Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q3 2023 Earnings Presentation
20 slides from Velocity Financial's earnings presentation, Nov 2, 2023
Slide 1: 3Q23 Results Presentation
3Q23 Results Presentation November 2, 2023
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: 3Q23 Highlights
3Q23 Highlights ▪ Net income of $12.1 million, up 21.1% from $10.0 million for 3Q22. Diluted EPS of $0.35, up $0.06 from $0.29 per share for 3Q22 ▪ Core net income(1) of $12.9 million, up 29.4% from $10.0 million for 3Q22. Core diluted Earnings EPS(1) of $0.37, up $0.08 from $0.29 per share for 3Q22
Slide 4: Core Income and Book Value Per Share
Core Income and Book Value Per Share Core Income(1) Book Value Per Share(2) $ 0.27 $13.00 GAAP Net Income $12,086 $ 0.18 $12.57 $(0.02) Equity award & ESPP costs $832 Core Net Income $12,918 Book value at Non-Core Other Ops. Portfolio Book value at 6/30/23 (3) Expenses Income Earnings 9/30/23 (4) ▪
Slide 5: Economic Value of Equity
Economic Value of Equity Fair Value Election to Capture Embedded Economic Value of Equity Over Time ▪ Prior to October 1, 2023, we elected to carry our retained interests in securitizations at amortized cost ▪ Prior M&A precedents for business purpose lenders demonstrate significant platform/franchi
Slide 6: Loan Production
Loan Production Production Volumes Grow Q/Q Driven by Strong Investor Demand ▪ 3Q23 volumes reflect continued tightening from regulated lenders ▪ Loan production in 3Q23 totaled $290.6 million in UPB, a 12.3% increase from $258.6 million in UPB for 2Q23 and a 36.5% decrease from $457.3 million in UP
Slide 7: Loan Portfolio
Loan Portfolio Portfolio Growth Continues Driven by Strong Production Volumes and Slower Prepayments ▪ The total loan portfolio was $3.9 billion in UPB as of Loan Portfolio by Property Type September 30, 2023, a 4.2% increase from $3.7 (UPB in millions) billion in UPB as of June 30, 2023, and 12.9%
Slide 8: Net Interest Margin
Net Interest Margin Continued Portfolio NIM Growth; Loan Yield Growth Outpaces Change in Cost of Funds ▪ Portfolio NIM(1) in 3Q23 was 3.34%, an increase of 10 bps from 3.24% in 2Q23, and a decrease of 25 bps from 3.59% in 3Q22 ‒ Portfolio Yield: Increased 14 bps from 2Q23 driven primarily by: • Weig
Slide 9: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance Continued Favorable NPL Resolution Activity ▪ Nonperforming loans (NPL) as a percentage of total HFI loans was 10.1% as of September 30, 2023, relatively flat to the 10.0% as of June 30, 2023, and an increase from 7.4% as of September 30, 2022 ▪ Continued gains
Slide 10: 2Q23 Asset Resolution Activity
2Q23 Asset Resolution Activity Continued NPL Loan Resolutions UPB and Gains Resolution Activity RESOLUTION ACTIVITIES LONG-TERM LOANS ▪ NPL resolution totaled 65.7 million in RESOLUTION ACTIVITY THIRD QUARTER 2023 SECOND QUARTER 2023 THIRD QUARTER 2022 UPB, realizing 101.8% of UPB Gain / Gain / Gain
Slide 11: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Reserve Decreases From Prior Year As Amortized Cost HFI Loan Portfolio Pays Down ▪ The reserve balance was $4.7 million as of September 30, 2023, relatively flat to the $4.6 million as of June 30, 2023, and a 12.1% decrease from $5.3 million as of September 30, 2022 ▪ Ve
Slide 12: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy Two Deals Issued in 3Q23(1); 2023-RTL1 Provides Permanent Financing for S-T Loans ▪ Cash reserves and unfinanced collateral of Outstanding Debt Balances(2) $60.3 million as of September 30, 2023 ($ in Millions) $3,600.2 ▪ The 2023-RTL1 securitization is Velocit
Slide 13: Outlook for Velocity's Key Business Drivers
Outlook for Velocity’s Key Business Drivers Improving Outlook for Markets and Growth MARKET CREDIT CAPITAL EARNINGS ▪ Underlying property ▪ U.S. economic ▪ Next long-term loan ▪ Well Positioned to value of small outlook still uncertain securitization on grow originations commercial and with reduced
Slide 14: Appendix
Appendix
Slide 15: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Confidential 15
Slide 16: Velocity Financial, Inc. Income Statement (Quarters)
Velocity Financial, Inc. Income Statement (Quarters) Confidential 16
Slide 17: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 2,966,765 86.8% $ 2,969,989 84.6% $ 3,049,110 85.2% $ 3,114,091 83.7% $ 3,188,015 82.6% 30-59 days past due 121,52
Slide 18: Loan Portfolio Rollforward
Loan Portfolio Rollforward Total Loan Portfolio UPB Rollforward (UPB in millions) $292.8 $3,876.7 $3,719.8 $(120.0) $(15.9) Loan Porfolio at Principal Payments Foreclosures Loan Production (1) Loan Porfolio at 6/30/23 9/30/23 (1) Includes $8.1 million in UPB of repurchased loans. Confidential 18
Slide 19: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $3.86 billion UPB)(1) Mixed Use 11.8% California 21.5% Investor 1-4 Rental Other 55.0% Retail 38.4% 8.5% New York 18.7% Multifamily 7.9% Florida Warehouse 13.9% 6.4% Office New Jersey Other 5.2% 7.5% 5.2% Confidential 19 (1) As
Slide 20: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Quarter: Core Net Income Quarter Ended ($ in thousands) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Net Income $ 12,086 $ 12,183 $ 10,649 $ 8,462 $ 9,983 Equity award & ESPP costs 832 745 728