Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q1 2022 Earnings Presentation
21 slides from Velocity Financial's earnings presentation, May 5, 2022
Slide 1: 1Q22 Results Presentation
1Q22 Results Presentation May 5, 2022
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: 1Q22 Highlights
1Q22 Highlights ▪ Net Income of $3.1 million and core net income(1) of $12.4 million; diluted EPS of $0.09 and core diluted EPS of $0.36 – Core EPS growth of 23.3% from 4Q21 Earnings ▪ Portfolio net interest income was $28.5 million, a 10.9% increase from 4Q21 resulting from robust portfolio growth
Slide 4: Core Income and Book Value Per Share
Core Income and Book Value Per Share Core Income Book Value Per Share 10.84 $(0.29) $0.26 10.90 GAAP Net Income $3,121 $0.10 Deal cost write-off – corporate $5,567 debt Prepayment penalty on corporate $3,719 debt refinancing Core Net Income $12,407 Book value at (1) Non Core Loan Sales Portfolio Boo
Slide 5: Loan Production
Loan Production Robust Demand in 1Q22 Results in a New Quarterly Production Volume Record ▪ Loan production totaled $581.4 million in UPB for 1Q22, a 16.8% Q/Q increase from $497.8 million in UPB in 4Q21 and 149.5% from $233.0 million in 1Q21 – Traditional Commercial production was up $68.2 million
Slide 6: Loan Portfolio
Loan Portfolio Record Production Volumes Drives Portfolio Growth ▪ The total loan portfolio as of March 31, 2022 was $2.9 billion in UPB, a 11.2% Q/Q increase from $2.6 billion in UPB as of December 31, 2021, and 44.5% from $2.0 billion as of March 31, 2021 – Portfolio growth driven by record produc
Slide 7: Held for Investment Portfolio and Financing
Held for Investment Portfolio and Financing Minimal Interest-Rate Risk Results From Fixed-Rate Loans Funded by Fixed-Rate MBS ▪ Fixed-rate loans comprise 70.5% of our loan portfolio ▪ Velocity’s loan investments are financed by our ▪ The hybrid adjustable-rate loans(ARMs) comprise proprietary securi
Slide 8: Net Interest Margin
Net Interest Margin Portfolio NIM Reflects Portfolio Growth; Lower Average Rates On Securitized Debt ▪ Portfolio NIM(1) in 1Q22 was 4.25%, consistent with 4Q21 – The portfolio weighted loan yield as of March 31, 2022 was 7.76% compared to 8.21% as of December 31, 2021 – Portfolio-related debt cost w
Slide 9: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance Portfolio Performance Improvement Driven by Growth and Resolution Activities ▪ Nonperforming loans totaled $275.5 million in UPB as of March 31, 2022, or 9.8% of total loans held for investment, compared to $273.1 million, and 10.9%,respectively, as of December
Slide 10: 1Q22 Asset Resolution Activity
1Q22 Asset Resolution Activity NPL Loan Resolution Gains in 1Q22 Reflect Continued Strong Operational Execution Resolution Activity RESOLUTION ACTIVITIES ▪ Total NPL resolutions in 1Q22 totaled $37.4 million in LONG-TERM LOANS UPB and realized net gains of $1.8 million, or 104.8% RESOLUTION ACTIVITY
Slide 11: 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 totaled $4.7 million as of March 31, 2022, a 9.4% increase from $4.3 million as of December 31, 2021, and a 20.7% decrease from $5.9 million as of March 31, 2021 ▪ Charge-
Slide 12: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy Two Securitizations Issued To Date in 2022(1); Substantial Available Warehouse Capacity ▪ Outstanding debt was $2.7 billion as of Outstanding Debt Balances(2) March 31, 2022, an increase of $293 million ($ in Millions) – The net increase in non-recourse $2,669.
Slide 13: 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 securitizations at amortized cost to minimize volatility – The graph below reflects our estimate of economic value of equity (a non-GAAP financial measure) by adding the n
Slide 14: Outlook for Velocity’s Key Business Drivers
Outlook for Velocity’s Key Business Drivers Strong Demand for Commercial Investor Loan Expected to Continue MARKET CREDIT CAPITAL EARNINGS ▪ Robust investor loan ▪ Macroeconomic and ▪ Targeting four to five ▪ Operating leverage: demand expected geopolitical additional Portfolio growth to – Rental pr
Slide 15: Appendix
Appendix
Slide 16: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Quarter Ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Unaudited Unaudited Unaudited Unaudited Unaudited (In thousands) Assets Cash and cash equivalents $ 36,629 $ 35,965 $ 35,497 $ 27,741 $ 20,434 Restricted cash 10,837 11,639 9,586 7,921 6,808 Loans
Slide 17: Velocity Financial, Inc. Income Statement (Quarter)
Velocity Financial, Inc. Income Statement (Quarter) Quarter Ended ($ in thousands) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Unaudited Unaudited Unaudited Unaudited Unaudited Revenues Interest income $ 52,049 $ 49,360 $ 46,923 $ 44,978 $ 40,707 Interest expense - portfolio related 23,556 23
Slide 18: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 1,528,684 76.8% $ 1,645,019 79.8% $ 1,878,555 82.7% $ 2,068,024 82.7% $ 2,388,442 85.3% 30-59 days past due 67,100 3.4
Slide 19: Loan Portfolio Rollforward
Loan Portfolio Rollforward Loan Portfolio Rollforward (UPB in millions) $585.8 $2,877 $2,587 $(149.8) $(144.1) $(2.3) (1) Loan Porfolio at Principal Payments Loan Sales Foreclosures Loan Production Loan Porfolio at 12/31/21 3/31/22 Confidential 19 (1) Includes $0.48 million in UPB of repurchased loa
Slide 20: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $2.80 billion UPB)(1) Mixed Use 14% New York Multifamily 22% 10% Other 33% Investor 1-4 Rental 47% Retail 10% California 24% Office 6% Florida New Jersey 13% 8% Warehouse Other 7% 6% Confidential 20 (1) As of March 31, 2022
Slide 21: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Core Income Quarter Ended ($ in thousands) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Net Income $ 3,121 $ 8,353 $ 8,022 $ 9,453 $ 3,396 Deal cost write-off - collapsed securitizations $ 1,1