VEL Velocity Financial Inc

First Quarter Highlights:

• Net income of $17.3 million, up 62.0% from $10.6 million for 1Q23. Diluted EPS of $0.49, up $0.18 from $0.31 per share for 1Q23
• Core net income(1) of $18.2 million, an increase of 60.4% from $11.4 million for 1Q23. Core diluted EPS(1) of $0.51, up from $0.33 per share for 1Q23

• Loan production of $378.7 million in UPB, a 7.5% increase from 4Q23 and 74.5% from 1Q23
  • Loan production in April 2024 totaled $129.0 million with an 11.0% weighted average coupon (WAC)

• Nonperforming loans as a percentage of Held for Investment (HFI) loans was 10.1%, up slightly from the 9.7% as of December 31, 2023, and an increase from 8.7% as of March 31, 2023
• Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled $54.5 million in UPB
  • Realized gains of $1.3 million or 102.3% of UPB resolved

• Portfolio net interest margin (NIM) of 3.35%, a decrease of 17 bps Q/Q and an increase of 12 bps from 3.23% for 1Q23
• Completed the VCC 2024-1 securitization totaling $209.9 million of securities issued
• Issued $75.0 million of senior secured notes to support ongoing investment portfolio growth
• Liquidity(2) of $78.5 million as of March 31, 2024
• Recourse debt to equity ratio of 1.4x
• GAAP Book value per common share of $14.01 as of March 31, 2024, an increase from $13.49 as of December 31, 2023

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $17.3 million and core net income of $18.2 million for 1Q24, compared to net income of $10.6 million and core net income of $11.4 million for 1Q23. Earnings and core earnings per diluted share were $0.49 and $0.51, respectively, for 1Q24, compared to $0.31 and $0.33 for 1Q23.

“Velocity began 2024 with another quarter of strong production and loan portfolio growth, resulting in the second highest quarterly net earnings in the Company’s history,” said Chris Farrar, President and CEO. “We saw strong demand for financing to purchase real estate assets, particularly in traditional commercial properties, which equaled our 1-4 Investor loan volume this quarter and drove our production volume growth. While base rates increased during the first quarter, we continued to see an improvement of spreads in the securitization markets and robust investor demand for asset-backed securities. We remain on track to attain our “5X25” goal of a $5 billion loan portfolio by 2025 and deliver another year of solid financial performance.”

First Quarter Operating Results

KEY PERFORMANCE INDICATORS ($ in thousands)

 

1Q 2024

 

 

1Q 2023

 

$ Variance

% Variance

Pretax income

$

23,236

 

$

14,757

 

$

8,479

57

%

Net income

$

17,251

 

$

10,649

 

$

6,602

62

%

Diluted earnings per share

$

0.49

 

$

0.31

 

$

0.18

56

%

Core Pretax income

$

24,525

 

$

15,681

 

$

8,844

56

%

Core net income(a)

$

18,249

 

$

11,376

 

$

6,873

60

%

Core diluted earnings per share(a)

$

0.51

 

$

0.33

 

$

0.18

54

%

Pretax return on equity

 

20.77

%

 

15.27

%

n.a.

36

%

Core pretax return on equity(a)

 

21.92

%

 

16.20

%

n.a.

35

%

Net interest margin - portfolio

 

3.35

%

 

3.23

%

n.a.

4

%

Net interest margin - total company

 

2.83

%

 

2.76

%

n.a.

3

%

Average common equity

$

447,613

 

$

386,935

 

$

60,678

16

%

(a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP at the end of this release. n.a.- not applicable

Discussion of results:

• Net income in 1Q24 was $17.3 million, compared to $10.6 million for 1Q23
  • Robust production volume with weighted average coupons of 11.1% drove strong fair market value gains

• Core net income(1) was $18.2 million, compared to $11.4 million for 1Q23
  • 1Q24 core adjustments include incentive compensation expenses and costs related to the Company’s employee stock purchase plan (ESPP)

• Portfolio NIM for 1Q24 was 3.35%, compared to 3.23% for 1Q23, a 4.0% Y/Y increase driven by 11.1% average loan coupons on recent loan production and continued NPL resolutions, partially offset by higher funding costs
• The GAAP pretax return on equity was 20.77% for 1Q24, compared to 15.27% for 1Q23

TOTAL LOAN PORTFOLIO ($ of UPB in millions)

 

1Q 2024

 

 

1Q 2023

 

$ Variance

% Variance Held for Investment Investor 1-4 Rental

$

2,337

 

$

1,905

 

$

432

 

23

%

Mixed Use

 

492

 

 

450

 

 

43

 

9

%

Multi-Family

 

323

 

 

304

 

 

19

 

6

%

Retail

 

364

 

 

308

 

 

56

 

18

%

Warehouse

 

276

 

 

221

 

 

55

 

25

%

All Other

 

489

 

 

391

 

 

98

 

25

%

Total

$

4,282

 

$

3,579

 

$

703

 

20

%

Held for Sale Investor 1-4 Rental

$

-

 

$

-

 

$

-

 

n.m. Multi-Family

 

-

 

 

17

 

 

(17

)

n.m. Warehouse

 

-

 

 

-

 

 

-

 

n.m. All Other

 

-

 

 

-

 

 

-

 

n.m. Total Managed Loan Portfolio UPB

$

4,282

 

$

3,596

 

$

685

 

19

%

Key loan portfolio metrics: Total loan count

 

11,013

 

 

9,147

 

Weighted average loan to value

 

67.6

%

 

68.1

%

Weighted average coupon

 

9.07

%

 

8.15

%

Weighted average total portfolio yield

 

8.71

%

 

8.00

%

Weighted average portfolio debt cost

 

5.93

%

 

5.33

%

n.m. - non meaningful

Discussion of results:

• Velocity’s total loan portfolio was $4.3 billion in UPB as of March 31, 2024, an increase of 19.1% from $3.6 billion in UPB as of March 31, 2023
  • Primarily driven by 22.7% Y/Y growth in loans collateralized by Investor 1-4 Rental properties and 25.1% Y/Y growth in loans collateralized by “Other” commercial properties
  • Loan prepayments totaled $142.0 million, an increase of 20.9% Q/Q and 64.1% Y/Y

• The UPB of Fair Value (FVO) loans was $1.58 billion, or 36.9% of total HFI loans, as of March 31, 2024, an increase from $454.0 million in UPB and 12.6%, as of March 31, 2023
• The weighted average portfolio loan-to-value ratio was 67.6% as of March 31, 2024, down from 68.1% as of March 31, 2023, and consistent with the five-quarter trailing average of 67.9%
• The weighted average total portfolio yield was 8.71% for 1Q24, an increase of 71 bps from 1Q23, driven by a 93 bps increase in average loan coupons from 1Q23
• Portfolio-related debt cost for 1Q24 was 5.93%, an increase of 60 bps from 1Q23, driven by higher interest rates on warehouse financing and recent securitizations

LOAN PRODUCTION VOLUMES ($ in millions)

 

1Q 2024

 

1Q 2023

$ Variance % Variance Investor 1-4 Rental

$

167

$

116

$

51

44

%

Traditional Commercial

 

167

 

80

 

87

109

%

Short-term loans

 

45

 

21

 

24

115

%

Total loan production

$

379

$

217

$

162

75

%

  Acquisitions

$

12

$

-

  n.m. - non meaningful

Discussion of results:

• Loan production for 1Q24 totaled $378.7 million in UPB, a 74.5% increase from $217.0 million in UPB for 1Q23
  • Driven by growing demand for Traditional Commercial financing. On a Q/Q basis, production volume rose 7.5%.
• The weighted average coupon (WAC) on 1Q24 HFI loan production was 11.1%, essentially unchanged from 1Q23

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS ($ in thousands)

 

1Q 2024

 

 

1Q 2023

 

$ Variance % Variance Nonperforming loans(a)

$

432,560

 

$

309,937

 

$

122,623

40

%

Average Nonperforming Loans (b)

$

321,442

 

$

298,703

 

$

22,739

8

%

Average Loan HFI

$

4,149,750

 

$

3,512,133

 

$

637,617

18

%

Nonperforming loans % total HFI Loans

 

10.1

%

 

8.7

%

n.a.

17

%

Total Charge Offs

$

504

 

$

484

 

$

20

4

%

Charge-offs as a % of Avg. Nonperforming Loans(c)

 

0.63

%

 

0.65

%

n.a.

(3

)%

Loan Loss Reserve

$

5,267

 

$

5,045

 

$

221

4

%

(a) Total nonperforming/nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual. (b) Reflects monthly average nonperforming loans held for investment, excluding FVO loans, during the period. (c) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period. n.a.- not applicable

Discussion of results:

• Nonperforming loans (NPL) totaled $432.6 million in UPB as of March 31, 2024, or 10.1% of loans HFI, compared to $309.9 million and 8.7% as of March 31, 2023
  • Driven by growth in loans transitioning to foreclosure

• Charge-offs for 4Q23 totaled $504.0 thousand, compared to $484.0 thousand for 1Q23
  • The trailing five-quarter charge-off average was $508.8 thousand

• The loan loss reserve totaled $5.3 million as of March 31, 2024, a 4.4% increase from $5.0 million as of March 31, 2023
  • Primarily resulting from an increase in the individually-assessed reserve component
  • Loans carried at fair value are not subject to a CECL reserve

NET REVENUES ($ in thousands)

 

1Q 2024

 

 

1Q 2023

 

$ Variance % Variance Interest income

$

90,529

 

$

70,521

 

$

20,007

 

28

%

Interest expense - portfolio related

 

(55,675

)

 

(42,029

)

 

(13,645

)

32

%

Net Interest Income - portfolio related

 

34,854

 

 

28,492

 

 

6,362

 

22

%

Interest expense - corporate debt

 

(5,380

)

 

(4,139

)

 

(1,241

)

30

%

Loan loss provision

 

(1,002

)

 

(636

)

 

(366

)

58

%

Net interest income after provision for loan losses

$

28,472

 

$

23,717

 

$

4,755

 

20

%

Gain on disposition of loans

 

1,699

 

 

1,913

 

 

(214

)

(11

)%

Unrealized (loss) gain on fair value loans

 

18,925

 

 

7,354

 

 

11,571

 

157

%

Unrealized gain (loss) on fair value of securitized debt

 

(2,318

)

 

(170

)

 

(2,148

)

n.m. Unrealized gain/(loss) on mortgage servicing rights

 

444

 

 

(95

)

 

539

 

(567

)%

Origination income(a)

 

4,986

 

 

2,411

 

 

2,575

 

107

%

Bank interest income

 

1,631

 

 

948

 

 

683

 

n.m. Other operating income (expense)

 

408

 

 

481

 

 

(72

)

(15

)%

Total Other operating income (expense)

$

25,775

 

$

12,842

 

$

12,933

 

101

%

Net Revenue

$

54,247

 

$

36,560

 

$

17,687

 

48

%

(a) 1Q23 includes a reclass of production fees to expenses n.m. - non meaningful

Discussion of results:

• Net Revenue for 1Q24 was $54.2 million, an increase of 48.4% compared to $36.6 million for 1Q23
  • Driven primarily by $12.9 million Y/Y growth in other operating income and continued strong loan portfolio performance from organically sourced production

• Total net interest income for 1Q24, including corporate debt interest expense and loan loss provision, was $28.5 million, a 20.0% increase from $23.7 million for 1Q23
  • Portfolio net Interest income was $34.9 million for 1Q24, an increase of 22.3% from 1Q23 resulting from portfolio growth and a 12bps increase in NIM

• Total other operating income was $25.8 million for 1Q24, an increase from $12.8 million for 1Q23, driven by net fair value gains and origination fees on higher 1Q24 loan production
  • Net FVO gains on loans and securitized debt were $16.6 million, resulting primarily from fair value gains on new 1Q24 loan production, partially offset by fair value losses on securitized debt
  • Origination income totaled $5.0 million, resulting from fee income realized on loans 1Q24 loan production
  • Gain on disposition of loans totaled $1.7 million for 1Q24, primarily driven by loans transferred to Real Estate Owned (REO)

OPERATING EXPENSES ($ in thousands)

 

1Q 2024

 

1Q 2023

 

$ Variance % Variance Compensation and employee benefits

$

15,357

$

10,008

 

$

5,349

53

%

Origination (income)/expense(a)

 

646

 

(50

)

 

696

n.m.

Securitization expenses

 

2,874

 

2,584

 

 

290

n.m.

Rent and occupancy

 

498

 

446

 

 

51

12

%

Loan servicing

 

4,824

 

3,828

 

 

996

26

%

Professional fees

 

2,115

 

955

 

 

1,160

121

%

Real estate owned, net

 

2,455

 

1,829

 

 

626

34

%

Other expenses

 

2,242

 

2,202

 

 

39

2

%

Total operating expenses

$

31,011

$

21,802

 

$

9,208

42

%

(a) 1Q23 includes a reclass of production fees to expenses n.m. - non meaningful

Discussion of results:

• Operating expenses totaled $31.0 million for 1Q24, an increase of 42.2% from 1Q23, driven by our growth in originations and the portfolio
  • Compensation expense totaled $15.4 million, compared to $10.0 million for 1Q23
    • Compensation growth was driven by growth of the production team in addition to higher commissions expense from increased origination volumes
  • Securitization expenses totaled $2.9 million, resulting from the issuance of the VCC 2024-1 securitization during the quarter, in-line with securitization costs for 1Q23.
  • Loan servicing expense totaled $4.8 million, a 26.0% increase from $3.8 million for 1Q23, driven by portfolio growth and nonperforming loan resolution costs
  • REO expense increased totaled $2.5 million, an increase from $1.8 million for 1Q23, driven by increased valuation-related expenses

SECURITIZATIONS ($ in thousands) Securities Balance at Balance at Trusts Issued 3/31/2024 W.A. Rate 3/31/2023 W.A. Rate 2016-1 Trust

 

319,809

$

-

0.00%

$

19,896

8.85%

2017-2 Trust

 

245,601

 

41,610

4.06%

 

55,981

3.95%

2018-1 Trust

 

176,816

 

31,981

4.09%

 

41,239

4.01%

2018-2 Trust

 

307,988

 

74,490

4.51%

 

91,189

4.50%

2019-1 Trust

 

235,580

 

70,253

4.06%

 

87,832

4.08%

2019-2 Trust

 

207,020

 

62,467

3.44%

 

81,096

3.41%

2019-3 Trust

 

154,419

 

54,912

3.30%

 

65,757

3.28%

2020-1 Trust

 

248,700

 

101,991

2.89%

 

128,280

2.84%

2020-2 Trust

 

96,352

 

42,088

4.57%

 

57,239

4.60%

2021-1 Trust

 

251,301

 

165,657

1.77%

 

186,986

1.75%

2021-2 Trust

 

194,918

 

141,057

2.03%

 

161,511

2.01%

2021-3 Trust

 

204,205

 

153,438

2.46%

 

172,915

2.45%

2021-4 Trust

 

319,116

 

237,277

3.25%

 

266,076

3.19%

2022-1 Trust

 

273,594

 

233,429

3.94%

 

250,986

3.93%

2022-2 Trust

 

241,388

 

205,358

5.07%

 

231,171

5.09%

2022-MC1 Trust

 

84,967

 

27,519

6.92%

 

48,298

6.88%

2022-3 Trust

 

296,323

 

251,143

5.71%

 

277,038

5.67%

2022-4 Trust

 

308,357

 

263,336

6.22%

 

297,702

6.24%

2022-5 Trust

 

188,754

 

154,783

7.01%

 

184,213

7.08%

2023-1 Trust

 

198,715

 

169,107

7.04%

 

195,999

7.01%

2023-1R Trust

 

64,833

 

54,342

7.63%

2023-2 Trust

 

202,210

 

178,713

8.24%

2023-RTL1 Trust

 

81,608

 

81,608

7.22%

2023-3 Trust

 

234,741

 

220,689

7.87%

2023-4 Trust

 

202,890

 

215,821

8.32%

2024-1 Trust

 

209,862

 

207,855

7.91%

$

5,550,067

$

3,440,924

5.43%

$

2,901,403

4.47%

Discussion of results

• The company completed one securitization during 1Q24 totaling $209.9 million of securities issued
  • The transaction execution improved significantly from the prior quarter

• The weighted average rate on Velocity’s outstanding securitizations was 5.43% as of March 31, 2024, an increase of 96 bps from March 31, 2023

RESOLUTION ACTIVITIES LONG-TERM LOANS   RESOLUTION ACTIVITY FIRST QUARTER 2024 FIRST QUARTER 2023 ($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $ Paid in full

$

16,563

$

798

 

$

11,274

$

632

 

Paid current

 

27,494

 

164

 

 

18,477

 

233

 

REO sold (a)

 

3,888

 

224

 

 

570

 

137

 

Total resolutions

$

47,945

$

1,186

 

$

30,321

$

1,002

 

  Resolutions as a % of nonperforming UPB

 

102.5

%

 

103.3

%

  SHORT-TERM AND FORBEARANCE LOANS   RESOLUTION ACTIVITY FIRST QUARTER 2024 FIRST QUARTER 2023 ($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $ Paid in full

$

2,496

$

-

 

$

5,560

$

348

 

Paid current

 

2,927

 

25

 

 

1,633

 

9

 

REO sold

 

1,161

 

62

 

 

1,209

 

(21

)

Total resolutions

$

6,584

$

87

 

$

8,402

$

336

 

  Resolutions as a % of nonperforming UPB

 

101.3

%

 

104.0

%

  Grand total resolutions

$

54,529

$

1,274

 

$

38,723

$

1,338

 

  Grand total resolutions as a % of nonperforming UPB

 

102.3

%

 

103.5

%

Discussion of results:

• NPL resolution totaled $54.5 million in UPB, realizing 102.3% of UPB resolved compared to $38.7 million in UPB and realization of 103.5% of UPB resolved for 1Q23
• 1Q24 NPL resolutions represented 13.8% of nonperforming loan UPB as of December 31, 2023
• The UPB of loan resolutions in 1Q24 were in-line with the recent five-quarter resolution average of $55.9 million in UPB

Velocity’s executive management team will host a conference call and webcast to review 1Q24 financial results on May 2nd, 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 May 24, 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 #3912582. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages business purpose loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 19 years.

Non-GAAP Financial Measures

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

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

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

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

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

Forward-Looking Statements

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

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

Quarter Ended 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Unaudited Audited Unaudited Unaudited Unaudited (In thousands) Assets Cash and cash equivalents

$

34,829

$

40,566

$

29,393

$

33,987

$

39,397

Restricted cash

 

24,216

 

21,361

 

17,703

 

16,786

 

16,636

Loans held for sale, at fair value

 

-

 

17,590

 

19,536

 

-

 

18,081

Loans held for investment, at fair value

 

1,649,540

 

1,306,072

 

951,990

 

705,330

 

450,732

Loans held for investment

 

2,727,518

 

2,828,123

 

2,945,840

 

3,057,940

 

3,169,280

Total loans, net

 

4,377,058

 

4,151,785

 

3,917,366

 

3,763,270

 

3,638,093

Accrued interest receivables

 

29,374

 

27,028

 

24,756

 

22,602

 

20,931

Receivables due from servicers

 

87,523

 

85,077

 

70,139

 

63,896

 

64,133

Other receivables

 

2,113

 

8,763

 

236

 

1,306

 

2,188

Real estate owned, net

 

46,280

 

44,268

 

29,299

 

20,388

 

21,778

Property and equipment, net

 

2,013

 

2,785

 

2,861

 

3,023

 

3,209

Deferred tax asset

 

1,580

 

2,339

 

705

 

1,878

 

2,543

Mortgage Servicing Rights, at fair value

 

9,022

 

8,578

 

9,786

 

9,445

 

9,143

Derivative assets

 

1,967

 

-

 

1,261

 

-

 

-

Goodwill

 

6,775

 

6,775

 

6,775

 

6,775

 

6,775

Other assets

 

5,468

 

5,248

 

7,028

 

7,789

 

12,268

Total Assets

$

4,628,218

$

4,404,573

$

4,117,308

$

3,951,145

$

3,837,094

  Liabilities and members' equity Accounts payable and accrued expenses

$

123,988

$

121,969

$

97,869

$

95,344

$

84,976

Secured financing, net

 

283,813

 

211,083

 

210,774

 

210,464

 

210,155

Securitized debt, net

 

2,329,906

 

2,418,811

 

2,504,334

 

2,622,547

 

2,657,469

Securitized debt, at fair value

 

1,073,843

 

877,417

 

669,139

 

381,799

 

194,941

Warehouse & repurchase facilities

 

360,216

 

334,755

 

215,176

 

235,749

 

298,313

Derivative liability

 

-

 

3,665

 

-

 

-

 

-

Total Liabilities

 

4,171,766

 

3,967,700

 

3,697,292

 

3,545,903

 

3,445,854

  Stockholders' Equity Stockholders' equity

 

452,941

 

433,444

 

416,398

 

401,707

 

387,624

Noncontrolling interest in subsidiary

 

3,511

 

3,429

 

3,618

 

3,535

 

3,616

Total equity

 

456,452

 

436,873

 

420,016

 

405,242

 

391,240

Total Liabilities and members' equity

$

4,628,218

$

4,404,573

$

4,117,308

$

3,951,145

$

3,837,094

  Book value per share

$

14.01

$

13.49

$

13.00

$

12.57

$

12.18

  Shares outstanding

 

32,574(1)

 

32,395(2)

 

32,314(3)

 

32,239(4)

 

32,112(5)

(1)

Based on 32,574,498 common shares outstanding as of March 31, 2024, and excludes unvested shares of common stock authorized for incentive compensation totaling 411,296.

(2)

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.

(3)

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.

(4)

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.

(5)

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.

Velocity Financial, Inc.

Consolidated Statements of Income (Quarters)

Quarter Ended ($ in thousands) 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Unaudited Unaudited Unaudited Unaudited Unaudited Revenues Interest income

$

90,529

 

$

86,269

 

$

79,088

 

$

74,897

$

70,521

 

Interest expense - portfolio related

 

55,675

 

 

51,405

 

 

47,583

 

 

45,451

 

42,029

 

Net interest income - portfolio related

 

34,854

 

 

34,864

 

 

31,505

 

 

29,446

 

28,492

 

Interest expense - corporate debt

 

5,380

 

 

4,140

 

 

4,138

 

 

4,139

 

4,139

 

Net interest income

 

29,473

 

 

30,724

 

 

27,367

 

 

25,307

 

24,353

 

Provision for loan losses

 

1,002

 

 

828

 

 

154

 

 

298

 

636

 

Net interest income after provision for loan losses

 

28,472

 

 

29,897

 

 

27,213

 

 

25,009

 

23,717

 

Other operating income Gain on disposition of loans

 

1,699

 

 

1,482

 

 

3,606

 

 

1,237

 

1,913

 

Unrealized gain (loss) on fair value loans

 

18,925

 

 

39,367

 

 

(1,284

)

 

2,413

 

7,354

 

Unrealized gain (loss) on fair value securitized debt

 

(2,318

)

 

(24,085

)

 

9,692

 

 

5,560

 

(170

)

Unrealized gain/(loss) on mortgage servicing rights

 

444

 

 

(1,208

)

 

341

 

 

302

 

(95

)

Origination income

 

4,986

 

 

3,981

 

 

3,323

 

 

2,735

 

2,411

 

Bank interest income

 

1,631

 

 

1,716

 

 

1,342

 

 

1,188

 

948

 

Other income (expense)

 

408

 

 

418

 

 

340

 

 

601

 

481

 

Total other operating income

 

25,775

 

 

21,670

 

 

17,360

 

 

14,036

 

12,842

 

Net revenue

 

54,247

 

 

51,567

 

 

44,573

 

 

39,046

 

36,560

 

  Operating expenses Compensation and employee benefits

 

15,357

 

 

15,143

 

 

12,523

 

 

10,670

 

10,008

 

Origination expenses

 

646

 

 

173

 

 

273

 

 

123

 

(50

)

Securitizations expenses

 

2,874

 

 

2,709

 

 

4,930

 

 

2,699

 

2,584

 

Rent and occupancy

 

498

 

 

551

 

 

472

 

 

458

 

446

 

Loan servicing

 

4,824

 

 

4,636

 

 

4,901

 

 

4,267

 

3,828

 

Professional fees

 

2,115

 

 

1,733

 

 

854

 

 

1,056

 

955

 

Real estate owned, net

 

2,455

 

 

2,068

 

 

1,239

 

 

1,018

 

1,829

 

Other operating expenses

 

2,242

 

 

2,248

 

 

2,142

 

 

1,931

 

2,202

 

Total operating expenses

 

31,011

 

 

29,260

 

 

27,334

 

 

22,222

 

21,802

 

Income before income taxes

 

23,236

 

 

22,307

 

 

17,239

 

 

16,824

 

14,757

 

Income tax expense

 

5,903

 

 

5,141

 

 

5,070

 

 

4,602

 

4,021

 

Net income

 

17,333

 

 

17,166

 

 

12,169

 

 

12,222

 

10,736

 

Net income attributable to noncontrolling interest

 

82

 

 

(189

)

 

83

 

 

39

 

87

 

Net income attributable to Velocity Financial, Inc.

 

17,251

 

 

17,355

 

 

12,086

 

 

12,183

 

10,649

 

Less undistributed earnings attributable to participating securities

 

217

 

 

225

 

 

183

 

 

185

 

160

 

Net earnings attributable to common shareholders

$

17,034

 

$

17,130

 

$

11,903

 

$

11,998

$

10,489

 

  Basic earnings (loss) per share

$

0.52

 

$

0.53

 

$

0.37

 

$

0.37

$

0.33

 

  Diluted earnings (loss) per common share

$

0.49

 

$

0.50

 

$

0.35

 

$

0.36

$

0.31

 

  Basic weighted average common shares outstanding

 

32,541

 

 

32,326

 

 

32,275

 

 

32,122

 

32,098

 

  Diluted weighted average common shares outstanding

 

35,439

 

 

34,991

 

 

34,731

 

 

34,140

 

34,052

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

Quarters:

Quarter Ended March 31, 2024 Quarter Ended March 31, 2023 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

$

9,661

$

12,896

Loans held for investment

 

4,149,750

 

3,512,133

Total loans

$

4,159,412

$

90,529

8.71

%

$

3,525,029

$

70,521

8.00

%

  Debt: Warehouse and repurchase facilities

$

267,559

 

6,392

9.56

%

$

225,497

 

4,833

8.57

%

Securitizations

 

3,486,173

 

49,283

5.65

%

 

2,926,153

 

37,196

5.08

%

Total debt - portfolio related

 

3,753,732

 

55,675

5.93

%

 

3,151,650

 

42,029

5.33

%

Corporate debt

 

261,552

 

5,380

8.23

%

 

215,000

 

4,139

7.70

%

Total debt

$

4,015,284

$

61,055

6.08

%

$

3,366,650

$

46,168

5.49

%

  Net interest spread - portfolio related (2)

2.77

%

2.67

%

Net interest margin - portfolio related

3.35

%

3.23

%

  Net interest spread - total company (3)

2.62

%

2.52

%

Net interest margin - total company

2.83

%

2.76

%

(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 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023   Net Income

$

17,251

$

17,355

 

$

12,086

$

12,183

$

10,649

Corporate debt refinancing costs

 

-

 

-

 

 

-

 

-

 

-

Tax liability reduction

 

-

 

(1,866

)

 

-

 

-

 

-

Equity award & ESPP costs

 

998

 

673

 

 

832

 

745

 

728

Core Net Income

$

18,249

$

16,161

 

$

12,918

$

12,928

$

11,376

  Core diluted earnings per share

$

0.51

$

0.46

 

$

0.37

$

0.38

$

0.33

$

0.51

$

0.46

 

$

0.37

$

0.38

$

0.33

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240502443752/en/

Investors and Media: Chris Oltmann (818) 532-3708