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Velocity Financial, Inc. Reports First Quarter 2021 Results

First Quarter Highlights:

  • Net income of $3.40 million and core income(1) of $6.72 million; diluted EPS of $0.10 and Core diluted EPS of $0.20
  • 1Q21 loan production volume up 30% Q/Q, totaled $233.04 million in unpaid principal balance (UPB), driven by strong demand for investor loans
  • 1Q21 portfolio net interest margin of 4.10%
  • Book value per common share of $11.12 as of March 31, 2021
  • Loans held for investment (HFI) UPB of $1.99 billion as of March 31, 2021
  • Nonaccrual loans as a percentage of HFI loans was 16.8% as of March 31, 2021
  • 1Q21 nonperforming loan (NPL) resolutions totaled $49 million in UPB, realizing 102.7% of UPB resolved

    ‒ Continued Velocity’s track record of realizing net gains over and above contractual principal and interest on NPLs

Velocity Financial, Inc. (NYSE: VEL) (“Velocity” or the “Company”) reported net income of $3.40 million and core income of $6.72 million for 1Q21, compared to $2.58 million and $5.80 million, respectively, in 1Q20. Earnings and core earnings per diluted share were $0.10 and $0.20, respectively, in 1Q21, compared to $0.13 and $0.29, respectively, in 1Q20. Book value per common share was $11.12 as of March 31, 2021, compared to $12.47 as of March 31, 2020.

“As we mark the one-year anniversary of the COVID-19 pandemic, I am increasingly optimistic about the durability of the emerging economic recovery we are seeing as businesses reopen and growth opportunities for Velocity increase,” said Chris Farrar, President and CEO. “First quarter production volumes grew 30 percent quarter-over-quarter, and we continue to build momentum with the introduction of new products and re-launching existing products suspended during the pandemic. These initiatives provide our broker network with an expanded menu of options to satisfy their client’s financing needs, which drives higher production volume and accelerated growth of our loan portfolio. Velocity’s business model and integrated operational platform have shown continued resiliency and the ability to emerge from market dislocations stronger and more profitable than before. I am confident that this will be the case for Velocity going forward.”

First Quarter Operating Results

KEY PERFORMANCE INDICATORS
($ in thousands)

 

1Q 2021

 

 

1Q 2020

 

$ Variance % Variance
Pretax income

$

4,604

 

$

3,727

 

$

877

 

24

%

Net income

$

3,396

 

$

2,579

 

$

817

 

32

%

Diluted earnings per share

$

0.10

 

$

0.13

 

$

(0.03

)

(22

)%

Core income(1)

$

6,722

 

$

5,804

 

$

918

 

16

%

Core diluted earnings per share(1)

$

0.20

 

$

0.29

 

n.a.

(30

)%

Pretax return on equity

 

8.27

%

 

6.62

%

n.a.

25

%

Net interest margin - portfolio

 

4.10

%

 

4.18

%

n.a.

(2

)%

Net interest margin -total company

 

2.59

%

 

2.97

%

n.a.

(13

)%

Average common equity

$

222,810

 

$

225,125

 

$

(2,315

)

(1

)%

(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 1Q21 totaled $3.40 million, an increase from $2.58 million in 1Q20, driven by improved portfolio performance and significantly lower loan loss provisioning in the current quarter

    ‒ Pretax gain on loan sales in 1Q21 totaled $2.8 million (105% of UPB sold)
  • Core income for 1Q21 totaled $6.72 million, which reflects the exclusion of $3.33 million as a result of refinancing the Company’s corporate debt during the quarter
  • The pretax return on equity was 8.27% in 1Q21, an increase from 6.62% for 1Q20, driven by lower provisioning charges and operating expenses
  • Net interest margin - portfolio decreased 8 bps from 4.18% in 1Q20, to 4.10% in 1Q21, driven by growth in nonperforming loans and higher portfolio-related debt costs
TOTAL LOAN PORTFOLIO
($ of UPB in millions)

 

1Q 2021

 

 

1Q 2020

 

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

$

985

 

$

872

 

$

113

 

13

%

Mixed Use

 

275

 

 

265

 

 

10

 

4

%

Multi-Family

 

183

 

 

201

 

 

(18

)

(9

)%

Retail

 

178

 

 

181

 

 

(4

)

(2

)%

All Other

 

370

 

 

384

 

 

(14

)

(4

)%

Total

$

1,991

 

$

1,903

 

$

88

 

5

%

Held for Sale
Investor 1-4 Rental

$

-

 

$

224

 

$

(224

)

(100

)%

Total Managed Loan Portfolio UPB

$

1,991

 

$

2,127

 

$

(136

)

(6

)%

Key loan portfolio metrics:
Total loan count

 

5,935

 

 

6,504

 

Weighted average loan to value

 

66.28

%

 

66.00

%

Weighted average total portfolio yield

 

8.41

%

 

8.57

%

Weighted average portfolio debt cost

 

5.01

%

 

4.84

%

Discussion of results:

  • Velocity’s total loan portfolio totaled $1.99 billion as of March 31, 2021, a 6% decrease from $2.13 billion as of March 31, 2020

    ‒ The Company’s suspended new loan production activities from mid-March to September 2020 because of pandemic-related market disruption
  • The weighted average total portfolio yield was 8.41% in 1Q21, a decrease of 16 bps from 1Q20, primarily driven by payoffs of higher-yielding short-term loans and impact of non-accrual loans
  • Portfolio related debt cost in 1Q21 increased 17 bps from, driven by higher-cost securitizations issued during the pandemic
LOAN PRODUCTION VOLUMES
($ in millions)

 

1Q 2021

 

1Q 2020

$ Variance % Variance
Total loan production

$

233

$

248

$

(15

)

(6

)%

Discussion of results:

  • Loan production totaled $233.0 million in UPB in 1Q21, a 6% decrease from $248 million in UPB from 1Q20
  • In April 2021, the Company launched a new Flex I/O short-term loan product and also resumed production of the ARV Pro short-term product, which had been suspended since March 2020
CREDIT PERFORMANCE INDICATORS
($ in thousands)

 

1Q 2021

 

 

1Q 2020

 

$ Variance % Variance
Nonperforming loans(1)

$

335,048

 

$

151,136

 

$

183,912

 

122

%

Nonperforming loans % total HFI Loans

 

16.83

%

 

7.94

%

n.a.

112

%

Total Charge Offs

$

68.8

 

$

170.8

 

$

(102

)

(60

)%

Charge-offs as a % of Nonperforming loans(2)

 

0.082

%

 

0.452

%

n.a.

(82

)%

Loan Loss Reserve

$

5,881

 

$

3,496

 

$

2,385

 

68

%

(1) Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual.
(2) Annualized

Discussion of results:

  • Nonperforming loans as a percentage of the total HFI portfolio were 16.83% compared to 7.94% as of March 31, 2020, primarily driven by pandemic-related economic impacts
  • Charge-offs in 1Q21 totaled $68.8 thousand compared to $170.8 thousand in the 1Q20

    ‒ The current quarter’s charge-offs are well below the trailing eight quarter average of $276.0 thousand
  • The reserve for loan losses was $5.9 million as of March 31, 2021, compared to $3.5 million as of March 31, 2020

    ‒ Management continues to monitor the impacts of the pandemic on our portfolio and the economic outlook/forecasts
  • Capitalized interest on COVID forbearance loans recovered through the end of 1Q21 totaled $0.82 million, with a remaining balance of $7.82 million as of March 31, 2021
NET REVENUES
($ in thousands)

 

1Q 2021

 

 

1Q 2020

 

$ Variance % Variance
Interest income

$

40,707

 

$

44,637

 

$

(3,930

)

(9

)%

Interest expense - portfolio related

 

(20,832

)

 

(22,848

)

 

2,016

 

(9

)%

Interest expense - corporate debt

 

(7,350

)

 

(6,342

)

 

(1,008

)

16

%

Net Interest Income

$

12,525

 

$

15,447

 

$

(2,922

)

(19

)%

Loan loss provision

 

(105

)

 

(1,290

)

 

1,185

 

(92

)%

Gain on loan sales

 

2,839

 

 

2,618

 

 

221

 

8

%

Other Operating (loss) income

 

(38

)

 

(998

)

 

960

 

(96

)%

Total Net Revenues

$

15,221

 

$

15,777

 

$

(556

)

(4

)%

Discussion of results:

  • Net Revenue decreased 4% year-over-year, driven by growth in nonperforming loans, in addition to costs related to expanding warehouse line capacity and the Company’s corporate debt refinancing

    ‒ Partially offset by a reduction in loan loss provisioning in the current quarter compared to 1Q20
  • A decrease in the loan loss provision in 1Q21 reflects the continuation of Velocity’s track record of low charge-offs, as well as improved macroeconomic conditions
OPERATING EXPENSES
($ in thousands)

 

1Q 2021

 

1Q 2020

$ Variance % Variance
Compensation and employee benefits

$

5,186

$

5,041

$

145

 

3

%

Rent and occupancy

 

463

 

455

 

8

 

2

%

Loan servicing

 

1,867

 

2,239

 

(372

)

(17

)%

Professional fees

 

533

 

1,184

 

(651

)

(55

)%

Real estate owned, net

 

509

 

1,134

 

(625

)

(55

)%

Other expenses

 

2,059

 

1,998

 

61

 

3

%

Total expenses

$

10,617

$

12,050

$

(1,433

)

(12

)%

Discussion of results:

  • Operating expenses decreased 12% year-over-year driven by reductions in professional fees and real estate owned (REO) expenses

    ‒ 1Q20 professional fees were elevated due to new public company costs

    ‒ REO expenses decreased year-over-year as a result of lower valuation-related expenses and a strengthening real estate market
SECURITIZATIONS
Securities Balance at Balance at
Trusts Issued 3/31/2021 W.A. Rate 3/31/2020 W.A. Rate
2011-1 Trust

$

61,042

$

-

-

 

$

-

-

 

2014-1 Trust

 

161,076

 

21,690

7.92

%

 

28,116

8.04

%

2015-1 Trust

 

285,457

 

26,762

6.88

%

 

47,042

7.85

%

2016-1 Trust

 

319,809

 

50,940

8.06

%

 

73,887

7.20

%

2016-2 Trust

 

166,853

 

38,953

7.07

%

 

55,119

6.09

%

2017-1 Trust

 

211,910

 

65,728

5.69

%

 

97,576

4.77

%

2017-2 Trust

 

245,601

 

114,517

3.40

%

 

152,941

3.51

%

2018-1 Trust

 

176,816

 

88,754

4.12

%

 

125,421

3.96

%

2018-2 Trust

 

307,988

 

192,240

4.53

%

 

227,752

4.42

%

2019-1 Trust

 

235,580

 

173,216

4.11

%

 

207,144

4.03

%

2019-2 Trust

 

207,020

 

148,834

3.50

%

 

191,343

3.41

%

 

154,419

 

122,072

3.29

%

 

143,048

3.24

%

2020-1 Trust

 

248,700

 

208,269

2.84

%

 

247,293

2.94

%

2020-2 Trust

 

96,352

 

106,343

4.54

%

2020-MC1 Trust

 

179,371

 

116,241

4.50

%

$

3,057,994

$

1,474,560

$

1,596,682

 

Discussion of results:

  • Securitization balances as of March 31, 2021, totaled 1.47 billion, down from

    $1.60 billion as of March 31, 2020, driven by normal paydown activity, partially offset by the issuance of the 2020-2 and 2020-MC1 securitizations in June and July 2020, respectively.
  • No new securitizations were issued during 1Q21. The Company’s next securitization is on track for issuance in 2Q21
RESOLUTION ACTIVITY
 
LONG-TERM LOANS
 
RESOLUTION ACTIVITY FIRST QUARTER 2021 FIRST QUARTER 2020
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

15,961

$

795

 

$

12,928

$

850

 

Paid current

 

10,774

 

62

 

 

3,504

 

101

 

REO sold

 

2,754

 

76

 

 

1,091

 

(293

)

Total resolutions

$

29,489

$

932

 

$

17,523

$

658

 

 
Resolutions as a % of nonperforming UPB

 

103.2

%

 

103.8

%

 
SHORT-TERM AND FORBEARANCE LOANS
 
RESOLUTION ACTIVITY FIRST QUARTER 2021 FIRST QUARTER 2020
($ in thousands) UPB $ Gain / (Loss) $ UPB $ Gain / (Loss) $
Paid in full

$

8,569

$

343

 

$

-

$

-

 

Paid current

 

11,170

 

40

 

 

-

 

-

 

REO sold

 

-

 

-

 

 

-

 

-

 

Total resolutions

$

19,739

$

384

 

$

-

$

-

 

 
Resolutions as a % of nonperforming UPB

 

101.9

%

 

-

 

 
Grand total resolutions

$

49,228

$

1,316

 

$

17,523

$

658

 

 
Grand total resolutions as a % of nonperforming UPB

 

102.7

%

 

103.8

%

Discussion of results:

  • Strong asset resolution trends continued in 1Q21, with $1.3 million of gains realized on $49.2 million of UPB, compared to $0.66 million and $17.5 million, respectively, in 1Q20.

    ‒ Total resolution gains as a % of UPB resolved were 102.7% in 1Q21, compared to 103.8% in 1Q20
  • Resolution activity in 1Q21 has been split between long-term loans and short-term/forbearance loans

    ‒ Short-term loans do not require prepayment fees and result in a lower gain when paid in full, as compared to long-term loans

    ‒ Forbearance loans are loans granted a COVID-19 forbearance that subsequently became nonperforming
  • Transaction volumes reflect solid operational execution by Velocity’s in-house Special Servicing team

Webcast Information

Velocity’s executive management team will host a conference call and webcast to review its financial results on Thursday, May 6, 2021, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.

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 Thursday, May 6, 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 1-866-807-9684 in the U.S. and Canada and 1-412-317-5415 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 May 27, 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 #10154203. 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
3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020
Unaudited Audited Unaudited Unaudited Unaudited
(In thousands)
Assets
Cash and cash equivalents

$

20,434

$

13,273

$

19,210

$

9,803

$

7,649

Restricted cash

 

6,808

 

7,020

 

7,821

 

6,735

 

4,483

Loans held for sale, net

 

0

 

13,106

 

0

 

212,344

 

223,123

Loans held for investment, at fair value

 

1,364

 

1,539

 

3,327

 

2,956

 

2,987

Loans held for investment

 

1,983,435

 

1,924,489

 

1,977,236

 

1,836,065

 

1,895,684

Net deferred loan costs

 

25,070

 

23,600

 

23,850

 

25,754

 

26,801

Total loans, net

 

2,009,869

 

1,962,734

 

2,004,413

 

2,077,119

 

2,148,595

Accrued interest receivables

 

11,169

 

11,373

 

13,134

 

17,793

 

14,470

Receivables due from servicers

 

77,731

 

71,044

 

44,466

 

36,028

 

37,884

Other receivables

 

3,879

 

4,085

 

402

 

4,609

 

2,516

Real estate owned, net

 

14,487

 

15,767

 

14,653

 

15,648

 

16,164

Property and equipment, net

 

3,891

 

4,145

 

4,446

 

4,718

 

4,964

Deferred tax asset

 

9,246

 

6,654

 

1,832

 

5,556

 

10,111

Other assets

 

7,325

 

6,779

 

16,489

 

9,042

 

10,518

Total Assets

$

2,164,839

$

2,102,874

$

2,126,866

$

2,187,051

$

2,257,354

 
Liabilities and members' equity
Accounts payable and accrued expenses

$

65,003

$

63,361

$

61,859

$

55,938

$

58,591

Secured financing, net

 

129,666

 

74,982

 

74,776

 

74,571

 

74,364

Securitizations, net

 

1,453,386

 

1,579,019

 

1,670,930

 

1,599,719

 

1,576,432

Warehouse & repurchase facilities

 

203,314

 

75,923

 

19,541

 

160,796

 

297,537

Total Liabilities

 

1,851,369

 

1,793,285

 

1,827,106

 

1,891,024

 

2,006,924

 
Mezzanine Equity
Series A Convertible preferred stock

 

90,000

 

90,000

 

90,000

 

90,000

 

-

Stockholders' Equity
Stockholders' equity

 

223,470

 

219,589

 

209,760

 

206,027

 

250,430

Total Liabilities and members' equity

$

2,164,839

$

2,102,874

$

2,126,866

$

2,187,051

$

2,257,354

 
 
Book value per share

$

11.12

$

10.93

$

10.44

$

10.26

$

12.47

 
Shares outstanding

 

20,087

 

20,087

 

20,087

 

20,087

 

20,087

Velocity Financial, Inc.

Consolidated Statements of Income (Quarterly)

 

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

$

40,707

$

41,556

$

41,374

$

39,755

 

$

44,637

Interest expense - portfolio related

 

20,832

 

21,442

 

22,347

 

21,189

 

 

22,848

Net interest income - portfolio related

 

19,875

 

20,114

 

19,027

 

18,566

 

 

21,789

Interest expense - corporate debt

 

7,350

 

1,900

 

1,913

 

1,894

 

 

6,342

Net interest income

 

12,525

 

18,214

 

17,114

 

16,672

 

 

15,447

Provision for loan losses

 

105

 

406

 

1,573

 

1,800

 

 

1,290

Net interest income after provision for loan losses

 

12,420

 

17,808

 

15,541

 

14,872

 

 

14,157

Other operating income (expense)

 

2,801

 

4,691

 

1,349

 

(1,339

)

 

1,620

Total net revenues

 

15,221

 

22,499

 

16,890

 

13,533

 

 

15,777

 
Operating expenses
Compensation and employee benefits

 

5,186

 

4,135

 

5,692

 

5,863

 

 

5,041

Rent and occupancy

 

463

 

424

 

415

 

448

 

 

456

Loan servicing

 

1,867

 

1,977

 

2,168

 

1,754

 

 

2,238

Professional fees

 

533

 

1,415

 

1,051

 

588

 

 

1,184

Real estate owned, net

 

509

 

217

 

898

 

408

 

 

1,134

Other operating expenses

 

2,059

 

2,578

 

1,641

 

1,847

 

 

1,997

Total operating expenses

 

10,617

 

10,746

 

11,865

 

10,908

 

 

12,050

Income before income taxes

 

4,604

 

11,753

 

5,025

 

2,625

 

 

3,727

Income tax expense

 

1,208

 

2,177

 

1,544

 

484

 

 

1,148

Net income

$

3,396

$

9,576

$

3,481

$

2,141

 

$

2,579

Less Deemed dividends on preferred stock

 

-

 

-

 

-

$

48,955

 

n.a.
Less; Earnings allocated to participating securities

$

1,281

n.a. n.a.

 

-

 

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

$

2,115

$

9,576

$

3,481

$

(46,814

)

$

2,579

 
Basic earnings (loss) per share

$

0.11

$

0.48

$

0.17

$

(2.33

)

$

0.13

 
Diluted earnings (loss) per common share

$

0.10

$

0.29

$

0.11

$

(2.33

)

$

0.13

 
Basic weighted average common shares outstanding

 

20,087

 

20,087

 

20,087

 

20,087

 

 

20,087

 
Diluted weighted average common shares outstanding

 

33,407

 

32,793

 

32,435

 

20,087

 

 

20,087

Velocity Financial, Inc.

Net Interest Margin ‒ Portfolio Related and Total Company

(Unaudited)

 

Quarter Ended March 31, 2021 Quarter Ended December 31, 2020 Quarter Ended March 31, 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

$

8,904

$

20,719

$

202,474

Loans held for investment

 

1,927,760

 

1,958,436

 

1,881,308

Total loans

$

1,936,664

$

40,707

8.41

%

(4

)

$

1,979,155

$

41,557

8.40

%

$

2,083,783

$

44,637

8.57

%

 
Debt:
Warehouse and repurchase facilities

$

113,528

 

1,705

6.01

%

$

60,065

 

717

4.78

%

 

347,350

 

4,301

4.95

%

Securitizations

 

1,548,642

 

19,127

4.94

%

 

1,666,180

 

20,726

4.98

%

 

1,542,318

 

18,547

4.81

%

Total debt - portfolio related

 

1,662,170

 

20,832

5.01

%

 

1,726,245

 

21,443

4.98

%

 

1,889,668

 

22,848

4.84

%

Corporate debt

 

108,365

 

7,350

27.13

%

(5

)

 

78,000

 

1,900

9.74

%

 

94,468

 

6,342

26.85

%

(6

)

Total debt

$

1,770,535

$

28,182

6.37

%

$

1,804,245

$

23,343

5.18

%

 

1,984,136

 

29,190

5.88

%

 
Net interest spread - portfolio related (2)

3.39

%

3.43

%

3.73

%

Net interest margin - portfolio related

4.10

%

4.07

%

4.18

%

 
Net interest spread - total company (3)

2.04

%

(5

)

3.22

%

2.68

%

(6

)

Net interest margin - total company

2.59

%

(5

)

3.68

%

2.97

%

(6

)

 

(1)

Annualized.

(2)

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

(3)

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

(4)

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

(5)

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

(6)

Excluding the one-time debt issuance costs write-off of $3.5 million and prepayment penalties of $0.3 million associated with the $75.0 million paydown of our corporate debt in January 2020, the corporate debt average rate would have been 10.88%; net interest spread — total company would have been 3.44%; and net interest margin — total company would have been 3.69% for the three months ended March 31, 2020.

Velocity Financial, Inc.

Adjusted Financial Metric Reconciliation to GAAP Net Income

(Unaudited)`

 

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

$

3,396

$

9,576

$

3,481

$

2,141

$

2,579

Nonrecurring debt amortization

 

3,326

 

-

 

-

 

-

 

2,610

COVID-19 Impact

 

-

 

-

 

-

 

1,267

 

615

Workforce reduction costs

 

-

 

-

 

432

 

-

 

-

Core Income

$

6,722

$

9,576

$

3,913

$

3,408

$

5,804

 
Core diluted earnings per share

$

0.20

$

0.29

$

0.12

$

0.17

$

0.29

 

Contacts

Investors and Media:

Chris Oltmann

(818) 532-3708

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