UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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, 2022

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: 001-35000

Walker & Dunlop, Inc.

(Exact name of registrant as specified in its charter)

Maryland	80-0629925
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

7272 Wisconsin Avenue, Suite 1300

Bethesda, Maryland 20814

(301) 215-5500

(Address of principal executive offices and registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	WD	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, a 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 ☒  ​ Smaller Reporting Company ☐ Accelerated Filer ☐ ​ Emerging Growth Company ☐ Non-accelerated Filer ☐

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 October 31, 2022, there were 33,012,082 total shares of common stock outstanding.

Walker & Dunlop, Inc.
Form 10-Q
INDEX

		Page
PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	66
PART II	OTHER INFORMATION	67
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	68
	Signatures	70

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

		September 30, 2022	December 31, 2021
Assets
Cash and cash equivalents	$	152,188	$	305,635
Restricted cash		40,246		42,812
Pledged securities, at fair value		151,413		148,996
Loans held for sale, at fair value		2,180,117		1,811,586
Loans held for investment, net		247,106		269,125
Mortgage servicing rights		967,770		953,845
Goodwill		948,164		698,635
Other intangible assets		202,834		183,904
Derivative assets		255,295		37,364
Receivables, net		216,963		212,019
Committed investments in tax credit equity		214,430		177,322
Other assets		426,487		364,746
Total assets	$	6,003,013	$	5,205,989
Liabilities
Warehouse notes payable	$	2,545,406	$	1,941,572
Notes payable		711,107		740,174
Allowance for risk-sharing obligations		49,658		62,636
Derivative liabilities		24,054		6,403
Commitments to fund investments in tax credit equity		198,073		162,747
Other liabilities		780,012		714,250
Total liabilities	$	4,308,310	$	3,627,782
Stockholders' Equity
Preferred stock (authorized 50,000 shares; none issued)	$	—	$	—
Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 32,344 shares at September 30, 2022 and 32,049 shares at December 31, 2021)		323		320
Additional paid-in capital ("APIC")		407,417		393,022
Accumulated other comprehensive income (loss) ("AOCI")		(1,460)		2,558
Retained earnings		1,256,663		1,154,252
Total stockholders’ equity	$	1,662,943	$	1,550,152
Noncontrolling interests		31,760		28,055
Total equity	$	1,694,703	$	1,578,207
Commitments and contingencies (NOTES 2 and 9)		—		—
Total liabilities and equity	$	6,003,013	$	5,205,989

See accompanying notes to condensed consolidated financial statements.

3

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

(Unaudited)

	For the three months ended				For the nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenues
Loan origination and debt brokerage fees, net	$	90,858	$	123,242	$	275,773		306,593
Fair value of expected net cash flows from servicing, net		55,291		89,482		159,970		209,266
Servicing fees		75,975		70,628		222,916		205,658
Property sales broker fees		30,308		33,677		100,092		65,173
Investment management fees		16,301		2,564		47,345		9,115
Net warehouse interest income		3,980		5,583		14,021		14,768
Escrow earnings and other interest income		18,129		2,032		26,683		5,972
Other revenues		24,769		19,082		129,103		35,444
Total revenues	$	315,611	$	346,290	$	975,903	$	851,989
Expenses
Personnel	$	157,059	$	170,181	$	469,608		407,817
Amortization and depreciation		59,846		53,498		177,101		148,879
Provision (benefit) for credit losses		1,218		1,266		(13,120)		(14,380)
Interest expense on corporate debt		9,306		1,766		22,123		5,291
Other operating expenses		33,991		24,836		102,400		62,171
Total expenses	$	261,420	$	251,547	$	758,112	$	609,778
Income from operations	$	54,191	$	94,743	$	217,791	$	242,211
Income tax expense		7,532		22,953		46,495		56,311
Net income before noncontrolling interests	$	46,659	$	71,790	$	171,296	$	185,900
Less: net income (loss) from noncontrolling interests		(174)		69		(1,032)		69
Walker & Dunlop net income	$	46,833	$	71,721	$	172,328	$	185,831
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes		(1,238)		159		(4,018)		769
Walker & Dunlop comprehensive income	$	45,595	$	71,880	$	168,310	$	186,600
Basic earnings per share (NOTE 10)	$	1.41	$	2.23	$	5.18	$	5.80
Diluted earnings per share (NOTE 10)	$	1.40	$	2.21	$	5.13	$	5.73
Basic weighted-average shares outstanding		32,290		31,064		32,300		30,969
Diluted weighted-average shares outstanding		32,620		31,459		32,645		31,367

See accompanying notes to condensed consolidated financial statements.

4

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)

	For the three and nine months ended September 30, 2022
		Stockholders' Equity
	Common Stock							Retained		Noncontrolling		Total
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity
Balance at December 31, 2021	32,049	$	320	$	393,022	$	2,558	$	1,154,252	$	28,055	$	1,578,207
Walker & Dunlop net income	—		—		—		—		71,209		—		71,209
Net income (loss) from noncontrolling interests	—		—		—		—		—		(679)		(679)
Other comprehensive income (loss), net of tax	—		—		—		(970)		—		—		(970)
Stock-based compensation - equity classified	—		—		10,812		—		—		—		10,812
Issuance of common stock in connection with equity compensation plans	544		5		15,526		—		—		—		15,531
Repurchase and retirement of common stock	(195)		(1)		(27,048)		—		—		—		(27,049)
Cash dividends paid ($0.60 per common share)	—		—		—		—		(20,077)		—		(20,077)
Other activity (NOTE 10)	—		—		(5,303)		—		—		15,490		10,187
Balance at March 31, 2022	32,398	$	324	$	387,009	$	1,588	$	1,205,384	$	42,866	$	1,637,171
Walker & Dunlop net income	—		—		—		—		54,286		—		54,286
Net income (loss) from noncontrolling interests	—		—		—		—		—		(179)		(179)
Other comprehensive income (loss), net of tax	—		—		—		(1,810)		—		—		(1,810)
Stock-based compensation - equity classified	—		—		9,980		—		—		—		9,980
Issuance of common stock in connection with equity compensation plans	43		—		110		—		—		—		110
Repurchase and retirement of common stock	(119)		(1)		(2,409)		—		(9,892)		—		(12,302)
Distributions to noncontrolling interest holders	—		—		—		—		—		(1,675)		(1,675)
Cash dividends paid ($0.60 per common share)	—		—		—		—		(20,066)		—		(20,066)
Other activity (NOTE 10)	—		—		8,978		—		—		(8,718)		260
Balance at June 30, 2022	32,322	$	323	$	403,668	$	(222)	$	1,229,712	$	32,294	$	1,665,775
Walker & Dunlop net income	—		—		—		—		46,833		—		46,833
Net income (loss) from noncontrolling interests	—		—		—		—		—		(174)		(174)
Other comprehensive income (loss), net of tax	—		—		—		(1,238)		—		—		(1,238)
Stock-based compensation - equity classified	—		—		5,185		—		—		—		5,185
Issuance of common stock in connection with equity compensation plans	36		—		—		—		—		—		—
Repurchase and retirement of common stock	(14)		—		(1,436)		—		—		—		(1,436)
Distributions to noncontrolling interest holders	—		—		—		—		—		(360)		(360)
Cash dividends paid ($0.60 per common share)	—		—		—		—		(19,882)		—		(19,882)
Balance at September 30, 2022	32,344	$	323	$	407,417	$	(1,460)	$	1,256,663	$	31,760	$	1,694,703

5

	For the three and nine months ended September 30, 2021
		Stockholders' Equity
	Common Stock							Retained		Noncontrolling		Total
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity
Balance at December 31, 2020	30,678	$	307	$	241,004	$	1,968	$	952,943	$		$	1,196,222
Walker & Dunlop net income	—		—		—		—		58,052		—		58,052
Other comprehensive income (loss), net of tax	—		—		—		(158)		—		—		(158)
Stock-based compensation - equity classified	—		—		7,836		—		—		—		7,836
Issuance of common stock in connection with equity compensation plans	430		4		12,602		—		—		—		12,606
Repurchase and retirement of common stock	(131)		(1)		(13,373)		—		—		—		(13,374)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,052)		—		(16,052)
Balance at March 31, 2021	30,977	$	310	$	248,069	$	1,810	$	994,943	$	—	$	1,245,132
Walker & Dunlop net income	—		—		—		—		56,058		—		56,058
Other comprehensive income (loss), net of tax	—		—		—		768		—		—		768
Stock-based compensation - equity classified	—		—		7,892		—		—		—		7,892
Issuance of common stock in connection with equity compensation plans	64		1		530		—		—		—		531
Repurchase and retirement of common stock	(7)		(1)		(815)		—		—		—		(816)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,070)		—		(16,070)
Balance at June 30, 2021	31,034	$	310	$	255,676	$	2,578	$	1,034,931	$	—	$	1,293,495
Walker & Dunlop net income	—		—		—		—		71,721		—		71,721
Net income (loss) from noncontrolling interests	—		—		—		—		—		69		69
Other comprehensive income (loss), net of tax	—		—		—		159		—		—		159
Stock-based compensation - equity classified	—		—		10,426		—		—		—		10,426
Issuance of common stock in connection with equity compensation plans	124		2		1,706		—		—		—		1,708
Issuance of common stock in connection with acquisitions	50		1		5,249		—		—		—		5,250
Repurchase and retirement of common stock	(14)		(1)		(1,495)		—		—		—		(1,496)
Noncontrolling interests from acquisition	—		—		—		—		—		18,750		18,750
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,146)		—		(16,146)
Balance at September 30, 2021	31,194	$	312	$	271,562	$	2,737	$	1,090,506	$	18,819	$	1,383,936

See accompanying notes to condensed consolidated financial statements.

6

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	For the nine months ended September 30,
	2022		2021
Cash flows from operating activities
Net income before noncontrolling interests	$	171,296	$	185,900
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gains attributable to the fair value of future servicing rights, net of guaranty obligation		(159,970)		(209,266)
Change in the fair value of premiums and origination fees		8,586		6,909
Amortization and depreciation		177,101		148,879
Provision (benefit) for credit losses		(13,120)		(14,380)
Gain from revaluation of previously held equity-method investment		(39,641)		—
Originations of loans held for sale		(13,877,961)		(12,761,432)
Proceeds from transfers of loans held for sale		13,283,455		12,459,511
Other operating activities, net		(16,512)		(13,100)