Velocity Financial, Inc. Reports Second Quarter 2021 Results

Second Quarter Highlights:

  • Net income of $9.45 million and Core income(1) of $8.45 million; diluted EPS of $0.28 and Core diluted EPS of $0.25
  • Core diluted EPS(1) increased 24% sequentially to $0.25 per share in 2Q21 from $0.20 in 1Q21
  • Loan production volume increased 10.07% Q/Q and totaled $256.51 million in unpaid principal balance (UPB), driven by growth in Traditional Commercial and Short-Term products and continued strong demand for Investor 1-4 Rental loans
  • Portfolio net interest margin of 4.83%
  • Book value per common share of $11.62 as of June 30, 2021
  • Loans held for investment (HFI) UPB of $2.07 billion as of June 30, 2021
  • Nonaccrual loans as a percentage of HFI loans was 15.30% as of June 30, 2021
  • 2Q21 nonperforming loan (NPL) resolutions totaled $59.3 million in UPB, realizing 103.9% of UPB resolved
  • VEL added to the Russell 2000 and 3000 indices in June

WESTLAKE VILLAGE, Calif.--()--Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company) reported net income of $9.45 million and core income of $8.45 million for 2Q21, compared to net income of $3.40 million and core income of $6.72 million, respectively, in 1Q21. Earnings and core earnings per diluted share were $0.28 and $0.25, respectively, in 2Q21, compared to earnings per diluted share of $0.10 and core earnings per diluted share of $0.20, respectively, in 1Q21. Book value per common share was $11.62 as of June 30, 2021, compared to $11.12 as of March 31, 2021.

“Our results this quarter demonstrate the resilience of Velocity’s business model and the ability of our platform to deliver strong financial results,” said Chris Farrar, President and CEO.

“The U.S. economy improved significantly during the quarter and has driven renewed interest from investors looking to participate in the strong real estate markets across the country. The changes in housing demand that have occurred over the past 15 months have heightened the importance of Velocity’s role in providing business purposed financing to creditworthy borrowers who fall outside of the credit guidelines of traditional banks, and we continue to evolve our product offerings to meet the unique needs of our clients. Our team of talented and highly skilled mortgage professionals has done an exceptional job achieving this objective, and I am very optimistic about the growth opportunities for Velocity going forward.”

Second Quarter Operating Results

 
KEY PERFORMANCE INDICATORS
($ in thousands)

2Q 2021

1Q 2021

 

$ Variance

 

% Variance

Pretax income

$

12,885

$

4,604

$

8,281

180%

Net income

$

9,453

$

3,396

$

6,057

178%

Diluted earnings per share

$

0.28

$

0.10

$

0.18

174%

Core income(1)

$

8,453

$

6,722

$

1,731

26%

Core diluted earnings per share(1)

$

0.25

$

0.20

$

0.05

24%

Pretax return on equity

 

22.57%

 

8.27%

n.a.

173%

Net interest margin - portfolio

 

4.83%

 

4.10%

n.a.

18%

Net interest margin - total company

 

3.98%

 

2.59%

n.a.

54%

Average common equity

$

228,314

$

222,810

$

5,504

2%

(1) Core income and Core diluted earnings per share are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.

Discussion of results:

  • Net income for 2Q21 totaled $9.45 million, an increase from $3.40 million in 1Q21, driven by higher interest income resulting from strong resolutions of nonperforming loans and HFI portfolio growth
    ‒ GAAP net income in 2Q21 included $6.98 million of interest income from the realization of contractual interest, default interest, and prepayment fees on nonperforming loans in 2Q21, a 59% increase from 1Q21
  • Core income for 2Q21 totaled $8.45 million, which reflects the exclusion of $1.00 million from an improvement in the macroeconomic loan loss forecast
  • Portfolio NIM in 2Q21 was 4.83%, a 73 bps increase from 4.10% in 1Q21, driven by an increase in interest income received from nonperforming loans and 20 bps decrease in the weighted average cost of funds
  • The pretax return on equity was 22.57% in 2Q21, an increase from 8.27% for 1Q21
TOTAL LOAN PORTFOLIO
($ of UPB in millions)

2Q 2021

 

1Q 2021

 

$ Variance

 

% Variance

Held for Investment
Investor 1-4 Rental

$

1,019

$

985

$

26

3%

Mixed Use

 

293

 

275

 

16

6%

Multi-Family

 

184

 

183

 

1

0%

Retail

 

183

 

178

 

6

3%

All Other

 

384

 

370

 

10

4%

Total

$

2,062

$

1,991

$

59

4%

Held for Sale
Investor 1-4 Rental

$

8

$

-

$

(13)

n.m.
Total Managed Loan Portfolio UPB

$

2,070

$

1,991

$

80

4%

Key loan portfolio metrics:
Total loan count

 

6,125

 

5,935

Weighted average loan to value

 

66.70%

 

66.28%

Weighted average total portfolio yield

 

8.90%

 

8.41%

Weighted average portfolio debt cost

 

4.81%

 

5.01%

n.m. - non meaningful

Discussion of results:

  • Velocity’s total loan portfolio was $2.07 billion in UPB as of June 30, 2021, a 3.99% increase from $1.99 billion in UPB as of March 31, 2021
    ‒ HFI portfolio growth driven by solid production activity, partially offset by higher prepayment activity and loan sales
  • The weighted average total portfolio yield was 8.90% in 2Q21, an increase of 49 bps from 1Q21, primarily driven by the increased realization of delinquent and default interest from nonperforming loan resolutions and improved portfolio performance
  • Portfolio related debt cost in 2Q21 was 4.81%, a decrease of 20 bps from 1Q21, primarily driven by the issuance of Velocity’s VCC 2021-1 securitization in 2Q21, at a weighted average cost of 1.73%
LOAN PRODUCTION VOLUMES
($ in millions)

2Q 2021

 

1Q 2021

 

$ Variance

 

% Variance

Investor 1-4 Rental

$

147

$

149

$

(2)

(1)%

Traditional Commercial

 

95

 

84

 

11

12%

Short-term loans

 

15

 

-

 

15

n.m.
Total loan production

$

257

$

233

$

23

10%

n.m. - non meaningful

Discussion of results:

  • Loan production in 2Q21 totaled $256.51 million in UPB, a 10.07% increase from $233.04 million in UPB in 1Q21
    ‒ Driven by the re-introduction of short-term loans to the production mix and growth of long-term traditional commercial loan production
  • Loan origination volume in July 2021 totaled $104.4 million in UPB
CREDIT PERFORMANCE INDICATORS
($ in thousands)

2Q 2021

 

1Q 2021

 

$ Variance

 

% Variance

Nonperforming loans(1)

$

315,542

$

335,048

$

(19,506)

(6)%

Nonperforming loans % total HFI Loans

 

15.30%

 

16.83%

n.a.

(9)%

Total Charge Offs (trailing 6 months)(2)

$

986.40

$

377.14

$

609

162%

Charge-offs as a % of Avg. Nonperforming loans(3)

 

0.59%

 

0.23%

n.a.

157%

Loan Loss Reserve

$

3,963

$

5,881

$

(1,918)

(33)%

(1) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual.
(2) $420.47 thousand of the 2Q21 charge-off amount was related to one loan that transferred to REO.
(3) Annualized

Discussion of results:

  • Nonperforming loans totaled $315.54 million as of June 30, 2021, or 15.30% of loans HFI, compared to $335.05 million as of March 31, 2021, or 16.83% of loans HFI
    ‒ The quarter-over-quarter improvement was driven by resolution of 17.37% of nonperforming loan UPB as of March 31, 2021, 10.58% through payoff and 6.79% were brought back to performing (accrual) status. These resolutions in 2Q21 realized all delinquent contractual interest in addition to default interest and prepayment fees.
  • Charge-offs in 2Q21 totaled $917.6 thousand compared to $68.78 thousand in 1Q21
    ‒ Nearly half, or $420.47 thousand of the 2Q21 charge-off amount was related to one loan that transferred to REO, all or part of which could be recovered upon sale of the REO
  • The reserve for loan losses was $3.96 million as of June 30, 2021, compared to $5.88 million as of March 31, 2021
    ‒ The recovery of loan loss provision in 2Q21 reflects an improvement in the macroeconomic component of the loan loss reserve resulting from a more optimistic outlook for the U.S. economy
  • Capitalized interest recovered on COVID forbearance loans granted a deferral through the end of 2Q21 totaled $1.27 million, with a remaining balance of $7.37 million as of June 30, 2021. None of the capitalized interest has been forgiven.
NET REVENUES
($ in thousands)

2Q 2021

 

1Q 2021

 

$ Variance

 

% Variance

Interest income

$

44,978

$

40,707

$

4,271

10.49%

Interest expense - portfolio related

 

(20,566)

 

(20,832)

 

266

(1)%

Interest expense - corporate debt

 

(4,309)

 

(7,350)

 

3,041

(41)%

Net Interest Income

$

20,103

$

12,525

$

7,578

61%

Loan loss provision

 

1,000

 

(105)

 

1,105

n.m.
Gain on loan sales

 

2,391

 

2,839

 

(448)

(16)%

Other Operating (loss) income

 

41

 

(38)

 

79

n.m.
Total Net Revenues

$

23,535

$

15,221

$

8,314

55%

n.m. - non meaningful

Discussion of results:

  • Net revenue was $23.53 in 2Q21, a 54.62% increase from the prior quarter driven by the increased realization of delinquent and default interest from strong nonperforming loan resolution activity
    ‒ Net interest income in 1Q21 included $3.33 million of nonrecurring interest expense from the refinancing of our corporate debt
OPERATING EXPENSES
($ in thousands)

2Q 2021

 

1Q 2021

 

$ Variance

 

% Variance

Compensation and employee benefits

$

4,546

$

5,186

$

(640)

(12)%

Rent and occupancy

 

430

 

463

 

(33)

(7)%

Loan servicing

 

1,922

 

1,867

 

55

3%

Professional fees

 

795

 

533

 

262

49%

Real estate owned, net

 

1,039

 

509

 

530

104%

Other expenses

 

1,918

 

2,059

 

(141)

(7)%

Total expenses

$

10,650

$

10,617

$

33

0%

Discussion of results:

  • Operating expenses in 2Q21 were essentially unchanged from the prior quarter, with a 12% quarter-over-quarter decrease in compensation and employee benefits, offset by higher costs to maintain the real estate owned (REO) portfolio and professional fees for public company reporting requirements
SECURITIZATIONS
Securities Balance at Balance at
Trusts Issued 6/30/2021 W.A. Rate 3/31/2021 W.A. Rate
2014-1 Trust

$

161,076

$

19,973

7.86%

$

21,690

7.92%

2015-1 Trust

 

285,457

 

24,852

7.63%

 

26,762

6.88%

2016-1 Trust

 

319,809

 

43,925

8.12%

 

50,940

8.06%

2016-2 Trust

 

166,853

 

34,440

7.08%

 

38,953

7.07%

2017-1 Trust

 

211,910

 

55,648

6.02%

 

65,728

5.69%

2017-2 Trust

 

245,601

 

101,179

3.33%

 

114,517

3.40%

2018-1 Trust

 

176,816

 

79,377

4.02%

 

88,754

4.12%

2018-2 Trust

 

307,988

 

175,943

4.48%

 

192,240

4.53%

2019-1 Trust

 

235,580

 

159,345

4.06%

 

173,216

4.11%

2019-2 Trust

 

207,020

 

141,446

3.51%

 

148,834

3.50%

2019-3 Trust

 

154,419

 

112,848

3.28%

 

122,072

3.29%

2020-1 Trust

 

248,700

 

199,267

2.86%

 

208,269

2.84%

2020-2 Trust

 

96,352

 

97,601

4.44%

 

106,343

4.54%

2020-MC1 Trust

 

179,371

 

84,454

4.43%

 

116,241

4.50%

2021-1 Trust

 

251,301

 

250,109

1.73%

$

3,057,994

$

1,580,408

$

1,474,560

 

Discussion of results:

  • Securitization balances as of June 30, 2021, totaled $1.58 billion, an increase from $1.47 billion as of March 31, 2021, driven by the issuance of Velocity’s VCC 2021-1 securitization in May
  • The VCC 2021-1 transaction totaled $264.52 million in UPB and priced at a weighted average fixed rate of 1.73%
    ‒ Broad investor demand tightened spreads for the entire capital stack and lowered our weighted average coupon by over one percent as compared to our pre-COVID VCC 2020-1 transaction
RESOLUTION ACTIVITIES
LONG-TERM LOANS
 
RESOLUTION ACTIVITY SECOND QUARTER 2021 FIRST QUARTER 2021
($ in thousands) UPB $ Gain /
(Loss) $
UPB $ Gain /
(Loss) $
Paid in full

$

21,925

$

1,446

 

$

15,961

$

795

 

Paid current

 

14,949

 

 

219

 

 

10,774

 

62

 

REO sold

 

947

 

 

(2

)

 

2,754

 

76

 

Total resolutions

$

37,821

 

$

1,663

 

$

29,489

$

933

 

 
Resolutions as a % of nonperforming UPB

 

104.4

%

 

103.2

%

 
SHORT-TERM AND FORBEARANCE LOANS
 
RESOLUTION ACTIVITY SECOND QUARTER 2021 FIRST QUARTER 2021
($ in thousands) UPB $ Gain /
(Loss) $
UPB $ Gain /
(Loss) $
Paid in full

$

13,517

 

$

682

 

$

8,569

$

343

 

Paid current

 

7,794

 

 

59

 

 

11,170

 

40

 

REO sold

 

164

 

 

(73

)

 

-

 

-

 

Total resolutions

$

21,475

 

$

668

 

$

19,739

$

383

 

 
Resolutions as a % of nonperforming UPB

 

103.1

%

 

101.9

%

 
Grand total resolutions

$

59,296

 

$

2,331

 

$

49,228

$

1,316

 

 
Grand total resolutions as a % of nonperforming UPB

 

103.9

%

 

102.7

%

Discussion of results:

  • Resolution of nonperforming loans and REO in the HFI portfolio totaled $59.30 million in UPB during 2Q21 and realized $2.33 million of gains, compared to $49.23 million in UPB and $1.32 million of gains, respectively, in 1Q21
    ‒ Total resolution gains as a % of UPB resolved were 103.93% in 2Q21, compared to 102.67% in 1Q21, driven by a 94% quarter-over-quarter increase in the collection of default interest and prepayment penalties collected on NPL resolutions
  • Resolutions of long-term HFI loans in 2Q21 totaled $37.82 and realized $1.66 million of gains, compared to $29.49 million and $0.93 million, respectively, in 1Q21
  • Resolutions of short-term HFI loans totaled $21.48 in 2Q21 and realized $0.67 million of gains, compared to $19.74 million and $0.38 million, respectively, in 1Q21

Webcast Information

Velocity’s executive management team will host a conference call and webcast to review its financial results at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on the same day.

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of Velocity Financials’ Investor Relations website at https://www.velfinance.com/events-and-presentations. To listen to the webcast, please go to Velocity’s website at least 15 minutes before the call to register and to download and install any needed software.

Management’s slide presentation will be available through the Events and Presentations section of the Company’s Investor Relations website after the market close on Thursday, August 5, 2021.

Conference Call Information

To participate by phone, please dial in 15 minutes prior to the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to be joined into the Velocity Financial, Inc. earnings call.

A replay of the call will be available through midnight on August 30, 2021, and can be accessed by dialing 1-877-344-7529 in the U.S. and 855-669-9658 in Canada or 1-412-317-0088 internationally. The passcode for the replay is #10157578. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages investor loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 16 years.

(1) Core Income and Core EPS are non-GAAP financial measures the Company presents to help investors better understand unique items that impact earnings. For a reconciliation of GAAP Net Income to Core Income, please refer to the sections of this press release titled “Non-GAAP Financial Measures” and “Adjusted Financial Metric Reconciliation to GAAP Net Income.”

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses Core Income, which is a non-GAAP financial measure. For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, (3) regulatory and/or legislative changes, (4) our customers' continued interest in loans and doing business with us, (5) market conditions and investor interest in our contemplated securitization and (6) changes in federal government fiscal and monetary policies.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors” in our Form 10-Q filed with the SEC on May 14, 2020, as well as other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.

Velocity Financial, Inc.

Consolidated Statements of Financial Condition

 
Quarter Ended
6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020
Unaudited Unaudited Audited Unaudited Unaudited
(In thousands)
Assets
Cash and cash equivalents

$

27,741

$

20,434

$

13,273

$

19,210

$

9,803

Restricted cash

 

7,921

 

6,808

 

7,020

 

7,821

 

6,735

Loans held for sale, net

 

7,916

 

0

 

13,106

 

0

 

212,344

Loans held for investment, at fair value

 

1,370

 

1,364

 

1,539

 

3,327

 

2,956

Loans held for investment

 

2,057,046

 

1,983,435

 

1,924,489

 

1,977,236

 

1,836,065

Net deferred loan costs

 

26,707

 

25,070

 

23,600

 

23,850

 

25,754

Total loans, net

 

2,093,039

 

2,009,869

 

1,962,734

 

2,004,413

 

2,077,119

Accrued interest receivables

 

11,094

 

11,169

 

11,373

 

13,134

 

17,793

Receivables due from servicers

 

73,517

 

77,731

 

71,044

 

44,466

 

36,028

Other receivables

 

10,169

 

3,879

 

4,085

 

402

 

4,609

Real estate owned, net

 

20,046

 

14,487

 

15,767

 

14,653

 

15,648

Property and equipment, net

 

3,625

 

3,891

 

4,145

 

4,446

 

4,718

Deferred tax asset

 

13,196

 

9,246

 

6,654

 

1,832

 

5,556

Other assets

 

7,257

 

7,325

 

6,779

 

16,489

 

9,042

Total Assets

$

2,267,605

$

2,164,839

$

2,102,874

$

2,126,866

$

2,187,051

 
Liabilities and members' equity
Accounts payable and accrued expenses

$

70,049

$

65,003

$

63,361

$

61,859

$

55,938

Secured financing, net

 

164,053

 

129,666

 

74,982

 

74,776

 

74,571

Securitizations, net

 

1,558,163

 

1,453,386

 

1,579,019

 

1,670,930

 

1,599,719

Warehouse & repurchase facilities

 

151,872

 

203,314

 

75,923

 

19,541

 

160,796

Total Liabilities

 

1,944,137

 

1,851,369

 

1,793,285

 

1,827,106

 

1,891,024

 
Mezzanine Equity
Series A Convertible preferred stock

 

90,000

 

90,000

 

90,000

 

90,000

 

90,000

Stockholders' Equity
Stockholders' equity

 

233,468

 

223,470

 

219,589

 

209,760

 

206,027

Total Liabilities and members' equity

$

2,267,605

$

2,164,839

$

2,102,874

$

2,126,866

$

2,187,051

 
Book value per share

$

11.62

$

11.12

$

10.93

$

10.44

$

10.26

 
Shares outstanding

 

20,087

 

20,087

 

20,087

 

20,087

 

20,087

Velocity Financial, Inc.

Consolidated Statements of Income (Quarterly)

 
Quarter Ended
($ in thousands) 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020
Unaudited Unaudited Audited Unaudited Unaudited
Revenues
Interest income

$

44,978

 

$

40,707

$

41,556

$

41,374

$

39,755

 

Interest expense - portfolio related

 

20,566

 

 

20,832

 

 

21,442

 

 

22,347

 

 

21,189

 

Net interest income - portfolio related

 

24,412

 

 

19,875

 

 

20,114

 

 

19,027

 

 

18,566

 

Interest expense - corporate debt

 

4,309

 

 

7,350

 

 

1,900

 

 

1,913

 

 

1,894

 

Net interest income

 

20,103

 

 

12,525

 

 

18,214

 

 

17,114

 

 

16,672

 

Provision for loan losses

 

(1,000

)

 

105

 

 

406

 

 

1,573

 

 

1,800

 

Net interest income after provision for loan losses

 

21,103

 

 

12,420

 

 

17,808

 

 

15,541

 

 

14,872

 

Other operating income (expense)

 

2,432

 

 

2,801

 

 

4,691

 

 

1,349

 

 

(1,339

)

Total net revenues

 

23,535

 

 

15,221

 

 

22,499

 

 

16,890

 

 

13,533

 

 
Operating expenses
Compensation and employee benefits

 

4,546

 

 

5,186

 

 

4,135

 

 

5,692

 

 

5,863

 

Rent and occupancy

 

430

 

 

463

 

 

424

 

 

415

 

 

448

 

Loan servicing

 

1,922

 

 

1,867

 

 

1,977

 

 

2,168

 

 

1,754

 

Professional fees

 

795

 

 

533

 

 

1,415

 

 

1,051

 

 

588

 

Real estate owned, net

 

1,039

 

 

509

 

 

217

 

 

898

 

 

408

 

Other operating expenses

 

1,918

 

 

2,059

 

 

2,578

 

 

1,641

 

 

1,847

 

Total operating expenses

 

10,650

 

 

10,617

 

 

10,746

 

 

11,865

 

 

10,908

 

Income before income taxes

 

12,885

 

 

4,604

 

 

11,753

 

 

5,025

 

 

2,625

 

Income tax expense

 

3,432

 

 

1,208

 

 

2,177

 

 

1,544

 

 

484

 

Net income

$

9,453

 

$

3,396

 

$

9,576

 

$

3,481

 

$

2,141

 

Less: Deemed dividends on preferred stock

 

-

 

 

-

 

 

-

 

 

-

 

$

48,955

 

Less: Undistributed earnings allocated to participating securities

 

3,571

 

$

1,281

 

n.a. n.a. n.a.
Net income (loss) allocated to common shareholders

$

5,882

 

$

2,115

 

$

9,576

 

$

3,481

 

$

(46,814

)

 
Basic earnings (loss) per share

$

0.29

 

$

0.11

 

$

0.48

 

$

0.17

 

$

(2.33

)

 
Diluted earnings (loss) per common share

$

0.28

 

$

0.10

 

$

0.29

 

$

0.11

 

$

(2.33

)

 
Basic weighted average common shares outstanding

 

20,087

 

 

20,087

 

 

20,087

 

 

20,087

 

 

20,087

 

 
Diluted weighted average common shares outstanding

 

33,960

 

 

33,407

 

 

32,793

 

 

32,435

 

 

20,087

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

 

Quarter Ended June 30, 2021

 

Quarter Ended March 31, 2021

 

Quarter Ended June 30, 2020

 

 

Interest

 

Average

 

 

 

Interest

 

Average

 

 

 

Interest

 

Average

Average

 

Income /

 

Yield /

 

Average

 

Income /

 

Yield /

 

Average

 

Income /

 

Yield /

($ in thousands)

Balance

 

Expense

 

Rate(1)

 

Balance

 

Expense

 

Rate(1)

 

Balance

 

Expense

 

Rate(1)

Loan portfolio:
Loans held for sale

$

11,524

$

8,904

$

220,047

Loans held for investment

 

2,010,962

 

1,927,760

 

1,875,260

Total loans

$

2,022,486

$

44,978

8.90

%

$

1,936,664

$

40,707

8.41

%

(4

)

$

2,095,307

$

39,755

7.59

%

 
Debt:
Warehouse and repurchase facilities

$

166,981

 

2,361

 

5.66

%

$

113,528

 

1,705

 

6.01

%

$

242,676

 

2,632

 

4.34

%

Securitizations

 

1,543,295

 

18,205

 

4.72

%

 

1,548,642

 

19,127

 

4.94

%

 

1,589,191

 

18,557

 

4.67

%

Total debt - portfolio related

 

1,710,276

 

20,566

 

4.81

%

 

1,662,170

 

20,832

 

5.01

%

 

1,831,867

 

21,189

 

4.63

%

Corporate debt

 

166,335

 

4,309

 

10.36

%

 

108,365

 

7,350

 

27.13

%

(5

)

 

78,000

 

1,894

 

9.71

%

Total debt

$

1,876,611

$

24,875

 

5.30

%

$

1,770,535

$

28,182

 

6.37

%

$

1,909,867

$

23,083

 

4.83

%

 
Net interest spread - portfolio related (2)

4.08

%

3.39

%

2.96

%

Net interest margin - portfolio related

4.83

%

4.10

%

3.54

%

 
Net interest spread - total company (3)

3.59

%

2.04

%

(5

)

2.75

%

Net interest margin - total company

3.98

%

2.59

%

(5

)

3.18

%

(1)

Annualized.

(2)

Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt.

(3)

Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt.

(4)

The debt issuance cost amortization was higher for the three months ended March 31, 2021, as a result of a lower average outstanding borrowing balance from a new financing facility.

(5)

Excluding the one-time debt issuance cost write-off of $2.9 million and prepayment penalties of $1.6 million associated with the $78.0 million payoff of our corporate debt in February 2021, the corporate debt average rate would have been 10.49%; net interest spread — total company would have been 3.06%; and net interest margin — total company would have been 3.52% for the three months ended March 31, 2021.

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)

Core Income
Quarter Ended
($ in thousands) 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020
 
Net Income

$

9,453

 

$

3,396

$

9,576

$

3,481

$

2,141

Recovery of Loan Loss Provision

$

(1,000

)

Nonrecurring debt amortization

 

3,326

 

 

-

 

 

-

 

 

-

 

COVID-19 Impact

 

-

 

 

-

 

 

-

 

 

1,267

 

Workforce reduction costs

 

-

 

 

-

 

 

432

 

 

-

 

Core Income

$

8,453

 

$

6,722

 

$

9,576

 

$

3,913

 

$

3,408

 

 
Core diluted earnings per share

$

0.25

 

$

0.20

 

$

0.29

 

$

0.12

 

$

0.17

 

 

Contacts

Investors and Media:
Chris Oltmann
(818) 532-3708

Contacts

Investors and Media:
Chris Oltmann
(818) 532-3708