SEGMENTS

9 Months Ended

Sep. 30, 2023

SEGMENTS

SEGMENTS

NOTE 11—SEGMENTS

The Company’s executive leadership team, which functions as the Company’s chief operating decision making body, makes decisions and assesses performance based on the following three reportable segments. The reportable 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 its 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. CM also provides real estate-related investment banking and advisory services, including housing market research.

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, fees for property sales, appraisals, and investment banking and advisory services, and subscription revenue for its housing market research. Direct internal, including compensation, and external costs that are specific to CM are included within the results of this reportable 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 commercial real estate assets through senior secured debt or limited partnership equity instruments; e.g., preferred equity, mezzanine debt, etc. either through funds or direct investments, and (iii) managing third-party capital invested in tax credit equity funds focused on the low-income housing tax credit (“LIHTC”) sector and other commercial real estate.

SAM earns revenue through (i) fees for servicing and asset-managing the loans in the Company’s servicing portfolio, (ii) asset management fees for managing third-party capital, and (iii) 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 reportable 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. The Company does allocate interest expense and income tax expense. Corporate debt and the related interest expense are allocated first based on specific acquisitions where debt was directly used to fund the acquisition and then based on the remaining segment assets. Income tax expense 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, 2023 and 2022.

Segment Results (in thousands)	For the three months ended September 30, 2023
Revenues		CM		SAM		Corporate		Consolidated
Loan origination and debt brokerage fees, net	$	56,149	$	—	$	—	$	56,149
Fair value of expected net cash flows from servicing, net		35,375		—		—		35,375
Servicing fees		—		79,200		—		79,200
Property sales broker fees		16,862		—		—		16,862
Investment management fees		—		13,362		—		13,362
Net warehouse interest income (expense)		(2,565)		534		—		(2,031)
Placement fees and other interest income		—		39,475		3,525		43,000
Other revenues		11,875		15,569		(618)		26,826
Total revenues	$	117,696	$	148,140	$	2,907	$	268,743
Expenses
Personnel	$	97,973	$	17,139	$	21,395	$	136,507
Amortization and depreciation		1,137		54,375		1,967		57,479
Provision (benefit) for credit losses		—		421		—		421
Interest expense on corporate debt		4,874		11,096		1,624		17,594
Other operating expenses		4,193		5,039		19,297		28,529
Total expenses	$	108,177	$	88,070	$	44,283	$	240,530
Income (loss) from operations	$	9,519	$	60,070	$	(41,376)	$	28,213
Income tax expense (benefit)		2,386		15,040		(10,357)		7,069
Net income (loss) before noncontrolling interests	$	7,133	$	45,030	$	(31,019)	$	21,144
Less: net income (loss) from noncontrolling interests		83		(397)		—		(314)
Walker & Dunlop net income (loss)	$	7,050	$	45,427	$	(31,019)	$	21,458

Segment Results (in thousands)	For the three months ended September 30, 2022
Revenues		CM		SAM		Corporate		Consolidated
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 (expense)		2,178		1,802		—		3,980
Placement fees and other interest income		—		17,760		369		18,129
Other revenues		11,011		16,378		(2,620)		24,769
Total revenues	$	188,540	$	129,322	$	(2,251)	$	315,611
Expenses
Personnel	$	128,981	$	18,728	$	9,350	$	157,059
Amortization and depreciation		1,052		57,139		1,655		59,846
Provision (benefit) for credit losses		—		1,218		—		1,218
Interest expense on corporate debt		2,430		6,324		552		9,306
Other operating expenses		6,869		5,237		21,885		33,991
Total expenses	$	139,332	$	88,646	$	33,442	$	261,420
Income (loss) from operations	$	49,208	$	40,676	$	(35,693)	$	54,191
Income tax expense (benefit)		12,468		10,204		(15,140)		7,532
Net income (loss) before noncontrolling interests	$	36,740	$	30,472	$	(20,553)	$	46,659
Less: net income (loss) from noncontrolling interests		277		(451)		—		(174)
Walker & Dunlop net income (loss)	$	36,463	$	30,923	$	(20,553)	$	46,833

The following tables provide a summary and reconciliation of each segment’s results for the nine months ended September 30, 2023 and 2022 and total assets as of September 30, 2023 and 2022.

Segment Results and Total Assets (in thousands)	As of and for the nine months ended September 30, 2023
Revenues		CM		SAM		Corporate		Consolidated
Loan origination and debt brokerage fees, net	$	167,679	$	522	$	—	$	168,201
Fair value of expected net cash flows from servicing, net		107,446		—		—		107,446
Servicing fees		—		232,027		—		232,027
Property sales broker fees		38,831		—		—		38,831
Investment management fees		—		44,844		—		44,844
Net warehouse interest income (expense)		(7,006)		3,450		—		(3,556)
Placement fees and other interest income		—		100,636		8,674		109,310
Other revenues		40,735		42,697		(431)		83,001
Total revenues	$	347,685	$	424,176	$	8,243	$	780,104
Expenses
Personnel	$	281,502	$	53,669	$	53,254	$	388,425
Amortization and depreciation		3,412		161,935		5,390		170,737
Provision (benefit) for credit losses		—		(11,088)		—		(11,088)
Interest expense on corporate debt		13,870		31,385		4,623		49,878
Other operating expenses		15,037		16,465		51,820		83,322
Total expenses	$	313,821	$	252,366	$	115,087	$	681,274
Income (loss) from operations	$	33,864	$	171,810	$	(106,844)	$	98,830
Income tax expense (benefit)		8,462		42,931		(26,698)		24,695
Net income (loss) before noncontrolling interests	$	25,402	$	128,879	$	(80,146)	$	74,135
Less: net income (loss) from noncontrolling interests		1,741		(3,364)		—		(1,623)
Walker & Dunlop net income (loss)	$	23,661	$	132,243	$	(80,146)	$	75,758
Total assets	$	1,424,270	$	2,361,245	$	492,336	$	4,277,851

Segment Results and Total Assets (in thousands)	As of and for the nine months ended September 30, 2022
Revenues		CM		SAM		Corporate		Consolidated
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 (expense)		9,415		4,606		—		14,021
Placement fees and other interest income		—		26,166		517		26,683
Other revenues		29,838		57,624		41,641		129,103
Total revenues	$	572,975	$	360,770	$	42,158	$	975,903
Expenses
Personnel	$	372,656	$	53,211	$	43,741	$	469,608
Amortization and depreciation		2,191		170,501		4,409		177,101
Provision (benefit) for credit losses		—		(13,120)		—		(13,120)
Interest expense on corporate debt		5,488		15,388		1,247		22,123
Other operating expenses		19,943		15,535		66,922		102,400
Total expenses	$	400,278	$	241,515	$	116,319	$	758,112
Income (loss) from operations	$	172,697	$	119,255	$	(74,161)	$	217,791
Income tax expense (benefit)		41,878		28,919		(24,302)		46,495
Net income (loss) before noncontrolling interests	$	130,819	$	90,336	$	(49,859)	$	171,296
Less: net income (loss) from noncontrolling interests		995		(2,027)		—		(1,032)
Walker & Dunlop net income (loss)	$	129,824	$	92,363	$	(49,859)	$	172,328
Total assets	$	3,093,803	$	2,543,730	$	365,480	$	6,003,013