Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q2 2023 Earnings Presentation
20 slides from Velocity Financial's earnings presentation, Aug 3, 2023
Slide 1: 2Q23 Results Presentation
2Q23 Results Presentation August 3, 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: 2Q23 Highlights
2Q23 Highlights ▪ Net income of $12.2 million and diluted earnings per share (EPS) of $0.36, compared to $10.6 million and $0.31 per share, respectively, for 2Q22 ▪ Core net income(1) of $12.9 million and core diluted EPS(1) of $0.38, compared to Earnings $10.6 million and $0.31 per share, respectiv
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 $12.57 GAAP Net Income $12,183 $12.18 $0.14 (0.02) Equity award & ESPP costs $745 Core Net Income $12,928 Book value at Non-Core Other Ops. Portfolio Book value at 3/31/23 (3) Expenses Income Earnings 6/30/23 (4) ▪ Cor
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 ▪ Recent M&A precedents for business purpose lenders demonstrate significant platform/franch
Slide 6: Loan Production
Loan Production Production Volumes Rebound in 2Q23; Improved Demand as Rate Increases Slow ▪ 2Q23 production volumes reflects an improved market environment and heightened investor interest as the pace of interest rate increases slowed ▪ Loan production in 2Q23 totaled $258.6 million in UPB, a 19.2%
Slide 7: Loan Portfolio
Loan Portfolio Strong Portfolio Growth Driven by Improved Production Volumes Loan Portfolio by Property Type ▪ The total loan portfolio was $3.7 billion in UPB as of June 30, 2023, a 3.4% increase from $3.6 billion in (UPB in millions) $3,719.8 UPB as of March 31, 2023, and 20.4% from $3.1 $3,596.2
Slide 8: Net Interest Margin
Net Interest Margin Portfolio NIM Growth Driven By Higher Loan Yields, Partially Offset by Higher Cost of Funds ▪ Portfolio NIM(1) in 2Q23 was 3.24%, an increase of 1 bps from 3.23% in 1Q23, and a decrease of 86 bps from 4.10% in 2Q22 ‒ Portfolio Yield: Increased 24 bps from 1Q23 driven primarily by
Slide 9: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance Nonperforming Loan Rate Rise Mitigated by Strong NPL Resolution Activity ▪ Nonperforming loans (NPL) as a percentage of total HFI loans was 10.0% as of June 30, 2023, an increase from 8.7% as of March 31, 2023, and 8.2% as of June 30, 2022 – NPL growth driven by
Slide 10: 2Q23 Asset Resolution Activity
2Q23 Asset Resolution Activity NPL Loan Resolutions UPB and Gains Increase Q/Q Resolution Activity RESOLUTION ACTIVITIES LONG-TERM LOANS ▪ 2Q23 NPL resolutions represented RESOLUTION ACTIVITY SECOND QUARTER 2023 FIRST QUARTER 2023 SECOND QUARTER 2022 13.5% of nonperforming loan UPB as Gain / Gain /
Slide 11: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Reserve Decrease As Amortized Cost HFI Loan Portfolio Pays Down ▪ The reserve balance was $4.6 million as of June 30, 2023, an 8.3% decrease from $5.0 million as of March 31, 2023, and a 5.7% decrease from $4.9 million as of June 30, 2022 – The Q/Q decrease resulted from
Slide 12: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy Two Securitizations Issued in 2Q23(1); VCC2023-1R Further Diversifies Financing Options ▪ Cash reserves and unfinanced collateral of Outstanding Debt Balances(2) $72.0 million as of June 30, 2023 ($ in Millions) ▪ Issuance of VCC 2023-1R, collateralized by $3,2
Slide 13: Outlook for Velocity's Key Business Drivers
Outlook for Velocity’s Key Business Drivers Improving Outlook for Capital Markets and Growth MARKET CREDIT CAPITAL EARNINGS ▪ End to Federal ▪ U.S. economic ▪ Next long-term loan ▪ Increased loan Reserve tightening resilience continues, securitization on coupons in 1H23 cycle expected in but inflati
Slide 14: Appendix
Appendix
Slide 15: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Confidential 15
Slide 16: Velocity Financial, Inc. Income Statement (Quarter)
Velocity Financial, Inc. Income Statement (Quarter) Confidential 16
Slide 17: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 2,692,799 87.1% $ 2,966,765 86.8% $ 2,969,989 84.6% $ 3,049,110 85.2% $ 3,114,091 83.7% 30-59 days past due 105,808 3.4
Slide 18: Loan Portfolio Rollforward
Loan Portfolio Rollforward Total Loan Portfolio UPB Rollforward (UPB in millions) $266.7 $3,719.8 $3,596.2 $(119.5) $(17.4) $(6.2) Loan Porfolio at Principal Loan Sales Foreclosures Loan Production(1) Loan Porfolio at 3/31/23 Payments 6/30/23 (1) Includes $8.1 million in UPB of repurchased loans. Co
Slide 19: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $3.72 billion UPB)(1) Mixed Use 12.2% New York 19.2% Investor 1-4 Multifamily Other Rental 8.7% 37.8% 54.2% California 21.7% Retail 8.2% Florida Office 14.0% 6.3% New Jersey 7.4% Warehouse Other 5.2% 5.3% Confidential 19 (1) As
Slide 20: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Quarter: Core Net Income Quarter Ended ($ in thousands) 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Net Income $ 12,183 $ 10,649 $ 8,462 $ 9,983 $ 10,645 Equity award & ESPP costs 745 728 656