Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q2 2022 Earnings Presentation
20 slides from Velocity Financial's earnings presentation, Aug 4, 2022
Slide 1: 2Q22 Results Presentation
2Q22 Results Presentation August 4, 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: 2Q22 Highlights
2Q22 Highlights ▪ Net income of $10.6 million and diluted earnings per share (EPS) of $0.31, compared to $9.5 million and $0.28 per share, respectively, for 2Q21 ▪ Core EPS of $0.31, an increase from $0.25 in 2Q21, driven by higher net interest income Earnings from portfolio growth and NPL resolutio
Slide 4: Core Income and Book Value Per Share
Core Income and Book Value Per Share Core Income(1) Book Value Per Share $0.35 $11.26 GAAP Net Income $10,645 $10.90 $0.01 Core Net Income $10,645 Book value at (2) Loan Sales Portfolio Earnings (3) Book value at (4) 3/31/22 6/31/22 ▪ There were no noncore items in 2Q22. As a result, Core net income
Slide 5: Loan Production
Loan Production Strong Demand Continued in 2Q22; Over $1 Billion Funded in 1H22 • Loan production in 2Q22 totaled $445.4 million in UPB, compared to $581.4 million in UPB in 1Q22 and $256.5 million in UPB in 2Q21 ‒ Quarter over Quarter: The decrease from 1Q22 was driven by higher interest rates, in
Slide 6: Loan Portfolio
Loan Portfolio Strong Portfolio Growth ▪ The total loan portfolio was $3.1 billion in UPB as of June 30, 2022, a 7.4% increase from $2.9 billion in UPB as of March 31, 2022, and 49.3% from $2.1 billion as of June 30, 2021 ▪ The weighted average coupon was 7.53% as of June 30, 2022, up from 7.50% as
Slide 7: Net Interest Margin
Net Interest Margin Portfolio NIM Returns to More Normalized Levels ▪ Portfolio NIM(1) in 2Q22 was 4.10%, down 15 bps from 4.25% in 1Q22 and 73 bps from 4.83% in 2Q21 ‒ Quarter over quarter: Higher interest income from portfolio growth, in addition to default interest and fees from resolution activi
Slide 8: 2Q22 Asset Resolution Activity
2Q22 Asset Resolution Activity Strong NPL Loan Resolutions Drive Higher Gains and Lower Delinquencies Resolution Activity ▪ Total NPL resolution activities in 2Q22 totaled $50.5 million in UPB and realized net gains of $5.7 million, or 111.4% of UPB resolved, compared to $59.3 million in UPB and net
Slide 9: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance HFI Portfolio Performance Improvement Continued in 2Q22 ▪ Nonperforming loans totaled $252.3 million in UPB as of June 30, 2022, or 8.2% of total loans held for investment, compared to $ $275.5 million and 9.8%, respectively, as of March 31, 2022, and $315.5 mil
Slide 10: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Portfolio Credit Performance Remains Consistent, Loss Reserve Up From Portfolio Growth ▪ Velocity’s CECL reserve totaled $4.9 million as of June 30, 2022, a 5.2% increase from $4.7 million as of March 31, 2022, and a 23.8% increase from $4.0 million as of June 30, 2021 –
Slide 11: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy Four Securitizations Issued To Date in 2022(1); Warehouse Capacity Increased by $100MM ▪ Outstanding debt was $2.9 billion as of Outstanding Debt Balances(2) June 30, 2022, a Q/Q increase of $227.6 million ($ in Millions) $2,896.7 $2,669.0 $209.2 – The net incr
Slide 12: Economic Value of Equity
Economic Value of Equity Economic Value of Equity is significantly higher than GAAP Book Value of Equity ▪ We elect to carry our securitizations at amortized cost to minimize volatility – The graph below reflects our estimate of economic value of equity (a non-GAAP financial measure) by adding the n
Slide 13: Outlook for Velocity's Key Business Drivers
Outlook for Velocity’s Key Business Drivers Investor Loan Market Showing Resilience In Higher Rate Environment MARKET CREDIT CAPITAL EARNINGS ▪ Demand for investor ▪ Macroeconomic and ▪ Targeting two ▪ Stable core earnings properties showing geopolitical risk additional from locked-in resilience des
Slide 14: Appendix
Appendix
Slide 15: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Confidential 15
Slide 16: Velocity Financial, Inc. Income Statement (Quarter)
Velocity Financial, Inc. Income Statement (Quarter) Quarter Ended ($ in thousands) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Unaudited Unaudited Unaudited Unaudited Unaudited Revenues Interest income $ 59,243 $ 52,049 $ 49,360 $ 46,923 $ 44,978 Interest expense - portfolio related 28,752 23
Slide 17: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 1,645,019 79.8% $ 1,878,555 82.7% $ 2,068,024 82.7% $ 2,388,442 85.3% $ 2,692,799 87.1% 30-59 days past due 69,165 3.4%
Slide 18: Loan Portfolio Rollforward
Loan Portfolio Rollforward Loan Portfolio Rollforward (UPB in millions) $446.1 $3,090 $2,877 $(155.0) $(74.5) $(3.1) Loan Porfolio at Principal Payments Loan Sales Foreclosures Loan Production (1) Loan Porfolio at 3/31/22 6/30/22 Confidential 18 (1) Includes $0.39 million in UPB of repurchased loans
Slide 19: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $3.09 billion UPB)(1) Mixed Use 13% New York Multifamily 20.8% 9% Other Investor 1-4 34.6% Rental 49% Retail California 10% 23.6% Office Florida 6% 13.4% New Jersey 7.6% Warehouse Other 7% 6% Confidential 19 (1) As of June 30,
Slide 20: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Core Income Quarter Ended ($ in thousands) 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Net Income $ 10,645 $ 3,121 $ 8,353 $ 8,022 $ 9,453 Deal cost write-off - collapsed securitizations - -