Velocity Financial(US:VEL)2023-05-05 01:03Loan Portfolio and Performance - As of March 31, 2023, the company's loan portfolio totaled $3.6 billion, with an average loan balance of approximately $393,000[126] - The annualized yield on the total portfolio for the three months ended March 31, 2023, was 8.00%[126] - The portfolio-related net interest margin for the same period was 3.23%, an increase from 2.84% in the previous quarter[128] - The total loans increased from $3.51 billion as of December 31, 2022, to $3.60 billion as of March 31, 2023[149] - The weighted average loan-to-value ratio at origination was 68.1% as of March 31, 2023[126] - The weighted average coupon for the loan portfolio increased to 8.15% as of March 31, 2023, from 7.95% at the end of December 2022[149] - Total loan originations for Q1 2023 were $217.0 million, a decrease of $364.4 million from $581.4 million in Q1 2022, primarily due to a strategic reduction in originations[154] - The average loan size for total loan originations in Q1 2023 was $368, with a weighted average coupon of 10.58% and a weighted average loan-to-value (LTV) of 65.0%[154] - The total loans held for investment, net, as of March 31, 2023, was $3,620.0 million, compared to $3,548.5 million as of December 31, 2022[155] - The percentage of current performing loans was 85.2% as of March 31, 2023, compared to 84.6% as of December 31, 2022[162] Nonperforming Loans and Allowance for Loan Losses - Nonperforming loans as a percentage of total loans increased to 8.62% as of March 31, 2023, compared to 8.34% at the end of December 2022[149] - Nonperforming loans amounted to $309.9 million, or 8.7% of the held for investment loan portfolio as of March 31, 2023, up from $292.8 million, or 8.3% as of December 31, 2022[163] - The allowance for loan losses as of March 31, 2023, was $5.0 million, compared to $4.9 million as of December 31, 2022, reflecting a less optimistic macroeconomic outlook[159] - The company considers various factors, including economic conditions and borrower equity, in estimating the allowance for loan losses, which is subject to change based on market conditions[160] - The average nonperforming loans held for investment were $298,703,000, with charge-offs of $484,000, resulting in a charge-off rate of 0.65%[168] - The company resolved $36.9 million of nonperforming loans during Q1 2023, compared to $34.3 million in Q1 2022, realizing net gains of $1.3 million in Q1 2023[164] Financial Performance and Income - Net income for the three months ended March 31, 2023, was $10.736 million, up from $3.231 million for the same period in 2022, reflecting a significant increase in profitability[207] - Interest income increased by $18.5 million to $70.5 million for the three months ended March 31, 2023, compared to $52.0 million for the same period in 2022, primarily due to higher portfolio balances and an increase in average loan yield from 7.76% to 8.00%[209] - The total company net interest margin increased to 2.76% for the three months ended March 31, 2023, from 1.69% for the same period in 2022[183] - Net interest income after provision for loan losses was $23.717 million for the three months ended March 31, 2023, compared to $10.623 million for the same period in 2022[207] - Total operating expenses for the three months ended March 31, 2023, were $21.518 million, compared to $12.250 million for the same period in 2022, indicating increased operational costs[207] - The annualized charge-off rate over the average loans held for investment remained low at 0.06% for the three months ended March 31, 2023, compared to 0.00% for the previous quarter and 0.05% for the same quarter in 2022[187] Securitization and Debt - The company completed one securitization totaling $198.7 million in UPB of investor real estate loans during the quarter ended March 31, 2023[133] - The company has executed a total of twenty-six securitizations, resulting in over $5.6 billion in gross debt proceeds since May 2011[127] - The company completed twenty-six securitizations from May 2011 through March 2023, issuing $5.6 billion in principal amount of securities to third parties[245] - The total debt related to the portfolio was $3.366 billion as of March 31, 2023, compared to $2.535 billion for the same period in 2022[207] - A five-year $215,000,000 syndicated corporate debt agreement was established on March 15, 2022, with a fixed interest rate of 7.125%[249] Cash Flow and Liquidity - Total liquidity plus available warehouse capacity was $578.2 million as of March 31, 2023, consisting of $39.4 million in cash and $532.9 million in available warehouse capacity[236] - Cash used in operating activities for the three months ended March 31, 2023, was $(11,928) thousand, compared to $11,836 thousand provided in the same period of 2022[237] - The company had $299.0 million in borrowings under warehouse facilities as of March 31, 2023, with $532.9 million of available capacity[242] - The net cash provided by financing activities for the three months ended March 31, 2023, was $77,483 thousand, compared to $281,684 thousand in the same period of 2022[237] - The net change in cash, cash equivalents, and restricted cash for the three months ended March 31, 2023, was $(6,023) thousand, compared to $(138) thousand in the same period of 2022[237] Future Outlook and Strategic Plans - Forward-looking statements indicate expectations regarding loan originations and strategies for future funding and business development[256] - The company plans to use proceeds from new securities issuance primarily for repaying warehouse borrowings and originating new investor real estate loans[248] - The company does not plan to structure any securitizations as sales or utilize off-balance-sheet vehicles[248]