Velocity Financial, Inc. Reports Third Quarter 2022 Results

Rhea-AI Summary

Velocity Financial, Inc. (NYSE: VEL) reported strong financial results for the third quarter of 2022, with net income of $10.0 million and diluted earnings per share of $0.29, up from $8.0 million and $0.23 per share in the same period last year. The company's loan production volume reached $457.3 million, marking a 34.2% increase year-over-year. Nonaccrual loans decreased to 7.4% of the Held for Investment loans. However, the net interest margin declined to 3.59% from 4.97% in 3Q21. Liquidity stood at $96 million, with a book value per common share of $11.61.

Positive

• Net income increased by 24.4% year-over-year to $10.0 million.
• Loan production volume rose by 34.2% to $457.3 million.
• Nonaccrual loans as a percentage of Held for Investment loans improved to 7.4% from 12.7%.

Negative

• Net interest margin decreased to 3.59% from 4.97% year-over-year.
• Pretax return on equity fell to 15.26% from 18.23% in 3Q21.

Third Quarter Highlights:

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

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

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

Third Quarter Operating Results

KEY PERFORMANCE INDICATORS
($ in thousands)		3Q 2022			3Q 2021			$ Variance			% Variance
Pretax income	$	14,049		$	10,927			$	3,122		28.6	%
Net income	$	9,983		$	8,022			$	1,961		24.4	%
Diluted earnings per share	$	0.29		$	0.23			$	0.05		22.6	%
Core net income(a)	$	9,983		$	8,022			$	1,961		24.4	%
Core diluted earnings per share(a)	$	0.29		$	0.23			$	0.06		24.5	%
Pretax return on equity		15.26	%		18.23	%		n.a.			(16.3	)%
Core pretax return on equity(a)		15.26	%		18.23	%		n.a.			(16.3	)%
Net interest margin - portfolio		3.59	%		4.97	%		n.a.			(27.8	)%
Net interest margin - total company		3.09	%		4.13	%		n.a.			(25.3	)%
Average common equity	$	368,270		$	239,790			$	128,479		53.6	%
(a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.

Discussion of results:

• Net income in 3Q22 was $10.0 million, compared to $8.0 million in 3Q21

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

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

‒ Driven by a higher average equity balance in 3Q22

TOTAL LOAN PORTFOLIO
($ of UPB in millions)		3Q 2022			3Q 2021			$ Variance			% Variance
Held for Investment
Investor 1-4 Rental	$	1,777		$	1,150			$	627		55	%
Mixed Use		432			302				129		43	%
Multi-Family		297			203				94		46	%
Retail		304			197				107		54	%
Warehouse		228			151				77		51	%
All Other		379			268				111		41	%
Total	$	3,416		$	2,271			$	1,145		50.4	%
Held for Sale
Multi-Family	$	16.57		$	-			$	17		n.m.
Total Managed Loan Portfolio UPB	$	3,433		$	2,271			$	1,162		51.1	%
Key loan portfolio metrics:
Total loan count		8,476			6,430
Weighted average loan to value		68.7	%		67.2	%
Weighted average total portfolio yield		7.88	%		8.77	%
Weighted average portfolio debt cost		4.81	%		4.48	%

Discussion of results:

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

‒ Driven by record loan production volume

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

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

LOAN PRODUCTION VOLUMES
($ in millions)	3Q 2022	3Q 2021		$ Variance		% Variance
Investor 1-4 Rental	$ 278	$ 184		$ 94		50.9%
Traditional Commercial	133	131		2		1.7%
Short-term loans	46	25		21		82.2%
Total loan production	$ 457	$ 341		$ 117		34.2%

Discussion of results:

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

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

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

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS
($ in thousands)		3Q 2022			3Q 2021			$ Variance			% Variance
Nonperforming loans(a)	$	253,341		$	288,436			$	(35,095)		(12.2	)%
Average Nonperforming Loans	$	249,297		$	288,778			$	(39,480)		(13.7	)%
Nonperforming loans % total HFI Loans		7.4	%		12.7	%		n.a.			(41.6	)%
Total Charge Offs	$	155		$	162			$	(7)		(4.3	)%
Charge-offs as a % of Avg. Nonperforming loans(b)		0.25	%		0.22	%		n.a.			10.9	%
Loan Loss Reserve	$	5,330		$	4,028			$	1,302		32.3	%
(a) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual.
(b) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period.

Discussion of results:

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

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

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

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

NET REVENUES
($ in thousands)		3Q 2022			3Q 2021			$ Variance				% Variance
Interest income	$	63,419		$	46,923			$	16,496			35.2%
Interest expense - portfolio related		(34,561	)		(20,321	)			(14,240	)		70.1%
Net Interest Income - portfolio related		28,858			26,602				2,256			8.5%
Interest expense - corporate debt		(4,011	)		(4,488	)			477			(10.6)%
Net Interest Income	$	24,847		$	22,114			$	2,733			12.4%
Loan loss provision		(580	)		(228	)			(352	)		154.5%
Gain on disposition of loans		399			306				93			30.5%
Other operating income (expense)		2,111			33				2,078			n.m
Total Net Revenues	$	26,777		$	22,225			$	4,552			20.5%

Discussion of results:

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

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

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

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

OPERATING EXPENSES
($ in thousands)		3Q 2022			3Q 2021		$ Variance				% Variance
Compensation and employee benefits	$	6,788		$	4,738		$	2,050			43.3	%
Rent and occupancy		445			447			(2	)		(0.4	)%
Loan servicing		3,314			2,014			1,300			64.6	%
Professional fees		664			736			(72	)		(9.8	)%
Real estate owned, net		(195	)		1,186			(1,381	)		(116.4	)%
Other expenses		1,711			2,177			(466	)		(21.4	)%
Total operating expenses	$	12,727		$	11,298		$	1,429			12.6	%

Discussion of results:

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

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

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

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

SECURITIZATIONS
($ in thousands)	Securities			Balance at					Balance at
Trusts	Issued			9/30/2022		W.A. Rate			9/30/2021		W.A. Rate
2014-1 Trust		161,076		$	-	-			$	18,910	8.12	%
2015-1 Trust		285,457			-	-				21,161	7.57	%
2016-1 Trust		319,809			24,356	8.10	%			40,354	8.25	%
2016-2 Trust		166,853			-	-				29,207	7.54	%
2017-1 Trust		211,910			-	-				50,258	6.34	%
2017-2 Trust		245,601			61,224	3.75	%			94,486	3.45	%
2018-1 Trust		176,816			46,795	3.99	%			72,219	4.02	%
2018-2 Trust		307,988			99,151	4.49	%			156,587	4.34	%
2019-1 Trust		235,580			97,620	4.12	%			146,086	4.08	%
2019-2 Trust		207,020			90,165	3.39	%			130,198	3.44	%
2019-3 Trust		154,419			75,366	3.22	%			105,570	3.26	%
2020-1 Trust		248,700			141,423	2.87	%			186,400	2.86	%
2020-2 Trust		96,352			63,060	4.62	%			88,695	4.51	%
2020-MC1 Trust		179,371			-	-				57,111	4.51	%
2021-1 Trust		251,301			206,026	1.74	%			245,423	1.72	%
2021-2 Trust		194,918			177,993	2.02	%			203,743	1.77	%
2021-3 Trust		204,205			190,073	2.45	%
2021-4 Trust		319,116			282,567	3.18	%
2022-1 Trust		273,594			260,454	3.93	%
2022-2 Trust		241,388			236,918	5.09	%
2022-MC1 Trust		84,967			60,872	6.88	%
2022-3 Trust		296,323			285,847	5.64	%
2022-4 Trust		308,357			306,365	6.24	%
	$	5,171,122		$	2,706,275	4.05	%		$	1,646,408	3.55	%

Discussion of results:

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

RESOLUTION ACTIVITIES
LONG-TERM LOANS
RESOLUTION ACTIVITY		THIRD QUARTER 2022			THIRD QUARTER 2021
($ in thousands)		UPB $	Gain / (Loss) $		UPB $	Gain / (Loss) $
Paid in full		$ 16,175	$ 967		$ 13,353	$ 1,251
Paid current		11,410	182		7,722	79
REO sold (a)		3,171	250		4,680	31
Total resolutions		$ 30,756	$ 1,399		$ 25,755	$ 1,361
Resolutions as a % of nonperforming UPB			104.5%			105.3%
SHORT-TERM AND FORBEARANCE LOANS
RESOLUTION ACTIVITY		THIRD QUARTER 2022			THIRD QUARTER 2021
($ in thousands)		UPB $	Gain / (Loss) $		UPB $	Gain / (Loss) $
Paid in full		$ 8,691	$ 396		$ 8,960	$ 664
Paid current		2,075	-		25,141	29
REO sold		3,672	865		104	47
Total resolutions		$ 14,438	$ 1,261		$ 34,205	$ 740
Resolutions as a % of nonperforming UPB			108.7%			102.2%
Grand total resolutions		$ 45,194	$ 2,660		$ 59,960	$ 2,101
Grand total resolutions as a % of nonperforming UPB			105.9%			103.5%
(a) There was an REO property held since January 2019 that was sold during the quarter ended September 30, 2021, with a total lifetime loss of $1.7 million, all of which was recognized in prior periods.

Discussion of results:

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

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

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

Velocity’s executive management team will host a conference call and webcast to review 3Q22 financial results on November 3^rd, 2022, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please go to Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website following the completion of the conference call.

Conference Call Information

To participate by phone, please dial-in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to join the Velocity Financial, Inc. conference call.

A replay of the call will be available through midnight on November 30, 2022, and can be accessed by dialing 1-877-344-7529 in the U.S. and 855-669-9658 in Canada or 1-412-317-0088 internationally. The passcode for the replay is #9848120. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages investor loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 18 years.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.

Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs incurred from activities that are not normal recurring operating expenses, such as COVID-stressed charges and recoveries of loan loss provision, nonrecurring debt amortization, the impact of operational measures taken to address the COVID-19 pandemic and workforce reduction costs, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted-average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.

We have included non-GAAP core net income and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

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

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, including the risk of recession (3) regulatory and/or legislative changes, (4) our customers' continued interest in loans and doing business with us, (5) market conditions and investor interest in our future securitizations, and (6) the continued conflict in Ukraine and (7) changes in federal government fiscal and monetary policies.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors” in our Form 10-Q filed with the SEC on May 14, 2020, as well as other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.

Velocity Financial, Inc. Consolidated Statements of Financial Condition
	Quarter Ended
	9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021
	Unaudited			Unaudited			Unaudited			Unaudited			Unaudited
(In thousands)
Assets
Cash and cash equivalents	$	26,372		$	46,250		$	36,629		$	35,965		$	35,497
Restricted cash		14,533			9,217			10,837			11,639			9,586
Loans held for sale, net		-			-			77,503			87,908			-
Loans held for sale, at fair value		16,569			-			-			-			-
Loans held for investment, at fair value		926			1,351			1,352			1,359			1,360
Loans held for investment		3,445,563			3,118,799			2,828,302			2,527,564			2,295,697
Total loans, net		3,463,058			3,120,149			2,907,156			2,616,831			2,297,056
Accrued interest receivables		18,333			15,820			14,169			13,159			11,974
Receivables due from servicers		66,992			75,688			78,278			74,330			57,058
Other receivables		1,962			1,320			4,527			1,812			870
Real estate owned, net		13,188			19,218			16,177			17,557			17,905
Property and equipment, net		3,495			3,632			3,690			3,830			3,348
Deferred tax asset		4,337			15,195			16,477			16,604			17,026
Mortgage Servicing Rights, at fair value		9,868			8,438			7,661			7,152			-
Goodwill		6,775			6,775			6,775			6,775			-
Other assets		18,453			11,036			7,345			6,824			6,843
Total Assets	$	3,647,366		$	3,332,738		$	3,109,721		$	2,812,478		$	2,457,163
Liabilities and members' equity
Accounts payable and accrued expenses	$	75,150		$	78,384		$	92,768		$	92,195		$	79,360
Secured financing, net		209,537			209,227			208,956			162,845			163,449
Securitizations, net		2,651,895			2,477,226			2,035,374			1,911,879			1,623,674
Warehouse & repurchase facilities		340,050			208,390			424,692			301,069			258,491
Total Liabilities		3,276,632			2,973,227			2,761,790			2,467,988			2,124,974
Mezzanine Equity
Series A Convertible preferred stock					-			-			-			90,000
Stockholders' Equity
Stockholders' equity		366,810			355,895			344,441			341,109			242,190
Noncontrolling interest in subsidiary		3,924			3,617			3,491			3,381			-
Total equity		370,734			359,512			347,932			344,490			242,190
Total Liabilities and members' equity	$	3,647,366		$	3,332,739		$	3,109,722		$	2,812,478		$	2,457,164
Book value per share	$	11.61		$	11.26		$	10.90		$	10.84		$	12.05
Shares outstanding		31,922			31,922			31,913			31,787			20,098

Velocity Financial, Inc. Consolidated Statements of Income (Quarterly)
	Quarter Ended
($ in thousands)	9/30/2022				6/30/2022				3/31/2022				12/31/2021			9/30/2021
Revenues
Interest income	$	63,419			$	59,243			$	52,049			$	49,360		$	46,923
Interest expense - portfolio related		34,561				28,752				23,556				23,666			20,321
Net interest income - portfolio related		28,858				30,491				28,493				25,694			26,602
Interest expense - corporate debt		4,011				4,182				17,140				4,462			4,488
Net interest income		24,847				26,309				11,353				21,232			22,114
Provision for loan losses		580				279				730				377			228
Net interest income after provision for loan losses		24,267				26,030				10,623				20,855			21,886
Other operating income
Gain on disposition of loans		399				1,776				4,540				2,357			306
Unrealized gain/(loss) on fair value loans		453				6				11				11			0
Other income (expense)		1,657				1,257				1,097				249			33
Other operating income (expense)		2,509				3,039				5,648				2,617			339
Total net revenues		26,776				29,070				16,271				23,472			22,225
Operating expenses
Compensation and employee benefits		6,788				6,553				5,323				4,720			4,738
Rent and occupancy		445				426				442				429			447
Loan servicing		3,314				3,290				2,450				2,480			2,014
Professional fees		664				1,062				1,362				1,716			736
Real estate owned, net		(195	)			(251	)			(175	)			417			1,186
Other operating expenses		1,711				3,199				2,848				2,333			2,177
Total operating expenses		12,727				14,279				12,250				12,095			11,298
Income before income taxes		14,049				14,790				4,021				11,377			10,927
Income tax expense		3,759				4,019				790				3,024			2,905
Net income		10,290				10,771				3,231				8,353			8,022
Net income attributable to noncontrolling interest		307				126				110				-			-
Net income attributable to Velocity Financial, Inc.		9,983				10,645				3,121				8,353			8,022
Less undistributed earnings attributable to participating securities		152				164				48				362			3,030
Net earnings attributable to common stockholders	$	9,831			$	10,481			$	3,073			$	7,991		$	4,992
Basic earnings (loss) per share	$	0.31			$	0.33			$	0.10			$	0.26		$	0.25
Diluted earnings (loss) per common share	$	0.29			$	0.31			$	0.09			$	0.24		$	0.23
Basic weighted average common shares outstanding		31,922				31,917				31,892				30,897			20,090
Diluted weighted average common shares outstanding		34,199				34,057				34,204				34,257			34,212

Velocity Financial, Inc. Net Interest Margin ‒ Portfolio Related and Total Company (Unaudited)
	Quarter Ended September 30, 2022									Quarter Ended September 30, 2021
				Interest			Average						Interest			Average
	Average			Income /			Yield /			Average			Income /			Yield /
($ in thousands)	Balance			Expense			Rate(1)			Balance			Expense			Rate(1)
Loan portfolio:
Loans held for sale	$	176								$	2,284
Loans held for investment		3,217,264									2,137,505
Total loans	$	3,217,440		$	63,419		7.88	%		$	2,139,789		$	46,923		8.77	%
Debt:
Warehouse and repurchase facilities	$	226,660			3,798		6.70	%		$	182,383			2,365		5.19	%
Securitizations		2,644,489			30,763		4.65	%			1,633,059			17,956		4.40	%
Total debt - portfolio related		2,871,149			34,561		4.81	%			1,815,442			20,321		4.48	%
Corporate debt		215,000			4,011		7.46	%			172,934			4,488		10.38	%
Total debt	$	3,086,149		$	38,572		5.00	%		$	1,988,376		$	24,809		4.99	%
Net interest spread - portfolio related (2)							3.07	%								4.29	%
Net interest margin - portfolio related							3.59	%								4.97	%
Net interest spread - total company (3)							2.88	%								3.78	%
Net interest margin - total company							3.09	%								4.13	%
(1) Annualized.
(2) Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt.
(3) Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.

Velocity Financial, Inc. Adjusted Financial Metric Reconciliation to GAAP Net Income (Unaudited)
Core Income
	Quarter Ended
($ in thousands)	9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021
Net Income	$	9,983		$	10,645		$	3,121		$	8,353		$	8,022
Deal cost write-off - collapsed securitizations		-			-			-		$	1,104			-
One-time Century Health & Housing Capital deal costs		-			-			-		$	624			-
Corporate debt refinancing costs		-			-		$	9,286			-			-
Core Income	$	9,983		$	10,645		$	12,407		$	10,081		$	8,022
Diluted weighted average common shares outstanding		34,199			34,057			34,204			34,257			34,212
Core diluted earnings per share	$	0.29		$	0.31		$	0.36		$	0.29		$	0.23

 

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

Investors and Media:

Chris Oltmann

(818) 532-3708

Source: Velocity Financial, Inc.

FAQ

What were Velocity Financial's third quarter earnings for 2022?

Velocity Financial reported net income of $10.0 million and diluted earnings per share of $0.29 for the third quarter of 2022.

How much did Velocity Financial's loan production volume increase in 3Q22?

Loan production volume increased by 34.2% to $457.3 million in the third quarter of 2022.

What is the percentage of nonaccrual loans at Velocity Financial as of September 30, 2022?

As of September 30, 2022, nonaccrual loans were 7.4% of Held for Investment loans.

What is the net interest margin for Velocity Financial for 3Q22?

The net interest margin for Velocity Financial in the third quarter of 2022 was 3.59%.

What is the book value per common share for Velocity Financial as of September 30, 2022?

The book value per common share for Velocity Financial as of September 30, 2022, was $11.61.