Velocity Financial, Inc. Reports Fourth Quarter and Full-Year 2022 Results

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--March 9, 2023--Velocity Financial, Inc. (NYSE: VEL) (Velocity or the Company) reported net income of $32.2 million and core net income of $42.2 million for the full-year 2022, compared to net income of $29.2 million and core net income of $33.3 million in 2021. Earnings and core earnings per diluted share were $0.94 and $1.24, respectively, for the full-year 2022, compared to $0.86 and $0.98, respectively, for the full-year 2021.

“2022 was an exceptional year for Velocity,” said Chris Farrar, President and CEO. “This year, we delivered record loan production, portfolio growth of 36%, and the highest annual GAAP and Core net income in the Company’s history. While the market environment presented us with challenges resulting from the precipitous rise in interest rates, Velocity’s extensive track record of solid performance allowed us to issue six securitizations throughout the year, facilitating our impressive portfolio growth. We see considerable potential to grow our core business, which is underpinned by persistent demand for income-generating rental properties and small businesses that want to own the property where they operate. Across the broader mortgage landscape, opportunities for growth are emerging, and we remain diligent in assessing opportunities that complement our long-term strategic mission.”

Fourth Quarter Operating Results

KEY PERFORMANCE INDICATORS
($ in thousands)	4Q 2022			4Q 2021				$ Variance				% Variance
Pretax income	$	11,692		$	11,377			$	315			2.8	%
Net income	$	8,462		$	8,353			$	109			1.3	%
Diluted earnings per share	$	0.25		$	0.24			$	0			1.9	%
Core net income(a)	$	9,118		$	10,081			$	(963	)		(9.6	)%
Core diluted earnings per share(a)	$	0.27		$	0.29			$	(0	)		(9.0	)%
Pretax return on equity		12.37	%		13.75	%		n.a.				(10.0	)%
Core pretax return on equity(a)		13.61	%		16.59	%		n.a.				(18.0	)%
Net interest margin - portfolio		2.84	%		4.27	%		n.a.				(33.7	)%
Net interest margin - total company		2.36	%		3.53	%		n.a.				(33.1	)%
Average common equity	$	378,007		$	330,968			$	47,039			14.2	%

(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.

Discussion of results:

• Net income in 4Q22 was $8.5 million, compared to $8.4 million in 4Q21
• Core net income⁽¹⁾ was $9.1 million, a decrease of 9.6% from $10.1 million in 4Q21 primarily from lower NIM
• Portfolio NIM in 4Q22 was 2.84% compared to 4.27% from 4Q21, as a result of portfolio yields decreasing 70 bps and interest expense increasing 65 bps.
• The GAAP pretax return on equity was 12.37% in 4Q22, compared to 13.75% in 4Q21
  • Driven by a 14.2% year-over-year increase in the average equity balance from 4Q21

TOTAL LOAN PORTFOLIO
($ of UPB in millions)		4Q 2022			4Q 2021			$ Variance				% Variance
Held for Investment
Investor 1-4 Rental	$	1,852		$	1,225			$	627			51.2	%
Mixed Use		443			331				113			34.1	%
Multi-Family		301			228				73			32.2	%
Retail		305			234				71			30.2	%
Warehouse		223			173				51			29.3	%
All Other		388			309				78			25.3	%
Total	$	3,512		$	2,500				1,013			40.5	%
Held for Sale
Multi-Family	$	-		$	87			$	(87	)		(100.0	)%
Total Managed Loan Portfolio UPB	$	3,512		$	2,587			$	925			35.8	%
Key loan portfolio metrics:
Total loan count		8,893			6,964
Weighted average loan to value		68.2	%		67.7	%
Weighted average coupon		7.95	%		7.76	%
Weighted average total portfolio yield		7.51	%		8.21	%
Weighted average portfolio debt cost		5.23	%		4.58	%

Discussion of results:

• Velocity’s total loan portfolio was $3.5 billion in UPB as of December 31, 2022, an increase of 35.8% from $2.6 billion in UPB as of December 31, 2021
  • Driven by strong loan production volume and reduced payoff activity
  • Payoff activity totaled $84.6 million in UPB in 4Q22, a decrease of 39.7% from $140.3 million in 4Q21. As a result, we recognized less delinquent interest, which reduced portfolio yields
  • The UPB of FVO loans was $268.6 million as of December 31, 2022
• The weighted average portfolio loan-to-value ratio was 68.2% as of
  December 31, 2022, consistent with the 67.7% as of December 31, 2021, and the five-quarter trailing average of 68.1%
• The weighted average total portfolio yield was 7.51% in 4Q22, a decrease of 70 bps from 4Q21, driven primarily by fewer payoffs resulting in less delinquent interest collected
• Portfolio-related debt cost in 4Q22 was 5.23%, an increase of 65 bps from 4Q21 driven by higher interest rates

LOAN PRODUCTION VOLUMES
($ in millions)	4Q 2022			4Q 2021				$ Variance				% Variance
Investor 1-4 Rental	$	169		$	267			$	(98	)		(36.8	)%
Traditional Commercial	$	83			203				(120	)		(59.2	)%
Short-term loans	$	26			27				(1	)		(4.8	)%
Total loan production	$	277.8		$	498			$	(220	)		(44.2	)%
Acquisitions	$	-		$	10

Discussion of results:

• Loan production in 4Q22 totaled $277.8 million in UPB, a 44.2% decrease from $497.8 million in UPB in 4Q21
  • Driven by the decision to restrict lending due to securitization market volatility
• The weighted average coupon (WAC) on 4Q22 HFI loan production was 9.7%, an increase of 78 bps from 3Q22 and 339 basis points from 4Q21

HFI PORTFOLIO CREDIT PERFORMANCE INDICATORS
($ in thousands)	4Q 2022			4Q 2021				$ Variance				% Variance
Nonperforming loans(a)	$	292,789		$	273,101			$	19,688			7.2	%
Average Nonperforming Loans	$	279,224		$	274,112			$	5,112			1.9	%
Average Loan HFI	$	3,430,296		$	2,363,987			$	1,066,309			45.1	%
Nonperforming loans % total HFI Loans		8.3	%		10.9	%		n.a.				(24.0	)%
Total Charge Offs	$	-		$	143			$	(143	)		n.m
Charge-offs as a % of Avg. Nonperforming Loans(b)		0.00	%		0.21	%		n.a.				n.m
Loan Loss Reserve	$	4,893		$	4,262			$	631			14.8	%

(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.m. - non meaningful

Discussion of results:

• Nonperforming loans (NPL) totaled $292.8 million in UPB as of December 31, 2022, or 8.3% of loans HFI, compared to $273.1 million and 10.9%, respectively, as of December 31, 2021
• Charge-offs in 4Q22 totaled $0.0 compared to $142.7 thousand in 4Q21
  • The trailing five-quarter charge-off average was $132.6 thousand
• The loan loss reserve totaled $4.9 million as of December 31, 2022, a 14.8% increase from $4.3 million as of December 31, 2021
  • New originations or acquisitions where FVO accounting is elected will not be subject to a CECL reserve
• Since the program's inception in April 2020, capitalized interest recovered on COVID forbearance loans totaled $4.3 million, with a remaining balance of $7.2 million as of December 31, 2022. None of the capitalized interest has been forgiven.

NET REVENUES
($ in thousands)		4Q 2022			4Q 2021			$ Variance				% Variance
Interest income	$	65,632		$	49,360			$	16,272			33.0	%
Interest expense - portfolio related		(40,854	)		(23,666	)			(17,188	)		72.6	%
Net Interest Income - portfolio related		24,777			25,694				(917	)		(3.6	)%
Interest expense - corporate debt		(4,139	)	$	(4,462	)			323			(7.2	)%
Net Interest Income	$	20,638		$	21,232			$	(594	)		(2.8	)%
Loan loss provision		437			(377	)			814			(215.8	)%
Gain on disposition of loans		391			2,357				(1,966	)		(83.4	)%
Unrealized gain/(loss) on fair value loans		7,795			11				7,784			n.m
Unrealized gain/(loss) on mortgage servicing rights		(630	)		-				(630	)		n.m
Other operating income (expense)		3,472			249				3,223			n.m
Net Revenue	$	32,105		$	23,472			$	8,632			36.8	%

n.m. - non meaningful

Discussion of results:

• Net Revenue increased 36.8%, driven by higher other operating income as a result of our FVO election for new originations
• Total net interest income, including corporate debt interest expense, decreased by $0.6 million, or 2.8% from 4Q21
  • Interest income grew by $16.3 million from 4Q21 as a result of the higher portfolio balance, offset by lower yields
  • Portfolio interest expense increased by $17.2 million from 4Q21 as a result of higher warehouse balances and increased interest rates
• The company elected fair value accounting treatment for all HFI loan originations effective October 1, 2022
  • The unrealized fair value gain on loans originated during 4Q22 was $7.8 million
  • Other operating income in 4Q22 included $3.1 million of origination fees
  • Recognized additional compensation and production-related expenses of approximately $4.6 million
• The valuation loss in our mortgage servicing right (MSR) asset was $0.6 million, driven by a decrease in the servicing portfolio due to payoffs and an increase in the assumed CPR

OPERATING EXPENSES
($ in thousands)		4Q 2022			4Q 2021			$ Variance				% Variance
Compensation and employee benefits	$	11,793		$	4,720			$	7,073			149.9	%
Rent and occupancy		435			429				6			1.4	%
Loan servicing		3,244			2,480				764			30.8	%
Professional fees		1,091			1,716				(625	)		(36.4	)%
Real estate owned, net		552			417				135			32.3	%
Other expenses		3,297			2,333				964			41.3	%
Total operating expenses	$	20,413		$	12,095			$	8,318			68.8	%

Discussion of results:

• Operating expenses totaled $20.4 million in 4Q22, an increase of 68.8% from 4Q21
  • The increase in compensation and employee benefit expense resulted from the company’s fair value election. Compensation expense related to loan originations is expensed as incurred under fair value accounting rather than deferred over the life of the loan under amortized cost accounting
  • Servicing expense growth was driven by the increase in securitizations outstanding to $2.8 billion as of December 31, 2022 from $1.9 billion as of December 31, 2021
  • The growth in other expenses compared to 4Q21 relates to miscellaneous FVO production-related expenses that were previously deferred

SECURITIZATIONS
($ in thousands)	Securities		Balance at			Balance at
Trusts	Issued		12/31/2022		W.A. Rate	12/31/2021		W.A. Rate
2015-1 Trust		285,457		-	-	$	17,536	7.22%
2016-1 Trust		319,809		22,369	8.59%		36,401	8.22%
2017-2 Trust		245,601		59,183	3.92%		86,497	3.37%
2018-1 Trust		176,816		43,596	4.05%		62,375	4.04%
2018-2 Trust		307,988		93,792	4.46%		143,152	4.39%
2019-1 Trust		235,580		91,167	4.06%		132,306	4.02%
2019-2 Trust		207,020		82,508	3.46%		122,205	3.44%
2019-3 Trust		154,419		67,899	3.25%		95,521	3.26%
2020-1 Trust		248,700		136,643	2.89%		174,550	2.82%
2020-2 Trust		96,352		60,445	4.60%		80,676	4.45%
2020-MC1 Trust		179,371		-	-		35,711	4.42%
2021-1 Trust		251,301		196,969	1.73%		236,190	1.73%
2021-2 Trust		194,918		170,072	2.02%		197,744	2.28%
2021-3 Trust		204,205		178,038	2.44%		202,793	2.45%
2021-4 Trust		319,116		273,489	3.20%		315,489	3.11%
2022-1 Trust		273,594		256,667	3.93%
2022-2 Trust		241,388		233,045	5.07%
2022-MC1 Trust		84,967		54,528	6.91%
2022-3 Trust		296,323		280,066	5.67%
2022-4 Trust		308,357		301,856	6.23%
2022-5 Trust		188,754		186,577	7.10%
	$	4,820,036	$	2,788,909	4.27%	$	1,939,146	3.20%

Discussion of results

• Completed the VCC 2022-5 securitization totaling $188.8 million of securities issued in October, comprised of Investor 1-4 and Traditional Commercial long-term loans
• The weighted average rate on Velocity’s outstanding securitizations increased 107 bps from December 31, 2021, driven by higher rates on securitizations issued in 2022
• After quarter end, the Company completed the VCC 2023-1 securitization totaling $198.7 million of securities issued in January 2023

RESOLUTION ACTIVITIES
LONG-TERM LOANS
RESOLUTION ACTIVITY		FOURTH QUARTER 2022						FOURTH QUARTER 2021
($ in thousands)		UPB $			Gain / (Loss) $			UPB $			Gain / (Loss) $
Paid in full		$	8,188		$	329		$	11,464		$	614
Paid current			9,648			21			12,209			290
REO sold (a)			2,404			67			1,770			121
Total resolutions		$	20,240		$	417		$	25,443		$	1,025
Resolutions as a % of nonperforming UPB						102.1%						104.0%
SHORT-TERM AND FORBEARANCE LOANS
RESOLUTION ACTIVITY		FOURTH QUARTER 2022						FOURTH QUARTER 2021
($ in thousands)		UPB $			Gain / (Loss) $			UPB $			Gain / (Loss) $
Paid in full		$	4,092		$	82		$	12,567		$	623
Paid current			457			-			5,837			67
REO sold			529			74			266			48
Total resolutions		$	5,078		$	156		$	18,670		$	738
Resolutions as a % of nonperforming UPB						103.1%						104.0%
Grand total resolutions		$	25,318		$	572		$	44,113		$	1,763
Grand total resolutions as a % of nonperforming UPB						102.3%						104.0%

Discussion of results:

• Total NPL and REO resolution activities in 4Q22 totaled $25.3 million in UPB and realized net gains of $0.6 million, or 102.3% of UPB resolved, compared to $44.1 million in UPB and net gains of $1.8 million, or 104.0% of UPB resolved in 4Q21
  • Long-term loan and REO resolutions in 4Q22 totaled $20.2 million in UPB and realized gains of $0.4 million, compared to $25.4 million in UPB and realized gains of $1.0 million in 4Q21
  • Short-term loan and REO resolutions in 4Q22 totaled $5.1 million in UPB and realized gains of $0.2 million, compared to $18.7 million in UPB and realized gains of $0.74 million in 4Q21
• Loans resolutions in 4Q22 were $15.2 million in UPB below the recent five quarter resolution average of $40.5 million in UPB.
  • Expect resolutions to increase in 2023 to levels consistent with the historical average

Full-Year 2022 Operating Results

FULL-YEAR OPERATING RESULTS
($ in thousands)	FY 2022			FY 2021				$ Variance				% Variance
Investor 1-4 Rental	$	994		$	746			$	247			33.2	%
Traditional Commercial		652			512				140			27.2	%
Short-term loans		116			67				49			73.0	%
Total Loan production	$	1,762		$	1,326			$	436			32.9	%
Net Interest Margin - Portfolio		3.64	%		4.54	%		n.a.				(19.8	)%
Average Nonperforming Loans	$	266,129		$	307,562			$	(41,433	)		(13.5	)%
Charge-offs as a % of Avg. Nonperforming Loans(b)		0.20	%		0.42	%		n.a.				(53.4	)%
Total charge-offs	$	521		$	1,291			$	(770	)		(59.6	)%
Total Net Interest Income(a)		81,996			76,265			$	5,731			7.5	%
Total Other Income		22,225			8,188				14,037			171.4	%
Total Expenses		72,011			55,229				16,782			30.4	%
Net Income	$	32,211		$	29,224			$	2,987			10.2	%
Diluted EPS	$	0.94		$	0.86			$	0.08			9.7	%
Core Income(c)	$	42,153		$	33,278			$	8,874			26.7	%
Core Diluted EPS(c)	$	1.24		$	0.98			$	0.26			26.1	%

(a)		After provision for loan losses.
(b)		Reflects the annualized quarter-to-date charge-offs to average nonperforming loans for the period.
(c)		Core income is a non-GAAP measure. Please see the reconciliation to GAAP net income at the end of this release.

Discussion of results:

• Loan production in 2022 totaled $1.8 billion in UPB, a 32.9% increase from $1.3 billion in UPB in 2021
  • Record strong demand for single-family rentals and smaller commercial properties nationwide
• Net interest margin (NIM) was 3.64% in 2022, a 90 bps decrease from 4.54% in 2021
  • The decrease is a result of higher securitization and warehouse financing costs driven by the rapid increase in interest rates and lower realized portfolio yields
• Charge-offs in 2022 totaled $0.5 million, a 59.6% decrease from $1.3 million in 2021
  • As a percentage of average nonperforming loans, charge-offs were 0.20% in 2022, a decrease from 0.42% in 2021. The decrease reflects our continued strong underwriting process and successful loss mitigation by Velocity’s special servicing team.
• Net income totaled 32.2 million in 2022, a 10.2% increase from 29.2 million in 2021
  • Net interest income (after provision for loan losses) totaled $82.0 million, a 7.5% increase from $76.3 million in 2021, driven by HFI portfolio growth, partially offset by lower portfolio yields
  • Other income totaled $22.2 million, a 171.4% increase from $8.2 million in 2021, driven by the Company’s fair value accounting election for loan production originated after October 1, 2022, MSR valuation gains and production fee income
  • Expenses totaled $72.0 million, a 30.4% increase from $55.2 million in 2021, driven by an increase in compensation expense related to the Company’s fair value accounting election and servicing costs resulting from the issuance of six new VCC securitizations in 2022
• Core net income⁽¹⁾ totaled $42.2 million, a 26.7% increase from $32.3 million in 2021
  • 2022 core income adjustment totaled $9.9 million related to the Company’s corporate debt refinancing in March 2022, in addition to equity incentive compensation expenses and costs related to the Company’s employee stock purchase plan (ESPP) in 4Q22
• Core diluted EPS was $1.24 per share, a 26.1% increase from $0.98 per share in 2021

Velocity’s executive management team will host a conference call and webcast to review 4Q22 and Full-Year 2022 financial results on March 9^th, 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 go to 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 1-833-316-0544 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 March 31, 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 #1703714. 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 investor 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 18 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
	12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
	Unaudited			Unaudited			Unaudited			Unaudited			Unaudited
(In thousands)
Assets
Cash and cash equivalents	$	45,248		$	26,372		$	46,250		$	36,629		$	35,965
Restricted cash		16,808			14,533			9,217			10,837			11,639
Loans held for sale, net		-			-			-			77,503			87,908
Loans held for sale, at fair value		-			16,569			-			-			-
Loans held for investment, at fair value		276,095			926			1,351			1,352			1,359
Loans held for investment		3,272,390			3,445,563			3,118,799			2,828,302			2,527,564
Total loans, net		3,548,485			3,463,058			3,120,150			2,907,156			2,616,831
Accrued interest receivables		20,463			18,333			15,820			14,169			13,159
Receivables due from servicers		65,644			66,992			75,688			78,278			74,330
Other receivables		1,075			1,962			1,320			4,527			1,812
Real estate owned, net		13,325			13,188			19,218			16,177			17,557
Property and equipment, net		3,356			3,495			3,632			3,690			3,830
Deferred tax asset		5,033			4,337			15,195			16,477			16,604
Mortgage Servicing Rights, at fair value		9,238			9,868			8,438			7,661			7,152
Goodwill		6,775			6,775			6,775			6,775			6,775
Other assets		13,525			18,453			11,036			7,345			6,824
Total Assets	$	3,748,975		$	3,647,366		$	3,332,739		$	3,109,721		$	2,812,478
Liabilities and members' equity
Accounts payable and accrued expenses	$	91,525		$	75,150		$	78,384		$	92,768		$	92,195
Secured financing, net		209,846			209,537			209,227			208,956			162,845
Securitizations, net		2,736,290			2,651,895			2,477,226			2,035,374			1,911,879
Warehouse & repurchase facilities		330,814			340,050			208,390			424,692			301,069
Total Liabilities		3,368,475			3,276,632			2,973,227			2,761,790			2,467,988
Mezzanine Equity
Series A Convertible preferred stock		-			-			-			-			-
Stockholders' Equity
Stockholders' equity		376,811			366,810			355,895			344,441			341,109
Noncontrolling interest in subsidiary		3,689			3,924			3,617			3,491			3,381
Total equity		380,500			370,734			359,512			347,932			344,490
Total Liabilities and members' equity	$	3,748,975		$	3,647,366		$	3,332,739		$	3,109,722		$	2,812,478
Book value per share	$	11.89		$	11.61		$	11.26		$	10.90		$	10.84
Shares outstanding		31,996			31,922			31,922			31,913			31,787

Velocity Financial, Inc.
Consolidated Statements of Income (Quarters)
	Quarter Ended
($ in thousands)	12/31/2022				9/30/2022				6/30/2022				3/31/2022				12/31/2021
Revenues
Interest income	$	65,632			$	63,419			$	59,243			$	52,049			$	49,360
Interest expense - portfolio related		40,854				34,561				28,752				23,556				23,666
Net interest income - portfolio related		24,778				28,858				30,491				28,493				25,694
Interest expense - corporate debt		4,139				4,011				4,182				17,140				4,462
Net interest income		20,639				24,847				26,309				11,353				21,232
Provision for loan losses		(437	)			580				279				730				377
Net interest income after provision for loan losses		21,076				24,267				26,030				10,623				20,855
Other operating income
Gain on disposition of loans		391				399				1,776				4,540				2,357
Unrealized gain/(loss) on fair value loans		7,795				453				6				11				11
Unrealized gain/(loss) on mortgage servicing rights		(630	)			1,430				776				510				-
Other income (expense)		3,472				227				481				587				249
Other operating income (expense)		11,029				2,509				3,039				5,648				2,617
Net revenue		32,105				26,776				29,070				16,271				23,472
Operating expenses
Compensation and employee benefits		11,793				6,788				6,553				5,323				4,720
Rent and occupancy		435				445				426				442				429
Loan servicing		3,244				3,314				3,290				2,450				2,480
Professional fees		1,091				664				1,062				1,362				1,716
Real estate owned, net		552				(195	)			(251	)			(175	)			417
Other operating expenses		3,297				1,711				3,199				2,848				2,333
Total operating expenses		20,413				12,727				14,279				12,250				12,095
Income before income taxes		11,692				14,049				14,790				4,021				11,377
Income tax expense		3,465				3,759				4,019				790				3,024
Net income		8,227				10,290				10,771				3,231				8,353
Net income attributable to noncontrolling interest		(235	)			307				126				110				-
Net income attributable to Velocity Financial, Inc.		8,462				9,983				10,645				3,121				8,353
Less undistributed earnings attributable to participating securities		127				152				164				48				362
Net earnings attributable to common shareholders	$	8,335			$	9,831			$	10,481			$	3,073			$	7,991
Basic earnings (loss) per share	$	0.26			$	0.31			$	0.33			$	0.10			$	0.26
Diluted earnings (loss) per common share	$	0.25			$	0.29			$	0.31			$	0.09			$	0.24
Basic weighted average common shares outstanding		31,923				31,922				31,917				31,892				30,897
Diluted weighted average common shares outstanding		34,063				34,199				34,057				34,204				34,257

Velocity Financial, Inc.
Consolidated Statements of Income (Annual)
	Year Ended
($ in thousands)	12/31/2022				12/31/2021
Revenues
Interest income	$	240,343			$	181,968
Interest expense - portfolio related		127,723				85,386
Net interest income - portfolio related		112,620				96,582
Interest expense - corporate debt		29,472				20,609
Net interest income		83,148				75,973
Provision for loan losses		1,152				(292	)
Net interest income after provision for loan losses		81,996				76,265
Other operating income
Gain on disposition of loans		7,107				7,892
Unrealized gain/(loss) on fair value loans		8,265				29
Unrealized gain/(loss) on mortgage servicing rights		2,086				-
Other income (expense)		4,767				267
Other operating income (expense)		22,225				8,188
Net revenue		104,220				84,453
Operating expenses
Compensation and employee benefits		30,458				19,190
Rent and occupancy		1,748				1,769
Loan servicing		12,298				8,282
Professional fees		4,179				3,781
Real estate owned, net		(70	)			3,150
Other operating expenses		11,056				8,488
Total operating expenses		59,669				44,660
Income before income taxes		44,552				39,793
Income tax expense		12,033				10,569
Net income		32,519				29,224
Net income attributable to noncontrolling interest		308				-
Net income attributable to Velocity Financial, Inc.		32,211				29,224
Less undistributed earnings attributable to participating securities		491				8,589
Net earnings attributable to common shareholders	$	31,720			$	20,635
Basic earnings (loss) per share	$	0.99			$	0.90
Diluted earnings (loss) per common share	$	0.94			$	0.86
Basic weighted average common shares outstanding		31,913				22,813
Diluted weighted average common shares outstanding		34,131				33,982

Velocity Financial, Inc.
Net Interest Margin ‒ Portfolio Related and Total Company
(Unaudited)
Quarters:
	Quarter Ended December 31, 2022								Quarter Ended December 31, 2021
				Interest			Average					Interest			Average
	Average			Income /			Yield /		Average			Income /			Yield /
($ in thousands)	Balance			Expense			Rate(1)		Balance			Expense			Rate(1)
Loan portfolio:
Loans held for sale	$	64,699							$	40,464
Loans held for investment		3,430,296								2,363,987
Total loans	$	3,494,995		$	65,632		7.51%		$	2,404,451		$	49,360		8.21%
Debt:
Warehouse and repurchase facilities	$	284,178			5,776		8.13%		$	271,761			3,273		4.82%
Securitizations		2,840,230			35,077		4.94%			1,796,543			20,392		4.54%
Total debt - portfolio related		3,124,409			40,853		5.23%			2,068,304			23,665		4.58%
Corporate debt		215,000			4,139		7.70%			171,926			4,463		10.38%
Total debt	$	3,339,409		$	44,992		5.39%		$	2,240,230		$	28,128		5.02%
Net interest spread - portfolio related (2)							2.28%								3.63%
Net interest margin - portfolio related							2.84%								4.27%
Net interest spread - total company (3)							2.11%								3.19%
Net interest margin - total company							2.36%								3.53%

(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.

Annual:
	Year Ended December 31, 2022								Year Ended December 31, 2021
				Interest			Average					Interest			Average
	Average			Income /			Yield /		Average			Income /			Yield /
($ in thousands)	Balance			Expense			Rate(1)		Balance			Expense			Rate(1)
Loan portfolio:
Loans held for sale	$	49,194							$	15,794
Loans held for investment		3,043,003								2,110,053
Total loans	$	3,092,198		$	240,343		7.77%		$	2,125,847		$	181,968		8.56%
Debt:
Warehouse and repurchase facilities	$	292,490			17,454		5.97%		$	183,663			9,706		5.28%
Securitizations		2,458,332			110,269		4.49%			1,630,385			75,680		4.64%
Total debt - portfolio related		2,750,822			127,723		4.64%			1,814,048			85,386		4.71%
Corporate debt		205,979			29,472		14.31%			154,890			20,609		13.31%
Total debt	$	2,956,801		$	157,195		5.32%		$	1,968,938		$	105,995		5.38%
Net interest spread - portfolio related (2)							3.13%								3.85%
Net interest margin - portfolio related							3.64%								4.54%
Net interest spread - total company (3)							2.46%								3.18%
Net interest margin - total company							2.69%								3.57%

(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 Income
	Quarter Ended
	12/31/2022			9/30/2022				6/30/2022			3/31/2022			12/31/2021
Net Income	$	8,462		$	9,983			$	10,645		$	3,121		$	8,353
Deal cost write-off - collapsed securitizations		-			-				-			-		$	1,104
One-time Century Health & Housing Capital deal costs		-			-				-			-		$	624
Recovery of Loan Loss Provision		-			-				-			-			-
Corporate debt refinancing costs		-			-				-		$	9,286			-
Equity award & ESPP costs	$	656			-				-		$	-			-
Core Income	$	9,118		$	9,983			$	10,645		$	12,407		$	10,081
Diluted weighted average common shares outstanding		34,063			34,199				34,057			34,204			34,257
Core diluted earnings per share	$	0.27		$	0.29			$	0.31		$	0.36		$	0.29

Annual:
Core Income
	Year Ended
	12/31/2022			12/31/2021
Net Income	$	32,211		$	29,224
Deal cost write-off - collapsed securitizations		-			1,104
One-time Century Health & Housing Capital deal costs		-			624
Recovery of Loan Loss Provision		-			(1,000	)
Corporate debt refinancing costs		9,286			3,326
Equity award & ESPP costs		656			-
Core Income	$	42,153		$	33,278
Diluted weighted average common shares outstanding	$	34,131		$	33,982
Core diluted earnings per share	$	1.24		$	0.98