Velocity Financial(US:VEL)2022-08-04 22:52Loan Portfolio and Performance - As of June 30, 2022, the company's loan portfolio totaled $3.1 billion, with an average loan balance of approximately $397,000 and a weighted average loan-to-value (LTV) ratio of 68.2%[119] - Nonperforming loans represented 8.16% of the total loan portfolio as of June 30, 2022, down from 10.56% as of December 31, 2021[141] - Total loan originations for the three months ended June 30, 2022, were $445.4 million, a decrease of $136.0 million from $581.4 million in the previous quarter, but an increase of $189.0 million, or 73.6%, from $256.5 million in the same quarter of 2021[146] - The unpaid principal balance (UPB) of loans held for investment as of June 30, 2022, was $3,090.3 million, up from $2,799.9 million as of March 31, 2022, and $2,062.4 million as of June 30, 2021[147] - The weighted average loan-to-value (LTV) for total loans originated and acquired was 69.7% for the three months ended June 30, 2022, compared to 69.2% for the previous quarter and 69.6% for the same quarter of 2021[146] - The loan portfolio was concentrated in investor 1-4 loans, representing 49.1% of the unpaid principal balance (UPB) as of June 30, 2022[162] Financial Results - The company reported pre-tax income of $14.7 million and net income of $10.6 million for the three months ended June 30, 2022[121] - Net income for the three months ended June 30, 2022, was $10.6 million, compared to $9.5 million for the same period in 2021, reflecting an increase of 12.6%[202] - Pre-tax return on equity for the quarter ended June 30, 2022 was 16.4%, significantly higher than 4.4% for the previous quarter[184] - The net interest margin for the total company increased to 3.54% for the three months ended June 30, 2022, from 1.69% for the quarter ended March 31, 2022[178] - Interest income increased by $14.3 million to $59.2 million for the three months ended June 30, 2022, compared to $44.9 million for the same period in 2021, primarily due to higher portfolio balances[203] Securitizations and Debt - The company completed three securitizations totaling $682.5 million of investor real estate loans during the quarter ended June 30, 2022[124] - The company has executed a total of twenty-three securitizations, resulting in over $4.9 billion in gross debt proceeds from May 2011 through June 2022[120] - The outstanding bond balances increased from $1,939,146,000 on December 31, 2021, to $2,527,119,000 as of June 30, 2022[242] - The company entered into a five-year $215.0 million syndicated corporate debt agreement on March 15, 2022, with a fixed interest rate of 7.125%[243] - The corporate debt average rate was reported at 7.78%, with a significant impact from one-time costs associated with debt repayment[180] Expenses and Operating Costs - Total operating expenses increased by $3.6 million to $14.3 million for the three months ended June 30, 2022, from $10.7 million for the same period in 2021, primarily driven by a $2.0 million increase in compensation and employee benefits[217] - Loan servicing expenses increased from $1.9 million for the three months ended June 30, 2021 to $3.3 million for the same period in 2022, reflecting a 73.7% increase[220] - Other operating expenses increased from $1.9 million for the three months ended June 30, 2021 to $3.2 million for the same period in 2022, a 68.4% increase[223] Liquidity and Cash Flow - Total liquidity was $134.1 million as of June 30, 2022, comprised of $46.3 million in cash and $87.8 million of available borrowings[230] - Net cash provided by operating activities for the six months ended June 30, 2022 was $13.1 million, down from $20.9 million for the same period in 2021[232] - Net cash used in investing activities for the six months ended June 30, 2022 was $507.9 million, compared to $139.6 million for the same period in 2021[234] Non-Performing Loans and Credit Losses - The company resolved $47.1 million of non-performing loans during the quarter ended June 30, 2022, compared to $58.2 million during the same quarter in 2021[156] - The allowance for loan losses increased to $4.9 million as of June 30, 2022, compared to $4.7 million as of March 31, 2022, and $4.0 million as of June 30, 2021[150] - The company’s rigorous screening and underwriting process aims to minimize actual credit losses, with borrower equity of 25% to 40% providing significant protection against credit losses[150] - The company’s active management of loans and significant equity cushion at origination are expected to continue minimizing credit losses on defaulted loans[155] Future Strategy - The company aims to resume loan originations and resolve non-performing loans as part of its future strategy[250] - The company plans to use proceeds from new securities issuance primarily for repaying warehouse borrowings and originating new investor real estate loans[242] - The company does not plan to structure any securitizations as sales or utilize off-balance-sheet vehicles[242] - The company has not maintained relationships with unconsolidated entities for off-balance-sheet arrangements[249]