Velocity Financial, Inc. Reports Third Quarter 2023 Results

Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company), a leader in business purpose loans, reported net income of $12.1 million and core net income of $12.9 million for 3Q23, compared to net income and core net income of $10.0 million for 3Q22. Earnings and core earnings per diluted share were $0.35 and $0.37, respectively, for 3Q23, compared to $0.29 and $0.29 for 3Q22.

“Velocity’s differentiated business model and portfolio management strategies delivered another strong quarter for shareholders,” said Chris Farrar, President and CEO. “Our third quarter results continued to build upon our momentum from the first half of 2023, with sequential quarter production volume increases and higher portfolio interest income resulting from continued portfolio growth. We also successfully increased the coupon on production volumes again this quarter while capitalizing on the continued tightening of credit from regulated lenders. The result was higher net interest margin growth from 2Q23 and growth in non-interest-related origination income that delivered solid net income and return on equity this quarter. We also remain focused on opportunities to expand Velocity’s franchise by growing market share in our core lending business in addition to exploring opportunities to expand into other established loan products where we can leverage our lending expertise and existing infrastructure as a competitive advantage.”

(1)		Core income and Core EPS are non-GAAP measures that exclude nonrecurring and unusual activities from GAAP net income.
(2)		Liquidity includes unrestricted cash reserves of $29.4 million and available liquidity in unfinanced loans of $30.9 million.

Third Quarter Operating Results
KEY PERFORMANCE INDICATORS
($ in thousands)	3Q 2023	3Q 2022		$ Variance		% Variance
Pretax income	$ 17,239	$ 14,049		$ 3,190		23%
Net income	$ 12,086	$ 9,983		$ 2,103		21%
Diluted earnings per share	$ 0.35	$ 0.29		$ 0.06		19%
Core net income(a)	$ 12,918	$ 9,983		$ 2,935		29%
Core diluted earnings per share(a)	$ 0.37	$ 0.29		$ 0.08		27%
Pretax return on equity	16.82%	15.26%		n.a.		10%
Core pretax return on equity(a)	17.89%	15.26%		n.a.		17%
Net interest margin - portfolio	3.34%	3.59%		n.a.		(7)%
Net interest margin - total company	2.90%	3.09%		n.a.		(6)%
Average common equity	$ 409,954	$ 368,270		$ 41,685		11%

(a)		Core income, core diluted earnings per share and core pretax return on equity are non-GAAP measures. Please see the reconciliation to GAAP net income at the end of this release.
		n.a.- not applicable

Discussion of results:

• Net income in 3Q23 was $12.1 million, compared to $10.0 million for 3Q22
  • Driven by higher net interest income resulting from continued strong portfolio growth and fair value gains on securitizations, partially offset by unrealized losses on FVO loans and securitization issuance costs from closing two securitizations in the quarter
• Core net income⁽¹⁾ was $12.9 million, compared to $10.0 million for 3Q22
  • Core adjustments included equity incentive compensation expenses and costs related to the Company’s employee stock purchase plan (ESPP)
• Portfolio NIM in 3Q23 was 3.34%, compared to 3.59% for 3Q22, a 6.9% Y/Y decrease resulting from increased funding costs that have been mainly offset by rising portfolio yields from higher loan coupons on recent loan production
• The GAAP pretax return on equity was 16.8% for 3Q23, compared to 15.3% for 3Q22

TOTAL LOAN PORTFOLIO
($ of UPB in millions)	3Q 2023	3Q 2022		$ Variance		% Variance
Held for Investment
Investor 1-4 Rental	$ 2,120	$ 1,777		$ 343		19%
Mixed Use	457	432		25		6%
Multi-Family	305	297		8		3%
Retail	328	304		24		8%
Warehouse	247	228		19		8%
All Other	401	379		22		6%
Total	$ 3,858	$ 3,416		$ 441		13%
Held for Sale
Multi-Family	$ 7	$ 17		$ (10)		(60)%
Warehouse	11	-		11		n.m.
All Other	1	-		1		n.m.
Total Managed Loan Portfolio UPB	$ 3,877	$ 3,433		$ 444		13%
Key loan portfolio metrics:
Total loan count	9,953	8,476
Weighted average loan to value	68.0%	68.7%
Weighted average coupon	8.63%	7.71%
Weighted average total portfolio yield	8.38%	7.88%
Weighted average portfolio debt cost	5.63%	4.81%
n.m. - non meaningful

Discussion of results:

• Velocity’s total loan portfolio was $3.9 billion in UPB as of September 30, 2023, an increase of 12.9% from $3.4 billion in UPB as of September 30, 2022
  • Primarily driven by 19.3% Y/Y growth in loans collateralized by Investor 1-4 Rental properties and a combined 8.7% Y/Y growth in Multifamily and Mixed Use properties
  • Approximately 75% of the loans in Velocity’s HFI portfolio are collateralized by properties that have a housing component (Investor 1-4 Rental, Multifamily, and Mixed Use)
  • Loan prepayments totaled $104.5 million, a decrease of 1.0% Q/Q and 6.0% Y/Y
• The UPB of Fair Value (FVO) loans was $936.6 million, or 24.3% of total HFI loans, as of September 30, 2023, an increase from $0.9 million in UPB, or 0.03% as of
  September 30, 2022
  • The company elected fair value accounting treatment for new loan originations effective October 1, 2022
• The weighted average portfolio loan-to-value ratio was 68.0% as of
  September 30, 2023, a modest decrease from 68.7% as of September 30, 2022, and consistent with the five-quarter trailing average of 68.2%
• The weighted average total portfolio yield was 8.38% for 3Q23, an increase of 50 bps from 3Q22, driven by an average 92 bps increase in loan coupons from 3Q22
• Portfolio-related debt cost for 3Q23 was 5.63%, an increase of 82 bps from 3Q22, driven by higher interest rates on securitization and warehouse financing

LOAN PRODUCTION VOLUMES
($ in millions)	3Q 2023	3Q 2022		$ Variance		% Variance
Investor 1-4 Rental	$ 154	$ 278		$ (124)		(44)%
Traditional Commercial	98	133		(36)		(27)%
Short-term loans	39	46		(7)		(16)%
Total loan production	$ 291	$ 457		$ (167)		(36)%
Acquisitions	$ -	$ 10

Discussion of results:

• Loan production in 3Q23 totaled $290.6 million in UPB, a 36.5% decrease from
  $457.3 million in UPB in 3Q22
  • Driven by higher interest rates and strong real estate price appreciation. On a Q/Q basis, production volume rose 12.3% from 2Q23.
• The weighted average coupon (WAC) on 3Q23 HFI loan production was 11.1%, an increase of 189 bps from 3Q22

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS
($ in thousands)	3Q 2023	3Q 2022		$ Variance		% Variance
Nonperforming loans(a)	$ 387,725	$ 253,341		$ 134,384		53%
Average Nonperforming Loans	$ 351,848	$ 249,297		$ 102,551		41%
Nonperforming loans % total HFI Loans	10%	7%		n.a.		36%
Total Charge Offs	$ 95.2	$ 155.2		$ (60)		(39)%
Charge-offs as a % of Avg. Nonperforming Loans(b)	0.11%	0.25%		n.a.		(57)%
Loan Loss Reserve	$ 4,684.8	$ 5,330		$ (645)		(12)%

(a)		Nonperforming/Nonaccrual loans include loans 90+ days past due, loans in foreclosure, bankruptcy and on nonaccrual.
(b)		Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period.
		n.a.- not applicable

Discussion of results:

• Nonperforming loans (NPL) totaled $387.7 million in UPB as of September 30, 2023, or 10.1% of loans HFI, compared to $253.3 million and 7.4%, respectively, as of
  September 30, 2022
  • NPL growth in 3Q23 was driven by the legacy amortized cost portfolio and the Company’s collection philosophy that places loans in foreclosure quickly for early delinquencies
• Charge-offs in 2Q23 totaled $95.2 thousand, compared to $155.2 thousand in 3Q22
  • The trailing five-quarter charge-off average was $290.3 thousand
• The loan loss reserve totaled $4.7 million as of September 30, 2023, a 12.1% decrease from
  $5.3 million as of September 30, 2022
  • Resulting from the continued run-off of the amortized cost HFI loan portfolio
  • Loans carried at fair value are not subject to a CECL reserve

NET REVENUES
($ in thousands)	3Q 2023	3Q 2022		$ Variance		% Variance
Interest income	$ 79,088	$ 63,419		$ 15,669		25%
Interest expense - portfolio related	(47,583)	(34,561)		(13,022)		38%
Net Interest Income - portfolio related	31,505	28,858		2,647		9%
Interest expense - corporate debt	(4,138)	(4,011)		(127)		3%
Net Interest Income	$ 27,367	$ 24,847		$ 2,520		10%
Loan loss provision	(154)	(580)		427		(74)%
Gain on disposition of loans	3,606	399		3,207		803%
Unrealized (loss) gain on fair value loans	(1,284)	453		(1,737)		(383)%
Unrealized gain (loss) on fair value of securitized debt	9,692	-		9,692		n.m.
Origination income	3,323	518		2,805		541%
Bank interest income	1,342	-		1,342		n.m.
Other operating income (expense)	681	1,656		(976)		(59)%
Total Other operating income (expense)	$ 17,360	$ 3,027		$ 14,333		473%
Net Revenue	$ 44,573	$ 27,294		$ 17,279		63%
n.m. - non meaningful

Discussion of results:

• Net Revenue in 3Q23 was $44.6 million, an increase of 63.3% compared to $27.3 million for 3Q22
• Total net interest income, including corporate debt interest expense, was $27.4 million for 3Q23, a 10.1% increase from $24.8 million for 3Q22
  • Portfolio net Interest income was $31.5 million for 3Q23, an increase of 9.2% from 3Q22 resulting from a $15.7 million increase in interest income, partially offset by $13.0 million of interest expense growth
• Total other operating income includes gains on the disposition of loans, unrealized gains/(losses) on fair value loans and securitized debt, origination fee income, bank interest income on deposits, and other operating income, and totaled $17.4 million for 3Q23 compared to $3.0 million for 3Q22
  • Gain on disposition of loans totaled $3.6 million for 3Q23, resulting from loans transferred to REO
  • Unrealized losses on the fair value of loans totaled $(1.3) million for 3Q23, primarily driven by the impact of higher long-term interest rates on the existing FVO portfolio, partially offset by gains on 3Q23 new production
  • Unrealized gains on the fair value of securitized debt totaled $9.7 million for 3Q23, driven by an increase in long-term rates as of September 30, 2023
  • Origination income totaled $3.3 million, resulting from fee income realized on loans originated in 3Q23

OPERATING EXPENSES
($ in thousands)	3Q 2023	3Q 2022		$ Variance		% Variance
Compensation and employee benefits	$ 12,523	$ 6,788		$ 5,735		84%
Origination (income)/expense	273	209		64		31%
Securitization expenses	4,930	-		4,930		n.m.
Rent and occupancy	472	445		27		6%
Loan servicing	4,901	3,314		1,587		48%
Professional fees	854	664		190		29%
Real estate owned, net	1,239	(195)		1,434		n.m.
Other expenses	2,142	2,020		122		6%
Total operating expenses	$ 27,334	$ 13,245		$ 14,089		106%
n.m. - non meaningful

Discussion of results:

• Operating expenses totaled $27.3 million for 3Q23, an increase of 106.4% from 3Q22. The variance to prior year was higher compensation expense and securitization expenses, driven by impacts attributable to our fair value accounting elections and portfolio growth.
  • Compensation expense totaled $12.5 million, compared to $6.8 million for 3Q22.
    • In 3Q23, compensation expense related to loan originations was expensed as incurred under fair value accounting rather than deferred over the life of the loan under amortized cost accounting for 3Q22.
    • Compensation growth was driven, to a lesser extent, by hires of business development executives, sales account executives and operational staff
  • Securitization expenses totaled $4.9 million, resulting from the issuance of the VCC 2023-3 and VCC 2023-RTL1 securitizations during the quarter. Securitization issuance costs are now expensed under fair value accounting and were deferred in 3Q22.
  • Loan servicing expense totaled $4.9 million, a 47.9% increase from $3.3 million for 3Q22, driven by the increase in our loan portfolio and delinquent assets

SECURITIZATIONS
($ in thousands)	Securities		Balance at			Balance at
Trusts	Issued		9/30/2023	W.A. Rate		9/30/2022	W.A. Rate
2016-1 Trust	319,809		$ -	0.00%		$ 24,356	8.10%
2017-2 Trust	245,601		48,206	3.95%		61,224	3.75%
2018-1 Trust	176,816		35,010	3.99%		46,795	3.99%
2018-2 Trust	307,988		80,409	4.43%		99,151	4.49%
2019-1 Trust	235,580		79,215	4.06%		97,620	4.12%
2019-2 Trust	207,020		69,216	3.40%		90,165	3.39%
2019-3 Trust	154,419		60,482	3.29%		75,366	3.22%
2020-1 Trust	248,700		110,958	2.89%		141,423	2.87%
2020-2 Trust	96,352		49,528	4.59%		63,060	4.62%
2021-1 Trust	251,301		176,529	1.76%		206,026	1.74%
2021-2 Trust	194,918		149,431	2.02%		177,993	2.02%
2021-3 Trust	204,205		161,467	2.47%		190,073	2.45%
2021-4 Trust	319,116		250,941	3.24%		282,567	3.18%
2022-1 Trust	273,594		240,733	3.94%		260,454	3.93%
2022-2 Trust	241,388		221,631	5.08%		236,918	5.09%
2022-MC1 Trust	84,967		35,677	6.90%		60,872	6.88%
2022-3 Trust	296,323		262,308	5.71%		285,847	5.64%
2022-4 Trust	308,357		283,270	6.23%		306,365	6.24%
2022-5 Trust	188,754		171,183	7.05%
2023-1 Trust	198,715		181,006	7.01%
2023-1R Trust	64,833		60,515	7.69%
2023-2 Trust	202,210		194,955	7.19%
2023-RTL1 Trust	81,608		81,608	8.23%
2023-3 Trust	234,741		232,802	7.80%
	$ 5,137,315		$ 3,237,080	5.01%		$ 2,706,275	4.05%

Discussion of results

The company completed two securitizations during 3Q23 totaling $316.3 million of securities issued.

• The VCC 2023-3 securitization totaled $234.7 million of securities issued in August, comprised of long-term business-purpose loans
• Collapsed the 2016-1 Trust, retiring older, higher cost debt

• The VCC 2023-RTL1 securitization totaled $81.6 million of securities issued in August, comprised of short-term interest only business-purpose loans. The RTL1 transaction is Velocity’s first securitization collateralized entirely by short-term loans. Velocity also has the option to replace loans that payoff with new loans up to the original issued balance for 18 months from issuance.

• The weighted average rate on Velocity’s outstanding securitizations was 5.01% as of September 30, 2023, an increase of 96 bps from September 30, 2022

RESOLUTION ACTIVITIES
LONG-TERM LOANS
RESOLUTION ACTIVITY		THIRD QUARTER 2023			THIRD QUARTER 2022
($ in thousands)		UPB $	Gain / (Loss) $		UPB $	Gain / (Loss) $
Paid in full		$ 20,668	$ 758		$ 16,175	$ 967
Paid current		26,950	206		11,410	182
REO sold		6,341	162		3,171	250
Total resolutions		$ 53,959	$ 1,126		$ 30,756	$ 1,399
Resolutions as a % of nonperforming UPB			102.1%			104.5%
SHORT-TERM AND FORBEARANCE LOANS
RESOLUTION ACTIVITY		THIRD QUARTER 2023			THIRD QUARTER 2022
($ in thousands)		UPB $	Gain / (Loss) $		UPB $	Gain / (Loss) $
Paid in full		$ 2,967	$ 38		$ 8,691	$ 396
Paid current		6,292	-		2,075	-
REO sold		2,434	(11)		3,672	865
Total resolutions		$ 11,693	$ 27		$ 14,438	$ 1,261
Resolutions as a % of nonperforming UPB			100.2%			108.7%
Grand total resolutions		$ 65,652	$ 1,153		$ 45,194	$ 2,660
Grand total resolutions as a % of nonperforming UPB			101.8%			105.9%

Discussion of results:

• NPL resolution totaled 65.7 million in UPB, realizing 101.8% of UPB resolved compared to $45.2 million in UPB and realization of 105.9% of UPB resolved for 3Q22
• 3Q23 NPL resolutions represented 17.7% of nonperforming loan UPB as of June 30, 2023
• The UPB of loan resolutions in 3Q23 was higher than the recent five-quarter resolution average of $45.0 million in UPB

Velocity’s executive management team will host a conference call and webcast to review 3Q23 financial results on November 2^nd, 2023, at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time.

Webcast Information

The conference call will be webcast live in listen-only mode and can be accessed through the Events and Presentations section of the Velocity Financial Investor Relations website https://www.velfinance.com/events-and-presentations. To listen to the webcast, please visit Velocity’s website at least 15 minutes before the call to register, download, and install any needed software. An audio replay of the call will also be available on Velocity’s website following the completion of the conference call.

Conference Call Information

To participate by phone, please dial-in 15 minutes before the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing

F1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 for international callers. Callers should ask to join the Velocity Financial, Inc. conference call.

A replay of the call will be available through midnight on November 30, 2023, 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 #3150552. The replay will also be available on the Investor Relations section of the Company's website under "Events and Presentations.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages business purpose loans secured by 1-4-unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers built and refined over 19 years.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (GAAP), the Company uses non-GAAP core net income and core diluted EPS, which are non-GAAP financial measures.

Non-GAAP core net income and non-GAAP core diluted EPS are non-GAAP financial measures that represent our net income (loss) and net income (loss) per diluted share, adjusted to eliminate the effect of certain costs incurred from activities that are not normal recurring operating expenses, such as COVID-stressed charges and recoveries of loan loss provision, nonrecurring debt amortization, the impact of operational measures taken to address the COVID-19 pandemic and workforce reduction costs, and costs associated with acquisitions. To calculate non-GAAP core diluted EPS, we use the weighted-average number of shares of common stock outstanding that is used to calculate net income per diluted share under GAAP.

We have included non-GAAP core net income and non-GAAP core diluted EPS because they are key measures used by our management to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that non-GAAP core net income and non-GAAP core diluted EPS provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. In addition, they provide useful measures for period-to-period comparisons of our business, as they remove the effect of certain items that we expect to be nonrecurring.

These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

For more information on Core Income, please refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP Net Income” at the end of this press release.

Forward-Looking Statements

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to anticipated results, expectations, projections, plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” ”position,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement. While forward-looking statements reflect our good faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to, (1) the continued course and severity of the COVID-19 pandemic and its direct and indirect impacts, (2) general economic and real estate market conditions, including the risk of recession (3) regulatory and/or legislative changes, (4) our customers' continued interest in loans and doing business with us, (5) market conditions and investor interest in our future securitizations, and (6) the continued conflict in Ukraine and (7) changes in federal government fiscal and monetary policies.

Additional information relating to these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements can be found in the section titled ‘‘Risk Factors” in our Form 10-Q filed with the SEC on May 14, 2020, as well as other cautionary statements we make in our current and periodic filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.velfinance.com.

Velocity Financial, LLC
Consolidated Statements of Financial Condition
	Quarter Ended
	9/30/2023		6/30/2023		3/31/2023		12/31/2022		9/30/2022
	Unaudited		Unaudited		Unaudited		Audited		Unaudited
(In thousands)
Assets
Cash and cash equivalents	$ 29,393		$ 33,987		$ 39,397		$ 45,248		$ 26,372
Restricted cash	17,703		16,786		16,636		16,808		14,533
Loans held for sale, at fair value	19,536		-		18,081		-		16,569
Loans held for investment, at fair value	951,990		705,330		450,732		276,095		926
Loans held for investment	2,945,840		3,057,940		3,169,280		3,272,390		3,445,563
Total loans, net	3,917,366		3,763,270		3,638,093		3,548,485		3,463,058
Accrued interest receivables	24,756		22,602		20,931		20,463		18,333
Receivables due from servicers	70,139		63,896		64,133		65,644		66,992
Other receivables	236		1,306		2,188		1,075		1,962
Real estate owned, net	29,299		20,388		21,778		13,325		13,188
Property and equipment, net	2,861		3,023		3,209		3,356		3,495
Deferred tax asset	705		1,878		2,543		5,033		4,337
Mortgage Servicing Rights, at fair value	9,786		9,445		9,143		9,238		9,868
Derivative assets	1,261		-		-		-		-
Goodwill	6,775		6,775		6,775		6,775		6,775
Other assets	7,028		7,789		12,268		13,525		18,453
Total Assets	$ 4,117,308		$ 3,951,145		$ 3,837,094		$ 3,748,975		$ 3,647,366
Liabilities and members' equity
Accounts payable and accrued expenses	$ 97,869		$ 95,344		$ 84,976		$ 91,525		$ 75,150
Secured financing, net	210,774		210,464		210,155		209,846		209,537
Securitized debt, net	2,504,334		2,622,547		2,657,469		2,736,290		2,651,895
Securitized debt, at fair value	669,139		381,799		194,941		-		-
Warehouse & repurchase facilities	215,176		235,749		298,313		330,814		340,050
Total Liabilities	3,697,292		3,545,903		3,445,854		3,368,475		3,276,632
Stockholders' Equity
Stockholders' equity	416,398		401,707		387,624		376,811		366,810
Noncontrolling interest in subsidiary	3,618		3,535		3,616		3,689		3,924
Total equity	420,016		405,242		391,240		380,500		370,734
Total Liabilities and members' equity	$ 4,117,308		$ 3,951,145		$ 3,837,094		$ 3,748,975		$ 3,647,366
Book value per share	$ 13.00		$ 12.57		$ 12.18		$ 11.89		$ 11.61
Shares outstanding	32,314(1)		32,239(2)		32,112(3)		31,996(4)		31,922(5)

(1)		Based on 32,313,744 common shares outstanding as of September 30, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 589,634.
(2)		Based on 32,238,715 common shares outstanding as of June 30, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 502,913.
(3)		Based on 32,111,906 common shares outstanding as of March 31, 2023, and excludes unvested shares of common stock authorized for incentive compensation totaling 490,526.
(4)		Based on 31,955,730 common shares outstanding as of December 31, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.
(5)		Based on 31,921,721 common shares outstanding as of September 30, 2022, and excludes unvested shares of common stock authorized for incentive compensation totaling 494,139.

	Velocity Financial, LLC
	Consolidated Statements of Income (Quarters)
		Quarter Ended
	($ in thousands)	9/30/2023		6/30/2023		3/31/2023		12/31/2022		9/30/2022
		Unaudited		Unaudited		Unaudited		Audited		Unaudited
	Revenues
	Interest income	$ 79,088		$ 74,897		$ 70,521		$ 65,632		$ 63,419
	Interest expense - portfolio related	47,583		45,451		42,029		40,854		34,561
	Net interest income - portfolio related	31,505		29,446		28,492		24,778		28,858
	Interest expense - corporate debt	4,138		4,139		4,139		4,139		4,011
	Net interest income	27,367		25,307		24,353		20,639		24,847
	Provision for loan losses	154		298		636		(437)		580
	Net interest income after provision for loan losses	27,213		25,009		23,717		21,076		24,267
	Other operating income
	Gain on disposition of loans	3,606		1,237		1,913		391		399
	Unrealized gain on fair value loans	(1,284)		2,413		7,354		7,795		453
	Unrealized gain (loss) on fair value securitizations	9,692		5,560		(170)		-		-
	Origination income	3,323		2,735		2,411		3,521		518
	Bank interest income	1,342		1,188		948		-		0
	Other income (expense)	681		903		386		(288)		1,656
	Total other operating income	17,360		14,036		12,842		11,419		3,027
	Net revenue	44,573		39,046		36,560		32,495		27,294
	Operating expenses
	Compensation and employee benefits	12,523		10,670		10,008		11,793		6,788
	Origination expenses	273		123		(50)		1,328		209
	Securitizations expenses	4,930		2,699		2,584		-		-
	Rent and occupancy	472		458		446		435		445
	Loan servicing	4,901		4,267		3,828		3,244		3,314
	Professional fees	854		1,056		955		1,091		664
	Real estate owned, net	1,239		1,018		1,829		552		(195)
	Other operating expenses	2,142		1,931		2,202		2,360		2,020
	Total operating expenses	27,334		22,222		21,802		20,804		13,245
	Income before income taxes	17,239		16,824		14,757		11,692		14,049
	Income tax expense	5,070		4,602		4,021		3,465		3,759
	Net income	12,169		12,222		10,736		8,227		10,290
	Net income attributable to noncontrolling interest	83		39		87		(235)		307
	Net income attributable to Velocity Financial, Inc.	12,086		12,183		10,649		8,462		9,983
	Less undistributed earnings attributable to participating securities	183		185		160		127		152
	Net earnings attributable to common shareholders	$ 11,903		$ 11,998		$ 10,489		$ 8,335		$ 9,831
	Basic earnings (loss) per share	$ 0.37		$ 0.37		$ 0.33		$ 0.26		$ 0.31
	Diluted earnings (loss) per common share	$ 0.35		$ 0.36		$ 0.31		$ 0.25		$ 0.29
	Basic weighted average common shares outstanding	32,275		32,122		32,098		31,923		31,922
	Diluted weighted average common shares outstanding	34,731		34,140		34,052		34,063		34,199

Velocity Financial, Inc.
Net Interest Margin — Portfolio Related and Total Company
(Unaudited)
	Quarter Ended September 30, 2023						Quarter Ended June 30, 2023						Quarter Ended September 30, 2022
			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	$ 3,170						$ 3,477						$ 176
Loans held for investment	3,770,460						3,634,093						3,217,264
Total loans	$ 3,773,631		$ 79,088		8.38%		$ 3,637,570		$ 74,897		8.24%		$ 3,217,440		$ 63,419		7.88%
Debt:
Warehouse and repurchase facilities	$ 192,855		4,943		10.25%		$ 238,027		5,910		9.93%		$ 226,660		3,798		6.70%
Securitizations	3,186,756		42,640		5.35%		3,020,624		39,541		5.24%		2,644,489		30,763		4.65%
Total debt - portfolio related	3,379,610		47,583		5.63%		3,258,651		45,451		5.58%		2,871,149		34,561		4.81%
Corporate debt	215,000		4,138		7.70%		215,000		4,139		7.70%		215,000		4,011		7.46%
Total debt	$ 3,594,610		$ 51,721		5.76%		$ 3,473,651		$ 49,590		5.71%		$ 3,086,149		$ 38,572		5.00%
Net interest spread - portfolio related (2)					2.75%						2.66%						3.07%
Net interest margin - portfolio related					3.34%						3.24%						3.59%
Net interest spread - total company (3)					2.63%						2.53%						2.88%
Net interest margin - total company					2.90%						2.78%						3.09%

(1)		Annualized.
(2)		Net interest spread — portfolio related is the difference between the rate earned on our loan portfolio and the interest rates paid on our portfolio-related debt."
(3)		Net interest spread — total company is the difference between the rate earned on our loan portfolio and the interest rates paid on our total debt."

Velocity Financial, Inc. Adjusted Financial Metric Reconciliation to GAAP Net Income (Unaudited)
Quarters:
Core Net Income
	Quarter Ended
($ in thousands)	9/30/2023		6/30/2023		3/31/2023		12/31/2022		9/30/2022
Net Income	$ 12,086		$ 12,183		$ 10,649		$ 8,462		$ 9,983
Equity award & ESPP costs	832		745		728		656		-
Core Net Income	$ 12,918		$ 12,928		$ 11,376		$ 9,118		$ 9,983
Diluted weighted average common shares outstanding	34,731		34,140		34,052		34,063		34,199
Core diluted earnings per share	$ 0.37		$ 0.38		$ 0.33		$ 0.27		$ 0.29

 

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The Velocity Financial Stock at the time of publication of the news with a raise of +0,26 % to 11,51USD on NYSE stock exchange (02. November 2023, 21:15 Uhr).