Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q1 2020 Earnings Presentation
16 slides from Velocity Financial's earnings presentation, May 13, 2020
Slide 1: 1Q20 Earnings Presentation
1Q20 Earnings Presentation May 13, 2020
Slide 2: Forward-looking statements
Forward-looking statements Some of the statements contained in this presentation may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends, and simila
Slide 3: 1Q20 Update
1Q20 Update ▪ 1Q20 GAAP earnings per share (EPS) of $0.13 and “Core” Earnings per share of $0.29(1) ▪ Book value growth to $250.4 million at March 31, 2020, from $152.8 million Earnings at December 31, 2019 from new IPO capital and retained earnings; no distressed loan sales or significant impairmen
Slide 4: Earnings and Book Value
Earnings and Book Value ▪ “Core” earnings per share reflect adjustments for unique 1Q20 impacts, including one-time debt amortization expense and COVID-19 impacts on loan loss reserve ▪ Current and Expected Credit Loss (“CECL”) Loan Loss reserve primarily reflects macroeconomic effects of the COVID-
Slide 5: Loan Loss Reserve and CECL Adoption
Loan Loss Reserve and CECL Adoption Loan Loss Reserve Roll Forward ▪ Velocity adopted ASC 326 (“CECL methodology”), effective January 1, Description Amount 2020 ALLL Balance as of 12/31/19 $ 2,240 ▪ Impact of the CECL methodology CECL implementation impact 137 implementation from the prior GAAP 1/1/
Slide 6: Business Update
Business Update Financing / Securitization ▪ Outstanding warehouse repurchase facility (“warehouse lines”) advances totaled $265 million, collateralized by loans with an unpaid principal balance of $407 million(1) ▪ Pursuing securitization of long-term loans currently financed on warehouse lines ‒ M
Slide 7: Loan Portfolio – HFS and HFI
Loan Portfolio – HFS and HFI ▪ Net portfolio growth of $68 million in 1Q20 ▪ Loan origination volume was lower than originally forecast, driven by the suspension of loan production activities at the end of March as a result of the COVID-19 pandemic Loan Portfolio Composition Loan Portfolio Waterfall
Slide 8: Net Interest Margin
Net Interest Margin ▪ Net interest income(1) increased 2% Q/Q and 28% Y/Y driven by portfolio growth and improved portfolio-related debt costs ▪ Net interest margin (NIM)(1) was 4.18% in 1Q20, a decrease of 14 bps Q/Q and 2 bps Y/Y ▪ The decrease from 4Q19 was driven by an increase in nonaccrual loa
Slide 9: Loan Portfolio Performance
Loan Portfolio Performance ▪ Nonperforming loans(1) totaled $174 million in UPB at March 31, 2020, or 8.17% of total loans (held for sale and held for investment), up from 6.88% at December 31, 2019 and 5.65% at March 31, 2019 ▪ Charge-offs in 1Q20 were $171 thousand, down from $579 thousand in 4Q19
Slide 10: COVID-19 Relief Initiatives
COVID-19 Relief Initiatives ▪ In April, Velocity implemented COVID-19 Relief Requests Trend relief initiatives for borrowers experiencing temporary difficulties 303 256 ▪ Through May 8th, approximately 1,160 238 208 requests have been received ▪ Borrowers required to complete VCC 130 forbearance app
Slide 11: Key Initiatives
Key Initiatives ▪ Pay off loans currently financed on our existing warehouse lines through securitization, other forms of financing, or loan sales Financing & ▪ Use capital to further strengthen liquidity position and pursue attractive Capital loan acquisition opportunities ▪ Establish new financing
Slide 12: Appendix
Appendix
Slide 13: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet (Unaudited) Quarter Ended 3/31/2020 12/31/2019 09/30/2019 06/30/2019 03/31/2019 (In thousands) Assets Cash and cash equivalents $ 7,649 $ 21,465 $ 8,849 $ 14,105 $ 16,948 Restricted cash 4,483 6,087 3,152 1,542 1,986 Loans held for sale, net 223,123 214,467 170
Slide 14: Velocity Financial, Inc. Income Statement
Velocity Financial, Inc. Income Statement (Unaudited) Quarter Ended Quarter Ended ($ in thousands) 3/31/2020 12/31/2019 09/30/2019 06/30/2019 03/31/2019 Revenues Interest income $ 44,637 $ 44,124 $ 40,379 $ 36,884 $ 36,143 Interest expense - portfolio related 22,848 22,689 21,827 20,324 19,062 Net i
Slide 15: Adjusted Financial Metric Reconciliation to GAAP
Adjusted Financial Metric Reconciliation to GAAP Reconciliation of Velocity Financial Inc. GAAP Net Income Net Operating Income Quarter Ended 3/31/2020 12/31/2019 09/30/2019 06/30/2019 03/31/2019 GAAP Net Income $ 2,579 $ 5,182 $ 3,880 $ 3,535 $ 4,695 Income tax expense 1,148 2,960 1,796 1,444 1,906
Slide 16: Loan Portfolio
Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $2.1 billion UPB)(1) Mixed Use 12% California New York Multifamily 23% 22% 9% Investor 1-4 Retail 52% 9% Florida All other states 12% 25% Office 6% New Jersey Warehouse 8% Texas 6% Pennsylvania Other Maryland 4% 3% 3% 7% Confidenti