Velocity Financial(US:VEL)2023-03-13 21:14Financial Performance - Interest income for the year ended December 31, 2022, was $240.3 million, an increase of 32% from $182.0 million in 2021[81] - Net interest income after provision for loan losses was $82.0 million in 2022, compared to $76.3 million in 2021, reflecting a growth of 7%[81] - Net income attributable to Velocity Financial, Inc. for 2022 was $32.2 million, up from $29.2 million in 2021, reflecting an increase of 10%[81] - The company generated income before income taxes of $44.6 million and net income of $32.5 million for the year ended December 31, 2022[87] - Portfolio related net interest income increased by $16.0 million or 16.7%, from $96.6 million in 2021 to $112.6 million in 2022[119] - Net income for 2022 was $32,519 thousand, an increase from $29,224 thousand in 2021, representing an 7.8% growth[169] - Earnings per common share increased to $0.99 in 2022 from $0.90 in 2021[186] Loan Portfolio - The total loan portfolio as of December 31, 2022, amounted to $3.5 billion, with an average loan balance of approximately $395,000[85] - Total loans (UPB) rose to $3.51 billion in 2022, up from $2.59 billion in 2021, representing a growth of 35.7%[127] - Total loan originations for 2022 reached $1.76 billion, an increase of $435.6 million or 32.8% from $1.33 billion in 2021[132] - Nonperforming loans (UPB) decreased to $292.8 million, accounting for 8.34% of total loans, down from 10.56% in 2021[127] - Total loans held for investment (UPB) rose to $3,243,854,000 in 2022, up from $2,498,466,000 in 2021, indicating a growth of approximately 29.8%[139] - The weighted average loan-to-value (LTV) ratio at origination for the loan portfolio was 68.2%, with investor 1-4 loans representing 52.7% of the total unpaid principal balance (UPB)[85] - The weighted average loan-to-value ratio improved to 68.2% in 2022 from 67.7% in 2021, indicating better borrower equity[127] Expenses and Costs - Total operating expenses increased by 33.6%, or $15.0 million, to $59.7 million in 2022 from $44.7 million in 2021[198] - Compensation and employee benefits rose by 58.7% to $30.5 million in 2022, attributed to higher commission expenses from increased loan originations[199] - Interest expense related to the portfolio increased by $42.3 million, or 49.4%, to $127.7 million in 2022, primarily due to an increase in the loan portfolio[187] - Income tax expense increased to $12.0 million in 2022 from $10.6 million in 2021, with an effective tax rate of 27.2% compared to 26.6% in the previous year[204] Securitization and Debt - The company has executed 25 securitizations, issuing $5.4 billion in principal amount of securities from May 2011 through December 2022[86] - 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%[254] - Total debt for the company reached $2,956,801 thousand in 2022, up from $1,968,938 thousand in 2021, marking a 50.2% increase[161] - As of December 31, 2022, borrowings under warehouse facilities amounted to $331.7 million, with $500.1 million of available capacity remaining[232] Credit Quality - The allowance for loan losses increased to $4.9 million as of December 31, 2022, from $4.3 million in 2021, reflecting the growth in loans held for investment[134] - The allowance for credit losses increased to $4,893,000 as of December 31, 2022, from $4,262,000 in 2021, reflecting a provision for loan losses of $1,152,000[139] - The company resolved $142.2 million of nonperforming loans in 2022, with a recovery rate on resolved nonperforming UPB of 106.7%[143] - Charge-offs ratio improved to 0.02% in 2022 from 0.08% in 2021, indicating better credit quality[166] Market Conditions and Strategy - The operational and financial performance of the company is influenced by market developments, including the impact of the COVID-19 pandemic and macroeconomic conditions[96] - The investor real estate loan market remains highly competitive, impacting profitability and growth potential[121] - The company plans to expand its broker network and enhance brand awareness to drive future loan originations[119] - The transition from LIBOR to SOFR is expected to occur before June 30, 2023, with no material adverse effect anticipated on funding costs[123] Liquidity and Cash Flow - Total liquidity as of December 31, 2022, was $559.3 million, consisting of $45.2 million in cash and $500.1 million in available warehouse capacity[228] - The company generated approximately $14.5 million of net cash from operations for the year ended December 31, 2022, compared to a net cash usage of $27.3 million in the previous year[230] - Cash used in investing activities for the year ended December 31, 2022, was $908.2 million, primarily for originating held for investment loans[243] - Net cash provided by financing activities for the year ended December 31, 2022, was $874.0 million, mainly from $1.7 billion in borrowings from warehouse and repurchase facilities[246]