Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q3 2020 Earnings Presentation
16 slides from Velocity Financial's earnings presentation, Nov 11, 2020
Slide 1: 3Q20 Earnings Presentation
3Q20 Earnings Presentation November 11, 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: 3Q20 Highlights
3Q20 Highlights ▪ Net Income of $3.5 million and Core Earnings(1) of $3.9 million; diluted EPS of $0.11 ▪ Net income growth of 63% from the prior quarter primarily driven by normalization of provision expense Earnings – Normalized provision expense of $0.4 million(2) ▪ Portfolio net interest margin
Slide 4: Core Earnings and Book Value
Core Earnings and Book Value $0.19 Core Earnings(1) Book Value Per Share $ 0.20 $10.44 $10.26 ($0.02) Core earnings $3,913 (2) Workforce reduction costs $(432) GAAP net income $3,481 (4) Book value at Workforce Core Earnings Book value at 6/30/20 (3) Reduction 9/30/20 (3) ▪ 3Q20 core earnings(1) of
Slide 5: 3Q20 Asset Resolution Activity
3Q20 Asset Resolution Activity Resolutions of delinquent loans and REO continue to consistently realize gains 3Q20 Resolution Activity $ Gain $ UPB in millions $ UPB / Loss ▪ Nonaccrual loans paid in full during 3Q20 totaled $9.7 million in UPB with a $0.73 million net gain on Paid in full $9.7 $0.7
Slide 6: Held for Investment Loan Portfolio
Held for Investment Loan Portfolio ▪ Total portfolio as of September 30, 2020 was $1.99 billion in UPB, down from $2.06 billion in UPB as of June 30, 2020 ▪ Transferred approximately $214 million in UPB of short-term loans previously accounted for as held for sale (HFS) to the held for investment (H
Slide 7: Production Re-start Met With Strong Demand
Production Re-start Met With Strong Demand Loan Application & Production Volume ▪ Re-launched production operations in September ($ of UPB in millions) Applications Production – Application volume totaled $226 million in UPB during September and $256 million in UPB during October $252 – Funded produ
Slide 8: Net Interest Income and Margin
Net Interest Income and Margin ▪ 3Q20 Net Interest Income (NII)(1) totaled $19.0 million, an increase of 2% Q/Q and 3% Y/Y ▪ 3Q20 Net Interest Margin (NIM)(1) was 3.77%, an increase of 23 bps Q/Q, and a decrease of 29 bps Y/Y ▪ The Q/Q increase in NII and NIM was primarily driven by a decrease in ne
Slide 9: Loan Portfolio Performance
Loan Portfolio Performance ▪ Total nonaccrual loans as of September 30, 2020 totaled $315 million in UPB, or 15.8% of total loans held for investment, down from 16.0% as of June 30, 2020, and an increase from 6.6% as of September 30, 2019 ▪ Charge-offs were $1.05 million in 3Q20, primarily due to on
Slide 10: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs CECL reserve increase driven by growth of HFI portfolio from transfer of short-term loans; improved macroeconomic outlook drives reduction of macroeconomic reserve CECL Reserve $5,748 ▪ Velocity’s CECL reserve increased 1 bps Q/Q to 29 bps of HFI loans at $5,220 Septembe
Slide 11: Expectations for the Future
Expectations for the Future Expect ▪ Market opportunities have expanded for Velocity as a result of recent and continued fundamental shifts in real estate demand strong ▪ Transaction volumes following the restart of our production operations have demand for exceeded our estimates and we expect marke
Slide 12: Appendix
Appendix
Slide 13: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet (Unaudited) Quarter Ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 09/30/2019 (In thousands) Assets Cash and cash equivalents $ 19,210 $ 9,803 $ 7,649 $ 21,465 $ 8,849 Restricted cash 7,821 6,735 4,483 6,087 3,152 Total loans, net 2,004,413 2,077,119 2,148,595
Slide 14: Velocity Financial, Inc. Income Statement
Velocity Financial, Inc. Income Statement (Unaudited) Quarter Ended ($ in thousands) 9/30/2020 6/30/2020 3/31/2020 12/31/2019 09/30/2019 Revenues Interest income $ 41,374 $ 39,755 $ 44,637 $ 44,124 $ 40,379 Interest expense - portfolio related 22,347 21,189 22,848 22,689 21,827 Net interest income -
Slide 15: Total Loan Portfolio
Total Loan Portfolio Portfolio by Property Type Portfolio by State Mixed Use (100% = $1.99 billion UPB)(1) 13% New York Multifamily 23% 9% Other 34% Investor 1-4 51% Retail 9% California 23% Office 6% New Jersey Warehouse 8% Other 6% Florida 7% 12% Confidential 15 (1) As of September 30, 2020
Slide 16: CECL Reserve & HFS to HFI Reclass Reconciliation
CECL Reserve & HFS to HFI Reclass Reconciliation CECL Reserve Reconciliation (Balance Sheet): 3Q 2020 ($ in thousands) Beginning Balance 6/30/2020 $ (5,220) Add: Reserve for short-term loans transferred to HFI (1,166) 3Q20 CECL provision (407) Deduct: 3Q20 charge-offs 1,046 Ending Balance 9/30/2020