Velocity Financial, Inc. [VEL] Filings

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10-Q 1 vel-20240930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission File Number: 001-39183

Velocity Financial, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	46-0659719
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2945 Townsgate Road, Suite 110 Westlake Village, California	91361
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (818) 532-3700

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common stock, par value $0.01 per share

    VEL

    The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 1, 2024, the registrant had 33,114,845 shares of common stock outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Changes in Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	57

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59

SIGNATURES		61

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

VELOCITY FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)


	September 30, 2024			December 31, 2023
	(Unaudited)
ASSETS
Cash and cash equivalents	$	44,094		$	40,566
Restricted cash		23,167			21,361
Loans held for sale, at fair value		19,231			17,590
Loans held for investment, at amortized cost		2,526,320			2,828,123
Loans held for investment, at fair value		2,354,718			1,306,072
Total loans, net		4,900,269			4,151,785
Accrued interest receivables		32,944			27,028
Receivables due from servicers		93,681			85,077
Other receivables		4,265			8,763
Real estate owned, net		62,361			44,268
Property and equipment, net		1,693			2,785
Deferred tax asset		14,501			2,339
Mortgage servicing rights, at fair value		12,416			8,578
Goodwill		6,775			6,775
Other assets		6,308			5,248
Total assets	$	5,202,474		$	4,404,573

LIABILITIES
Accounts payable and accrued expenses	$	140,534		$	121,969
Secured financing, net		284,371			211,083
Securitized debt, at amortized cost		2,105,099			2,418,811
Securitized debt, at fair value		1,749,268			877,417
Warehouse and repurchase facilities, net		434,027			334,755
Derivative liability		1,486			3,665
Total liabilities		4,714,785			3,967,700
Commitments and contingencies
EQUITY
Common stock ($0.01 par value, 100,000,000 shares authorized; 33,330,407 and 32,987,248 shares issued, 33,114,845 and 32,865,836 shares outstanding as of September 30, 2024 and December 31, 2023, respectively)		335			331
Additional paid-in capital		313,087			306,736
Retained earnings		176,738			128,906
Treasury stock, at cost (215,562 and 121,412 common shares as of September 30, 2024 and December 31, 2023, respectively)		(2,869	)		(1,319	)
Accumulated other comprehensive loss		(2,655	)		(1,210	)
Total Velocity Financial, Inc. stockholders' equity		484,636			433,444
Noncontrolling interest in subsidiary		3,053			3,429
Total equity		487,689			436,873
Total liabilities and equity	$	5,202,474		$	4,404,573

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands)

The following table represents the assets and liabilities of consolidated variable interest entities as follows:


	September 30, 2024		December 31, 2023
	(Unaudited)
ASSETS
Restricted cash	$	10,117	$	11,428
Loans held for investment, at amortized cost		2,449,223		2,805,615
Loans held for investment, at fair value		1,810,924		914,891
Accrued interest and other receivables		114,551		104,663
Real estate owned, net		50,383		36,133
Deferred tax asset		566		—
Other assets		—		9
Total assets	$	4,435,764	$	3,872,739

LIABILITIES
Accounts payable and accrued expenses	$	85,937	$	74,153
Securitized debt		3,854,366		3,296,228
Total liabilities	$	3,940,303	$	3,370,381

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Interest income	$	105,070		$	79,088		$	293,359		$	224,506
Interest expense — portfolio related		63,871			47,583			178,734			135,062
Net interest income — portfolio related		41,199			31,505			114,625			89,444
Interest expense — corporate debt		6,143			4,138			17,677			12,417
Net interest income		35,056			27,367			96,948			77,027
Provision for (reversal of) credit losses		(69	)		154			1,151			1,088
Net interest income after provision for (reversal of) credit losses		35,125			27,213			95,797			75,939
Other operating income
Gain on disposition of loans		2,291			3,606			7,156			6,756
Unrealized gain (loss) on fair value loans		35,530			(1,284	)		71,579			8,483
Unrealized gain (loss) on fair value securitized debt		(24,995	)		9,692			(31,957	)		15,083
Unrealized gain (loss) on mortgage servicing rights		(993	)		341			(922	)		548
Origination fee income		6,704			3,323			16,762			8,469
Interest income on cash balance		1,676			1,342			5,038			3,478
Other income		519			340			1,412			1,422
Total other operating income		20,732			17,360			69,068			44,239
Operating expenses
Compensation and employee benefits		17,586			12,523			49,505			33,200
Origination expenses		867			273			2,262			347
Securitization expenses		3,186			4,930			12,292			10,213
Loan servicing		5,656			4,901			15,639			12,996
Professional fees		2,305			854			6,140			2,865
Rent and occupancy		519			472			1,633			1,377
Real estate owned, net		1,951			1,239			5,762			4,085
Other operating expenses		2,543			2,142			7,278			6,276
Total operating expenses		34,613			27,334			100,511			71,359
Income before income taxes		21,244			17,239			64,354			48,819
Income tax expense		5,627			5,070			16,693			13,693
Net income		15,617			12,169			47,661			35,126
Net income (loss) attributable to noncontrolling interest		(186	)		83			(171	)		208
Net income attributable to Velocity Financial, Inc.	$	15,803		$	12,086		$	47,832		$	34,918
Less undistributed earnings attributable to unvested restricted stock awards		191			183			580			530
Net earnings attributable to common stockholders	$	15,612		$	11,903		$	47,252		$	34,388
Earnings per common share
Basic	$	0.48		$	0.37		$	1.45		$	1.07
Diluted	$	0.44		$	0.35		$	1.34		$	1.02
Weighted average common shares outstanding
Basic		32,711			32,275			32,613			32,166
Diluted		35,895			34,731			35,645			34,313

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024			2023		2024			2023
Net income attributable to Velocity Financial, Inc.	$	15,803		$	12,086	$	47,832		$	34,918
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on cash flow hedges arising during the period		(4,161	)		905		(1,362	)		905
Reclassification adjustments included in net income		(92	)		—		(83	)		—
Total other comprehensive income (loss), net of tax		(4,253	)		905		(1,445	)		905
Total comprehensive income attributable to Velocity Financial, Inc.	$	11,550		$	12,991	$	46,387		$	35,823

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands, except share data)

(Unaudited)


	Common Stock - Number of Shares								Shareholders' Equity
	Shares Issued		Treasury Shares			Shares Outstanding			Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock, at Cost			Accumulated Other Comprehensive Income (Loss), Net of Tax		Total Stockholders' Equity			Noncontrolling Interest			Total Equity
Balance – December 31, 2022		32,523,516		(33,647	)		32,489,869		$	326	$	300,310	$	76,633	$	(458	)	$	—	$	376,811		$	3,689		$	380,500
Purchase of treasury stock, at cost		—		(85,574	)		(85,574	)		—		—		—		(836	)		—		(836	)		—			(836	)
Restricted stock awarded and stock-based compensation expenses		198,137		—			198,137			2		998		—		—			—		1,000			—			1,000
Distribution to non-controlling interest		—		—			—			—		—		—		—			—		—			(160	)		(160	)
Net income		—		—			—			—		—		10,649		—			—		10,649			87			10,736
Balance – March 31, 2023		32,721,653		(119,221	)		32,602,432		$	328	$	301,308	$	87,282	$	(1,294	)	$	—	$	387,624		$	3,616		$	391,240
Issuance of common stock		107,567		—			107,567			1		874		—		—			—		875			—			875
Restricted stock awarded and stock-based compensation expenses		31,629		—			31,629			—		1,025		—	</

Velocity Financial, Inc. [VEL] Filings
10-Q	[2024-11]
10-Q	[2024-08]
10-Q	[2024-05-03]
10-K	[2024-03-15]
10-Q	[2023-11-03]
10-Q	[2023-08-04]
10-Q	[2023-05-05]
10-K	[2023-03-13]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-03-15]
10-Q	[2021-11-04]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-17]
10-Q	[2020-11-12]
10-Q	[2020-08-13]
10-Q	[2020-05-14]
10-K	[2020-04-07]
S-1	[2019-10-18]