EX-99.1 2 wd-20211104xex99d1.htm EX-99.1

Exhibit 99.1

Graphic

Walker & Dunlop Reports 35% Growth in Net Income and 60% Growth

in Adjusted EBITDA on Revenues of $346 Million

THIRD QUARTER 2021 HIGHLIGHTS

Record total transaction volume of $18.5 billion, up 120% from Q3’20
Total revenues of $346.3 million, up 40% from Q3’20
Net income of $71.7 million and diluted earnings per share of $2.21, up 35% and 33%, respectively, from Q3’20
Record adjusted EBITDA1 of $72.4 million, up 60% from Q3’20
Servicing portfolio of $113.9 billion at September 30,2021, up 10% from September 30, 2020
Completed the acquisition of Zelman & Associates (“Zelman”)
Agreed to acquire Alliant Capital (“Alliant”)
Declared quarterly dividend of $0.50 per share for the fourth quarter

YEAR-TO-DATE 2021 HIGHLIGHTS

Total transaction volume of $41.1 billion, up 53% from 2020
Total revenues of $852.0 million, up 16% from 2020
Net income of $185.8 million and diluted earnings per share of $5.73, up 14% and 12%, respectively, from 2020
Adjusted EBITDA1 of $199.6 million, up 27% from 2020

Bethesda, MD – November 4, 2021Walker & Dunlop, Inc. (NYSE: WD) (the “Company”) reported third quarter 2021 total revenues of $346.3 million, an increase of 40% year over year. Net income for the third quarter of 2021 was $71.7 million or $2.21 per diluted share, up 35% and 33%, respectively, from the third quarter of 2020. Third quarter total transaction volume of $18.5 billion, a record and up 120% from the third quarter of 2020, was achieved due to the investments over the past several years in top bankers and brokers across the country to meet our customers’ needs in an extremely active market. Third quarter 2021 adjusted EBITDA was a record at $72.4 million, up 60% over the same period in 2020.

“Exceptional people, a dramatically expanded brand, and innovative technology produced record financial results for Walker & Dunlop in the third quarter and a 35% increase in net income,” commented Willy Walker, Chairman and CEO. “Fee based revenue from debt and property brokerage has surged in 2021, boosting Q3 adjusted EBITDA to $72 million, a dramatic 60% increase from Q3 2020. This is due to the breadth of our service offerings, technology, and the W&D team collaborating to meet our clients’ needs.”

Mr. Walker continued, “The growth and diversification of W&D from a mortgage-focused specialty finance company into a technology-enabled real estate services firm continues to gain momentum. Technology played a large role in Q3 record transaction volume of $18.5 billion.  Multifamily property sales, a business we entered only six years ago, contributed huge growth in the quarter and is scaling significantly faster than the market. And our emerging digital businesses of small loan lending and appraisals grew volumes 69% and 586%, respectively, leveraging off the people, brand, and technology of W&D. With only 1,200 employees and an incredibly healthy commercial real estate market that continues to attract massive capital flows, W&D is exceptionally well positioned to continue gaining market share and delivering strong financial results.”  

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Third quarter 2021 Earnings Release

THIRD QUARTER 2021 OPERATING RESULTS

TRANSACTION VOLUMES

(dollars in thousands)

Q3 2021

Q3 2020

$ Variance

% Variance

Fannie Mae

$

3,271,765

$

1,977,607

$

1,294,158

65

%

Freddie Mac

2,591,906

3,136,313

(544,407)

(17)

Ginnie Mae - HUD

522,093

373,480

148,613

40

Brokered (2)

6,402,862

1,711,541

4,691,321

274

Principal Lending and Investing (3)

472,142

105,488

366,654

348

Debt financing volume

$

13,260,768

$

7,304,429

$

5,956,339

82

%

Property sales volume

5,230,093

1,106,162

4,123,931

373

Total transaction volume

$

18,490,861

$

8,410,591

$

10,080,270

120

%

Discussion of Results:

Agency debt financing volumes increased by 16% in the third quarter of 2021 compared to the third quarter of 2020, driven by an increase in the overall lending volumes with Fannie Mae. Our year-to-date GSE market share has remained strong at 11%. HUD debt financing volume increased 40% from the prior year as the HUD product continues to be a favorable source of financing for multifamily properties, and our team continues to expand and execute well for our clients.
The increase in brokered loan originations to a quarterly record reflects the investments in acquiring and recruiting commercial mortgage bankers and the significant amount of capital being invested into U.S. commercial real estate.
The substantial increase in principal lending and investing volume, which includes interim loans, originations for Walker & Dunlop Investment Partners (“WDIP”) separate accounts, and interim lending for our joint venture with Blackstone Mortgage Trust, was due to a dramatically different view of the credit markets in Q3 2021 from the pandemic-impacted market of Q3 2020 and our team working closely with our capital partners to deploy capital.
Property sales volume increased 373% in the third quarter of 2021 due largely to (i) a 45% growth in our property sales team over the past year, with additions in key markets such as Miami, Houston and Denver, and (ii) lower overall market activity during the third quarter of 2020 due to the pandemic.

MANAGED PORTFOLIO

(dollars in thousands)

Q3 2021

Q3 2020

$ Variance

% Variance

Fannie Mae

$

52,317,953

$

46,224,549

$

6,093,404

13

%

Freddie Mac

38,039,014

35,726,109

2,312,905

6

Ginnie Mae - HUD

9,894,893

9,639,820

255,073

3

Brokered

13,429,801

11,513,521

1,916,280

17

Principal Lending and Investing

238,713

273,754

(35,041)

(13)

Total Servicing Portfolio

$

113,920,374

$

103,377,753

$

10,542,621

10

%

Assets under management

2,309,332

1,936,679

372,653

19

Total Managed Portfolio

$

116,229,706

$

105,314,432

$

10,915,274

10

%

Weighted-average servicing fee rate (basis points)

24.6

23.4

Weighted-average remaining servicing portfolio term (years)

9.2

9.4

Discussion of Results:

Our servicing portfolio continues to grow steadily due to our significant Agency debt financing volumes and relatively few maturities and prepayments over the past year compared to the overall portfolio.
During the third quarter of 2021, we added $1.6 billion of net loans to our servicing portfolio, and over the past 12 months, we added $10.5 billion of net loans to our servicing portfolio, 80% of which were Fannie Mae and Freddie Mac loans.
Only $5.9 billion of Agency loans in our servicing portfolio, representing 5% of the total portfolio, with a relatively low weighted-average servicing fee of 20.1 basis points, are scheduled to mature over the next two years.

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Third quarter 2021 Earnings Release

The increase in the weighted-average servicing fee was primarily due to an increase in Fannie Mae loans as a percentage of the overall servicing portfolio year over year, coupled with a higher weighted-average servicing fee on Fannie Mae debt financing volumes over the past year.
We added net mortgage servicing rights (“MSRs”) from originations of $14.3 million in the quarter and $124.2 million over the past 12 months.
The MSRs associated with our servicing portfolio had a fair value of $1.2 billion as of September 30, 2021, compared to $975.0 million as of September 30, 2020.
Assets under management (“AUM”) as of September 30, 2021 consisted of $1.4 billion of loans and funds managed by WDIP and $918.5 million of loans in our interim lending joint venture. The year-over-year increase in AUM is principally related to growth in the interim lending joint venture.

REVENUES

(dollars in thousands)

Q3 2021

Q3 2020

$ Variance

% Variance

Loan origination and debt brokerage fees, net

$

123,242

$

83,825

$

39,417

47

%

Fair value of expected net cash flows from servicing, net ("MSR income")

89,482

78,065

11,417

15

Servicing fees

70,628

60,265

10,363

17

Property sales broker fees

33,677

6,756

26,921

398

Net warehouse interest income, LHFS

3,723

4,869

(1,146)

(24)

Net warehouse interest income, LHFI

1,860

2,689

(829)

(31)

Escrow earnings and other interest income

2,032

2,275

(243)

(11)

Other revenues

21,646

8,272

13,374

162

Total revenues

$

346,290

$

247,016

$

99,274

40

%

Key revenue metrics (as a percentage of debt financing volume):

Origination fee margin (4)

0.95

%

1.15

%

MSR margin (5)

0.70

1.08

Agency MSR margin (6)

1.40

1.42

Discussion of Results:

The increase in loan origination and debt brokerage fees, net (“origination fees”) was driven by the substantial increase in overall debt financing volume, partially offset by the decrease in the origination fee margin as shown above resulting from the shift in transaction mix from 75% Agency loans in 2020 during the pandemic to 49% Agency loans in 2021. Agency loans typically carry higher origination fees than brokered loans.
The increase in MSR income was primarily related to a 16% increase in Agency debt financing volume year over year. The decrease in the MSR margin was attributable to the same shift in transaction mix noted above.
The $10.5 billion net increase in the servicing portfolio over the past 12 months was the principal driver of the growth in servicing fees year over year, combined with the increase in the servicing portfolio’s weighted-average servicing fee.
The decrease in net warehouse interest income from loans held for sale (“LHFS”) was due to a 4% decrease in the average balance of LHFS outstanding and a 21% decrease in the net spread.
The decrease in net warehouse interest income from loans held for investment (“LHFI”) was due to 17% decreases in both the average balance of LHFS outstanding and the net spread.
The increase in property sales broker fees was driven by the 373% increase in property sales volume year over year.
Other revenues increased principally due to increases in research subscription fees due to the acquisition of Zelman in the third quarter of 2021 and prepayment fees.

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Third quarter 2021 Earnings Release

EXPENSES

(dollars in thousands)

Q3 2021

Q3 2020

$ Variance

% Variance

Personnel

$

170,181

$

114,548

$

55,633

49

%

Amortization and depreciation

53,498

41,919

11,579

28

Provision (benefit) for credit losses

1,266

3,483

(2,217)

(64)

Interest expense on corporate debt

1,766

1,786

(20)

(1)

Other operating expenses

24,836

16,165

8,671

54

Total expenses

$

251,547

$

177,901

$

73,646

41

%

Key expense metrics (as a percentage of total revenues):

Personnel expenses

49

%

46

%

Other operating expenses

7

7

Discussion of Results:

The increase in personnel expenses was primarily the result of increased (i) commissions expense due to the increases in origination fees and property sales broker fees during the third quarter of 2021, (ii) salaries and benefits costs due to strategic acquisitions and hiring initiatives that contributed to a 22% increase in average headcount, (iii) subjective bonuses due to the increase in headcount and our financial performance, and (iv) stock-based compensation expense due to a stock grant provided to the vast majority of our non-executive employees in the fourth quarter of 2020 and our performance share plans due to our financial performance.
Amortization and depreciation increased as a result of the growth in the average balance of MSRs outstanding year over year.
The decrease in the provision (benefit) for credit losses was primarily attributable to $2.4 million in additional reserves recorded in the third quarter of 2020 for a loan that defaulted in 2019, with no comparable activity in the third quarter of 2021.
The increase in other operating expenses was largely attributable to increases in travel and entertainment and marketing costs, both of which are attributable to the overall growth of the Company over the past year and low costs in these areas in the third quarter of 2020 due to the pandemic. Additionally, professional fees increased due to $2.9 million of due diligence costs for our pending acquisition of Alliant.

KEY PERFORMANCE METRICS

(dollars in thousands, except per share amounts)

Q3 2021

Q3 2020

$ Variance

% Variance

Walker & Dunlop net income

$

71,721

$

53,190

$

18,531

35

%

Adjusted EBITDA

72,430

45,165

27,265

60

Diluted EPS

$

2.21

$

1.66

$

0.55

33

%

Operating margin

27

%

28

%

Return on equity

22

20

Discussion of Results:

The increase in net income was the result of a 37% increase in income from operations, primarily driven by the 40% increase in total revenues year over year.
Adjusted EBITDA increased year over year largely due to significantly higher origination fees, property sales broker fees and other revenues and the increase in servicing fees. These increases were partially offset by increases in personnel expense and other operating expenses.
The decrease in operating margin was due primarily to the one-time due diligence costs related to the acquisition of Alliant.
The increase in return on equity was primarily due to the substantial increase in Walker & Dunlop net income.

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Third quarter 2021 Earnings Release

KEY CREDIT METRICS

(dollars in thousands)

Q3 2021

Q3 2020

$ Variance

% Variance

At-risk servicing portfolio (7)

$

48,209,532

$

41,848,548

$

6,360,984

15

%

Maximum exposure to at-risk portfolio (8)

9,784,054

8,497,807

1,286,247

15

Defaulted loans

$

48,481

$

48,481

$

-

%

Key credit metrics (as a percentage of the at-risk portfolio):

Defaulted loans

0.10

%

0.12

%

Allowance for risk-sharing

0.13

0.17

Key credit metrics (as a percentage of maximum exposure):

Allowance for risk-sharing

0.63

%

0.83

%

Discussion of Results:

Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased due to the significant level of Fannie Mae loans added to the portfolio during the past 12 months. As of September 30, 2021, there were two defaulted loans that were provisioned for in 2019. Both properties have been foreclosed on and final settlement of any losses will occur in the future upon disposition of the assets by Fannie Mae.
The on-balance sheet interim loan portfolio, which is comprised of loans for which we have full risk of loss, was $238.7 million at September 30, 2021 compared to $273.8 million at September 30, 2020. There was one defaulted loan in our interim loan portfolio at September 30, 2021, which defaulted and was provisioned for in 2020 as noted above. All other loans in the on-balance sheet interim loan portfolio are current and performing as of September 30, 2021. The interim loan joint venture holds $918.5 million of loans as of September 30, 2021, compared to $566.1 million as of September 30, 2020. We share in a small portion of the risk of loss, and as of September 30, 2021, all loans in the interim loan joint venture are current and performing.

YEAR-TO-DATE 2021 OPERATING RESULTS

YEAR-TO-DATE OPERATING RESULTS AND KEY PERFORMANCE METRICS

(dollars in thousands)

Q3 2021

Q3 2020

$ Variance

% Variance

Debt financing volume

$

31,096,071

$

23,611,558

$

7,484,513

32

%

Property sales volume

9,967,385

3,283,463

6,683,922

204

Total transaction volume

$

41,063,456

$

26,895,021

$

14,168,435

53

%

Total revenues

851,989

733,998

117,991

16

Total expenses

609,778

521,068

88,710

17

Net income

$

185,831

$

163,078

$

22,753

14

%

Adjusted EBITDA

199,611

157,687

41,924

27

Diluted EPS

$

5.73

$

5.11

$

0.62

12

%

Operating margin

28

%

29

%

Return on equity

20

21

Discussion of Results:

The 16% increase in total revenues was largely driven by:

Significant Increases

Origination fees (29%), primarily from the overall increase in debt financing volume;
Servicing fees (19%), related to growth in our servicing portfolio and the weighted-average servicing fee of the portfolio;
Property sales broker fees (227%), due to the increase in property sales volume; and
Other revenues (55%), mostly from prepayment fees and the research subscription fees due to the acquisition of Zelman.

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Third quarter 2021 Earnings Release

Significant Decreases (partially offsetting the increases noted above)

MSR income (11%), largely the result of a decrease in Fannie Mae debt financing volume, partially offset by an increase in the Agency MSR margin. The decline in Fannie Mae debt financing volume was largely the result of a Fannie Mae portfolio of over $2 billion originated in 2020, with no comparable activity in 2021. The Agency MSR margin increased due primarily to this large portfolio, which had a lower-than-average servicing fee;
Warehouse interest income (34%), due to decreases in LHFS and LHFI outstanding and net spreads; and
Escrow earnings and other interest income (62%), primarily from a substantial year-over-year decline in short-term interest rates late in the first quarter of 2020, partially offset by an increase in the average balance of escrow accounts outstanding.

The 17% increase in total expenses was primarily driven by:

Significant Increases

Personnel expense (31%), primarily due to (i) higher commissions expense resulting from higher origination fees and property sales broker fees, (ii) increased salaries and benefits expenses resulting from a rise in average headcount due to strategic acquisitions and hiring initiatives, and (iii) larger stock-based compensation expense due a stock grant provided to the vast majority of our non-executive employees in the fourth quarter of 2020 and our performance share plans due to our financial performance;
Amortization and depreciation costs (20%), largely due to an increase in the average balance of MSRs outstanding year over year; and
Other operating expenses (31%), primarily resulting from increases in travel and entertainment, professional fees, marketing costs, and office expenses, all of which are primarily attributable to the overall growth of the Company over the past year and low costs in these areas in 2020 due to the pandemic. Additionally, included within the increase in professional fees are one-time due-diligence fess of $2.9 million associated with our pending acquisition of Alliant.

Significant Decreases (partially offsetting the increases noted above)

Provision (benefit) for credit losses (145%), primarily due to a decrease in the loss rate used for the forecast period to three basis points as of September 30, 2021 from six basis points as of December 31, 2020 principally due to forecasted low unemployment rates. During the first nine months of 2020, we recorded a significant provision expense as a result of the COVID-19 pandemic and its expected impacts on future losses in the at-risk servicing portfolio under the new CECL accounting standard in addition to provision expense for a defaulted interim loan.

Net income for the nine months ended September 30, 2021 and 2020 was $185.8 million and $163.1 million, respectively. The 14% increase in net income was primarily a result of a 14% increase in income from operations.

Adjusted EBITDA for the nine months ended September 30, 2021 and 2020 was $199.6 million and $157.7 million, respectively. The 27% increase was largely driven by the increases in origination fees, servicing fees, and property sales broker fees, partially offset by the decreases in escrow earnings and other interest income and warehouse interest income and the increases in personnel expenses and other operating expenses.

The decrease in operating margin was due primarily to the one-time due diligence costs mentioned above.

The decrease in return on equity was related to a substantial increase in retained earnings due to our strong financial performance over the past year, partially offset by the increase in Walker & Dunlop net income and the impact of dividend payments.

CAPITAL SOURCES AND USES

On November 3, 2021, our Board of Directors declared a dividend of $0.50 per share for the fourth quarter of 2021. The dividend will be paid on November 29, 2021 to all holders of record of our restricted and unrestricted common stock as of November 19, 2021.

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Third quarter 2021 Earnings Release

On February 3, 2021, our Board of Directors authorized the repurchase of up to $75 million of our outstanding common stock over a one-year period (“2021 Share Repurchase Program”). We have not repurchased any shares of common stock under the share repurchase program.

Any future purchases made pursuant to the 2021 Share Repurchase Program will be made in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.

On October 5, 2021, we announced plans to refinance our senior secured term loan and increase the aggregate principal amount to $600 million. We will use the proceeds from the loan to fund repayment of our existing senior secured term loan and to fund our pending acquisition of Alliant Capital. The new loan is expected to have conventional terms for this type of financing and is anticipated to close in November 2021 simultaneously with the closing of the acquisition of Alliant, subject to market and other customary conditions and the closing of the Alliant acquisition. We have received commitments well in excess of the targeted $600 million.


(1)Adjusted EBITDA is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of adjusted EBITDA to net income, refer to the sections of this press release below titled “Non-GAAP Financial Measures” and “Adjusted Financial Metric Reconciliation to GAAP.”
(2)Brokered transactions for life insurance companies, commercial banks, and other capital sources.
(3)Includes debt financing volumes from our interim loan program, our interim loan joint venture, and WDIP separate accounts.
(4)Loan origination and debt brokerage fees, net as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(5)MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(6)MSR income as a percentage of Agency debt financing volume.
(7)At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio.

For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at-risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans.

(8)Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.

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Third quarter 2021 Earnings Release

Conference Call Information

The Company will host a conference call to discuss its quarterly results on Thursday, November 4, 2021 at 8:30 a.m. Eastern time. Listeners can access the webcast via the link: https://walkerdunlop.zoom.us/webinar/register/WN_o5eOx4RhR6a7dx9jL-DxSg or by dialing +1 408 901 0584, Webinar ID 873 5905 0174, Password 604830. Presentation materials related to the conference call will be posted to the Investor Relations section of the Company’s website prior to the call. An audio replay will also be available on the Investor Relations section of the Company’s website, along with the presentation materials.


About Walker & Dunlop

Walker & Dunlop (NYSE: WD) is the largest provider of capital to the multifamily industry in the United States and the fourth largest lender on all commercial real estate including industrial, office, retail, and hospitality. Walker & Dunlop enables real estate owners and operators to bring their visions of communities — where Americans live, work, shop, and play — to life. The power of our people, premier brand, and industry-leading technology enables us to meet any client need – including financing, research, property sales, valuation, and advisory services. With over 1,000 employees across every major U.S. market, Walker & Dunlop has consistently been named one of Fortune’s Great Places to Work® and is committed to making the commercial real estate industry more inclusive and diverse while creating meaningful social, environmental, and economic change in our communities.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses adjusted EBITDA, a non-GAAP financial measure. The presentation of adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use adjusted EBITDA in addition to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan facility, and amortization and depreciation, adjusted for provision (benefit) for credit losses net of write-offs, stock-based incentive compensation charges, and the fair value of expected net cash flows from servicing, net. Because not all companies use identical calculations, our presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants.

We use adjusted EBITDA to evaluate the operating performance of our business, for comparison with forecasts and strategic plans and for benchmarking performance externally against competitors. We believe that this non-GAAP measure, when read in conjunction with the Company's GAAP financials, provides useful information to investors by offering:

the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
the ability to better identify trends in the Company's underlying business and perform related trend analyses; and
a better understanding of how management plans and measures the Company's underlying business.

We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate the Company's results of operations in conjunction with net income. For more information on adjusted EBITDA, refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP.”

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 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,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” 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.

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Third quarter 2021 Earnings Release

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) general economic conditions and multifamily and commercial real estate market conditions, (2) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, and (4) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.

For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled “Risk Factors” in our most recent Annual Report on Form 10-K and any updates or supplements in subsequent Quarterly Reports on Form 10-Q and our other filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.

Contacts:

Investors:

Media:

Kelsey Duffey

Susan Weber

Vice President, Investor Relations

Chief Marketing Officer

Phone 301.202.3207

Phone 301.215.5515

investorrelations@walkeranddunlop.com

info@walkeranddunlop.com

Phone 301.215.5500

7501 Wisconsin Avenue, Suite 1200E

Bethesda, Maryland 20814

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Third quarter 2021 Earnings Release

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Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Unaudited

September 30, 

    

June 30,

    

March 31,

    

December 31,

    

September 30, 

2021

2021

2021

2020

2020

(in thousands)

Assets

Cash and cash equivalents

$

318,188

$

326,518

$

277,277

$

321,097

$

294,873

Restricted cash

 

34,875

 

15,842

 

14,805

 

19,432

 

12,383

Pledged securities, at fair value

 

148,774

 

146,548

 

139,570

 

137,236

 

134,295

Loans held for sale, at fair value

 

2,711,900

 

1,718,444

 

1,048,385

 

2,449,198

 

3,227,287

Loans held for investment, net

 

233,685

 

272,033

 

281,788

 

360,402

 

342,056

Mortgage servicing rights

 

929,825

 

915,519

 

909,884

 

862,813

 

805,655

Goodwill and other intangible assets

 

341,703

 

268,018

 

262,906

 

250,838

 

251,002

Derivative assets

 

85,486

 

36,751

 

58,130

 

49,786

 

37,290

Receivables, net

 

106,228

 

80,196

 

59,526

 

65,735

 

51,837

Other assets

 

206,198

 

163,252

 

151,694

 

134,438

 

143,025

Total assets

$

5,116,862

$

3,943,121

$

3,203,965

$

4,650,975

$

5,299,703

Liabilities

Warehouse notes payable

$

2,848,579

$

1,823,982

$

1,112,340

$

2,517,156

$

3,328,327

Note payable

 

289,763

 

290,498

 

291,045

 

291,593

 

292,272

Allowance for risk-sharing obligations

 

61,607

 

60,329

 

64,580

 

75,313

 

70,495

Guaranty obligation, net

 

49,060

 

50,369

 

51,836

 

52,306

 

53,474

Derivative liabilities

 

13,263

 

30,411

 

9,250

 

5,066

 

3,858

Other liabilities

470,654

394,037

429,782

513,319

436,152

Total liabilities

$

3,732,926

$

2,649,626

$

1,958,833

$

3,454,753

$

4,184,578

Stockholders' Equity

Common stock

$

312

$

310

$

310

$

307

$

306

Additional paid-in capital

 

271,562

 

255,676

 

248,069

 

241,004

 

230,302

Accumulated other comprehensive income (loss)

2,737

2,578

1,810

1,968

1,468

Retained earnings

 

1,090,506

 

1,034,931

 

994,943

 

952,943

 

883,049

Total stockholders’ equity

$

1,365,117

$

1,293,495

$

1,245,132

$

1,196,222

$

1,115,125

Noncontrolling interests

 

18,819

 

 

 

 

Total equity

$

1,383,936

$

1,293,495

$

1,245,132

$

1,196,222

$

1,115,125

Commitments and contingencies

 

 

 

 

 

Total liabilities and stockholders' equity

$

5,116,862

$

3,943,121

$

3,203,965

$

4,650,975

$

5,299,703

10


Graphic

Third quarter 2021 Earnings Release

Graphic

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

Unaudited

Quarterly Trends

Nine months ended

September 30, 

(in thousands, except per share amounts)

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

2021

2020

Revenues

Loan origination and debt brokerage fees, net

$

123,242

$

107,472

$

75,879

$

120,956

$

83,825

$

306,593

$

238,105

Fair value of expected net cash flows from servicing, net ("MSR income")

89,482

61,849

57,935

121,566

78,065

209,266

236,434

Servicing fees

 

70,628

 

69,052

 

65,978

 

63,240

 

60,265

 

205,658

 

172,561

Property sales broker fees

33,677

22,454

9,042

18,180

6,756

65,173

19,928

Net warehouse interest income

 

5,583

 

4,630

 

4,555

 

6,872

 

7,558

 

14,768

 

22,454

Escrow earnings and other interest income

 

2,032

 

1,823

 

2,117

 

2,566

 

2,275

 

5,972

 

15,689

Other revenues

 

21,646

 

14,131

 

8,782

 

16,329

 

8,272

 

44,559

 

28,827

Total revenues

$

346,290

$

281,411

$

224,288

$

349,709

$

247,016

$

851,989

$

733,998

Expenses

Personnel

$

170,181

$

141,421

$

96,215

$

157,826

$

114,548

$

407,817

$

310,993

Amortization and depreciation

 

53,498

 

48,510

 

46,871

 

45,013

 

41,919

 

148,879

 

123,998

Provision (benefit) for credit losses

 

1,266

 

(4,326)

 

(11,320)

 

5,450

 

3,483

 

(14,380)

 

32,029

Interest expense on corporate debt

 

1,766

 

1,760

 

1,765

 

1,826

 

1,786

 

5,291

 

6,724

Other operating expenses

 

24,836

 

19,748

 

17,587

 

22,258

 

16,165

 

62,171

 

47,324

Total expenses

$

251,547

$

207,113

$

151,118

$

232,373

$

177,901

$

609,778

$

521,068

Income from operations

$

94,743

$

74,298

$

73,170

$

117,336

$

69,115

$

242,211

$

212,930

Income tax expense

 

22,953

 

18,240

 

15,118

 

34,237

 

15,925

 

56,311

 

50,076

Net income before noncontrolling interests

$

71,790

$

56,058

$

58,052

$

83,099

$

53,190

$

185,900

$

162,854

Less: net income (loss) from noncontrolling interests

 

69

 

 

 

 

 

69

 

(224)

Walker & Dunlop net income

$

71,721

$

56,058

$

58,052

$

83,099

$

53,190

$

185,831

$

163,078

Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes

159

768

(158)

500

1,219

769

731

Walker & Dunlop comprehensive income

$

71,880

$

56,826

$

57,894

$

83,599

$

54,409

$

186,600

$

163,809

Basic earnings per share

$

2.23

$

1.75

$

1.82

$

2.63

$

1.69

$

5.80

$

5.21

Diluted earnings per share

2.21

1.73

1.79

2.59

1.66

5.73

5.11

Cash dividends paid per common share

0.50

0.50

0.50

0.36

0.36

1.50

1.08

Basic weighted-average shares outstanding

 

31,064

 

31,019

 

30,823

 

30,635

 

30,560

 

30,969

 

30,379

Diluted weighted-average shares outstanding

 

31,459

 

31,370

 

31,276

 

31,227

 

31,074

 

31,367

 

30,995

11


Graphic

Third quarter 2021 Earnings Release

Graphic

SUPPLEMENTAL OPERATING DATA

Unaudited

Quarterly Trends

Nine months ended

September 30, 

(dollars in thousands, except per share data)

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

2021

2020

Transaction Volume:

Components of Debt Financing Volume

Fannie Mae

$

3,271,765

$

1,911,976

$

1,533,024

$

3,891,649

$

1,977,607

$

6,716,765

$

8,911,397

Freddie Mac

 

2,591,906

 

1,003,319

 

1,012,720

 

2,685,359

 

3,136,313

 

4,607,945

 

5,903,389

Ginnie Mae - HUD

 

522,093

 

672,574

 

622,133

 

844,221

 

373,480

 

1,816,800

 

1,368,317

Brokered (1)

 

6,402,862

 

6,280,578

 

4,302,492

 

3,768,689

 

1,711,541

 

16,985,932

 

7,200,926

Principal Lending and Investing (2)

 

472,142

 

318,237

 

178,250

 

152,831

 

105,488

 

968,629

 

227,529

Total Debt Financing Volume

$

13,260,768

$

10,186,684

$

7,648,619

$

11,342,749

$

7,304,429

$

31,096,071

$

23,611,558

Property Sales Volume

 

5,230,093

 

3,341,532

 

1,395,760

 

2,846,276

 

1,106,162

 

9,967,385

 

3,283,463

Total Transaction Volume

$

18,490,861

$

13,528,216

$

9,044,379

$

14,189,025

$

8,410,591

$

41,063,456

$

26,895,021

Key Performance Metrics:

Operating margin

27

%

26

%

33

%

34

%

28

%

28

%

29

%

Return on equity

22

18

19

29

20

20

21

Walker & Dunlop net income

$

71,721

$

56,058

$

58,052

$

83,099

$

53,190

$

185,831

$

163,078

Adjusted EBITDA (3)

72,430

66,514

60,667

58,161

45,165

199,611

157,687

Diluted EPS

2.21

1.73

1.79

2.59

1.66

5.73

5.11

Key Expense Metrics (as a percentage of total revenues):

Personnel expenses

49

%

50

%

43

%

45

%

46

%

48

%

42

%

Other operating expenses

7

7

8

6

7

7

6

Key Revenue Metrics (as a percentage of debt financing volume):

Origination fee margin (4)

0.95

%

1.07

%

1.02

%

1.08

%

1.15

%

1.00

%

1.01

%

MSR margin (5)

0.70

0.63

0.78

1.09

1.08

0.69

1.01

Agency MSR margin (6)

1.40

1.72

1.83

1.64

1.42

1.59

1.46

Other Data:

Market capitalization at period end

$

3,540,501

$

3,239,332

$

3,182,606

$

2,822,970

$

1,657,545

Closing share price at period end

$

113.50

$

104.38

$

102.74

$

92.02

$

53.00

Average headcount

1,084

1,027

974

928

887

Components of Servicing Portfolio (end of period):

Fannie Mae

$

52,317,953

$

51,077,660

$

50,113,076

$

48,818,185

$

46,224,549

Freddie Mac

 

38,039,014

 

37,887,969

 

37,695,462

 

37,072,587

 

35,726,109

Ginnie Mae - HUD

 

9,894,893

 

9,904,246

 

9,754,667

 

9,606,506

 

9,639,820

Brokered (7)

 

13,429,801

 

13,129,969

 

12,090,825

 

11,419,372

 

11,513,521

Principal Lending and Investing (8)

 

238,713

 

276,738

 

213,240

 

295,322

 

273,754

Total Servicing Portfolio

$

113,920,374

$

112,276,582

$

109,867,270

$

107,211,972

$

103,377,753

Assets under management (9)

2,309,332

1,801,577

1,836,086

1,816,421

1,936,679

Total Managed Portfolio

$

116,229,706

$

114,078,159

$

111,703,356

$

109,028,393

$

105,314,432

 

Key Servicing Portfolio Metrics (end of period):

Custodial escrow account balance (in billions)

$

3.0

$

3.0

$

2.5

$

3.1

$

2.8

Weighted-average servicing fee rate (basis points)

24.6

24.5

24.3

24.0

23.4

Weighted-average remaining servicing portfolio term (years)

9.2

9.2

9.2

9.4

9.4


(1)Brokered transactions for life insurance companies, commercial banks, and other capital sources.
(2)Includes debt financing volumes from our interim lending platform, our interim lending joint venture, and WDIP separate accounts.
(3)This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section above titled “Non-GAAP Financial Measures.”
(4)Loan origination and debt brokerage fees, net as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(5)MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.
(6)MSR income as a percentage of Agency debt financing volume.
(7)Brokered loans serviced primarily for life insurance companies.
(8)Consists of interim loans not managed for our interim loan joint venture.
(9)Interim loans serviced for our interim loan joint venture and WDIP assets under management.

12


Graphic

Third quarter 2021 Earnings Release

Graphic

KEY CREDIT METRICS

Unaudited