Velocity Financial, Inc. [VEL] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 vel-20230331.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 March 31, 2023


☐	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.)
30699 Russell Ranch Road, Suite 295 Westlake Village, California	91362
(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 May 1, 2023, the registrant had 32,602,432 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 Changes in Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

SIGNATURES		52

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

VELOCITY FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except par value amounts)


	March 31, 2023			December 31, 2022
	(Unaudited)
ASSETS
Cash and cash equivalents	$	39,397		$	45,248
Restricted cash		16,636			16,808
Loans held for sale, at fair value		18,081			—
Loans held for investment, net		3,169,280			3,272,390
Loans held for investment, at fair value		450,732			276,095
Total loans, net		3,638,093			3,548,485
Accrued interest receivables		20,931			20,463
Receivables due from servicers		64,133			65,644
Other receivables		2,188			1,075
Real estate owned, net		21,778			13,325
Property and equipment, net		3,209			3,356
Deferred tax asset		2,543			5,033
Mortgage servicing rights, at fair value		9,143			9,238
Goodwill		6,775			6,775
Other assets		12,268			13,525
Total assets	$	3,837,094		$	3,748,975
LIABILITIES
Accounts payable and accrued expenses	$	84,976		$	91,525
Secured financing, net		210,155			209,846
Securitizations, net		2,657,469			2,736,290
Securitizations, at fair value		194,941			—
Warehouse and repurchase facilities, net		298,313			330,814
Total liabilities		3,445,854			3,368,475
Commitments and contingencies
EQUITY
Common stock ($0.01 par value, 100,000,000 shares authorized; 32,721,653 and 32,523,516 shares issued, 32,602,432 and 32,489,869 shares outstanding at March 31, 2023 and December 31, 2022, respectively)		328			326
Treasury stock, at cost (119,221 and 33,647 common shares at March 31, 2023 and December 31, 2022, respectively)		(1,294	)		(458	)
Additional paid-in capital		301,308			300,310
Retained earnings		87,282			76,633
Total Velocity Financial, Inc. stockholders' equity		387,624			376,811
Noncontrolling interest in subsidiary		3,616			3,689
Total equity		391,240			380,500
Total liabilities and equity	$	3,837,094		$	3,748,975

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:


	March 31, 2023		December 31, 2022
	(Unaudited)
ASSETS
Restricted cash	$	2,972	$	2,968
Loans held for investment, net		3,259,141		3,108,316
Accrued interest and other receivables		80,302		77,191
Real estate owned, net		18,471		10,380
Other assets		9		15
Total assets	$	3,360,895	$	3,198,870
LIABILITIES
Accounts payable and accrued expenses	$	52,585	$	50,169
Securitizations		2,852,410		2,736,290
Total liabilities	$	2,904,995	$	2,786,459

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Interest income	$	70,521		$	52,049
Interest expense — portfolio related		42,029			23,556
Net interest income — portfolio related		28,492			28,493
Interest expense — corporate debt		4,139			17,140
Net interest income		24,353			11,353
Provision for loan losses		636			730
Net interest income after provision for loan losses		23,717			10,623
Other operating income
Gain on disposition of loans		1,913			4,540
Unrealized gain on fair value loans		7,354			11
Unrealized loss on fair value securitizations		(170	)		—
Other income		3,461			1,097
Total other operating income		12,558			5,648
Operating expenses
Compensation and employee benefits		10,008			5,323
Origination (income) expenses		(334	)		310
Securitizations expenses		2,584			—
Loan servicing		3,828			2,450
Professional fees		955			1,362
Rent and occupancy		446			442
Real estate owned, net		1,829			(175	)
Other operating expenses		2,202			2,538
Total operating expenses		21,518			12,250
Income before income taxes		14,757			4,021
Income tax expense		4,021			790
Net income		10,736			3,231
Net income attributable to noncontrolling interest		87			110
Net income attributable to Velocity Financial, Inc.		10,649			3,121
Less undistributed earnings attributable to participating securities		160			48
Net earnings attributable to common stockholders	$	10,489		$	3,073
Earnings per common share
Basic	$	0.33		$	0.10
Diluted	$	0.31		$	0.09
Weighted average common shares outstanding
Basic		32,098			31,892
Diluted		34,052			34,204

See accompanying Notes to Consolidated Financial Statements.

VELOCITY FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands)

(Unaudited)


	Common Stock								Treasury Stock
	Shares		Par Value		Additional Paid-in Capital		Retained Earnings		Shares			Amount			Total Stockholders' Equity			Noncontrolling Interest		Total Equity
Balance – December 31, 2021		32,293,042	$	323	$	296,364	$	44,422		—		$	—		$	341,109		$	3,381	$	344,490
Purchase of treasury stock, at cost		—		—		—		—		(33,647	)		(458	)		(458	)		—		(458	)
Restricted stock awarded and earned stock compensation		125,250		2		416		—		—			—			418			—		418
Stock-based compensation - Options		—		—		251		—		—			—			251			—		251
Net income		—		—		—		3,121		—			—			3,121			110		3,231
Balance – March 31, 2022		32,418,292	$	325	$	297,031	$	47,543		(33,647	)	$	(458	)	$	344,441		$	3,491	$	347,932

Balance – December 31, 2022		32,523,516	$	326	$	300,310	$	76,633		(33,647	)	$	(458	)	$	376,811		$	3,689	$	380,500
Purchase of treasury stock, at cost		—		—		—		—		(85,574	)		(836	)		(836	)		—		(836	)
Restricted stock awarded and stock-based compensation expenses		198,137		2		998		—		—			—			1,000			—		1,000
Distribution to non-controlling interest		—		—		—		—		—			—			—			(160

Velocity Financial, Inc. [VEL] Filings
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]