Velocity Financial, Inc. Earnings Per Share Disclosure
Note 21 — Earnings Per Share
The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shareholders for the period are allocated between common shareholders and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock and resulted in the issuance of common stock that shared in earnings.
The following table presents the basic and diluted income per share calculations for the years ended December 31, 2024, 2023 and 2022:
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|
December 31, |
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|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
|
|
(In thousands, except per share data) |
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Basic EPS: |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to common shareholders |
|
$ |
68,419 |
|
|
$ |
52,273 |
|
|
$ |
32,211 |
|
Less undistributed earnings attributable to unvested restricted stock awards |
|
|
834 |
|
|
|
753 |
|
|
|
491 |
|
Net earnings attributable to common shareholders |
|
$ |
67,585 |
|
|
$ |
51,520 |
|
|
$ |
31,720 |
|
Weighted average common shares outstanding |
|
|
32,653 |
|
|
|
32,206 |
|
|
|
31,913 |
|
Basic earnings per common share |
|
$ |
2.07 |
|
|
$ |
1.60 |
|
|
$ |
0.99 |
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to common shareholders |
|
$ |
68,419 |
|
|
$ |
52,273 |
|
|
$ |
32,211 |
|
Weighted average common shares outstanding |
|
|
32,653 |
|
|
|
32,206 |
|
|
|
31,913 |
|
Add dilutive effects for warrants |
|
|
2,410 |
|
|
|
2,020 |
|
|
|
2,025 |
|
Add dilutive effects for stock options |
|
|
215 |
|
|
|
14 |
|
|
|
5 |
|
Add dilutive effects of unvested restricted stock awards |
|
|
179 |
|
|
|
173 |
|
|
|
188 |
|
Add dilutive effects of unvested performance-based stock units |
|
|
302 |
|
|
|
71 |
|
|
|
— |
|
Add dilutive effects of employee stock purchase plan |
|
|
1 |
|
|
|
— |
|
|
|
— |
|
Weighted average diluted common shares outstanding |
|
|
35,760 |
|
|
|
34,484 |
|
|
|
34,131 |
|
Diluted earnings per common share |
|
$ |
1.91 |
|
|
$ |
1.52 |
|
|
$ |
0.94 |
|
The following table sets forth the number of shares excluded from the computation of diluted earnings per share, as their inclusion would have been anti-dilutive:
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|
December 31, |
|
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|
|
2024(1) |
|
|
2023 |
|
|
2022 |
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|
|
(In thousands) |
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Stock options |
|
|
155 |
|
|
|
5 |
|
|
|
773 |
|
Unvested restricted stock awards |
|
|
53 |
|
|
|
— |
|
|
|
— |
|
Unvested performance-based stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Employee stock purchase plan |
|
|
54 |
|
|
|
— |
|
|
|
— |
|
Shares equivalents excluded from EPS |
|
|
262 |
|
|
|
5 |
|
|
|
773 |
|
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About Earnings Per Share Disclosures
The earnings per share disclosure breaks down the calculation from net income to both basic and diluted EPS, revealing the full impact of a company's capital structure on per-share economics. The reconciliation between basic and diluted share counts exposes how many stock options, RSUs, convertible securities, and warrants are potentially dilutive to existing shareholders.
Key signals: a widening gap between basic and diluted shares indicates growing dilution from equity compensation or convertible instruments. Anti-dilutive securities excluded from the diluted calculation deserve attention — they represent latent dilution that will materialize if the stock price rises. Watch for the effect of share buybacks on per-share metrics: EPS growth driven primarily by repurchases rather than income growth signals weakening fundamentals. Compare year-over-year changes in the diluted share count against equity compensation expense to assess whether management is effectively managing dilution.