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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Velocity Financial Inc | NYSE:VEL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.07 | -0.38% | 18.12 | 18.12 | 18.12 | 18.12 | 74 | 14:30:13 |
First Quarter Highlights:
Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $10.6 million and core net income of $11.4 million for 1Q23, compared to net income of $3.1 million and core net income of $12.4 million in 1Q22. Earnings and core earnings per diluted share were $0.31 and $0.33, respectively, for 1Q23, compared to $0.09 and $0.36, for 1Q22.
“Velocity’s first quarter results demonstrate the resiliency of our business model and our ability to deliver strong results in dynamic market conditions,” said Chris Farrar, President and CEO. “Our first quarter results included strong portfolio income and improved fundamentals, setting the stage for continued solid performance in 2023. Net interest margin increased by 39 basis points on a sequential-quarter basis, and gains from nonperforming loan resolutions returned to more normalized levels, resulting in solid net income growth. We continued to enjoy support from the capital markets with the April issuance of our VCC 2023-1R securitization collateralized by retained tranches of previous VCC securitizations. This transaction provides a new source of non-mark-to-market liquidity for the company at cost-effective levels and enhances our ability to capitalize on opportunities for growth. We expect to increase production from first quarter levels for the remainder of 2023 and are optimistic regarding our ability to deliver strong earnings growth in the future.”
(1) Core income and Core EPS are a non-GAAP measures that exclude nonrecurring and unusual activities from GAAP net income.
(2) Liquidity includes unrestricted cash reserves of $39.4 million and available liquidity in unfinanced loans of $5.9 million.
First Quarter Operating Results
KEY PERFORMANCE INDICATORS ($ in thousands)1Q 2023
1Q 2022
$ Variance
% Variance
Pretax income$
14,757
$
4,021
$
10,736
267.0
%
Net income$
10,649
$
3,121
$
7,528
241.2
%
Diluted earnings per share$
0.31
$
0.09
$
0.22
242.7
%
Core net income(a)$
11,376
$
12,407
$
(1,031
)
(8.3
)%
Core diluted earnings per share(a)$
0.33
$
0.36
$
(0.03
)
(7.9
)%
Pretax return on equity
15.27
%
4.55
%
n.a.235.6
%
Core pretax return on equity(a)
16.20
%
19.02
%
n.a.(14.8
)%
Net interest margin - portfolio
3.23
%
4.25
%
n.a.(23.9
)%
Net interest margin - total company
2.76
%
1.69
%
n.a.63.3
%
Average common equity$
386,935
$
353,635
$
33,300
9.4
%
(a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.Discussion of results:
1Q 2023
1Q 2022
$ Variance
% Variance
Held for Investment Investor 1-4 Rental$
1,905
$
1,319
$
586
44.4
%
Mixed Use
450
380
70
18.4
%
Multi-Family
304
279
25
9.0
%
Retail
308
278
30
10.8
%
Warehouse
221
201
20
10.1
%
All Other
391
343
48
13.9
%
Total$
3,579
$
2,800
779
27.8
%
Held for Sale Multi-Family$
17
$
77
$
(59
)
(77.4
)%
Total Managed Loan Portfolio UPB$
3,596
$
2,877
$
719
25.0
%
Key loan portfolio metrics: Total loan count
9,147
7,365
Weighted average loan to value
68.1
%
67.9
%
Weighted average coupon
8.15
%
7.50
%
Weighted average total portfolio yield
8.00
%
7.76
%
Weighted average portfolio debt cost
5.33
%
4.00
%
Discussion of results:
1Q 2023
1Q 2022
$ Variance
% Variance
Investor 1-4 Rental$
116
$
293
$
(177
)
(60.4
)%
Traditional Commercial
80
272
(192
)
(70.6
)%
Short-term loans
21
16
5
28.1
%
Total loan production$
217
$
581
$
(364
)
(62.7
)%
Acquisitions$
-
$
4
Discussion of results:
1Q 2023
1Q 2022
$ Varience
$ Varience
Nonperforming loans(a)$
309,937
$
275,487
$
34,450
12.5
%
Average Nonperforming Loans$
298,703
$
278,349
$
20,354
7.3
%
Nonperforming loans % total HFI Loans
8.7
%
9.8
%
n.a.
(12.0
)%
Total Charge Offs$
484
$
328
$
156
47.5
%
Charge-offs as a % of Avg. Nonperforming Loans(b)
0.65
%
0.47
%
n.a.
n.m Loan Loss Reserve$
5,045
$
4,664
$
381
8.2
%
(a) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual. (b) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period. n.m. - non meaningfulDiscussion of results:
1Q 2023
1Q 2022
$ Variance
% Variance
Interest income$
70,521
$
52,049
$
18,472
35.5
%
Interest expense - portfolio related
(42,029
)
(23,556
)
(18,473
)
78.4
%
Net Interest Income - portfolio related
28,492
28,493
(1
)
(0.0
)%
Interest expense - corporate debt
(4,139
)
(17,140
)
13,001
(75.9
)%
Net Interest Income$
24,353
$
11,353
$
13,000
114.5
%
Loan loss provision
(636
)
(730
)
94
(12.9
)%
Gain on disposition of loans
1,913
4,540
(2,627
)
(57.9
)%
Unrealized gain on fair value loans
7,354
11
7,343
n.m Unrealized loss on fair securitizations
(170
)
-
(170
)
n.m Other operating income (expense)
3,460
1,097
2,363
215.4
%
Net Revenue$
36,275
$
16,271
$
20,004
122.9
%
n.m. - non meaningfulDiscussion of results:
1Q 2023
1Q 2022
$ Variance % Variance Compensation and employee benefits$
10,008
$
5,323
$
4,685
88.0
%
Origination (income)/expense
(334
)
310
(644
)
n.m Securitization issuance expense
2,584
-
2,584
n.m Rent and occupancy
446
442
4
1.0
%
Loan servicing
3,828
2,450
1,378
56.2
%
Professional fees
955
1,362
(407
)
(29.8
)%
Real estate owned, net
1,829
(175
)
2,004
n.m Other expenses
2,202
2,227
(25
)
(1.1
)%
Total operating expenses$
21,518
$
12,250
$
9,268
75.7
%
n.m. - non meaningfulDiscussion of results:
285,457
-
$
14,407
7.21
%
2016-1 Trust
319,809
19,896
8.85
%
32,518
8.10
%
2017-2 Trust
245,601
55,981
3.95
%
75,303
3.36
%
2018-1 Trust
176,816
41,239
4.01
%
57,284
4.04
%
2018-2 Trust
307,988
91,189
4.50
%
123,854
4.31
%
2019-1 Trust
235,580
87,832
4.08
%
115,299
3.95
%
2019-2 Trust
207,020
81,096
3.41
%
114,665
3.45
%
2019-3 Trust
154,419
65,757
3.28
%
90,919
3.27
%
2020-1 Trust
248,700
128,280
2.84
%
162,092
2.85
%
2020-2 Trust
96,352
57,239
4.60
%
73,750
4.36
%
2020-MC1 Trust
179,371
-
-
12,842
4.57
%
2021-1 Trust
251,301
186,986
1.75
%
228,015
1.74
%
2021-2 Trust
194,918
161,511
2.01
%
191,183
2.01
%
2021-3 Trust
204,205
172,915
2.45
%
199,381
2.46
%
2021-4 Trust
319,116
266,076
3.19
%
305,530
3.16
%
2022-1 Trust
273,594
250,986
3.93
%
270,642
3.94
%
2022-2 Trust
241,388
231,171
5.09
%
2022-MC1 Trust
84,967
48,298
6.88
%
2022-3 Trust
296,323
277,038
5.67
%
2022-4 Trust
308,357
297,702
6.24
%
2022-5 Trust
188,754
184,213
7.08
%
2023-1 Trust
198,715
195,999
7.01
%
$
5,018,751
$
2,901,403
4.29
%
$
2,067,684
3.12
%
Discussion of results
$
11,274
$
632
$
9,144
$
474
Paid current
18,477
233
7,597
117
REO sold (a)
570
137
2,522
469
Total resolutions
$
30,321
$
1,002
$
19,263
$
1,060
Resolutions as a % of nonperforming UPB
103.3
%
105.5
%
SHORT-TERM AND FORBEARANCE LOANS RESOLUTION ACTIVITY FIRST QUARTER 2023 FIRST QUARTER 2022 ($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $ Paid in full$
5,560
$
348
$
13,820
$
646
Paid current
1,633
9
3,783
39
REO sold
1,209
(21
)
503
35
Total resolutions
$
8,402
$
336
$
18,106
$
720
Resolutions as a % of nonperforming UPB
104.0
%
104.0
%
Grand total resolutions$
38,723
$
1,338
$
37,369
$
1,780
Grand total resolutions as a % of nonperforming UPB
103.5
%
104.8
%
Discussion of results:
Velocity’s executive management team will host a conference call and webcast to review 1Q23 financial results on May 4th, 2023, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.
Webcast Information
The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please go to Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website following the completion of the conference call.
Conference Call Information
To participate by phone, please dial-in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the 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 31, 2023, 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 #4004772. 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 (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 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Unaudited Audited Unaudited Unaudited Unaudited (In thousands) Assets Cash and cash equivalents$
39,397
$
45,248
$
26,372
$
46,250
$
36,629
Restricted cash
16,636
16,808
14,533
9,217
10,837
Loans held for sale, net
-
-
-
-
77,503
Loans held for sale, at fair value
18,081
-
16,569
-
-
Loans held for investment, at fair value
450,732
276,095
926
1,351
1,352
Loans held for investment
3,169,280
3,272,390
3,445,563
3,118,799
2,828,302
Total loans, net
3,638,093
3,548,485
3,463,058
3,120,150
2,907,157
Accrued interest receivables
20,931
20,463
18,333
15,820
14,169
Receivables due from servicers
64,133
65,644
66,992
75,688
78,278
Other receivables
2,188
1,075
1,962
1,320
4,527
Real estate owned, net
21,778
13,325
13,188
19,218
16,177
Property and equipment, net
3,209
3,356
3,495
3,632
3,690
Deferred tax asset
2,543
5,033
4,337
15,195
16,477
Mortgage Servicing Rights, at fair value
9,143
9,238
9,868
8,438
7,661
Goodwill
6,775
6,775
6,775
6,775
6,775
Other assets
12,268
13,525
18,453
11,036
7,345
Total Assets$
3,837,094
$
3,748,975
$
3,647,366
$
3,332,739
$
3,109,722
Liabilities and members' equity Accounts payable and accrued expenses
$
84,976
$
91,525
$
75,150
$
78,384
$
92,768
Secured financing, net
210,155
209,846
209,537
209,227
208,956
Securitizations, net
2,657,469
2,736,290
2,651,895
2,477,226
2,035,374
Securitizations at Fair Value
194,941
-
-
-
-
Warehouse & repurchase facilities
298,313
330,814
340,050
208,390
424,692
Total Liabilities
3,445,854
3,368,475
3,276,632
2,973,227
2,761,790
Stockholders' Equity Stockholders' equity
387,624
376,811
366,810
355,895
344,441
Noncontrolling interest in subsidiary
3,616
3,689
3,924
3,617
3,491
Total equity
391,240
380,500
370,734
359,512
347,932
Total Liabilities and members' equity$
3,837,094
$
3,748,975
$
3,647,366
$
3,332,739
$
3,109,722
Book value per share
$
12.18
$
11.89
$
11.61
$
11.26
$
10.90
Shares outstanding
32,112(1)
31,996(2)
31,922(3)
$
31,922(4)
$
31,913(5)
(1)
Based on 32,111,906 common shares outstanding as of March 31, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 490,526.
(2)
Based on 31,955,730 common shares outstanding as of December 31, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.
(3)
Based on 31,921,721 common shares outstanding as of September 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.
(4)
Based on 31,921,721 common shares outstanding as of June 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.
(5)
Based on 31,912,884 common shares outstanding as of March 31, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 505,408.
Velocity Financial, Inc.
Consolidated Statements of Income (Quarters)
Quarter Ended ($ in thousands) 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Revenues Interest income$
70,521
$
65,632
$
63,419
$
59,243
$
52,049
Interest expense - portfolio related
42,029
40,854
34,561
28,752
23,556
Net interest income - portfolio related
28,492
24,778
28,858
30,491
28,493
Interest expense - corporate debt
4,139
4,139
4,011
4,182
17,140
Net interest income
24,353
20,639
24,847
26,309
11,353
Provision for loan losses
636
(437
)
580
279
730
Net interest income after provision for loan losses
23,717
21,076
24,267
26,030
10,623
Other operating income Gain on disposition of loans
1,913
391
399
1,776
4,540
Unrealized gain on fair value loans
7,354
7,795
453
6
11
Unrealized loss on fair securitizations
(170
)
-
-
-
-
Other income (expense)
3,461
2,842
1,657
1,257
1,097
Total other operating income
12,558
11,029
2,509
3,039
5,648
Net revenue
36,275
32,105
26,776
29,070
16,271
Operating expenses Compensation and employee benefits
10,008
11,793
6,788
6,553
5,323
Origination (income)/expense
(334
)
937
(309
)
951
310
Securitization issuance expense
2,584
-
-
-
-
Rent and occupancy
446
435
445
426
442
Loan servicing
3,828
3,244
3,314
3,290
2,450
Professional fees
955
1,091
664
1,062
1,362
Real estate owned, net
1,829
552
(195
)
(251
)
(175
)
Other operating expenses
2,202
2,360
2,020
2,248
2,538
Total operating expenses
21,518
20,413
12,727
14,279
12,250
Income before income taxes
14,757
11,692
14,049
14,790
4,021
Income tax expense
4,021
3,465
3,759
4,019
790
Net income
10,736
8,227
10,290
10,771
3,231
Net income attributable to noncontrolling interest
87
(235
)
307
126
110
Net income attributable to Velocity Financial, Inc.
10,649
8,462
9,983
10,645
3,121
Less undistributed earnings attributable to participating securities
160
127
152
164
48
Net earnings attributable to common shareholders
$
10,489
$
8,335
$
9,831
$
10,481
$
3,073
Basic earnings (loss) per share
$
0.33
$
0.26
$
0.31
$
0.33
$
0.10
Diluted earnings (loss) per common share
$
0.31
$
0.25
$
0.29
$
0.31
$
0.09
Basic weighted average common shares outstanding
32,098
31,923
31,922
31,917
31,892
Diluted weighted average common shares outstanding
34,052
34,063
34,199
34,057
34,204
Velocity Financial, Inc.
Net Interest Margin ‒ Portfolio Related and Total Company
(Unaudited)
Quarters:
Quarter Ended March 31, 2023 Quarter Ended December 31, 2022 Quarter Ended March 31, 2022 Interest Average Interest Average Interest Average Average Income / Yield / Average Income / Yield / Average Income / Yield / ($ in thousands) Balance Expense Rate(1) Balance Expense Rate(1) Balance Expense Rate(1) Loan portfolio: Loans held for sale$
12,896
$
64,699
$
69,092
Loans held for investment
3,512,133
3,430,296
2,613,759
Total loans$
3,525,029
$
70,521
8.00
%
$
3,494,995
$
65,632
7.51
%
$
2,682,851
$
52,049
7.76
%
Debt: Warehouse and repurchase facilities$
225,497
4,833
8.57
%
$
286,094
5,776
8.08
%
$
338,247
3,764
4.45
%
Securitizations
2,926,153
37,196
5.08
%
2,838,315
35,078
4.94
%
2,018,186
19,791
3.92
%
Total debt - portfolio related
3,151,650
42,029
5.33
%
3,124,409
40,854
5.23
%
2,356,433
23,555
4.00
%
Corporate debt
215,000
4,139
7.70
%
215,000
4,139
7.70
%
178,915
17,141
38.32
%
Total debt$
3,366,650
$
46,168
5.49
%
$
3,339,409
$
44,993
5.39
%
$
2,535,348
$
40,696
6.42
%
Net interest spread - portfolio related (2)2.67
%
2.28
%
3.76
%
Net interest margin - portfolio related3.23
%
2.84
%
4.25
%
Net interest spread - total company (3)2.52
%
2.11
%
1.34
%
Net interest margin - total company2.76
%
2.36
%
1.69
%
(1)
Annualized.(2)
Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt.(3)
Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.Velocity Financial, Inc.
Adjusted Financial Metric Reconciliation to GAAP Net Income
(Unaudited)
Quarters:
Core Net Income Quarter Ended 3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022 Net Income$
10,649
$
8,462
$
9,983
$
10,645
$
3,121
Corporate debt refinancing costs
-
-
-
-
$
9,286
Equity award & ESPP costs$
728
$
656
-
-
$
-
Core Net Income$
11,376
$
9,118
$
9,983
$
10,645
$
12,407
Diluted weighted average common shares outstanding
34,052
34,063
34,199
34,057
34,204
Core diluted earnings per share$
0.33
$
0.27
$
0.29
$
0.31
$
0.36
View source version on businesswire.com: https://www.businesswire.com/news/home/20230504005760/en/
Investors and Media: Chris Oltmann (818) 532-3708
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