Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q2 2021 Earnings Presentation
19 slides from Velocity Financial's earnings presentation, Aug 5, 2021
Slide 1: 2Q21 Earnings Presentation
2Q21 Earnings Presentation August 5, 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: 2Q21 Highlights
2Q21 Highlights ▪ Net Income of $9.5 million and Core income(1) of $8.5 million; diluted EPS of $0.28 and Core diluted EPS of $0.25 – Results driven by strong net interest income growth resulting from increased nonperforming Earnings asset resolutions and improved loan portfolio performance ▪ Portfo
Slide 4: Core Income and Book Value Growth
Core Income and Book Value Growth Core Income Book Value Per Share 0.38 $11.62 $11.12 0.08 0.04 GAAP Net Income $9,453 Recovery of Loan Loss Provision $(1,000) Core Income $8,453 Book value at Loan Sales Provision Portfolio Book value at 3/31/21 (1) Recovery Earnings(2) 6/30/21(1) ▪ Core income tota
Slide 5: Production Momentum Continues to Build
Production Momentum Continues to Build New Product Additions and Continued Strong Demand Drive 2Q21 Volume Growth ▪ Loan production totaled $256.5 million in UPB for 2Q21, a 10.1% Q/Q increase from $233.0 million in UPB in 1Q21 – Driven by the re-introduction of short-term loans to the production mi
Slide 6: Loan Portfolio
Loan Portfolio ▪ Total loan portfolio as of June 30, 2021, was $2.07 billion in UPB, a 4.0% Q/Q increase from $1.99 billion in UPB as of March 31, 2021 – Net Portfolio growth of $80 million driven by strong production activity ▪ Strong credit discipline has maintained low average loan-to-value ratio
Slide 7: Net Interest Margin
Net Interest Margin Portfolio NIM Rises On Improved Loan Performance and Strong Resolution Activity ▪ 2Q21 Portfolio NIM(1) was 4.83%, an increase of 73 bps from 4.10% in 1Q21, driven by an increase in the HFI loan yield and a reduction in the portfolio-related weighted average cost of funds – Inter
Slide 8: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance ▪ Total nonperforming loans as of June 30, 2021, totaled $315.5 million in UPB, or 15.3% of total loans held for investment, compared to $335.0 million, or 16.8% as of March 31, 2021 – The quarter-over-quarter improvement was driven by the resolution of 17.37% o
Slide 9: 2Q21 Asset Resolution Activity
2Q21 Asset Resolution Activity Growth in Nonperforming Loan and REO Resolution Activity Realized Strong Gains Resolution Activity RESOLUTION ACTIVITIES ▪ Resolution activities on $59.3 million of UPB LONG-TERM LOANS and realized $2.3 million of gains during 2Q21 RESOLUTION ACTIVITY SECOND QUARTER 20
Slide 10: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Loan Loss Reserve Recovery Driven by Improved Economic Outlook ▪ Velocity’s CECL reserve as a percentage of the HFI portfolio as of June 30, 2021, was 19 bps compared to 29 bps as of March 31, 2021, and 28 bps as of June 30, 2020 – Provision recovery primarily resulted f
Slide 11: Outlook for Velocity's Business
Outlook for Velocity’s Business ▪ Considerable momentum the U.S. economy was gained during this spring, with further Transitioning to improvement expected in 2H 2021 a More – COVID risks have diminished, but further caution is still warranted given delta variant “Normalized” ▪ Real estate prices rem
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 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 13: Appendix
Appendix
Slide 14: Vertically Integrated Platform
Vertically Integrated Platform Highly Customized Platform Integrates All Functional Areas to Enable Efficient Workflow Execution Sourcing ▪ 100% of new loan applications submitted via fully integrated broker portal ▪ Proprietary network of local appraisers with internal licensed appraisers Appraisal
Slide 15: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Quarter Ended 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Unaudited Unaudited Audited Unaudited Unaudited (In thousands) Assets Cash and cash equivalents $ 27,741 $ 20,434 $ 13,273 $ 19,210 $ 9,803 Restricted cash 7,921 6,808 7,020 7,821 6,735 Loans held
Slide 16: Velocity Financial, Inc. Income Statement
Velocity Financial, Inc. Income Statement Quarter Ended ($ in thousands) 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Unaudited Unaudited Audited Unaudited Unaudited Revenues Interest income $ 44,978 $ 40,707 $ 41,556 $ 41,374 $ 39,755 Interest expense - portfolio related 20,566 20,832 21,442
Slide 17: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $2.06 billion UPB)(1) Mixed Use 14% New York 23% Multifamily Other 9% 34% Investor 1-4 Rental 49% Retail California 9% 22% Office New Jersey Florida 6% 8% 13% Other Warehouse 7% 6% Confidential 17 (1) As of June 30, 2021
Slide 18: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends June 30, 2020 September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 1,186,267 64.3% $ 1,474,076 74.2% $ 1,445,131 74.9% $ 1,528,684 76.8% $ 1,645,019 79.8% 30-59 days past due 121,320 6.6
Slide 19: Loan Portfolio Rollforward
Loan Portfolio Rollforward Loan Portfolio Waterfall (UPB in millions) $257.6 $2,070 $1,990.7 $(145.9) $146 $(27.2) $27 $(7.5) (1) Loan Porfolio at Principal Loan Sales Foreclosures Loan Production Loan Porfolio at 3/31/21 Payments 06/30/21 Confidential 19 (1) Includes $1.1 million in UPB of repurcha