Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — FY2021 Earnings Presentation
24 slides from Velocity Financial's earnings presentation, Aug 5, 2022
Slide 1: 4Q21 and FY 2021 Earnings Presentation
Exhibit 99 4Q21 and FY 2021 Earnings Presentation March 10, 2021
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: 2021 Highlights
2021 Highlights Full Year 2021 Performance Metrics NetIncome Net Income Loan Production ($ in millions) ($ in millions) $29.2 $1,328.0 $17.8 64% $435.0 205% FY2020 FY 2021 FY2020 FY 2021 HFI Portfolio & NIM Charge-offs ($ UPB in billions) $2.5 ($ in millions) $1.60 $1.29 29% 4.54% $1.9 (27)% 3.89% 1
Slide 4: 4Q21 Highlights
4Q21 Highlights Net Income of $8.4 million and core net income(1) of $10.1 million; diluted EPS of $0.24 and core diluted EPS of $0.29 – Core EPS growth of 25.5% from 3Q21 Earnings Interest income was $49.4 million, a 5.2% increase from 3Q21 driven by portfolio growth from record loan production
Slide 5: 4Q21 Highlights (cont.)
4Q21 Highlights (cont.) Converted all 45,000 outstanding shares of the Company’s Series A Convertible Preferred Stock into 11,688,310 shares of Velocity common stock Acquired a majority stake in Century Health & Housing Capital, LLC (“Century”) for $12.8 million in cash – Licensed “Ginnie Mae” i
Slide 6: Core Income and Book Value Per Share
Core Income and Book Value Per Share Core Income Book Value Per Share GAAP Net Income $8,353 $12.05 $(1.58) $ 0.40 10.84 Deal cost write-off - collapsed $(0.09) $1,104 $ 0.06 securitizations One-time Century Health & $624 Housing Capital deal costs Core Net Income $10,081 Book value Stock Non Core L
Slide 7: Loan Production
Loan Production Production Volume in 4Q21 Establishes a New Quarterly Record Loan production totaled $497.8 million in UPB for 4Q21, a 46.1% Q/Q increase from $340.7 million in UPB in 3Q21 and 177.6% from 4Q20, mainly driven by continued strong demand and targeted strategies to grow broker relatio
Slide 8: Acquisition of Century Health & Housing Capital
Acquisition of Century Health & Housing Capital Bolsters Our Business-Purposed Finance Strategy with Access To New Markets and Product Diversification Business Overview Transaction Highlights Founded in 1992, Century provides government- Century full-year 2021 pretax income totaled $2.3 million
Slide 9: Loan Portfolio
Loan Portfolio Strong Portfolio Growth Driven By Record Production Volumes Total loan portfolio as of December 31, 2021, was $2.6 billion in UPB, a 13.9% Q/Q increase from $2.3 billion in UPB as of September 30, 2021, and 33.0% from $1.9 billion as of December 31, 2020 – Net portfolio growth drive
Slide 10: Net Interest Margin
Net Interest Margin Portfolio NIM Impacted by Nonrecurring Costs; Lower Rates on New Production Portfolio NIM(1) decreased 70 bps from 3Q21, primarily driven by one-time costs(2) from the collapse of three higher-cost VCC securitizations and a lower weighted average rate on loans originated in 4Q2
Slide 11: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance Portfolio Performance Improvement Driven by Growth and Resolution Activities Nonperforming loans totaled $273.1 million in UPB as of December 31, 2021, or 10.9% of total loans held for investment, compared to $288.4 million, and 12.7%,respectively, as of Septe
Slide 12: 4Q21 Asset Resolution Activity
4Q21 Asset Resolution Activity Strong Loan Resolution Gains Continued in 4Q21 Resolution Activity RESOLUTION ACTIVITIES Resolution activities on $44.1 million of UPB in LONG-TERM LOANS 4Q21 resulted in net gains of $1.8 million or RESOLUTION ACTIVITY FOURTH QUARTER 2021 THIRD QUARTER 2021 104.0% o
Slide 13: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Loan Loss Reserve Increases With Portfolio Growth, Charge-offs Remain Low Velocity’s CECL reserve was $4.3 million as of December 31, 2021, a 5.8% increase from $4.0 million as of September 30, 2021, and a 27.1% decrease from $5.8 million as of December 31, 2020 – The
Slide 14: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy $2.4 Billion of Financing Outstanding; Substantial Available Warehouse Capacity Outstanding Debt Balances (1) Available Financing Capacity ($ in Millions) ($ in Millions) $2,375.8 $162.8 As of 12/31/21, $2,045.6 $348.9 $1,874.1 $301.1 four of five $163.4 $1,729
Slide 15: Outlook for Velocity's Key Business Drivers
Outlook for Velocity’s Key Business Drivers Strong Momentum Headed Into 2022 FINANCING CREDIT CAPITAL EARNINGS DEMAND Modestly higher Macroeconomic Targeting 5 to 6 Continued strong interest rates environment is securitizations in production volume to expected compared to generally positive
Slide 16: 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 retained interests in securitizations at amortized cost to minimize volatility – The graph below reflects our estimate of economic value of equity (a non-GAAP financial me
Slide 17: Appendix
Appendix
Slide 18: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Quarter Ended 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 Unaudited Unaudited Unaudited Unaudited Audited (In thousands) Assets Cash and cash equivalents $ 35,965 $ 35,497 $ 27,741 $ 20,434 $ 13,273 Restricted cash 11,639 9,586 7,921 6,808 7,020 Loans h
Slide 19: Velocity Financial, Inc. Income Statement (Quarter)
Velocity Financial, Inc. Income Statement (Quarter) Quarter Ended ($ in thousands) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 Unaudited Unaudited Unaudited Unaudited Unaudited Revenues Interest income $ 49,360 $ 46,923 $ 44,978 $ 40,707 $ 41,556 Interest expense - portfolio related 23,666 2
Slide 20: Velocity Financial, Inc. Income Statement (Year)
Velocity Financial, Inc. Income Statement (Year) Year Ended ($ in thousands) 12/31/2021 12/31/2020 Audited Audited Revenues Interest income $ 181,968 $ 167,322 Interest expense - portfolio related 85,386 87,826 Net interest income - portfolio related 96,582 79,496 Interest expense - corporate debt 2
Slide 21: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $2.50 billion UPB)(1) Mixed Use 13% New York 22% Multifamily Other 9% 34% Investor 1-4 Rental 49% Retail 9% California 23% Office Florida 6% New Jersey 13% 8% Warehouse Other 7% 6% Confidential 21 (1) As of December 31, 2021
Slide 22: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 1,445,131 74.8% $ 1,528,684 76.8% $ 1,645,019 79.8% $ 1,878,555 82.7% $ 2,068,024 82.7% 30-59 days past due 89,284
Slide 23: Loan Portfolio Rollforward
Loan Portfolio Rollforward Loan Portfolio Rollforward (UPB in millions) $508.6 $2,587.2 $2,271.3 $(157.0) $(34.2) $(1.2) (1) Loan Porfolio at Principal Payments Loan Sales Foreclosures Loan Production Loan Porfolio at 9/30/21 12/31/21 Confidential 23 (1) Includes $0.96 million in UPB of repurchased
Slide 24: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Quarterly: Core Income Quarter Ended ($ in thousands) 12/31/2021 9/30/2021 6/30/2021 3/31/2021 12/31/2020 Net Income $ 8,353 $ 8,022 $ 9,453 $ 3,396 $ 9,576 Deal cost write-off - collapsed securitiz