Velocity Financial, Inc. Announces Fourth Quarter and Full Year 2019 Results

Fourth Quarter Highlights:

  • Record total production of $321 million in UPB
  • Net interest income of $17.1 million
  • Net income of $5.2 million and pro forma diluted earnings per share of $0.44(1)
  • Net operating income of $12.2 million(2)
  • Total loan portfolio of $2.1 billion(3)
  • Completed third securitization of 2019 for $154 million

Full-year Highlights:

  • Record total production of $1.01 billion in UPB
  • Net interest income of $57.9 million
  • Net income of $17.3 million
  • Completed three securitizations totaling $597 million

WESTLAKE VILLAGE, Calif.--()--Velocity Financial, Inc. (NYSE:VEL) (“Velocity”) reported net interest income of $17.1 million, an increase of 40 percent from the fourth quarter of 2018. Net income for the fourth quarter of 2019 was $5.2 million, or $0.44 per diluted share on a pro forma basis1, an increase of 167 percent from the fourth quarter of the prior year. Net operating income was $12.2 million, an 81 percent increase from the fourth quarter of 2018 and pro forma book value at December 31, 2019 was $13.01 per share.

President and CEO, Chris Farrar commented, “We are very pleased with the company’s performance in the fourth quarter and for the full year 2019, with results largely at the mid-points of the ranges we provided in our IPO prospectus filed on January 17th.”

Mr. Farrar continued, “Over the past two weeks, the Capital Markets have become increasingly volatile. In particular, prices for mortgage assets across the industry have been adversely impacted by the expected economic ramifications stemming from the COVID-19 pandemic. To proactively address these unprecedented events, we have entered into an agreement with our original sponsors, Snow Phipps and PIMCO to issue $45 million of convertible preferred stock and warrants. We have also temporarily suspended our loan origination operations until the current market volatility subsides, and entered into an agreement with our warehouse repurchase lending partners to provide a more flexible and stable financing solution for our recently originated whole loans. Together, these measures have significantly enhanced the strength of the company’s balance sheet and liquidity profile. Furthermore, it is our expectation that delinquencies in our loan portfolio will increase and we are implementing strategies to address this challenge, including redeployment of production staff to our internal Special Servicing department, enhanced portfolio monitoring and expanded borrower outreach. While it is still too early to predict how loan performance will be impacted, we expect that our large in-place loan portfolio will continue to generate significant cash flow and earnings for Velocity.”

Fourth Quarter Operating Results

 
 
LOAN PRODUCTION VOLUMES  
($ in millions) 4Q 2019 Q4 2018 $ Variance % Variance
Investor 1-4 Perm.

$

95

$

69

$

26

37

%

Traditional Perm.

 

103

 

82

 

22

27

%

Short-term loans

 

123

 

61

 

63

103

%

Total loan production

$

321

$

211

$

110

52

%

Broker relationships

 

3,256

 

2,530

 

726

29

%

Discussion of results:

  • We experienced strong demand for financing from property investors during the quarter, supported by strong rental markets and continued real estate price appreciation for both commercial and residential real estate
  • Loan origination volume in the fourth quarter of 2019 totaled $321 million, a 52 percent increase from $211 million in the fourth quarter of 2018
  • Loan origination volume growth was primarily driven by a 103 percent year-over-year growth in short-term loans. These loans typically serve as an interim solution for borrowers and/or properties that do not meet the investment criteria of our primary 30-year product
  • Investor 1-4 Permanent loans provide a long-term debt financing solution for investors in residential rental properties. Fourth quarter origination volumes rose 37 percent from the fourth quarter of 2018
  • Traditional Permanent loans are secured by traditional commercial and multi-family real estate. Fourth quarter origination volumes rose 27 percent from the fourth quarter of 2018
  • Broker relationships reached 3,256 at December 31, 2019, up from 2,530 at December 31, 2018
TOTAL LOAN PORTFOLIO      
($ in millions) 4Q 2019 Q4 2018   $ Variance   % Variance
Held for Investment        
Investor 1-4 Perm    

$

859

 

$

732

 

 

$

128

 

17

%

Mixed Use    

 

251

 

 

203

 

 

 

48

 

24

%

Multi-Family    

 

198

 

 

179

 

 

 

19

 

11

%

Retail    

 

180

 

 

151

 

 

 

29

 

19

%

All Other    

 

355

 

 

288

 

 

 

67

 

23

%

Total    

$

1,843

 

$

1,552

 

 

$

291

 

19

%

Held for Sale        
Short-term loans    

$

216

 

$

79

 

 

$

137

 

172

%

Total Managed Loan Portfolio

$

2,059

 

$

1,631

 

 

$

428

 

26

%

Key loan portfolio metrics:        
Total loan count    

 

6,373

 

 

5,171

 

   
Weighted average loan to value    

 

66

%

 

63

%

   
Weighted average total portfolio yield    

 

8.89

%

 

8.62

%

   
Weighted average total debt cost    

 

5.44

%

 

5.68

%

   

Discussion of results:

  • Our total loan portfolio continued its steady growth during 2019, driven by strong loan production growth sourced through our nationwide production platform
  • Loans held for investment totaled $1.84 billion at December 31, 2019, a 19 percent year-over-year increase. Loans held for investment have grown at a 36 percent compounded annual growth rate over the last five years
  • Loans held for sale totaled $216 million, a 172 percent increase from the same period a year ago
  • During the fourth quarter, net loan additions to the portfolio totaled $131 million in UPB. For the full year 2019, net loan additions were $428 million in UPB.
  • We introduced a 30-year fixed rate loan product in the second quarter that has been met with strong borrower demand and comprised 17 percent of our held for investment portfolio at December 31, 2019. As production increases, we expect that this product will gradually increase the duration of our portfolio.
  • We have maintained our underwriting discipline as the portfolio has grown. The weighted average loan-to-value ratio of the total portfolio was 66 percent at December 31, 2019, compared to 63 percent at December 31, 2018.
  • The weighted average total portfolio yield increased to 8.89 percent in the fourth quarter, an increase of 27 basis point from the fourth quarter of 2018, primarily driven by the growth in short-terms loans, which carry a higher coupon than our 30-year product.
  • The decrease in the weighted average debt cost resulted from the ongoing pay-down of our older, higher cost sequential structure securitizations and the addition of lower cost pro-rata structure securitizations
REVENUES    
($ in millions) 4Q 2019 Q4 2018   $ Variance   % Variance
Interest income

$

44,124

 

$

33,560

 

 

$

10,565

 

 

31

%

Interest expense - portfolio related

 

(22,690

)

 

(17,807

)

 

 

(4,883

)

 

27

%

Interest expense - corporate debt

 

(4,069

)

 

(3,337

)

 

 

(733

)

 

22

%

Provision for loan losses

 

(242

)

 

(221

)

 

 

(21

)

 

9

%

Net Interest Income

$

17,123

 

$

12,195

 

 

$

4,928

 

 

40

%

Gain on loan sales

 

1,496

 

 

27

 

 

 

1,469

 

 

22

%

Other Operating (loss) income

 

(665

)

 

63

 

 

 

(728

)

 

(1158

)%

Total Revenues

$

17,955

 

$

12,285

 

$

5,670

 

46

%

Discussion of results:

  • The increase in interest income in the fourth quarter was the result of portfolio growth from strong organic loan production volumes and a higher weighted average coupon
  • The increase in portfolio-related interest expense resulted from the addition of three securitizations in 2019 to finance our portfolio growth, partially offset by improved financing costs
  • The provision for loan losses increased modestly, reflecting the continued strong credit performance of the held for investment loan portfolio
  • During the quarter we completed sales of short-terms loans totaling $41 million in UPB and $190 million in UPB for the full year 2019
  • Other operating loss in the fourth quarter of 2019 was mainly driven by fair value losses on our interest-only securities received as proceeds from our loan sales, which was largely offset by the interest income earned on these securities
EXPENSES    
($ in millions) 4Q 2019 Q4 2018   $ Variance   % Variance
Compensation and employee benefits

$

3,992

$

3,827

 

$

165

 

 

4

%

Rent and occupancy

 

426

 

336

 

 

90

 

 

27

%

Loan servicing

 

1,939

 

1,818

 

 

121

 

 

7

%

Professional fees

 

468

 

1,235

 

 

(767

)

 

(62

)%

Real estate owned, net

 

1,300

 

285

 

 

1,016

 

 

357

%

Other expenses

 

1,680

 

1,370

 

 

310

 

 

23

%

Total expenses

$

9,806

$

8,870

$

935

 

11

%

Discussion of results:

  • The modest growth in compensation and employee benefits prudent expense management and realization of technology-driven efficiencies
  • Rent and occupancy increases were driven by the addition of an additional sales office in Austin, Texas and the expansion of our Westlake Village, California headquarters
  • Growth in expenses related to Real Estate Owned resolutions during the quarter were primarily driven by growth in the portfolio to 24 properties at December 31, 2019, up from 12 properties at December 31, 2018
  • The primary drivers of other expenses include office equipment, data processing, and marketing
SECURITIZATIONS

Securities

Balance at

Securities

Balance at

Trusts

Issued

12/31/2019

W.A. Rate

Trusts

Issued

12/31/2018

W.A. Rate

2011-1 Trust

$

61,042

$

-

-

 

2011-1 Trust

$

61,042

$

3,593

6.19

%

2014-1 Trust

 

161,076

 

31,139

8.33

%

2014-1 Trust

 

161,076

 

36,751

7.09

%

2015-1 Trust

 

285,457

 

50,631

6.37

%

2015-1 Trust

 

285,457

 

91,246

6.63

%

2016-1 Trust

 

319,809

 

86,901

6.75

%

2016-1 Trust

 

319,809

 

164,715

5.48

%

2016-2 Trust

 

166,853

 

63,983

5.59

%

2016-2 Trust

 

166,853

 

114,143

4.67

%

2017-1 Trust

 

211,910

 

113,540

4.56

%

2017-1 Trust

 

211,910

 

147,326

4.35

%

2017-2 Trust

 

245,601

 

163,295

3.50

%

2017-2 Trust

 

245,601

 

205,388

3.56

%

2018-1 Trust

 

176,816

 

134,700

3.95

%

2018-1 Trust

 

176,816

 

159,116

3.99

%

2018-2 Trust

 

307,988

 

247,580

4.44

%

2018-2 Trust

 

307,988

 

298,556

4.40

%

2019-1 Trust

 

235,580

 

214,709

4.00

%

-

 

-

 

-

-

 

2019-2 Trust

 

207,020

 

200,345

3.44

%

-

 

-

 

-

-

 

2019-3 Trust

 

154,419

 

150,725

3.27

%

-

 

-

 

-

-

 

$

2,533,571

$

1,457,547

$

1,936,552

$

1,220,834

 

Discussion of results:

  • During the fourth quarter, we issued our third securitization of the year (VCC 2019-3), and our twelfth securitization overall, for $154.4 million and a weighted average rate of 3.27 percent.
  • We have developed a strong track record with ABS investors as a consistent issuer with strong collateral performance
CREDIT PERFORMANCE INDICATORS
($ in thousands) 4Q 2019 Q4 2018 $ Variance % Variance
Nonperforming loans

$

141,607

 

$

95,259

 

$

46,348

 

49

%

Nonperforming loans as a % total

 

6.88

%

 

5.84

%

 

1.04

%

18

%

Total Charge Offs

$

113

 

$

60

 

$

53

 

89

%

Charge-offs as a % of average HFI loans

 

0.006

%

 

0.004

%

 

0.002

%

59

%

Discussion of results:

  • Nonperforming loans as a percentage of total loans (including short-term held for sale loans) was 6.88%. Our in-house special servicing operations assumes the servicing responsibilities for Velocity’s nonperforming loans and has a successful track record avoiding foreclosure in 93 percent of loan resolutions since 2013.
  • Charge-offs as a percentage of average HFI loans was 6 basis points at quarter end, a modest increase of two basis points from December 31, 2018, driven by seasoning of our held for investment portfolio
KEY PERFORMANCE INDICATORS
($ in thousands) 4Q 2019 Q4 2018 $ Variance % Variance
Pretax income

$

8,142

 

$

3,414

 

$

4,727

138

%

Net income

 

5,182

 

 

1,939

 

 

3,243

167

%

Net operating income

 

12,211

 

 

6,751

 

 

5,460

81

%

Diluted EPS(1)

$

0.44

 

$

0.17

 

$

0.27

159

%

Operating margin

 

68

%

 

55

%

 

-

24

%

Pretax return on equity

 

22

%

 

10

%

 

-

116

%

Net interest margin

 

4.3

%

 

4.0

%

 

-

7

%

Average equity

$

150,388

 

$

136,340

 

$

14,048

10

%

 
(1) Pro forma for post IPO equivalent shares purchased by existing stockholders at 12/31/2019.

Discussion of results:

  • Growth in net income was driven by loan portfolio growth and improved funding costs
  • Pro forma diluted EPS(1) was $0.44 per share compared to $0.17 per share in the fourth quarter of 2018
  • Net operating income in the fourth quarter of 2019 was $12.2 million, an increase of 81 percent from the fourth quarter of 2018. The company’s operating margin in the fourth quarter was 68 percent compared to 55 percent in the prior quarter. The improvement in these metrics reflects the continued realization of scale efficiencies as the company grows.
  • The increase in net interest margin reflects structural improvements in portfolio-related financing costs as older, higher-cost securitizations continue to pay down and replaced by new, lower-cost securitizations
  • The growth in average equity was driven by retained earnings from Velocity’s strong profitability in 2019

Full Year 2019 Operating Results

Total loan production for the year ended December 31, 2019 was $1.01 billion, a 37 percent increase from 2018.

Total net interest income for the year ended December 31, 2019 was $60.5 million, an 18 percent increase from $51.4 million in the prior year. The increase in net interest income was driven by a 26 percent year-over-year increase in interest income to $157.5 million, mainly as a result of an increase in the portfolio’s weighted average yield. The increase in interest income was partially offset by a 30 percent year-over-year increase in interest expense to $98.5 million. The increase was the result of the older, higher-cost sequential securitizations becoming more costly as they paid down. The higher financing cost reached its peak in the fourth quarter as the newer, lower-cost post 2017 pro rata structure securitizations have now begun to reduce our ongoing financing costs. Other operating income of $2.6 million was primarily driven by sales of short-term loans.

Total operating expenses for the year ended December 31, 2019 totaled $35.1 million, a 9 percent year-over-year increase from $32.2 million in the prior year. The growth in expenses was primarily driven by (i) a $1.3 million increase in serving expenses related to portfolio growth, and (ii) REO expenses which grew by $1.3 million from the prior year, driven by higher maintenance and rehabilitation costs.

Total charge-offs for the year ended December 31, 2019 totaled $579 thousand, a 42 percent increase from $407 thousand in 2018. This increase was the result of portfolio growth over the past few years and in-line with our expectations for higher delinquencies as the loan portfolio seasons.

Net income for the year ended December 31, 2019 totaled $17.3 million, a 127 percent year-over-year increase from $7.6 million in the prior year, primarily driven by a 21 percent year-over-year increase in net interest income.

Net operating income increased to $40.0 million, a 23 percent increase from $32.6 million in the prior year. The company’s net operating margin in 2019 was 66 percent compared to 63 percent in 2018.

For the year ended December 31, 2019 and 2018, pretax return on equity was 18 percent and 15 percent, respectively, and reflects our consistent portfolio growth and unwavering focus on expense management.

Management’s slide presentation will be available on the Company’s investor relations website at www.velfinance.com beginning at 8:30 a.m. (Eastern Time) on Wednesday, April 8, 2020.

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)

Pro forma for post IPO equivalent shares purchased by existing stockholders at 12/31/2019.

(2)

Operating income is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of operating income to net income, refer to the sections of this press release below titled “Non-GAAP Financial Measures” and “Adjusted Financial Metric Reconciliation to GAAP.”

(3)

The total loan portfolio at December 31, 2019 was comprised of $1.84 billion in UPB of held for investment loans and $0.22 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 operating income and operating margin, which are non-GAAP financial measures. The presentation of operating income and operating margin is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use operating income and operating margin in addition to, and not as an alternative for, net income. Operating income represents net income before income taxes, interest expense on our corporate debt, and the amortization of deal costs related to corporate debt issuance. Additionally, operating margin is the ratio of operating income total revenues. Because not all companies use identical calculations, our presentation of net operating income and net operating margin may not be comparable to similarly titled measures of other companies. Furthermore, net operating income is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and portfolio-related debt service payments. The amounts shown for Operating income may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.

We use operating income to evaluate the operating performance of our business, for comparison with forecasts and strategic plans and for benchmarking performance externally against competitors. We believe that this non-GAAP measure, when read in conjunction with the Company's GAAP financials, provides useful information to investors by offering:

  • The ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
  • The ability to better identify trends in the Company's underlying business and perform related trend analyses; and
  • A better understanding of how management plans and measures the Company's underlying business.

We believe that operating income has limitations in that it does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that operating income should only be used to evaluate the Company's results of operations in conjunction with net income. For more information on operating income, refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP.”

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 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 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" in the Company’s Form 10-K filed with the SEC on April 7, 2020, as such risk factors may be updated from time to time in the Company’s 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

(Unaudited)

 
Quarter Ending
12/31/2019 09/30/2019 06/30/2019 03/31/2019 12/31/2018
(In thousands)
Assets
Cash and cash equivalents

$

21,465

 

$

8,849

 

$

14,105

 

$

16,948

 

$

15,008

 

Restricted Cash

 

6,087

 

 

3,152

 

 

1,542

 

 

1,986

 

 

1,669

 

Loans held for sale, net

 

214,467

 

 

170,440

 

 

82,308

 

 

58,123

 

 

78,446

 

Loans held for investment, at fair value

 

2,960

 

 

2,936

 

 

2,974

 

 

2,971

 

 

3,463

 

Loans held for investment
Unpaid principal balance

 

1,839,886

 

 

1,753,289

 

 

1,662,483

 

 

1,594,624

 

 

1,547,942

 

Allowance for loan losses

 

(1,680

)

 

(1,680

)

 

(1,680

)

 

(1,679

)

 

(1,885

)

Provision for loan losses

 

(1,139

)

 

(897

)

 

(559

)

 

(348

)

 

(201

)

Charge-offs

 

579

 

 

466

 

 

143

 

 

111

 

 

407

 

Loans held for investment

 

1,837,646

 

 

1,751,178

 

 

1,660,387

 

 

1,592,708

 

 

1,546,263

 

Net deferred loan costs

 

25,714

 

 

24,757

 

 

23,346

 

 

21,874

 

 

21,145

 

Total loans, net

 

2,080,787

 

 

1,949,311

 

 

1,769,015

 

 

1,675,676

 

 

1,649,317

 

Accrued interest receivables

 

13,295

 

 

12,450

 

 

11,326

 

 

10,788

 

 

10,096

 

Receivables due from servicers

 

49,659

 

 

38,349

 

 

33,618

 

 

35,395

 

 

40,473

 

Other receivables

 

4,778

 

 

7,585

 

 

3,321

 

 

1,190

 

 

974

 

Real estate owned, net

 

13,068

 

 

15,806

 

 

14,221

 

 

12,996

 

 

7,167

 

Property and equipment, net

 

4,680

 

 

4,903

 

 

5,045

 

 

5,254

 

 

5,535

 

Deferred tax asset

 

8,280

 

 

4,127

 

 

3,228

 

 

1,778

 

 

517

 

Other assets

 

12,667

 

 

17,219

 

 

15,383

 

 

7,365

 

 

4,479

 

Total Assets

$

2,214,766

 

$

2,061,751

 

$

1,870,804

 

$

1,769,376

 

$

1,735,235

 

 
Liabilities and members' equity
Accounts payable and accrued expenses

$

56,146

 

$

41,957

 

$

30,832

 

$

39,731

 

$

26,797

 

Secured financing, net

 

145,599

 

 

145,285

 

 

127,061

 

 

127,179

 

 

127,040

 

Securitizations, net

 

1,438,629

 

 

1,377,733

 

 

1,261,456

 

 

1,338,032

 

 

1,202,202

 

Warehouse and repurchase facilities

 

422,688

 

 

349,859

 

 

280,710

 

 

97,059

 

 

216,725

 

Debt issuance costs

 

(1,140

)

 

(744

)

 

(750

)

 

(586

)

 

(794

)

Total Liabilities

 

2,061,922

 

 

1,914,090

 

 

1,699,309

 

 

1,601,415

 

 

1,571,970

 

 
Class C preferred units

 

-

 

 

-

 

 

27,399

 

 

26,929

 

 

26,465

 

Members' equity

 

152,844

 

 

147,661

 

 

144,096

 

 

141,032

 

 

136,800

 

Total Liabilities and members' equity

$

2,214,766

 

$

2,061,751

 

$

1,870,804

 

$

1,769,376

 

$

1,735,235

 

 

Velocity Financial, Inc.

Consolidated Statements of Income

(Unaudited)

 
Quarter Ending Year Ended
($ in thousands) 12/31/2019 09/30/2019 06/30/2019 03/31/2019 12/31/2018 12/31/2019 12/31/2018
 
Revenues
Interest income

$

44,124

 

$

40,379

 

$

36,884

 

$

36,143

 

$

33,560

 

$

157,531

 

$

124,722

Interest expense - portfolio related

 

22,689

 

 

21,827

 

 

20,324

 

 

19,062

 

 

17,807

 

 

83,903

 

 

62,597

Net interest income - portfolio related

 

21,435

 

 

18,552

 

 

16,560

 

 

17,081

 

 

15,753

 

 

73,628

 

 

62,125

Interest expense - corporate debt

 

4,070

 

 

3,842

 

 

3,353

 

 

3,353

 

 

3,337

 

 

14,618

 

 

13,322

Net interest income

 

17,365

 

 

14,710

 

 

13,207

 

 

13,728

 

 

12,416

 

 

59,010

 

 

48,803

Provision for loan losses

 

242

 

 

338

 

 

212

 

 

348

 

 

221

 

 

1,139

 

 

201

Net interest income after provision for loan losses

 

17,123

 

 

14,372

 

 

12,995

 

 

13,380

 

 

12,195

 

 

57,871

 

 

48,602

 
Other operating income
Gain on disposition of loans

 

1,497

 

 

56

 

 

863

 

 

1,995

 

 

27

 

 

4,410

 

 

1,201

Unrealized gain/(loss) on fair value loans

 

42

 

 

(17

)

 

(25

)

 

(8

)

 

(59

)

 

(9

)

 

241

Other income (expense)

 

(706

)

 

(251

)

 

(530

)

 

(266

)

 

122

 

 

(1,752

)

 

1,365

Total other operating income (expense)

 

833

 

 

(212

)

 

308

 

 

1,721

 

 

90

 

 

2,649

 

 

2,807

Total revenues

 

17,956

 

 

14,160

 

 

13,303

 

 

15,101

 

 

12,285

 

 

60,520

 

 

51,409

 
Operating expenses
Compensation and employee benefits

 

3,992

 

 

3,712

 

 

3,801

 

 

4,006

 

 

3,828

 

 

15,512

 

 

15,105

Rent and occupancy

 

426

 

 

369

 

 

398

 

 

338

 

 

336

 

 

1,531

 

 

1,320

Loan servicing

 

1,939

 

 

1,957

 

 

1,637

 

 

1,863

 

 

1,817

 

 

7,395

 

 

6,009

Professional fees

 

469

 

 

398

 

 

534

 

 

656

 

 

1,235

 

 

2,056

 

 

3,040

Real estate owned, net

 

1,300

 

 

485

 

 

561

 

 

301

 

 

285

 

 

2,648

 

 

1,373

Provision for held for sale loan losses

 

7

 

 

-

 

 

-

 

 

-

 

 

-

 

 

7

 

 

-

Other operating expenses

 

1,681

 

 

1,563

 

 

1,393

 

 

1,336

 

 

1,370

 

 

5,973

 

 

5,313

Total operating expenses

 

9,814

 

 

8,484

 

 

8,324

 

 

8,500

 

 

8,871

 

 

35,122

 

 

32,160

Income before income taxes

 

8,142

 

 

5,676

 

 

4,979

 

 

6,601

 

 

3,414

 

 

25,398

 

 

19,249

Income tax expense

 

2,960

 

 

1,796

 

 

1,444

 

 

1,906

 

 

1,475

 

 

8,106

 

 

11,618

Net income

$

5,182

 

$

3,880

 

$

3,535

 

$

4,695

 

$

1,939

 

$

17,292

 

$

7,631

 

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

 

Quarter Ended December 31, 2019

Quarter Ended December 31, 2018

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

$

184,021

$

45,325

Loans held for investment

1,800,507

1,511,580

Total loans

$

1,984,528

$

44,124

8.89%

$

1,556,905

$

33,560

8.62%

 
Debt:
Warehouse and repurchase facilities

$

320,456

$

4,223

5.27%

$

130,255

$

1,974

6.06%

Securitizations

1,495,456

18,467

4.94%

1,230,972

15,832

5.14%

Total debt - portfolio related

1,815,912

22,690

5.00%

1,361,227

17,807

5.23%

Corporate debt

153,000

4,069

10.64%

127,594

3,337

10.46%

Total debt

$

1,968,912

$

26,759

5.44%

$

1,488,820

$

21,143

5.68%

 
Net interest spread - portfolio related (2)

3.90%

3.39%

Net interest margin - portfolio related

4.32%

4.05%

 
Net interest spread - total company (3)

3.46%

2.94%

Net interest margin - total company

3.50%

3.19%

 
(1) Annualized.
(2) Net interest spread - portfolio related is the difference between the rate earned on our loan portfolio and the yield on our portfolio related debt.
(3) Net interest spread - total company is the difference between the yield on our loan portfolio and the interest rates paid on our total debt.
Year Ended December 31, 2019 Year Ended December 31, 2018
Interest Average Interest Average
Average Income / Yield / Average Income / Yield /
($ in thousands) Balance Expense Rate Balance Expense Rate
Loan portfolio:
Loans held for sale

$

106,852

$

26,306

Loans held for investment

1,675,706

1,403,571

Total loans

$

1,782,558

$

157,531

8.84%

$

1,429,877

$

124,722

8.72%

 
Debt:
Warehouse and repurchase facilities

$

240,608

13,583

5.65%

$

162,761

$

9,213

5.66%

Securitizations

1,362,851

70,320

5.16%

1,072,080

53,384

4.98%

Total debt - portfolio related

1,603,459

83,903

5.23%

1,234,841

62,597

5.07%

Corporate debt

136,294

14,617

10.72%

127,594

13,322

10.44%

Total debt

$

1,739,753

$

98,521

5.66%

$

1,362,435

$

75,919

5.57%

 
Net interest spread - portfolio related (1)

3.60%

3.65%

Net interest margin - portfolio related

4.13%

4.34%

 
Net interest spread - total company (2)

3.17%

3.15%

Net interest margin - total company

3.31%

3.41%


(1) Net interest spread - portfolio related is the difference between the rate earned on our loan portfolio and the yield 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.

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP

Quarter Ending Year Ended
12/31/2019 12/31/2018 12/31/2019 12/31/2018
Reconciliation of Velocity Financial Inc. Net Income to Net Operating Income
GAAP Net Income

$ 5,182

$ 1,939

$ 17,292

$ 7,631

Income tax expense

2,960

1,475

8,106

11,618

Interest expense - corporate debt

3,657

3,190

13,437

12,759

Amortization expense - corporate debt deal costs

412

147

1,181

562

Net Operating Income

$ 12,211

$ 6,751

$ 40,015

$ 32,570

 

 

Contacts

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

Contacts

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