VEL Velocity Financial Inc

Second Quarter Highlights:

• Net income of $14.7 million, up 21.3% from $12.2 million for 2Q23. Diluted EPS of $0.42, up $0.06 from $0.36 per share for 2Q23
• Core net income(1) of $15.9 million, an increase of 23.1% from $12.9 million for 2Q23. Core diluted EPS(1) of $0.45, up from $0.38 per share for 2Q23
• Loan production of $422.2 million in UPB, an 11.5% and 63.2% increase from 1Q24 and 2Q23, respectively
• Nonperforming loans as a percentage of Held for Investment (HFI) loans was 10.5%, up slightly from 10.1% as of March 31, 2024, and 10.0% as of June 30, 2023, respectively
• Resolutions of nonperforming loans (NPL) and real estate owned (REO) totaled $80.7 million in UPB
  • Realized gains of $1.0 million or 101.3% of UPB resolved
• Portfolio net interest margin (NIM) of 3.54%, an increase of 19 bps Q/Q and an increase of 30 bps from 3.24% for 2Q23
• Completed the VCC 2024-2 and VCC 2024-3 securitizations totaling $286.2 million and 204.6 million, respectively, of securities issued
  • Resulted in a $0.06 per share EPS reduction from additional issuance expenses from a second securitization during the quarter
• Century Health & Housing Capital, LLC acquired $3.6 million in Mortgage Servicing Rights (MSRs) related to $227.6 million in UPB of commercial GNMA mortgages
• Liquidity(2) of $83.8 million and total available warehouse line capacity of $646.5 million as of June 30, 2024
• Recourse debt to equity ratio of 1.1x
• GAAP Book value per common share of $14.52 as of June 30, 2024, a 15.5% increase from $12.57 as of June 30, 2023 

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $14.7 million and core net income of $15.9 million for 2Q24, compared to net income of $12.2 million and core net income of $12.9 million for 2Q23. Earnings and core earnings per diluted share were $0.42 and $0.45, respectively, for 2Q24, compared to $0.36 and $0.38 for 2Q23.

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

(2) Liquidity includes unrestricted cash reserves of $47.4 million and available liquidity in unfinanced loans of $36.4 million.

“Velocity continued to build on its strong momentum in the second quarter, delivering continued production volume and earnings growth,” said Chris Farrar, President and CEO. “During the quarter, we expanded our loan production team and realized the benefits of earlier investments through higher production volume and market share growth, which has been particularly robust in our traditional commercial product. We also saw continued strong investor demand for Velocity’s asset-backed securities, evidenced by improving economics on the $490.8 million of new issuance during the quarter. Our discipline in maintaining higher loan coupons while increasing production volume has driven our strong earnings results through stable net interest margin growth and solid net fair market value gains. Our team has positioned Velocity for continued success, and we remain on track to achieve our year-end 2024 portfolio target of $5 billion in UPB.”

Second Quarter Operating Results

KEY PERFORMANCE INDICATORS ($ in thousands)

2Q 2024

2Q 2023

$ Variance % Variance Pretax income

$

19,873

 

$

16,824

 

$

3,049

18

%

Net income

$

14,711

 

$

12,183

 

$

2,527

21

%

Diluted earnings per share

$

0.42

 

$

0.36

 

$

0

16

%

Core Pretax income

$

21,507

 

$

17,811

 

$

3,696

21

%

Core net income(a)

$

15,918

 

$

12,928

 

$

2,990

23

%

Core diluted earnings per share(a)

$

0.45

 

$

0.38

 

$

0.07

18

%

Pretax return on equity

 

16.95

%

 

16.81

%

n.a.

1

%

Core pretax return on equity(a)

 

18.34

%

 

17.79

%

n.a.

3

%

Net interest margin - portfolio

 

3.54

%

 

3.24

%

n.a.

9

%

Net interest margin - total company

 

2.98

%

 

2.78

%

n.a.

7

%

Average common equity

$

469,071

 

$

400,441

 

$

68,630

17

%

  (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. n.a.- not applicable

Discussion of results:

• Net income in 2Q24 was $14.7 million, compared to $12.2 million for 2Q23
  • Driven by higher production volume, net interest income growth, and continued strong loan resolution activity
• Core net income(1) was $15.9 million, compared to $12.9 million for 2Q23
  • 2Q24 core adjustments included incentive compensation expenses and costs related to the Company’s employee stock purchase plan (ESPP)
• Portfolio NIM for 2Q24 was 3.54%, compared to 3.24% for 2Q23, a 9.4% Y/Y increase driven by HFI portfolio growth and average loan coupons of more than 11.0% on recent loan production

TOTAL LOAN PORTFOLIO ($ of UPB in millions)

2Q 2024

2Q 2023

$ Variance % Variance Held for Investment Investor 1-4 Rental

$

2,425

 

$

2,016

 

$

409

 

20

%

Mixed Use

 

510

 

 

452

 

 

58

 

13

%

Multi-Family

 

336

 

 

304

 

 

33

 

11

%

Retail

 

385

 

 

322

 

 

63

 

20

%

Warehouse

 

288

 

 

235

 

 

53

 

23

%

All Other

 

535

 

 

391

 

 

144

 

37

%

Total

$

4,480

 

$

3,720

 

$

760

 

20

%

Held for Sale Investor 1-4 Rental

$

-

 

$

-

 

$

-

 

n.m. Multi-Family

 

-

 

 

-

 

 

(17

)

n.m. Warehouse

 

-

 

 

-

 

 

-

 

n.m. All Other

 

-

 

 

-

 

 

-

 

n.m. Total Managed Loan Portfolio UPB

$

4,480

 

$

3,720

 

$

760

 

20

%

Key loan portfolio metrics: Total loan count

 

11,582

 

 

9,541

 

Weighted average loan to value

 

67.4

%

 

68.2

%

Weighted average coupon

 

9.25

%

 

8.40

%

Weighted average total portfolio yield

 

8.98

%

 

8.24

%

Weighted average portfolio debt cost

 

6.01

%

 

5.58

%

n.m. - non meaningful

Discussion of results:

• Velocity’s total loan portfolio was $4.5 billion in UPB as of June 30, 2024, an increase of 20.4% from $3.7 billion in UPB as of June 30, 2023
  • Primarily driven by 20.3% Y/Y growth in loans collateralized by Investor 1-4 Rental properties and 36.9% Y/Y growth in loans collateralized by “Other” commercial properties
  • Loan prepayments totaled $165.8 million in UPB, an increase from $142.0 million in UPB for 1Q24, and $105.8 million in UPB for 2Q23
• The UPB of Fair Value Option (“FVO”) loans was $1.88 billion, or 42.0% of total HFI loans, as of June 30, 2024, an increase from $688.1 million in UPB or 18.5%, as of June 30, 2023
• The weighted average portfolio loan-to-value ratio was 67.4% as of June 30, 2024, down from 68.2% as of June 30, 2023, and consistent with the five-quarter trailing average of 67.8%
• The weighted average total portfolio yield was 8.98% as of June 30, 2024, an increase of 74 bps from 2Q23, driven by an 85 bps increase in weighted average loan coupons from June 30, 2023
• Portfolio-related debt cost as of June 30, 2024, was 6.01%, an increase of 43 bps from June 30, 2023, driven by higher interest rates on warehouse financing and recent securitizations

LOAN PRODUCTION VOLUMES   ($ in millions)

2Q 2024

 

2Q 2023

$ Variance % Variance Investor 1-4 Rental

$

184

 

$

163

$

21

13

%

Traditional Commercial

 

175

 

 

73

 

101

138

%

Short-term loans

 

63

 

 

22

 

41

187

%

Total loan production

$

422

 

$

259

$

164

63

%

    Acquisitions

$

3

 

$

-

 

Discussion of results:

• Loan production for 2Q24 totaled $422.2 million in UPB, a 63.2% increase from $258.6 million in UPB for 2Q23
  • Driven by continued strong demand for Traditional Commercial financing. On a Y/Y basis, traditional commercial production volume rose 137.6%.
• The weighted average coupon (WAC) on 2Q24 HFI loan production was 11.0%, essentially unchanged from 2Q23

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS ($ in thousands)

2Q 2024

2Q 2023

$ Variance % Variance Nonperforming loans(a)

$

470,649

 

$

371,154

 

$

99,495

 

27

%

Average Nonperforming Loans (b)

$

319,342

 

$

328,897

 

$

(9,555

)

(3

)%

Average Loans HFI

$

4,345,962

 

$

3,634,093.1

 

$

711,869

 

20

%

Nonperforming loans % total HFI Loans

 

10.5

%

 

10.0

%

n.a.

4

%

Total Charge Offs

$

245

 

$

717

 

$

(472

)

(66

)%

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

 

0.31

%

 

0.87

%

n.a.

(65

)%

Loan Loss Reserve

$

5,240

 

$

4,626

 

$

614

 

13

%

  (a) Total HFI 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 $470.6 million in UPB as of June 30, 2024, or 10.5% of loans HFI, compared to $371.2 million and 10.0% as of June 30, 2023
  • Driven by the growth of loans in foreclosure
• Charge-offs for 2Q24 totaled $244.6 thousand, compared to $716.6 thousand for 2Q23
  • The trailing five-quarter charge-off average was $461.0 thousand
• The loan loss reserve totaled $5.2 million as of June 30, 2024, a 13.3% increase from $4.6 million as of June 30, 2023
  • Primarily resulting from an increase in the individually assessed component of the CECL reserve
  • Loans carried at fair value or held for sale are not subject to a CECL reserve

NET REVENUES ($ in thousands)

2Q 2024

2Q 2023

$ Variance % Variance Interest income

$

97,760

 

$

74,897

 

$

22,863

 

31

%

Interest expense - portfolio related

 

(59,188

)

 

(45,451

)

 

(13,737

)

30

%

Net Interest Income - portfolio related

 

38,572

 

 

29,446

 

 

9,126

 

31

%

Interest expense - corporate debt

 

(6,155

)

 

(4,139

)

 

(2,016

)

49

%

Loan loss provision

 

(218

)

 

(298

)

 

80

 

(27

)%

Net interest income after provision for loan losses

$

32,199

 

$

25,009

 

$

7,190

 

29

%

Gain on disposition of loans

 

3,168

 

 

1,237

 

 

1,931

 

156

%

Unrealized (loss) gain on fair value loans

 

17,123

 

 

2,413

 

 

14,710

 

610

%

Unrealized gain (loss) on fair value of securitized debt

 

(4,643

)

 

5,560

 

 

(10,203

)

(184

)%

Unrealized gain/(loss) on mortgage servicing rights

 

(373

)

 

302

 

 

(675

)

(223

)%

Origination income(a)

 

5,072

 

 

2,735

 

 

2,337

 

85

%

Bank interest income

 

1,731

 

 

1,189

 

 

542

 

46

%

Other operating income (expense)

 

483

 

 

601

 

 

(118

)

(20

)%

Total Other operating income (expense)

$

22,561

 

$

14,037

 

$

8,524

 

61

%

Net Revenue

$

54,760

 

$

38,749

 

$

16,011

 

41

%

(a) 2Q23 includes a reclass of production fees to expenses

Discussion of results:

• Net Revenue for 2Q24 was $54.8 million, an increase of 41.3% compared to $38.7 million for 2Q23
  • Driven by increased production volume and disciplined focus on maintaining spreads with 11.0% rates on loan originations since 2Q23
• Total net interest income for 2Q24, including corporate debt interest expense and loan loss provision, was $32.2 million, a 28.7% increase from $25.0 million for 2Q23
  • Portfolio net Interest income was $38.6 million for 2Q24, an increase of 31.0% from 2Q23 resulting from portfolio growth and a 30bps increase in NIM
• Total other operating income was $22.6 million for 2Q24, an increase from $14.0 million for 2Q23
  • Net unrealized FVO gains on loans and securitized debt were $12.4 million, resulting from fair value gains on new 2Q24 loan production, partially offset by fair value losses on securitized debt
  • Origination income totaled $5.1 million, resulting from fee income realized from 2Q24 new loan production
  • Gain on disposition of loans totaled $3.2 million for 2Q24, driven by loans transferred to Real Estate Owned (REO)

OPERATING EXPENSES   ($ in thousands)

2Q 2024

 

2Q 2023

$ Variance % Variance Compensation and employee benefits

$

16,562

 

$

10,670

$

5,892

55

%

Origination (income)/expense(a)

 

749

 

 

123

626

510

%

Securitization expenses

 

6,232

 

 

2,699

3,533

131

%

Rent and occupancy

 

617

 

 

458

159

35

%

Loan servicing

 

5,160

 

 

4,267

893

21

%

Professional fees

 

1,718

 

 

1,056

662

63

%

Real estate owned, net

 

1,355

 

 

1,018

337

33

%

Other expenses

 

2,494

 

 

1,931

563

29

%

Total operating expenses

$

34,887

 

$

22,222

$

12,665

57

%

(a) 2Q23 includes a reclass of production fees to expenses  

Discussion of results:

• Operating expenses totaled $34.9 million for 2Q24, an increase of 57.0% from 2Q23, primarily driven by the continued growth of our origination platform and increased securitization expenses from issuing two transactions in the quarter
  • Compensation expense totaled $16.6 million, compared to $10.7 million for 2Q23
    • Primarily driven by higher commissions on increased production volume and growth of the production team
  • Securitization expenses totaled $6.2 million, resulting from issuance of the VCC 2024-2 and 2024-3 securitizations during the quarter, compared to costs of $2.7 million for one securitization during 2Q23.
  • Loan servicing expense totaled $5.2 million, a 20.9% increase from $4.3 million for 2Q23, driven by the growth in our portfolio
  • Professional fees totaled $1.7 million, a 62.7% increase from $1.1 million for 2Q23, driven by growth in accounting and legal fees necessary to support the Company’s growth
  • REO expenses totaled $1.4 million, a 33.1% increase from $1.0 million for 2Q23, driven by higher asset preservation expenses

SECURITIZATIONS ($ in thousands) Securities Balance at Balance at Trusts Issued 6/30/2024 W.A. Rate 6/30/2023 W.A. Rate 2016-1 Trust

319,809

$ 17,704

9.29%

2017-2 Trust

245,601

39,444

4.08%

51,930

3.95%

2018-1 Trust

176,816

29,170

4.09%

36,882

4.07%

2018-2 Trust

307,988

67,437

4.41%

87,984

4.51%

2019-1 Trust

235,580

69,189

4.09%

83,435

4.04%

2019-2 Trust

207,020

54,005

3.40%

76,284

3.45%

2019-3 Trust

154,419

53,431

3.32%

63,278

3.29%

2020-1 Trust

248,700

99,102

2.87%

121,074

2.86%

2020-2 Trust

96,352

40,293

4.67%

53,309

4.61%

2021-1 Trust

251,301

160,668

1.76%

183,089

1.76%

2021-2 Trust

194,918

133,508

2.02%

156,681

2.03%

2021-3 Trust

204,205

146,569

2.47%

167,652

2.46%

2021-4 Trust

319,116

223,950

3.26%

257,369

3.22%

2022-1 Trust

273,594

227,222

3.93%

246,883

3.93%

2022-2 Trust

241,388

200,677

5.06%

226,763

5.10%

2022-MC1 Trust

84,967

20,213

6.87%

39,862

6.90%

2022-3 Trust

296,323

244,398

5.73%

268,008

5.69%

2022-4 Trust

308,357

255,922

6.25%

289,929

6.25%

2022-5 Trust

188,754

147,377

7.05%

177,075

7.07%

2023-1 Trust

198,715

161,344

7.01%

189,763

7.02%

2023-1R Trust

64,833

51,383

7.61%

63,390

7.73%

2023-2 Trust

202,210

162,932

7.25%

199,864

7.17%

2023-RTL1 Trust

81,608

81,608

8.24%

2023-3 Trust

234,741

213,787

7.86%

2023-4 Trust

202,890

208,449

8.35%

2024-1 Trust

209,862

195,460

7.64%

2024-2 Trust

286,235

280,139

7.15%

2024-3 Trust

204,599

203,662

7.24%

$ 6,040,901

$ 3,771,339

5.62%

$ 3,058,208

4.72%

Discussion of results

• The company completed two securitizations during 2Q24 totaling $490.8 million of securities issued
  • The 2024-2 securitization was completed in April and totaled $286.2 million of securities issued with a weighted average rate of 7.15%
  • The 2024-3 securitization was completed in June and totaled $204.6 million of securities issued with a weighted average rate of 7.24%
• The weighted average rate on Velocity’s outstanding securitizations was 5.62% as of June 30, 2024, an increase of 90 bps from June 30, 2023

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

$

26,119

$

793

 

$

13,485

$

965

 

Paid current

 

35,292

 

188

 

 

19,771

 

280

 

REO sold (a)

 

7,859

 

(202

)

 

4,836

 

(382

)

Total resolutions

$

69,270

$

779

 

$

38,092

$

863

 

  Resolutions as a % of nonperforming UPB

 

101.1

%

 

102.3

%

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

$

4,545

$

93

 

$

7,004

$

318

 

Paid current

 

2,689

 

1

 

 

3,290

 

89

 

REO sold

 

4,176

 

165

 

 

1,672

 

222

 

Total resolutions

$

11,410

$

259

 

$

11,966

$

629

 

  Resolutions as a % of nonperforming UPB

 

102.3

%

 

105.3

%

  Grand total resolutions

$

80,680

$

1,037

 

$

50,058

$

1,492

 

  Grand total resolutions as a % of nonperforming UPB

 

101.3

%

 

103.0

%

 

Discussion of results:

• NPL resolution totaled $80.7 million in UPB, realizing 101.3% of UPB resolved compared to $50.1 million in UPB and realization of 103.0% of UPB resolved for 2Q23
• 2Q24 NPL resolutions represented 18.7% of nonperforming loan UPB as of March 31, 2024
• The UPB of loan resolutions in 2Q24 was in line with the recent five-quarter resolution average of $64.4 million in UPB, and the realization of 102.0% of UPB resolved

Velocity’s executive management team will host a conference call and webcast on August 1st, 2024, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to review 2Q24 financial results.

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 after the conference call is completed.

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 August 30, 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 #8011693. 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 20 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 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023 Unaudited Unaudited Audited Unaudited Unaudited (In thousands) Assets Cash and cash equivalents

$

47,366

 

$

34,829

 

$

40,566

 

$

29,393

 

$

33,987

 

Restricted cash

 

32,293

 

 

24,216

 

 

21,361

 

 

17,703

 

 

16,786

 

Loans held for sale, net

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Loans held for sale, at fair value

 

-

 

 

-

 

 

17,590

 

 

19,536

 

 

-

 

Loans held for investment, at fair value

 

1,971,683

 

 

1,649,540

 

 

1,306,072

 

 

951,990

 

 

705,330

 

Loans held for investment

 

2,619,619

 

 

2,727,518

 

 

2,828,123

 

 

2,945,840

 

 

3,057,940

 

Total loans, net

 

4,591,302

 

 

4,377,058

 

 

4,151,785

 

 

3,917,366

 

 

3,763,270

 

Accrued interest receivables

 

31,124

 

 

29,374

 

 

27,028

 

 

24,756

 

 

22,602

 

Receivables due from servicers

 

82,359

 

 

87,523

 

 

85,077

 

 

70,139

 

 

63,896

 

Other receivables

 

6,566

 

 

2,113

 

 

8,763

 

 

236

 

 

1,306

 

Real estate owned, net

 

50,757

 

 

46,280

 

 

44,268

 

 

29,299

 

 

20,388

 

Property and equipment, net

 

1,912

 

 

2,013

 

 

2,785

 

 

2,861

 

 

3,023

 

Deferred tax asset

 

1,144

 

 

1,580

 

 

2,339

 

 

705

 

 

1,878

 

Mortgage Servicing Rights, at fair value

 

12,229

 

 

9,022

 

 

8,578

 

 

9,786

 

 

9,445

 

Derivative assets

 

-

 

 

1,967

 

 

-

 

 

1,261

 

 

-

 

Goodwill

 

6,775

 

 

6,775

 

 

6,775

 

 

6,775

 

 

6,775

 

Other assets

 

9,566

 

 

5,468

 

 

5,248

 

 

7,028

 

 

7,789

 

Total Assets

$

4,873,393

 

$

4,628,218

 

$

4,404,573

 

$

4,117,308

 

$

3,951,145

 

  Liabilities and members' equity Accounts payable and accrued expenses

$

138,032

 

$

123,988

 

$

121,969

 

$

97,869

 

$

95,344

 

Secured financing, net

 

283,909

 

 

283,813

 

 

211,083

 

 

210,774

 

 

210,464

 

Securitized debt, net

 

2,228,941

 

 

2,329,906

 

 

2,418,811

 

 

2,504,334

 

 

2,622,547

 

Securitized debt, at fair value

 

1,509,952

 

 

1,073,843

 

 

877,417

 

 

669,139

 

 

381,799

 

Warehouse & repurchase facilities

 

237,437

 

 

360,216

 

 

334,755

 

 

215,176

 

 

235,749

 

Derivative liability

 

374

 

 

-

 

 

3,665

 

 

0

 

 

0

 

Total Liabilities

 

4,398,646

 

 

4,171,766

 

 

3,967,700

 

 

3,697,292

 

 

3,545,903

 

  Stockholders' Equity Stockholders' equity

 

471,323

 

 

452,941

 

 

433,444

 

 

416,398

 

 

401,707

 

Noncontrolling interest in subsidiary

 

3,424

 

 

3,511

 

 

3,429

 

 

3,618

 

 

3,535

 

Total equity

 

474,747

 

 

456,452

 

 

436,873

 

 

420,016

 

 

405,242

 

Total Liabilities and members' equity

$

4,873,393

 

$

4,628,218

 

$

4,404,573

 

$

4,117,308

 

$

3,951,145

 

    Book value per share

$

14.52

 

$

14.01

 

$

13.49

 

$

13.00

 

$

12.57

 

  Shares outstanding

 

32,701(1)

 

32,574(2)

 

32,395(3)

 

32,314(4)

 

32,239(5)

(1)

Based on 32,701,185 common shares outstanding as of June 30, 2024, and excludes unvested shares of common stock authorized for incentive compensation totaling 397,450.

(2)

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.

(3)

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.

(4)

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.

(5)

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.

Velocity Financial, Inc.

Consolidated Statements of Income (Quarters)

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

$

97,760

 

$

90,529

 

$

86,269

 

$

79,088

 

$

74,897

Interest expense - portfolio related

 

59,188

 

 

55,675

 

 

51,405

 

 

47,583

 

 

45,451

Net interest income - portfolio related

 

38,572

 

 

34,854

 

 

34,864

 

 

31,505

 

 

29,446

Interest expense - corporate debt

 

6,155

 

 

5,380

 

 

4,140

 

 

4,138

 

 

4,139

Net interest income

 

32,417

 

 

29,474

 

 

30,724

 

 

27,367

 

 

25,307

Provision for loan losses

 

218

 

 

1,002

 

 

827

 

 

154

 

 

298

Net interest income after provision for loan losses

 

32,199

 

 

28,472

 

 

29,897

 

 

27,213

 

 

25,009

Other operating income Gain on disposition of loans

 

3,168

 

 

1,699

 

 

1,482

 

 

3,606

 

 

1,237

Unrealized gain (loss) on fair value loans

 

17,123

 

 

18,925

 

 

39,367

 

 

(1,284

)

 

2,413

Unrealized gain (loss) on fair value securitized debt

 

(4,643

)

 

(2,318

)

 

(24,085

)

 

9,692

 

 

5,560

Unrealized gain/(loss) on mortgage servicing rights

 

(373

)

 

444

 

 

(1,208

)

 

341

 

 

302

Origination income

 

5,072

 

 

4,986

 

 

3,981

 

 

3,323

 

 

2,735

Bank interest income

 

1,731

 

 

1,631

 

 

1,716

 

 

1,342

 

 

1,189

Other income (expense)

 

483

 

 

408

 

 

418

 

 

340

 

 

601

Total other operating income

 

22,561

 

 

25,775

 

 

21,670

 

 

17,360

 

 

14,037

Net revenue

 

54,760

 

 

54,247

 

 

51,567

 

 

44,573

 

 

39,047

  Operating expenses Compensation and employee benefits

 

16,562

 

 

15,357

 

 

15,143

 

 

12,523

 

 

10,670

Origination expenses

 

749

 

 

646

 

 

173

 

 

273

 

 

123

Securitizations expenses

 

6,232

 

 

2,874

 

 

2,709

 

 

4,930

 

 

2,699

Rent and occupancy

 

617

 

 

498

 

 

551

 

 

472

 

 

458

Loan servicing

 

5,160

 

 

4,824

 

 

4,636

 

 

4,901

 

 

4,267

Professional fees

 

1,718

 

 

2,115

 

 

1,733

 

 

854

 

 

1,056

Real estate owned, net

 

1,355

 

 

2,455

 

 

2,068

 

 

1,239

 

 

1,018

Other operating expenses

 

2,494

 

 

2,242

 

 

2,248

 

 

2,142

 

 

1,931

Total operating expenses

 

34,887

 

 

31,011

 

 

29,260

 

 

27,334

 

 

22,222

Income before income taxes

 

19,873

 

 

23,236

 

 

22,307

 

 

17,239

 

 

16,824

Income tax expense

 

5,162

 

 

5,903

 

 

5,141

 

 

5,070

 

 

4,602

Net income

 

14,711

 

 

17,333

 

 

17,166

 

 

12,169

 

 

12,222

Net income attributable to noncontrolling interest

 

(67

)

 

82

 

 

(189

)

 

83

 

 

39

Net income attributable to Velocity Financial, Inc.

 

14,778

 

 

17,251

 

 

17,355

 

 

12,086

 

 

12,183

Less undistributed earnings attributable to participating securities

 

182

 

 

217

 

 

225

 

 

183

 

 

185

Net earnings attributable to common shareholders

$

14,596

 

$

17,034

 

$

17,130

 

$

11,903

 

$

11,998

  Basic earnings (loss) per share

$

0.45

 

$

0.52

 

$

0.53

 

$

0.37

 

$

0.37

  Diluted earnings (loss) per common share

$

0.42

 

$

0.49

 

$

0.50

 

$

0.35

 

$

0.36

  Basic weighted average common shares outstanding

 

32,585

 

 

32,541

 

 

32,326

 

 

32,275

 

 

32,122

  Diluted weighted average common shares outstanding

 

35,600

 

 

35,439

 

 

34,991

 

 

34,731

 

 

34,140

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

 

Quarters:

  Quarter Ended June 30, 2024 Quarter Ended June 30, 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

$

9,979

$

3,477

Loans held for investment

 

4,345,962

 

3,634,093

Total loans

$

4,355,942

$

97,760

8.98

%

$

3,637,570

$

74,897

8.24

%

  Debt: Warehouse and repurchase facilities

$

263,029

 

6,116

9.30

%

$

238,027

 

5,910

9.93

%

Securitizations

 

3,678,478

 

53,072

5.77

%

 

3,020,624

 

39,541

5.24

%

Total debt - portfolio related

 

3,941,506

 

59,188

6.01

%

 

3,258,651

 

45,451

5.58

%

Corporate debt

 

290,000

 

6,155

8.49

%

 

215,000

 

4,139

7.70

%

Total debt

$

4,231,506

$

65,343

6.18

%

$

3,473,651

$

49,590

5.71

%

  Net interest spread - portfolio related (2)

2.97

%

2.66

%

Net interest margin - portfolio related

3.54

%

3.24

%

  Net interest spread - total company (3)

2.80

%

2.53

%

Net interest margin - total company

2.98

%

2.78

%

  (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 ($ in thousands) 6/30/2024 3/31/2024 12/31/2023 9/30/2023 6/30/2023   Net Income

$

14,778

$

17,251

$

17,355

 

$

12,086

$

12,183

Tax liability reduction

 

-

 

-

 

(1,866

)

 

-

 

-

Equity award & ESPP costs

 

1,140

 

998

 

673

 

 

832

 

745

Core Net Income

$

15,918

$

18,249

$

16,161

 

$

12,918

$

12,928

  Diluted weighted average common shares outstanding

 

35,600

 

35,439

 

34,991

 

 

34,731

 

34,140

Core diluted earnings per share

$

0.45

$

0.51

$

0.46

 

$

0.37

$

0.38

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801859924/en/

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