.72 million in 1Q21.
• Diluted earnings per share increased 174% from $0.10 to $0.28.
• Total loan portfolio grew by 4% to $2.07 billion from $1.99 billion.
• Net interest margin improved by 73 basis points to 4.83%.

Negative

• Loan loss reserve decreased by 33% to $3.96 million from $5.88 million.
• Total charge-offs increased 162% to $986.40 thousand from $377.14 thousand.

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company) reported net income of $9.45 million and core income of $8.45 million for 2Q21, compared to net income of $3.40 million and core income of $6.72 million, respectively, in 1Q21. Earnings and core earnings per diluted share were $0.28 and $0.25, respectively, in 2Q21, compared to earnings per diluted share of $0.10 and core earnings per diluted share of $0.20, respectively, in 1Q21. Book value per common share was $11.62 as of June 30, 2021, compared to $11.12 as of March 31, 2021.

“Our results this quarter demonstrate the resilience of Velocity’s business model and the ability of our platform to deliver strong financial results,” said Chris Farrar, President and CEO.

“The U.S. economy improved significantly during the quarter and has driven renewed interest from investors looking to participate in the strong real estate markets across the country. The changes in housing demand that have occurred over the past 15 months have heightened the importance of Velocity’s role in providing business purposed financing to creditworthy borrowers who fall outside of the credit guidelines of traditional banks, and we continue to evolve our product offerings to meet the unique needs of our clients. Our team of talented and highly skilled mortgage professionals has done an exceptional job achieving this objective, and I am very optimistic about the growth opportunities for Velocity going forward.”

Second Quarter Operating Results
KEY PERFORMANCE INDICATORS
($ in thousands)	2Q 2021			1Q 2021			$ Variance			% Variance
Pretax income	$	12,885		$	4,604		$	8,281		180%
Net income	$	9,453		$	3,396		$	6,057		178%
Diluted earnings per share	$	0.28		$	0.10		$	0.18		174%
Core income(1)	$	8,453		$	6,722		$	1,731		26%
Core diluted earnings per share(1)	$	0.25		$	0.20		$	0.05		24%
Pretax return on equity		22.57%			8.27%		n.a.			173%
Net interest margin - portfolio		4.83%			4.10%		n.a.			18%
Net interest margin - total company		3.98%			2.59%		n.a.			54%
Average common equity	$	228,314		$	222,810		$	5,504		2%

(1) Core income and Core diluted earnings per share are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.

Discussion of results:

• Net income for 2Q21 totaled $9.45 million, an increase from $3.40 million in 1Q21, driven by higher interest income resulting from strong resolutions of nonperforming loans and HFI portfolio growth
  ‒ GAAP net income in 2Q21 included $6.98 million of interest income from the realization of contractual interest, default interest, and prepayment fees on nonperforming loans in 2Q21, a 59% increase from 1Q21
• Core income for 2Q21 totaled $8.45 million, which reflects the exclusion of $1.00 million from an improvement in the macroeconomic loan loss forecast
• Portfolio NIM in 2Q21 was 4.83%, a 73 bps increase from 4.10% in 1Q21, driven by an increase in interest income received from nonperforming loans and 20 bps decrease in the weighted average cost of funds
• The pretax return on equity was 22.57% in 2Q21, an increase from 8.27% for 1Q21

TOTAL LOAN PORTFOLIO
($ of UPB in millions)	2Q 2021			1Q 2021			$ Variance			% Variance
Held for Investment
Investor 1-4 Rental	$	1,019		$	985		$	26		3%
Mixed Use		293			275			16		6%
Multi-Family		184			183			1		0%
Retail		183			178			6		3%
All Other		384			370			10		4%
Total	$	2,062		$	1,991		$	59		4%
Held for Sale
Investor 1-4 Rental	$	8		$	-		$	(13)		n.m.
Total Managed Loan Portfolio UPB	$	2,070		$	1,991		$	80		4%
Key loan portfolio metrics:
Total loan count		6,125			5,935
Weighted average loan to value		66.70%			66.28%
Weighted average total portfolio yield		8.90%			8.41%
Weighted average portfolio debt cost		4.81%			5.01%
n.m. - non meaningful

Discussion of results:

• Velocity’s total loan portfolio was $2.07 billion in UPB as of June 30, 2021, a 3.99% increase from $1.99 billion in UPB as of March 31, 2021
  ‒ HFI portfolio growth driven by solid production activity, partially offset by higher prepayment activity and loan sales
• The weighted average total portfolio yield was 8.90% in 2Q21, an increase of 49 bps from 1Q21, primarily driven by the increased realization of delinquent and default interest from nonperforming loan resolutions and improved portfolio performance
• Portfolio related debt cost in 2Q21 was 4.81%, a decrease of 20 bps from 1Q21, primarily driven by the issuance of Velocity’s VCC 2021-1 securitization in 2Q21, at a weighted average cost of 1.73%

LOAN PRODUCTION VOLUMES
($ in millions)	2Q 2021			1Q 2021			$ Variance			% Variance
Investor 1-4 Rental	$	147		$	149		$	(2)		(1)%
Traditional Commercial		95			84			11		12%
Short-term loans		15			-			15		n.m.
Total loan production	$	257		$	233		$	23		10%
n.m. - non meaningful

Discussion of results:

• Loan production in 2Q21 totaled $256.51 million in UPB, a 10.07% increase from $233.04 million in UPB in 1Q21
  ‒ Driven by the re-introduction of short-term loans to the production mix and growth of long-term traditional commercial loan production
• Loan origination volume in July 2021 totaled $104.4 million in UPB

CREDIT PERFORMANCE INDICATORS
($ in thousands)	2Q 2021			1Q 2021			$ Variance			% Variance
Nonperforming loans(1)	$	315,542		$	335,048		$	(19,506)		(6)%
Nonperforming loans % total HFI Loans		15.30%			16.83%		n.a.			(9)%
Total Charge Offs (trailing 6 months)(2)	$	986.40		$	377.14		$	609		162%
Charge-offs as a % of Avg. Nonperforming loans(3)		0.59%			0.23%		n.a.			157%
Loan Loss Reserve	$	3,963		$	5,881		$	(1,918)		(33)%

(1) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual.

(2) $420.47 thousand of the 2Q21 charge-off amount was related to one loan that transferred to REO.

(3) Annualized

Discussion of results:

• Nonperforming loans totaled $315.54 million as of June 30, 2021, or 15.30% of loans HFI, compared to $335.05 million as of March 31, 2021, or 16.83% of loans HFI
  ‒ The quarter-over-quarter improvement was driven by resolution of 17.37% of nonperforming loan UPB as of March 31, 2021, 10.58% through payoff and 6.79% were brought back to performing (accrual) status. These resolutions in 2Q21 realized all delinquent contractual interest in addition to default interest and prepayment fees.
• Charge-offs in 2Q21 totaled $917.6 thousand compared to $68.78 thousand in 1Q21
  ‒ Nearly half, or $420.47 thousand of the 2Q21 charge-off amount was related to one loan that transferred to REO, all or part of which could be recovered upon sale of the REO
• The reserve for loan losses was $3.96 million as of June 30, 2021, compared to $5.88 million as of March 31, 2021
  ‒ The recovery of loan loss provision in 2Q21 reflects an improvement in the macroeconomic component of the loan loss reserve resulting from a more optimistic outlook for the U.S. economy
• Capitalized interest recovered on COVID forbearance loans granted a deferral through the end of 2Q21 totaled $1.27 million, with a remaining balance of $7.37 million as of June 30, 2021. None of the capitalized interest has been forgiven.

NET REVENUES
($ in thousands)	2Q 2021			1Q 2021			$ Variance			% Variance
Interest income	$	44,978		$	40,707		$	4,271		10.49%
Interest expense - portfolio related		(20,566)			(20,832)			266		(1)%
Interest expense - corporate debt		(4,309)			(7,350)			3,041		(41)%
Net Interest Income	$	20,103		$	12,525		$	7,578		61%
Loan loss provision		1,000			(105)			1,105		n.m.
Gain on loan sales		2,391			2,839			(448)		(16)%
Other Operating (loss) income		41			(38)			79		n.m.
Total Net Revenues	$	23,535		$	15,221		$	8,314		55%
n.m. - non meaningful

Discussion of results:

• Net revenue was $23.53 in 2Q21, a 54.62% increase from the prior quarter driven by the increased realization of delinquent and default interest from strong nonperforming loan resolution activity
  ‒ Net interest income in 1Q21 included $3.33 million of nonrecurring interest expense from the refinancing of our corporate debt

OPERATING EXPENSES
($ in thousands)	2Q 2021			1Q 2021			$ Variance			% Variance
Compensation and employee benefits	$	4,546		$	5,186		$	(640)		(12)%
Rent and occupancy		430			463			(33)		(7)%
Loan servicing		1,922			1,867			55		3%
Professional fees		795			533			262		49%
Real estate owned, net		1,039			509			530		104%
Other expenses		1,918			2,059			(141)		(7)%
Total expenses	$	10,650		$	10,617		$	33		0%

Discussion of results:

• Operating expenses in 2Q21 were essentially unchanged from the prior quarter, with a 12% quarter-over-quarter decrease in compensation and employee benefits, offset by higher costs to maintain the real estate owned (REO) portfolio and professional fees for public company reporting requirements

SECURITIZATIONS
		Securities			Balance at					Balance at
Trusts		Issued			6/30/2021			W.A. Rate		3/31/2021			W.A. Rate
2014-1 Trust		$	161,076		$	19,973		7.86%		$	21,690		7.92%
2015-1 Trust			285,457			24,852		7.63%			26,762		6.88%
2016-1 Trust			319,809			43,925		8.12%			50,940		8.06%
2016-2 Trust			166,853			34,440		7.08%			38,953		7.07%
2017-1 Trust			211,910			55,648		6.02%			65,728		5.69%
2017-2 Trust			245,601			101,179		3.33%			114,517		3.40%
2018-1 Trust			176,816			79,377		4.02%			88,754		4.12%
2018-2 Trust			307,988			175,943		4.48%			192,240		4.53%
2019-1 Trust			235,580			159,345		4.06%			173,216		4.11%
2019-2 Trust			207,020			141,446		3.51%			148,834		3.50%
2019-3 Trust			154,419			112,848		3.28%			122,072		3.29%
2020-1 Trust			248,700			199,267		2.86%			208,269		2.84%
2020-2 Trust			96,352			97,601		4.44%			106,343		4.54%
2020-MC1 Trust			179,371			84,454		4.43%			116,241		4.50%
2021-1 Trust			251,301			250,109		1.73%
		$	3,057,994		$	1,580,408				$	1,474,560

Discussion of results:

• Securitization balances as of June 30, 2021, totaled $1.58 billion, an increase from $1.47 billion as of March 31, 2021, driven by the issuance of Velocity’s VCC 2021-1 securitization in May
• The VCC 2021-1 transaction totaled $264.52 million in UPB and priced at a weighted average fixed rate of 1.73%
  ‒ Broad investor demand tightened spreads for the entire capital stack and lowered our weighted average coupon by over one percent as compared to our pre-COVID VCC 2020-1 transaction

RESOLUTION ACTIVITIES
LONG-TERM LOANS
RESOLUTION ACTIVITY		SECOND QUARTER 2021								FIRST QUARTER 2021
($ in thousands)		UPB $				Gain / (Loss) $				UPB $			Gain / (Loss) $
Paid in full		$	21,925			$	1,446			$	15,961		$	795
Paid current			14,949				219				10,774			62
REO sold			947				(2	)			2,754			76
Total resolutions		$	37,821			$	1,663			$	29,489		$	933
Resolutions as a % of nonperforming UPB							104.4	%						103.2	%
SHORT-TERM AND FORBEARANCE LOANS
RESOLUTION ACTIVITY		SECOND QUARTER 2021								FIRST QUARTER 2021
($ in thousands)		UPB $				Gain / (Loss) $				UPB $			Gain / (Loss) $
Paid in full		$	13,517			$	682			$	8,569		$	343
Paid current			7,794				59				11,170			40
REO sold			164				(73	)			-			-
Total resolutions		$	21,475			$	668			$	19,739		$	383
Resolutions as a % of nonperforming UPB							103.1	%						101.9	%
Grand total resolutions		$	59,296			$	2,331			$	49,228		$	1,316
Grand total resolutions as a % of nonperforming UPB							103.9	%						102.7	%

Discussion of results:

• Resolution of nonperforming loans and REO in the HFI portfolio totaled $59.30 million in UPB during 2Q21 and realized $2.33 million of gains, compared to $49.23 million in UPB and $1.32 million of gains, respectively, in 1Q21
  ‒ Total resolution gains as a % of UPB resolved were 103.93% in 2Q21, compared to 102.67% in 1Q21, driven by a 94% quarter-over-quarter increase in the collection of default interest and prepayment penalties collected on NPL resolutions
• Resolutions of long-term HFI loans in 2Q21 totaled $37.82 and realized $1.66 million of gains, compared to $29.49 million and $0.93 million, respectively, in 1Q21
• Resolutions of short-term HFI loans totaled $21.48 in 2Q21 and realized $0.67 million of gains, compared to $19.74 million and $0.38 million, respectively, in 1Q21

Webcast Information

Velocity’s executive management team will host a conference call and webcast to review its financial results at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on the same day.

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of Velocity Financials’ Investor Relations website at 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 and to download and install any needed software.

Management’s slide presentation will be available through the Events and Presentations section of the Company’s Investor Relations website after the market close on Thursday, August 5, 2021.

Conference Call Information

To participate by phone, please dial in 15 minutes prior to 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 be joined into the Velocity Financial, Inc. earnings call.

A replay of the call will be available through midnight on August 30, 2021, 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 #10157578. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages investor loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 16 years.

(1) Core Income and Core EPS are non-GAAP financial measures the Company presents to help investors better understand unique items that impact earnings. For a reconciliation of GAAP Net Income to Core Income, please refer to the sections of this press release titled “Non-GAAP Financial Measures” and “Adjusted Financial Metric Reconciliation to GAAP Net Income.”

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses Core Income, which is a non-GAAP financial measure. For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, (3) regulatory and/or legislative changes, (4) our customers' continued interest in loans and doing business with us, (5) market conditions and investor interest in our contemplated securitization and (6) changes in federal government fiscal and monetary policies.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors” in our Form 10-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
	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
	Unaudited			Unaudited			Audited			Unaudited			Unaudited
(In thousands)
Assets
Cash and cash equivalents	$	27,741		$	20,434		$	13,273		$	19,210		$	9,803
Restricted cash		7,921			6,808			7,020			7,821			6,735
Loans held for sale, net		7,916			0			13,106			0			212,344
Loans held for investment, at fair value		1,370			1,364			1,539			3,327			2,956
Loans held for investment		2,057,046			1,983,435			1,924,489			1,977,236			1,836,065
Net deferred loan costs		26,707			25,070			23,600			23,850			25,754
Total loans, net		2,093,039			2,009,869			1,962,734			2,004,413			2,077,119
Accrued interest receivables		11,094			11,169			11,373			13,134			17,793
Receivables due from servicers		73,517			77,731			71,044			44,466			36,028
Other receivables		10,169			3,879			4,085			402			4,609
Real estate owned, net		20,046			14,487			15,767			14,653			15,648
Property and equipment, net		3,625			3,891			4,145			4,446			4,718
Deferred tax asset		13,196			9,246			6,654			1,832			5,556
Other assets		7,257			7,325			6,779			16,489			9,042
Total Assets	$	2,267,605		$	2,164,839		$	2,102,874		$	2,126,866		$	2,187,051
Liabilities and members' equity
Accounts payable and accrued expenses	$	70,049		$	65,003		$	63,361		$	61,859		$	55,938
Secured financing, net		164,053			129,666			74,982			74,776			74,571
Securitizations, net		1,558,163			1,453,386			1,579,019			1,670,930			1,599,719
Warehouse & repurchase facilities		151,872			203,314			75,923			19,541			160,796
Total Liabilities		1,944,137			1,851,369			1,793,285			1,827,106			1,891,024
Mezzanine Equity
Series A Convertible preferred stock		90,000			90,000			90,000			90,000			90,000
Stockholders' Equity
Stockholders' equity		233,468			223,470			219,589			209,760			206,027
Total Liabilities and members' equity	$	2,267,605		$	2,164,839		$	2,102,874		$	2,126,866		$	2,187,051
Book value per share	$	11.62		$	11.12		$	10.93		$	10.44		$	10.26
Shares outstanding		20,087			20,087			20,087			20,087			20,087

Velocity Financial, Inc.
Consolidated Statements of Income (Quarterly)
	Quarter Ended
($ in thousands)	6/30/2021				3/31/2021				12/31/2020				9/30/2020				6/30/2020
	Unaudited				Unaudited				Audited				Unaudited				Unaudited
Revenues
Interest income	$	44,978			$	40,707			$	41,556			$	41,374			$	39,755
Interest expense - portfolio related		20,566				20,832				21,442				22,347				21,189
Net interest income - portfolio related		24,412				19,875				20,114				19,027				18,566
Interest expense - corporate debt		4,309				7,350				1,900				1,913				1,894
Net interest income		20,103				12,525				18,214				17,114				16,672
Provision for loan losses		(1,000	)			105				406				1,573				1,800
Net interest income after provision for loan losses		21,103				12,420				17,808				15,541				14,872
Other operating income (expense)		2,432				2,801				4,691				1,349				(1,339	)
Total net revenues		23,535				15,221				22,499				16,890				13,533
Operating expenses
Compensation and employee benefits		4,546				5,186				4,135				5,692				5,863
Rent and occupancy		430				463				424				415				448
Loan servicing		1,922				1,867				1,977				2,168				1,754
Professional fees		795				533				1,415				1,051				588
Real estate owned, net		1,039				509				217				898				408
Other operating expenses		1,918				2,059				2,578				1,641				1,847
Total operating expenses		10,650				10,617				10,746				11,865				10,908
Income before income taxes		12,885				4,604				11,753				5,025				2,625
Income tax expense		3,432				1,208				2,177				1,544				484
Net income	$	9,453			$	3,396			$	9,576			$	3,481			$	2,141
Less: Deemed dividends on preferred stock		-				-				-				-			$	48,955
Less: Undistributed earnings allocated to participating securities		3,571			$	1,281			n.a.				n.a.				n.a.
Net income (loss) allocated to common shareholders	$	5,882			$	2,115			$	9,576			$	3,481			$	(46,814	)
Basic earnings (loss) per share	$	0.29			$	0.11			$	0.48			$	0.17			$	(2.33	)
Diluted earnings (loss) per common share	$	0.28			$	0.10			$	0.29			$	0.11			$	(2.33	)
Basic weighted average common shares outstanding		20,087				20,087				20,087				20,087				20,087
Diluted weighted average common shares outstanding		33,960				33,407				32,793				32,435				20,087

Velocity Financial, Inc.
Net Interest Margin ‒ Portfolio Related and Total Company
(Unaudited)
	Quarter Ended June 30, 2021										Quarter Ended March 31, 2021											Quarter Ended June 30, 2020
				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	$	11,524									$	8,904										$	220,047
Loans held for investment		2,010,962										1,927,760											1,875,260
Total loans	$	2,022,486		$	44,978			8.90	%		$	1,936,664		$	40,707			8.41	%	(4	)	$	2,095,307		$	39,755			7.59	%
Debt:
Warehouse and repurchase facilities	$	166,981			2,361			5.66	%		$	113,528			1,705			6.01	%			$	242,676			2,632			4.34	%
Securitizations		1,543,295			18,205			4.72	%			1,548,642			19,127			4.94	%				1,589,191			18,557			4.67	%
Total debt - portfolio related		1,710,276			20,566			4.81	%			1,662,170			20,832			5.01	%				1,831,867			21,189			4.63	%
Corporate debt		166,335			4,309			10.36	%			108,365			7,350			27.13	%	(5	)		78,000			1,894			9.71	%
Total debt	$	1,876,611		$	24,875			5.30	%		$	1,770,535		$	28,182			6.37	%			$	1,909,867		$	23,083			4.83	%
Net interest spread - portfolio related (2)								4.08	%									3.39	%										2.96	%
Net interest margin - portfolio related								4.83	%									4.10	%										3.54	%
Net interest spread - total company (3)								3.59	%									2.04	%	(5	)								2.75	%
Net interest margin - total company								3.98	%									2.59	%	(5	)								3.18	%

(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.
(4)		The debt issuance cost amortization was higher for the three months ended March 31, 2021, as a result of a lower average outstanding borrowing balance from a new financing facility.
(5)		Excluding the one-time debt issuance cost write-off of $2.9 million and prepayment penalties of $1.6 million associated with the $78.0 million payoff of our corporate debt in February 2021, the corporate debt average rate would have been 10.49%; net interest spread — total company would have been 3.06%; and net interest margin — total company would have been 3.52% for the three months ended March 31, 2021.

Velocity Financial, Inc.
Adjusted Financial Metric Reconciliation to GAAP Net Income
(Unaudited)
Core Income
	Quarter Ended
($ in thousands)	6/30/2021				3/31/2021				12/31/2020				9/30/2020				6/30/2020
Net Income	$	9,453			$	3,396			$	9,576			$	3,481			$	2,141
Recovery of Loan Loss Provision	$	(1,000	)
Nonrecurring debt amortization						3,326				-				-				-
COVID-19 Impact						-				-				-				1,267
Workforce reduction costs						-				-				432				-
Core Income	$	8,453			$	6,722			$	9,576			$	3,913			$	3,408
Core diluted earnings per share	$	0.25			$	0.20			$	0.29			$	0.12			$	0.17

 

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FAQ

What are the key financial results for Velocity Financial, Inc. for 2Q21?

In 2Q21, Velocity Financial, Inc. reported a net income of $9.45 million and core income of $8.45 million, along with diluted earnings per share of $0.28.

How much did Velocity Financial's total loan portfolio increase in 2Q21?

Velocity Financial's total loan portfolio increased by 4% to $2.07 billion in 2Q21 from $1.99 billion in 1Q21.

What was the percentage increase in diluted earnings per share for VEL from 1Q21 to 2Q21?

Diluted earnings per share for VEL increased by 174% from $0.10 in 1Q21 to $0.28 in 2Q21.

How did Velocity Financial's net interest margin change in 2Q21?

In 2Q21, Velocity Financial's net interest margin improved to 4.83%, an increase of 73 basis points from 4.10% in 1Q21.

What was the change in loan loss reserves for VEL in 2Q21?

The loan loss reserve for VEL decreased by 33% in 2Q21 to $3.96 million from $5.88 million in 1Q21.