Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q4 2020 Earnings Presentation
16 slides from Velocity Financial's earnings presentation, Mar 16, 2021
Slide 1: 4Q20 Earnings Presentation
4Q20 Earnings Presentation March 16, 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: 4Q20 Highlights
4Q20 Highlights ▪ Net Income and Core Income(1) of $9.6 million; diluted earnings per share (EPS) of $0.29 – Strong earnings growth driven by gains from the sale of newly originated loans and improved net interest margin Earnings ▪ Book value per common share as of December 31, 2020, was $10.93 comp
Slide 4: Pretax Earnings Composition and Book Value Growth
Pretax Earnings Composition and Book Value Growth Earnings Composition Book Value Per Share 0.30 $10.93 $10.44 0.19 Portfolio earnings $7,050 Gain on sale of loans $4,702 Pretax income $11,753 (2) Book value at Loan Sales Portfolio Earnings Book value at 9/30/20 (1) 12/31/20(1) ▪ Portfolio earnings
Slide 5: Production Momentum Building with Solid 4Q20 Volume
Production Momentum Building with Solid 4Q20 Volume ▪ The fourth quarter was Velocity’s first full quarter of production since the Company suspended loan origination activities in March, originating $179.3 million in UPB of 30-year Investor 1-4 Rental and Traditional Commercial loans ▪ The Company h
Slide 6: Held for Investment Loan Portfolio
Held for Investment Loan Portfolio ▪ Total loan portfolio as of December 31, 2020, was $1.94 billion in UPB, compared to $1.99 billion in UPB as of September 30, 2020 ▪ During 4Q20, $106.4 million in UPB of newly originated loans was transferred to held for sale (HFS), of which $96.3 million in UPB
Slide 7: 4Q20 Asset Resolution Activity
4Q20 Asset Resolution Activity Net resolutions of nonperforming loans and REOs continue to consistently realize gains Resolution Activity ▪ Nonperforming loans paid in full during 4Q20 4Q20 3Q20 totaled $16.4 million in UPB with a $0.11 million net gain on resolution, compared to $9.7 million $ Gain
Slide 8: Net Interest Margin
Net Interest Margin ▪ 4Q20 Portfolio Net Interest Margin (NIM)(1) was 4.07%, an increase of 30 bps from 3.77% in 3Q20 – The Q/Q increase was driven by strong resolution activities resulting in increased collections of nonperforming loan interest and default interest ▪ Weighted average cost of funds
Slide 9: Loan Portfolio Performance
Loan Portfolio Performance ▪ Total nonaccrual loans as of December 31, 2020 totaled $333 million in UPB, or 17.23% of total loans held for investment, an increase from 15.8% as of September 30, 2020 – Driven by addition of new nonaccrual loans, primarily comprised of loans previously granted forbear
Slide 10: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Modest increase to Loan Loss Reserve ▪ Velocity’s CECL reserve as a percentage of the HFI portfolio as of December 31, 2020, increased modestly to 30 bps compared to 29 bps as of September 30, 2020 ▪ While there is optimism about the COVID vaccine, it is still too early
Slide 11: Outlook for Velocity's Business
Outlook for Velocity’s Business ▪ Improving vaccination rates will hopefully allow expansion of economic activity in the coming months Improvement ▪ Expect to build on strong momentum generated with the restart of loan origination in Economic activities Conditions – Expanding and deepening our broke
Slide 12: Appendix
Appendix
Slide 13: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Quarter Ended 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019 Audited Unaudited Unaudited Unaudited Audited (In thousands) Assets Cash and cash equivalents $ 13,273 $ 19,210 $ 9,803 $ 7,649 $ 21,465 Restricted cash 7,020 7,821 6,735 4,483 6,087 Loans held f
Slide 14: Velocity Financial, Inc. Income Statement
Velocity Financial, Inc. Income Statement Quarter Ended ($ in thousands) 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019 Audited Unaudited Unaudited Unaudited Audited Revenues Interest income $ 41,556 $ 41,374 $ 39,755 $ 44,637 $ 44,124 Interest expense - portfolio related 21,442 22,347 21,189 2
Slide 15: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State Mixed Use 13% (100% = $1.93 billion UPB)(1) Multifamily New York 9% 24% Other 34% Investor 1-4 50% Retail 9% California 23% Office 6% Florida New Jersey 11% Warehouse 8% Other 6% 7% Confidential 15 (1) As of December 31, 2020
Slide 16: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends December 31, 2019 September 30, 2020 December 31, 2020 ($ in thousands) $ % $ % $ % Performing/Accruing: Current $ 1,559,373 84.6% $ 1,474,076 74.2% $ 1,445,131 74.8% 30-59 days past due 123,704 6.7% 108,601 5.5% 89,284 4.6% 60-89 days past due 48,062 2.6% 74,351 3.7