Walker & Dunlop Reports First Quarter 2024 Financial Results

Published

FIRST QUARTER 2024 HIGHLIGHTS

  • Total transaction volume of $6.4 billion, down 5% from Q1’23
  • Total revenues of $228.1 million, down 4% from Q1’23
  • Net income of $11.9 million and diluted earnings per share of $0.35, down 55% and 56%, respectively, from Q1’23
  • Adjusted EBITDA1 of $74.1 million, up 9% from Q1’23
  • Adjusted core EPS2 of $1.19, up 2% from Q1’23
  • Servicing portfolio of $132.0 billion as of March 31, 2024, up 6% from March 31, 2023
  • Declared quarterly dividend of $0.65 per share for the second quarter of 2024

BETHESDA, Md.--(BUSINESS WIRE)-- Walker & Dunlop, Inc. (NYSE: WD) (the “Company,” “Walker & Dunlop,” or “W&D”) reported total revenues of $228.1 million for the first quarter of 2024, a decrease of 4% year over year. First quarter total transaction volume was $6.4 billion, down 5% year over year. Net income for the first quarter of 2024 was $11.9 million, or $0.35 per diluted share, down 55% and 56%, respectively, year over year. Adjusted EBITDA was up 9% to $74.1 million, reflecting the strength of the Company’s recurring revenue streams. As well, adjusted core EPS, which primarily strips out non-cash revenues and expenses, was up 2% from the first quarter of 2023 to $1.19. The Company’s Board of Directors declared a dividend of $0.65 per share for the second quarter of 2024.

“Q1 2024 began with optimism for imminent Fed rate cuts and ended with broad acceptance of ‘higher for longer.’ The market uncertainty along with rising rates slowed transaction volume significantly. The W&D team closed $6.4 billion of total transaction volume in the quarter, down 5% from Q1 2023,” commented Walker & Dunlop Chairman and CEO Willy Walker. “While lower origination volumes with the GSEs and HUD reduced mortgage servicing rights as well as non-cash revenues and diluted EPS, both adjusted core EPS and adjusted EBITDA, which eliminate the impact of non-cash revenues and expenses, were up 2% and 9%, respectively, on the quarter. These numbers exemplify the durability of the W&D business model."

"As we enter Q2, there are plenty of signs that commercial real estate investors are working ‘higher for longer’ into their actions -- to refinance properties, buy and sell properties, or raise new capital," continued Walker. "We believe our full-year 2024 financial guidance is achievable given the volume of loan refinancings and equity capital looking to be deployed between now and year-end. And while higher rates and uncertain Fed policy are headwinds, the onus is on our team to provide our clients with solutions in challenging markets."

"Finally," added Walker, “Walker & Dunlop's business model -- that includes a scaled, low risk servicing business generating strong cash flow -- allows us to invest in our people, brand, and technology to continue exceeding our clients' expectations."

CONSOLIDATED FIRST QUARTER 2024

OPERATING RESULTS

TRANSACTION VOLUMES

(dollars in thousands)

 

Q1 2024

 

Q1 2023

 

$ Variance

 

% Variance

Fannie Mae

 

$

903,368

 

$

1,358,708

 

$

(455,340

)

 

(34

)%

Freddie Mac

 

 

974,926

 

 

975,737

 

 

(811

)

 

-

 

Ginnie Mae - HUD

 

 

14,140

 

 

127,599

 

 

(113,459

)

 

(89

)

Brokered (3)

 

 

3,319,074

 

 

2,363,754

 

 

955,320

 

 

40

 

Principal Lending and Investing (4)

 

 

15,800

 

 

-

 

 

15,800

 

 

N/A

 

Debt financing volume

 

$

5,227,308

 

$

4,825,798

 

$

401,510

 

 

8

%

Property sales volume

 

 

1,167,151

 

 

1,894,682

 

 

(727,531

)

 

(38

)

Total transaction volume

 

$

6,394,459

 

$

6,720,480

 

$

(326,021

)

 

(5

)%

Discussion of Results:

  • Total transaction volume decreased 5% from the first quarter of 2023, primarily due to a 20% decrease in the Fannie Mae and the Freddie Mac (collectively, the “GSEs”) transaction volume and a decrease in property sales volume, partially offset by a 40% increase in brokered transactions.
  • The decrease in HUD debt financing volume reflects the impacts of high interest rates and elongated processing times for construction loans. Walker & Dunlop was the second largest HUD construction loan lender by volume for HUD’s 2023 fiscal year.
  • The 40% increase in brokered debt volume drove our 8% increase in debt financing volume in the first quarter of 2024, as there was increased activity from life insurance companies, banks, CMBS and other private capital providers in the first quarter 2024 compared to 2023.
  • Property sales volume decreased as fewer multifamily owners seek to sell their investments under these market conditions, resulting in the market’s lowest quarter of multifamily property sales volume since the second quarter of 2020, according to Real Capital Analytics. Volatility in interest rates and increased supply in select markets from new deliveries have caused cap rates for multifamily assets to widen, and sellers remain hesitant to pursue sales in this market.

MANAGED PORTFOLIO

(dollars in thousands, unless otherwise noted)

 

Q1 2024

 

Q1 2023

 

$ Variance

 

% Variance

Fannie Mae

 

$

64,349,886

 

$

59,890,444

 

$

4,459,442

 

 

7

%

Freddie Mac

 

 

39,665,386

 

 

38,184,798

 

 

1,480,588

 

 

4

 

Ginnie Mae - HUD

 

 

10,595,841

 

 

10,027,781

 

 

568,060

 

 

6

 

Brokered

 

 

17,312,513

 

 

16,285,391

 

 

1,027,122

 

 

6

 

Principal Lending and Investing

 

 

40,139

 

 

187,505

 

 

(147,366

)

 

(79

)

Total Servicing Portfolio

 

$

131,963,765

 

$

124,575,919

 

$

7,387,846

 

 

6

%

Assets under management

 

 

17,465,398

 

 

16,654,566

 

 

810,832

 

 

5

 

Total Managed Portfolio

 

$

149,429,163

 

$

141,230,485

 

$

8,198,678

 

 

6

%

Custodial escrow account balance at period end (in billions)

 

$

2.3

 

$

2.2

 

 

 

 

 

Weighted-average servicing fee rate (basis points)

 

 

24.0

 

 

24.3

 

 

 

 

 

Weighted-average remaining servicing portfolio term (years)

 

 

8.0

 

 

8.7

 

 

 

 

 

Discussion of Results:

  • Our servicing portfolio continues to expand with the addition of GSE debt financing volumes over the past 12 months. Although loan origination volumes have slowed down over the past year, higher interest rates are leading to fewer loan prepayments within the servicing portfolio.
  • During the first quarter of 2024, we added $1.5 billion of net loans to our servicing portfolio, and over the past 12 months, we added $7.4 billion of net loans to our servicing portfolio, 88% of which were GSE or HUD (collectively, “Agency”) loans.
  • $10.7 billion of Agency loans in our servicing portfolio are scheduled to mature over the next two years. These loans, with a low weighted-average servicing fee of 20 basis points, represent only 9% of the total Agency loans in our portfolio.
  • The mortgage servicing rights (“MSRs”) associated with our servicing portfolio had a fair value of $1.4 billion as of both March 31, 2024 and 2023.
  • Assets under management as of March 31, 2024 consisted of $15.2 billion of low-income housing tax credit (“LIHTC”) funds, $1.4 billion of debt funds, and $0.9 billion of equity funds. The $0.8 billion increase was primarily related to syndication activity of the tax credit funds over the past year.

KEY PERFORMANCE METRICS

(dollars in thousands, except per share amounts)

 

Q1 2024

 

Q1 2023

 

$ Variance

 

% Variance

Walker & Dunlop net income

 

$

11,866

 

$

26,665

 

$

(14,799

)

 

(55

)%

Adjusted EBITDA

 

 

74,136

 

 

67,975

 

 

6,161

 

 

9

 

Diluted EPS

 

$

0.35

 

$

0.79

 

$

(0.44

)

 

(56

)%

Adjusted core EPS

 

$

1.19

 

$

1.17

 

$

0.02

 

 

2

%

Operating margin

 

 

6

%

 

14

%

 

 

 

 

Return on equity

 

 

3

 

 

6

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

 

49

%

 

50

%

 

 

 

 

Other operating expenses

 

 

13

 

 

10

 

 

 

 

 

Discussion of Results:

  • Net income and diluted EPS decreased 55% and 56%, respectively, in the first quarter of 2024, compared to the same period in 2023. The first quarter of 2023 included a $10.8 million benefit for credit losses, a $4.4 million benefit from the refinancing of debt assumed in the acquisition of Alliant, and a $7.5 million investment banking transaction, with no comparable transaction activity in the first quarter of 2024, which contributed to the decrease in our income from operations. Adjusted core EPS, which excludes, among other items, the impacts of non-cash MSR revenues, the provision for loan losses, and acquisition related costs (such as amortization of intangible assets) was $1.19 in the first quarter 2024, an increase of 2% year over year.
  • The increase in adjusted EBITDA was primarily the result of increased placement fees and other interest income, higher servicing fees, and decreased personnel expenses, partially offset by decreases in loan origination and debt brokerage fees, net and property sales broker fees.
  • Operating margin decreased primarily due to changes in our non-cash activity, including: (i) a decline of MSR income due to lower Fannie Mae volume, and (ii) a change from a large benefit for credit losses in 2023 to a small provision for credit losses in 2024.
  • Return on equity declined primarily due to the 55% decrease in net income combined with a 2% increase in stockholders’ equity over the past year.

KEY CREDIT METRICS

(dollars in thousands)

 

 

Q1 2024

 

Q1 2023

 

$ Variance

 

% Variance

At-risk servicing portfolio (5)

 

$

59,498,851

 

$

54,898,461

 

$

4,600,390

 

8

%

Maximum exposure to at-risk portfolio (6)

 

 

12,088,698

 

 

11,132,473

 

 

956,225

 

9

 

Defaulted loans (7)

 

$

63,264

 

$

36,983

 

$

26,281

 

71

%

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

 

 

 

 

 

 

 

 

 

 

 

 

Defaulted loans

 

 

0.11

%

 

0.07

%

 

 

 

 

 

Allowance for risk-sharing

 

 

0.05

 

 

0.06

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for risk-sharing

 

 

0.25

%

 

0.30

%

 

 

 

 

 

Discussion of Results:

  • Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased primarily due to the level of Fannie Mae loans added to the portfolio during the past 12 months.
  • As of March 31, 2024, six at-risk loans were in default with an aggregate unpaid principal balance (“UPB”) of $63.3 million compared to two at-risk loans with an aggregate UPB of $37.0 million that were in default as of March 31, 2023. The collateral-based reserve on defaulted loans was $5.1 million and $4.4 million as of March 31, 2024 and March 31, 2023, respectively. The remaining at-risk servicing portfolio continues to exhibit strong credit quality, with very low levels of delinquencies and strong operating performance of the underlying properties in the portfolio.
  • We take credit risk exclusively on loans backed by multifamily assets and have no credit exposure to losses in any other sector of the commercial real estate lending market.
  • During the first quarter of 2024, we repurchased a Fannie Mae loan for $13.5 million in cash. We have an immaterial reserve for credit losses related to this loan.
  • In 2023, we received repurchase requests from Freddie Mac related to two loans with UPBs of $11.4 million and $34.8 million, respectively. In March 2024, we entered into a forbearance and indemnification agreement with Freddie Mac that, among other things, delayed the repurchases of these loans for six and twelve months, respectively, and transferred the risk of loss for both loans from Freddie Mac to Walker & Dunlop. As of March 31, 2024, our estimate of the fair value of the indemnification agreements was $2.0 million, which is included in the provision for credit losses for the first quarter of 2024.

FIRST QUARTER 2024 FINANCIAL RESULTS BY SEGMENT

Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s use of that corporate debt.

Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

The following details explain the changes in these expense items at a consolidated corporate level:

  • Interest expense on corporate debt increased $2.4 million, or 16%, from the first quarter of 2023, primarily as a result of an increase in interest rates year over year, as our term loan carries a floating interest rate.
  • Income tax expense decreased $4.3 million, or 60%, from the first quarter of 2023, primarily as a result of the 60% decrease in income from operations, as our effective tax rate remained flat at 21% year over year.

FINANCIAL RESULTS - CAPITAL MARKETS

(dollars in thousands)

 

Q1 2024

Q1 2023

$ Variance

 

% Variance

Loan origination and debt brokerage fees, net ("Origination fees")

 

$

43,700

 

$

46,956

 

$

(3,256

)

 

(7

)%

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

 

 

20,898

 

 

30,013

 

 

(9,115

)

 

(30

)

Property sales broker fees

 

 

8,821

 

 

11,624

 

 

(2,803

)

 

(24

)

Net warehouse interest income (expense), loans held for sale ("LHFS")

 

 

(1,574

)

 

(1,689

)

 

115

 

 

(7

)

Other revenues

 

 

10,052

 

 

17,100

 

 

(7,048

)

 

(41

)

Total revenues

 

$

81,897

 

$

104,004

 

$

(22,107

)

 

(21

)%

Personnel

 

$

79,187

 

$

90,462

 

$

(11,275

)

 

(12

)%

Amortization and depreciation

 

 

1,137

 

 

1,186

 

 

(49

)

 

(4

)

Interest expense on corporate debt

 

 

4,851

 

 

4,269

 

 

582

 

 

14

 

Other operating expenses

 

 

5,052

 

 

5,644

 

 

(592

)

 

(10

)

Total expenses

 

$

90,227

 

$

101,561

 

$

(11,334

)

 

(11

)%

Income from operations

 

$

(8,330

)

$

2,443

 

$

(10,773

)

 

(441

)%

Income tax expense (benefit)

 

 

(1,744

)

 

504

 

 

(2,248

)

 

(446

)

Net income before noncontrolling interests

 

$

(6,586

)

$

1,939

 

$

(8,525

)

 

(440

)%

Less: net income (loss) from noncontrolling interests

 

 

114

 

 

1,435

 

 

(1,321

)

 

(92

)

Walker & Dunlop net income (loss)

 

$

(6,700

)

$

504

 

$

(7,204

)

 

(1,429

)%

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

Origination fee rate (8)

 

 

0.84

%

 

0.97

%

 

 

 

 

MSR rate (9)

 

 

0.40

 

 

0.62

 

 

 

 

 

Agency MSR rate (10)

 

 

1.10

 

 

1.22

 

 

 

 

 

Key performance metrics:

 

 

 

 

 

 

 

 

 

Operating margin

 

 

(10

)%

 

2

%

 

 

 

 

Adjusted EBITDA

 

$

(19,297

)

$

(18,687

)

$

(610

)

 

3

%

Capital Markets - Discussion of Quarterly Results:

The Capital Markets segment includes our Agency lending, debt brokerage, property sales, appraisal and valuation services, investment banking, and housing market research businesses.

  • The decrease in origination fees was primarily the result of the 13-basis-point decrease in our origination fee rate, partially offset by an 8% increase in debt financing volume. The decrease in the origination fee rate was driven by an increase in brokered debt financing volume as a percentage of total debt financing volume and decreases in the Fannie Mae and HUD percentages. Brokered loans have lower origination fees than Agency loans.
  • The decrease in MSR income was primarily attributable to the decreases in Fannie Mae and HUD debt financing volumes Fannie Mae loans have higher weighted-average servicing fee (“WASF”) than our other products, resulting in higher MSR income from this product than our other products.
  • The decrease in property sales broker fees was primarily driven by the 38% decrease in property sales transaction volume.
  • The decrease in other revenues was primarily related to the closing of the largest investment banking deal in the Company’s history, a $7.5 million transaction, which closed in the first quarter of 2023, with no comparable activity in the first quarter of 2024.
  • Personnel expense decreased primarily due to a decrease in commission costs on lower transaction revenues, combined with a decrease in other personnel costs due to lower headcount. Our lower headcount was due to a workforce reduction undertaken in the second quarter of 2023.

FINANCIAL RESULTS - SERVICING & ASSET MANAGEMENT

(dollars in thousands)

 

Q1 2024

Q1 2023

$ Variance

 

% Variance

Origination fees

 

$

40

 

$

128

 

$

(88

)

 

(69

)%

Servicing fees

 

 

80,043

 

 

75,766

 

 

4,277

 

 

6

 

Investment management fees

 

 

13,520

 

 

15,173

 

 

(1,653

)

 

(11

)

Net warehouse interest income, loans held for investment ("LHFI")

 

 

458

 

 

1,690

 

 

(1,232

)

 

(73

)

Placement fees and other interest income

 

 

35,603

 

 

28,824

 

 

6,779

 

 

24

 

Other revenues

 

 

11,571

 

 

11,615

 

 

(44

)

 

(0

)

Total revenues

 

$

141,235

 

$

133,196

 

$

8,039

 

 

6

%

Personnel

 

$

18,055

 

$

15,341

 

$

2,714

 

 

18

%

Amortization and depreciation

 

 

53,071

 

 

54,010

 

 

(939

)

 

(2

)

Provision (benefit) for credit losses

 

 

524

 

 

(10,775

)

 

11,299

 

 

(105

)

Interest expense on corporate debt

 

 

11,191

 

 

9,582

 

 

1,609

 

 

17

 

Other operating expenses

 

 

5,123

 

 

1,480

 

 

3,643

 

 

246

 

Total expenses

 

$

87,964

 

$

69,638

 

$

18,326

 

 

26

%

Income from operations

 

$

53,271

 

$

63,558

 

$

(10,287

)

 

(16

)%

Income tax expense (benefit)

 

 

11,153

 

 

13,104

 

 

(1,951

)

 

(15

)

Net income before noncontrolling interests

 

$

42,118

 

$

50,454

 

$

(8,336

)

 

(17

)%

Less: net income (loss) from noncontrolling interests

 

 

(1,165

)

 

(630

)

 

(535

)

 

85

 

Walker & Dunlop net income (loss)

 

$

43,283

 

$

51,084

 

$

(7,801

)

 

(15

)%

Key performance metrics:

 

 

 

 

 

 

 

 

 

Operating margin

 

 

38

%

 

48

%

 

 

 

 

Adjusted EBITDA

 

$

119,658

 

$

112,975

 

$

6,683

 

 

6

%

Servicing & Asset Management - Discussion of Quarterly Results:

The Servicing & Asset Management segment includes loan servicing, principal lending and investing, management of third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate, and real estate-related investment banking and advisory services.

  • The $7.4 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, partially offset by a slight decrease in the servicing portfolio’s weighted-average servicing fee.
  • Investment management fees decreased primarily as a result of a decline in revenue from our LIHTC funds as fewer dispositions were expected to be realized in Q1 2024 compared to Q1 2023.
  • Placement fees and other interest income increased largely as a result of higher custodial escrow balances and higher placement fees earned on those escrow deposits due to higher short-term interest rates.
  • The increase in personnel expense was primarily the result of an increase in salaries and benefits as the average headcount for the segment increased. The increase in average headcount was due to additional personnel hired in our LIHTC operations as we continue to scale and integrate those operations.
  • The provision for credit losses in 2024 was primarily attributable to losses related to the forbearance and indemnification agreement with Freddie Mac noted above, partially offset by a small benefit for risk-sharing obligations resulting from an update to our historical loss rate and forecast-period loss rate. The benefit for credit losses in 2023 was primarily due to the annual update of our historical loss rate and forecast-period loss rates that resulted in a decrease to the calculated CECL. The ratio of the forecast-period loss rate to the historical loss rate was 3.8 at March 31, 2023, compared to 7.7 at March 31, 2024, reflecting the high inflation, higher interest rates and continued uncertainty in the macroeconomic environment.
  • The increase in other operating expenses was primarily driven by the write-off of the unamortized premium associated with the payoff of the note payable of one of our subsidiaries that occurred in the first quarter of 2023, with no comparable activity in the current year.

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL RESULTS - CORPORATE

(dollars in thousands)

 

Q1 2024

 

Q1 2023

 

$ Variance

 

% Variance

Other interest income

 

$

3,799

 

 

$

2,100

 

 

$

1,699

 

 

81

%

Other revenues

 

 

1,128

 

 

 

(554

)

 

 

1,682

 

 

(304

)

Total revenues

 

$

4,927

 

 

$

1,546

 

 

$

3,381

 

 

219

%

Personnel

 

$

14,221

 

 

$

12,810

 

 

$

1,411

 

 

11

%

Amortization and depreciation

 

 

1,683

 

 

 

1,770

 

 

 

(87

)

 

(5

)

Interest expense on corporate debt

 

 

1,617

 

 

 

1,423

 

 

 

194

 

 

14

 

Other operating expenses

 

 

18,668

 

 

 

16,939

 

 

 

1,729

 

 

10

 

Total expenses

 

$

36,189

 

 

$

32,942

 

 

$

3,247

 

 

10

%

Income (loss) from operations

 

$

(31,262

)

 

$

(31,396

)

 

$

134

 

 

(0

)%

Income tax expense (benefit)

 

 

(6,545

)

 

 

(6,473

)

 

 

(72

)

 

1

 

Walker & Dunlop net income (loss)

 

$

(24,717

)

 

$

(24,923

)

 

$

206

 

 

(1

)%

Key performance metric:

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

(26,225

)

 

$

(26,313

)

 

$

88

 

 

(0

)%

Corporate - Discussion of Quarterly Results:

The Corporate segment consists of corporate-level activities including 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 its other segments in presenting segment operating results.

  • The increase in total revenues was primarily driven by the increase in interest income earned on our corporate cash balances due to a higher short-term interest rate environment, combined with an increase in income from equity-method investments.
  • The increase in personnel expense was primarily related to an increase in subjective bonus accrual, partially offset by a decrease in salaries and benefits, driven by lower headcount as a result of our workforce reduction undertaken in the second quarter of 2023.
  • The increase in other operating expenses was primarily the result of increased office and software expenses in the first quarter of 2024, partially offset by decreased professional fees.

CAPITAL SOURCES AND USES

On May 1, 2024, the Company’s Board of Directors declared a dividend of $0.65 per share for the second quarter of 2024. The dividend will be paid on May 31, 2024 to all holders of record of the Company’s restricted and unrestricted common stock as of May 16, 2024.

In January 2023, the Company entered into a lender joinder agreement and amendment to our existing credit agreement that provided for an incremental term loan with a principal amount of $200 million. The incremental term loan bears interest at a rate equal to adjusted Term SOFR plus 3.00% per annum and matures in December 2028. Proceeds from the debt were used to repay $116 million of debt assumed in an acquisition and to strengthen the balance sheet for general corporate purposes.

On February 14, 2024, our Board of Directors authorized the repurchase of up to $75.0 million of the Company’s outstanding common stock over a 12-month period ending February 23, 2025 (“2024 Share Repurchase Program”).

Any purchases made pursuant to the 2024 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.

_____________________________________

(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,” “Adjusted Financial Measure Reconciliation to GAAP” and “Adjusted Financial Measure Reconciliation to GAAP by Segment.”

(2)

Adjusted core EPS is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of Adjusted core EPS to Diluted EPS, refer to the sections of this press release below titled “Non-GAAP Financial Measures” and “Adjusted Core EPS Reconciliation.”

(3)

Brokered transactions for life insurance companies, commercial banks, and other capital sources.

(4)

Includes debt financing volumes from our interim loan program, our interim loan joint venture, and Walker & Dunlop Investment Partners, Inc. (“WDIP”) separate accounts.

(5)

At-risk servicing portfolio is defined as the balance of Fannie Mae Delegated Underwriting and Servicing (“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.

(6)

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.

(7)

Defaulted loans represent loans in our Fannie Mae at-risk portfolio that are probable of foreclosure or that have foreclosed and for which we have recorded a collateral-based reserve (i.e., loans where we have assessed a probable loss). Other loans that have defaulted but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to us are not included here.

(8)

Origination fees as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(9)

MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(10)

MSR income as a percentage of Agency debt financing volume.

CONFERENCE CALL INFORMATION

The Company will host a conference call to discuss its quarterly results on Thursday, May 2, 2024 at 8:30 a.m. Eastern time. Listeners can access the call via the dial-in number and webcast link below. 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.

Phone: (888) 256-1007 from within the United States; (773) 305-6853 from outside the United States Confirmation Code: 4299257 Webcast Link: https://event.webcasts.com/starthere.jsp?ei=1653643&tp_key=e4cfac9b39

ABOUT WALKER & DUNLOP

Walker & Dunlop (NYSE: WD) is one of the largest commercial real estate finance and advisory services firms in the United States. Our ideas and capital create communities where people live, work, shop, and play. The diversity of our people, breadth of our brand and technological capabilities make us one of the most insightful and client-focused firms in the commercial real estate industry.

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, adjusted core net income, and adjusted core EPS, which are non-GAAP financial measures. The presentation of these non-GAAP financial measures 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, adjusted core net income, and adjusted core EPS in addition to, and not as an alternative for, net income and diluted EPS.

Adjusted core net income and adjusted core EPS represent net income adjusted for amortization and depreciation, provision (benefit) for credit losses, net write-offs, the fair value of expected net cash flows from servicing, net, the income statement impact from periodic revaluation and accretion associated with contingent consideration liabilities related to acquired companies, and other one-time adjustments, such as goodwill impairment. Adjusted EBITDA represents net income before income taxes, interest expense on our corporate debt, and amortization and depreciation, adjusted for provision (benefit) for credit losses, net write-offs, stock-based incentive compensation charges, the fair value of expected net cash flows from servicing, net, the write-off of the unamortized balance of premium associated with the repayment of a portion of our corporate debt, goodwill impairment, and contingent consideration liability fair value adjustments when the fair value adjustment is a triggering event for a goodwill impairment assessment. 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. Because not all companies use identical calculations, our presentation of adjusted EBITDA, adjusted core net income and adjusted core EPS may not be comparable to similarly titled measures of other companies.

We use adjusted EBITDA, adjusted core net income, and adjusted core EPS 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 these non-GAAP measures, when read in conjunction with the Company's GAAP financial information, provide 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 these non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these non-GAAP financial measures should only be used to evaluate the Company's results of operations in conjunction with the Company’s GAAP financial information. For more information on adjusted EBITDA, adjusted core net income, and adjusted core EPS, refer to the section of this press release below titled “Adjusted Financial Measure Reconciliation to GAAP” and “Adjusted Financial Measure Reconciliation to GAAP By Segment.”

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.

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) changes in interest rates, (3) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (4) our ability to retain and attract loan originators and other professionals, (5) success of our various investments funded with corporate capital, and (6) 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.

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

2024

 

2023

 

2023

 

2023

 

2023

(in thousands)

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

216,532

 

 

$

328,698

 

 

$

236,321

 

 

$

228,091

 

 

$

188,389

 

Restricted cash

 

21,071

 

 

 

21,422

 

 

 

17,768

 

 

 

21,769

 

 

 

20,504

 

Pledged securities, at fair value

 

190,679

 

 

 

184,081

 

 

 

177,509

 

 

 

170,666

 

 

 

165,081

 

Loans held for sale, at fair value

 

497,933

 

 

 

594,998

 

 

 

758,926

 

 

 

1,303,686

 

 

 

934,991

 

Mortgage servicing rights

 

881,834

 

 

 

907,415

 

 

 

921,746

 

 

 

932,131

 

 

 

946,406

 

Goodwill

 

901,710

 

 

 

901,710

 

 

 

949,710

 

 

 

963,710

 

 

 

959,712

 

Other intangible assets

 

178,221

 

 

 

181,975

 

 

 

185,927

 

 

 

189,919

 

 

 

194,208

 

Receivables, net

 

250,406

 

 

 

233,563

 

 

 

265,234

 

 

 

242,397

 

 

 

224,776

 

Committed investments in tax credit equity

 

122,332

 

 

 

154,028

 

 

 

212,296

 

 

 

165,136

 

 

 

207,750

 

Other assets, net

 

565,194

 

 

 

544,457

 

 

 

552,414

 

 

 

589,919

 

 

 

651,235

 

Total assets

$

3,825,912

 

 

$

4,052,347

 

 

$

4,277,851

 

 

$

4,807,424

 

 

$

4,493,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse notes payable

$

521,977

 

 

$

596,178

 

 

$

790,742

 

 

$

1,342,187

 

 

$

1,031,277

 

Notes payable

 

772,037

 

 

 

773,358

 

 

 

774,677

 

 

 

775,995

 

 

 

777,311

 

Allowance for risk-sharing obligations

 

30,124

 

 

 

31,601

 

 

 

30,957

 

 

 

32,410

 

 

 

33,087

 

Commitments to fund investments in tax credit equity

 

114,206

 

 

 

140,259

 

 

 

196,250

 

 

 

156,617

 

 

 

196,522

 

Other liabilities

 

651,660

 

 

 

764,822

 

 

 

754,234

 

 

 

775,718

 

 

 

739,759

 

Total liabilities

$

2,090,004

 

 

$

2,306,218

 

 

$

2,546,860

 

 

$

3,082,927

 

 

$

2,777,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

$

331

 

 

$

329

 

 

$

328

 

 

$

327

 

 

$

327

 

Additional paid-in capital

 

427,184

 

 

 

425,488

 

 

 

420,062

 

 

 

412,182

 

 

 

405,303

 

Accumulated other comprehensive income (loss)

 

(492

)

 

 

(479

)

 

 

(1,864

)

 

 

(1,465

)

 

 

(1,621

)

Retained earnings

 

1,288,313

 

 

 

1,298,412

 

 

 

1,287,653

 

 

 

1,287,334

 

 

 

1,281,119

 

Total stockholders’ equity

$

1,715,336

 

 

$

1,723,750

 

 

$

1,706,179

 

 

$

1,698,378

 

 

$

1,685,128

 

Noncontrolling interests

 

20,572

 

 

 

22,379

 

 

 

24,812

 

 

 

26,119

 

 

 

29,968

 

Total equity

$

1,735,908

 

 

$

1,746,129

 

 

$

1,730,991

 

 

$

1,724,497

 

 

$

1,715,096

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

$

3,825,912

 

 

$

4,052,347

 

 

$

4,277,851

 

 

$

4,807,424

 

 

$

4,493,052 

  

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Trends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

Q1 2024

 

Q4 2023

 

Q3 2023

 

Q2 2023

 

Q1 2023

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination fees

$

43,740

 

 

$

66,208

 

 

$

56,149

 

 

$

64,968

 

 

$

47,084

 

MSR income

 

20,898

 

 

 

34,471

 

 

 

35,375

 

 

 

42,058

 

 

 

30,013

 

Servicing fees

 

80,043

 

 

 

79,887

 

 

 

79,200

 

 

 

77,061

 

 

 

75,766

 

Property sales broker fees

 

8,821

 

 

 

15,135

 

 

 

16,862

 

 

 

10,345

 

 

 

11,624

 

Investment management fees

 

13,520

 

 

 

537

 

 

 

13,362

 

 

 

16,309

 

 

 

15,173

 

Net warehouse interest income (expense)

 

(1,116

)

 

 

(2,077

)

 

 

(2,031

)

 

 

(1,526

)

 

 

1

 

Placement fees and other interest income

 

39,402

 

 

 

45,210

 

 

 

43,000

 

 

 

35,386

 

 

 

30,924

 

Other revenues

 

22,751

 

 

 

34,965

 

 

 

26,826

 

 

 

28,014

 

 

 

28,161

 

Total revenues

$

228,059

 

 

$

274,336

 

 

$

268,743

 

 

$

272,615

 

 

$

238,746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

$

111,463

 

 

$

125,865

 

 

$

136,507

 

 

$

133,305

 

 

$

118,613

 

Amortization and depreciation

 

55,891

 

 

 

56,015

 

 

 

57,479

 

 

 

56,292

 

 

 

56,966

 

Provision (benefit) for credit losses

 

524

 

 

 

636

 

 

 

421

 

 

 

(734

)

 

 

(10,775

)

Interest expense on corporate debt

 

17,659

 

 

 

18,598

 

 

 

17,594

 

 

 

17,010

 

 

 

15,274

 

Goodwill impairment

 

 

 

 

48,000

 

 

 

14,000

 

 

 

 

 

 

 

Fair value adjustments to contingent consideration liabilities

 

 

 

 

(48,500

)

 

 

(14,000

)

 

 

 

 

 

 

Other operating expenses

 

28,843

 

 

 

34,355

 

 

 

28,529

 

 

 

30,730

 

 

 

24,063

 

Total expenses

$

214,380

 

 

$

234,969

 

 

$

240,530

 

 

$

236,603

 

 

$

204,141

 

Income from operations

$

13,679

 

 

$

39,367

 

 

$

28,213

 

 

$

36,012

 

 

$

34,605

 

Income tax expense

 

2,864

 

 

 

10,331

 

 

 

7,069

 

 

 

10,491

 

 

 

7,135

 

Net income before noncontrolling interests

$

10,815

 

 

$

29,036

 

 

$

21,144

 

 

$

25,521

 

 

$

27,470

 

Less: net income (loss) from noncontrolling interests

 

(1,051

)

 

 

(2,563

)

 

 

(314

)

 

 

(2,114

)

 

 

805

 

Walker & Dunlop net income

$

11,866

 

 

$

31,599

 

 

$

21,458

 

 

$

27,635

 

 

$

26,665

 

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

 

(13

)

 

 

1,385

 

 

 

(399

)

 

 

156

 

 

 

(53

)

Walker & Dunlop comprehensive income

$

11,853

 

 

$

32,984

 

 

$

21,059

 

 

$

27,791

 

 

$

26,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective Tax Rate

 

21

%

 

 

26

%

 

 

25

%

 

 

29

%

 

 

21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.35

 

 

$

0.94

 

 

$

0.64

 

 

$

0.82

 

 

$

0.80

 

Diluted earnings per share

 

0.35

 

 

 

0.93

 

 

 

0.64

 

 

 

0.82

 

 

 

0.79

 

Cash dividends paid per common share

 

0.65

 

 

 

0.63

 

 

 

0.63

 

 

 

0.63

 

 

 

0.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average shares outstanding

 

32,978

 

 

 

32,825

 

 

 

32,737

 

 

 

32,695

 

 

 

32,529

 

Diluted weighted-average shares outstanding

 

33,048

 

 

 

32,941

 

 

 

32,895

 

 

 

32,851

 

 

 

32,816

 

SUPPLEMENTAL OPERATING DATA

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Trends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data and unless otherwise noted)

Q1 2024

 

Q4 2023

 

Q3 2023

 

Q2 2023

 

Q1 2023

 

Transaction Volume:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Components of Debt Financing Volume

 

 

 

 

 

 

 

 

 

 

Fannie Mae

$

903,368

 

$

1,692,405

 

$

1,739,332

 

$

2,230,952

 

$

1,358,708

 

Freddie Mac

 

974,926

 

 

1,308,263

 

 

1,072,048

 

 

1,212,887

 

 

975,737

 

Ginnie Mae - HUD

 

14,140

 

 

316,960

 

 

86,557

 

 

147,773

 

 

127,599

 

Brokered (1)

 

3,319,074

 

 

2,885,454

 

 

3,149,457

 

 

3,316,223

 

 

2,363,754

 

Principal Lending and Investing (2)

 

15,800

 

 

218,750

 

 

 

 

 

 

 

Total Debt Financing Volume

$

5,227,308

 

$

6,421,832

 

$

6,047,394

 

$

6,907,835

 

$

4,825,798

 

Property Sales Volume

 

1,167,151

 

 

2,877,399

 

 

2,508,073

 

 

1,504,383

 

 

1,894,682

 

Total Transaction Volume

$

6,394,459

 

$

9,299,231

 

$

8,555,467

 

$

8,412,218

 

$

6,720,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Performance Metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin

 

6

%

 

14

%

 

10

%

 

13

%

 

14

%

Return on equity

 

3

 

 

7

 

 

5

 

 

7

 

 

6

 

Walker & Dunlop net income

$

11,866

 

$

31,599

 

$

21,458

 

$

27,635

 

$

26,665

 

Adjusted EBITDA (3)

 

74,136

 

 

87,582

 

 

74,065

 

 

70,501

 

 

67,975

 

Diluted EPS

 

0.35

 

 

0.93

 

 

0.64

 

 

0.82

 

 

0.79

 

Adjusted core EPS (4)

 

1.19

 

 

1.42

 

 

1.11

 

 

0.98

 

 

1.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

49

%

 

46

%

 

51

%

 

49

%

 

50

%

Other operating expenses

 

13

 

 

13

 

 

11

 

 

11

 

 

10

 

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

 

 

 

 

 

 

 

 

 

 

Origination fee rate (5)

 

0.84

%

 

1.05

%

 

0.93

%

 

0.93

%

 

0.97

%

MSR rate (6)

 

0.40

 

 

0.56

 

 

0.58

 

 

0.61

 

 

0.62

 

Agency MSR rate (7)

 

1.10

 

 

1.04

 

 

1.22

 

 

1.17

 

 

1.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market capitalization at period end

$

3,406,853

 

$

3,719,589

 

$

2,433,494

 

$

2,586,519

 

$

2,489,200

 

Closing share price at period end

$

101.06

 

$

111.01

 

$

74.24

 

$

79.09

 

$

76.17

 

Average headcount

 

1,323

 

 

1,341

 

 

1,344

 

 

1,385

 

 

1,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Components of Servicing Portfolio (end of period):

 

 

 

 

 

 

 

 

 

 

Fannie Mae

$

64,349,886

 

$

63,699,106

 

$

62,850,853

 

$

61,356,554

 

$

59,890,444

 

Freddie Mac

 

39,665,386

 

 

39,330,545

 

 

38,656,136

 

 

38,287,200

 

 

38,184,798

 

Ginnie Mae - HUD

 

10,595,841

 

 

10,460,884

 

 

10,320,520

 

 

10,246,632

 

 

10,027,781

 

Brokered (8)

 

17,312,513

 

 

16,940,850

 

 

17,091,925

 

 

16,684,115

 

 

16,285,391

 

Principal Lending and Investing (9)

 

40,139

 

 

40,139

 

 

40,000

 

 

71,680

 

 

187,505

 

Total Servicing Portfolio

$

131,963,765

 

$

130,471,524

 

$

128,959,434

 

$

126,646,181

 

$

124,575,919

 

Assets under management (10)

 

17,465,398

 

 

17,321,452

 

 

17,334,877

 

 

16,903,055

 

 

16,654,566

 

Total Managed Portfolio

$

149,429,163

 

$

147,792,976

 

$

146,294,311

 

$

143,549,236

 

$

141,230,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Servicing Portfolio Metrics (end of period):

 

 

 

 

 

 

 

 

 

 

Custodial escrow deposit balance (in billions)

$

2.3

 

$

2.7

 

$

2.8

 

$

2.8

 

$

2.2

 

Weighted-average servicing fee rate (basis points)

 

24.0

 

 

24.1

 

 

24.2

 

 

24.3

 

 

24.3

 

Weighted-average remaining servicing portfolio term (years)

 

8.0

 

 

8.2

 

 

8.4

 

 

8.6

 

 

8.7

 

_____________________________________

(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)

This is a non-GAAP financial measure. For more information on adjusted core EPS, refer to the section above titled “Non-GAAP Financial Measures.”

(5)

Origination fees 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 debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(7)

MSR income as a percentage of Agency debt financing volume.

(8)

Brokered loans serviced primarily for life insurance companies.

(9)

Consists of interim loans not managed for our interim loan joint venture.

(10)

Walker & Dunlop Affordable Equity, assets under management, commercial real estate loans and funds managed by WDIP, and interim loans serviced for our interim loan joint venture.

KEY CREDIT METRICS

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

(dollars in thousands)

2024

 

2023

 

2023

 

2023

 

2023

 

Risk-sharing servicing portfolio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fannie Mae Full Risk

$

55,236,618

 

$

54,583,555

 

$

53,549,966

 

$

52,383,701

 

$

50,713,349

 

Fannie Mae Modified Risk

 

9,113,268

 

 

9,115,551

 

 

9,295,368

 

 

8,947,292

 

 

9,170,127

 

Freddie Mac Modified Risk

 

69,510

 

 

23,415

 

 

23,415

 

 

23,515

 

 

23,515

 

Total risk-sharing servicing portfolio

$

64,419,396

 

$

63,722,521

 

$

62,868,749

 

$

61,354,508

 

$

59,906,991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-risk-sharing servicing portfolio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fannie Mae No Risk

$

 

$

 

$

5,519

 

$

25,561

 

$

6,968

 

Freddie Mac No Risk

 

39,595,876

 

 

39,307,130

 

 

38,632,721

 

 

38,263,685

 

 

38,161,283

 

GNMA - HUD No Risk

 

10,595,841

 

 

10,460,884

 

 

10,320,520

 

 

10,246,632

 

 

10,027,781

 

Brokered

 

17,312,513

 

 

16,940,850

 

 

17,091,925

 

 

16,684,115

 

 

16,285,391

 

Total non-risk-sharing servicing portfolio

$

67,504,230

 

$

66,708,864

 

$

66,050,685

 

$

65,219,993

 

$

64,481,423

 

Total loans serviced for others

$

131,923,626

 

$

130,431,385

 

$

128,919,434

 

$

126,574,501

 

$

124,388,414

 

Interim loans (full risk) servicing portfolio

 

40,139

 

 

40,139

 

 

40,000

 

 

71,680

 

 

187,505

 

Total servicing portfolio unpaid principal balance

$

131,963,765

 

$

130,471,524

 

$

128,959,434

 

$

126,646,181

 

$

124,575,919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interim Loan Joint Venture Managed Loans (1)

$

711,541

 

$

710,041

 

$

736,320

 

$

895,491

 

$

894,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At-risk servicing portfolio (2)

$

59,498,851

 

$

58,801,055

 

$

57,857,659

 

$

56,430,098

 

$

54,898,461

 

Maximum exposure to at-risk portfolio (3)

 

12,088,698

 

 

11,949,041

 

 

11,750,068

 

 

11,346,580

 

 

11,132,473

 

Defaulted loans(4)

 

63,264

 

 

27,214

 

 

 

 

36,983

 

 

36,983

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defaulted loans as a percentage of the at-risk portfolio

 

0.11

%

 

0.05

%

 

0.00

%

 

0.07

%

 

0.07

%

Allowance for risk-sharing as a percentage of the at-risk portfolio

 

0.05

 

 

0.05

 

 

0.05

 

 

0.06

 

 

0.06

 

Allowance for risk-sharing as a percentage of maximum exposure

 

0.25

 

 

0.26

 

 

0.26

 

 

0.29

 

 

0.30

 

_____________________________________

(1)

This balance consists entirely of interim loan joint venture managed loans. We indirectly share in a portion of the risk of loss associated with interim loan joint venture managed loans through our 15% equity ownership in the joint venture. We had no exposure to risk of loss for the loans serviced directly for our interim loan joint venture partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table.

(2)

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.

(3)

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.

(4)

Defaulted loans represent loans in our Fannie Mae at-risk portfolio that are probable of foreclosure or that have foreclosed and for which we have recorded a collateral-based reserve (i.e. loans where we have assessed a probable loss). Other loans that have defaulted but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to us are not included here.

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Trends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Q1 2024

 

Q4 2023

 

Q3 2023

 

Q2 2023

 

Q1 2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

Walker & Dunlop Net Income

$

11,866

 

 

$

31,599

 

 

$

21,458

 

 

$

27,635

 

 

$

26,665

 

Income tax expense

 

2,864

 

 

 

10,331

 

 

 

7,069

 

 

 

10,491

 

 

 

7,135

 

Interest expense on corporate debt

 

17,659

 

 

 

18,598

 

 

 

17,594

 

 

 

17,010

 

 

 

15,274

 

Amortization and depreciation

 

55,891

 

 

 

56,015

 

 

 

57,479

 

 

 

56,292

 

 

 

56,966

 

Provision (benefit) for credit losses

 

524

 

 

 

636

 

 

 

421

 

 

 

(734

)

 

 

(10,775

)

Net write-offs (1)

 

 

 

 

 

 

 

(2,008

)

 

 

(6,033

)

 

 

 

Stock-based compensation expense

 

6,230

 

 

 

5,374

 

 

 

7,427

 

 

 

7,898

 

 

 

7,143

 

MSR income

 

(20,898

)

 

 

(34,471

)

 

 

(35,375

)

 

 

(42,058

)

 

 

(30,013

)

Write-off of unamortized premium from corporate debt repayment

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,420

)

Goodwill impairment, net of contingent consideration liability fair value adjustments

 

 

 

 

(500

)

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

74,136

 

 

$

87,582

 

 

$

74,065

 

 

$

70,501

 

 

$

67,975

 

_____________________________________

(1)

The net write-off in Q2 2023 was related to the write off of the collateral-based reserves related to a loan held for investment.

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP BY SEGMENT

Unaudited

 

 

 

 

 

 

 

Capital Markets

 

Three months ended March 31,

(in thousands)

2024

 

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

$

(6,700

)

 

$

504

 

Income tax expense (benefit)

 

(1,744

)

 

 

504

 

Interest expense on corporate debt

 

4,851

 

 

 

4,269

 

Amortization and depreciation

 

1,137

 

 

 

1,186

 

Stock-based compensation expense

 

4,057

 

 

 

4,863

 

MSR income

 

(20,898

)

 

 

(30,013

)

Adjusted EBITDA

$

(19,297

)

 

$

(18,687

)

 

 

 

 

 

 

 

Servicing & Asset Management

 

Three months ended March 31,

(in thousands)

2024

 

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

$

43,283

 

 

$

51,084

 

Income tax expense (benefit)

 

11,153

 

 

 

13,104

 

Interest expense on corporate debt

 

11,191

 

 

 

9,582

 

Amortization and depreciation

 

53,071

 

 

 

54,010

 

Provision (benefit) for credit losses

 

524

 

 

 

(10,775

)

Net write-offs

 

 

 

 

 

Stock-based compensation expense

 

436

 

 

 

390

 

Write-off of unamortized premium from corporate debt repayment

 

 

 

 

(4,420

)

Adjusted EBITDA

$

119,658