Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q3 2021 Earnings Presentation
20 slides from Velocity Financial's earnings presentation, Nov 3, 2021
Slide 1: 3Q21 Earnings Presentation
3Q21 Earnings Presentation November 3, 2021
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: 3Q21 Highlights
3Q21 Highlights ▪ Net and Core income(1) of $8.0 million; diluted EPS and Core diluted EPS of $0.23 – Strong loan production activity continues to drive loan portfolio and net interest income Earnings growth as credit performance improves ▪ Portfolio NIM(2) of 4.97%, an increase of 14 basis points (
Slide 4: 3Q21 Highlights (cont.)
3Q21 Highlights (cont.) Subsequent to Quarter-End ▪ Completed the voluntary conversion of all 45,000 outstanding shares of the Company’s Series A Convertible Preferred Stock into 11,688,310 shares of Velocity common stock – Reclassed $90 million from mezzanine equity to permanent equity – Common sha
Slide 5: Core Income and Book Value Growth
Core Income and Book Value Growth Core Income Book Value Per Share 0.43 $12.05 $11.62 GAAP Net Income $8,022 Non-core earnings adjustments – Core Income $8,022 (1) (2) (3) Book value at 6/30/21 Portfolio Earnings Book value at 9/30/21 ▪ GAAP Net income and Core income were the same in 3Q21 ▪ Minimal
Slide 6: Loan Production
Loan Production 3Q21 Production Volume Reached New Quarterly Record as Strong Demand Continues ▪ Loan production totaled $340.7 million in UPB for 3Q21, a 32.8% Q/Q increase from $256.5 million in UPB in 2Q21 – Driven by strong demand for 1-4 residential rental financing and the introduction of lend
Slide 7: Loan Portfolio
Loan Portfolio ▪ Total loan portfolio as of September 30, 2021, was $2.3 billion in UPB, a 10.0% Q/Q increase from $2.1 billion in UPB as of June 30, 2021 – Net Portfolio growth driven by strong production activity and slower prepayment activity ▪ Solid growth in each property type maintains portfol
Slide 8: Net Interest Margin
Net Interest Margin Portfolio NIM Improves in 3Q21, Driven by Attractive Securitization Levels ▪ 3Q21 Portfolio NIM(1) was 4.97%, an increase of 14 bps from 4.83% in 2Q21, primarily driven by a 33 bps reduction in the portfolio-related weighted average cost of funds – Portfolio net interest income g
Slide 9: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance Portfolio Performance Continues to Improve ▪ Total nonperforming loans as of September 30, 2021, totaled $288.4 million in UPB, or 12.7% of total loans held for investment, compared to $315.5 million, or 15.3% as of June 30, 2021, and $314.7 million or 15.8% as
Slide 10: 3Q21 Asset Resolution Activity
3Q21 Asset Resolution Activity Continued Solid Loan Resolution Activity Drives Continued Realization of Gains Resolution Activity RESOLUTION ACTIVITIES ▪ Resolution activities on $60.0 million of UPB in LONG-TERM LOANS 3Q21 resulted in net gains of $2.1 million or RESOLUTION ACTIVITY THIRD QUARTER 2
Slide 11: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Minimal Loan Loss Reserve Change as Portfolio Grows, NPLs and Charge-offs Decrease ▪ Velocity’s CECL reserve as a percentage of the HFI portfolio as of September 30, 2021, was 18 bps compared to 19 bps as of June 30, 2021, and 29 bps as of September 30, 2020 – The reserv
Slide 12: Outlook for Velocity's Business
Outlook for Velocity’s Business ▪ Growth in rents has been robust, particularly in smaller metropolitan areas where Business demand has spiked as a result of COVID-related demographic changes Purpose ▪ Prices for small-balance commercial real estate is expected to remain generally well- Lending supp
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 retained interests in securitizations at amortized cost to minimize volatility – The graph below reflects our estimate of economic value of equity (a non-GAAP financial meas
Slide 14: Appendix
Appendix
Slide 15: Vertically Integrated Platform
Vertically Integrated Platform Highly Customized Platform Integrates All Functional Areas to Enable Efficient Workflow Execution Sourcing ▪ 100% of new loan applications submitted via fully integrated broker portal ▪ Proprietary network of local appraisers with internal licensed appraisers Appraisal
Slide 16: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Quarter Ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Unaudited Unaudited Unaudited Audited Unaudited (In thousands) Assets Cash and cash equivalents $ 35,497 $ 27,741 $ 20,434 $ 13,273 $ 19,210 Restricted cash 9,586 7,921 6,808 7,020 7,821 Loans hel
Slide 17: Velocity Financial, Inc. Income Statement
Velocity Financial, Inc. Income Statement Quarter Ended ($ in thousands) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Unaudited Unaudited Unaudited Audited Unaudited Revenues Interest income $ 46,923 $ 44,978 $ 40,707 $ 41,556 $ 41,374 Interest expense - portfolio related 20,321 20,566 20,832
Slide 18: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $2.27 billion UPB)(1) Mixed Use 13% Multifamily New York 9% 22% Other 34% Investor 1-4 Rental Retail 51% 9% California 23% Office 6% Florida New Jersey 13% Warehouse 8% 7% Other 6% Confidential 18 (1) As of September 30, 2021
Slide 19: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 1,474,076 74.2% $ 1,445,131 74.9% $ 1,528,684 76.8% $ 1,645,019 79.8% $ 1,878,555 82.7% 30-59 days past due 108,60
Slide 20: Loan Portfolio Rollforward
Loan Portfolio Rollforward Loan Portfolio Waterfall (UPB in millions) $346.2 $2,271.3 $2,070.2 $(136.0) $(7.8) $(1.3) (1) Loan Porfolio at Principal Payments Loan Sales Transfer to REO Loan Production Loan Porfolio at 6/30/21 09/30/21 Confidential 20 (1) Includes $5.6 million in UPB of repurchased l