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SEGMENTS
9 Months Ended
Sep. 30, 2022
SEGMENTS  
Segments

NOTE 11—SEGMENTS

In the first quarter of 2022, as a result of the Company’s growth and recent acquisitions, the Company’s executive leadership team, which functions as the Company’s chief operating decision making body, began making decisions and assessing performance based on the following three operating segments. The operating segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information.  

(i)Capital Markets (“CM”)—CM provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, property sales, and appraisal and valuation services. The Company’s long-established relationships with the Agencies and institutional investors enable CM to offer a broad range of loan products and services to the Company’s customers, including first mortgage, second trust, supplemental, construction, mezzanine, preferred equity, and small-balance loans. CM provides property sales services to owners and developers of multifamily properties and commercial real estate and multifamily property appraisals for various investors.

As part of Agency lending, CM temporarily funds the loans it originates (loans held for sale) before selling them to the Agencies and earns net interest income on the spread between the interest income on the loans and the warehouse interest expense. For Agency loans, CM recognizes the fair value of expected net cash flows from servicing, which represents the right to receive future servicing fees. CM also earns fees for origination of loans for both Agency lending and debt brokerage and fees for property sales and appraisals. Direct internal, including compensation, and external costs that are specific to CM are included within the results of this operating segment.

(ii)Servicing & Asset Management (“SAM”)—SAM’s activities include: (i) servicing and asset-managing the portfolio of loans the Company (a) originates and sells to the Agencies, (b) brokers to certain life insurance companies, and (c) originates through its principal lending and investing activities, (ii) managing third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate, and (iii) real estate-related investment banking and advisory services, including housing market research.

SAM earns revenue through (i) fees for servicing the loans in the Company’s servicing portfolio, (ii) asset management fees for managing third-party capital invested in funds, primarily LIHTC tax credit funds, (iii) subscription revenue for its housing market research, and (iv) net interest income on the spread between the interest income on the loans and the warehouse interest expense for loans held for investment. Direct internal, including compensation, and external costs that are specific to SAM are included within the results of this operating segment.

(iii)Corporate—The Corporate segment consists primarily of the Company’s treasury operations and other corporate-level activities. The Company’s treasury activities include monitoring and managing liquidity and funding requirements, including corporate debt. Other corporate-level activities include equity-method investments, accounting, information technology, legal, human resources, marketing, internal audit, and various other corporate groups (“support functions”). The Company does not allocate costs from these support functions to the CM or SAM segments in presenting segment operating results, other than income tax expense, which is allocated proportionally based on income from operations at each segment, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

The following tables provide a summary and reconciliation of each segment’s results for the three months ended September 30, 2022 and 2021.

For the three months ended September 30, 2022

Segment Results

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

    

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

89,752

$

1,106

$

$

90,858

Fair value of expected net cash flows from servicing, net

55,291

55,291

Servicing fees

75,975

75,975

Property sales broker fees

30,308

30,308

Investment management fees

16,301

16,301

Net warehouse interest income

2,178

1,802

3,980

Escrow earnings and other interest income

17,760

369

18,129

Other revenues

5,845

21,544

(2,620)

24,769

Total revenues

$

183,374

$

134,488

$

(2,251)

$

315,611

Expenses

Personnel

$

125,980

$

21,676

$

9,403

$

157,059

Amortization and depreciation

952

57,239

1,655

59,846

Provision (benefit) for credit losses

 

 

1,218

 

 

1,218

Interest expense on corporate debt

 

 

 

9,306

 

9,306

Other operating expenses

 

6,063

 

6,043

 

21,885

 

33,991

Total expenses

$

132,995

$

86,176

$

42,249

$

261,420

Income from operations

$

50,379

$

48,312

$

(44,500)

$

54,191

Income tax expense (benefit)

 

12,751

12,110

(17,329)

 

7,532

Net income before noncontrolling interests

$

37,628

$

36,202

$

(27,171)

$

46,659

Less: net income (loss) from noncontrolling interests

 

 

(174)

 

 

(174)

Walker & Dunlop net income

$

37,628

$

36,376

$

(27,171)

$

46,833

For the three months ended September 30, 2021

Segment Results

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

    

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

121,133

$

2,109

$

$

123,242

Fair value of expected net cash flows from servicing, net

89,482

89,482

Servicing fees

70,628

70,628

Property sales broker fees

33,677

33,677

Investment management fees

2,564

2,564

Net warehouse interest income

3,723

1,860

5,583

Escrow earnings and other interest income

1,945

87

2,032

Other revenues

3,026

16,724

(668)

19,082

Total revenues

$

251,041

$

95,830

$

(581)

$

346,290

Expenses

Personnel

$

139,890

$

10,446

$

19,845

$

170,181

Amortization and depreciation

17

52,388

1,093

53,498

Provision (benefit) for credit losses

 

 

1,266

 

 

1,266

Interest expense on corporate debt

 

 

 

1,766

 

1,766

Other operating expenses

 

4,628

 

3,199

 

17,009

 

24,836

Total expenses

$

144,535

$

67,299

$

39,713

$

251,547

Income from operations

$

106,506

$

28,531

$

(40,294)

$

94,743

Income tax expense (benefit)

 

25,660

7,040

(9,747)

 

22,953

Net income before noncontrolling interests

$

80,846

$

21,491

$

(30,547)

$

71,790

Less: net income (loss) from noncontrolling interests

 

 

69

 

 

69

Walker & Dunlop net income

$

80,846

$

21,422

$

(30,547)

$

71,721

The following tables provide a summary and reconciliation of each segment’s results for the nine months ended September 30, 2022 and 2021 and total assets as of September 30, 2022 and 2021.

As of and for the nine months ended September 30, 2022

Segment Results and Total Assets

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

    

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

273,660

$

2,113

$

$

275,773

Fair value of expected net cash flows from servicing, net

159,970

159,970

Servicing fees

222,916

222,916

Property sales broker fees

100,092

100,092

Investment management fees

47,345

47,345

Net warehouse interest income

9,415

4,606

14,021

Escrow earnings and other interest income

26,166

517

26,683

Other revenues

12,503

74,959

41,641

129,103

Total revenues

$

555,640

$

378,105

$

42,158

$

975,903

Expenses

Personnel

$

363,619

$

62,195

$

43,794

$

469,608

Amortization and depreciation

1,762

170,930

4,409

177,101

Provision (benefit) for credit losses

 

 

(13,120)

 

 

(13,120)

Interest expense on corporate debt

 

 

 

22,123

 

22,123

Other operating expenses

 

16,757

 

18,721

 

66,922

 

102,400

Total expenses

$

382,138

$

238,726

$

137,248

$

758,112

Income from operations

$

173,502

$

139,379

$

(95,090)

$

217,791

Income tax expense (benefit)

 

42,074

33,799

(29,378)

 

46,495

Net income before noncontrolling interests

$

131,428

$

105,580

$

(65,712)

$

171,296

Less: net income (loss) from noncontrolling interests

 

(1,032)

 

(1,032)

Walker & Dunlop net income

$

131,428

$

106,612

$

(65,712)

$

172,328

Total assets

$

3,016,153

$

2,621,380

$

365,480

$

6,003,013

As of and for the nine months ended September 30, 2021

Segment Results and Total Assets

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

    

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

302,011

$

4,582

$

$

306,593

Fair value of expected net cash flows from servicing, net

209,266

209,266

Servicing fees

205,658

205,658

Property sales broker fees

65,173

65,173

Investment management fees

9,115

9,115

Net warehouse interest income

9,066

5,702

14,768

Escrow earnings and other interest income

5,712

260

5,972

Other revenues

8,721

28,381

(1,658)

35,444

Total revenues

$

594,237

$

259,150

$

(1,398)

$

851,989

Expenses

Personnel

$

332,519

$

27,004

$

48,294

$

407,817

Amortization and depreciation

556

145,161

3,162

148,879

Provision (benefit) for credit losses

 

 

(14,380)

 

 

(14,380)

Interest expense on corporate debt

 

5,291

 

5,291

Other operating expenses

 

11,628

8,056

42,487

 

62,171

Total expenses

$

344,703

$

165,841

$

99,234

$

609,778

Income from operations

$

249,534

$

93,309

$

(100,632)

$

242,211

Income tax expense (benefit)

 

58,014

21,693

(23,396)

 

56,311

Net income before noncontrolling interests

$

191,520

$

71,616

$

(77,236)

$

185,900

Less: net income (loss) from noncontrolling interests

 

 

69

 

 

69

Walker & Dunlop net income

$

191,520

$

71,547

$

(77,236)

$

185,831

Total assets

$

3,229,274

$

1,387,423

$

500,165

$

5,116,862