Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q3 2022 Earnings Presentation
20 slides from Velocity Financial's earnings presentation, Nov 3, 2022
Slide 1: 3Q22 Results Presentation
3Q22 Results Presentation November 3, 2022
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, positioning, anticipated events or trend
Slide 3: 3Q22 Highlights
3Q22 Highlights ▪ Net income of $10.0 million and diluted earnings per share (EPS) of $0.29, compared to $8.0 million and $0.23 per share, respectively, for 3Q21 ▪ Core EPS(1) and EPS were the same in both 3Q22 and 3Q21 Earnings ▪ Portfolio-related net interest income(2) totaled $28.9 million, an in
Slide 4: Core Income and Book Value Per Share
Core Income and Book Value Per Share Core Income(1) Book Value Per Share(2) $0.31 $11.61 GAAP Net Income $9,983 $11.26 $0.01 $0.03 Core Net Income $9,983 Book value at Non-Controlling Stock-Based Portfolio Book value at 6/30/22 (3) Interest Compensation Earnings 9/30/22 (4) ▪ Core net income and GAA
Slide 5: Loan Production
Loan Production Strong Demand For Investor Loans Continues in 3Q22 ▪ Loan production in 3Q22 totaled $457.3 million in UPB, compared to $445.4 million in UPB in 2Q22 and $340.7 million in UPB in 3Q21 ‒ Quarter over Quarter: 3Q22 production increased 2.7% from 2Q22 levels despite higher interest rate
Slide 6: Loan Portfolio
Loan Portfolio Strong Portfolio Growth Continues Driven by Investor 1-4 Rental ▪ The total loan portfolio was $3.4 billion in UPB as of September 30, 2022, a 11.1% increase from $3.1 billion in UPB as of June 30, 2022, and 51.1% from $2.3 billion as of September 30, 2021 ▪ The WAC(1) of the portfoli
Slide 7: Net Interest Margin
Net Interest Margin Portfolio NIM Lower from Higher Debt Costs; Lower Coupon Production Earlier in 2022 ▪ Portfolio NIM(1) in 3Q22 was 3.59%, down 51 bps from 4.10% in 2Q22 and 138 bps from 4.97% in 3Q21 ‒ Loan Yield: The decrease was driven by record loan production volume earlier this year in a lo
Slide 8: 3Q22 Asset Resolution Activity
3Q22 Asset Resolution Activity Strong NPL Loan Resolutions Drive Higher Gains and Lower Delinquencies Resolution Activity RESOLUTION ACTIVITIES ▪ Total NPL resolution activities in 3Q22 totaled LONG-TERM LOANS $45.2 million in UPB and realized net gains of RESOLUTION ACTIVITY THIRD QUARTER 2022 THIR
Slide 9: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance HFI Portfolio Performance Improvement Continued in 3Q22 ▪ Nonperforming loans totaled $253.3 million in UPB as of September 30, 2022, or 7.4% of total loans held for investment, compared to $252.3 million and 8.2%, respectively, as of June 30, 2022, and $288.4 m
Slide 10: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Performance Consistent, Reserve Build Reflects Growth and Macroeconomic Outlook ▪ Velocity’s CECL reserve totaled $5.3 million as of September 30, 2022, an 8.7% increase from $4.9 million as of June 30, 2022, and a 32.3% increase from $4.0 million as of September 30, 202
Slide 11: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy Five Securitizations Issued in 2022(1); Significant Reserves and Warehouse Capacity ▪ Cash reserves and unfinanced collateral of Outstanding Debt Balances(2) $96.0 million as of September 30, 2022 ($ in Millions) $3,201.5 ▪ Available warehouse line capacity of
Slide 12: Economic Value of Equity
Economic Value of Equity Economic Value of Equity is significantly higher than GAAP Book Value of Equity ▪ We elect to carry our securitizations at amortized cost to minimize volatility – The graph below reflects our estimate of economic value of equity (a non-GAAP financial measure) by adding the n
Slide 13: Outlook for Velocity's Key Business Drivers
Outlook for Velocity’s Key Business Drivers Investor Loan Market Remain Resilient MARKET CREDIT CAPITAL EARNINGS ▪ Demand for investor ▪ Macroeconomic and ▪ Targeting next ▪ Core earnings from properties to remain geopolitical risk securitization in early locked-in portfolio resilient despite remain
Slide 14: Appendix
Appendix
Slide 15: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Quarter Ended 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Unaudited Unaudited Unaudited Unaudited Unaudited (In thousands) Assets Cash and cash equivalents $ 26,372 $ 46,250 $ 36,629 $ 35,965 $ 35,497 Restricted cash 14,533 9,217 10,837 11,639 9,586 Loan
Slide 16: Velocity Financial, Inc. Income Statement (Quarter)
Velocity Financial, Inc. Income Statement (Quarter) Quarter Ended ($ in thousands) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Revenues Interest income $ 63,419 $ 59,243 $ 52,049 $ 49,360 $ 46,923 Interest expense - portfolio related 34,561 28,752 23,556 23,666 20,321 Net interest income - po
Slide 17: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 1,878,555 82.7% $ 2,068,023 82.7% $ 2,388,442 85.3% $ 2,692,799 87.1% $ 2,966,765 86.8% 30-59 days past due 81,893
Slide 18: Loan Portfolio Rollforward
Loan Portfolio Rollforward Loan Portfolio Rollforward (UPB in millions) $467.3 $3,433 $3,090 $(123.3) $(2.0) Loan Porfolio at Principal Payments Foreclosures Loan Production (1) Loan Porfolio at 6/30/22 9/30/22 Confidential 18 (1) Includes $1.29 million in UPB of repurchased loans and $10.01 million
Slide 19: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $3.42 billion UPB)(1) Mixed Use 13% New York Multifamily 20% 9% Other 36% Investor 1-4 Rental Retail California 52% 9% 23% Office 6% Florida New Jersey 13% Warehouse 7% Other 7% 5% Confidential 19 (1) As of September 30, 2022
Slide 20: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Core Income Quarter Ended ($ in thousands) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Net Income $ 9,983 $ 10,645 $ 3,121 $ 8,353 $ 8,022 Deal cost write-off - collapsed securitizations - -