Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q2 2020 Earnings Presentation
17 slides from Velocity Financial's earnings presentation, Aug 12, 2020
Slide 1: 2Q20 Earnings Presentation
2Q20 Earnings Presentation August 12, 2020
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: 2Q20 Highlights
2Q20 Highlights ▪ Net Income of $2.1 million and “Core” EPS of $0.17(1) ▪ Results reflect resiliency of Velocity’s business model, maintaining positive net income Earnings despite extreme challenges presented by the pandemic ▪ Deemed dividend to adjust the redemption value of the preferred stock res
Slide 4: Earnings and Book Value
Earnings and Book Value $0.19 Adjusted “Core” Earnings Per Share Book Value Per Share $12.47 “Core” earnings per share $0.17 $ 0.17 $ 0.12 $10.26 COVID-19 Reserve $(0.06) ($2.44) ($0.06) Preferred stock deemed dividends $(2.44) GAAP diluted loss per common share $(2.33) Book value Convertible COVID-
Slide 5: Business Update
Business Update Financing / Securitization ▪ Eliminated mark-to market risk with long term, fixed rate securitizations – Ability to execute two securitizations in highly disrupted and uncertain market speaks to Velocity’s franchise value and extensive track record of strong collateral performance ▪
Slide 6: Loan Portfolio – HFS and HFI
Loan Portfolio – HFS and HFI ▪ Total portfolio at June 30, 2020 was $2.06 billion from $2.13 billion at March 31, 2020 ▪ Real estate markets remains very active despite COVID-19 pandemic-related issues – Receiving strong indications of demand from our broker network for financing of investor propert
Slide 7: Net Interest Income and Margin
Net Interest Income and Margin ▪ 2Q20 Net Interest Income (NII)(1) totaled $18.6 million, a decrease of 15% Q/Q and up 12% Y/Y ▪ 2Q20 Net Interest Margin (NIM)(1) was 3.54%, a decrease of 64 bps Q/Q and 37 bps Y/Y ▪ The Q/Q decrease in NII and NIM was primarily been driven by increased loan delinque
Slide 8: HFI Loan Portfolio Performance
HFI Loan Portfolio Performance ▪ Nonaccrual loans at June 30, 2020 totaled $269 million in UPB, or 14.6% of total loans held for investment, up from 7.9% at March 31, 2020 and 6.0% at March 31, 2019 ▪ Charge-offs were $75 thousand in 2Q20, continuing the historical trend of extremely low loss severi
Slide 9: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Strengthening the CECL reserve to address the COVID-19 pandemic; model assumes more severe macroeconomic environment going forward CECL Reserve ▪ Velocity’s CECL reserve increased 10 bps $5,220 Q/Q to 28 bps of HFI loans at June 30, 2020, from 18 bps at March 31, 2020 ▪
Slide 10: 2Q20 Asset Resolution Activity
2Q20 Asset Resolution Activity Continued positive 2Q20 P&L trend in resolutions of delinquent loans and REO assets 2Q20 Resolution Activity $ Gain $ UPB in millions $ UPB / Loss ▪ Nonaccrual loans paid in full during 2Q20 totaled $6.7 million in UPB with a $0.34 million net gain on Paid in full $6.7
Slide 11: Expectations for the Future
Expectations for the Future ▪ Real estate values have held up better than expectations and we believe that Demand for considerable demand for financing of investor properties exists Our Products ▪ Restarting lending at a measured pace with more attractive risk adjusted returns ▪ Our special servicin
Slide 12: Appendix
Appendix
Slide 13: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet (Unaudited) Quarter Ended 6/30/2020 3/31/2020 12/31/2019 09/30/2019 6/30/2019 (In thousands) Assets Cash and cash equivalents $ 9,803 $ 7,649 $ 21,465 $ 8,849 $ 14,105 Restricted cash 6,735 4,483 6,087 3,152 1,542 Loans held for sale, net 212,344 223,123 214,46
Slide 14: Velocity Financial, Inc. Income Statement
Velocity Financial, Inc. Income Statement (Unaudited) Quarter Ended Quarter Ended ($ in thousands) 6/30/2020 3/31/2020 12/31/2019 09/30/2019 06/30/2019 Revenues Interest income $ 39,755 $ 44,637 $ 44,124 $ 40,379 $ 36,884 Interest expense - portfolio related 21,189 22,848 22,689 21,827 20,324 Net in
Slide 15: Velocity Financial, Inc. – Earnings (Loss) Per Share
Velocity Financial, Inc. – Earnings (Loss) Per Share Three Months Ended June 30, 2020 Basic EPS: Net income $ 2,141 Less deemed dividends on preferred stock 48,955 Less dividends on common stock - Net loss allocated to common stock $ (46,814) Less earnings allocated to participating stock - Net loss
Slide 16: Total Loan Portfolio
Total Loan Portfolio Portfolio by Property Type Portfolio by State Mixed Use (100% = $2.06 billion UPB)(1) 13% New York Multifamily 22% 9% Other Investor 1-4 35% 51% Retail California 9% 23% Office 6% New Jersey Warehouse 8% Other 6% Florida 7% 12% Confidential 16 (1) At June 30, 2020
Slide 17: COVID-19 Forbearance Plans
COVID-19 Forbearance Plans Forbearance Plans for Payment Effective Date April 1, 2020(1) (100% = 394 loans) 19 25 Due for 7/1 Due for 8/1 128 175 - Paid Paid In Full Not Approved for Deferral 47 – Did Not Pay (1) The chart above shows the population of COVID-19 forbearances. 175 of the loans had the