Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q4 2023 Earnings Presentation
20 slides from Velocity Financial's earnings presentation, Mar 7, 2024
Slide 1: 4Q23 Results Presentation
4Q23 Results Presentation March 7, 2024
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: 4Q23 and Year-End Highlights
4Q23 and Year-End Highlights ▪ Net income of $17.4 million, up 105.1% from $8.5 million for 4Q22. Diluted EPS of $0.50, up $0.25 from $0.25 per share for 4Q22 ▪ Core net income(1) of $16.2 million, up 77.2% from $9.1 million for 4Q22. Core diluted Earnings EPS(1) of $0.46, up $0.19 from $0.27 per sh
Slide 4: Core Income, Book Value and Adjusted Book Value Per Share
Core Income, Book Value and Adjusted Book Value Per Share Core Income(1) Book Value and Adjusted Book Value Per Share(2) $ 3.32 $16.81 GAAP Net Income $17,355 $ 0.53 $13.49 $13.00 Tax liability reduction (1,866) $0.04 Equity award & ESPP costs $673 Core Net Income $16,161 Book value at Non-Core Core
Slide 5: Loan Production
Loan Production Production Volumes Grow Q/Q and Y/Y; Strong Demand for 1-4 Rental and Commercial ▪ 4Q23 volumes reflect ongoing tight credit conditions with banks and improved market dynamics ▪ Loan production in 4Q23 totaled $352.1 million in UPB, a 21.2% increase from $290.6 million in UPB for 3Q2
Slide 6: Loan Portfolio
Loan Portfolio Portfolio Tops $4 Billion in UPB, Driven by Continued Strong Production Volumes ▪ The total loan portfolio was $4.1 billion in UPB as of Loan Portfolio by Property Type December 31, 2023, an increase of 5.1% from (UPB in millions) $3.9 billion in UPB as of September 30, 2023, and $4,0
Slide 7: Net Interest Margin
Net Interest Margin Loan Yield Growth Drives Portfolio NIM Expansion in 2023 ▪ Portfolio NIM(1) in 4Q23 was 3.52%, an increase of 18 bps from 3.34% for 3Q23, and 68 bps from 2.84% for 4Q22 ‒ Portfolio Yield: Increased 32 bps from 3Q23 and 119 bps from 4Q22: • Weighted average coupon of 11.1% for FY
Slide 8: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance Improved NPL Performance Trends and NPL Resolution Activity ▪ Nonperforming loans (NPL) as a percentage of total HFI loans was 9.7% as of December 31, 2023, a decrease from 10.1% as of September 30, 2023, and an increase from 8.3% as of December 31, 2022 ▪ Gains
Slide 9: 4Q23 Asset Resolution Activity
4Q23 Asset Resolution Activity Continued NPL Loan Resolutions UPB and Gains Resolution Activity RESOLUTION ACTIVITIES LONG-TERM LOANS ▪ NPL resolution totaled 70.9 million in RESOLUTION ACTIVITY FOURTH QUARTER 2023 THIRD QUARTER 2023 FOURTH QUARTER 2022 UPB, realizing 102.2% of UPB Gain / Gain / Gai
Slide 10: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Reserve Consistent Q/Q; Long-term Trend Expected Lower As Eligible Portfolio Pays Down ▪ The reserve balance was $4.8 million as of December 31, 2023, relatively flat compared to $4.7 million as of September 30, 2023, and a 12.1% decrease from $5.3 million as of December
Slide 11: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy One Securitization Issued in 4Q23(1); New Corporate Debt Issuance to Drive Investment Growth ▪ Cash reserves and unfinanced collateral of Outstanding Debt Balances(2) $63.2 million as of December 31, 2023 ▪ Available warehouse line capacity of $556.2 ($ in Mill
Slide 12: Outlook for Velocity's Key Business Drivers
Outlook for Velocity’s Key Business Drivers Improving Outlook for Markets and Growth MARKET CREDIT CAPITAL EARNINGS ▪ Property values in our ▪ U.S. economic ▪ Next long-term loan ▪ Targeting continued asset class remain outlook remains securitization production growth healthy uncertain. targeted for
Slide 13: Appendix
Appendix
Slide 14: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Confidential 14
Slide 15: Velocity Financial, Inc. Income Statement (Quarters)
Velocity Financial, Inc. Income Statement (Quarters) Confidential 15
Slide 16: Velocity Financial, Inc. Income Statement (Years)
Velocity Financial, Inc. Income Statement (Years) Confidential 16
Slide 17: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 2,969,989 84.6% $ 3,049,110 85.2% $ 3,114,091 83.7% $ 3,188,015 82.6% $ 3,354,197 82.7% 30-59 days past due 186,051
Slide 18: Loan Portfolio Rollforward
Loan Portfolio Rollforward Total Loan Portfolio UPB Rollforward (UPB in millions) $354.4 $4,072.9 $3,876.7 $(132.9) $(5.8) $(19.6) Loan Porfolio at Principal Payments Loan Sales Foreclosures Loan Production Loan Porfolio at 9/30/23 12/31/23 . Confidential 18
Slide 19: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $4.06 billion UPB)(1) Mixed Use 11.7% California 21.9% Investor 1-4 Rental 54.9% Retail Other 8.5% 39.0% New York 18.3% Multifamily 7.8% Warehouse 6.5% Florida 13.4% Office New Jersey Other 5.5% 7.3% 5.2% Confidential 19 (1) As
Slide 20: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Quarters: Years: Confidential 20