WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $17.3 million and core net income of $18.2 million for 1Q24, compared to net income of $10.6 million and core net income of $11.4 million for 1Q23. Earnings and core earnings per diluted share were $0.49 and $0.51, respectively, for 1Q24, compared to $0.31 and $0.33 for 1Q23.
"Velocity began 2024 with another quarter of strong production and loan portfolio growth, resulting in the second highest quarterly net earnings in the Company's history," said Chris Farrar, President and CEO. "We saw strong demand for financing to purchase real estate assets, particularly in traditional commercial properties, which equaled our 1-4 Investor loan volume this quarter and drove our production volume growth. While base rates increased during the first quarter, we continued to see an improvement of spreads in the securitization markets and robust investor demand for asset-backed securities. We remain on track to attain our "5X25" goal of a $5 billion loan portfolio by 2025 and deliver another year of solid financial performance."
First Quarter Operating Results
| KEY PERFORMANCE INDICATORS | ||||||||||||
| ($ in thousands) | 1Q 2024 | 1Q 2023 | $ Variance | % Variance | ||||||||
| Pretax income | $ | 23,236 | $ | 14,757 | $ | 8,479 | 57 | % | ||||
| Net income | $ | 17,251 | $ | 10,649 | $ | 6,602 | 62 | % | ||||
| Diluted earnings per share | $ | 0.49 | $ | 0.31 | $ | 0.18 | 56 | % | ||||
| Core Pretax income | $ | 24,525 | $ | 15,681 | $ | 8,844 | 56 | % | ||||
| Core net income(a) | $ | 18,249 | $ | 11,376 | $ | 6,873 | 60 | % | ||||
| Core diluted earnings per share(a) | $ | 0.51 | $ | 0.33 | $ | 0.18 | 54 | % | ||||
| Pretax return on equity | 20.77 | % | 15.27 | % | n.a. | 36 | % | |||||
| Core pretax return on equity(a) | 21.92 | % | 16.20 | % | n.a. | 35 | % | |||||
| Net interest margin - portfolio | 3.35 | % | 3.23 | % | n.a. | 4 | % | |||||
| Net interest margin - total company | 2.83 | % | 2.76 | % | n.a. | 3 | % | |||||
| Average common equity | $ | 447,613 | $ | 386,935 | $ | 60,678 | 16 | % | ||||
| (a) Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP at the end of this release. | ||||||||||||
| n.a.- not applicable | ||||||||||||
Discussion of results:
- Net income in 1Q24 was $17.3 million, compared to $10.6 million for 1Q23
- Robust production volume with weighted average coupons of 11.1% drove strong fair market value gains
- Core net income(1) was $18.2 million, compared to $11.4 million for 1Q23
- 1Q24 core adjustments include incentive compensation expenses and costs related to the Company's employee stock purchase plan (ESPP)
- Portfolio NIM for 1Q24 was 3.35%, compared to 3.23% for 1Q23, a 4.0% Y/Y increase driven by 11.1% average loan coupons on recent loan production and continued NPL resolutions, partially offset by higher funding costs
- The GAAP pretax return on equity was 20.77% for 1Q24, compared to 15.27% for 1Q23
| TOTAL LOAN PORTFOLIO | |||||||||||||
| ($ of UPB in millions) | 1Q 2024 | 1Q 2023 | $ Variance | % Variance | |||||||||
| Held for Investment | |||||||||||||
| Investor 1-4 Rental | $ | 2,337 | $ | 1,905 | $ | 432 | 23 | % | |||||
| Mixed Use | 492 | 450 | 43 | 9 | % | ||||||||
| Multi-Family | 323 | 304 | 19 | 6 | % | ||||||||
| Retail | 364 | 308 | 56 | 18 | % | ||||||||
| Warehouse | 276 | 221 | 55 | 25 | % | ||||||||
| All Other | 489 | 391 | 98 | 25 | % | ||||||||
| Total | $ | 4,282 | $ | 3,579 | $ | 703 | 20 | % | |||||
| Held for Sale | |||||||||||||
| Investor 1-4 Rental | $ | - | $ | - | $ | - | n.m. | ||||||
| Multi-Family | - | 17 | (17 | ) | n.m. | ||||||||
| Warehouse | - | - | - | n.m. | |||||||||
| All Other | - | - | - | n.m. | |||||||||
| Total Managed Loan Portfolio UPB | $ | 4,282 | $ | 3,596 | $ | 685 | 19 | % | |||||
| Key loan portfolio metrics: | |||||||||||||
| Total loan count | 11,013 | 9,147 | |||||||||||
| Weighted average loan to value | 67.6 | % | 68.1 | % | |||||||||
| Weighted average coupon | 9.07 | % | 8.15 | % | |||||||||
| Weighted average total portfolio yield | 8.71 | % | 8.00 | % | |||||||||
| Weighted average portfolio debt cost | 5.93 | % | 5.33 | % | |||||||||
| n.m. - non meaningful | |||||||||||||
Discussion of results:
- Velocity's total loan portfolio was $4.3 billion in UPB as of March 31, 2024, an increase of 19.1% from $3.6 billion in UPB as of March 31, 2023
- Primarily driven by 22.7% Y/Y growth in loans collateralized by Investor 1-4 Rental properties and 25.1% Y/Y growth in loans collateralized by "Other" commercial properties
- Loan prepayments totaled $142.0 million, an increase of 20.9% Q/Q and 64.1% Y/Y
- The UPB of Fair Value (FVO) loans was $1.58 billion, or 36.9% of total HFI loans, as of March 31, 2024, an increase from $454.0 million in UPB and 12.6%, as of
March 31, 2023 - The weighted average portfolio loan-to-value ratio was 67.6% as of March 31, 2024, down from 68.1% as of March 31, 2023, and consistent with the five-quarter trailing average of 67.9%
- The weighted average total portfolio yield was 8.71% for 1Q24, an increase of 71 bps from 1Q23, driven by a 93 bps increase in average loan coupons from 1Q23
- Portfolio-related debt cost for 1Q24 was 5.93%, an increase of 60 bps from 1Q23, driven by higher interest rates on warehouse financing and recent securitizations
| LOAN PRODUCTION VOLUMES | ||||||||||
| ($ in millions) | 1Q 2024 | 1Q 2023 | $ Variance | % Variance | ||||||
| Investor 1-4 Rental | $ | 167 | $ | 116 | $ | 51 | 44 | % | ||
| Traditional Commercial | 167 | 80 | 87 | 109 | % | |||||
| Short-term loans | 45 | 21 | 24 | 115 | % | |||||
| Total loan production | $ | 379 | $ | 217 | $ | 162 | 75 | % | ||
| Acquisitions | $ | 12 | $ | - | ||||||
| n.m. - non meaningful | ||||||||||
Discussion of results:
- Loan production for 1Q24 totaled $378.7 million in UPB, a 74.5% increase from $217.0 million in UPB for 1Q23
- Driven by growing demand for Traditional Commercial financing. On a Q/Q basis, production volume rose 7.5%.
- The weighted average coupon (WAC) on 1Q24 HFI loan production was 11.1%, essentially unchanged from 1Q23
| HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS | ||||||||||||
| ($ in thousands) | 1Q 2024 | 1Q 2023 | $ Variance | % Variance | ||||||||
| Nonperforming loans(a) | $ | 432,560 | $ | 309,937 | $ | 122,623 | 40 | % | ||||
| Average Nonperforming Loans (b) | $ | 321,442 | $ | 298,703 | $ | 22,739 | 8 | % | ||||
| Average Loan HFI | $ | 4,149,750 | $ | 3,512,133 | $ | 637,617 | 18 | % | ||||
| Nonperforming loans % total HFI Loans | 10.1 | % | 8.7 | % | n.a. | 17 | % | |||||
| Total Charge Offs | $ | 504 | $ | 484 | $ | 20 | 4 | % | ||||
| Charge-offs as a % of Avg. Nonperforming Loans(c) | 0.63 | % | 0.65 | % | n.a. | (3 | )% | |||||
| Loan Loss Reserve | $ | 5,267 | $ | 5,045 | $ | 221 | 4 | % | ||||
| (a) Total nonperforming/nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual. | ||||||||||||
| (b) Reflects monthly average nonperforming loans held for investment, excluding FVO loans, during the period. | ||||||||||||
| (c) Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period. | ||||||||||||
| n.a.- not applicable | ||||||||||||
Discussion of results:
- Nonperforming loans (NPL) totaled $432.6 million in UPB as of March 31, 2024, or 10.1% of loans HFI, compared to $309.9 million and 8.7% as of March 31, 2023
- Driven by growth in loans transitioning to foreclosure
- Charge-offs for 4Q23 totaled $504.0 thousand, compared to $484.0 thousand for 1Q23
- The trailing five-quarter charge-off average was $508.8 thousand
- The loan loss reserve totaled $5.3 million as of March 31, 2024, a 4.4% increase from
$5.0 million as of March 31, 2023- Primarily resulting from an increase in the individually-assessed reserve component
- Loans carried at fair value are not subject to a CECL reserve
| NET REVENUES | |||||||||||||
| ($ in thousands) | 1Q 2024 | 1Q 2023 | $ Variance | % Variance | |||||||||
| Interest income | $ | 90,529 | $ | 70,521 | $ | 20,007 | 28 | % | |||||
| Interest expense - portfolio related | (55,675 | ) | (42,029 | ) | (13,645 | ) | 32 | % | |||||
| Net Interest Income - portfolio related | 34,854 | 28,492 | 6,362 | 22 | % | ||||||||
| Interest expense - corporate debt | (5,380 | ) | (4,139 | ) | (1,241 | ) | 30 | % | |||||
| Loan loss provision | (1,002 | ) | (636 | ) | (366 | ) | 58 | % | |||||
| Net interest income after provision for loan losses | $ | 28,472 | $ | 23,717 | $ | 4,755 | 20 | % | |||||
| Gain on disposition of loans | 1,699 | 1,913 | (214 | ) | (11 | )% | |||||||
| Unrealized (loss) gain on fair value loans | 18,925 | 7,354 | 11,571 | 157 | % | ||||||||
| Unrealized gain (loss) on fair value of securitized debt | (2,318 | ) | (170 | ) | (2,148 | ) | n.m. | ||||||
| Unrealized gain/(loss) on mortgage servicing rights | 444 | (95 | ) | 539 | (567 | )% | |||||||
| Origination income(a) | 4,986 | 2,411 | 2,575 | 107 | % | ||||||||
| Bank interest income | 1,631 | 948 | 683 | n.m. | |||||||||
| Other operating income (expense) | 408 | 481 | (72 | ) | (15 | )% | |||||||
| Total Other operating income (expense) | $ | 25,775 | $ | 12,842 | $ | 12,933 | 101 | % | |||||
| Net Revenue | $ | 54,247 | $ | 36,560 | $ | 17,687 | 48 | % | |||||
| (a) 1Q23 includes a reclass of production fees to expenses | |||||||||||||
| n.m. - non meaningful | |||||||||||||
Discussion of results:
- Net Revenue for 1Q24 was $54.2 million, an increase of 48.4% compared to $36.6 million for 1Q23
- Driven primarily by $12.9 million Y/Y growth in other operating income and continued strong loan portfolio performance from organically sourced production
- Total net interest income for 1Q24, including corporate debt interest expense and loan loss provision, was $28.5 million, a 20.0% increase from $23.7 million for 1Q23
- Portfolio net Interest income was $34.9 million for 1Q24, an increase of 22.3% from 1Q23 resulting from portfolio growth and a 12bps increase in NIM
- Total other operating income was $25.8 million for 1Q24, an increase from $12.8 million for 1Q23, driven by net fair value gains and origination fees on higher 1Q24 loan production
- Net FVO gains on loans and securitized debt were $16.6 million, resulting primarily from fair value gains on new 1Q24 loan production, partially offset by fair value losses on securitized debt
- Origination income totaled $5.0 million, resulting from fee income realized on loans 1Q24 loan production
- Gain on disposition of loans totaled $1.7 million for 1Q24, primarily driven by loans transferred to Real Estate Owned (REO)
| OPERATING EXPENSES | |||||||||||
| ($ in thousands) | 1Q 2024 | 1Q 2023 | $ Variance | % Variance | |||||||
| Compensation and employee benefits | $ | 15,357 | $ | 10,008 | $ | 5,349 | 53 | % | |||
| Origination (income)/expense(a) | 646 | (50 | ) | 696 | n.m. | ||||||
| Securitization expenses | 2,874 | 2,584 | 290 | n.m. | |||||||
| Rent and occupancy | 498 | 446 | 51 | 12 | % | ||||||
| Loan servicing | 4,824 | 3,828 | 996 | 26 | % | ||||||
| Professional fees | 2,115 | 955 | 1,160 | 121 | % | ||||||
| Real estate owned, net | 2,455 | 1,829 | 626 | 34 | % | ||||||
| Other expenses | 2,242 | 2,202 | 39 | 2 | % | ||||||
| Total operating expenses | $ | 31,011 | $ | 21,802 | $ | 9,208 | 42 | % | |||
| (a) 1Q23 includes a reclass of production fees to expenses | |||||||||||
| n.m. - non meaningful | |||||||||||
Discussion of results:
- Operating expenses totaled $31.0 million for 1Q24, an increase of 42.2% from 1Q23, driven by our growth in originations and the portfolio
- Compensation expense totaled $15.4 million, compared to $10.0 million for 1Q23
- Compensation growth was driven by growth of the production team in addition to higher commissions expense from increased origination volumes
- Securitization expenses totaled $2.9 million, resulting from the issuance of the VCC 2024-1 securitization during the quarter, in-line with securitization costs for 1Q23.
- Loan servicing expense totaled $4.8 million, a 26.0% increase from $3.8 million for 1Q23, driven by portfolio growth and nonperforming loan resolution costs
- REO expense increased totaled $2.5 million, an increase from $1.8 million for 1Q23, driven by increased valuation-related expenses
- Compensation expense totaled $15.4 million, compared to $10.0 million for 1Q23
| SECURITIZATIONS | ||||||||||
| ($ in thousands) | Securities | Balance at | Balance at | |||||||
| Trusts | Issued | 3/31/2024 | W.A. Rate | 3/31/2023 | W.A. Rate | |||||
| 2016-1 Trust | 319,809 | $ | - | 0.00% | $ | 19,896 | 8.85% | |||
| 2017-2 Trust | 245,601 | 41,610 | 4.06% | 55,981 | 3.95% | |||||
| 2018-1 Trust | 176,816 | 31,981 | 4.09% | 41,239 | 4.01% | |||||
| 2018-2 Trust | 307,988 | 74,490 | 4.51% | 91,189 | 4.50% | |||||
| 2019-1 Trust | 235,580 | 70,253 | 4.06% | 87,832 | 4.08% | |||||
| 2019-2 Trust | 207,020 | 62,467 | 3.44% | 81,096 | 3.41% | |||||
| 2019-3 Trust | 154,419 | 54,912 | 3.30% | 65,757 | 3.28% | |||||
| 2020-1 Trust | 248,700 | 101,991 | 2.89% | 128,280 | 2.84% | |||||
| 2020-2 Trust | 96,352 | 42,088 | 4.57% | 57,239 | 4.60% | |||||
| 2021-1 Trust | 251,301 | 165,657 | 1.77% | 186,986 | 1.75% | |||||
| 2021-2 Trust | 194,918 | 141,057 | 2.03% | 161,511 | 2.01% | |||||
| 2021-3 Trust | 204,205 | 153,438 | 2.46% | 172,915 | 2.45% | |||||
| 2021-4 Trust | 319,116 | 237,277 | 3.25% | 266,076 | 3.19% | |||||
| 2022-1 Trust | 273,594 | 233,429 | 3.94% | 250,986 | 3.93% | |||||
| 2022-2 Trust | 241,388 | 205,358 | 5.07% | 231,171 | 5.09% | |||||
| 2022-MC1 Trust | 84,967 | 27,519 | 6.92% | 48,298 | 6.88% | |||||
| 2022-3 Trust | 296,323 | 251,143 | 5.71% | 277,038 | 5.67% | |||||
| 2022-4 Trust | 308,357 | 263,336 | 6.22% | 297,702 | 6.24% | |||||
| 2022-5 Trust | 188,754 | 154,783 | 7.01% | 184,213 | 7.08% | |||||
| 2023-1 Trust | 198,715 | 169,107 | 7.04% | 195,999 | 7.01% | |||||
| 2023-1R Trust | 64,833 | 54,342 | 7.63% | |||||||
| 2023-2 Trust | 202,210 | 178,713 | 8.24% | |||||||
| 2023-RTL1 Trust | 81,608 | 81,608 | 7.22% | |||||||
| 2023-3 Trust | 234,741 | 220,689 | 7.87% | |||||||
| 2023-4 Trust | 202,890 | 215,821 | 8.32% | |||||||
| 2024-1 Trust | 209,862 | 207,855 | 7.91% | |||||||
$ | 5,550,067 | $ | 3,440,924 | 5.43% | $ | 2,901,403 | 4.47% | |||
Discussion of results
- The company completed one securitization during 1Q24 totaling $209.9 million of securities issued
- The transaction execution improved significantly from the prior quarter
- The weighted average rate on Velocity's outstanding securitizations was 5.43% as of March 31, 2024, an increase of 96 bps from March 31, 2023
| RESOLUTION ACTIVITIES | ||||||||||||
| LONG-TERM LOANS | ||||||||||||
| RESOLUTION ACTIVITY | FIRST QUARTER 2024 | FIRST QUARTER 2023 | ||||||||||
| ($ in thousands) | UPB $ | Gain / (Loss) $ | UPB $ | Gain / (Loss) $ | ||||||||
| Paid in full | $ | 16,563 | $ | 798 | $ | 11,274 | $ | 632 | ||||
| Paid current | 27,494 | 164 | 18,477 | 233 | ||||||||
| REO sold (a) | 3,888 | 224 | 570 | 137 | ||||||||
| Total resolutions | $ | 47,945 | $ | 1,186 | $ | 30,321 | $ | 1,002 | ||||
| Resolutions as a % of nonperforming UPB | 102.5 | % | 103.3 | % | ||||||||
| SHORT-TERM AND FORBEARANCE LOANS | ||||||||||||
| RESOLUTION ACTIVITY | FIRST QUARTER 2024 | FIRST QUARTER 2023 | ||||||||||
| ($ in thousands) | UPB $ | Gain / (Loss) $ | UPB $ | Gain / (Loss) $ | ||||||||
| Paid in full | $ | 2,496 | $ | - | $ | 5,560 | $ | 348 | ||||
| Paid current | 2,927 | 25 | 1,633 | 9 | ||||||||
| REO sold | 1,161 | 62 | 1,209 | (21 | ) | |||||||
| Total resolutions | $ | 6,584 | $ | 87 | $ | 8,402 | $ | 336 | ||||
| Resolutions as a % of nonperforming UPB | 101.3 | % | 104.0 | % | ||||||||
| Grand total resolutions | $ | 54,529 | $ | 1,274 | $ | 38,723 | $ | 1,338 | ||||
| Grand total resolutions as a % of nonperforming UPB | 102.3 | % | 103.5 | % | ||||||||
Discussion of results:
- NPL resolution totaled $54.5 million in UPB, realizing 102.3% of UPB resolved compared to $38.7 million in UPB and realization of 103.5% of UPB resolved for 1Q23
- 1Q24 NPL resolutions represented 13.8% of nonperforming loan UPB as of
December 31, 2023 - The UPB of loan resolutions in 1Q24 were in-line with the recent five-quarter resolution average of $55.9 million in UPB
Velocity's executive management team will host a conference call and webcast to review 1Q24 financial results on May 2nd, 2024, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.
Webcast Information
The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please visit Velocity's website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity's website following the completion of the conference call.
Conference Call Information
To participate by phone, please dial-in 15 minutes before 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 join the Velocity Financial, Inc. conference call.
A replay of the call will be available through midnight on May 24, 2024, 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 #3912582. 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 business purpose 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 19 years.
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.
Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs incurred from activities that are not normal recurring operating expenses, such as COVID-stressed charges and recoveries of loan loss provision, nonrecurring debt amortization, the impact of operational measures taken to address the COVID-19 pandemic and workforce reduction costs, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted-average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.
We have included non-GAAP core net income and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.
These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.
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," "position," 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, including the risk of recession (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 future securitizations, and (6) the continued conflict in Ukraine and Israel and (7) 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.
| ||||||||||||||
| Quarter Ended | ||||||||||||||
| 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | ||||||||||
| Unaudited | Audited | Unaudited | Unaudited | Unaudited | ||||||||||
| (In thousands) | ||||||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ | 34,829 | $ | 40,566 | $ | 29,393 | $ | 33,987 | $ | 39,397 | ||||
| Restricted cash | 24,216 | 21,361 | 17,703 | 16,786 | 16,636 | |||||||||
| Loans held for sale, at fair value | - | 17,590 | 19,536 | - | 18,081 | |||||||||
| Loans held for investment, at fair value | 1,649,540 | 1,306,072 | 951,990 | 705,330 | 450,732 | |||||||||
| Loans held for investment | 2,727,518 | 2,828,123 | 2,945,840 | 3,057,940 | 3,169,280 | |||||||||
| Total loans, net | 4,377,058 | 4,151,785 | 3,917,366 | 3,763,270 | 3,638,093 | |||||||||
| Accrued interest receivables | 29,374 | 27,028 | 24,756 | 22,602 | 20,931 | |||||||||
| Receivables due from servicers | 87,523 | 85,077 | 70,139 | 63,896 | 64,133 | |||||||||
| Other receivables | 2,113 | 8,763 | 236 | 1,306 | 2,188 | |||||||||
| Real estate owned, net | 46,280 | 44,268 | 29,299 | 20,388 | 21,778 | |||||||||
| Property and equipment, net | 2,013 | 2,785 | 2,861 | 3,023 | 3,209 | |||||||||
| Deferred tax asset | 1,580 | 2,339 | 705 | 1,878 | 2,543 | |||||||||
| Mortgage Servicing Rights, at fair value | 9,022 | 8,578 | 9,786 | 9,445 | 9,143 | |||||||||
| Derivative assets | 1,967 | - | 1,261 | - | - | |||||||||
| Goodwill | 6,775 | 6,775 | 6,775 | 6,775 | 6,775 | |||||||||
| Other assets | 5,468 | 5,248 | 7,028 | 7,789 | 12,268 | |||||||||
| Total Assets | $ | 4,628,218 | $ | 4,404,573 | $ | 4,117,308 | $ | 3,951,145 | $ | 3,837,094 | ||||
| Liabilities and members' equity | ||||||||||||||
| Accounts payable and accrued expenses | $ | 123,988 | $ | 121,969 | $ | 97,869 | $ | 95,344 | $ | 84,976 | ||||
| Secured financing, net | 283,813 | 211,083 | 210,774 | 210,464 | 210,155 | |||||||||
| Securitized debt, net | 2,329,906 | 2,418,811 | 2,504,334 | 2,622,547 | 2,657,469 | |||||||||
| Securitized debt, at fair value | 1,073,843 | 877,417 | 669,139 | 381,799 | 194,941 | |||||||||
| Warehouse & repurchase facilities | 360,216 | 334,755 | 215,176 | 235,749 | 298,313 | |||||||||
| Derivative liability | - | 3,665 | - | - | - | |||||||||
| Total Liabilities | 4,171,766 | 3,967,700 | 3,697,292 | 3,545,903 | 3,445,854 | |||||||||
| Stockholders' Equity | ||||||||||||||
| Stockholders' equity | 452,941 | 433,444 | 416,398 | 401,707 | 387,624 | |||||||||
| Noncontrolling interest in subsidiary | 3,511 | 3,429 | 3,618 | 3,535 | 3,616 | |||||||||
| Total equity | 456,452 | 436,873 | 420,016 | 405,242 | 391,240 | |||||||||
| Total Liabilities and members' equity | $ | 4,628,218 | $ | 4,404,573 | $ | 4,117,308 | $ | 3,951,145 | $ | 3,837,094 | ||||
| Book value per share | $ | 14.01 | $ | 13.49 | $ | 13.00 | $ | 12.57 | $ | 12.18 | ||||
| Shares outstanding | 32,574(1) | 32,395(2) | 32,314(3) | 32,239(4) | 32,112(5) | |||||||||
(1) | Based on 32,574,498 common shares outstanding as of March 31, 2024, and excludes unvested shares of common stock authorized for incentive compensation totaling 411,296. | |
(2) | Based on 32,395,423 common shares outstanding as of December 31, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 470,413. | |
(3) | Based on 32,313,744 common shares outstanding as of September 30, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 589,634. | |
(4) | Based on 32,238,715 common shares outstanding as of June 30, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 502,913. | |
(5) | Based on 32,111,906 common shares outstanding as of March 31, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 490,526. |
Velocity Financial, Inc. Consolidated Statements of Income (Quarters) | ||||||||||||||||||
| Quarter Ended | ||||||||||||||||||
| ($ in thousands) | 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | |||||||||||||
| Unaudited | Unaudited | Unaudited | Unaudited | Unaudited | ||||||||||||||
| Revenues | ||||||||||||||||||
| Interest income | $ | 90,529 | $ | 86,269 | $ | 79,088 | $ | 74,897 | $ | 70,521 | ||||||||
| Interest expense - portfolio related | 55,675 | 51,405 | 47,583 | 45,451 | 42,029 | |||||||||||||
| Net interest income - portfolio related | 34,854 | 34,864 | 31,505 | 29,446 | 28,492 | |||||||||||||
| Interest expense - corporate debt | 5,380 | 4,140 | 4,138 | 4,139 | 4,139 | |||||||||||||
| Net interest income | 29,473 | 30,724 | 27,367 | 25,307 | 24,353 | |||||||||||||
| Provision for loan losses | 1,002 | 828 | 154 | 298 | 636 | |||||||||||||
| Net interest income after provision for loan losses | 28,472 | 29,897 | 27,213 | 25,009 | 23,717 | |||||||||||||
| Other operating income | ||||||||||||||||||
| Gain on disposition of loans | 1,699 | 1,482 | 3,606 | 1,237 | 1,913 | |||||||||||||
| Unrealized gain (loss) on fair value loans | 18,925 | 39,367 | (1,284 | ) | 2,413 | 7,354 | ||||||||||||
| Unrealized gain (loss) on fair value securitized debt | (2,318 | ) | (24,085 | ) | 9,692 | 5,560 | (170 | ) | ||||||||||
| Unrealized gain/(loss) on mortgage servicing rights | 444 | (1,208 | ) | 341 | 302 | (95 | ) | |||||||||||
| Origination income | 4,986 | 3,981 | 3,323 | 2,735 | 2,411 | |||||||||||||
| Bank interest income | 1,631 | 1,716 | 1,342 | 1,188 | 948 | |||||||||||||
| Other income (expense) | 408 | 418 | 340 | 601 | 481 | |||||||||||||
| Total other operating income | 25,775 | 21,670 | 17,360 | 14,036 | 12,842 | |||||||||||||
| Net revenue | 54,247 | 51,567 | 44,573 | 39,046 | 36,560 | |||||||||||||
| Operating expenses | ||||||||||||||||||
| Compensation and employee benefits | 15,357 | 15,143 | 12,523 | 10,670 | 10,008 | |||||||||||||
| Origination expenses | 646 | 173 | 273 | 123 | (50 | ) | ||||||||||||
| Securitizations expenses | 2,874 | 2,709 | 4,930 | 2,699 | 2,584 | |||||||||||||
| Rent and occupancy | 498 | 551 | 472 | 458 | 446 | |||||||||||||
| Loan servicing | 4,824 | 4,636 | 4,901 | 4,267 | 3,828 | |||||||||||||
| Professional fees | 2,115 | 1,733 | 854 | 1,056 | 955 | |||||||||||||
| Real estate owned, net | 2,455 | 2,068 | 1,239 | 1,018 | 1,829 | |||||||||||||
| Other operating expenses | 2,242 | 2,248 | 2,142 | 1,931 | 2,202 | |||||||||||||
| Total operating expenses | 31,011 | 29,260 | 27,334 | 22,222 | 21,802 | |||||||||||||
| Income before income taxes | 23,236 | 22,307 | 17,239 | 16,824 | 14,757 | |||||||||||||
| Income tax expense | 5,903 | 5,141 | 5,070 | 4,602 | 4,021 | |||||||||||||
| Net income | 17,333 | 17,166 | 12,169 | 12,222 | 10,736 | |||||||||||||
| Net income attributable to noncontrolling interest | 82 | (189 | ) | 83 | 39 | 87 | ||||||||||||
| Net income attributable to Velocity Financial, Inc. | 17,251 | 17,355 | 12,086 | 12,183 | 10,649 | |||||||||||||
| Less undistributed earnings attributable to participating securities | 217 | 225 | 183 | 185 | 160 | |||||||||||||
| Net earnings attributable to common shareholders | $ | 17,034 | $ | 17,130 | $ | 11,903 | $ | 11,998 | $ | 10,489 | ||||||||
| Basic earnings (loss) per share | $ | 0.52 | $ | 0.53 | $ | 0.37 | $ | 0.37 | $ | 0.33 | ||||||||
| Diluted earnings (loss) per common share | $ | 0.49 | $ | 0.50 | $ | 0.35 | $ | 0.36 | $ | 0.31 | ||||||||
| Basic weighted average common shares outstanding | 32,541 | 32,326 | 32,275 | 32,122 | 32,098 | |||||||||||||
| Diluted weighted average common shares outstanding | 35,439 | 34,991 | 34,731 | 34,140 | 34,052 | |||||||||||||
Velocity Financial, Inc. Net Interest Margin ? Portfolio Related and Total Company (Unaudited) | |||||||||||||||||
Quarters: | |||||||||||||||||
| Quarter Ended March 31, 2024 | Quarter Ended March 31, 2023 | ||||||||||||||||
| Interest | Average | Interest | Average | ||||||||||||||
| Average | Income / | Yield / | Average | Income / | Yield / | ||||||||||||
| ($ in thousands) | Balance | Expense | Rate(1) | Balance | Expense | Rate(1) | |||||||||||
| Loan portfolio: | |||||||||||||||||
| Loans held for sale | $ | 9,661 | $ | 12,896 | |||||||||||||
| Loans held for investment | 4,149,750 | 3,512,133 | |||||||||||||||
| Total loans | $ | 4,159,412 | $ | 90,529 | 8.71 | % | $ | 3,525,029 | $ | 70,521 | 8.00 | % | |||||
| Debt: | |||||||||||||||||
| Warehouse and repurchase facilities | $ | 267,559 | 6,392 | 9.56 | % | $ | 225,497 | 4,833 | 8.57 | % | |||||||
| Securitizations | 3,486,173 | 49,283 | 5.65 | % | 2,926,153 | 37,196 | 5.08 | % | |||||||||
| Total debt - portfolio related | 3,753,732 | 55,675 | 5.93 | % | 3,151,650 | 42,029 | 5.33 | % | |||||||||
| Corporate debt | 261,552 | 5,380 | 8.23 | % | 215,000 | 4,139 | 7.70 | % | |||||||||
| Total debt | $ | 4,015,284 | $ | 61,055 | 6.08 | % | $ | 3,366,650 | $ | 46,168 | 5.49 | % | |||||
| Net interest spread - portfolio related (2) | 2.77 | % | 2.67 | % | |||||||||||||
| Net interest margin - portfolio related | 3.35 | % | 3.23 | % | |||||||||||||
| Net interest spread - total company (3) | 2.62 | % | 2.52 | % | |||||||||||||
| Net interest margin - total company | 2.83 | % | 2.76 | % | |||||||||||||
| (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. | |||||||||||||||||
Velocity Financial, Inc. Adjusted Financial Metric Reconciliation to GAAP Net Income (Unaudited) | |||||||||||||||
Quarters: | |||||||||||||||
| Core Net Income | |||||||||||||||
| Quarter Ended | |||||||||||||||
| 3/31/2024 | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | |||||||||||
| Net Income | $ | 17,251 | $ | 17,355 | $ | 12,086 | $ | 12,183 | $ | 10,649 | |||||
| Corporate debt refinancing costs | - | - | - | - | - | ||||||||||
| Tax liability reduction | - | (1,866 | ) | - | - | - | |||||||||
| Equity award & ESPP costs | 998 | 673 | 832 | 745 | 728 | ||||||||||
| Core Net Income | $ | 18,249 | $ | 16,161 | $ | 12,918 | $ | 12,928 | $ | 11,376 | |||||
| Core diluted earnings per share | $ | 0.51 | $ | 0.46 | $ | 0.37 | $ | 0.38 | $ | 0.33 | |||||
$ | 0.51 | $ | 0.46 | $ | 0.37 | $ | 0.38 | $ | 0.33 | ||||||
Contacts
Investors and Media:
Chris Oltmann
(818) 532-3708
