0000950170-23-018048.txt : 20230505 0000950170-23-018048.hdr.sgml : 20230505 20230504210315 ACCESSION NUMBER: 0000950170-23-018048 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 94 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230505 DATE AS OF CHANGE: 20230504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Velocity Financial, Inc. CENTRAL INDEX KEY: 0001692376 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39183 FILM NUMBER: 23890868 BUSINESS ADDRESS: STREET 1: 30699 RUSSELL RANCH ROAD STREET 2: BUILDING 111, SUITE 295 CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91362 BUSINESS PHONE: 866-505-3863 MAIL ADDRESS: STREET 1: 30699 RUSSELL RANCH ROAD STREET 2: BUILDING 111, SUITE 295 CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91362 FORMER COMPANY: FORMER CONFORMED NAME: Velocity Financial, LLC DATE OF NAME CHANGE: 20161214 10-Q 1 vel-20230331.htm 10-Q 10-Q
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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

OR

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.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

 

i


 

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.

2


 

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.

3


 

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.

4


 

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

)

 

 

(160

)

Net income

 

 

 

 

 

 

 

 

 

 

 

10,649