Velocity Financial, Inc. Reports Third Quarter 2021 Results

Nov 03, 2021 04:15 pm
WESTLAKE VILLAGE, Calif. -- 

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company) reported net income and core income of $8.02 million for 3Q21, compared to net income of $9.45 million and core income of $8.45 million in 2Q21. Earnings and core earnings per diluted share were $0.23 in 3Q21, compared to $0.28 and $0.25, respectively, in 2Q21. Book value per common share was $12.05 as of September 30, 2021, compared to $11.62 as of June 30, 2021.

“Third quarter results reflect outstanding execution by our loan origination team which delivered 33% quarter-over-quarter production growth, in addition to strong earnings and improved credit performance from our held for investment portfolio,” said Chris Farrar, President and CEO. “Demand for small balance business purposed loans accelerated in the third quarter with solid growth in rental demand driven by consumer preference for single family homes. Our strong originations trends continued in October as we originated $138.5 million of new loans, an all-time record for Velocity.”

“We are focused on driving continued organic growth in our core business, while at the same time seeking attractive opportunities that will allow us to reach new markets as we continue to execute on our vision of becoming the lender of choice in small-balance commercial lending.”

Third Quarter Operating Results

 
KEY PERFORMANCE INDICATORS
($ in thousands)

 

3Q 2021

 

 

2Q 2021

 

$ Variance

% Variance

Pretax income

$

10,927

 

$

12,885

 

$

(1,958

)

(15

)%

Net income

$

8,022

 

$

9,453

 

$

(1,431

)

(15

)%

Diluted earnings per share

$

0.23

 

$

0.28

 

$

(0

)

(16

)%

Core income(1)

$

8,022

 

$

8,453

 

$

(431

)

(5

)%

Core diluted earnings per share(1)

$

0.23

 

$

0.25

 

$

(0

)

(6

)%

Pretax return on equity

 

18.23

%

 

22.57

%

n.a.

(19

)%

Net interest margin - portfolio

 

4.97

%

 

4.83

%

n.a.

3

%

Net interest margin - total company

 

4.13

%

 

3.98

%

n.a.

4

%

Average common equity

$

239,790

 

$

228,314

 

$

11,476

 

5

%

 
(1) Core income is a non-GAAP measure. Please see the reconciliation to GAAP net income at the end of this release.

Discussion of results:

  • Net income for 3Q21 totaled $8.02 million, a decrease from $9.45 million in 2Q21, mainly as a result of a $2.2MM gain from the sale of loans during 2Q21 and only a $0.3 million gain from loans sold in 3Q21, as we decided to retain all new production for securitization
  • GAAP Net income and Core income were the same in 3Q21
  • Portfolio NIM in 3Q21 was 4.97%, a 14 bps increase from 4.83% in 2Q21, driven by a quarter-over-quarter increase in portfolio-related interest income and a decrease in portfolio-related interest expense
  • The pretax return on equity was 18.23% in 3Q21, a decrease from 22.57% for 2Q21, mainly as a result our decision to reduce whole loan sales in 3Q21.
TOTAL LOAN PORTFOLIO
($ of UPB in millions)

 

3Q 2021

 

 

2Q 2021

 

$ Variance % Variance
Held for Investment
Investor 1-4 Rental

$

1,150

 

$

1,019

 

$

131

 

13

%

Mixed Use

 

302

 

 

293

 

 

10

 

3

%

Multi-Family

 

203

 

 

184

 

 

19

 

10

%

Retail

 

197

 

 

183

 

 

14

 

8

%

All Other

 

419

 

 

384

 

 

35

 

9

%

Total

$

2,271

 

$

2,062

 

$

209

 

10

%

Held for Sale
Investor 1-4 Rental

$

-

 

$

8

 

$

(8

)

n.m.
Total Managed Loan Portfolio UPB

$

2,271

 

$

2,070

 

$

201

 

10

%

Key loan portfolio metrics:
Total loan count

 

6,430

 

 

6,125

 

Weighted average loan to value

 

67.22

%

 

66.70

%

Weighted average total portfolio yield

 

8.77

%

 

8.90

%

Weighted average portfolio debt cost

 

4.48

%

 

4.81

%

n.m. - non meaningful

Discussion of results:

  • Velocity’s total loan portfolio was $2.27 billion in UPB as of September 30, 2021, a 9.71% increase from $2.07 billion in UPB as of June 30, 2021
    ‒ HFI portfolio growth driven by record production activity, and also aided by a 5% quarter-over-quarter decrease in loan payoffs
  • The weighted average loan-to-value of the HFI portfolio was 67.22% as of September 30, 2021, consistent with 66.70% as of June 30, 2021
  • The weighted average total portfolio yield was 8.77% in 3Q21, a decrease of 13 bps from 2Q21, primarily driven by a reduction in delinquent contractual (NPL) interest received in 3Q21
  • Portfolio related debt cost in 3Q21 was 4.48%, a decrease of 33 bps from 2Q21, primarily driven by the attractive issuance levels of Velocity’s securitization thus far in 2021
LOAN PRODUCTION VOLUMES
($ in millions)

 

3Q 2021

 

2Q 2021

$ Variance % Variance
Investor 1-4 Rental

$

234

$

147

$

87

 

59

%

Traditional Commercial

 

81

 

95

 

(13

)

(14

)%

Short-term loans

 

25

 

15

 

11

 

72

%

Total loan production

$

341

$

257

$

84

 

33

%

Discussion of results:

  • Loan production in 2Q21 totaled $340.66 million in UPB, a 32.81% increase from $256.51 million in UPB in 2Q21
    ‒ Driven by strong demand for 1-4 residential rental financing and the introduction of lending products tailored to meeting the evolving needs of our customers
  • Loan origination volume in October 2021 totaled $138.5 million in UPB
CREDIT PERFORMANCE INDICATORS

 

 

 

($ in thousands)

 

3Q 2021

 

 

2Q 2021

 

$ Variance % Variance
Nonperforming loans(1)

$

288,436

 

$

315,542

 

$

(27,106

)

(9

)%

Nonperforming loans % total HFI Loans

 

12.70

%

 

15.30

%

n.a.

(17

)%

Total Charge Offs(2)

$

162.08

 

$

917.61

 

$

(756

)

(82

)%

Charge-offs as a % of Avg. Loans HFI(3)

 

0.030

%

 

0.183

%

n.a.

(83

)%

Loan Loss Reserve

$

4,028

 

$

3,963

 

$

65

 

2

%

 
(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 $288.44 million as of September 30, 2021, or 12.70% of loans HFI, compared to $315.54 million as of June 30, 2021, or 15.30% of loans HFI
    ‒ The quarter-over-quarter improvement was driven by resolution of 19.00% of nonperforming loan UPB as of June 30, 2021, 10.41% through payoff and 7.07% were brought back to performing (accrual) status, 1.52% from sales of REO properties. Loan resolutions in 3Q21 realized all delinquent contractual interest in addition to default interest and prepayment fees.
  • Charge-offs in 3Q21 totaled $162.08 thousand compared to $917.6 thousand in 2Q21
    ‒ Charge-offs in 3Q21 reflect a reversion to more normalized levels, which have averaged $358 thousand per quarter over the past eight quarters
  • The reserve for loan losses was $4.03 million as of September 30, 2021, compared to $3.96 million as of June 30, 2021
    ‒ The reserve remained consistent. An increase in reserve attributable to portfolio growth was mainly offset by a reduction in reserve driven by strong resolutions on nonperforming loans.
  • Capitalized interest recovered on COVID forbearance loans granted a deferral through the end of 3Q21 totaled $1.77 million, with a remaining balance of $8.03 million as of September 30, 2021. None of the capitalized interest has been forgiven.
NET REVENUES
($ in thousands)

 

3Q 2021

 

 

2Q 2021

 

$ Variance % Variance
Interest income

$

46,923

 

$

44,978

 

$

1,945

 

4

%

Interest expense - portfolio related

$

(20,321

)

 

(20,566

)

 

245

 

(1

)%

Interest expense - corporate debt

 

(4,488

)

 

(4,309

)

 

(179

)

4

%

Net Interest Income

$

22,114

 

$

20,103

 

$

2,011

 

10

%

Loan loss provision

 

(228

)

 

1,000

 

 

(1,228

)

n.m.
Gain on loan sales

 

306

 

 

2,391

 

 

(2,085

)

(87

)%

Other operating income (expense)

 

33

 

 

41

 

 

(8

)

(20

)%

Total Net Revenues

$

22,225

 

$

23,535

 

$

(1,310

)

(6

)%

n.m. - non meaningful

Discussion of results:

  • Total net interest income, including corporate interest expense, increased by $2.01 million, or 10.0% sequentially, primarily resulting from growth in our HFI portfolio.
  • Net Revenues decreased quarter-over-quarter by $1.31 million, mainly due to our decision to retain loans for securitization and a more normalized loan loss provision
OPERATING EXPENSES
($ in thousands)

 

3Q 2021

 

2Q 2021

$ Variance % Variance
Compensation and employee benefits

$

4,738

$

4,546

$

192

 

4

%

Rent and occupancy

 

447

 

430

 

17

 

4

%

Loan servicing

 

2,014

 

1,922

 

92

 

5

%

Professional fees

 

736

 

795

 

(59

)

(7

)%

Real estate owned, net

 

1,186

 

1,039

 

147

 

14

%

Other expenses

 

2,177

 

1,918

 

259

 

14

%

Total expenses

$

11,298

$

10,650

$

648

 

6

%

Discussion of results:

  • Operating expenses in 3Q21 of $11.3 million were generally consistent with the $10.7 million in 2Q21
SECURITIZATIONS
Securities Balance at Balance at
Trusts Issued 9/30/2021 W.A. Rate 6/30/2021 W.A. Rate
2014-1 Trust

$

161,076

$

18,910

8.12

%

$

19,973

7.86

%

2015-1 Trust

 

285,457

 

21,161

7.57

%

 

24,852

7.63

%

2016-1 Trust

 

319,809

 

40,354

8.25

%

 

43,925

8.12

%

2016-2 Trust

 

166,853

 

29,207

7.54

%

 

34,440

7.08

%

2017-1 Trust

 

211,910

 

50,258

6.34

%

 

55,648

6.02

%

2017-2 Trust

 

245,601

 

94,486

3.45

%

 

101,179

3.33

%

2018-1 Trust

 

176,816

 

72,219

4.02

%

 

79,377

4.02

%

2018-2 Trust

 

307,988

 

156,587

4.34

%

 

175,943

4.48

%

2019-1 Trust

 

235,580

 

146,086

4.08

%

 

159,345

4.06

%

2019-2 Trust

 

207,020

 

130,198

3.44

%

 

141,446

3.51

%

2019-3 Trust

 

154,419

 

105,570

3.26

%

 

112,848

3.28

%

2020-1 Trust

 

248,700

 

186,400

2.86

%

 

199,267

2.86

%

2020-2 Trust

 

96,352

 

88,695

4.51

%

 

97,601

4.44

%

2020-MC1 Trust

 

179,371

 

57,111

4.51

%

 

84,454

4.43

%

2021-1 Trust

 

251,301

 

245,423

1.72

%

 

250,109

1.73

%

2021-2 Trust

 

194,918

 

203,743

1.77

%

$

3,504,213

$

1,646,408

3.55

%

$

1,580,407

3.83

%

 
 

Discussion of results:

  • Weighted Average Rate decreased 28bps as a result of our continued lower cost issuances
  • Securitization balances as of September 30, 2021, totaled $1.65 billion, an increase from $1.58 billion as of June 30, 2021, driven by the issuance of Velocity’s VCC 2021-2 securitization in August, partially offset by prepayment activity and contractual principal amortization
  • Exploring strategies to opportunistically refinance certain of our existing securitizations with exercisable call rights to further reduce financing costs
RESOLUTION ACTIVITIES
LONG-TERM LOANS
 
RESOLUTION ACTIVITY THIRD QUARTER 2021 SECOND QUARTER 2021
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

13,353

$

1,251

 

$

21,925

$

1,446

 

Paid current

 

7,722

 

79

 

 

14,949

 

219

 

REO sold(1)

 

4,680

 

31

 

 

947

 

(2

)

Total resolutions

$

25,755

$

1,361

 

$

37,821

$

1,663

 

 
Resolutions as a % of nonperforming UPB

 

105.3

%

 

104.4

%

Note (1) There was an REO property held since January 2019 that was sold during the quarter ended September 30, 2021, with a total lifetime loss of $1.7 million, all of which was recognized in prior periods.
 
SHORT-TERM AND FORBEARANCE LOANS
 
RESOLUTION ACTIVITY THIRD QUARTER 2021 SECOND QUARTER 2021
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

8,960

$

664

 

$

13,517

$

682

 

Paid current

 

25,141

 

29

 

 

7,794

 

59

 

REO sold

 

104

 

47

 

 

164

 

(73

)

Total resolutions

$

34,205

$

740

 

$

21,475

$

668

 

 
Resolutions as a % of nonperforming UPB

 

102.2

%

 

103.1

%

 
Grand total resolutions

$

59,960

$

2,101

 

$

59,296

$

2,331

 

 
Grand total resolutions as a % of nonperforming UPB

 

103.5

%

 

103.9

%

Discussion of results:

  • Resolution activities on $60.0 million of UPB in 3Q21 resulted in net gains of $2.1 million or 103.5% of UPB resolved
  • Long-term loan resolutions totaled $25.76 million in UPB and realized $1.4 million of gains
    ‒ Gains in 3Q21 were primarily comprised of default interest realized when the loans payoff or cure, and prepayment penalties on payoff if the loan is still within the prepayment window
  • Short-term loan resolutions totaled $34.2 million in UPB and realized $0.74 million of gains
    ‒ Gains in 3Q21 were primarily comprised of default interest realized when the loans payoff
    ‒ The UPB of short-term loans that paid current was $25.1 million in 3Q21, and increase from $7.8 million in 2Q21

Conference Call and Webcast

Velocity’s executive management team will host a conference call and webcast to review its financial results on Wednesday, November 3, 2021, 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 Velocity Financial’s 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 Wednesday, November 3, 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 November 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 #10160806. 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
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 held for sale, net

 

0

 

7,916

 

0

 

13,106

 

0

Loans held for investment, at fair value

 

1,360

 

1,370

 

1,364

 

1,539

 

3,327

Loans held for investment

 

2,265,922

 

2,057,046

 

1,983,435

 

1,924,489

 

1,977,236

Net deferred loan costs

 

29,775

 

26,707

 

25,070

 

23,600

 

23,850

Total loans, net

 

2,297,057

 

2,093,039

 

2,009,869

 

1,962,734

 

2,004,413

Accrued interest receivables

 

11,974

 

11,094

 

11,169

 

11,373

 

13,134

Receivables due from servicers

 

57,058

 

73,517

 

77,731

 

71,044

 

44,466

Other receivables

 

870

 

10,169

 

3,879

 

4,085

 

402

Real estate owned, net

 

17,905

 

20,046

 

14,487

 

15,767

 

14,653

Property and equipment, net

 

3,348

 

3,625

 

3,891

 

4,145

 

4,446

Deferred tax asset

 

17,026

 

13,196

 

9,246

 

6,654

 

1,832

Other assets

 

6,843

 

7,257

 

7,325

 

6,779

 

16,489

Total Assets

$

2,457,164

$

2,267,605

$

2,164,839

$

2,102,874

$

2,126,866

 
Liabilities and members' equity
Accounts payable and accrued expenses

$

79,360

$

70,049

$

65,003

$

63,361

$

61,859

Secured financing, net

 

163,449

 

164,053

 

129,666

 

74,982

 

74,776

Securitizations, net

 

1,623,674

 

1,558,163

 

1,453,386

 

1,579,019

 

1,670,930

Warehouse & repurchase facilities

 

258,491

 

151,872

 

203,314

 

75,923

 

19,541

Total Liabilities

 

2,124,974

 

1,944,137

 

1,851,369

 

1,793,285

 

1,827,106

 
Mezzanine Equity
Series A Convertible preferred stock

 

90,000

 

90,000

 

90,000

 

90,000

 

90,000

Stockholders' Equity
Stockholders' equity

 

242,190

 

233,468

 

223,470

 

219,589

 

209,760

Total Liabilities and members' equity

$

2,457,164

$

2,267,605

$

2,164,839

$

2,102,874

$

2,126,866

 
 
Book value per share

$

12.05

$

11.62

$

11.12

$

10.93

$

10.44

 
Shares outstanding

 

20,098

 

20,087

 

20,087

 

20,087

 

20,087

Velocity Financial, Inc.

Consolidated Statements of Income (Quarterly)

 
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

 

 

21,442

 

 

22,347

 

Net interest income - portfolio related

 

26,602

 

24,412

 

 

19,875

 

 

20,114

 

 

19,027

 

Interest expense - corporate debt

 

4,488

 

4,309

 

 

7,350

 

 

1,900

 

 

1,913

 

Net interest income

 

22,114

 

20,103

 

 

12,525

 

 

18,214

 

 

17,114

 

Provision for loan losses

 

228

 

(1,000

)

 

105

 

 

406

 

 

1,573

 

Net interest income after provision for loan losses

 

21,886

 

21,103

 

 

12,420

 

 

17,808

 

 

15,541

 

Other operating income
Gain on disposition of loans

 

306

 

2,391

 

 

2,839

 

 

4,855

 

 

(51

)

Unrealized gain/(loss) on fair value loans

 

0

 

20

 

 

(2

)

 

32

 

 

379

 

Other income (expense)

 

33

 

21

 

 

(36

)

 

(196

)

 

1,021

 

Other operating income (expense)

 

339

 

2,432

 

 

2,801

 

 

4,691

 

 

1,349

 

Total net revenues

 

22,225

 

23,535

 

 

15,221

 

 

22,499

 

 

16,890

 

 
Operating expenses
Compensation and employee benefits

 

4,738

 

4,546

 

 

5,186

 

 

4,135

 

 

5,692

 

Rent and occupancy

 

447

 

430

 

 

463

 

 

424

 

 

415

 

Loan servicing

 

2,014

 

1,922

 

 

1,867

 

 

1,977

 

 

2,168

 

Professional fees

 

736

 

795

 

 

533

 

 

1,415

 

 

1,051

 

Real estate owned, net

 

1,186

 

1,039

 

 

509

 

 

217

 

 

898

 

Other operating expenses

 

2,177

 

1,918

 

 

2,059

 

 

2,578

 

 

1,641

 

Total operating expenses

 

11,298

 

10,650

 

 

10,617

 

 

10,746

 

 

11,865

 

Income before income taxes

 

10,927

 

12,885

 

 

4,604

 

 

11,753

 

 

5,025

 

Income tax expense

 

2,905

 

3,432

 

 

1,208

 

 

2,177

 

 

1,544

 

Net income

$

8,022

$

9,453

 

$

3,396

 

$

9,576

 

$

3,481

 

Less: Deemed dividends on preferred stock

 

-

 

 

-

 

 

-

 

 

-

 

Less: Undistributed earnings allocated to participating securities

 

3,030

$

3,571

 

$

1,281

 

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

$

4,992

$

5,882

 

$

2,115

 

$

9,576

 

$

3,481

 

 
Basic earnings (loss) per share

$

0.25

$

0.29

 

$

0.11

 

$

0.48

 

$

0.17

 

 
Diluted earnings (loss) per common share

$

0.23

$

0.28

 

$

0.10

 

$

0.29

 

$

0.11

 

 
Basic weighted average common shares outstanding

 

20,090

 

20,087

 

 

20,087

 

 

20,087

 

 

20,087

 

 
Diluted weighted average common shares outstanding

 

34,212

 

33,960

 

 

33,407

 

 

32,793

 

 

32,435

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

 
Quarter Ended September 30, 2021 Quarter Ended June 30, 2021 Quarter Ended September 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

$

2,284

$

11,524

$

-

Loans held for investment

 

2,137,505

 

2,010,962

 

2,016,414

Total loans

$

2,139,789

$

46,923

8.77

%

$

2,022,486

$

44,978

8.90

%

$

2,016,414

$

41,374

8.21

%

 
Debt:
Warehouse and repurchase facilities

$

182,383

 

2,365

5.19

%

$

166,981

 

2,361

5.66

%

$

22,306

 

703

12.61

%

Securitizations

 

1,633,059

 

17,956

4.40

%

 

1,543,295

 

18,205

4.72

%

 

1,742,669

 

21,644

4.97

%

Total debt - portfolio related

 

1,815,442

 

20,321

4.48

%

 

1,710,276

 

20,566

4.81

%

 

1,764,975

 

22,347

5.07

%

Corporate debt

 

172,934

 

4,488

10.38

%

 

166,335

 

4,309

10.36

%

 

78,000

 

1,913

9.81

%

Total debt

$

1,988,376

$

24,809

4.99

%

$

1,876,611

$

24,875

5.30

%

$

1,842,975

$

24,260

5.27

%

 
Net interest spread - portfolio related (2)

4.29

%

4.08

%

3.14

%

Net interest margin - portfolio related

4.97

%

4.83

%

3.77

%

 
Net interest spread - total company (3)

3.78

%

3.59

%

2.94

%

Net interest margin - total company

4.13

%

3.98

%

3.39

%

 
(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)

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

$

8,022

$

9,453

 

$

3,396

$

9,576

$

3,481

Recovery of Loan Loss Provision

 

-

$

(1,000

)

 

-

 

-

 

-

Nonrecurring debt amortization

 

-

 

-

 

 

3,326

 

-

 

-

COVID-19 Impact

 

-

 

-

 

 

-

 

-

 

-

Workforce reduction costs

 

-

 

-

 

 

-

 

-

 

432

Core Income

$

8,022

$

8,453

 

$

6,722

$

9,576

$

3,913

 
Core diluted earnings per share

$

0.23

$

0.25

 

$

0.20

$

0.29

$

0.12

 

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