Exhibit 99.1
Investors and Media:
Chris Oltmann
(818) 532-3708
Velocity Financial, Inc. Announces
Second Quarter 2020 Results
Second Quarter Highlights:
|
|
▪ |
Net Income of $2.1 million and “Core” EPS of $0.17(1) |
|
|
▪ |
The preferred stock deemed dividend reduced common stockholders’ equity and correspondingly increased preferred stock under mezzanine equity, resulting in a non-cash loss per common share of $(2.33) during the quarter |
|
|
▪ |
Eliminated all mark-to-market risk for assets previously financed with legacy warehouse lines |
|
|
‒ |
Completed VCC 2020-2 securitization totaling $128 million in June |
|
|
‒ |
Completed the VCC 2020-MC1 securitization totaling $276 million in July |
|
|
▪ |
Book value per common share as of June 30, 2020 was $10.26 compared to $12.47 as of March 31, 2020 |
|
|
▪ |
Preparations to restart loan production operations largely complete, targeting early September resumption of new lending activities |
|
|
▪ |
Continued strong recovery rate of 102 percent of unpaid principal balance (UPB) on resolved delinquent assets |
Westlake Village, CA – August 12, 2020 – Velocity Financial, Inc. (NYSE:VEL) (“Velocity” or the “Company”) reported a loss per common share of $(2.33) resulting from a non-cash deemed dividend on preferred stock issued during the quarter. Net income for the second quarter of 2020 was $2.1 million, compared to net income of $2.6 million in the prior quarter. “Core” net income(1) for the second quarter of 2020 was $3.4 million, or $0.17 per share. “Core” earnings(1) excludes the increase to the macroeconomic model forecast of the CECL loan loss reserve of ($0.06) per share due to a more adverse outlook regarding the impacts of the COVID-19 pandemic and the ($2.44) per share impact of the preferred stock deemed dividend. Book value of common stockholders’ equity was $206.0 million and Convertible Preferred stock was $90.0 million as of June 30, 2020.
“In light of the unprecedented environment we faced, I am pleased with our second quarter results and the tremendous accomplishments of the Velocity team to address
1 | Page
Second Quarter 2020 Earnings
the pandemic’s impact on our company and preparations to restart our loan production operations in the third quarter,” said Chris Farrar, President and CEO. “Net income for the second quarter and year-to-date was positive and reflects the resiliency of Velocity’s business model under extreme conditions. While challenges remain, we are now fully devoted to restarting our loan production activities, and I am excited about driving growth and future returns for our stockholders.”
Second Quarter Operating Results
|
KEY PERFORMANCE INDICATORS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
2Q 2020 |
|
|
1Q 2020 |
|
|
$ Variance |
|
|
% Variance |
|
||||
|
Pretax income |
|
$ |
2,625 |
|
|
$ |
3,727 |
|
|
$ |
(1,102 |
) |
|
|
(30 |
)% |
|
Net income |
|
$ |
2,141 |
|
|
$ |
2,579 |
|
|
$ |
(438 |
) |
|
|
(17 |
)% |
|
Preferred stock deemed dividend(1) |
|
$ |
(48,955 |
) |
|
|
- |
|
|
- |
|
|
- |
|
||
|
Diluted (loss) earnings per share |
|
$ |
(2.33 |
) |
|
$ |
0.13 |
|
|
$ |
(2.46 |
) |
|
|
(1915 |
)% |
|
"Core" Earnings(2) |
|
$ |
3,408 |
|
|
$ |
5,804 |
|
|
$ |
(2,396 |
) |
|
|
(41 |
)% |
|
"Core" EPS(2) |
|
$ |
0.17 |
|
|
$ |
0.29 |
|
|
$ |
(0.12 |
) |
|
|
(41 |
)% |
|
Pretax return on equity |
|
|
4.9 |
% |
|
|
6.6 |
% |
|
|
(2 |
)% |
|
|
(25 |
)% |
|
Return on equity |
|
|
4.0 |
% |
|
|
4.6 |
% |
|
|
(1 |
)% |
|
|
(12 |
)% |
|
Net interest margin - portfolio |
|
|
3.5 |
% |
|
|
4.2 |
% |
|
|
(1 |
)% |
|
|
(15 |
)% |
|
Avergage common equity |
|
$ |
212,407 |
|
|
$ |
225,125 |
|
|
$ |
74,737 |
|
|
|
(6 |
)% |
|
(1) |
Charged against common equity |
|
(2) |
Core earnings and and Core earnings per share are a non-GAAP measure. |
Please see the reconciliation to GAAP net income at the end of this release.
Discussion of results:
|
|
▪ |
2Q20 “Core” EPS(1) was $0.17 per share and reflects a $2.50 per share adjustments for the following: |
|
|
‒ |
$0.06 per share impact driven by the increase in the macroeconomic forecast of the CECL loan loss reserve resulting from a more-adverse outlook related to the impacts of the COVID-19 pandemic |
|
|
‒ |
$2.44 per share impact related the non-cash deemed dividend on preferred stock |
|
|
▪ |
The preferred stock deemed dividend reduced common stockholders’ equity and correspondingly increased preferred stock under mezzanine equity. This transaction reflects the redemption value of the preferred stock as of June 30, 2020. |
2 | Page
Second Quarter 2020 Earnings
|
TOTAL LOAN PORTFOLIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
2Q 2020 |
|
|
1Q 2020 |
|
|
$ Variance |
|
|
% Variance |
|
||||
|
Held for Investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor 1-4 Rental |
|
$ |
841 |
|
|
$ |
872 |
|
|
$ |
(30 |
) |
|
|
(3 |
)% |
|
Mixed Use |
|
|
260 |
|
|
|
265 |
|
|
|
(5 |
) |
|
|
(2 |
)% |
|
Multi-Family |
|
|
193 |
|
|
|
201 |
|
|
|
(8 |
) |
|
|
(4 |
)% |
|
Retail |
|
|
178 |
|
|
|
181 |
|
|
|
(4 |
) |
|
|
(2 |
)% |
|
All Other |
|
|
373 |
|
|
|
384 |
|
|
|
(11 |
) |
|
|
(3 |
)% |
|
Total |
|
$ |
1,845 |
|
|
$ |
1,903 |
|
|
$ |
(58 |
) |
|
|
(3 |
)% |
|
Held for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor 1-4 Rental |
|
$ |
214 |
|
|
$ |
224 |
|
|
$ |
(10 |
) |
|
|
(4 |
)% |
|
Total Managed Loan Portfolio |
|
$ |
2,059 |
|
|
$ |
2,127 |
|
|
$ |
(68 |
) |
|
|
(3 |
)% |
|
Key loan portfolio metrics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan count |
|
|
6,294 |
|
|
|
6,504 |
|
|
|
|
|
|
|
|
|
|
Weighted average loan to value |
|
|
66 |
% |
|
|
66 |
% |
|
|
|
|
|
|
|
|
|
Weighted average total portfolio yield |
|
|
7.59 |
% |
|
|
8.57 |
% |
|
|
|
|
|
|
|
|
|
Weighted average total debt cost |
|
|
4.83 |
% |
|
|
5.88 |
% |
|
|
|
|
|
|
|
|
Discussion of results:
|
|
▪ |
The weighted average total portfolio yield was 7.59 percent in the second quarter, a decrease of 98 basis points from the first quarter of 2020, primarily driven by an increase nonaccrual loans |
|
|
▪ |
The 105 basis point decrease in portfolio related debt cost was primarily attributable to the lower corporate debt expense resulting from the paydown of corporate debt upon completion of our IPO |
|
|
▪ |
Velocity’s total loan portfolio (comprised of loans held for sale and loans held for investment) was $2.059 billion as of June 30, 2020, a 3 percent quarter-over-quarter decrease from the first quarter of 2020 |
|
|
▪ |
The weighted average loan-to-value ratio of the total portfolio was 66 percent as of June 30, 2020, essentially unchanged from the prior quarter |
|
LOAN PRODUCTION VOLUMES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
2Q 2020 |
|
|
1Q 2020 |
|
|
$ Variance |
|
|
% Variance |
|
||||
|
Investor 1-4 Rental |
|
$ |
- |
|
|
$ |
65 |
|
|
$ |
(65 |
) |
|
|
(100 |
)% |
|
Traditional Perm. |
|
|
- |
|
|
|
86 |
|
|
|
(86 |
) |
|
|
(100 |
)% |
|
Short-term loans |
|
|
- |
|
|
|
96 |
|
|
|
(96 |
) |
|
|
(100 |
)% |
|
Total loan production |
|
$ |
- |
|
|
$ |
248 |
|
|
$ |
(248 |
) |
|
|
(100 |
)% |
3 | Page
Second Quarter 2020 Earnings
|
|
▪ |
In late March, Velocity temporarily suspended loan origination activities, which resulted in origination volume lower than originally forecast in the first quarter of 2020 and no loan production in the second quarter of 2020. |
|
|
▪ |
The completion of the VCC 2020-2 and the VCC 2020-MC1 securitizations in June and July, respectively, marks the culmination of our strategy to find permanent financing solutions for our assets previously financed with warehouse facilities. With this objective achieved, the Company can now devote its full attention to restarting loan production operations in early September 2020. |
|
NET REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
2Q 2020 |
|
|
1Q 2020 |
|
|
$ Variance |
|
|
% Variance |
|
||||
|
Interest income |
|
$ |
39,755 |
|
|
$ |
44,637 |
|
|
$ |
(4,882 |
) |
|
|
(11 |
)% |
|
Interest expense - portfolio related |
|
|
(21,189 |
) |
|
|
(22,848 |
) |
|
$ |
1,659 |
|
|
|
(7 |
)% |
|
Net Interest Income |
|
$ |
18,566 |
|
|
$ |
21,789 |
|
|
$ |
(3,223 |
) |
|
|
(15 |
)% |
|
Interest expense - corporate debt |
|
|
(1,894 |
) |
|
|
(6,342 |
) |
|
$ |
4,448 |
|
|
|
(70 |
)% |
|
CECL provision |
|
|
(1,800 |
) |
|
|
(1,289 |
) |
|
$ |
(511 |
) |
|
|
40 |
% |
|
Gain on loan sales |
|
|
155 |
|
|
|
2,617 |
|
|
|
(2,462 |
) |
|
|
(94 |
)% |
|
Other Operating (loss) income |
|
|
(1,494 |
) |
|
|
(998 |
) |
|
|
(496 |
) |
|
|
50 |
% |
|
Total Net Revenues |
|
$ |
13,533 |
|
|
$ |
15,777 |
|
|
$ |
(2,244 |
) |
|
|
(14 |
)% |
Discussion of results:
|
|
▪ |
Net Revenue was lower by $2.2 million driven primarily driven by a decrease in gains from loan sales caused by our decision to hold the short-term loans to maturity |
|
|
▪ |
The CECL provision increase was driven primarily by an increase in the macroeconomic model forecast of the reserve, resulting from a more-adverse outlook related to the sustained impacts of the COVID-19 pandemic |
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
2Q 2020 |
|
|
1Q 2020 |
|
|
$ Variance |
|
|
% Variance |
|
||||
|
Compensation and employee benefits |
|
$ |
5,863 |
|
|
$ |
5,041 |
|
|
$ |
822 |
|
|
|
16 |
% |
|
Rent and occupancy |
|
|
448 |
|
|
|
455 |
|
|
|
(7 |
) |
|
|
(2 |
)% |
|
Loan servicing |
|
|
1,754 |
|
|
|
2,239 |
|
|
|
(485 |
) |
|
|
(22 |
)% |
|
Professional fees |
|
|
588 |
|
|
|
1,184 |
|
|
|
(596 |
) |
|
|
(50 |
)% |
|
Real estate owned, net |
|
|
408 |
|
|
|
1,134 |
|
|
|
(726 |
) |
|
|
(64 |
)% |
|
Other expenses |
|
|
1,847 |
|
|
|
1,998 |
|
|
|
(151 |
) |
|
|
(8 |
)% |
|
Total expenses |
|
$ |
10,908 |
|
|
$ |
12,051 |
|
|
$ |
(1,143 |
) |
|
|
(9 |
)% |
4 | Page
Second Quarter 2020 Earnings
|
|
▪ |
Operating expenses were $1.1 million lower as a result of lower REO valuation expenses and lower one-time professional fees related to our IPO, offset by slightly higher compensation expenses. |
|
SECURITIZATIONS |
|
|
|
|
|
|
|
|
|
|
Trusts |
Securities Issued |
|
Balance at 6/30/2020 |
|
W.A. Rate |
|
|||
|
2011-1 Trust |
$ |
61,042 |
|
$ |
- |
|
- |
|
|
|
2014-1 Trust |
|
161,076 |
|
|
26,659 |
|
|
7.29 |
% |
|
2015-1 Trust |
|
285,457 |
|
|
44,394 |
|
|
7.12 |
% |
|
2016-1 Trust |
|
319,809 |
|
|
67,333 |
|
|
7.42 |
% |
|
2016-2 Trust |
|
166,853 |
|
|
52,341 |
|
|
6.34 |
% |
|
2017-1 Trust |
|
211,910 |
|
|
88,950 |
|
|
4.79 |
% |
|
2017-2 Trust |
|
245,601 |
|
|
146,611 |
|
|
3.34 |
% |
|
2018-1 Trust |
|
176,816 |
|
|
118,605 |
|
|
4.01 |
% |
|
2018-2 Trust |
|
307,988 |
|
|
219,591 |
|
|
4.49 |
% |
|
2019-1 Trust |
|
235,580 |
|
|
200,484 |
|
|
4.04 |
% |
|
2019-2 Trust |
|
207,020 |
|
|
183,578 |
|
|
3.41 |
% |
|
2019-3 Trust |
|
154,419 |
|
|
137,789 |
|
|
3.27 |
% |
|
2020-1 Trust |
|
248,700 |
|
|
240,334 |
|
|
2.85 |
% |
|
2020-2 Trust |
|
96,352 |
|
|
95,963 |
|
|
4.50 |
% |
|
|
$ |
2,878,623 |
|
$ |
1,622,632 |
|
|
|
|
Discussion of results:
|
|
▪ |
The Company issued its second securitization of 2020 (VCC 2020-2) in June, and our fourteenth securitization overall totaling $96 million of securities issued and a weighted average rate of 4.50 percent. |
|
RESOLUTION ACTIVITY - SECOND QUARTER 2020 |
|
|||||||
|
($ in thousands) |
|
UPB $ |
|
|
Gain / (Loss) $ |
|
||
|
Paid in full |
|
$ |
6,658 |
|
|
$ |
336 |
|
|
Paid current |
|
|
19,635 |
|
|
|
208 |
|
|
REO sold |
|
|
1,406 |
|
|
|
38 |
|
|
|
|
$ |
27,699 |
|
|
$ |
582 |
|
5 | Page
Second Quarter 2020 Earnings
|
|
▪ |
Continued strong recovery rate, realizing 102 percent of nonperforming UPB resolved during the quarter |
|
|
▪ |
Nonaccrual loans paid in full during the second quarter of 2020 totaled $6.7 million in UPB with a $0.34 million net gain on resolutions. Gains primarily reflect the collection of default interest, in addition to regular interest and prepayment penalties |
|
|
▪ |
Loans paid current during the second quarter of 2020 totaled $19.6 million in UPB with a $0.21 million net gain. Gains primarily reflects collections of default interest, in addition to regular interest, and the loan remains in our portfolio |
|
|
▪ |
REO sales totaled $1.4 million for net gains of $0.04 million |
Conference Call Information
The Company will host a webcast to discuss the second quarter 2020 results on August 12, 2020, at 5:00 p.m. Eastern Time. Listeners can access the webcast via the link below:
https://services.choruscall.com/links/vel200812GlpLAgtc.html
The earnings discussion can also be accessed by dialing 1-866-807-9684 in the U.S. and Canada. International callers must dial 1-412-317-5415. Callers should ask to be joined into the Velocity Financial, Inc. earnings call. 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. An audio replay of the call will also be available on Velocity's website following the call.
A replay of the call will be available through midnight on August 19, 2020 and can be accessed by dialing 1-877-344-7529 in the U.S. and 1-855-669-9658 in Canada or
1-412-317-0088 internationally and entering access code #10146597. The replay will also be available on the Investor Relations section of the Company's website a under "Events and Presentations.”
6 | Page
Second Quarter 2020 Earnings
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 it has built and refined over 15 years.
(1) “Core” EPS and “Core” Earnings are a non-GAAP financial measure the Company presents to help investors better understand unique items that impact earnings. For a reconciliation of GAAP EPS to “Core” EPS, please refer to the sections of this press release titled “Non-GAAP Financial Measures” and “Adjusted Financial Metric Reconciliation to GAAP Net Income”
(2) The total loan portfolio at June 30, 2020 was comprised of $1.845 billion in UPB of held for investment loans and $0.214 billion of held for sale loans.
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses Core Earnings and Core Earnings Per Share, which are non-GAAP financial measures. For more information on Core Earnings, 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 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," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases. 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
7 | Page
Second Quarter 2020 Earnings
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 course and severity of the COVID-19 pandemic, and its direct and indirect impacts (2) general economic conditions and real estate market conditions, (3) regulatory and/or legislative changes, (4) our ability to retain and attract loan originators and other professionals, and (5) changes in federal government fiscal and monetary policies.
For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled ''Risk Factors" previously disclosed in our Form 10-K filed with the SEC on April 7, 2020 and Form 10-Q filed with the SEC on May 14, 2020. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.
8 | Page
Second Quarter 2020 Earnings
Consolidated Statements of Financial Condition
(Unaudited)
|
|
|
Quarter Ended |
|
|||||||||||||||||||||||||
|
|
|
6/30/2020 |
|
|
|
|
3/31/2020 |
|
|
|
|
12/31/2019 |
|
|
|
|
09/30/2019 |
|
|
|
|
6/30/2019 |
|
|||||
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
9,803 |
|
|
|
|
$ |
7,649 |
|
|
|
|
$ |
21,465 |
|
|
|
|
$ |
8,849 |
|
|
|
|
$ |
14,105 |
|
|
Restricted cash |
|
|
6,735 |
|
|
|
|
|
4,483 |
|
|
|
|
|
6,087 |
|
|
|
|
|
3,152 |
|
|
|
|
|
1,542 |
|
|
Loans held for sale, net |
|
|
212,344 |
|
|
|
|
|
223,123 |
|
|
|
|
|
214,467 |
|
|
|
|
|
170,440 |
|
|
|
|
|
82,308 |
|
|
Loans held for investment, at fair value |
|
|
2,956 |
|
|
|
|
|
2,987 |
|
|
|
|
|
2,960 |
|
|
|
|
|
2,936 |
|
|
|
|
|
2,974 |
|
|
Loans held for investment |
|
|
1,836,065 |
|
|
|
|
|
1,895,684 |
|
|
|
|
|
1,837,646 |
|
|
|
|
|
1,751,178 |
|
|
|
|
|
1,660,387 |
|
|
Net deferred loan costs |
|
|
25,754 |
|
|
|
|
|
26,801 |
|
|
|
|
|
25,714 |
|
|
|
|
|
24,757 |
|
|
|
|
|
23,346 |
|
|
Total loans, net |
|
|
2,077,119 |
|
|
|
|
|
2,148,595 |
|
|
|
|
|
2,080,787 |
|
|
|
|
|
1,949,311 |
|
|
|
|
|
1,769,015 |
|
|
Accrued interest receivables |
|
|
17,793 |
|
|
|
|
|
14,470 |
|
|
|
|
|
13,295 |
|
|
|
|
|
12,450 |
|
|
|
|
|
11,326 |
|
|
Receivables due from servicers |
|
|
36,028 |
|
|
|
|
|
37,884 |
|
|
|
|
|
49,659 |
|
|
|
|
|
38,349 |
|
|
|
|
|
33,618 |
|
|
Other receivables |
|
|
4,609 |
|
|
|
|
|
2,516 |
|
|
|
|
|
4,778 |
|
|
|
|
|
7,585 |
|
|
|
|
|
3,321 |
|
|
Real estate owned, net |
|
|
15,648 |
|
|
|
|
|
16,164 |
|
|
|
|
|
13,068 |
|
|
|
|
|
15,806 |
|
|
|
|
|
14,221 |
|
|
Property and equipment, net |
|
|
4,718 |
|
|
|
|
|
4,964 |
|
|
|
|
|
4,680 |
|
|
|
|
|
4,903 |
|
|
|
|
|
5,045 |
|
|
Deferred tax asset |
|
|
5,556 |
|
|
|
|
|
10,111 |
|
|
|
|
|
8,280 |
|
|
|
|
|
4,127 |
|
|
|
|
|
3,228 |
|
|
Other assets |
|
|
9,042 |
|
|
|
|
|
10,519 |
|
|
|
|
|
12,667 |
|
|
|
|
|
17,219 |
|
|
|
|
|
15,383 |
|
|
Total Assets |
|
$ |
2,187,051 |
|
|
|
|
$ |
2,257,354 |
|
|
|
|
$ |
2,214,766 |
|
|
|
|
$ |
2,061,751 |
|
|
|
|
$ |
1,870,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and members' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
55,938 |
|
|
|
|
$ |
58,591 |
|
|
|
|
$ |
56,146 |
|
|
|
|
$ |
41,957 |
|
|
|
|
$ |
30,832 |
|
|
Secured financing, net |
|
|
74,571 |
|
|
|
|
|
74,364 |
|
|
|
|
|
145,599 |
|
|
|
|
|
145,285 |
|
|
|
|
|
127,061 |
|
|
Securitizations, net |
|
|
1,599,719 |
|
|
|
|
|
1,576,431 |
|
|
|
|
|
1,438,629 |
|
|
|
|
|
1,377,733 |
|
|
|
|
|
1,261,456 |
|
|
Warehouse & repurchase facilities and other |
|
|
160,796 |
|
|
|
|
|
297,537 |
|
|
|
|
|
421,548 |
|
|
|
|
|
349,115 |
|
|
|
|
|
279,960 |
|
|
Total Liabilities |
|
|
1,891,024 |
|
|
|
|
|
2,006,924 |
|
|
|
|
|
2,061,922 |
|
|
|
|
|
1,914,090 |
|
|
|
|
|
1,699,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mezzanine Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C preferred units |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
27,399 |
|
|||
|
Series A Convertible preferred stock |
|
|
90,000 |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
||||
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
206,027 |
|
|
|
|
|
250,430 |
|
|
|
|
|
152,844 |
|
|
|
|
|
147,661 |
|
|
|
|
|
144,096 |
|
|
Total Liabilities and members' equity |
|
$ |
2,187,051 |
|
|
|
|
$ |
2,257,354 |
|
|
|
|
$ |
2,214,766 |
|
|
|
|
$ |
2,061,751 |
|
|
|
|
$ |
1,870,804 |
|
9 | Page
Second Quarter 2020 Earnings
Consolidated Statements of Income
(Unaudited)
|
|
|
Quarter Ended |
|
|||||||||||||||||||
|
$ in thousands) |
|
6/30/2020 |
|
|
3/31/2020 |
|
|
12/31/2019 |
|
|
|
|
09/30/2019 |
|
|
06/30/2019 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
39,755 |
|
|
$ |
44,637 |
|
|
$ |
44,124 |
|
|
|
|
$ |
40,379 |
|
|
$ |
36,884 |
|
|
Interest expense - portfolio related |
|
|
21,189 |
|
|
|
22,848 |
|
|
|
22,689 |
|
|
|
|
|
21,827 |
|
|
|
20,324 |
|
|
Net interest income - portfolio related |
|
|
18,566 |
|
|
|
21,789 |
|
|
|
21,435 |
|
|
|
|
|
18,552 |
|
|
|
16,560 |
|
|
Interest expense - corporate debt |
|
|
1,894 |
|
|
|
6,342 |
|
|
|
4,070 |
|
|
|
|
|
3,842 |
|
|
|
3,353 |
|
|
Net interest income |
|
|
16,672 |
|
|
|
15,447 |
|
|
|
17,365 |
|
|
|
|
|
14,710 |
|
|
|
13,207 |
|
|
Provision for loan losses |
|
|
1,800 |
|
|
|
1,289 |
|
|
|
242 |
|
|
|
|
|
338 |
|
|
|
212 |
|
|
Net interest income after provision for loan losses |
|
|
14,872 |
|
|
|
14,157 |
|
|
|
17,123 |
|
|
|
|
|
14,372 |
|
|
|
12,995 |
|
|
Other operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues |
|
|
13,533 |
|
|
|
15,777 |
|
|
|
17,956 |
|
|
|
|
|
14,160 |
|
|
|
13,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and employee benefits |
|
|
5,863 |
|
|
|
5,041 |
|
|
|
3,992 |
|
|
|
|
|
3,712 |
|
|
|
3,801 |
|
|
Rent and occupancy |
|
|
448 |
|
|
|
455 |
|
|
|
426 |
|
|
|
|
|
369 |
|
|
|
398 |
|
|
Loan servicing |
|
|
1,754 |
|
|
|
2,239 |
|
|
|
1,939 |
|
|
|
|
|
1,957 |
|
|
|
1,637 |
|
|
Professional fees |
|
|
588 |
|
|
|
1,184 |
|
|
|
469 |
|
|
|
|
|
398 |
|
|
|
534 |
|
|
Real estate owned, net |
|
|
408 |
|
|
|
1,134 |
|
|
|
1,300 |
|
|
|
|
|
485 |
|
|
|
561 |
|
|
Other operating expenses |
|
|
1,847 |
|
|
|
1,998 |
|
|
|
1,688 |
|
|
|
|
|
1,563 |
|
|
|
1,393 |
|
|
Total operating expenses |
|
|
10,908 |
|
|
|
12,051 |
|
|
|
9,814 |
|
|
|
|
|
8,484 |
|
|
|
8,324 |
|
|
Income before income taxes |
|
|
2,625 |
|
|
|
3,727 |
|
|
|
8,142 |
|
|
|
|
|
5,676 |
|
|
|
4,979 |
|
|
Income tax expense |
|
|
484 |
|
|
|
1,148 |
|
|
|
2,960 |
|
|
|
|
|
1,796 |
|
|
|
1,444 |
|
|
Net income |
|
$ |
2,141 |
|
|
$ |
2,579 |
|
|
$ |
5,182 |
|
|
|
|
$ |
3,880 |
|
|
$ |
3,535 |
|
|
Less deemed dividends on preferreds stock |
|
$ |
48,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss allocated to common shareholders |
|
$ |
(46,814 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share |
|
$ |
(2.33 |
) |
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted avergage common shares outstanding |
|
$ |
20,087 |
|
|
$ |
20,087 |
|
|
|
- |
|
|
|
|
|
- |
|
|
|
- |
|
10 | Page
Second Quarter 2020 Earnings
Velocity Financial, Inc.
Net Interest Margin ‒ Portfolio Related and Total Company
(Unaudited)
|
|
|
Quarter Ended June 30, 2020 |
|
|
Quarter Ended March 31, 2020 |
|
|
Quarter Ended June 30, 2019 |
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
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 |
|
$ |
220,047 |
|
|
|
|
|
|
|
|
|
|
$ |
202,474 |
|
|
|
|
|
|
|
|
|
|
$ |
60,940 |
|
|
|
|
|
|
|
|
|
|
Loans held for investment |
|
|
1,875,260 |
|
|
|
|
|
|
|
|
|
|
|
1,881,308 |
|
|
|
|
|
|
|
|
|
|
|
1,632,626 |
|
|
|
|
|
|
|
|
|
|
Total loans |
|
$ |
2,095,307 |
|
|
$ |
39,755 |
|
|
|
7.59 |
% |
|
$ |
2,083,783 |
|
|
$ |
44,637 |
|
|
|
8.57 |
% |
|
$ |
1,693,566 |
|
|
$ |
36,884 |
|
|
|
8.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse and repurchase facilities |
|
$ |
242,676 |
|
|
|
2,632 |
|
|
|
|
|
|
|
347,350 |
|
|
|
4,301 |
|
|
|
|
|
|
$ |
179,193 |
|
|
|
2,692 |
|
|
|
|
|
|
Securitizations |
|
|
1,589,191 |
|
|
|
18,557 |
|
|
|
|
|
|
|
1,542,318 |
|
|
|
18,547 |
|
|
|
|
|
|
|
1,325,571 |
|
|
|
17,632 |
|
|
|
|
|
|
Total debt - portfolio related |
|
|
1,831,867 |
|
|
|
21,189 |
|
|
|
4.63 |
% |
|
|
1,889,668 |
|
|
|
22,848 |
|
|
|
4.84 |
% |
|
|
1,504,764 |
|
|
|
20,324 |
|
|
|
5.40 |
% |
|
Corporate debt |
|
|
78,000 |
|
|
|
1,895 |
|
|
|
|
|
|
|
94,468 |
|
|
|
6,342 |
|
|
|
|
|
|
|
127,594 |
|
|
|
3,353 |
|
|
|
|
|
|
Total debt |
|
$ |
1,909,867 |
|
|
$ |
23,084 |
|
|
|
4.83 |
% |
|
|
1,984,136 |
|
|
|
29,190 |
|
|
|
5.88 |
% |
|
$ |
1,632,357 |
|
|
$ |
23,677 |
|
|
|
5.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread - portfolio related (1) |
|
|
|
|
|
|
|
|
|
|
2.96 |
% |
|
|
|
|
|
|
|
|
|
|
3.73 |
% |
|
|
|
|
|
|
|
|
|
|
3.31 |
% |
|
Net interest margin - portfolio related |
|
|
|
|
|
|
|
|
|
|
3.54 |
% |
|
|
|
|
|
|
|
|
|
|
4.18 |
% |
|
|
|
|
|
|
|
|
|
|
3.91 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread - total company (2) |
|
|
|
|
|
|
|
|
|
|
2.75 |
% |
|
|
|
|
|
|
|
|
|
|
2.68 |
% |
|
|
|
|
|
|
|
|
|
|
2.91 |
% |
|
Net interest margin - total company |
|
|
|
|
|
|
|
|
|
|
3.18 |
% |
|
|
|
|
|
|
|
|
|
|
2.97 |
% |
|
|
|
|
|
|
|
|
|
|
3.12 |
% |
|
(1) |
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. |
|
(2) |
Net interest spread - total company is the difference between the yield on our loan portfolio and the interest rates paid on our total debt. |
11 | Page
Second Quarter 2020 Earnings
Velocity Financial, Inc.
Adjusted Financial Metric Reconciliation to GAAP Net Income
(Unaudited)
|
"CORE" EARNINGS PER SHARE |
|
|||||||
|
|
|
Quarter Ended |
|
|||||
|
($ in thousands) |
|
6/30/2020 |
|
|
3/31/2020 |
|
||
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,141 |
|
|
$ |
2,579 |
|
|
One-time Debt Amortization & Expenses |
|
|
- |
|
|
|
2,610 |
|
|
COVID-19 Impact |
|
|
1,267 |
|
|
|
615 |
|
|
"Core" Earnings |
|
$ |
3,408 |
|
|
$ |
5,804 |
|
|
|
|
|
|
|
|
|
|
|
|
"Core" EPS |
|
$ |
0.17 |
|
|
$ |
0.29 |
|
|
Diluted weighted average common shares outstanding |
|
$ |
20,087 |
|
|
$ |
20,087 |
|
12 | Page
