Velocity Financial, Inc. · NYSE:VEL
Velocity Financial — Q1 2023 Earnings Presentation
20 slides from Velocity Financial's earnings presentation, May 4, 2023
Slide 1: 1Q23 Results Presentation
1Q23 Results Presentation May 4, 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: 1Q23 Highlights
1Q23 Highlights ▪ Net income of $10.6 million and diluted earnings per share (EPS) of $0.31, compared to $3.1 million and $0.09 per share, respectively, for 1Q22 ▪ Core net income(1) of $11.4 million and core diluted EPS(1) of $0.33, compared to Earnings $12.4 million and $0.36 per share, respective
Slide 4: Core Income and Book Value Per Share
Core Income and Book Value Per Share Core Income(1) Book Value Per Share(2) $ 0.19 $12.18 GAAP Net Income $10,649 $11.89 $ 0.12 $ 0.02 Equity award & ESPP costs $728 Core Net Income $11,377 Book value at Non-Core Other Ops. Portfolio Book value at 12/31/22 (3) Expenses Income Earnings 3/31/23 (4) ▪
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 Strategic Decision to Reduce Production in 1Q23; Improvement During Quarter ▪ 1Q23 production reflects management’s decision to strategically reduce production volume ▪ Loan production in 1Q23 totaled $217.0 million in UPB, a 21.9% decrease from $277.8 million in UPB for 4Q22 and a 6
Slide 7: Loan Portfolio
Loan Portfolio Portfolio Growth Driven by Investor 1-4 Rental and Multifamily Collateralized Loans Loan Portfolio by Property Type ▪ The total loan portfolio was $3.6 billion in UPB as (UPB in millions) of March 31, 2023, a 2.4% increase from $3.5 $3,596.2 $3,512.5 billion in UPB as of December 31,
Slide 8: 1Q23 Asset Resolution Activity
1Q23 Asset Resolution Activity NPL Loan UPB Resolutions In-line With Five-Quarter Average; Net Gains Increase Q/Q Resolution Activity RESOLUTION ACTIVITIES ▪ Total NPL and REO resolution LONG-TERM LOANS activities in 1Q23 totaled $38.7 RESOLUTION ACTIVITY FIRST QUARTER 2023 FOURTH QUARTER 2022 FIRST
Slide 9: Net Interest Margin
Net Interest Margin Quarter-Over-Quarter Portfolio NIM Growth In-line With Expectations ▪ Portfolio NIM(1) in 1Q23 was 3.23%, an increase of 39 bps from 2.84% in 4Q22, and a decrease of 102 bps from 4.25% in 1Q22 ‒ Portfolio Yield: Increased 49 bps from 4Q22 driven primarily by: • Growth in the weig
Slide 10: Loan Investment Portfolio Performance
Loan Investment Portfolio Performance Nonperforming Loan Rate Higher; Mitigation Through Improved Resolution Activity ▪ Nonperforming loans as a percentage of total HFI loans was 8.7% as of March 31, 2023, a slight increase from 8.3% as of December 31, 2022, and a decrease from 9.8% as of March 31,
Slide 11: CECL Reserve and Charge-Offs
CECL Reserve and Charge-Offs Modest Reserve Increase Based on Macroeconomic Factors ▪ The reserve balance was $5.0 million as of March 31, 2023, an 3.1% increase from $4.9 million as of December 31, 2022, and a 8.2% increase from $4.7 million as of March 31, 2022 – The Q/Q increase resulted from a m
Slide 12: Durable Funding and Liquidity Strategy
Durable Funding and Liquidity Strategy One Securitization Issued in 1Q23(1); Significant Reserves and Warehouse Capacity ▪ Cash reserves and unfinanced collateral of Outstanding Debt Balances(2) $45.3 million as of March 31, 2023 ($ in Millions) ▪ Improved market conditions have reduced $3,201.5 $3,
Slide 13: Outlook for Velocity's Key Business Drivers
Outlook for Velocity’s Key Business Drivers Improving Outlook for Capital Markets and Growth MARKET CREDIT CAPITAL EARNINGS ▪ Possible pause from ▪ Macroeconomic and ▪ Next securitization ▪ Increased loan Federal Reserve, geopolitical risks on target for mid- coupons and higher while market increasi
Slide 14: Appendix
Appendix
Slide 15: Velocity Financial, Inc. Balance Sheet
Velocity Financial, Inc. Balance Sheet Confidential 15
Slide 16: Velocity Financial, Inc. Income Statement (Quarter)
Velocity Financial, Inc. Income Statement (Quarter) Confidential 16
Slide 17: HFI Portfolio Delinquency Trends
HFI Portfolio Delinquency Trends March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 ($ in thousands) $ % $ % $ % $ % $ % Performing/Accruing: Current $ 2,388,442 85.3% $ 2,692,799 87.1% $ 2,966,765 86.8% $ 2,969,989 84.6% $ 3,049,110 85.2% 30-59 days past due 94,058 3.4
Slide 18: Loan Portfolio Rollforward
Loan Portfolio Rollforward Total Loan Portfolio UPB Rollforward (UPB in millions) $217.0 $3,596 $3,512 $(101.9) $(20.8) $(10.5) Loan Porfolio at Principal Loan Sales Foreclosures Loan Production Loan Porfolio at 12/31/22 Payments 3/31/23 Confidential 18
Slide 19: HFI Loan Portfolio
HFI Loan Portfolio Portfolio by Property Type Portfolio by State (100% = $3.58 billion UPB)(1) Mixed Use 12.6% New York 19.9% Investor 1-4 Other Multifamily 36.9% Rental 8.5% 53.2% California 22.0% Retail 8.6% Office Florida 5.5% 13.7% New Jersey Warehouse 7.5% Other 6.2% 5.4% Confidential 19 (1) As
Slide 20: Adjusted Financial Metric Reconciliation
Adjusted Financial Metric Reconciliation: Adjusted Financial Metric Reconciliation to GAAP Net Income Quarter: Confidential 20