Velocity Financial Inc. (VEL) Updated Q4 EPS Guidance Tops Consensus

Velocity Financial, Inc. (“Velocity” or the “Company”) (NYSE: VEL), a leading provider of small balance investor loans, today announced a preliminary financial and operational update for the quarter ended December 31, 2021. The Company expects to release its fourth quarter 2021 results after market close on March 10, 2022, to be followed by a conference call and webcast hosted by the Company to review its financial results at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time on the same day.

Fourth Quarter Financial and Operational Estimates:

• Loan production volume is expected to be approximately $497.8 million in unpaid principal balance (UPB), the largest volume of originations in a single quarter and a 46% increase from the prior quarter.
• Net income is expected to be in the range of $8.2 million and $8.6 million and non-GAAP core net income(1) is expected to be between $9.8 and $10.3 million for the quarter ended December 31, 2021; and diluted EPS and non-GAAP core diluted EPS(1) is expected to be in the range of $0.24 and $0.25 and $0.29 and $0.30, respectively.
• Total loans held for investment are expected to total approximately $2.5 billion in UPB as of December 31, 2021, an increase from $2.3 billion in UPB as of September 30, 2021.
• Nonperforming loans are expected to range between 10.3% and 10.8% of total loans, as measured by unpaid principal balance, as of December 31, 2021, compared to 12.7% as of September 30, 2021.
• Completed two new securitizations of Velocity’s business purposed loans:
  • VCC 2021-3, totaling $204.2 million in UPB.
  • VCC 2021-4, totaling $319.1 million in UPB, comprised of $233.1 million of recently originated investor real estate loans and $86.0 million of loans that were previously included in our VCC 2014-1, VCC 2016-2 and VCC 2017-1 securitizations , which were concurrently collapsed. The total UPB loans for VCC 2014-1, VCC 2016-2 and VCC2017-1 was approximately $109.1 million and outstanding bond balances were approximately $90.8 million and carried a weighted average coupon of 7.25%. Approximately $86.0 million in new bonds were issued for the transferred loans and reduced our coupon to approximately 3.2% in the December 2021 securitizations, which resulted in an approximately four percentage point reduction in the financing rate for those loans.
• Acquired a majority stake in Century Health & Housing Capital (“Century”) for $12.8 million in cash. Century is a licensed “Ginnie Mae” issuer/servicer that provides government-insured Federal Housing Administration (FHA) mortgage financing for multifamily housing, senior housing and long-term care/assisted living facilities and services the loans through its in-house servicing platform.
• We expect to report stockholders’ equity between $344.3 million and $344.7 million as of December 31, 2021.
  • The estimated range of stockholders’ equity as of December 31, 2021 includes the impact of the conversion of our outstanding Series A Convertible Preferred Stock, with a liquidation preference of $90 million as of September 30, 2021 and December 31, 2020, into 11,688,310 shares of common stock on October 8, 2021
  • We expect to report stockholders’ equity per common share between $10.83 per share and $10.84 per share as of December 31, 2021

(Consensus sees Q4 EPS of $0.23)

The foregoing estimated amount of loans originated and estimated range of net income, diluted EPS, non-GAAP core net income(1) and non-GAAP core diluted EPS(1) for the quarter ended December 31, 2021 and estimated amount of total loans and estimated ranges of nonperforming loans and stockholders’ equity as of December 31, 2021 are preliminary and subject to completion of financial and operating closing procedures for the year ended December 31, 2021. We have begun our normal annual closing and review procedures for the year ended December 31, 2021; however, given the timing of these estimates, the actual amounts of such measures may differ materially, including as a result of our year-end closing procedures, review adjustments and other developments that may arise between now and the time our audited financial results for the year ended December 31, 2021 are finalized. Therefore, you should not place undue reliance on these estimates.

Webcast Information

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. 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 prior to the start time to allow for wait times to access the conference call. The live conference call will be accessible by dialing 1-833-316-0544 in the U.S. and Canada and 1-412-317-5725 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 March 31, 2022 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 #744168. The replay will also be available on the Investor Relations section of the Company’s website under “Events and Presentations.”

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