NOTE 9—8—FAIR VALUE MEASUREMENTS

The Company uses valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach to measure assets and liabilities that are measured at fair value. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting ~~entity's~~entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

●

Level 1——Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

●

Level 2——Financial assets and liabilities whose values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, discount rates, volatilities, prepayment speeds, earnings rates, credit ~~risks,~~risk, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

●

Level 3——Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation.

The ~~Company's~~Company's MSRs are measured at fair value at inception, and thereafter on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value ~~adjustments in certain circumstances (for example,~~measurement when there is evidence of ~~impairment)~~impairment and for disclosure purposes (NOTE 3). The ~~Company's~~Company's MSRs do not trade in an active, open market with readily observable prices. ~~While sales of multifamily MSRs do occur, precise terms and conditions vary with each transaction and are not readily available.~~ Accordingly, the estimated fair value of the ~~Company’s~~Company’s MSRs was developed using discounted cash flow models that calculate the present value of estimated future net servicing income. The model considers contractually specified servicing fees, prepayment assumptions, ~~delinquency status, late charges, other ancillary~~estimated revenue from escrow accounts, costs to service, and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used in the model to reflect observable market conditions and assumptions that a market ~~participant would~~participants consider in valuing an MSR ~~asset.~~assets. MSRs are carried at the lower of amortized cost or fair ~~value (measured at the portfolio level).~~value.

A description of the valuation methodologies used for assets and liabilities measured at fair value, ~~on a recurring basis,~~ as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. ~~These valuation methodologies were applied to all of the Company's assets and liabilities carried at fair value on a recurring basis:~~

●

Derivative Instruments——The derivative ~~instruments used by the Company~~positions consist of interest rate lock commitments with borrowers and forward sale ~~agreements.~~ ~~These~~agreements to the Agencies. The fair value of these instruments ~~are valued~~is estimated using a discounted cash flow model developed based on changes in the

~~Table of Contents~~

applicable U.S. Treasury rate and other observable market data. The value was determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company, and are classified within Level 3 of the valuation hierarchy.

●

Loans Held for Sale—~~Loans~~—All loans held for sale presented in the Condensed Consolidated Balance Sheets are reported at fair value. The Company determines the fair value of the loans held for sale using discounted cash flow models that incorporate quoted observable ~~prices~~inputs from market ~~participants.~~participants such as changes in the U.S. Treasury rate. Therefore, the Company classifies these loans held for sale as Level 2.

●

Pledged Securities~~—The pledged securities~~—Investments in money market funds are valued using quoted market prices from recent trades. Therefore, the Company classifies this portion of pledged securities as Level 1.

The Company determines the fair value of its AFS investments in Agency debt securities using discounted cash flows that incorporate observable inputs from market participants and then compares the fair value to broker estimates of fair value. Consequently, the Company classifies this portion of pledged securities as Level 2.

●

Contingent Consideration Liabilities—Contingent consideration liabilities from acquisitions are initially recognized at fair value at acquisition and subsequently remeasured based on the change in probability of achievement of the performance objectives and

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fair value accretion. The Company determines the fair value of each contingent consideration liability based on a probability of achievement, which incorporates management estimates. As a result, the Company classifies these liabilities as Level 3.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~September 30, 2017,~~March 31, 2022 and December 31, ~~2016,~~2021, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value:

Quoted Prices in

Significant

Significant



Active Markets

Other

Other

For Identical

Observable

Unobservable

Assets

Inputs

Inputs

Balance as of

(in thousands)

(Level 1)

(Level 2)

(Level 3)

Period End

September 30, 2017

Assets

Loans held for sale

$
—

$
3,275,761

$
—

$
3,275,761

Pledged securities

95,102

—

—

95,102

Derivative assets

—

—

43,853

43,853

Total

$
95,102

$
3,275,761

$
43,853

$
3,414,716

Liabilities

Derivative liabilities

$
—

$
—

$
175

$
175

Total

$
—

$
—

$
175

$
175

December 31, 2016

Assets

Loans held for sale

$
—

$
1,858,358

$
—

$
1,858,358

Pledged securities

84,850

—

—

84,850

Derivative assets

—

—

61,824

61,824

Total

$
84,850

$
1,858,358

$
61,824

$
2,005,032

Liabilities

Derivative liabilities

$
—

$
—

$
4,396

$
4,396

Total

$
—

$
—

$
4,396

$
4,396


							Balance as of
(in thousands)	Level 1		Level 2		Level 3		Period End
March 31, 2022
Assets
Loans held for sale	$	—	$	703,629	$	—	$	703,629
Pledged securities		41,053		107,594		—		148,647
Derivative assets		—		—		112,023		112,023
Total	$	41,053	$	811,223	$	112,023	$	964,299

Liabilities
Derivative liabilities	$	—	$	—	$	12,400	$	12,400
Contingent consideration liabilities		—		—		218,729		218,729
Total	$	—	$	—	$	231,129	$	231,129

December 31, 2021
Assets
Loans held for sale	$	—	$	1,811,586	$	—	$	1,811,586
Pledged securities		44,733		104,263		—		148,996
Derivative assets		—		—		37,364		37,364
Total	$	44,733	$	1,915,849	$	37,364	$	1,997,946

Liabilities
Derivative liabilities	$	—	$	—	$	6,403	$	6,403
Contingent consideration liabilities		—		—		125,808		125,808
Total	$	—	$	—	$	132,211	$	132,211

There were no0 transfers between any of the levels within the fair value hierarchy during the ~~nine~~three months ended ~~September 30, 2017.~~

~~Table of Contents~~

March 31, 2022.

Derivative instruments (Level 3) are outstanding for short periods of time (generally less than 60 days). A roll forward of derivative instruments is presented below for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016:~~2021:


	For the three months ended
	March 31,
Derivative Assets and Liabilities, net (in thousands)	2022		2021
Beginning balance	$	30,961	$	44,720
Settlements		(66,378)		(129,655)
Realized gains recorded in earnings⁽¹⁾		35,417		84,935
Unrealized gains (losses) recorded in earnings⁽¹⁾		99,623		48,880
Ending balance	$	99,623	$	48,880

Fair Value Measurements

Using Significant Unobservable Inputs:

Derivative Instruments

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Derivative assets and liabilities, net

Beginning balance

$
24,491

$
600

$
57,428

$
10,345

Settlements

(92,117)

(71,250)

(323,662)

(229,178)

Realized gains recorded in earnings (1)

67,626

70,650

266,234

218,833

Unrealized gains recorded in earnings (1)

43,678

31,156

43,678

31,156

Ending balance

$
43,678

$
31,156

$
43,678

$
31,156

(1)

~~(1)~~

Realized and unrealized gains (losses) from derivatives are recognized in ~~Gains~~Loan origination and debt brokerage fees, net and Fair value of expected net cash flows from ~~mortgage banking activities~~servicing, net in the Condensed Consolidated Statements of Income.

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The following table presents information about significant unobservable inputs used in the recurring measurement of the fair value of the ~~Company’s~~Company’s Level 3 assets and liabilities as of ~~September 30, 2017:~~March 31, 2022:


	Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value		Valuation Technique	Unobservable Input⁽¹⁾	Input Range ⁽¹⁾	Weighted Average ⁽³⁾
Derivative assets	$	112,023	Discounted cash flow	Counterparty credit risk	—	—
Derivative liabilities	$	12,400	Discounted cash flow	Counterparty credit risk	—	—
Contingent consideration liabilities	$	218,729	Various⁽²⁾	Probability of earn-out achievement	88% - 100%	90%

Quantitative Information about Level 3 Measurements

(in thousands)

Fair Value

Valuation Technique

Unobservable Input (1)

Input Value (1)

Derivative assets

$
43,853

Discounted cash flow

Counterparty credit risk

—

Derivative liabilities

$
175

Discounted cash flow

Counterparty credit risk

—

(1)

~~(1)~~

Significant increases in this input may lead to significantly lower fair value measurements.

(2)	Primary valuation technique used was a Monte Carlo simulation analysis.

(3)	Contingent consideration weighted based on maximum gross earn-out amount.

The carrying amounts and the fair values of the ~~Company's~~Company's financial instruments as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 are presented below:

September 30, 2017

December 31, 2016


Carrying

Fair

Carrying

Fair

(in thousands)

Amount

Value

Amount

Value

Financial assets:

Cash and cash equivalents

$
85,363

$
85,363

$
118,756

$
118,756

Restricted cash

17,179

17,179

9,861

9,861

Pledged securities

95,102

95,102

84,850

84,850

Loans held for sale

3,275,761

3,275,761

1,858,358

1,858,358

Loans held for investment, net

152,050

152,764

220,377

222,313

Derivative assets

43,853

43,853

61,824

61,824

Total financial assets

$
3,669,308

$
3,670,022

$
2,354,026

$
2,355,962

Financial liabilities:

Derivative liabilities

$
175

$
175

$
4,396

$
4,396

Warehouse notes payable

3,305,589

3,305,807

1,990,183

1,992,111

Note payable

163,935

166,499

164,163

167,327

Total financial liabilities

$
3,469,699

$
3,472,481

$
2,158,742

$
2,163,834

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	March 31, 2022				December 31, 2021
	Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value
Financial Assets:
Cash and cash equivalents	$	141,375	$	141,375	$	305,635	$	305,635
Restricted cash		41,584		41,584		42,812		42,812
Pledged securities		148,647		148,647		148,996		148,996
Loans held for sale		703,629		703,629		1,811,586		1,811,586
Loans held for investment, net		216,620		217,932		269,125		270,826
Derivative assets		112,023		112,023		37,364		37,364
Total financial assets	$	1,363,878	$	1,365,190	$	2,615,518	$	2,617,219

Financial Liabilities:
Derivative liabilities	$	12,400	$	12,400	$	6,403	$	6,403
Contingent consideration liabilities		218,729		218,729		125,808		125,808
Warehouse notes payable		924,280		924,702		1,941,572		1,942,448
Notes payable		726,555		731,416		740,174		745,175
Total financial liabilities	$	1,881,964	$	1,887,247	$	2,813,957	$	2,819,834

The following methods and assumptions were used ~~to estimate the~~for recurring fair value measurements as of ~~each class of financial instruments for which it is practicable to estimate that value:~~March 31, 2022 and December 31, 2021.

Cash and Cash Equivalents and Restricted Cash——The carrying amounts approximate fair value because of the short maturity of these instruments (Level 1).

Pledged Securities——Consist of cash, highly liquid investments in money market accounts invested in government securities, and investments in ~~government guaranteed~~Agency debt securities. ~~Investments~~The investments of the money market funds typically have maturities of 90 days or less and are valued using quoted market prices from recent trades.The fair value of the Agency debt securities incorporates the contractual cash flows of the security discounted at market-rate, risk-adjusted yields.

Loans Held for Sale——Consist of originated loans that are generally transferred or sold within 60 days from the date that ~~the~~a mortgage loan is funded and are valued using discounted cash flow models that incorporate observable ~~inputs~~prices from market participants.

~~Loans Held~~ f~~or Investment—Consist~~

Table of ~~originated interim loans which the Company expects to hold for investment for the term~~Contents

Contingent Consideration Liability—Consists of the ~~loan, which is three~~estimated fair values of expected future earn-out payments related to acquisitions completed over the past several years, ~~or less, and~~including 2022. The earn-out liabilities are valued using ~~discounted~~a Monte Carlo simulation analysis. The fair value of the contingent consideration liabilities incorporates unobservable inputs, such as the probability of earn-out achievement, volatility rates, and discount rate, to determine the expected earn-out cash ~~flow models that incorporate primarily observable inputs from market participants~~flows. The probability of the earn-out achievement is based on management’s estimate of the expected future performance and ~~also credit-related adjustments, if applicable (Level 3). As~~other financial metrics of ~~September 30, 2017 and December 31, 2016, no credit-related adjustments were required.~~each of the acquired entities, which are subject to significant uncertainty.

Derivative Instruments——Consist of interest rate lock commitments and forward sale agreements. These instruments are valued using discounted cash flow models developed based on changes in the U.S. Treasury rate and other observable market data. The value is determined after considering the potential impact of collateralization, adjusted to reflect nonperformance risk of both the counterparty and the Company.

~~Warehouse Notes Payable~~—Consist of borrowings outstanding under warehouse line agreements. The borrowing rates on the warehouse lines are based upon 30-day LIBOR plus a margin. The unpaid principal balance of warehouse notes payable approximates fair value because of the short maturity of these instruments and the monthly resetting of the index rate to prevailing market rates (Level 2).

~~Note Payable~~—Consists of borrowings outstanding under a term note agreement. The borrowing rate on the note payable is based upon 30-day LIBOR plus an applicable margin. The Company estimates the fair value by discounting the future cash flows at market rates (Level 2).

Fair Value of Derivative Instruments and Loans Held for Sale——In the normal course of business, the Company enters into contractual commitments to originate and sell multifamily mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrowers ~~"lock-in"~~"lock-in" a specified interest rate within time frames established by the Company. All mortgagors are evaluated for creditworthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the ~~"lock-in"~~"lock-in" of rates by the borrower and the sale date of the loan to an investor.

To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the ~~Company's policy is to enter~~Company enters into a sale commitment with the investor ~~simultaneous~~simultaneously with the rate lock commitment with the borrower. The sale contract with the investor locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. Sale commitments with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale commitment.

Both the rate lock commitments to borrowers and the forward sale contracts to buyers are undesignated derivatives and, accordingly, are marked to fair value through ~~Gains on mortgage banking activities~~Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income. The fair value of the ~~Company's~~Company's rate lock commitments to borrowers and loans held for sale and the related input levels includes, as applicable:

●

the estimated gain ~~from~~of the expected loan sale to the investor (Level 2);

●

the expected net cash flows associated with servicing the loan, net of any guaranty obligations retained ~~(Level~~(Level 2);

●

the effects of interest rate movements between the date of the rate lock and the balance sheet date (Level 2); and

●

the nonperformance risk of both the counterparty and the Company (Level 3; derivative instruments only).

The estimated gain considers the origination fees the Company expects to collect upon loan closing (derivative instruments only) and premiums the Company expects to receive upon sale of the loan ~~sale~~ (Level 2). The fair value of the expected net cash flows associated with servicing

~~Table of Contents~~

the loan is calculated pursuant to the valuation techniques applicable to ~~MSRs (Level 2).~~

~~The~~the fair value of ~~the Company's derivative instruments and loans held for~~future servicing, net at loan sale ~~considers the effects of the market price movement of the same type of security due to interest rate movements between the trade date and the balance sheet date.~~ (Level 2).

To calculate the effects of interest rate movements, the Company uses applicable published U.S. Treasury prices, and multiplies the price movement between the rate lock date ~~or loan origination date~~ and the balance sheet date by the notional loan commitment amount of ~~the derivative instruments or loans held for sale~~ (Level 2).

The fair value of the ~~Company’s~~Company's forward sales contracts to investors considers effects of interest rate movements between the trade date and the balance sheet date (Level 2). The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.

The fair value of the Company’s interest rate lock commitments and forward sales contracts is adjusted to reflect the risk that the agreement will not be fulfilled. The ~~Company’s~~Company’s exposure to nonperformance in interest rate lock commitments and forward sale contracts is represented by the contractual amount of those instruments. Given the credit quality of our counterparties and the short duration of interest rate lock commitments and forward sale contracts, the risk of nonperformance by the ~~Company’s~~Company’s counterparties has historically ~~not~~ been ~~significant~~minimal (Level 3).

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The following table presents the components of fair value and other relevant information associated with the ~~Company’s~~Company’s derivative instruments and loans held for sale as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~2021:


			Fair Value Adjustment Components						Balance Sheet Location
													Fair Value
	Notional or		Estimated				Total						Adjustment
	Principal		Gain		Interest Rate		Fair Value		Derivative		Derivative		To Loans

																	Fair Value Adjustment Components						Balance Sheet Location
																											Fair Value
															Notional or		Estimated				Total						Adjustment
															Principal		Gain		Interest Rate		Fair Value		Derivative		Derivative		to Loans
(in thousands)	Amount		on Sale		Movement		Adjustment		Assets		Liabilities		Held for Sale		Amount		on Sale		Movement		Adjustment		Assets		Liabilities		Held for Sale
September 30, 2017
March 31, 2022
Rate lock commitments	$	688,375	$	19,292	$	(4,987)	$	14,305	$	14,305	$	—	$	—	$	1,179,917	$	36,930	$	(10,360)	$	26,570	$	33,564	$	(6,994)	$	—
Forward sale contracts		3,963,275		—		29,373		29,373		29,548		(175)		—		1,932,125		—		73,053		73,053		78,459		(5,406)		—
Loans held for sale		3,274,900		25,247		(24,386)		861		—		—		861		752,208		14,114		(62,693)		(48,579)		—		—		(48,579)
Total			$	44,539	$	—	$	44,539	$	43,853	$	(175)	$	861			$	51,044	$	—	$	51,044	$	112,023	$	(12,400)	$	(48,579)

December 31, 2016

December 31, 2021
Rate lock commitments	$	395,462	$	15,844	$	(2,275)	$	13,569	$	14,482	$	(913)	$	—	$	1,115,829	$	29,837	$	(4,604)	$	25,233	$	26,526	$	(1,293)	$	—
Forward sale contracts		2,248,385		—		43,859		43,859		47,342		(3,483)		—		2,881,224		—		5,728		5,728		10,838		(5,110)		—
Loans held for sale		1,852,923		47,019		(41,584)		5,435		—		—		5,435		1,765,395		47,315		(1,124)		46,191		—		—		46,191
Total			$	62,863	$	—	$	62,863	$	61,824	$	(4,396)	$	5,435			$	77,152	$	—	$	77,152	$	37,364	$	(6,403)	$	46,191

NOTE ~~10—LITIGATION,~~9—FANNIE MAE COMMITMENTS AND ~~CONTINGENCIES~~PLEDGED SECURITIES

Fannie Mae DUS Related Commitments——Commitments for the origination and subsequent sale and delivery of loans to Fannie Mae represent those mortgage loan transactions where the borrower has locked an interest rate and scheduled closing, and the Company has entered into a mandatory delivery commitment to sell the loan to Fannie Mae. As discussed in NOTE 9,8, the Company accounts for these commitments as derivatives recorded at fair value.

The Company is generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program. The Company is required to secure these obligations by assigning restricted cash balances and securities to Fannie ~~Mae.~~Mae, which are classified as Pledged securities, at fair value on the Condensed Consolidated Balance Sheets. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires restricted liquidity for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. ~~Restricted liquidity~~Pledged securities held in the form of money market funds holding U.S. Treasuries isare discounted 5%, and Agency mortgage-backed securities (“Agency MBS”) are discounted 4% for purposes of calculating compliance with the restricted liquidity requirements. As ~~of September 30, 2017,~~seen below, the Company held ~~substantially all~~the majority of its ~~restricted liquidity~~pledged securities in ~~money market funds holding U.S. Treasuries. Additionally, substantially all~~Agency MBS as of March 31, 2022. The majority of the loans for which the Company has risk sharing are Tier 2 loans.

The Company is in compliance with the ~~September 30, 2017~~March 31, 2022 collateral requirements as outlined above. As of ~~September 30, 2017,~~March 31, 2022, reserve requirements for the DUS loan portfolio will require the Company to fund ~~$61.3~~$68.2 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within the ~~at risk~~at-risk portfolio. Fannie Mae ~~periodically reassesses~~has in the past reassessed the DUS Capital Standards and may make changes to these standards in the future. The Company generates sufficient cash flow from its operations to meet these capital standards and does not expect any future changes to have a material impact on its future operations; however, any future ~~changes~~increases to collateral requirements may adversely impact the ~~Company’s~~Company’s available cash.

~~Table of Contents~~

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate the ~~Company's~~Company's servicing authority for all or some of the portfolio if, at any time, it determines that the ~~Company's~~Company's financial condition is not adequate to support its obligations under the DUS agreement. The Company is required to maintain acceptable net worth as defined in the agreement, and the Company satisfied the requirements as of ~~September 30, 2017.~~March 31, 2022. The net worth requirement is derived primarily from unpaid principal balances on Fannie Mae loans and the level of risk sharing. At ~~September 30, 2017,~~March 31, 2022, the ~~minimum~~ net worth requirement was ~~$145.7~~$261.2 million, and the ~~Company's~~Company's net worth, as defined in the requirements, was ~~$634.5~~$704.8 million, as measured at our wholly owned operating subsidiary, Walker && Dunlop, LLC. As of ~~September 30, 2017,~~March 31, 2022, the Company was required to maintain at least ~~$28.6~~$51.8 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae,~~. As of September 30, 2017,~~ and the Company had operational liquidity, as defined in the requirements, of ~~$145.1~~$98.6 million, as of March 31, 2022, as measured at our wholly owned operating subsidiary, Walker && Dunlop, ~~LLC~~.LLC.

~~Litigation~~—~~In the ordinary course~~21

Table of business, the Company may be party to various claims and litigation, none of which the Company believes is material. The Company cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties, and other costs, and the Company’s reputation and business may be impacted. The Company believes that any liability that could be imposed on the Company in connection with the disposition of any pending lawsuits would not have a material adverse effect on its business, results of operations, liquidity, or financial condition.Contents

Pledged Securities, at Fair Value—Pledged securities, at fair value consisted of the following balances as of March 31, 2022 and 2021 and December 31, 2021 and 2020:


	March 31,				December 31,
Pledged Securities (in thousands)	2022		2021		2021		2020
Restricted cash	$	4,099	$	24,578	$	3,779	$	4,954
Money market funds		36,954		14,954		40,954		12,519
Total pledged cash and cash equivalents	$	41,053	$	39,532	$	44,733	$	17,473
Agency MBS		107,594		100,038		104,263		119,763
Total pledged securities, at fair value	$	148,647	$	139,570	$	148,996	$	137,236

The information in the preceding table is presented to reconcile beginning and ending cash, cash equivalents, restricted cash, and restricted cash equivalents in the Condensed Consolidated Statements of Cash Flows as more fully discussed in NOTE ~~11—EARNINGS PER SHARE~~2.

The Company’s investments included within Pledged securities, at fair value consist primarily of money market funds and Agency debt securities. The investments in Agency debt securities consist of multifamily Agency MBS and are all accounted for as AFS securities. When the fair value of Agency MBS is lower than the carrying value, the Company assesses whether an allowance for credit losses is necessary. The Company does not record an allowance for credit losses for its AFS securities, including those whose fair value is less than amortized cost, when the AFS securities are issued by the GSEs. The contractual cash flows of these AFS securities are guaranteed by the GSEs, which are government-sponsored enterprises under the conservatorship of the Federal Housing Finance Agency. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of these securities. The Company does not intend to sell any of the Agency MBS whose fair value is less than the carrying value, nor does the Company believe that it is more likely than not that it would be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. The following table provides additional information related to the Agency MBS as of March 31, 2022 and December 31, 2021:


Fair Value and Amortized Cost of Agency MBS (in thousands)	March 31, 2022		December 31, 2021
Fair value	$	107,594	$	104,263
Amortized cost		105,484		100,847
Total gains for securities with net gains in AOCI		2,743		3,636
Total losses for securities with net losses in AOCI		(633)		(220)
Fair value of securities with unrealized losses		38,964		4,757

An immaterial amount of the pledged securities has been in a continuous unrealized loss position for more than 12 months.

The following ~~weighted average shares~~table provides contractual maturity information related to Agency MBS. The money market funds invest in short-term Federal Government and Agency debt securities and have no stated maturity date.


	March 31, 2022
Detail of Agency MBS Maturities (in thousands)	Fair Value		Amortized Cost
Within one year	$	—	$	—
After one year through five years		2,253		2,248
After five years through ten years		78,112		77,631
After ten years		27,229		25,605
Total	$	107,594	$	105,484

NOTE 10—EARNINGS PER SHARE AND STOCKHOLDERS’ EQUITY

Earnings per share ~~equivalents are used~~(“EPS”) is calculated under the two-class method. The two-class method allocates all earnings (distributed and undistributed) to ~~calculate~~each class of common stock and participating securities based on their respective rights to receive dividends. The Company grants share-based awards to various employees and nonemployee directors under the 2020 Equity Incentive Plan that entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities.

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The following table presents the calculation of basic and diluted ~~earnings per share~~EPS for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016:~~2021 under the two-class method. Participating securities were included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the treasury-stock method.

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Weighted average number of shares outstanding used to calculate basic earnings per share

30,085

29,374

30,009

29,417

Dilutive securities

Unvested restricted shares and restricted share units

1,404

1,068

1,394

1,024

Stock options

823

351

767

302

Weighted average number of shares and share equivalents outstanding used to calculate diluted earnings per share

32,312

30,793

32,170

30,743


	For the three months ended March 31,
EPS Calculations (in thousands, except per share amounts)	2022		2021
Calculation of basic EPS
Walker & Dunlop net income	$	71,209	$	58,052
Less: dividends and undistributed earnings allocated to participating securities		2,172		1,967
Net income applicable to common stockholders	$	69,037	$	56,085
Weighted-average basic shares outstanding		32,219		30,823
Basic EPS	$	2.14	$	1.82

Calculation of diluted EPS
Net income applicable to common stockholders	$	69,037	$	56,085
Add: reallocation of dividends and undistributed earnings based on assumed conversion		19		20
Net income allocated to common stockholders	$	69,056	$	56,105
Weighted-average basic shares outstanding		32,219		30,823
Add: weighted-average diluted non-participating securities		398		453
Weighted-average diluted shares outstanding		32,617		31,276
Diluted EPS	$	2.12	$	1.79

The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the ~~treasury~~treasury-stock method includes the unrecognized compensation costs associated with the awards. ~~The following table presents any average outstanding options to purchase shares~~An immaterial number of ~~common stock and~~ average restricted shares ~~that~~ were ~~not included in~~excluded from the computation of diluted earnings per share under the treasury-stock method for the three months ended March 31, 2022 and March 31, 2021, respectively, because the effect would have been anti-dilutive, ~~(the exercise price of the options or~~as the grant date market price of the restricted shares was greater than the average market price of the ~~Company’s~~Company’s shares of common stock during the periods ~~presented).~~presented.

The following non-cash transactions did not impact the amount of cash paid on the Condensed Consolidated Statements of Cash Flows. For the three months ended March 31, 2022, the Company issued shares of common stock totaling $6.6 million to settle compensation liabilities. During the three months ended March 31, 2022, the operating agreement of 1 of the Company’s joint ventures changed. The Company reconsidered its consolidation conclusion based on this change and concluded that the joint venture should be consolidated, resulting in a $5.3 million reduction in APIC and $15.5 million of noncontrolling interests consolidated as shown on the Consolidated Statements of Changes in Equity. The consolidation also resulted in a $35.0 million increase in Receivables, net, a $21.3 million reduction in Other assets, and a $3.6 million increase in Other liabilities. $8.8 million of the payments settling contingent consideration liabilities included in NOTE 7 for the three months ended March 31, 2022 were from the issuance of the Company’s common stock.

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Average options

113

207

94

172

Average restricted shares

3

—

5

211

~~Table~~In February 2022, the Company’s Board of ~~Contents~~

~~NOTE 12—TOTAL EQUITY~~

~~A summary~~Directors approved a stock repurchase program that permits the repurchase of ~~changes in total equity is presented below:~~

Stockholders' Equity

Additional

Common Stock

Paid-In

Retained

Noncontrolling

Total

(in thousands)

Shares

Amount

Capital

Earnings

Interests

Equity

Balance at December 31, 2016

29,551

$
296

$
228,889

$
381,031

$
4,858

$
615,074

Walker & Dunlop net income

—

—

—

112,166

—

112,166

Net income from noncontrolling interests

—

—

—

—

114

114

Stock-based compensation - equity classified

—

—

14,948

—

—

14,948

Issuance of common stock in connection with equity compensation plans

1,077

10

2,877

—

—

2,887

Repurchase and retirement of common stock

(679)

(7)

(20,622)

(8,234)

—

(28,863)

Other

—

—

6

—

—

6

Balance at September 30, 2017

29,949

$
299

$
226,098

$
484,963

$
4,972

$
716,332

up to $75.0 million of the Company’s common stock over a 12-month period beginning on February 13, 2022. During the first quarter of ~~2017, the Company’s Board of Directors authorized~~2022, the Company todid 0t repurchase ~~up to $75.0 million of its common stock over a 12-month period.~~ ~~During 2017, the Company has repurchased 228 thousand~~any shares of its common stock under the share repurchase ~~program at a weighted average price~~program. As of ~~$47.07 per share and immediately retired~~March 31, 2022, the ~~shares, reducing stockholders’ equity by $10.8 million. The~~ Company had ~~$64.2~~$75.0 million of authorized share repurchase capacity remaining under the 2022 share repurchase program.

In February 2022, our Board of Directors declared a dividend of $0.60 per share for the first quarter of 2022, which the Company paid during the first quarter of 2022. On May 4, 2022, the Company’s Board of Directors declared a dividend of $0.60 per share for the second quarter of 2022. The dividend will be paid on June 3, 2022 to all holders of record of the Company’s restricted and unrestricted common stock as of ~~September 30, 2017.~~May 19, 2022.

The Company’s Note Payable (“Term Loan”) contains direct restrictions to the amount of dividends the Company may pay, and the warehouse debt facilities and agreements with the Agencies contain minimum equity, liquidity, and other capital requirements that indirectly restrict the amount of dividends the Company may pay. The Company does not believe that these restrictions currently limit the amount of dividends the Company can pay for the foreseeable future.

2023

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NOTE 11—SEGMENTS

In the first quarter of 2022, as a result of the Company’s growth and recent acquisitions, the Company’s chief operating decision maker began making decisions and assessing performance based on the following 3 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 segments.

(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, include 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 strategic equity-method investments, information technology, legal, human resources, marketing, accounting, 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.

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The following table provides a summary and reconciliation of each segment’s results for the three months ended March 31, 2022 and 2021 and total assets as of March 31, 2022 and 2021.


	As of and for the three months ended March 31, 2022
Segment Results and Total Assets					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	81,823	$	487	$	—	$	82,310
Fair value of expected net cash flows from servicing, net			52,730		—		—		52,730
Servicing fees			—		72,681		—		72,681
Property sales broker fees			23,398		—		—		23,398
Net warehouse interest income, loans held for sale			3,530		—		—		3,530
Net warehouse interest income, loans held for investment			—		1,243		—		1,243
Escrow earnings and other interest income			—		1,758		45		1,803
Other revenues			2,763		34,897		44,089		81,749
Total revenues		$	164,244	$	111,066	$	44,134	$	319,444

Expenses
Personnel		$	98,726	$	18,638	$	26,817	$	144,181
Amortization and depreciation			—		54,931		1,221		56,152
Provision (benefit) for credit losses			—		(9,498)		—		(9,498)
Interest expense on corporate debt			—		—		6,405		6,405
Other operating expenses			6,111		6,119		19,984		32,214
Total expenses		$	104,837	$	70,190	$	54,427	$	229,454
Income from operations		$	59,407	$	40,876	$	(10,293)	$	89,990
Income tax expense			12,847		8,839		(2,226)		19,460
Net income before noncontrolling interests		$	46,560	$	32,037	$	(8,067)	$	70,530
Less: net income (loss) from noncontrolling interests			—		(679)		—		(679)
Walker & Dunlop net income		$	46,560	$	32,716	$	(8,067)	$	71,209

Total assets		$	1,398,272	$	2,573,112	$	368,247	$	4,339,631

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	As of and for the three months ended March 31, 2021
Segment Results and Total Assets					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	75,295	$	584	$	—	$	75,879
Fair value of expected net cash flows from servicing, net			57,935		—		—		57,935
Servicing fees			—		65,978		—		65,978
Property sales broker fees			9,042		—		—		9,042
Net warehouse interest income, loans held for sale			2,459		—		—		2,459
Net warehouse interest income, loans held for investment			—		2,096		—		2,096
Escrow earnings and other interest income			—		1,999		118		2,117
Other revenues			2,560		7,508		(1,286)		8,782
Total revenues		$	147,291	$	78,165	$	(1,168)	$	224,288

Expenses
Personnel		$	72,635	$	7,111	$	16,469	$	96,215
Amortization and depreciation			521		45,378		972		46,871
Provision (benefit) for credit losses			—		(11,320)		—		(11,320)
Interest expense on corporate debt			—		—		1,765		1,765
Other operating expenses			3,402		2,253		11,932		17,587
Total expenses		$	76,558	$	43,422	$	31,138	$	151,118
Income from operations		$	70,733	$	34,743	$	(32,306)	$	73,170
Income tax expense			14,615		7,178		(6,675)		15,118
Net income before noncontrolling interests		$	56,118	$	27,565	$	(25,631)	$	58,052
Less: net income (loss) from noncontrolling interests			—		—		—		—
Walker & Dunlop net income		$	56,118	$	27,565	$	(25,631)	$	58,052

Total assets		$	1,394,741	$	1,402,627	$	406,597	$	3,203,965

NOTE 12—VARIABLE INTEREST ENTITIES

The Company, through its subsidiary Alliant, provides alternative investment management services through the syndication of tax credit funds and the joint development of affordable housing projects. To facilitate the syndication and development of affordable housing projects, the Company is involved with the acquisition and/or formation of limited partnerships and joint ventures with investors, property developers, and property managers that are VIEs. The Company’s continuing involvement in the VIEs usually includes either serving as the manager of the VIE (as is the case in the tax credit funds) or as a majority investor in the VIE with a third-party property developer or property manager serving as the manager of the VIE.

A detailed discussion of the Company’s accounting policies regarding the consolidation of VIEs and significant transactions involving VIEs is included in NOTE 2 and NOTE 17 of the Company’s 2021 Form 10-K.

During the first quarter of 2022, the operating agreement of one of the Company’s joint ventures changed, resulting in the Company gaining the power to direct the activities that most significantly impact the economic performance of the joint venture; previously, the Company only held rights to receive the significant economic benefits of the joint venture. The Company reassessed its consolidation conclusion and determined that it was the primary beneficiary and as a result consolidated the joint venture as of as March 31, 2022. As of March 31, 2022 and December 31, 2021, the assets and liabilities of the consolidated tax credit funds were immaterial.

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The table below presents the assets and liabilities of the Company’s consolidated joint development VIEs included in the Condensed Consolidated Balance Sheets:


Consolidated VIEs (in thousands):		March 31, 2022		December 31, 2021
Assets:
Cash and cash equivalents	$	321	$	—
Restricted cash		849		—
Receivables, net		35,675		—
Other Assets		59,283		54,880
Total assets of consolidated VIEs	$	96,128	$	54,880

Liabilities:
Other liabilities	$	40,778	$	36,480
Total liabilities of consolidated VIEs	$	40,778	$	36,480

The table below presents the carrying value and classification of the Company’s interests in nonconsolidated VIEs included in the Condensed Consolidated Balance Sheets:


Nonconsolidated VIEs (in thousands):		March 31, 2022		December 31, 2021
Assets
Committed investments in tax credit equity	$	223,771	$	177,322
Other assets: Equity-method investments		54,335		74,997
Total interests in nonconsolidated VIEs	$	278,106	$	252,319

Liabilities
Commitments to fund investments in tax credit equity		206,605		162,747
Total commitments to fund nonconsolidated VIEs	$	206,605	$	162,747

Maximum exposure to losses⁽¹⁾⁽²⁾	$	278,106	$	252,319

(1)

Maximum exposure determined as Total interests in nonconsolidated VIEs. The maximum exposure for the Company’s investments in tax credit equity is limited to the carrying value of its investment, as there are no funding obligations or other commitments related to the nonconsolidated VIEs other than the amounts presented in the table above.

(2)	Based on historical experience and the underlying expected cash flows from the underlying investment, the maximum exposure of loss is not representative of the actual loss, if any, that the Company may incur.

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Item 2. ��~~Management's~~ Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the historical financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“(“Form ~~10-Q”~~10-Q”). The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those expressed or contemplated in those forward-looking statements as a result of certain factors, including those set forth under the headings ~~“Forward-Looking Statements”~~“Forward-Looking Statements” and ~~“Risk Factors” elsewhere~~“Risk Factors” in ~~this Form 10-Q and in the~~our Annual Report on Form 10-K for the year ended December 31, ~~2016 (“2016~~2021 (“2021 Form ~~10-K”~~10-K”).

Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q of Walker && Dunlop, Inc. and subsidiaries (the ~~“Company,” “Walker &~~“Company,” “Walker & Dunlop,~~” “we,” “us”~~” “we,” or “us”), 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,”~~“may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or ~~“potential”~~“potential” or the negative of these words and phrases or similar words or phrases which 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 Form 10-Q 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. Statements regarding the following subjects, among others, may be forward-looking:

●

the future of the Federal National Mortgage Association (“(“Fannie ~~Mae”~~Mae”) and the Federal Home Loan Mortgage Corporation (“(“Freddie Mac,”” and together with Fannie Mae, the ~~“GSEs”~~“GSEs”), including their existence, relationship to the U.S. federal government, origination capacities, and their impact on our business;

●

the general volatility and global economic disruption caused by the ongoing impacts of the COVID-19 pandemic and its potential impact on our business operations, financial results and cash flows and liquidity;

●

changes to and trends in the interest rate environment and its impact on our business;

●

our growth ~~strategy, which includes a focus on building direct access to capital we control;~~

strategy;

●

our projected financial condition, liquidity, and results of operations;

●

our ability to obtain and maintain warehouse and other loan funding arrangements;

●

our ability to make future dividend payments or repurchase shares of our common stock;

●

availability of and our ability to attract and retain qualified personnel and our ability to develop and retain relationships with borrowers, key principals, and lenders;

●

degree and nature of our competition;

●

changes in governmental regulations, policies, and ~~policies,~~programs, tax laws and rates, and similar matters and the impact of such regulations, policies, and actions;

●

our ability to comply with the laws, rules, and regulations applicable to ~~us;~~

us, including additional regulatory requirements for broker-dealer and other financial services firms;

●

our ability to successfully integrate Alliant’s and GeoPhy’s (each as defined below) employees and operations;

●

trends in the commercial real estate finance market, ~~interest rates,~~ commercial real estate values, the credit and capital markets, or the general ~~economy;~~

economy, including demand for multifamily housing and rent growth;

●

general volatility of the capital markets and the market price of our common stock;

●

our and

our service providers’ ability to prevent, detect, and mitigate cybersecurity risks; and

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●

other risks and uncertainties associated with our business described in our ~~2016~~2021 Form 10-K and our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission.

While forward-looking statements reflect our ~~good faith~~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. 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 ~~“Risk~~“Risk Factors.””

Business

~~Business~~Overview

We are a leading commercial real estate (i) services, (ii) finance, and (iii) technology company in the United States. Through strategic investments in people, brand, and technology, we have built a diversified suite of commercial real estate services to meet the needs of our customers. Our services include (i) multifamily lending, property sales, appraisal, valuation, and research, (ii) commercial real estate debt brokerage and advisory, (iii) investment management, and (iv) affordable housing lending, development, and investment. We leverage our technological resources and investments to (i) provide an enhanced experience for our customers, (ii) identify refinancing and other financial opportunities for new and existing customers, and (iii) drive efficiencies in our internal processes. We believe our people, brand, and technology provide us with a competitive advantage, as evidenced by 61% of refinancing volumes in the quarter being new loans to us and 19% of total transaction volumes coming from new customers.

We are one of the ~~leading~~largest lenders to multifamily properties and commercial real estate ~~services and finance companies~~ in the ~~United States, with a primary focus on multifamily lending.~~country. We originate, sell, ~~broker,~~ and service a range of multifamily and other commercial real estate financing products, ~~and provide multifamily investment sales brokerage services.~~ ~~Our clients are owners and developers of commercial real estate across the country. We originate and sell~~including loans through the programs of Fannie Mae and Freddie Mac (the “GSEs”), and the ~~GSEs~~Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”) (collectively, the ~~“Agencies”~~“Agencies”)~~, with which we have long-established~~

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~~relationships.~~. We retain servicing rights and asset management responsibilities on substantially all loans that we originate ~~through~~for the ~~Agencies’~~Agencies’ programs. We ~~are approved as a Fannie Mae Delegated Underwriting~~broker, and Servicing™ ("DUS") lender nationally, a Freddie Mac Multifamily Approved Seller/Servicer for Conventional Loans (“Freddie Mac seller/servicer”) in 23 states and the District of Columbia, a Freddie Mac Approved Seller/Servicer for Seniors Housing and Targeted Affordable Housing nationwide, a HUD Multifamily Accelerated Processing lender nationally, a HUD LEAN lender nationally, and a Ginnie Mae issuer. We also brokeroccasionally service, loans for ~~a number of~~many life insurance companies, commercial banks, and other institutional investors, in which cases we do not fund the loan but rather act as a loan broker.

We ~~service~~provide multifamily property sales brokerage and appraisal and valuation services and engage in commercial real estate investment management activities, including a focus on the affordable housing sector through low-income housing tax credit (“LIHTC”) syndication. We engage in the development and preservation of affordable housing projects through joint ventures with real estate developers and the management of funds focused on affordable housing. We provide housing market research and real estate-related investment banking and advisory services, which provides our clients and us with market insight into many areas of the housing market. Our clients are owners and developers of multifamily properties and other commercial real estate assets across the country, some of whom are the largest owners and developers in the industry. We also underwrite, service, and asset-manage shorter term loans on commercial real estate. Most of these shorter-term interim loans are closed through a joint venture or through separate accounts managed by our investment management subsidiary, Walker & Dunlop Investment Partners, Inc. (“WDIP”). Some of these interim loans are closed and retained by us through our Interim Program JV or Interim Loan Program (as defined below in Principal Lending and Investing). We are a leader in commercial real estate technology, developing and acquiring technology resources that (i) provide innovative solutions and a better experience for ~~which~~our customers and (ii) allow us to reach a broader customer base.

On February 28, 2022, we ~~act~~acquired GeoPhy B.V. (“GeoPhy”), a leading commercial real estate technology company based in the Netherlands. We plan to use GeoPhy’s data analytics and technology development capabilities to accelerate the growth of our small balance lending platform and our technology-enabled appraisal and valuation platform, Apprise.

Walker & Dunlop, Inc. is a holding company. We conduct the majority of our operations through Walker & Dunlop, LLC, our operating company.

Segments

In the first quarter of 2022, as a result of the Company’s growth and recent acquisitions, our chief operating decision maker began making decisions and assessing performance based on the following three operating segments: (i) Capital Markets (“CM”), (ii) Servicing & Asset Management (“SAM”), and (iii) Corporate. The operating segments are determined based on the product or service provided and reflect the

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manner in which management is currently evaluating the Company’s financial information. The CM and SAM segments and related services are described in the following paragraphs.

The Corporate segment consists primarily of our treasury operations and other corporate-level activities. Our treasury operations include monitoring and managing our liquidity and funding, including our corporate debt. The major other corporate-level functions include our strategic equity-method investments, information technology, legal, human resources, marketing, accounting, internal audit, and various other corporate groups.

Capital Markets

Capital Markets 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. Our long-established relationships with the Agencies and institutional investors enable us to offer a broad range of loan ~~broker.~~products and services to our customers. We provide property sales services to owners and developers of multifamily properties and commercial real estate and multifamily property appraisals for various investors. The primary services within CM are described below.

Agency Lending

We ~~fund loans for~~are one the leading lenders with the Agencies, ~~generally through warehouse facility financings,~~where we originate and sell ~~them~~ to ~~investors~~the Agencies multifamily, manufactured housing communities, student housing, affordable housing, seniors housing and small balance multifamily loans. For additional information on our Agency Lending services, refer to Item 1. Business in accordance with the related loan sale commitment, which we obtain prior to rate lock. Proceeds from the sale of the loan are used to pay off the warehouse borrowing. The sale of the loan is typically completed within 60 days after the loan is closed.our 2021 Form 10-K.

We recognize ~~gains~~loan origination and debt brokerage fees, net and the fair value of expected net cash flows from ~~mortgage banking activities~~servicing, net from our lending with the Agencies when we commit to both originate a loan with a borrower and sell that loan to an investor. The ~~gains~~loan origination and debt brokerage fees, net and the fair value of expected net cash flows from ~~mortgage banking activities~~servicing, net for these transactions reflect the fair value attributable to loan origination fees, premiums on the sale of loans, net of any co-broker fees, and the fair value of the expected net cash flows associated with servicing the loans, net of any guaranty obligations retained.

We ~~also generate revenue~~generally fund our Agency loan products through warehouse facility financing and sell them to investors in accordance with the related loan sale commitment, which we obtain concurrent with rate lock. Proceeds from ~~(i) net~~the sale of the loan are used to pay off the warehouse ~~interest income we earn while~~facility borrowing. The sale of the loan is ~~held for sale through one of our warehouse facilities, (ii)~~typically completed within 60 days after the loan is closed. We earn net warehouse interest income from loans held for ~~investment~~sale while they are outstanding equal to the difference between the note rate on the loan and ~~(iii)~~the cost of borrowing of the warehouse facility.

Our loan commitments and loans held for sale are currently not exposed to unhedged interest rate risk during the loan commitment, closing, and delivery process. The sale or placement of each loan to an investor is negotiated at the same time we establish the coupon rate for the loan. We also seek to mitigate the risk of a loan not closing by collecting good faith deposits from the borrower. The deposit is returned to the borrower only once the loan is closed. Any potential loss from a catastrophic change in the property condition while the loan is held for sale using warehouse facility financing is mitigated through property insurance equal to replacement cost. We are also protected contractually from an investor’s failure to purchase the loan. We have experienced an immaterial number of failed deliveries in our history and have incurred immaterial losses on such failed deliveries.

As part of our overall growth strategy, we are focused on significantly growing and investing in our small-balance multifamily lending platform, which involves a high volume of transactions with smaller loan balances. In support of this product, we acquired a company named TapCap during the second quarter of 2021. TapCap has a technology platform that streamlines and accelerates the quoting, processing, and underwriting of small-balance, multifamily loans. Additionally, the technology platform provides the borrower with a web-based, user-friendly interface, enhancing the borrower’s experience during the origination process. As noted above, during the first quarter of 2022, we acquired GeoPhy, a leading commercial real estate technology company based in the Netherlands, to support our small-balance lending platform in data analytics and to further advance our technology development capabilities in this area.

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Debt Brokerage

Our mortgage bankers who focus on debt brokerage are engaged by borrowers to work with a variety of institutional lenders to find the most appropriate loan instrument for the borrowers’ needs. These loans are then funded directly by the institutional lender, and we receive an origination fee for placing the loan.

Property Sales

We offer property sales ~~commissions~~brokerage services to owners and developers of multifamily properties that are seeking to sell these properties through our subsidiary Walker & Dunlop Investment Sales, LLC (“WDIS”). Through these property sales brokerage services, we seek to maximize proceeds and certainty of closure for our clients using our knowledge of the commercial real estate and capital markets and relying on our experienced transaction professionals. We receive a sales commission for brokering the sale of these multifamily ~~properties.~~assets on behalf of our clients, and we often are able to provide financing to the purchaser of the properties through our Agency or debt brokerage teams. Our property sales services are offered in various regions throughout the United States. We have increased the number of property sales brokers and the geographical reach of our investment sales platform over the past several years through hiring and acquisitions and intend to continue this expansion in support of our growth strategy.

Appraisal and Valuation Services

We offer multifamily appraisal and valuation services though our subsidiary Apprise by Walker & Dunlop (“Apprise”). Apprise leverages technology and data science to dramatically improve the consistency, transparency, and speed of multifamily property appraisals in the U.S. through the licensing of our technology and leveraging of our expertise in the commercial real estate industry. Prior to the GeoPhy acquisition, we owned a 50% interest in Apprise and accounted for the interest as an equity-method investment. Apprise’s operations continue to rapidly grow, with significant increases in the volume of appraisal reports generated and a client list that includes several national commercial real estate lenders.

Servicing & Asset Management

Servicing & Asset Management focuses on (i) servicing and asset-managing the portfolio of loans we originate and sell to the Agencies, we service for certain life insurance companies, and we originate through our principal lending and investing activities, (ii) managing of third-party capital invested in 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. We earn servicing fees for overseeing the loans in our servicing portfolio and asset management fees for the capital invested in our funds. Additionally, we earn subscription fees for our housing related research, and we earn revenue through net interest income on the loans and the warehouse interest expense for loans held for investment. The primary services within SAM are described below.

Loan Servicing

We retain servicing rights and asset management responsibilities on substantially all of ~~the loans~~our Agency loan products that we originate and sell and generate cash revenues from the fees we receive for servicing the loans, from the interest income on escrow deposits held on behalf of borrowers, and from other ancillary fees relating to servicing the loans. Servicing fees, which are based on servicing fee rates set at the time an investor agrees to purchase the loan and on the unpaid principal balance of the loan, are generally paid monthly for the duration of the loan. Our Fannie Mae and Freddie Mac servicing arrangements generally provide for prepayment ~~fees~~protection to us in the event of a voluntary prepayment. For loans serviced outside of Fannie Mae and Freddie Mac, we typically do not ~~share~~have similar prepayment protections. For most loans we service under the Fannie Mae DUS program, we are required to advance the principal and interest payments and guarantee fees for four months should a borrower cease making payments under the terms of their loan, including while that loan is in ~~any such payments.~~

forbearance. After advancing for four months, we may request reimbursement by Fannie Mae for the principal and interest advances, and Fannie Mae will reimburse us for these advances within 60 days of the request. Under the Ginnie Mae program, we are obligated to advance the principal and interest payments and guarantee fees until the HUD loan is brought current, fully paid or assigned to HUD. We are ~~currently not exposed~~eligible to ~~unhedged interest rate risk during~~assign a loan to HUD once it is in default for 30 days. If the loan ~~commitment, closing, and delivery process~~is not brought current, or the loan otherwise defaults, we are not reimbursed for our Agency activities. The sale or placement of each loan to an investor is negotiated prior to establishing the coupon rate for the loan. We also seek to mitigate the risk of a loan not closing. We have agreements in place with the Agencies that specify the cost of a failed loan delivery, also knownadvances until such time as ~~a pair off fee, in the event~~ we ~~fail to deliver~~assign the loan to HUD or work out a payment modification for the ~~investor. To protect us against such pair off fees,~~borrower. For loans in default, we ~~require a deposit from~~may repurchase those loans out of the ~~borrower~~Ginnie Mae security, at ~~rate lock that is typically more than the potential pair off fee. The deposit is returned to the borrower only once~~which time our advance requirements cease and we may then modify and resell the loan ~~is closed. Any potential loss from a catastrophic change in the property condition while~~or assign the loan ~~is held~~back to

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HUD and be reimbursed for ~~sale using warehouse facility financing is mitigated through property insurance equal to replacement cost.~~our advances. We are ~~also protected contractually from an investor’s failure~~not obligated to ~~purchase~~make advances on the ~~loan. We have experienced an immaterial number of failed deliveries in our history and have incurred immaterial losses on such failed deliveries.~~

In cases where we do not fund the loan, we act as a loan broker and retain the right to service some of the loans. Our loan originators who focus on loan brokerage are engaged by borrowers to work with a variety of institutional lenders to find the most appropriate loan instrument for the borrowers' needs. These loans are then funded directly by the institutional lender, and we receive an origination fee for placing the loan, and for those brokered loans we service ~~we collect ongoing~~under the Freddie Mac Optigo® program and our bank and life insurance company servicing fees while those loans remain in our servicing portfolio. The servicing fees we typically earn on brokered loan transactions are substantially lower than the servicing fees we earn for servicing Agency loans.agreements.

We have risk-sharing obligations on substantially all loans we originate under the Fannie Mae DUS program. When a Fannie Mae DUS loan is subject to full risk-sharing, we absorb losses on the first 5% of the unpaid principal balance of a loan at the time of loss settlement, and above 5% we share a percentage of the loss with Fannie Mae, with our maximum loss capped at 20% of the original unpaid principal balance of the loan (subject to doubling or tripling if the loan does not meet specific underwriting criteria or if the loan defaults within 12 months of its sale to Fannie Mae). We may, however, request modified risk-sharing at the time of origination, which reduces our potential risk-sharing losses from the levels described above. We occasionally request modified risk-sharing based on the size of the loan. We may also request modified risk-sharing on large transactions if we do not believe that we are being fully compensated for the risks of the transactions or to manage overall risk levels. Our ~~current credit management policy is to cap each loan balance subject to~~ full risk-sharing ~~at $60.0 million. Accordingly, we generally elect~~is currently limited to ~~use modified risk-sharing for~~ loans ~~of more than $60.0~~up to $300 million, ~~in order~~which equates to ~~limit our~~a maximum loss ~~exposure on any one~~per loan ~~to $12.0~~of $60 million (such exposure would occur in the event that the underlying collateral is determined to be completely without value at the time of loss). ~~However,~~For loans in excess of $300 million, we receive modified risk-sharing. We also may request modified risk-sharing at the time of origination on ~~occasion elect to originate a loan with full risk sharing even when~~loans below $300 million, which reduces our potential risk-sharing losses from the ~~loan balance is greater than $60.0 million~~levels described above if we do not believe that we are being fully compensated for the ~~loan characteristics support such an approach.~~

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the transaction. The full risk-sharing limit prior to June 30, 2021 was less than $300 million. Accordingly, loans originated prior to then may have been subject to modified risk-sharing at much lower levels.

Our servicing fees for risk-sharing loans include compensation for the risk-sharing obligations and are larger than the servicing fees we would receive from Fannie Mae for loans with no risk-sharing obligations. We receive a lower servicing fee for modified risk-sharing than for full risk-sharing. For brokered loans we also service, we collect ongoing servicing fees while those loans remain in our servicing portfolio. The servicing fees we typically earn on brokered loan transactions are substantially lower than the servicing fees we earn on Agency loans.

~~We have~~Principal Lending and Investing

Our Interim Program is composed of the loans held by the Interim Program JV and the Interim Loan Program as described below. Through a joint venture with an ~~interim loan program offering~~affiliate of Blackstone Mortgage Trust, Inc., we offer short-term senior secured debt financing products that provide floating-rate, interest-only loans for terms of generally up to three years to experienced borrowers seeking to acquire or reposition multifamily properties that do not currently qualify for permanent financing (the ~~“Interim Program”). We underwrite and originate all loans held for investment closed through the~~ “Interim Program ~~and assume the full risk of loss on the loans while they are outstanding. In addition, we service~~ and asset-manage loans originated through the Interim Program, with the ultimate goal of providing permanent Agency financing on the properties. We have not experienced any delinquencies or charged off any loans originated under the Interim Program, which began operations in 2012. As of September 30, 2017, we had seven loans held for investment under the Interim Program with an aggregate outstanding unpaid principal balance of $152.8 million.

During the second quarter of 2017, we formed a joint venture with an affiliate of one of the world’s largest owners of commercial real estate to originate, hold, and finance loans that previously met the criteria of the Interim Program (the “Interim Program JV”JV” or the ~~“joint venture”~~“joint venture”). The ~~Interim Program JV assumes full risk~~joint venture funds its operations using a combination of ~~loss while the loans it originates are outstanding.~~equity contributions from its owners and third-party credit facilities. We hold a 15% ownership interest in the Interim Program JV and are responsible for sourcing, underwriting, servicing, and asset-managing the loans originated by the joint venture. The ~~joint venture funds its operations using~~Interim Program JV assumes full risk of loss while the loans it originates are outstanding, while we assume risk commensurate with our 15% ownership interest.

Using a combination of ~~equity contributions from its owners~~our own capital and ~~third-party credit facilities. We expect~~warehouse debt financing, we offer interim loans that ~~substantially all loans satisfying~~do not meet the criteria ~~for~~of the Interim Program ~~will be originated by the joint venture going forward; however, we may opportunistically originate~~JV (the “Interim Loan Program”). We underwrite, service, and asset-manage all loans ~~held for investment~~executed through the Interim Loan Program. We originate and hold these Interim Loan Program loans for investment, which are included on our balance sheet, and during the time that these loans are outstanding, we assume the full risk of loss. The ultimate goal of the Interim Loan Program is to provide permanent Agency financing on these transitional properties.

Affordable Housing and Other Commercial Real Estate-related Investment Management Services

We provide affordable housing investment management services through our subsidiary, Alliant Capital, Ltd and its affiliates (“Alliant”). Alliant is one of the largest tax credit syndicators and affordable housing developers in the ~~future. During~~U.S. and provides alternative investment management services focused on the ~~third quarter~~affordable housing sector through LIHTC syndication, development of ~~2017,~~affordable housing projects through joint ventures, and affordable housing preservation fund management. Our affordable housing investment management services works with our developer clients to identify properties that will generate LIHTCs and meet our affordable investors’ needs, and forms limited partnership funds (“LIHTC funds”) with third-party investors that invest in the limited partnership interests in these properties. Alliant serves as the general partner of these LIHTC funds, and it receives fees, such as asset management fees, and a portion of refinance and disposition proceeds as compensation for its work as the general partner of the fund. Additionally, Alliant earns a syndication fee from the LIHTC funds for the identification, organization, and acquisition of affordable housing projects that generate LIHTCs.

We invest, as the managing or non-managing member of joint ventures, with developers of affordable housing projects that generate LIHTCs. These joint ventures earn developer fees, operating cash and sale / refinance proceeds from the properties they develop, and we ~~sold $119.8 million~~receive the portion of ~~loans from our interim loan portfolio to~~the economic benefits commensurate with its investment in the joint ~~venture at par. We do not expect to sell additional loans held for investment to the joint venture.~~

Through Walker & Dunlop Investment Sales, LLC (“WDIS”), we offer investment sales brokerage services to owners and developers of multifamily properties that are seeking to sell these properties. Through our investment sales services, we seek to maximize proceeds and certainty of closure for our clients using our knowledge of the commercial real estate and capital markets and our experienced transaction professionals. Our investment sales services are offered primarilyventures. Additionally, Alliant also invests with third-party investors (either in ~~the eastern United States, with~~ a ~~particular focus in the southeastern United States. Our goal is to add other investment sales brokerage talent,~~fund or joint-venture structure) with the goal of ~~expanding~~preserving affordability on multifamily properties coming out of the LIHTC 15-year compliance period or on which market forces are likely to keep the properties affordable. Through these ~~brokerage services nationally.~~preservation funds,

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Alliant may receive acquisition and asset management fees and will receive a portion of the operating cash and capital appreciation upon sale through a promote structure.

~~Under certain limited circumstances,~~Through our subsidiary, WDIP and its subsidiaries, we ~~may make~~function as the operator of a private commercial real estate investment adviser focused on the management of debt, preferred equity, and mezzanine equity investments in entities controlled by certain of our borrowers that will assist those borrowers to acquire and reposition properties. The terms of such investments are negotiated with each investment. As of September 30, 2017, we have funded $~~41.2~~ ~~million of such investments. We expect these preferred equity investments to be repaid to us within the next two years.~~

~~During the first quarter of 2017, we~~ completed the purchase of certain assets and assumption of certain liabilities of Deerwood Real Estate Capital, LLC (“Deerwood”), a regional commercial mortgage banking company based in the greater New York City area. Prior to the acquisition, Deerwood engaged inmiddle-market commercial real estate ~~loan brokerage services across~~funds. WDIP’s current assets under management (“AUM”) of $1.3 billion primarily consist of five sources: Fund III, Fund IV, Fund V, and Fund VI (collectively, the ~~United States,~~“Funds”), and separate accounts managed for life insurance companies. AUM for the Funds and for the separate accounts consists of both unfunded commitments and funded investments. Unfunded commitments are highest during the fundraising and investment phases. WDIP receives management fees based on both unfunded commitments and funded investments. Additionally, with respect to the Funds, WDIP receives a ~~primary focus~~percentage of the return above the fund return hurdle rate specified in the ~~Greater New York City area. The acquisition expands our network of loan originators~~fund agreements.

Housing Market Research and ~~provides further diversification~~Real Estate Investment Banking Services

We own a 75% interest in a subsidiary doing business as Zelman & Associates (“Zelman”). Zelman is a nationally recognized housing market research and investment banking firm that will enhance the information we provide to our ~~loan origination platform.~~clients and increase our access to high-quality market insight in many areas of the housing market, including construction trends, demographics, mortgage finance, and real estate technology and services. Zelman generates revenues through the sale of its housing market research data and related publications to banks, investment banks and other financial institutions, and through its offering of real estate-related investment banking and advisory services.

Basis of Presentation

The accompanying condensed consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries, and all intercompany transactions have been eliminated. ~~Additionally, we consolidate the activities of WDIS and present the portion of WDIS that we do not control as~~ ~~Noncontrolling interests~~ ~~in the Condensed Consolidated Balance Sheets and~~ ~~Net income from noncontrolling interests~~ ~~in the Condensed Consolidated Statements of Income.~~

Critical Accounting ~~Policies~~Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ~~(“GAAP”~~(“GAAP”), which ~~require~~requires management to make estimates based on certain judgments and assumptions that are inherently uncertain and affect reported amounts. The estimates and assumptions are based on historical experience and other factors management believes to be reasonable. Actual results may differ from those estimates and ~~assumptions. We believe~~assumptions and the use of different judgments and assumptions may have a material impact on our results. The following critical accounting estimates involve significant estimation uncertainty that may have or are reasonably likely to have a material impact on our financial condition or results of operations. Additional information about our critical accounting estimates and other significant accounting policies ~~represent~~are discussed in NOTE 2 of the ~~areas where more significant judgments and estimates are used in the preparation of our condensed~~ consolidated financial ~~statements.~~statements in our 2021 Form 10-K.

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Mortgage Servicing Rights ~~(“MSRs”~~(“MSRs”).MSRs are recorded at fair value at loan sale or upon purchase. The fair value ~~of MSRs acquired through a stand-alone servicing portfolio purchase is equal to the purchase price paid. The fair value~~ at loan sale (“OMSR”) is based on estimates of expected net cash flows associated with the servicing rights and takes into consideration an estimate of loan prepayment. Initially, the fair value amount is included as a component of the derivative asset fair value at the loan commitment date. The estimated net cash flows from servicing, which includes assumptions for discount rate, escrow earnings, prepayment speed, and servicing costs, are discounted at a rate that reflects the credit and liquidity risk of the ~~MSR~~OMSR over the estimated life of the underlying loan. The discount rates used throughout the periods presented for all ~~MSRs recognized at loan sale~~OMSRs were between ~~10-15%~~8-14% during 2022 and 2021 and varied based on the loan type. The life of the underlying loan is estimated giving consideration to the prepayment provisions in the ~~loan.~~loan and assumptions about loan behaviors around those provisions. Our model for OMSRs assumes no prepayment prior to the expiration of the prepayment provisions and full prepayment of the loan at or near the point ~~where~~when the prepayment provisions have expired. The estimated net cash flows also include cash flows related to the future earnings on the escrow accounts associated with servicing the loans that are based on an escrow earnings rate assumption. We include a servicing cost assumption to account for our expected costs to service a loan. The servicing cost assumption has not had a material impact on the estimate. We record an individual ~~MSR~~OMSR asset (or liability) for each loan at loan sale. ~~For purchased~~The fair value of MSRs acquired through a stand-alone servicing ~~portfolios,~~portfolio purchase (“PMSR”) is equal to the purchase price paid. For PMSRs, we record and amortize a portfolio-level MSR asset based on the estimated remaining life of the portfolio using the prepayment characteristics of the portfolio. ~~We have had only one stand-alone servicing portfolio purchase, which occurred in the second quarter of 2016.~~

The assumptions used to estimate the fair value of ~~MSRs at loan sale~~capitalized OMSRs are ~~based on internal models~~developed internally and are periodically compared to assumptions used by other market participants. Due to the relatively few transactions in the multifamily MSR market and the lack of significant changes in assumptions by market participants, we have experienced ~~little~~limited volatility in the assumptions ~~we use during the periods presented,~~historically, including the ~~most-significant~~significant assumption –that most significantly impacts the estimate – the discount rate. ~~Additionally, we~~We do not expect to see ~~much~~significant volatility in the assumptions for

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the foreseeable future. ~~Management~~We actively ~~monitors~~monitor the assumptions used and ~~makes~~make adjustments to those assumptions when market conditions change, or other factors indicate such adjustments are warranted. ~~We carry originated~~During the first quarter of 2021, we reduced the discount rate and ~~purchased MSRs at the lower of amortized cost or fair value and evaluate the carrying value~~escrow earnings rate assumptions for ~~impairment quarterly. We test for impairment on the purchased stand-alone servicing portfolio separately from~~ our ~~other MSRs. The MSRs from both stand-alone portfolio purchases and from loans sales are tested for impairment at the portfolio level.~~OMSRs. We engage a third party to assist in determining an estimated fair value of our existing and outstanding MSRs on at least a semi-annual basis.

Gains from mortgage banking activities income is recognized when we record a derivative asset upon the simultaneous commitments to originate a loan with a borrower and sell the loan to an investor. The commitment asset related to the loan origination is recognized at fair value, which reflects Changes in our discount rate assumptions may materially impact the fair value of the ~~contractual loan origination related fees and sale premiums, net of any co-broker fees, and the estimated fair value~~MSRs (NOTE 3 of the ~~expected net cash flows associated with~~condensed consolidated financial statements details the ~~servicing~~portfolio-level impact of the loan, net of the estimated net future cash flows associated with any risk-sharing obligations (the “servicing component of the commitment asset”). Upon loan sale, we derecognize the servicing component of the commitment asset and recognize an MSR. All MSRs are amortized into expense over the estimated life of the loan and presented as a ~~component of~~ ~~Amortization and depreciation~~change in the ~~Condensed Consolidated Statements of Income.~~discount rate).

~~All MSRs are amortized using the interest method over the period that servicing income is expected to be received.~~ For ~~MSRs recognized at loan sale, the individual loan-level MSR is written off through a charge to~~ ~~Amortization and depreciation~~ ~~when a loan prepays, defaults, or is probable of default. For MSRs related to purchased stand-alone servicing portfolios,~~PMSRs, a constant rate of prepayments and defaults is included in the determination of the ~~portfolio’s~~portfolio’s estimated life at purchase (and thus included as a component of the ~~portfolio’s~~portfolio’s amortization). Accordingly, prepayments and defaults of individual ~~MSRs~~loans do not change the level of amortization expense recorded for the portfolio unless the pattern of actual prepayments and defaults varies significantly from the estimated pattern. When such a significant difference in the pattern of estimated and actual prepayments and defaults occurs, we prospectively adjust the estimated life of the portfolio (and thus future amortization) to approximate the actual pattern observed. We have ~~not adjusted~~made adjustments to the estimated life of our ~~one purchased stand-alone servicing portfolio as~~PMSRs in the past when the actual ~~prepayment~~ experience ~~has not~~of prepayments differed materially from the ~~expected prepayment experience.~~estimated prepayments.

Allowance for ~~Risk-sharing~~Risk-Sharing Obligations. ~~The~~ This reserve liability (referred to as “allowance”) for risk-sharing obligations relates to our ~~at risk~~Fannie Mae at-risk servicing portfolio and is presented as a separate liability ~~within the Condensed Consolidated Balance Sheets. The amount of this allowance considers~~on our ~~assessment~~balance sheets. We record an estimate of the ~~likelihood~~loss reserve for the current expected credit losses (“CECL”) for all loans in our Fannie Mae at-risk servicing portfolio using the weighted-average remaining maturity method (“WARM”). WARM uses an average annual loss rate that contains loss content over multiple vintages and loan terms and is used as a foundation for estimating the CECL reserve. The average annual loss rate is applied to the estimated unpaid principal balance over the contractual term, adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio as described further below. We currently use one year for our reasonable and supportable forecast period (“forecast period”) as we believe forecasts beyond one year are inherently less reliable. During the forecast period, we apply an adjusted loss factor based on loss rates form a historical period that we believe is similar. We revert to the historical loss rate over a one-year period on a straight-line basis. Over the past couple of ~~repayment by~~years, the ~~borrower or key principal(s),~~loss rate used in the ~~risk characteristics~~forecast period has been updated to reflect our expectations of the ~~loan,~~economic conditions. Changes in the ~~loan’s risk rating, historical~~ loss ~~experience, adverse situations affecting individual loans,~~rate used in the ~~estimated disposition value~~forecast period have materially impacted the estimate in the past.

One of the ~~underlying collateral, and~~key components of a WARM calculation is the ~~level of risk sharing. Historically, initial loss recognition occurs~~runoff rate, which is the expected rate at ~~or before a loan becomes 60 days delinquent. We regularly monitor the allowance on all applicable~~which loans ~~and update loss estimates as current information is received.~~ ~~Provision (benefit) for credit losses~~ in the ~~Condensed Consolidated Statements~~current portfolio will amortize and prepay in the future based on our historical prepayment and amortization experience. We group loans by similar origination dates (vintage) and contractual maturity terms for purposes of ~~Income reflects~~calculating the ~~income statement~~runoff rate. We originate loans under the DUS program with various terms generally ranging from several years to 15 years; each of these various loan terms has a different runoff rate. The runoff rates applied to each vintage and contractual maturity term is determined using historical data; however, changes in prepayment and amortization behavior may significantly impact the estimate.

The weighted-average annual loss rate is calculated using a rolling 10-year look-back period, utilizing the average portfolio balance and settled losses for each year. A 10-year period is used as we believe that this period of ~~changes~~time includes sufficiently different economic conditions to ~~both~~generate a reasonable estimate of expected results in the ~~allowance for risk-sharing obligations~~future, given the relatively long-term nature of the current portfolio. As the weighted-average annual loss rate utilizes a rolling 10-year look-back period, the loss rate used in the estimate will change as loss data from earlier periods in the look-back period continue to fall off and ~~allowance for loan losses.~~as new loss data are added. For example, in the first quarter of 2022, loss data from earlier periods in the look-back period fell off and were replaced with more recent loss data, resulting in the weighted-average annual loss rate changing from 1.8 basis points to 1.2 basis points. Changes in our expectations and forecasts have materially impacted, and in the future may materially impact, the estimate.

We ~~perform a quarterly evaluation of all of~~evaluate our risk-sharing loans on a quarterly basis to determine whether ~~a loss is probable. Our process for identifying which risk-sharing~~there are loans ~~may be~~that are probable of ~~loss consists of an assessment of several~~default. Specifically, we assess a loan’s qualitative and quantitative risk factors, ~~including~~such as payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. When ~~we believe~~ a loan is determined to be probable of ~~foreclosure or when a loan is in foreclosure, we record an allowance for that loan (a “specific reserve”). The specific reserve is~~default based on these factors, we remove the ~~estimate of~~loan from the WARM calculation and individually assess the loan for potential credit loss. This assessment requires certain judgments and assumptions to be made regarding the property ~~fair value less selling~~values and property preservation costs and considers the loss-sharing requirements detailed below in the “Credit Quality and Allowance for Risk-Sharing Obligations” section. The estimate of property fair value at initial recognition of the allowance for risk-sharing obligations is based on ~~appraisals, broker opinions of~~

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~~value, or net operating income and market capitalization rates, whichever we believe is the best estimate of the net disposition value.~~ ~~The allowance for risk-sharing obligations for such loans is updated as any additional information is received until the loss is settled with Fannie Mae. The settlement with Fannie Mae is based on the~~other factors that may differ significantly from actual ~~sales price of the property less selling and property preservation costs and considers the Fannie Mae loss-sharing requirements.~~results. Loss settlement with Fannie Mae has historically concluded within 18 to 36 months after foreclosure. Historically, the initial ~~specific~~collateral-based reserves have not varied significantly from the final settlement.

We actively monitor the judgments and assumptions used in our Allowance for Risk-Sharing Obligation estimate and make adjustments to those assumptions when market conditions change, or when other factors indicate such adjustments are warranted. We believe the level of Allowance for Risk-Sharing Obligation is appropriate based on our expectations of future market conditions; however, changes in one or more of the judgments or assumptions used above could have a significant impact on the estimate.

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Contingent Consideration Liabilities. The Company typically includes an earnout as part of the consideration paid for acquisitions to align the long-term interests of the acquiree with the Company. These earnouts contain milestones for achievement, which typically are revenue, revenue-like, or productivity measurements. If the milestone is achieved, the acquiree is paid the additional consideration. Upon acquisition, the Company is required to estimate the fair value of the earnout and include that fair value measurement as a component of the total consideration paid in the calculation of goodwill. The fair value of the earnout is recorded as a contingent consideration liability and included within Other liabilities in the Condensed Consolidated Balance Sheets. We are also required to continue to record the contingent consideration at fair value at each reporting period.

The determination of the fair value of contingent consideration liabilities requires significant management judgment and unobservable inputs to (i) determine forecasts and scenarios of future revenues, net cash flows and certain other performance metrics, (ii) assign a probability of achievement for the forecasts and scenarios, and (iii) select a discount rate. A Monte Carlo simulation analysis is used to determine many iterations of potential fair values. The average of these iterations is then used to determine the estimated fair value. We typically obtain the assistance of third-party valuation specialists to assist with the fair value estimation. The probability of the earn-out achievement is based on management’s estimate of the expected future performance and other financial metrics of each of the acquired entities, which are subject to significant uncertainty. On occasion, we may also use a probability weighted estimated return model to (i) provide an additional data point for a Monte Carlo simulation and (ii) to calculate the fair value of contingent consideration for immaterial acquisitions.

Over the past two quarters, we have made two large acquisitions that included significant portions of contingent consideration. The aggregate fair value of our contingent consideration liabilities as of March 31, 2022 was $218.7 million. This fair value represents management’s best estimate of the discounted cash payments that will be made in the future for all of our contingent consideration arrangements. The maximum remaining undiscounted earnout payments as of March 31, 2022 was $323.8 million. Historically, all of the contingent consideration arrangements have paid out at the maximum achievable amount. We are uncertain whether ~~such a~~this trend will continue in the future.

~~In addition~~ Additionally, the earnouts completed in the past have involved substantially smaller amounts of contingent consideration as compared to the ~~specific reserves discussed above,~~two recent acquisitions.

Goodwill. As of March 31, 2022 and December 31, 2021, we ~~also record~~reported goodwill of $908.7 million and $698.6 million, respectively. Goodwill represents the excess of cost over the identifiable net assets of businesses acquired. Goodwill is assigned to the segment to which the acquisition relates. Goodwill is recognized as an ~~allowance~~asset and is reviewed for ~~risk-sharing obligations related to all risk-sharing loans on our watch list (“general reserves”). Such loans are not probable~~impairment annually in the fourth quarter. Between the annual evaluation time, we will perform an evaluation of ~~foreclosure but are probable of loss as the characteristics of these loans~~recoverability when events and circumstances indicate that that it is ~~probable~~more-likely-than not that ~~these loans~~the fair value of a reporting unit is below its carrying value. Impairment testing requires an assessment of qualitative factors to determine if there are indicators of potential impairment, followed by, if necessary, an assessment of quantitative factors. These factors include, ~~some losses even though~~but not limited to, whether there has been a significant or adverse change in the ~~loss cannot be attributed~~business climate that could affect the value of an asset and/or significant or adverse changes in cash flow projections or earnings forecasts. These assessments require management to ~~a specific loan. For all~~make judgements, assumptions, and estimates about projected cash flows, discount rates and other ~~risk-sharing loans not on our watch list,~~factors. As of March 31, 2022, we continue to ~~carry a guaranty obligation. We calculate the general reserves based on a migration analysis of the loans on~~believe our ~~historical watch lists, adjusted for qualitative factors.~~ When we place a risk-sharing loan on our watch list, we cease to amortize the guaranty obligation and transfer the remaining unamortized balance of the guaranty obligation to the general reserves. If a risk-sharing loangoodwill is subsequently removed from our watch list due to improved financial performance, we transfer the unamortized balance of the guaranty obligation back to the guaranty obligation classification on the balance sheet and amortize the remaining unamortized balance evenly over the remaining estimated life. For each loan for which we have a risk-sharing obligation, we record one of the following liabilities associated with that loan as discussed above: guaranty obligation, general reserve, or specific reserve. Although the liability type may change over the life of the loan, at any particular point in time, only one such liability is associated with a loan for which we have a risk-sharing obligation. ~~The~~ ~~Allowance for risk-sharing obligations~~ ~~as of September 30, 2017 is based primarily on general reserves related to the loans on the watch list as of September 30, 2017.~~not impaired.

Overview of Current Business Environment

The fundamentals of the commercial ~~and multifamily~~ real estate market ~~remain strong. Multifamily occupancy rates and effective rents~~ continue to remain ~~at historical highs based upon~~ strong, ~~rental market demand while delinquency~~particularly multifamily. Over the past two years, multifamily property fundamentals showed strength, with multifamily occupancy rates, remain at historic lows, all of which aid loan performance and loan origination volumes due to their importance to the cash flows of the underlying properties. Additionally, the single-family home ownership level remains at historical lows while new household formation grows, resulting in increased demand for ~~multifamily housing. The Mortgage Bankers Association (“MBA”) recently reported that the amount of commercial~~new leases, and ~~multifamily mortgage debt outstanding continued~~retention rates at record highs. According to grow in the second quarter of 2017, reaching $3.1 trillion by the end of the second quarter of 2017, an increase of 1.6% from the first quarter of 2017. Multifamily mortgage debt outstanding rose to $1.2 trillion, an increase of 1.8% from the first quarter of 2017. The majority of this growth in multifamily mortgage debt outstanding was related to Agency lending. The MBA also recently reported that multifamily loan originations during the second quarter of 2017 increased 21% from the second quarter of 2016 and 25% from the first quarter of 2017.

The increase in rental housing demand and gaps in housing production have led to continued steady rising rents in multifamily properties in most markets. The positive performance has boosted the value of many multifamily properties towards the high end of historical ranges. However, during the second quarter of 2017, the pace of multifamily rent growth slowed to the lowest rate in six years. This slower rate of multifamily rent growth continued into the third quarter of 2017, as effective rents grew 0.9% from the second quarter of 2017, as reported by Reis,RealPage, a provider of commercial real estate data and ~~analytics.~~analytics, occupancy rates have increased to 97.6% as of March 2022, compared to 95.8% as of December 2019, prior to the start of the pandemic. Additionally, the ~~level~~continued demand combined with limited supply of multifamily ~~properties under construction is at~~units drove rental rates higher for both new leases and renewals, with rent growth increasing by 15.2% year over year as of March 2022. Higher occupancy rates coupled with limited supply and rent growth indicate a ~~nearly 40-year high, which has led~~robust and healthy multifamily market.

Macroeconomic conditions impacting multifamily markets have stabilized in the first quarter of 2022, with the national unemployment rate falling to pre-pandemic lows of 3.6% as of both March 2022 and December 2019. The low unemployment rate coupled with higher inflation rates seen during 2021 and into the first quarter of 2022 resulted in the Federal Reserve increasing its target Federal Funds Rate by 0.25% with a target range of 0.25% to 0.50% and an acceleration of the reduction of its holdings in Treasury securities and Agency mortgage-backed securities (“Agency MBS”). Both of these actions by the Federal Reserve have resulted in an increase in ~~national vacancy~~long-term mortgage interest rates, ~~of 40~~which form the basis ~~points from the third quarter~~ of ~~2016, as reported by Reis, as newly constructed multifamily properties continue to come online. We believe that the market demand for multifamily housing in the upcoming quarters will absorb~~ most of ~~the capacity created by these properties currently under construction and that vacancy rates will remain at historic lows, making~~our lending.

Our Agency multifamily ~~properties an attractive investment option.~~

In addition to the improved property fundamentals, for the last several years, the U.S. commercial and multifamily mortgage market has experienced historically low interest rates, leading many borrowers to seek refinancing prior to the scheduled maturity date of their loans. As borrowersdebt financing operations have sought to take advantage of the interest rate environment and improved property fundamentals, the number of lenders and amount of capital available to lend have increased. According to the Mortgage Bankers Association, commercial and multifamily loan maturities are expected to remain at elevated levels through the end of 2017. All of these factors have benefited our origination volumes over the past several years. We expect the multifamily market to experience record origination volumes in 2017 due to the underlying strength of the multifamily market as labor markets are strong and demand increases from new household formation. Competition for lending on commercial and multifamily real estate among commercial real estate services firms, banks, life insurance companies, and the GSEs remains fierce.

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~~The Federal Reserve has raised its targeted Fed Funds Rate by 75 basis points~~remained very active over the past year. We have not experienced a significant decline in origination volume or profitability as long-term mortgage interest rates have remained at historically low levels as the yield curve has flattened throughout most of 2017. Reis recently reported that in spite of these recent interest-rate increases and slowing rent growth, multifamily cap rates decreased 30 basis points to 5.7% during the second quarter of 2017 from 6.0% in the fourth quarter of 2016. We cannot be certain that these trends will continue as the number, timing, and magnitude of any future increases by the Federal Reserve, taken together with previous interest rate increases and combined with other macroeconomic factors, may have a different effect on the commercial real estate market.

We are a market-leading originator with

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the Agencies, and we believe our market leadership positions us well to continue gaining market share and remain a significant lender with the Agencies for the foreseeable future. We expect strength in our Agency operations to continue despite the return of other capital sources.

The FHFA establishes loan origination caps for both Fannie Mae and Freddie Mac ~~and~~each year. In October 2021, the ~~GSEs remain the most significant providers of capital to the multifamily market. The Federal Housing Finance Agency (“FHFA”) 2017 GSE Scorecard (“2017 Scorecard”)~~FHFA established Fannie ~~Mae’s~~Mae’s and Freddie ~~Mac’s 2017~~Mac’s 2022 loan origination caps at ~~$36.5~~$78 billion each for ~~market-rate apartments (“2017 Caps”). Affordable housing loans, loans to small~~all multifamily ~~properties, green,~~business. In the first quarter of 2022, Fannie Mae and ~~manufactured housing rental community loans continue~~Freddie Mac had multifamily origination volumes of $16.0 billion and $14.9 billion, respectively, down 25.6% and up 6.4%, respectively, from the first quarter of 2021.

As part FHFA’s 2022 loan origination caps, at least 50% of the GSEs’ multifamily business is required to be ~~excluded~~targeted towards affordable housing. Additionally, in 2021 the FHFA raised the GSEs’ combined LIHTC investment cap to $1.7 billion, up 70% from the ~~2017 Caps. Additionally, the definition~~previous cap of ~~the~~$1.0 billion. We intend to leverage our affordable ~~loan exclusion continues~~debt financing and our newly acquired LIHTC syndication platforms to ~~encompass affordable housing in high-~~create additional growth opportunities for our debt financing, property sales, and very-high cost markets and to allow for an exclusion from the 2017 Caps for the pro-rata portion of any loan on a multifamily property that includes affordable units. The 2017 Scorecard provides the FHFALIHTC syndication platforms.

Our debt financing operations with the flexibility to review the estimated size of the multifamily loan origination market on a quarterly basis and proactively adjust the 2017 Caps upward should the market be larger than expected in 2017, which has not occurred in 2017 but did happen twice in 2016. The 2017 Scorecard also provides exclusions for loans to properties located in underserved markets including rural, small multifamily, and senior assisted living and for loans to finance energy or water efficiency improvements.

Our GSE loan origination volume for the nine months ended September 30, 2017 increased 52% over the same period in 2016 as demand for multifamily lending remained strong as borrowers continue to focus on locking in interest rates ahead of a potential rising interest rate environment. We expect the GSEs to maintain their historical market share in a multifamily market that is projected by Freddie Mac to be $290.0 billion in 2017. The GSEs reported a combined loan origination volume of $92.6 billionHUD fell during the first ~~nine months~~quarter of ~~2017 compared to $79.9 billion~~2022, as we had strong HUD originations during the first ~~nine months~~quarter of ~~2016; however, we do not expect the 2017 Caps to adversely impact~~2021. HUD loan volumes accounted for 4% of our ~~fourth quarter 2017 GSE loan origination volume. As seen from our GSE loan origination~~total debt financing volumes for the ~~nine months~~quarter ended ~~September 30, 2017, we believe our market leadership with the GSEs positions us~~March 31, 2022, compared to ~~be a significant lender with the GSEs~~8% for the ~~foreseeable future.~~ quarter ended March 31, 2021. The decline in HUD debt financing volumes as a percentage of our total debt financing volumes was driven by a combination of higher HUD debt financing volumes in the first quarter of 2021 and growth in our other debt financing products.

Our originations with the ~~GSEs~~Agencies are ~~some of~~ our most profitable executions as they provide significant non-cash gains from ~~mortgage servicing rights, and~~MSRs that turn into significant cash revenue streams from future servicing fees. During the first quarter of 2022, servicing fees were up 10% compared to the same quarter in 2021, due to the ~~future.~~continued growth in our Agency servicing portfolio. A decline in our ~~GSE~~Agency originations would negatively impact our financial results as our non-cash revenues would decrease disproportionately with ~~loan origination~~debt financing volume and future servicing fee revenue would be constrained or decline. ~~We do not know whether~~

Our multifamily property sales volumes continued to grow significantly in 2022, as (i) the ~~FHFA will impose stricter limitations on GSE~~ multifamily ~~production volume beyond 2017.~~

Weacquisitions market continues to be very active during the year and (ii) we continue to ~~grow~~leverage the expanded the number of property sales brokers and the geographical reach of our ~~capital markets platform to take advantage of~~property sales platform. Long term, we believe the ~~ongoing wave of loan maturities and gain greater access to capital, deal flow, and borrower relationships. The apparent appetite for debt funding within the broader commercial real estate~~ market along with the additions of brokered loan originators over the past several years, has resulted in significant growth in our brokered originations, as evidenced by the 89% year-over-year growth in brokered originations from the first nine months of 2016 to the first nine months of 2017. Our outlook for our capital markets platform is positive as we expect continued growth in non-bank commercial and multifamily markets in the near future.

Over the last few years, HUD has reduced the cost of borrowing, making HUD loans more competitive and returning them to relevance for our core multifamily borrowers in 2016 and into 2017, as evidenced by a 41% increase in HUD loan originations from the nine months ended September 30, 2016 to the nine months ended September 30, 2017. HUD remains a strong source of capital for new construction loans and healthcare facilities. We expect that HUDfundamentals will continue to be positive for multifamily property sales. Over the last several years, and throughout the pandemic, household formation and a ~~meaningful supplier~~dearth of ~~capital~~supply of entry-level single-family homes led to ~~our borrowers. We remain committed~~strong demand for rental housing in most geographic areas. Consequently, the fundamentals of the multifamily property sales market were strong prior to the ~~HUD~~pandemic, and, when combined with high occupancy and rent growth and rising real-estate prices, it is our expectation that market demand for multifamily business, adding resources and scale to our HUD lending platform, particularly in the area of seniors housing and skilled nursing, where HUD remains a dominant provider of capital in the current business environment.

~~Many of our borrowers~~property sales will continue to ~~seek higher returns by identifying~~grow as this asset class remains an attractive investment option.

Our debt brokerage platform continued its growth from 2021, with brokered volume increasing during the first quarter of 2022. The increase in volume in 2022 reflects the continued demand from private capital providers, with activity focused not only on multifamily but also on other commercial real estate assets such as office and ~~acquiring the transitional properties that the Interim Program and Interim Program JV are designed~~retail. We expect non-multifamily debt financing volumes to ~~address.~~ continue to recover over time as other commercial real estate asset classes stabilize post-pandemic.

We ~~created~~entered into the Interim Program JV to both increase the overall capital available to ~~the opportunity~~transitional multifamily properties and to dramatically expand our capacity to originate ~~new interim~~Interim Program loans. The demand for transitional lending has brought increased competition from lenders, specifically banks, mortgage ~~REITs,~~real estate investment trusts, and life insurance companies. ~~All are actively pursuing transitional properties by leveraging their low cost of capital and desire for short-term, high-yield commercial real estate investments. We~~For the quarter ended March 31, 2022, we originated ~~$189.6~~$86.3 million of ~~interim~~Interim Program JV loans, compared to $144.5 million of originations for the same period last year. In 2020, we had few originations of new Interim Program loans as a result of the pandemic. Except for one loan that defaulted in early 2019, the loans in ~~the first nine months of 2017 compared to $235.0 million~~our portfolio and in the ~~first nine months of 2016.~~

~~Finally,~~Interim Program JV continue to perform as we have stated, multifamily property values are at near historic highs on the back of positive fundamentals across the industry. As a result, we saw increased activity within the investment sales business throughout 2016. ~~However, we experienced a decline in our investment sales volume year over year during the first half of 2017 due to a year-over-year decline of 16% in multifamily investment~~

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sales transactions in the broader market. The investment sales market improved during the third quarter of 2017, with a 5% year-over-year increase in multifamily investment sales transactions. This improvement in the overall market, along with the additions we have made to our investment sales team over the past year, resulted in a 19% increase in our investment sales volume from the third quarter of 2016 to the third quarter of 2017. We continue our efforts to expand our investment sales platform more broadly across the United States and to increase the size of our investment sales team to capture what we believe will be strong multifamily investment sales activity over the coming quarters.

During the third quarter of 2017, Hurricanes Harvey and Irma made landfall in the United States, causing substantial damage to the affected areas. Although we have operations in affected areas, none of our operating assets was materially affected by the natural disasters. Located within the affected areas are multiple properties collateralizing loans for which we have risk-sharing obligations. Based on our preliminary assessment of these properties, we believe that few, if any, of these properties incurred significant damage, and those that did have adequate insurance coverage. Additionally, we have not experienced an increase in late payments from risk-sharing loans collateralized by properties in the affected areas. Accordingly, based on information currently available, we do not believe that these natural disasters will have a material impact on the ~~Allowance for risk-sharing obligations~~agreed. The damage in the affected areas continues to be assessed. The impact to borrowers from such natural disasters may not be known by the Company for months after the occurrence of the disaster; therefore, over the coming months, we may experience an increase in late payments or defaults of loans for which we have risk-sharing obligations that are collateralized by properties in the affected areas.

Consolidated Results of Operations

~~Following~~The following is a discussion of our consolidated results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~2021. The financial results are not necessarily indicative of future results. Our quarterly results have fluctuated in the past and are expected to fluctuate in the future, reflecting the interest-rate environment, the volume of transactions, business acquisitions, regulatory actions, industry trends, and general economic conditions. ~~Please refer to the~~The table below ~~which~~ provides supplemental data regarding our financial performance.

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SUPPLEMENTAL OPERATING DATA

CONSOLIDATED


	For the three months ended
	March 31,
(dollars in thousands; except per share data)	2022			2021
Transaction Volume:
Total Debt Financing Volume	$	9,135,017		$	7,826,869
Property Sales Volume		3,531,690			1,395,760
Total Transaction Volume	$	12,666,707		$	9,222,629

Key Performance Metrics:
Operating margin		28	%		33	%
Return on equity		19			19
Walker & Dunlop net income	$	71,209		$	58,052
Adjusted EBITDA⁽¹⁾		62,636			60,667
Diluted EPS		2.12			1.79

Key Expense Metrics (as a percentage of total revenues):
Personnel expenses		45	%		43	%
Other operating expenses		10			8

	As of March 31,
Managed Portfolio:	2022			2021
Total Servicing Portfolio	$	116,257,265		$	109,867,270
Assets under management		16,687,112			1,836,086
Total Managed Portfolio	$	132,944,377		$	111,703,356

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)

2017

2016


2017

2016

Transaction Volume:

Loan Origination Volume by Product Type

Fannie Mae

$
1,389,451

$
1,565,915

$
5,467,228

$
4,727,563

Freddie Mac

4,040,985

1,296,045

6,315,369

3,002,305

Ginnie Mae - HUD

263,714

382,602

874,727

618,737

Brokered (1)

1,893,047

922,969

5,172,263

2,884,392

Interim Loans

26,375

76,475

189,562

235,040

Total Loan Origination Volume

$
7,613,572

$
4,244,006

$
18,019,149

$
11,468,037

Investment Sales Volume

935,960

788,232

1,574,515

1,569,177

Total Transaction Volume

$
8,549,532

$
5,032,238

$
19,593,664

$
13,037,214

Key Performance Metrics:

Operating margin

30
%

31
%

33
%

31
%
Return on equity

20

22

23

20

Walker & Dunlop net income

$
34,378

$
29,628

$
112,166

$
77,107

Adjusted EBITDA (2)

45,000

36,227

146,293

95,734

Diluted EPS

1.06

0.96

3.49

2.51

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

Personnel expenses

44
%

42
%

39
%

39
%
Other operating expenses

6

6

7

7

Key Revenue Metrics (as a percentage of loan origination volume):

Origination related fees

0.79
%

1.23
%

0.94
%

1.06
%
Gains attributable to MSRs

0.67

1.14

0.78

1.11

Gains attributable to MSRs, as a percentage of Agency loan origination volume (3)

0.89

1.49

1.11

1.53

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~~SUPPLEMENTAL OPERATING DATA - continued~~

As of September 30,

Servicing Portfolio by Product:

2017

2016

Fannie Mae

$
30,005,596

$
25,875,684

Freddie Mac

25,930,819

19,702,477

Ginnie Mae - HUD

8,878,899

9,254,830

Brokered (1)

5,170,479

4,024,490

Interim Loans

298,889

264,508

Total Servicing Portfolio

$
70,284,682

$
59,121,989

Key Servicing Metrics (end of period):

Weighted-average servicing fee rate (basis points)

25.7

25.6

Weighted-average remaining term (years)

9.9

10.5

(1)

~~(1)~~

~~Brokered transactions for commercial mortgage backed securities, life insurance companies, commercial banks, and other capital sources.~~

~~(2)~~

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

”

~~(3)~~

~~The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained, as a percentage of Agency volume.~~

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The following ~~tables present~~table presents a period-to-period comparison of our financial results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~2021.

FINANCIAL RESULTS –– THREE MONTHS

For the three months ended

September 30,

Dollar

Percentage

(dollars in thousands)

2017

2016

Change

Change

Revenues

Gains from mortgage banking activities

$
111,304

$
100,630

$
10,674

11
%

Servicing fees

44,900

37,134

7,766

21

Net warehouse interest income

5,358

5,614

(256)

(5)

Escrow earnings and other interest income

5,804

2,630

3,174

121

Other

12,370

8,778

3,592

41

Total revenues

$
179,736

$
154,786

$
24,950

16

Expenses

Personnel

$
78,469

$
64,377

$
14,092

22
%

Amortization and depreciation

32,343

29,244

3,099

11

Provision for credit losses

9

283

(274)

(97)

Interest expense on corporate debt

2,555

2,485

70

3

Other operating expenses

11,664

9,685

1,979

20

Total expenses

$
125,040

$
106,074

$
18,966

18

Income from operations

54,696

48,712

5,984

12

Income tax expense

19,988

18,851

1,137

6

Net income before noncontrolling interests

$
34,708

$
29,861

$
4,847

16

Less: net income from noncontrolling interests

330

233

97

42

Walker & Dunlop net income

$
34,378

$
29,628

$
4,750

16

CONSOLIDATED


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	82,310	$	75,879	$	6,431	8	%
Fair value of expected net cash flows from servicing, net		52,730		57,935		(5,205)	(9)
Servicing fees		72,681		65,978		6,703	10
Property sales broker fees		23,398		9,042		14,356	159
Net warehouse interest income		4,773		4,555		218	5
Escrow earnings and other interest income		1,803		2,117		(314)	(15)
Other revenues		81,749		8,782		72,967	831
Total revenues	$	319,444	$	224,288	$	95,156	42

Expenses
Personnel	$	144,181	$	96,215	$	47,966	50	%
Amortization and depreciation		56,152		46,871		9,281	20
Provision (benefit) for credit losses		(9,498)		(11,320)		1,822	(16)
Interest expense on corporate debt		6,405		1,765		4,640	263
Other operating expenses		32,214		17,587		14,627	83
Total expenses	$	229,454	$	151,118	$	78,336	52
Income from operations	$	89,990	$	73,170	$	16,820	23
Income tax expense		19,460		15,118		4,342	29
Net income before noncontrolling interests	$	70,530	$	58,052	$	12,478	21
Less: net income (loss) from noncontrolling interests		(679)		—		(679)	N/A
Walker & Dunlop net income	$	71,209	$	58,052	$	13,157	23

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~~FINANCIAL RESULTS – NINE MONTHS~~

For the nine months ended

September 30,

Dollar

Percentage

(dollars in thousands)

2017

2016

Change

Change

Revenues

Gains from mortgage banking activities

$
309,912

$
249,406

$
60,506

24
%

Servicing fees

129,639

101,554

28,085

28

Net warehouse interest income

17,778

15,925

1,853

12

Escrow earnings and other interest income

13,610

6,225

7,385

119

Other

33,716

23,775

9,941

42

Total revenues

$
504,655

$
396,885

$
107,770

27

Expenses

Personnel

$
198,157

$
154,365

$
43,792

28
%

Amortization and depreciation

97,541

80,824

16,717

21

Provision (benefit) for credit losses

(216)

166

(382)

(230)

Interest expense on corporate debt

7,401

7,419

(18)

(0)

Other operating expenses

34,871

29,511

5,360

18

Total expenses

$
337,754

$
272,285

$
65,469

24

Income from operations

166,901

124,600

42,301

34

Income tax expense

54,621

47,295

7,326

15

Net income before noncontrolling interests

$
112,280

$
77,305

$
34,975

45

Less: net income from noncontrolling interests

114

198

(84)

(42)

Walker & Dunlop net income

$
112,166

$
77,107

$
35,059

45

Overview

~~Overview~~

~~For both~~Other revenues for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022 primarily consisted of the ~~increases~~following: (i) $39.6 million of Apprise revaluation gain (as defined below), (ii) $12.7 million of investment management fees, (iii) $9.8 million of prepayment and application fees, and (iv) $4.5 million of research subscription fees. Other revenues for the three months ended March 31, 2021 primarily consisted of $5.5 million of prepayment and application fees and $2.7 million of investment management fees.

The increase in revenues ~~were~~was primarily ~~attributable to~~driven by increases ~~in gains from mortgage banking activities and servicing fees. The increases in gains from mortgage banking activities were largely related to the substantial increase~~ in loan origination ~~volume. The increases in~~and debt brokerage fees, net (“origination fees”), servicing fees, ~~were mainly due~~property sales broker fees, and other revenues, partially offset by a decrease in the fair value of expected net cash flows from servicing, net (“MSR Income”). The increase in origination fees was primarily related to ~~increases~~an overall increase in debt financing volume, particularly in our Fannie Mae and brokered debt financing volumes. Servicing fees increased largely from an increase in the average servicing ~~portfolio. Our~~portfolio outstanding. The increase in property sales broker fees was a result of a substantial increase in property sales volume. Other revenues ~~also benefitted~~increased primarily as a result of increases in: (i) a one-time gain from the revaluation of our previously held equity-method investment in Apprise (“Apprise revaluation gain”), (ii) prepayment fees, and (iii) asset management and research subscription fees from our subsidiaries acquired in the second half of 2021. MSR Income decreased due to a decrease in the MSR Rate (defined below in the discussion of our capital markets segment results) resulting from a change in the transaction mix and a decrease in the profitability of our Fannie Mae and HUD products.

The increase in expenses was due to a decrease in the benefit for credit losses and increases in ~~short-term interest rates over the past 12 months, which increased our escrow interest earnings when compared to the same periods last year.~~all other expense categories. The ~~increases~~increase in personnel expenses ~~were~~was primarily ~~the~~a result of ~~increased (i)~~increases in commission costs due to an increase in origination fees, (ii) salaries expense due to rises in average headcount, and (iii) bonus expense due to the Company’s strong financial performance and the rises in average headcount. Headcount increased due to acquisition activity and hiring to support the growth of our business. Additionally, amortization and depreciation expense increased as the average MSR balances increased period over period.

~~Revenues~~

~~Gains from Mortgage Banking Activities.~~ ~~The following tables provide additional information that helps explain changes in gains from mortgage banking activities period over period:~~

Loan Origination Volume by Product Type

For the three months ended

For the nine months ended

September 30,

September 30,

2017

2016

2017

2016

Fannie Mae

18
%

37
%

30
%

41
%
Freddie Mac

53

31

35

26

Ginnie Mae - HUD

3

9

5

5

Brokered

26

21

29

26

Interim Loans (1)

-

2

1

2

~~(1)~~

~~Interim loan origination volume as a percentage of total loan origination volume for the three months ended September 30, 2017 was less than 1%.~~

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Gains from Mortgage Banking Activities Detail

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)
2017

2016

2017

2016

Origination Fees
$
60,523

$
52,401

$
168,927

$
121,682

Dollar Change
$
8,122

$
47,245

Percentage Change

15
%

39
%

MSR Income (1)
$
50,781

$
48,229

$
140,985

$
127,724

Dollar Change
$
2,552

$
13,261

Percentage Change

5
%

10
%

Origination Fee Rate (2) (basis points)

79

123

94

106

Basis Point Change

(44)

(12)

Percentage Change

(36)
%

(11)
%

MSR Rate (3) (basis points)

67

114

78

111

Basis Point Change

(47)

(33)

Percentage Change

(41)
%

(30)
%

Agency MSR Rate (4) (basis points)

89

149

111

153

Basis Point Change

(60)

(42)

Percentage Change

(40)
%

(27)
%

~~(1)~~

~~The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained.~~

~~(2)~~

~~Origination fees as a percentage of total loan origination volume~~.

~~(3)~~

~~MSR income as a percentage of total loan origination volume~~.

~~(4)~~

~~MSR income as a percentage of Agency loan origination volume~~.

Gains from mortgage banking activities reflect the fair value of loan origination fees, the fair value of loan premiums, net of any co-broker fees, and MSR income. For both the three and nine months ended September 30, 2017, the increases in origination fees and ~~MSR income were largely attributable to the substantial increases in loan origination volume, partially offset~~property sales brokers fees and salaries and benefits costs driven by ~~decreases in the origination fee rate and the Agency MSR rate.~~

For the three months ended September 30, 2017, the decrease in the origination fee rate was principally due to the increase in brokered loan origination volume as a percentage of total loan origination volume and the origination of a $1.9 billion portfolio of Freddie Mac loans, the largest transaction in the Company’s history with no comparable activity in 2016. We receive lower origination fees on brokered loans than we do for Agency loans. Additionally, we generally receive lower origination fee rates on large Agency portfolio transactions than we do on typical Agency transactions. The decrease in the Agency MSR rate was primarily attributable to ~~the increase~~ in Freddie Mac loan origination volume coupled with the decrease in Fannie Mae loan origination volume and a 100% increase in floating-rate loan origination volume. Freddie Mac loan origination volume as a percentage of total loan origination volume increased significantly from 2016 to 2017 as seen in the table above. Additionally, Freddie Mac loan origination volume as a percentage of Agency loan origination volume increased from 40% during 2016 to 71% during 2017. We record relatively less MSR income on floating-rate loan originations as their estimated life is substantially shorter than fixed-rate loan originations. We record less MSR income on Freddie Mac loans as their servicing fees are less than other Agency products.

For the nine months ended September 30, 2017, the decrease in the origination fee rate was principally due to the increase in brokered loan origination volume as a percentage of total loan origination volume and an increase in the ~~number of portfolio transactions from 2016 to 2017, including the aforementioned origination of a $1.9 billion portfolio of Freddie Mac loans in the third quarter of 2017.~~ ~~The decrease in the Agency MSR rate was~~average headcount. Amortization and depreciation expense increased primarily ~~attributable to~~ ~~the increase~~ in Freddie Mac loan origination volume as a percentage of Agency loan origination volume and a 68% increase in floating-rate loan origination volume. Freddie Mac loan origination volume as a percentage of total loan origination volume increased from 2016 to 2017 as seen in the table above. Additionally, Freddie Mac loan origination volume as a percentage of Agency loan origination volume increased from 36% during 2016 to 50% during 2017.

~~See the “Overview of Business Environment” section above for a detailed discussion of the factors driving the increases in loan origination volumes~~.

~~Servicing Fees.~~ For both the three and nine months ended September 30, 2017, the increases were primarily attributable to increases in the average servicing portfolio from 2016 to 2017 as shown below due to new loan originations and relatively few payoffs. ~~Additionally,~~

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~~the servicing portfolio’s weighted average servicing fee increased as shown below~~ due to an increase in the ~~Fannie Mae servicing portfolio~~.

Servicing Fees Details

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)
2017

2016

2017

2016

Average Servicing Portfolio
$
67,685,503

$
58,181,130

$
65,438,795

$
53,820,305

Dollar Change
$
9,504,373

$
11,618,490

Percentage Change

16
%

22
%

Average Servicing Fee (basis points)

26.3

25.3

26.3

25.1

Basis Point Change

1.0

1.2

Percentage Change

4
%

5
%

~~Net Warehouse~~average MSR balance. Interest ~~Income.~~ For the nine months ended September 30, 2017, the increase was primarily related to a $3.0 million increase in net warehouse interest income from loans held for investment (“LHFI”), partially offset by a decrease in net warehouse interest income from loans held for sale (“LHFS”) of $1.2 million. ~~The increase in net warehouse interest income from loans held for investment was~~expense on corporate debt increased due to ~~increases in the average outstanding balance and net spread period over period as shown below~~. The decrease in net warehouse interest income from loans held for sale is primarily attributable to a decrease in the net spread of loans held for sale in 2017 compared to 2016 as shown below. The decrease in the net spread was a result of a greater increase in the short-term interest rates on which our borrowings are based than in the long-term interest rates on which the majority of our loans held for sale are based. If the yield curve continues to flatten following future increases in short-term rates, a tightening of the net spread may continue. We expect to see a decrease in net warehouse interest income from LHFI going forward as most of our future Interim Program loan originations are expected to be completed by the Interim Program JV, reducing the balance of LHFI as the existing portfolio matures. This decrease in net warehouse interest income from LHFI is expected to be partially offset by our portion of the net income generated by the Interim Program JV.

Net Warehouse Interest Income Details

For the three months ended

For the nine months ended

September 30,

September 30,

(dollars in thousands)
2017

2016

2017

2016

Average LHFS Outstanding Balance
$
1,633,976

$
1,366,356

$
1,289,861

$
1,212,304

Dollar Change
$
267,620

$
77,557

Percentage Change

20
%

6
%

LHFS Net Spread (basis points)

85

102

99

119

Basis Point Change

(17)

(20)

Percentage Change

(17)
%

(17)
%

Average LHFI Outstanding Balance
$
192,244

$
240,431

$
254,421

$
214,608

Dollar Change
$
(48,187)

$
39,813

Percentage Change

(20)
%

19
%

LHFI Net Spread (basis points)

389

356

429

320

Basis Point Change

33

109

Percentage Change

9
%

34
%

~~Escrow Earnings and Other Interest Income.~~ ~~For both the three and nine months ended September 30, 2017, t~~he increases were due to increases in both the average balances of escrow accounts and the average earnings rates from 2016 to 2017. The increases in the average balances were due to the increases in the average servicing portfolio. The increases in the average earnings rates were due to the increases in short-term interest rates over the past 12 months as discussed above in the “Overview of Business Environment” section.

~~Other Revenues.~~ ~~For both the three and nine months ended September 30, 2017, t~~he increases were primarily attributable to increases in investment sales placement fees and prepayment fee income from 2016 to 2017. The increase in investment sales placement fees for the three-month period was largely driven by the increase in investment sales volume period over period. The increase in investment sales placement fees for the year-to-date period was principally attributable to an increase in the average placement fee. The increases in prepayment fee income were due to increases in the payoff of prepayment-protected loans.

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~~Expenses~~

~~Personnel.~~ ~~For the three months ended September 30, 2017, the increase was principally the result of higher loan originator commission costs and increased salaries and bonus expenses.~~ ~~Commission costs increased substantially due to the large increase in origination fee income. Salaries expense increased~~ ~~due to a rise in average headcount~~ ~~from 521 in 2016 to 609 in 2017~~ ~~as a result of acquisitions and organic growth of the Company to support our expanding operations~~. ~~The increase in bonus expense is due to the Company’s improved financial performance year over year and~~ the increase in the ~~average headcount.~~

~~For the nine months ended September 30, 2017, the increase was largely the result of higher commission costs and increased salaries expense, bonus expense, and stock compensation expense.~~ ~~Commission costs increased substantially due to the large increase in origination fee income. Salaries expense increased~~ ~~due to a rise in average headcount~~ ~~from 511 in 2016 to 591 in 2017~~ ~~as a result of acquisitions and organic growth~~size of the ~~Company to support our expanding operations~~. ~~The increase in bonus expense is due to the Company’s improved financial performance year over year~~debt outstanding and the ~~increase in~~assumption of Alliant’s note payable the ~~average headcount. Finally, stock compensation expense~~fourth quarter of 2021. Other operating expenses increased largely as a result of ~~performance-based stock awards. The~~(i) the overall growth of the Company over the past year, (ii) an increase in travel and entertainment costs ~~associated with these awards increased~~compared to 2021 when our travel and entertainment

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expenses were depressed due to the ~~Company’s improved financial performance year over year.~~

~~Amortization~~on-going effects of the pandemic, and ~~Depreciation.~~ ~~For both the three and nine months ended September 30, 2017, the increases were primarily attributable to loan origination activity and the resulting growth~~(iii) acquisition related costs. The decrease in the average MSR balances during the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016. Over the past 12 months, we have added $91.2 million of MSRs, net of write offsbenefit for credit losses was due to ~~prepayment.~~a lower reduction to one of the loss rates used to calculate our CECL reserves.

Income Tax Expense. ~~For the three months ended September 30, 2017, the~~The increase isin income tax expense relates primarily ~~related~~ to the ~~change~~23% increase in income from operations ~~period over period, partially offset by an increase in excess tax benefits from share-based payments that reduced income tax expense by an additional $0.3 million~~ and a ~~decrease~~70-basis point increase in the estimated annual effective tax ~~rate.~~

~~For the nine months ended September 30, 2017, the substantial decrease~~rate, partially offset by a $0.8 million increase in ~~the effective income tax rate was related to~~realizable excess tax ~~benefits and a decrease in the~~benefits.

We do not expect our annual estimated ~~annual effective tax rate.~~ Excess tax benefits recognized during the nine months ended September 30, 2016 reduced income tax expense by $0.5 million compared to $9.1 million during the same period in 2017. The reduction to income tax expense due to excess tax benefits in 2017 was substantially larger as a result of the significant increase in our stock price over the past year and an increase in the number of shares that vested in 2017, reducing the effective tax rate ~~significantly. The increase in~~to differ significantly from the ~~number~~26.9% rate estimated for the three months ended March 31, 2022. Accordingly, we expect an estimated effective tax rate of shares that vested was largely attributable to a performance share plan that vested in the first quarter of 2017 as we achieved each of the performance targets at or near the high end of the payout range. The performance share plan vesting was the first of its kind in the Company’s history. No other performance share plans are scheduled to vest in 2017 or 2018. We expect the reduction to income taxes related to excess tax benefits to be substantially lessbetween approximately 26.5% and 27.5% for the remainder of ~~2017 than it was~~the year. The effective tax rate increased year over year from 20.7% in 2021 to 21.6% in 2022 due to the factors noted above.

A discussion of the financial results for ~~the first nine months of 2017.~~our segments is included further below.

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we use 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 Alliant’s note payable, and amortization and depreciation, adjusted for provision (benefit) for credit losses net of write-offs, stock-based incentive compensation charges, the fair value of expected net cash flows from servicing, net, and ~~non-cash revenues such as gains attributable to MSRs and unrealized gains and losses~~the gain from ~~commercial mortgage backed securities (“CMBS”) activities.~~revaluation of a previously held equity-method investment. 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~~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 ~~adjusted EBITDA,~~this non-GAAP measure, when read in conjunction with our GAAP financials, provides useful information to investors by offering:

●

the ability to make more meaningful period-to-period comparisons of our ~~on-going~~ongoing operating results;

●

the ability to better identify trends in our underlying business and perform related trend analyses; and

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●

a better understanding of how management plans and measures our underlying business.

We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate our results of operations in conjunction with net ~~income.~~income on both a consolidated and segment basis.Adjusted EBITDA is ~~calculated~~reconciled to net income as ~~follows.~~follows:

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ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

CONSOLIDATED

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2017

2016

2017

2016

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income

$
34,378

$
29,628

$
112,166

$
77,107

Income tax expense

19,988

18,851

54,621

47,295

Interest expense on corporate debt

2,555

2,485

7,401

7,419

Amortization and depreciation

32,343

29,244

97,541

80,824

Provision (benefit) for credit losses

9

283

(216)

166

Net write-offs

—

(2,567)

—

(2,567)

Stock compensation expense

6,508

5,270

15,765

12,784

Gains attributable to mortgage servicing rights (1)

(50,781)

(48,229)

(140,985)

(127,724)

Unrealized (gains) losses from proprietary CMBS mortgage banking activities

—

1,262

—

430

Adjusted EBITDA

$
45,000

$
36,227

$
146,293

$
95,734

~~(1)~~

~~Represents the fair value of the expected net cash flows from servicing recognized at commitment, net of any expected guaranty obligation.~~


	For the three months ended
	March 31,
(in thousands)	2022		2021
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income	$	71,209	$	58,052
Income tax expense		19,460		15,118
Interest expense on corporate debt		6,405		1,765
Amortization and depreciation		56,152		46,871
Provision (benefit) for credit losses		(9,498)		(11,320)
Net write-offs		—		—
Share-based compensation expense		11,279		8,116
Gain from revaluation of previously held equity-method investment		(39,641)		—
Fair value of expected net cash flows from servicing, net		(52,730)		(57,935)
Adjusted EBITDA	$	62,636	$	60,667

The following ~~tables present~~table presents a period-to-period comparison of the components of adjusted EBITDA for ~~the three and nine months ended September 30, 2017 and 2016~~

~~ADJUSTED EBITDA – THREE MONTHS~~

For the three months ended

September 30,

Dollar

Percentage

(dollars in thousands)
2017

2016

Change

Change

Origination fees
$
60,523

$
53,663

$
6,860

13
%
Servicing fees

44,900

37,134

7,766

21

Net warehouse interest income

5,358

5,614

(256)

(5)

Escrow earnings and other interest income

5,804

2,630

3,174

121

Other revenues

12,040

8,545

3,495

41

Personnel

(71,961)

(59,107)

(12,854)

22

Net write-offs

—

(2,567)

2,567

(100)

Other operating expenses

(11,664)

(9,685)

(1,979)

20

Adjusted EBITDA
$
45,000

$
36,227

$
8,773

24

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~~ADJUSTED EBITDA – NINE MONTHS~~

For the nine months ended

September 30,

Dollar

Percentage

(dollars in thousands)
2017

2016

Change

Change

Origination fees
$
168,927

$
122,112

$
46,815

38
%
Servicing fees

129,639

101,554

28,085

28

Net warehouse interest income

17,778

15,925

1,853

12

Escrow earnings and other interest income

13,610

6,225

7,385

119

Other revenues

33,602

23,577

10,025

43

Personnel

(182,392)

(141,581)

(40,811)

29

Net write-offs

—

(2,567)

2,567

(100)

Other operating expenses

(34,871)

(29,511)

(5,360)

18

Adjusted EBITDA
$
146,293

$
95,734

$
50,559

53

~~See the tables above for the components of the change in adjusted EBITDA for the three and nine months ended September 30, 2017. For~~ the three months ended ~~September 30, 2017, the increase~~March 31, 2022 and 2021.

ADJUSTED EBITDA – THREE MONTHS

CONSOLIDATED


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	82,310	$	75,879	$	6,431	8	%
Servicing fees		72,681		65,978		6,703	10
Property sales broker fees		23,398		9,042		14,356	159
Net warehouse interest income		4,773		4,555		218	5
Escrow earnings and other interest income		1,803		2,117		(314)	(15)
Other revenues		42,787		8,782		34,005	387
Personnel		(132,902)		(88,099)		(44,803)	51
Net write-offs		—		—		—	N/A
Other operating expenses		(32,214)		(17,587)		(14,627)	83
Adjusted EBITDA	$	62,636	$	60,667	$	1,969	3

Loan origination and debt brokerage fees, net increased due to increases in ~~origination fees was largely related to the increase~~overall debt financing volumes, particularly in ~~loan origination volume period over period.~~our Fannie Mae and brokered debt financing volumes. Servicing fees increased due to ~~an increase~~growth in the average servicing portfolio period over ~~period as a result of new loan originations. Escrow earnings and other interest income~~period. Property sales broker fees increased as a result of ~~increases~~the increase in ~~the average escrow balance outstanding and the average earnings rate following the increases in short-term interest rates over the past year.~~property sales volumes. Other revenues increased primarily due to an increase in ~~investment sales placement~~asset management and research subscription fees ~~and prepayment fee income.~~generated from our acquired subsidiaries in the second half of 2021. The ~~increase~~increases in personnel expense ~~was~~were primarily due to ~~(i)~~ increased commission costs due to the increase in origination fees, (ii) increased salaries expense due to a rise in headcount, and (iii) increased bonus expense due to the Company’s improved financial performance and rise in headcount. We settled the risk-sharing losses on one loan in the third quarter of 2016, while we have settled no risk-sharing losses in 2017.

For the nine months ended September 30, 2017, the increase in origination fees was largely related to the increase in loan origination volume period over period. Servicing fees increased due to an increase in the average servicing portfolio period over period as a result of new loan originations. Net warehouse interest income increased largely ~~due to~~ increases in ~~the~~total transaction volumes and salaries and benefits resulting from growth in average ~~outstanding balance and net spread of loans held for investment. Escrow earnings and other interest income~~headcount. Other operating expenses increased as a result of ~~increases in~~ the ~~average escrow balance outstanding and~~overall growth of the ~~average earnings rate following the increases in short-term interest rates~~Company over the past ~~year. Other revenues~~year, increased ~~primarily due to an increase in investment sales placement fees~~travel and ~~prepayment fee income. The increase in personnel expense was primarily due to (i)~~entertainment costs, and increased commission costs due to the increase in origination fees, (ii) increased salaries expense due to a rise in headcount, (iii) increased bonus expense due to the Company’s improved financial performance and rise in headcount. We settled the risk-sharing losses on one loan in the third quarter of 2016, while we have settled no risk-sharing losses in 2017.acquisition related costs.

Financial Condition

Cash Flows from Operating Activities

Our cash flows from ~~operations~~operating activities are generated from loan sales, servicing fees, escrow earnings, net warehouse interest income, property sales broker fees, research subscription fees, investment banking advisory fees, and other income, net of loan originations and operating costs. Our cash flows from operations are impacted by the fees generated by our loan originations, the timing of loan closings, and the period of time loans are held for sale in the warehouse loan facility prior to delivery to the investor.

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Cash ~~Flow~~Flows from Investing Activities

We usually lease facilities and equipment for our operations. ~~However, when necessary and cost effective, we invest cash in property, plant, and equipment.~~ Our cash flows from investing activities also include the funding and repayment of loans held for investment, contributions to and distributions from joint ventures, purchases of equity-method investments, and the ~~funding~~purchase of ~~preferred equity investments.~~available-for-sale (“AFS”) securities pledged to Fannie Mae. We opportunistically invest cash for acquisitions and MSR portfolio purchases.

Cash ~~Flow~~Flows from Financing Activities

We use our warehouse loan facilities and, when necessary, our corporate cash to fund loan ~~closings.~~closings, both for loans held for sale and loans held for investment. We believe that our current warehouse loan facilities are adequate to meet our increasing loan origination needs. Historically, we have used a combination of long-term

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debt and cash ~~flows from operations~~on hand to fund ~~acquisitions,~~large acquisitions. Additionally, we repurchase shares, pay cash dividends, make long-term debt principal payments, and ~~fund~~repay short-term borrowings on a ~~portion~~regular basis. We issue stock primarily for exercise of ~~loans held~~stock options (cash inflow) and for ~~investment.~~acquisitions (non-cash transactions).

~~We currently do not pay dividends on our common stock and have never paid a dividend.~~

~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2022 Compared to ~~Nine~~Three Months Ended ~~September 30, 2016~~March 31, 2021

The following table presents a period-to-period comparison of the significant components of cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~ ~~Certain prior-year balances have been adjusted for the adoption~~2021.

Table of a new accounting standard relating to the presentation of cash flows associated with restricted cash and restricted cash equivalents during the fourth quarter of 2016 as more fully described in NOTE 2 of the 2016 Form 10-K.Contents

SIGNIFICANT COMPONENTS OF CASH FLOWS


	For the nine months ended September 30,				Dollar		Percentage

									For the three months ended March 31,				Dollar		Percentage
(dollars in thousands)	2017		2016		Change		Change		2022		2021		Change		Change
Net cash provided by (used in) operating activities	$	(1,328,432)	$	1,300,257	$	(2,628,689)	(202)	%	$	971,928	$	1,315,692	$	(343,764)	(26)	%
Net cash provided by (used in) investing activities		27,406		(92,260)		119,666	(130)			(44,440)		81,179		(125,619)	(155)
Net cash provided by (used in) financing activities		1,285,203		(1,242,291)		2,527,494	(203)			(1,096,656)		(1,423,259)		326,603	(23)
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period		197,644		180,190		17,454	10

Cash flows from operating activities
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")										224,012		331,614		(107,602)	(32)

Cash flows from (used in) operating activities
Net receipt (use) of cash for loan origination activity	$	(1,421,977)	$	1,238,428	$	(2,660,405)	(215)	%	$	1,013,187	$	1,340,034	$	(326,847)	(24)	%
Net cash provided by (used in) operating activities, excluding loan origination activity		93,545		61,829		31,716	51			(41,259)		(24,342)		(16,917)	69

Cash flows from investing activities
Funding of preferred equity investments	$	(16,321)	$	(15,538)	$	(783)	5	%
Capital invested in Interim Program JV		(6,184)		—		(6,184)	N/A

Cash flows from (used in) investing activities
Purchases of pledged AFS securities									$	(7,010)	$	(2,000)	$	(5,010)	251	%
Proceeds from the prepayment/sale of pledged AFS securities										1,672		20,884		(19,212)	(92)
Purchase of equity-method investments										(5,941)		(1,124)		(4,817)	429
Acquisitions, net of cash received		(15,000)		—		(15,000)	N/A			(78,465)		(7,506)		(70,959)	945
Purchase of mortgage servicing rights		—		(42,705)		42,705	(100)

Originations of loans held for investment		(167,680)		(218,958)		51,278	(23)
Total principal collected on loans held for investment		237,229		187,820		49,409	26
Capital expenditures										(11,790)		(1,794)		(9,996)	557
Net payoff of (investment in) loans held for investment	$	69,549	$	(31,138)	$	100,687	(323)			52,893		79,745		(26,852)	(34)

Cash flows from financing activities
Net distributions from (investments in) joint ventures										4,201		(7,026)		11,227	160

Cash flows from (used in) financing activities
Borrowings (repayments) of warehouse notes payable, net	$	1,360,969	$	(1,239,677)	$	2,600,646	(210)	%	$	(1,006,545)	$	(1,400,704)	$	394,159	(28)	%
Borrowings of interim warehouse notes payable		128,661		148,478		(19,817)	(13)			—		25,313		(25,313)	(100)
Repayments of interim warehouse notes payable		(175,934)		(138,898)		(37,036)	27			(11,200)		(29,534)		18,334	(62)
Repayments of notes payable										(13,759)		(745)		(13,014)	1,747
Payment of contingent consideration										(17,612)		—		(17,612)	N/A
Repurchase of common stock		(28,863)		(12,374)		(16,489)	133			(27,049)		(13,374)		(13,675)	102
Cash dividends paid										(20,077)		(16,052)		(4,025)	25

~~Changes~~The change in cash flows from ~~operations were~~operating activities was driven primarily by loans ~~acquired~~originated and sold. Such loans are held for short periods of time, generally less than 60 days, and impact cash flows presented as of a point in time. The decrease in cash flows ~~from operations~~received in loan origination activities is primarily attributable to ~~the use of $1.4~~a net decrease in sales (net cash received) outpacing originations by $1.0 billion ~~for the funding of loan originations, net of sales of loans to third parties during 2017~~in 2022 compared to ~~the receipt~~$1.3 billion in 2021. Our Agency debt financing activity decreased in 2021, which resulted in a lower loan held for sale balance as of ~~$1.2 billion for the funding of loan originations, net of sales~~December 31, 2021 compared to ~~third parties during 2016.~~December 31, 2020 resulting in fewer loans transferred in 2022 compared to 2021. Excluding cash used for the origination and sale of loans, cash flows used in operating activities were $41.3 million in 2022, up from $24.3 million in 2021. The increase is primarily the result of a $39.6 million reduction for the Apprise revaluation gain in 2022 with no comparable activity in 2021, partially offset by a $12.6 million lower use for other operating activities, net, ~~cash provided by operations was $93.5~~and a $12.5 million ~~during 2017 compared to net cash provided by operations of $61.8 million during 2016. The significant components of the change included an~~ increase ~~of $35.0 million~~ in net income before noncontrolling ~~interests, an increase of $16.7 million~~interest. The significant decrease in Total cash over the ~~adjustment~~past year is largely attributable to ~~net income for amortization and depreciation, and a greater increase to net income related to the change in the fair value of premiums and origination fees of $22.3 million,~~acquisition activity, partially offset by ~~a greater reduction to net income related to gains attributable to future servicing rights of $13.3 million during 2017, a greater reduction~~an increase in our long-term debt.

The change in cash flows provided by investing activities in 2021 to cash ~~related~~used in investing activities in 2022 was due to ~~accounts payable and other liabilities of $20.7 million, and a greater use of cash for performance deposits from borrowers of $2.7 million.~~

~~The~~(i) an increase in the cash ~~provided by (used in) investing activities is primarily attributable~~used in acquisitions due to ~~decreases~~an increase in the ~~net investment~~size of the acquisition in ~~loans held for investment and cash used for the purchase of mortgage servicing rights, partially offset by increases in net cash used for acquisitions and~~

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~~cash used to invest in the Interim Program JV. The net payoff of loans held for investment during 2017 was $69.5 million~~2022 compared to ~~net investment~~2021, (ii) a decrease in ~~loans held for investment of $31.1 million during 2016. Of the $69.5 million of~~ the net payoff of loans held for investment, ~~during 2017, $47.3 million was funded using interim warehouse borrowings (included~~(iii), a decrease in ~~cash flows from financing activities), with~~ the ~~other $22.2 million funded using~~payoff of pledged AFS securities, which is unpredictable, (iv) an increase in capital expenditures due to the build out of our new corporate ~~cash. Of~~headquarters, (v) an increase in the ~~$31.1 million~~purchase of equity-method investments as capital calls for capital commitments increased year over year, and (vi) an increase in the purchase of AFS securities, partially offset by a reduction in the net investment in joint ventures. In the first quarter of 2021, we had one small acquisition compared to the GeoPhy acquisition, which was substantially larger, resulting in an increase in cash used for acquisitions. Net payoff of loans held for investment ~~during 2016, $9.6 million was funded using interim warehouse borrowings, with the remaining $21.5 million funded using corporate cash. Net cash paid for acquisitions increased by $15.0 million~~decreased as ~~the Company did not execute any acquisitions during the first nine months of 2016. Cash paid to invest~~there were fewer payoffs in ~~the Interim Program JV increased by $6.2 million as the Interim Program JV began operations~~2022 than in ~~the third quarter of 2017. Lastly, cash paid for~~2021. Our purchases of ~~mortgage servicing rights decreased by $42.7 million~~AFS securities increased in 2022 as we ~~did not purchase any mortgage servicing rights~~reinvested the funds from the payoff of AFS securities late in ~~2017.~~2021.

The ~~substantial change~~decrease in cash ~~provided~~used by ~~(used in)~~ financing ~~activities~~activity was primarily attributable to ~~the significant change~~a decrease in net warehouse ~~borrowings period to period,~~repayments, partially offset by increases in (i) the net repayment of interim warehouse notes payables, (ii) repayments of notes payable, (iii) repurchase of common stock, (iv)

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dividends paid, and (v) cash payments of contingent consideration liabilities. The decrease in the net repayment in warehouse notes payable was due to the aforementioned decrease in cash received from loan origination activity. The increase in net cash repayments of interim warehouse notes payable ~~and cash used~~was primarily due to ~~repurchase and retire shares~~a reduction in borrowings. The increase in repayments of ~~our common stock. The change in net borrowings (repayments) of warehouse borrowings during 2017~~notes payable was due to the quarterly paydowns of a ~~large~~note payable at our subsidiary, Alliant. The Alliant note payable requires much more significant paydowns than our corporate debt. The increase in cash paid for repurchases of common stock was related to significant vesting events in our various share-based compensation plans. Cash dividends paid increased largely as a result of the increase in our dividend to $0.60 per share in 2022 compared to $0.50 per share in 2021.

Segment Results

The Company is managed based on our three operating segments: (i) Capital Markets, (ii) Servicing & Asset Management, and (iii) Corporate. The segment results below are intended to present each of the operating segments on a stand-alone basis.

Capital Markets

SUPPLEMENTAL OPERATING DATA

CAPITAL MARKETS


	For the three months ended
	March 31,
(in thousands; except per share data)	2022			2021
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	1,998,374		$	1,533,024
Freddie Mac		987,849			1,012,720
Ginnie Mae ̶ HUD		391,693			622,133
Brokered⁽¹⁾		5,643,081			4,302,492
Total Debt Financing Volume	$	9,020,997		$	7,470,369
Property Sales Volume		3,531,690			1,395,760
Total Transaction Volume	$	12,552,687		$	8,866,129

Key Performance Metrics:
Operating Margin		36	%		48	%
Adjusted EBITDA⁽²⁾	$	11,256		$	17,131

Key Revenue Metrics (as a percentage of debt financing volume):
Origination related fees⁽³⁾		0.90	%		1.02	%
MSR income⁽⁴⁾		0.58			0.78
MSR income, as a percentage of Agency debt financing volume⁽⁴⁾		1.56			1.83

(1)

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

(2)

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

(3)

The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained. Excludes the income and debt financing volume from Principal Lending and Investing.

(4)

The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained, as a percentage of Agency volume.

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FINANCIAL RESULTS – THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	81,823	$	75,295	$	6,528	9	%
Fair value of expected net cash flows from servicing, net		52,730		57,935		(5,205)	(9)
Property sales broker fees		23,398		9,042		14,356	159
Net warehouse interest income, loans held for sale		3,530		2,459		1,071	44
Other revenues		2,763		2,560		203	8
Total revenues	$	164,244	$	147,291	$	16,953	12

Expenses
Personnel	$	98,726	$	72,635	$	26,091	36	%
Amortization and depreciation		—		521		(521)	(100)
Other operating expenses		6,111		3,402		2,709	80
Total expenses	$	104,837	$	76,558	$	28,279	37
Income from operations	$	59,407	$	70,733	$	(11,326)	(16)
Income tax expense		12,847		14,615		(1,768)	(12)
Net income	$	46,560	$	56,118	$	(9,558)	(17)

Revenues

Loan origination and debt brokerage fees, net (“origination fees”) and Fair value of expected net cash flows from servicing, net (“MSR Income”). The following tables provide additional information that helps explain changes in origination fees and MSR Income period over period:


	For the three months ended
	March 31,
Debt Financing Volume by Product Type	2022		2021
Fannie Mae	22	%	21	%
Freddie Mac	11		14
Ginnie Mae ̶ HUD	4		8
Brokered	63		57


	For the three months ended
	March 31,
Mortgage Banking Details (basis points)	2022			2021
Origination Fee Rate ⁽¹⁾		90			102
Basis Point Change		(12)
Percentage Change		(12)	%
MSR Rate ⁽²⁾		58			78
Basis Point Change		(20)
Percentage Change		(26)	%
Agency MSR Rate ⁽³⁾		156			183
Basis Point Change		(27)
Percentage Change		(15)	%

(1)	Loan origination and debt brokerage fees, net as a percentage of total mortgage banking volume.

(2)	MSR Income as a percentage of total debt financing volume, excluding the income and debt financing volume from principal lending and investing.

(3)	MSR Income as a percentage of Agency debt financing volume.

The increase in origination fees was driven by the increase in overall debt financing volume, particularly the substantial growth in our Fannie Mae and brokered debt financing volume, which grew by 30% and 31%, respectively, from 2021. The increase in origination fees due

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to the increase in volume was partially offset by a decrease in the origination fee rate resulting from the shift in transaction mix from 43% Agency loans in 2021 to 37% Agency loans in 2022, and specifically from lower HUD volumes in the first quarter of 2022 as compared to the first quarter of 2021. We typically earn higher origination fees on Agency loans than brokered loans.

The decrease in MSR Income was primarily a result of a decrease in the MSR Rate due to the aforementioned change in transaction mix and a decline in the Agency MSR Rate, partially offset by a 7% percent increase in Agency debt financing volume. The decrease in Agency MSR rate was the result of the significant decline in HUD debt financing volume as HUD loans have the highest MSR margins of all our products. Additionally, the weighted-average servicing fee for our Fannie Mae debt financing volume decreased 25% year over year.

See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the changes in debt financing volumes.

Property sales broker fees. The increase in property sales broker fees was driven by significant increases in the property sales volumes year over year. See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the changes in property sales volumes.

Net Warehouse Interest Income, loans held for sale. The increase in net warehouse interest income was primarily due to the increase in the ~~unpaid principal~~net spread shown below, as the short-term interest rates upon which we incur interest expense increased at a slower rate than the mortgage rates upon which we earn interest income. The increase in net warehouse interest income was partially offset by a lower average balance of loans held for sale ~~funded by Agency Warehouse Facilities (as defined below)~~outstanding in 2022 compared to 2021.


	For the three months ended
	March 31,
Net Warehouse Interest Income Details (dollars in thousands)	2022			2021
Average LHFS Outstanding Balance	$	1,145,882		$	1,503,204
Dollar Change	$	(357,322)
Percentage Change		(24)	%
LHFS Net Spread (basis points)		123			65
Basis Point Change		58
Percentage Change		89	%

Expenses

Personnel. The increase was primarily the result of (i) a $15.7 million increase in commission costs due to higher origination fees and property sales broker fees, (ii) a $4.5 million increase in salaries and benefits due to a higher average headcount to support our growth efforts, and (iii) a $5.0 million increase in the accrual for subjective bonuses due to the increase in average headcount and the Company’s financial performance.

Other Operating Expenses. The increase primarily stemmed from ~~December 31, 2016~~a $2.3 million increase in travel and entertainment costs associated with the growth of the Company and increased travel costs as our bankers and brokers attended more in person meetings compared to ~~September 30, 2017. During 2017,~~ the ~~unpaid principal balance~~first quarter of 2021.

Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations.

Non-GAAP Financial Measures

A reconciliation of adjusted EBITDA for our CM segment is presented below. Our segment level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measures. CM adjusted EBITDA is reconciled to net income as follows:

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ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

CAPITAL MARKETS


	For the three months ended
	March 31,
(in thousands)	2022		2021
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	46,560	$	56,118
Income tax expense		12,847		14,615
Amortization and depreciation		—		521
Share-based compensation expense		4,579		3,812
Fair value of expected net cash flows from servicing, net		(52,730)		(57,935)
Adjusted EBITDA	$	11,256	$	17,131

ADJUSTED EBITDA – THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	81,823	$	75,295	$	6,528	9	%
Property sales broker fees		23,398		9,042		14,356	159
Net warehouse interest income, loans held for sale		3,530		2,459		1,071	44
Other revenues		2,763		2,560		203	8
Personnel		(94,147)		(68,823)		(25,324)	37
Other operating expenses		(6,111)		(3,402)		(2,709)	80
Adjusted EBITDA	$	11,256	$	17,131	$	(5,875)	(34)

Loan origination and debt brokerage fees, net increased due to increases in overall debt financing volumes. Property sales broker fees increased as a result of the significant increases in property sales volumes. Net warehouse interest income, loans held for sale ~~funded by Agency Warehouse Facilities~~ increased $1.4 billion from their December 31, 2016 balance compared to a decrease of $1.2 billion during the same period in 2016. The change in net borrowings of interim warehouse notes payable was principallyprimarily due ~~to a decrease in originations of loans held for investment and an increase in payoffs of loans held for investment year over year. The increase in share repurchase activity was principally related~~ to an increase in the ~~repurchase~~net spread, partially offset by a decrease in the average balance outstanding. The increases in personnel expense were primarily due to increased (i) commission costs due to the increases in total transaction volumes, (ii) salaries and benefits resulting from increases in average headcount from strategic acquisitions and hiring initiatives, and (iii) accrual for subjective bonuses due to the increase in the average headcount and the Company’s financial performance. Other operating expenses increased as a result of ~~shares~~the increased travel and marketing costs.

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Servicing & Asset Management

SUPPLEMENTAL OPERATING DATA

SERVICING & ASSET MANAGEMENT


(dollars in thousands)	As of March 31,
Managed Portfolio:	2022			2021
Components of Servicing Portfolio
Fannie Mae	$	54,000,550		$	50,113,076
Freddie Mac		36,965,185			37,695,462
Ginnie Mae - HUD		9,954,262			9,754,667
Brokered ⁽¹⁾		15,115,619			12,090,825
Principal Lending and Investing ⁽²⁾		221,649			213,240
Total Servicing Portfolio	$	116,257,265		$	109,867,270
Assets under management		16,687,112			1,836,086
Total Managed Portfolio	$	132,944,377		$	111,703,356

	For the three months ended
	March 31,
Key Volume and Performance Metrics:	2022			2021
Principal Lending and Investing Origination Volume⁽³⁾	$	114,020		$	178,250
Adjusted EBITDA⁽⁴⁾		87,773			69,419
Operating Margin		37	%		44	%

	As of March 31,
Key Servicing Portfolio Metrics:	2022			2021
Custodial escrow account balance (in billions)	$	2.5		$	2.5
Weighted-average servicing fee rate (basis points)		25.0			24.3
Weighted-average remaining servicing portfolio term (years)		9.1			9.2

		As of March 31,
Components of assets under management (in thousands)	2022			2021
Alliant⁽⁵⁾
Syndication	$	13,928,089		$	—
Real Estate Investment		557,475			—
Total Alliant assets under management	$	14,485,564		$	—

WDIP
Funds	$	609,717		$	670,872
Separate accounts		661,535			504,215
Total WDIP assets under management	$	1,271,252		$	1,175,087

Interim Program JV Managed Loans⁽⁶⁾	$	930,296		$	660,999

Total assets under management	$	16,687,112		$	1,836,086

(1)	Brokered loans serviced primarily for life insurance companies.

(2)	Consists of interim loans not managed for the Interim Program JV.

(3)	For the three months ended March 31, 2022, includes $86.3 million from the Interim Program JV and $27.7 million from WDIP separate accounts. For the three months ended March 31, 2021, includes $144.5 million from the Interim Program JV and $33.8 million from the Interim Loan Program.

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(4)	This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled “Non-GAAP Financial Measures”.

(5)	Alliant assets under management were acquired in December 2021.

(6)	As of March 31, 2022, only comprised of Interim Program JV managed loans. As of March 31, 2021, includes $587.7 million of Interim Program JV managed loans and $73.3 million of loans serviced directly for the Interim Program JV partner.

FINANCIAL RESULTS – THREE MONTHS

SERVICING & ASSET MANAGEMENT


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	487	$	584	$	(97)	(17)	%
Servicing fees		72,681	$	65,978		6,703	10
Net warehouse interest income, loans held for investment		1,243		2,096		(853)	(41)
Escrow earnings and other interest income		1,758		1,999		(241)	(12)
Other revenues		34,897		7,508		27,389	365
Total revenues	$	111,066	$	78,165	$	32,901	42

Expenses
Personnel	$	18,638	$	7,111	$	11,527	162	%
Amortization and depreciation		54,931		45,378		9,553	21
Provision (benefit) for credit losses		(9,498)		(11,320)		1,822	(16)
Other operating expenses		6,119		2,253		3,866	172
Total expenses	$	70,190	$	43,422	$	26,768	62
Income from operations	$	40,876	$	34,743	$	6,133	18
Income tax expense		8,839		7,178		1,661	23
Income before noncontrolling interests	$	32,037	$	27,565	$	4,472	16
Less: net income (loss) from noncontrolling interests		(679)		—		(679)	N/A
Net income	$	32,716	$	27,565	$	5,151	19

Revenues

Servicing Fees. The increase was primarily attributable to ~~settle employee tax obligations for restricted~~an increase in the average servicing portfolio period over period as shown below, primarily due to a $3.9 billion net increase in Fannie Mae serviced loans and ~~performance-based share awards along~~a $3.0 billion net increase in brokered loans serviced over the past year, coupled with an increase in the servicing portfolio’s average servicing fee rate as shown below. The increase in the average servicing fee is the result of the large volume of Fannie Mae debt financing volume over the past year.


	For the three months ended
	March 31,
Servicing Fees Details (dollars in thousands)	2022			2021
Average Servicing Portfolio	$	116,137,461		$	108,568,268
Dollar Change		7,569,193
Percentage Change		7	%
Average Servicing Fee (basis points)		24.9			24.2
Basis Point Change		0.8
Percentage Change		3	%

Other Revenues. The increase was primarily attributable to: (i) an $18.5 million increase in asset management fees and other Alliant revenues, (ii) a $4.1 million increase in research subscription fees, and (iii) a $5.0 million increase in prepayment penalties. The increase in asset management fees and other Alliant revenues was driven by our Alliant LIHTC operations, and the research subscription fees increase was driven by Zelman, both of which were acquired in the second half of 2021. The increase in prepayment fees was due to a substantial increase in the volume of loans that prepaid year over year due to anticipated changes in the interest rate environment.

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Expenses

Personnel. The increase was the result of an $11.4 million increase in salaries and benefits due to growth in headcount as a result of strategic acquisitions that occurred during the second half of 2021.

Amortization and Depreciation. The increase was primarily attributed to loan origination activity and the resulting growth in the average MSR balance. Over the past 12 months, we have added $66.7 million of MSRs, net of amortization and write offs due to prepayment. Additionally, we had a $3.3 million increase in amortization of intangible assets from our strategic investments in 2021.

Provision (Benefit) for Credit Losses. The benefit for credit losses for first quarter of 2022 was primarily attributable to the update in our historical loss rate factor that is based on a 10-year rolling period. The historical loss rate decreased to 1.2 basis points as of March 31, 2022 compared to 1.8 basis points as of December 31, 2021. In response to improving unemployment statistics and the expected continued overall health of the multifamily market, we adjusted the loss rate for the forecast period downwards to four basis points as of March 31, 2021 from six basis points as of December 31, 2020, resulting in the benefit for risk-sharing obligations for the first quarter of 2021.

Other Operating Expenses. The increase primarily stemmed from a $2.5 million increase in office and other expenses and a $1.2 million increase in professional fees to support growth in our operations.

Income Tax Expense. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportional-ly based on each segment’s income from operations.

Non-GAAP Financial Measures

A reconciliation of adjusted EBITDA for our SAM segment is presented below. Our segment level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measures. SAM adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

SERVICING & ASSET MANAGEMENT


	For the three months ended
	March 31,
(in thousands)	2022		2021
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	32,716	$	27,565
Income tax expense		8,839		7,178
Amortization and depreciation		54,931		45,378
Provision (benefit) for credit losses		(9,498)		(11,320)
Net write-offs		—		—
Share-based compensation expense		785		618
Adjusted EBITDA	$	87,773	$	69,419

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ADJUSTED EBITDA – THREE MONTHS

SERVICING & ASSET MANAGEMENT


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	487	$	584	$	(97)	(17)
Servicing fees		72,681		65,978		6,703	10
Net warehouse interest income, loans held for investment		1,243		2,096		(853)	(41)
Escrow earnings and other interest income		1,758		1,999		(241)	(12)
Other revenues		35,576		7,508		28,068	374
Personnel		(17,853)		(6,493)		(11,360)	175
Net write-offs		—		—		—	N/A
Other operating expenses		(6,119)		(2,253)		(3,866)	172
Adjusted EBITDA	$	87,773	$	69,419	$	18,354	26

Servicing fees increased due to growth in the average servicing portfolio period over period as a result of loan originations and relatively few payoffs in the quarter. Other revenues increased primarily due to the addition of asset management and other fees and research subscription fees resulting from our acquisitions in the second of half of 2021 and an increase in prepayment penalties. Personnel and Other operating expenses increased due to growth in headcount and operations from the aforementioned acquisitions.

Corporate

FINANCIAL RESULTS – THREE MONTHS

CORPORATE


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Other interest income	$	45	$	118	$	(73)	(62)	%
Other revenues		44,089		(1,286)		45,375	(3,528)
Total revenues	$	44,134	$	(1,168)	$	45,302	(3,879)

Expenses
Personnel	$	26,817	$	16,469	$	10,348	63	%
Amortization and depreciation		1,221		972		249	26
Interest expense on corporate debt		6,405		1,765		4,640	263
Other operating expenses		19,984		11,932		8,052	67
Total expenses	$	54,427	$	31,138	$	23,289	75
Income from operations	$	(10,293)	$	(32,306)	$	22,013	(68)
Income tax expense		(2,226)		(6,675)		4,449	(67)
Net income	$	(8,067)	$	(25,631)	$	17,564	(69)

Adjusted EBITDA	$	(36,393)	$	(25,883)	$	(10,510)	41	%

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Revenues

Other Revenues. The increase was primarily due to the $39.6 million Apprise revaluation gain. As part of our acquisition of GeoPhy, we acquired the other 50% interest in Apprise. The revaluation of our existing 50% ownership interest with a carrying value of $18.9 million to a fair value of $58.5 million resulted in a $39.6 million gain. The remaining increase was due to a $6.0 million increase in income from our other equity-method investments.

Expenses

Personnel. The increase was primarily the ~~Company’s stock,~~result of a $8.2 million increase in salaries and benefits and in the accrual for subjective bonuses due to the increase in average headcount and the Company’s financial performance and a $2.2 million increase in stock-based compensation expense due to higher stock-based compensation expense associated with our performance share plans due to the Company’s financial performance.

Interest expense on corporate debt. The increase was driven by an increase of slightly more than 100% in the size of our corporate debt during the fourth quarter of 2021 and an increase in interest expense related to a note payable at our subsidiary, Alliant, which we assumed in the fourth quarter of 2021.

Other Operating Expenses. The increase was primarily due to: (i) a $5.3 million increase in professional fees largely due to increases in legal and other professional fees related to our acquisitions and growth of the Company, (ii) a $1.2 million increase in office expenses related to the growth of the company and acquired offices, and (iii) a $1.1 million increase in travel and entertainment costs attributable to the growth of the Company and as travel and entertainment costs in 2021 were depressed due to the pandemic.

Non-GAAP Financial Measures

A reconciliation of adjusted EBITDA for our Corporate segment is presented below. Our segment level adjusted EBITDA represents the segment portion of consolidated adjusted EBITDA. A detailed description and reconciliation of consolidated adjusted EBITDA is provided above in our Consolidated Results of Operations—Non-GAAP Financial Measures. Corporate adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

CORPORATE


	For the three months ended
	March 31,
(in thousands)	2022		2021
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	(8,067)	$	(25,631)
Income tax expense		(2,226)		(6,675)
Interest expense on corporate debt		6,405		1,765
Amortization and depreciation		1,221		972
Share-based compensation expense		5,915		3,686
Gain from revaluation of previously held equity-method investment		(39,641)		—
Adjusted EBITDA	$	(36,393)	$	(25,883)

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The following table presents a period-to-period comparison of the components of Corporate adjusted EBITDA for the three months ended March 31, 2022 and 2021.

ADJUSTED EBITDA – THREE MONTHS

CORPORATE


	For the three months ended
	March 31,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Other interest income		45		118		(73)	(62)
Other revenues		4,448		(1,286)		5,734	(446)
Personnel		(20,902)		(12,783)		(8,119)	64
Other operating expenses		(19,984)		(11,932)		(8,052)	67
Adjusted EBITDA	$	(36,393)	$	(25,883)	$	(10,510)	41

Other revenues increased ~~the taxable compensation~~primarily due to ~~employees upon vesting. No performance-based awards vested during 2016~~our equity method investments generating income in 2022 compared to ~~0.6 million shares during 2017. Additionally, we repurchased 0.2 million shares~~losses in 2021. The increase in personnel expense were primarily due to increased salaries and benefits resulting from increases in average headcount and the Company’s financial performance. Other operating expenses increased as a result of ~~our own stock under a repurchase program as more fully discussed below in~~ the ~~“Uses~~overall growth of ~~Liquidity, Cash~~the Company over the past year and ~~Cash Equivalents” section.~~from increased professional costs associated with acquisitions.

Liquidity and Capital Resources

Uses of Liquidity, Cash and Cash Equivalents

Our significant recurring cash flow requirements consist of ~~(i) short-term~~ liquidity ~~necessary~~ to (i) fund loans held for sale; (ii) ~~liquidity necessary to~~ fund loans held for investment under the Interim Loan Program; (iii) ~~liquidity necessary to fund our preferred equity investments;~~pay cash dividends; (iv) ~~liquidity necessary to~~ fund our portion of the equity necessary for the operations of the Interim Program ~~JV;~~JV, our appraisal JV, and other equity-method investments; (v) fund investments in properties to be syndicated to LIHTC investment funds that we will asset-manage;(vi) make payments related to earnouts from acquisitions, (vii) meet working capital needs to support our day-to-day operations, including debt service payments, joint venture development partnerships contributions, servicing advances ~~consisting of principal and interest advances for Fannie Mae or HUD loans that become delinquent, advances on insurance and tax payments if the escrow funds are insufficient,~~ and payments for salaries, commissions, and income ~~taxes;~~taxes,; and ~~(vi)~~(viii) meet working capital to satisfy collateral requirements for our Fannie Mae DUS risk-sharing obligations and to meet the operational liquidity requirements of Fannie Mae, Freddie Mac, HUD, Ginnie Mae, and our warehouse facility lenders.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate our servicing authority for all or some of the portfolio if, at any time, it determines that our financial condition is not adequate to support our obligations under the DUS agreement. We are required to maintain acceptable net worth as defined in the standards, and we satisfied the ~~September 30, 2017 requirements.~~requirements as of March 31, 2022. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. ~~At September 30, 2017,~~As of March 31, 2022, the ~~minimum~~ net worth requirement was ~~$145.7~~$261.2 million, and our net worth ~~as defined in the requirements,~~ was ~~$634.5~~$704.8 million, as measured at our wholly owned operating subsidiary, Walker && Dunlop, LLC. As of ~~September 30, 2017,~~March 31, 2022, we were required to maintain at least ~~$28.6~~$51.8 million of liquid assets to meet our operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, Ginnie Mae and our warehouse facility lenders. As of ~~September 30, 2017,~~March 31, 2022, we had operational liquidity ~~as defined in the requirements,~~ of ~~$145.1~~$98.6 million, as measured at our wholly owned operating subsidiary, Walker && Dunlop, LLC.

~~As noted previously, under certain limited circumstances, we may make preferred equity investments~~We paid a cash dividend of $0.60 per share for the first quarter of 2022, which is 20% higher than the quarterly dividend paid in ~~entities controlled by certain~~the first quarter of 2021. On May 4, 2022, the Company’s Board of Directors declared a dividend of $0.60 per share for the second quarter of 2022. The dividend will be paid on June 3, 2022 to all holders of record of our ~~borrowers that will assist those borrowers to acquire~~restricted and ~~reposition properties. The terms~~unrestricted common stock as of ~~such investments are negotiated with each investment. As of September 30, 2017,~~May 19, 2022.

Over the past three years, we have ~~funded $41.2~~returned $188.3 million to investors in the form of ~~such investments. We expect these preferred equity investments to be repaid to us within~~ the ~~next two years~~.

~~We currently retain all future earnings for the operation and expansion~~repurchase of ~~our business and therefore do not pay cash dividends on our common stock. Since the beginning of 2014, we have repurchased 5.5~~0.5 million shares of our common stock ~~from large stockholders~~under share repurchase programs for ~~an aggregate~~a cost of ~~$82.3~~$30.5 million and cash dividend payments of $157.8 million. Additionally, we have invested ~~$93.3~~$834.9 million ~~of cash~~ in ~~acquisitions and the purchase of mortgage servicing rights, and funded $41.2 million of preferred equity investments.~~acquisitions. On occasion, we may use cash to fully fund ~~Agency~~some loans held for investment or loans held for sale instead of using our warehouse ~~line.~~lines. As of ~~September 30, 2017,~~March 31, 2022, we ~~used corporate cash~~did not fully fund any such loans. We continually seek opportunities to ~~fund Agency loans held for sale with an unpaid principal balance~~complete additional acquisitions if we believe the economics are favorable.

Table of ~~$64.3 million. During the first quarter of 2017,~~Contents

In February 2022, our Board of Directors ~~authorized us to~~approved a stock repurchase program that permits the repurchase of up to $75.0 million of shares of our common stock over a 12-month period ~~ending~~beginning February ~~10, 2018. We~~13, 2022. Through March 31, 2022 we have not repurchased ~~228 thousand~~any shares under the 2022 repurchase program and have $75.0 million of ~~our stock with an aggregate cost of $10.8~~

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~~million~~remaining capacity under ~~this~~that program.

Historically, our cash flows from operations and warehouse facilities have been sufficient to enable us to meet our short-term liquidity needs and other funding requirements. We believe that cash flows from operations will continue to be sufficient for us to meet our current obligations for the foreseeable future.

Restricted Cash and Pledged Securities

Restricted cash consists primarily of good faith deposits held on behalf of borrowers between the time we enter into a loan commitment with the borrower and the ~~borrower closes~~investor purchases the ~~loan.~~loan and cash held in collection accounts to be used to fund the repayment of the Alliant note payable. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS ~~program.~~program, our only off-balance sheet arrangement. We are required to secure this obligation by assigning collateral to Fannie Mae. We meet this obligation by assigning pledged securities to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires collateral for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. Collateral held in the form of money market funds holding U.S. Treasuries is discounted 5%, and Agency MBS are discounted 4% for purposes of calculating compliance with the collateral requirements. As of ~~September 30, 2017,~~March 31, 2022, we held substantially all of our restricted liquidity in ~~money market funds holding U.S. Treasuries~~Agency MBS in the aggregate amount of ~~$91.0~~$107.6 million. Additionally, ~~substantially all~~the majority of the loans for which we have ~~risk sharing~~risk-sharing are Tier 2 loans. We fund any growth in our Fannie Mae required operational liquidity and collateral requirements from our working capital.

We are in compliance with the ~~September 30, 2017~~March 31, 2022 collateral requirements as outlined above. As of ~~September 30, 2017,~~March 31, 2022, reserve requirements for the March 31, 2022 DUS loan portfolio will require us to fund ~~$61.3~~$68.2 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our ~~at risk~~at-risk portfolio. Fannie Mae ~~periodically reassesses~~has assessed the DUS Capital Standards in the past and may make changes to these standards in the future. We generate sufficient cash ~~flow~~flows from our operations to meet these capital standards and do not expect any future changes to have a material impact on our future operations; however, any future changes to collateral requirements may adversely impact our available cash.

Under the provisions of the DUS agreement, we must also maintain a certain level of liquid assets referred to as the operational and unrestricted portions of the required reserves each year. We satisfied these requirements as of ~~September 30, 2017.~~March 31, 2022.

Sources of Liquidity: Warehouse Facilities and Notes Payable

~~The following table provides information related to our~~Warehouse Facilities

We utilize a combination of warehouse facilities ~~as of September 30, 2017.~~

September 30, 2017

(dollars in thousands)

Committed

Uncommitted

Temporary

Total Facility

Outstanding


Facility

Amount

Amount

Increase

Capacity

Balance

Interest rate
Agency Warehouse Facility #1

$
425,000

$
—

$
—

$
425,000

$
190,054

30-day LIBOR plus 1.40%
Agency Warehouse Facility #2

500,000

—

2,066,000

2,566,000

2,228,837

30-day LIBOR plus 1.30%
Agency Warehouse Facility #3

480,000

—

400,000

880,000

424,714

30-day LIBOR plus 1.25%
Agency Warehouse Facility #4

350,000

—

—

350,000

285,170

30-day LIBOR plus 1.40%
Agency Warehouse Facility #5

30,000

—

—

30,000

5,797

30-day LIBOR plus 1.80%
Agency Warehouse Facility #6

250,000

250,000

—

500,000

—

30-day LIBOR plus 1.35%
Fannie Mae repurchase agreement, uncommitted line and open maturity

—

1,500,000

—

1,500,000

75,391

30-day LIBOR plus 1.15%
Total Agency Warehouse Facilities

$
2,035,000

$
1,750,000

$
2,466,000

$
6,251,000

$
3,209,963

Interim Warehouse Facility #1

$
85,000

$
—

$
—

$
85,000

$
43,440

30-day LIBOR plus 1.90%
Interim Warehouse Facility #2

200,000

—

—

200,000

23,272

30-day LIBOR plus 2.00%
Interim Warehouse Facility #3

75,000

—

—

75,000

29,132

30-day LIBOR plus 2.00% to 2.50%
Total Interim Warehouse Facilities

$
360,000

$
—

$
—

$
360,000

$
95,844

Total warehouse facilities

$
2,395,000

$
1,750,000

$
2,466,000

$
6,611,000

$
3,305,807

~~Agency Warehouse Facilities~~

~~At September 30, 2017,~~and notes payable to provide ~~financing~~funding for our operations. We utilize warehouse facilities to ~~borrowers under the Agencies’ programs, we have six committed~~fund our Agency Lending, Interim Loan Program, and ~~uncommitted~~

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warehouse lines of credit in the amount of $4.8 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). Five of these facilities are revolving commitments we expect to renew annually (consistent with industry practice), one we expect to renew every 18 months, and the other facility is provided on an uncommitted basis without a specific maturity date.LIHTC operations. Our ability to originate Agency mortgage loans ~~intended to be sold under an Agency execution~~and loans held for investments depends upon our ability to secure and maintain these types of short-term financing agreements on acceptable terms.

~~Agency Warehouse Facility #1~~

~~We have~~ For a warehousing credit and security agreement with a national bank for a $425.0 million committed warehouse line. The warehousing credit and security agreement provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100%detailed description of the ~~loan balance, and borrowings under this line bear interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 140 basis points. During the fourth quarter~~terms of ~~2017, we executed the 13~~th ~~amendment to the~~each warehouse agreement ~~that extended~~including the ~~maturity date~~affirmative and negative covenants, refer to ~~November 30, 2017~~. ~~No other material modifications have been made to the agreement during 2017.~~

~~Agency Warehouse Facility #2~~

~~We have a warehousing credit and security agreement with a national bank for a $2.6 billion committed warehouse line.~~ ~~The total commitment amount of $2.6 billion as of September 30, 2017 consists of a base committed amount of $500.0 million and a temporary increase of $2.1 billion, as more fully described below.~~ ~~The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans.Advances are made at 100% of the loan balance, and borrowings under this line bear interest at 30-day LIBOR plus 130 basis points.~~ During the third quarter of 2017, we executed the Second Amended and Restated Warehousing Credit and Security Agreement (the “Second Amended Agreement”). The Second Amended Agreement removed one of the lenders under the prior agreement, which reduced the maximum committed borrowing capacity to $500.0 million. It also extended the maturity date to September 10, 2018 and reduced the interest rate to the 30-day LIBOR plus 130 basis points. In addition to the committed borrowing capacity, the Second Amended Agreement provides $300.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. Concurrent with the execution of the Second Amended Agreement, we executed ~~a new, separate warehousing credit agreement with one of the lenders under the prior facility, which is referred to as Agency Warehouse Facility #6 and is more fully described below~~. Also during the third quarter of 2017, we executed the first amendment to the Second Amended Agreement that provides a temporary increase of $2.1 billion to fund a specific portfolio of loans. The temporary increase expires the sooner of the sale of the portfolio of loans, or February 28, 2018. The uncommitted borrowing capacity is reduced to zero while the temporary increase is outstanding. No other material modifications have been made to the agreement during 2017.

~~Agency Warehouse Facility #3~~

~~We have a warehousing credit and security agreement with a national bank for a $880.0 million committed warehouse line.~~ ~~The total commitment amount of $880.0 million as of September 30, 2017 consists of a base committed amount of $480.0 million and a temporary increase of $400.0 million, as more fully described below.~~ The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 125 basis points. During the second quarter of 2017, we executed the seventh amendment to the warehouse agreement. The amendment reduced the interest rate to the 30-day LIBOR plus 125 basis points, extended the maturity date to April 30, 2018, and increased the permanent borrowing capacity to $480.0 million. During the third quarter of 2017, we executed the eighth amendment to the warehouse agreement that provided for a temporary increase to the borrowing capacity of $400.0 million that expires January 30, 2018. No other material modifications have been made to the agreement during 2017.

~~Agency Warehouse Facility #4~~

We have a warehousing credit and security agreement with a national bank for a $350.0 million committed warehouse line. The committed warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of the loan balance, and borrowings under this line bear interest at 30-day LIBOR plus 130 basis points. During the fourth quarter of 2017, we executed the third amendment to the warehouse agreement that extended the maturity date to October 5, 2018 and reduced the interest rate to 30-day LIBOR plus 130 basis points. ~~No other material modifications have been made to the agreement during 2017.~~

~~Agency Warehouse Facility #5~~

~~We have a $30.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature in January 2018. The committed warehouse facility provides us with the ability to fund defaulted HUD and FHA loans. The borrowings under~~

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~~the warehouse agreement bear interest at a rate of 30-day LIBOR plus 180 basis points. No material modifications have been made to the agreement during 2017.~~

~~Agency Warehouse Facility #6~~

During the third quarter of 2017, we executed a warehousing and security agreement that established Agency Warehouse Facility #6. The warehouse facility has a $250.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures September 18, 2018. The borrowings under the warehouse agreement bear interest at a rate of 30-day LIBOR plus 135 basis points. In addition to the committed borrowing capacity, the agreement provides $250.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility.

~~Uncommitted Agency Warehouse Facility~~

We have a $1.5 billion uncommitted facility with Fannie Mae under its As Soon As Pooled funding program. After approval of certain loan documents, Fannie Mae will fund loans after closing and the advances are used to repay the primary warehouse line. Fannie Mae will advance 99% of the loan balance, and borrowings under this program bear interest at 30-day LIBOR plus 115 basis points, with a minimum 30-day LIBOR rate of 35 basis points. There is no expiration date for this facility. ~~No changes have been made to the uncommitted facility during 2017.~~ ~~The uncommitted facility has no specific negative or financial covenants.~~

~~Interim~~ “Warehouse Facilities

~~To assist~~” in ~~funding loans held for investment under the Interim Program, we have three warehouse facilities with certain national banks~~NOTE 6 in the aggregate amount of $0.4 billion as of September 30, 2017 (“Interim Warehouse Facilities”). Consistent with industry practice, two of these facilities are revolving commitments we expect to renew annually and one is a revolving commitment we expect to renew every two years. Our ability to originate loans held for investment depends uponconsolidated financial statements in our ~~ability to secure and maintain these types of short-term financings on acceptable terms.~~2021 Form 10-K, updated in NOTE 6 in the condensed consolidated financial statements in this Form 10-Q.

~~Interim Warehouse Facility #1~~Notes Payable

We have an $85.0 million committed warehouse line agreement that provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company and bear interest at 30-day LIBOR plus 190 basis points. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. During the second quarter of 2017, we executed the seventh amendment to the credit and security agreement that extended the maturity date to April 30, 2018. No other material modifications have been made to the agreement during 2017.

~~Interim Warehouse Facility #2~~

We have a $200.0 million committed warehouse line agreement that is scheduled to mature on December 13, 2017. The agreement provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. All borrowings bear interest at 30-day LIBOR plus 200 basis points. The lender retains a first priority security interest in all mortgages funded by such advances on a cross-collateralized basis. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. No material modifications have been made to the agreement during 2017.

~~Interim Warehouse Facility #3~~

We have a $75.0 million repurchase agreement that provides us with the ability to fund first mortgage loans on multifamily real estate properties for periods of up to three years, using available cash in combination with advances under the facility. The borrowings under the agreement bear interest at a rate of 30-day LIBOR plus 200 basis points to 250 basis points (“the spread”). The spread varies according to the type of asset the borrowing finances. Repayments under the credit agreement are interest-only, with principal repayments made upon the earlier of the refinancing of an underlying mortgage or the maturity of an advance under the credit agreement. ~~During the second quarter of 2017, we exercised our option to extend the maturity date to May 19, 2018. No other material modifications have been made to the agreement during 2017.~~

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As a result of the aforementioned amendments and new agreements, we have increased our aggregate borrowing capacity, including temporary increases, from $4.0 billion at December 31, 2016 to $6.6 billion at September 30, 2017.

The Agency and Interim Warehouse Facility agreements above contain cross-default provisions, such that if a default occurs under any of those debt agreements, generally the lenders under our other Agency and Interim debt agreements could also declare a default. We were in compliance with all covenants as of September 30, 2017.

~~We believe that the combination of our capital and warehouse facilities is adequate to meet our loan origination needs.~~

~~Debt Obligations~~

We have a senior secured ~~term loan~~ credit agreement (the ~~“Term Loan Agreement”~~“Credit Agreement”)~~. The Term Loan Agreement~~ that provides for a ~~$175.0~~$600 million term loan ~~that was issued at a discount of 1.0%~~ (the “Term Loan”). At any time, we may also elect to request the establishment of one or more incremental term loan commitments to make up to three additional term loans (any such additional term loan, an “Incremental Term Loan”) in an aggregate principal amount for all such Incremental Term Loans not to exceed $60.0 million.

~~We are obligated to repay the aggregate outstanding principal amount of the~~ “Term Loan ~~in consecutive quarterly installments equal to $0.3 million on the last business day~~”) that bears interest at Adjusted Term SOFR plus 225 basis points with a floor of ~~each quarter. The Term Loan also requires other prepayments in certain circumstances pursuant to the terms~~50 basis points and has a stated maturity date of ~~the Term Loan Agreement. The final principal installment of the Term Loan is required to be paid in full on~~ December ~~20, 2020 (or,~~16, 2028 (or, if earlier, the date of acceleration of the Term Loan pursuant to the ~~terms~~term of the ~~Term Loan Agreement) and will be in an amount equal to the aggregate outstanding principal of the Term Loan on such date (together with all accrued interest thereon).~~

At our election, the Term Loan will bear interest at either (i) the “Base Rate” plus an applicable margin or (ii) the LIBOR Rate plus an applicable margin, subject to adjustment if an event of default under the Term Loan Agreement has occurred and is continuing with a minimum LIBOR Rate of 1.0%. The “Base Rate” means the highest of (a) the administrative agent’s “prime rate,” (b) the federal funds rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1%. In each case, the applicable margin is determined by our Consolidated Corporate Leverage Ratio (as defined in the Term LoanCredit Agreement). ~~If such~~At any time, we may also elect to request one or more incremental term loan commitments not to exceed the lesser of $230 million and 100% of trailing four-quarter Consolidated ~~Corporate Leverage Ratio is greater than 2.50~~Adjusted EBITDA, provided that total indebtedness would not cause the leverage ratio to ~~1.00, the applicable margin will be 4.50% for LIBOR Rate loans and 3.50% for Base Rate loans, and if such Consolidated Corporate Leverage Ratio is less than or equal~~exceed 3.00 to 2.50 to 1.00, the applicable margin will be 4.25% for LIBOR Rate loans and 3.25% for Base Rate loans. The applicable margin is 4.25% for LIBOR Rate loans and 3.25% for Base Rate loans as of September 30, 2017.

Our obligations under the Term Loan Agreement are guaranteed by Walker & Dunlop Multifamily, Inc., Walker & Dunlop, LLC, Walker & Dunlop Capital, LLC, and W&D BE, Inc., each of which is a direct or indirect wholly owned subsidiary of the Company (together with the Company, the “Loan Parties”), pursuant to a Guarantee and Collateral Agreement entered into on December 20, 2013 among the Loan Parties and the Agent. 1.00. As of ~~September 30, 2017,~~March 31, 2022, the

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outstanding principal balance of the Term Loan was ~~$166.5~~$598.5 million.

The ~~Term Loan~~note payable and the warehouse facilities are senior obligations of the Company. ~~The Term Loan Agreement contains affirmative and negative covenants, including financial covenants.~~ As of ~~September 30, 2017,~~March 31, 2022, we were in compliance with all ~~such covenants.~~covenants related to the Credit Agreement.

~~Table~~For a detailed description of ~~Contents~~the terms of the Credit Agreement, refer to “Notes Payable – Term Loan Note Payable” in NOTE 6 in the consolidated financial statements in our 2021 Form 10-K. There have been no changes to the Credit Agreement in 2022.

We have a note payable through our wholly owned subsidiary Alliant, which has an outstanding balance of $132.9 million as of March 31, 2022 and bears interest at a fixed rate of 4.75%. The note has a stated maturity of January 15, 2035 and requires quarterly payments of principal, interest, and other required priority items shortly after the beginning of each quarter as further detailed in “Notes Payable – Alliant Note Payable” in NOTE 6 in the consolidated financial statements in our 2021 Form 10-K. There have no changes to the terms of the note during 2022.

Credit Quality and Allowance for Risk-Sharing Obligations

The following table sets forth certain information useful in evaluating our credit performance.


	March 31,
(dollars in thousands)	2022			2021
Key Credit Metrics
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	46,194,756		$	41,152,790
Fannie Mae Modified Risk		7,794,710			8,941,234
Freddie Mac Modified Risk		23,715			37,006
Total risk-sharing servicing portfolio	$	54,013,181		$	50,131,030

Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	11,084		$	19,052
Freddie Mac No Risk		36,941,470			37,658,456
GNMA - HUD No Risk		9,954,262			9,754,667
Brokered		15,115,619			12,090,825
Total non-risk-sharing servicing portfolio	$	62,022,435		$	59,523,000
Total loans serviced for others	$	116,035,616		$	109,654,030
Interim loans (full risk) servicing portfolio		221,649			213,240
Total servicing portfolio unpaid principal balance	$	116,257,265		$	109,867,270

Interim Program JV Managed Loans ⁽¹⁾		930,296			660,999

At risk servicing portfolio ⁽²⁾	$	50,176,521		$	45,796,952
Maximum exposure to at risk portfolio ⁽³⁾		10,178,454			9,304,440
Defaulted loans		78,659			48,481

Defaulted loans as a percentage of the at-risk portfolio		0.16	%		0.11	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.11			0.14
Allowance for risk-sharing as a percentage of maximum exposure		0.52			0.69

September 30,

(dollars in thousands)

2017

2016

Key Credit Metrics

Risk-sharing servicing portfolio:

Fannie Mae Full Risk

$
22,966,583

$
19,411,757

Fannie Mae Modified Risk

6,858,310

5,784,275

Freddie Mac Modified Risk

53,217

53,377

Interim Program JV Modified Risk (1)

146,125

—

Total risk-sharing servicing portfolio

$
30,024,235

$
25,249,409

Non-risk-sharing servicing portfolio:

Fannie Mae No Risk

$
180,703

$
679,652

Freddie Mac No Risk

25,877,602

19,649,100

GNMA - HUD No Risk

8,878,899

9,254,830

Brokered

5,170,479

4,024,490

Total non-risk-sharing servicing portfolio

$
40,107,683

$
33,608,072

Total loans serviced for others

$
70,131,918

$
58,857,481

Interim loans (full risk) servicing portfolio

152,764

264,508

Total servicing portfolio unpaid principal balance

$
70,284,682

$
59,121,989

At risk servicing portfolio (2)

$
26,556,339

$
22,384,966

Maximum exposure to at risk portfolio (3)

5,420,386

4,602,118

60+ day delinquencies, within at risk portfolio (4)

5,962

—

Specifically identified at risk loan balances associated with allowance for risk-sharing obligations

5,962

—

60+ day delinquencies as a percentage of the at risk portfolio

0.02
%

0.00
%
Allowance for risk-sharing as a percentage of the at risk portfolio

0.01

0.02

Allowance for risk-sharing as a percentage of the specifically identified at risk loan balances

63.22

N/A

Allowance for risk-sharing as a percentage of maximum exposure

0.07

0.07

Allowance for risk-sharing and guaranty obligation as a percentage of maximum exposure

0.78

0.75

(1)

~~(1)~~

As of March 31, 2022, this balance consists entirely of Interim Program JV managed loans. As of March 31, 2021, this balance consists of $73.3 million of loans serviced directly for the Interim Program JV partner and $587.7 million of Interim Program JV managed loans. We indirectly share in a portion of the risk of loss associated with ~~these~~Interim Program JV managed loans through our 15% equity ownership in the Interim Program JV.

We have no exposure to risk of loss for the loans serviced directly for the Interim Program JV partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table above.

(2)

~~(2)~~

~~At risk~~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~~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~~at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the ~~at risk~~at-risk portfolio.

Table of Contents

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~~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)

~~(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)~~

~~Includes loans that are not 60+ days delinquent but have defaulted.~~

Fannie Mae DUS risk-sharing obligations are based on a tiered formula and represent substantially all of our risk-sharing activities. The risk-sharing tiers and the amount of the risk-sharing obligations we absorb under full risk-sharing are provided below. Except as described

~~Table of Contents~~

in the following paragraph, the maximum amount of risk-sharing obligations we absorb at the time of default is generally 20% of the origination unpaid principal balance ~~(“UPB”~~(“UPB”) of the loan.


Risk-Sharing Losses
~~Risk-Sharing Losses~~		Percentage Absorbed by Us
First 5% of UPB at the time of loss settlement		100%
Next 20% of UPB at the time of loss settlement		25%
Losses above 25% of UPB at the time of loss settlement		10%
Maximum loss		20% of origination UPB

Fannie Mae can double or triple our risk-sharing obligation if the loan does not meet specific underwriting criteria or if a loan defaults within 12 months of its sale to Fannie Mae. We may request modified risk-sharing at the time of origination, which reduces our potential risk-sharing obligation from the levels described above.

We use several techniques to manage our risk exposure under the Fannie Mae DUS risk-sharing program. These techniques include maintaining a strong underwriting and approval process, evaluating and modifying our underwriting criteria given the underlying multifamily housing market fundamentals, limiting our geographic market and borrower exposures, and electing the modified risk-sharing option under the Fannie Mae DUS program.

~~We may request modified risk-sharing based on such factors as the size~~The “Business” section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains a discussion of the ~~loan, market conditions and loan pricing. Our current credit management policy is to cap the loan balance subject to full~~ risk-sharing ~~at $60.0 million. Accordingly,~~caps we currently elect to use modified risk-sharing for loans of more than $60.0 million in order to limit our maximum loss on any loan to $12.0 million (such exposure would occur in the event that the underlying collateral is determined to be completely without value at the time of loss). However, we occasionally elect to originate a loanhave with ~~full risk sharing even when the loan balance is greater than $60.0 million if we believe the loan characteristics support such an approach.~~Fannie Mae.

We regularly monitor the credit quality of all loans for which we have a risk-sharing obligation. Loans with indicators of underperforming credit are placed on a watch ~~lists,~~list, assigned a numerical risk rating based on our assessment of the relative credit weakness, and subjected to additional evaluation or loss mitigation. Indicators of underperforming credit include poor financial performance, poor physical condition, poor management, and delinquency. A ~~specific~~collateral-based reserve is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed, and a ~~general~~ reserve ~~is recorded~~ for ~~other risk-sharing loans on the watch list,~~estimated credit losses and a guaranty obligation isare recorded for all other risk-sharing ~~loans that are not on the watch list.~~loans.

The ~~allowance~~calculated CECL reserve for the Company’s $49.7 billion at-risk Fannie Mae servicing portfolio as of March 31, 2022 was $42.5 million compared to $52.3 million as of December 31, 2021. The significant decrease in the CECL reserve was principally related to a reduction in our historical loss factor.

As of March 31, 2022, three at-risk loans with an aggregate UPB of $78.7 million were in default compared to two loans with an aggregated UPB of $48.5 million as of March 31, 2021. The collateral-based reserve on defaulted loans was $10.8 million and $7.6 million as of March 31, 2022 and March 31, 2021, respectively. We had a benefit for risk-sharing obligations ~~has been primarily~~of $9.4 million for ~~Fannie Mae loans with full risk-sharing. The amount of~~ the provision considers our assessment of the likelihood of payment by the borrower, the value of the underlying collateral and the level of risk-sharing. Historically, the loss recognition occurs at or before the loan becoming 60 days delinquent. Our estimates of value are determined considering broker opinions, appraisals, and other sources of market value information relevant to the underlying property and collateral. Risk-sharing obligations are written off against the allowance at final settlement with Fannie Mae.

~~For the nine~~three months ended ~~September 30, 2017 and 2016 the provision~~March 31, 2022 compared to a benefit for risk-sharing obligations ~~was $74 thousand and $453 thousand, respectively. As there is currently only one defaulted loan in~~of $10.7 million for the ~~at risk servicing portfolio, the~~ ~~Allowance for risk-sharing obligations~~ ~~as of September 30, 2017 is based primarily on our collective assessment of the probability of loss related to the loans on the watch list as of September 30, 2017. The~~ ~~Allowance for risk-sharing obligations~~ ~~as of September 30, 2016 was based entirely on our collective assessment of the probability of loss related to the loans on the watch list as of September 30, 2016.~~three months ended March 31, 2021.

We have never been required to repurchase a loan.

~~Off-Balance Sheet Arrangements~~

~~Other than the risk-sharing obligations under the Fannie Mae DUS Program disclosed previously in this Quarterly Report on Form 10-Q, we do not have any off-balance-sheet arrangements.~~

~~Table of Contents~~

New/Recent Accounting Pronouncements

~~See~~As seen in NOTE 2 toin the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, ~~for a table that presents the~~there are no accounting pronouncements that the Financial Accounting Standards Board has issued and that have the potential to impact us but have not yet been adopted by ~~us. Although we do not believe any~~us as of ~~the accounting pronouncements listed in that table will have a significant impact on our business activities or compliance with our debt covenants, we are still in the process~~March 31, 2022.

Table of ~~determining the impact some of the new pronouncements may have on our financial results and operating activities~~.Contents

Item 3. Quantitative and Qualitative ~~Disclosure~~Disclosures About Market Risk

Interest Rate Risk

For loans held for sale to ~~the Agencies,~~Fannie Mae, Freddie Mac, and HUD, we are not currently exposed to unhedged interest rate risk during the loan commitment, closing, and delivery processes. The sale or placement of each loan to an investor is negotiated prior to closing on the loan with the borrower, and the sale or placement is typically effectuated within 60 days of closing. The coupon rate for the loan is set at the same time we establish the interest rate with the investor.

Some of our assets and liabilities are subject to changes in interest rates. Earnings from escrows ~~are~~ generally ~~based on~~track 30-day LIBOR. 30-day LIBOR as of ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~123~~45 basis points and 5311 basis points, respectively. The following table shows the impact on our annual escrow earnings due to a 100-basis point increase and decrease in 30-day LIBOR based on our escrow balances outstanding at each period end. A portion of these changes in earnings as a result of a 100-basis point increase in the 30-day LIBOR would be delayed several months due to the negotiated nature of some of our escrow arrangements.

As of September 30,

Change in annual escrow earnings due to (in thousands):

2017

2016

100 basis point increase in 30-day LIBOR

$
17,856

$
16,734

100 basis point decrease in 30-day LIBOR (1)

(17,856)

(8,413)


	As of March 31,
Change in annual escrow earnings due to: (in thousands)	2022		2021
100 basis point increase in 30-day LIBOR	$	24,807	$	25,292
100 basis point decrease in 30-day LIBOR⁽¹⁾		(4,543)		(2,594)

The borrowing cost of our warehouse facilities used to fund loans held for sale, ~~and~~ loans held for investment, and investments in tax credit equity is based on ~~LIBOR.~~LIBOR or Adjusted Term Secured Overnight Financing Rate (“SOFR”). The base SOFR was 29 basis points as of March 31, 2022. The interest income on our loans held for investment is based on LIBOR. The LIBOR reset date for loans held for investment is the same date as the LIBOR reset date for the corresponding warehouse facility. The following table shows the impact on our annual net warehouse interest income due to a 100-basis point increase and decrease in ~~30-day~~ LIBOR or Adjusted Term SOFR, based on our warehouse borrowings outstanding at each period end. The changes shown below do not reflect ~~the assumption that there is a corresponding 100-basis point~~an increase or decrease in the interest rate earned on our loans held for sale.


	As of March 31,
Change in annual net warehouse interest income due to: (in thousands)	2022		2021
100 basis point increase in SOFR or 30-day LIBOR	$	(8,929)	$	(8,744)
100 basis point decrease in SOFR or 30-day LIBOR ⁽¹⁾⁽²⁾		3,295		540

As of September 30,

Change in annual net warehouse interest income due to (in thousands):

2017

2016

100 basis point increase in 30-day LIBOR

$
(9,765)

$
(6,702)

100 basis point decrease in 30-day LIBOR (1)

9,765

3,534

~~All of our corporate debt~~Our Term Loan is based on Adjusted Term SOFR as of March 31, 2022. In December 2021, we fully paid the prior $300 million term loan agreement, which was based on interest at 30-day LIBOR and entered into a $600 million note payable with an interest based Adjusted Term SOFR and a ~~30-day LIBOR~~SOFR floor of ~~100~~50 basis points. The following table shows the impact on our annual ~~net warehouse interest income~~earnings due to a 100-basis point increase and decrease in SOFR or 30-day LIBOR as of March 31, 2022 and March 31, 2021, respectively, based on our ~~note~~current and previous notes payable balance outstanding at each period end. The Alliant note payable is fixed-rate debt; therefore, there is no impact to our earnings related to this debt when interest rates change.


	As of March 31,
Change in annual income from operations due to: (in thousands)	2022		2021
100 basis point increase in SOFR or 30-day LIBOR	$	(4,728)	$	(2,940)
100 basis point decrease in SOFR or 30-day LIBOR ^(1)(2)(3)		—		327

As of September 30,

Change in annual corporate debt interest expense due to (in thousands):

2017

2016

100 basis point increase in 30-day LIBOR (2)

$
(1,665)

$
(884)

100 basis point decrease in 30-day LIBOR (3)

383

—

(1)

The decrease ~~in 2016 was~~as of March 31, 2021 is limited to ~~zero~~30-day LIBOR as ~~30-day LIBOR~~of March 31, 2021, as it was less than 100 basis points,.

or the interest rate floor, if applicable.

(2)

The ~~increase in 2016 was 53~~decrease as of March 31, 2022 is limited to 30-day LIBOR or SOFR as of March 31, 2022, as they were less than 100 basis points, ~~due to~~or the ~~30-day LIBOR floor.~~

interest rate floor, if applicable.

(3)

~~There~~As of March 31, 2022, the SOFR floor of 50 basis points was in effect, resulting in no impact ~~in 2016 as 30-day LIBOR at the time was less than the 30-day LIBOR floor~~. ~~The~~from a 100-basis point decrease in ~~2017 was 23 basis points due to the 30-day LIBOR floor.~~

SOFR.

~~Table of Contents~~

Market Value Risk

The fair value of our MSRs is subject to ~~market~~market-value risk. A 100-basis point increase or decrease in the weighted average discount rate would decrease or increase, respectively, the fair value of our MSRs by approximately ~~$24.6~~$39.1 million as of ~~September 30, 2017,~~March 31, 2022 compared to ~~$19.4~~ $36.0

Table of Contents

million as of ~~September 30, 2016.~~March 31, 2021. Our Fannie Mae and Freddie Mac servicing ~~arrangements~~engagements provide for ~~make-whole payments~~prepayment fees in the event of a voluntary prepayment prior to the expiration of the prepayment protection period. Our servicing contracts with institutional investors and HUD do not require ~~payment of a make-whole amount.~~them to provide us with prepayment fees. As of ~~September 30, 2017~~March 31, 2022 and ~~2016, 87%~~March 31, 2021, 85% of the servicing fees are protected from the risk of prepayment through ~~make-whole requirements;~~prepayment provisions; given this significant level of prepayment protection, we do not hedge our servicing portfolio for prepayment risk.

London Interbank Offered Rate (“LIBOR”) Transition

In the first quarter of 2021, the United Kingdom’s Financial Conduct Authority, the regulator for the administration of LIBOR, announced specific dates for its intention to stop publishing LIBOR rates, including the 30-day LIBOR (our primary reference rate) which is scheduled for June 30, 2023. It is expected that legacy LIBOR-based loans will transition to Secured Overnight Financing Rate (“SOFR”) on or before June 30, 2023. With respect to the loans we underwrite and service, we have been working closely with the GSEs on this matter through our participation on subcommittees and advisory councils. We continue to monitor our LIBOR exposure, review legal contracts and assess fallback language impacts, engage with our clients and other stakeholders, and monitor developments associated with LIBOR alternatives. We have also updated our debt agreements with warehouse facility providers to include fallback language governing the transition and have already transitioned our Term Loan and three of our warehouse facilities to SOFR, and a fourth warehouse facility in the second quarter of 2022.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.

Based on that evaluation, the principal executive officer and principal financial officer concluded that the design and operation of these disclosure controls and procedures as of the end of the period covered by this report were effective to provide reasonable assurance that information required to be disclosed in our reports under the Securities and Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange ~~Commission’s~~Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We acquired Alliant on December 16, 2021 and GeoPhy on February 28, 2022. We have integrated the accounting processes and internal controls over financial reporting for Alliant and its affiliates into our internal control over financial reporting environment. The operations of GeoPhy are immaterial.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may be party to various claims and litigation, none of which we believe is material. We cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties and other costs, and our reputation and business may be impacted. Our management believes that any liability that could be imposed on us in connection with the disposition of any pending lawsuits would not have a material adverse effect on our business, results of operations, liquidity, or financial condition.

Item 1A. Risk Factors

We have included in Part I, Item 1A of our ~~2016~~2021 Form 10-K descriptions of certain risks and uncertainties that could affect our business, future performance, or financial condition (the ~~“Risk Factors”~~“Risk Factors”). There have been no material changes from the disclosures provided in the ~~2016~~2021 Form 10-K with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investment decision with respect to the ~~Company’s~~Company’s stock.

Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Under the ~~2015~~2020 Equity Incentive Plan, subject to the ~~Company’s~~Company’s approval, grantees have the option of electing to satisfy minimum tax withholding obligations at the time of vesting or exercise by allowing usthe Company to withhold and purchase ~~at the prevailing market price~~ the shares of stock otherwise issuable to the grantee. During the quarter ended ~~September 30, 2017,~~March 31, 2022, we purchased 10195 thousand shares to satisfy grantee tax withholding obligations on share-vesting events. ~~Additionally, we announced a share repurchase program in~~ During the first quarter of ~~2017. The repurchase program authorized by our~~2022, the Company’s Board of Directors approved a stock repurchase program that permits ~~us to~~the repurchase of up to $75.0 million of ~~shares of our~~the Company’s common stock

~~Table of Contents~~

over a 12-month period ~~ending~~beginning on February ~~10, 2018.~~13, 2022. During the quarter ended March 31, 2022 we did not repurchase any shares under this share repurchase program. The Company had ~~$64.2~~$75.0 million of authorized share repurchase capacity remaining as of ~~September 30, 2017.~~March 31, 2022. The following table provides information regarding common stock repurchases for the quarter ended ~~September 30, 2017:~~March 31, 2022:

Total Number of

Approximate

Shares Purchased as

Dollar Value

Total Number

Average

Part of Publicly

of Shares that May


of Shares

Price Paid

Announced Plans

Yet Be Purchased Under

Period

Purchased

per Share

or Programs

the Plans or Programs

July 1-31, 2017

10,487

48.83

—

75,000,000

August 1-31, 2017

188,419

47.18

188,419

66,105,030

September 1-30, 2017

40,000

46.59

40,000

64,240,362

Total

238,906

$
47.15

228,419

$
64,240,362


				Total Number of	Approximate
				Shares Purchased as	Dollar Value
	Total Number	Average		Part of Publicly	of Shares that May
	of Shares	Price Paid		Announced Plans	Yet Be Purchased Under
Period	Purchased	per Share		or Programs	the Plans or Programs
January 1-31, 2022	5,985		138.18	—		75,000,000
February 1-28, 2022	156,391		139.75	—		75,000,000
March 1-31, 2022	33,055		131.32	—		75,000,000
1st Quarter	195,431	$	138.28	—

On January 31, 2022, we issued 66,667 shares (the “Shares”) of our common stock as earnout consideration for our purchase of the noncontrolling interest from one of the members of WDIS in August 2020. The Shares are prohibited from being transferred until January 31, 2023. The issuance of the Shares was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

(a) Exhibits:

2.1		Contribution Agreement, dated as of October 29, 2010, by and among Mallory Walker, Howard W. Smith, William M. Walker, Taylor Walker, Richard C. Warner, Donna Mighty, Michael Yavinsky, Edward B. Hermes, Deborah A. Wilson and Walker && Dunlop, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 4 to the ~~Company’s~~Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
2.2		Contribution Agreement, dated as of October 29, 2010, between Column Guaranteed LLC and Walker && Dunlop, Inc. (incorporated by reference to Exhibit 2.2 to Amendment No. 4 to the ~~Company’s~~Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
2.3		Amendment No. 1 to Contribution Agreement, dated as of December 13, 2010, by and between Walker && Dunlop, Inc. and Column Guaranteed LLC (incorporated by reference to Exhibit 2.3 to Amendment No. 6 to the ~~Company’s~~Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 13, 2010)
2.4		Purchase Agreement, dated June 7, 2012, by and among Walker && Dunlop, Inc., Walker && Dunlop, LLC, CW Financial Services LLC and CWCapital LLC (incorporated by reference to Exhibit 2.1 to the ~~Company’s~~Company’s Current Report on Form 8-K/A filed on June 15, 2012)
2.5		Purchase Agreement, dated as of August 30, 2021, by and among Walker & Dunlop, Inc., WDAAC, LLC, Alliant Company, LLC, Alliant Capital, Ltd., Alliant Fund Asset Holdings, LLC, Alliant Asset Management Company, LLC, Alliant Strategic Investments II, LLC, ADC Communities, LLC, ADC Communities II, LLC, AFAH Finance, LLC, Alliant Fund Acquisitions, LLC, Vista Ridge 1, LLC, Alliant, Inc., Alliant ADC, Inc., Palm Drive Associates, LLC, and Shawn Horwitz (incorporated by reference to Exhibit 2.5 of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021)
2.6		Share Purchase Agreement dated February 4, 2022 by and among Walker & Dunlop, Inc., WD-GTE, LLC, GeoPhy B.V. (“GeoPhy”), the several persons and entities constituting the holders of all of GeoPhy’s issued and outstanding shares of capital stock, and Shareholder Representative Services LLC, as representative of the Shareholders (incorporated by reference to Exhibit 2.6 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021)
3.1		Articles of Amendment and Restatement of Walker && Dunlop, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the ~~Company’s~~Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on December 1, 2010)
3.2		Amended and Restated Bylaws of Walker && Dunlop, Inc. (incorporated by reference to Exhibit 3.1 to the ~~Company’s~~Company’s Current Report on Form 8-K filed on ~~February 21, 2017)~~November 8, 2018)
4.1		Specimen Common Stock Certificate of Walker && Dunlop, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the ~~Company’s~~Company’s Registration Statement on Form S-1 (File No. 333-168535) filed on September 30, 2010)
4.2		Registration Rights Agreement, dated December 20, 2010, by and among Walker && Dunlop, Inc. and Mallory Walker, Taylor Walker, William M. Walker, Howard W. Smith, III, Richard C. Warner, Donna Mighty, Michael Yavinsky, Ted Hermes, Deborah A. Wilson and Column Guaranteed LLC (incorporated by reference to Exhibit 10.1 to the ~~Company’s~~Company’s Current Report on Form 8-K filed on December 27, 2010)
4.3		Stockholders Agreement, dated December 20, 2010, by and among William M. Walker, Mallory Walker, Column Guaranteed LLC and Walker && Dunlop, Inc. (incorporated by reference to Exhibit 10.2 to the ~~Company’s~~Company’s Current Report on Form 8-K filed on December 27, 2010)
4.4		Piggy-Back Registration Rights Agreement, dated June 7, 2012, by and among Column Guaranteed, LLC, William M. Walker, Mallory Walker, Howard W. Smith, III, Deborah A. Wilson, Richard C. Warner, CW Financial Services LLC and Walker && Dunlop, Inc. (incorporated by reference to Exhibit 4.3 to the ~~Company’s~~Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 filed on August 9, 2012)

~~Table of Contents~~

4.5		Voting Agreement, dated as of June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, Mallory Walker, William M. Walker, Richard Warner, Deborah Wilson, Richard M. Lucas, and Howard W. Smith, III, and CW Financial Services LLC (incorporated by reference to Annex C of the ~~Company’s~~Company’s proxy statement filed on July 26, 2012)
4.6		Voting Agreement, dated as of June 7, 2012, by and among Walker & Dunlop, Inc., Walker & Dunlop, LLC, Column Guaranteed, LLC and CW Financial Services LLC (incorporated by reference to Annex D of the ~~Company’s~~Company’s proxy statement filed on July 26, 2012)
~~10.1~~		Eighth Amendment to Warehousing Credit and Security Agreement, dated as of August 9, 2017, by and between Walker & Dunlop, LLC, as Borrower, the various financial institutions and other Persons parties thereto, as Lenders, and TD Bank, N.A., as Credit Agent ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 9, 2017).~~
~~10.2~~		Second Amended and Restated Warehousing Credit and Security Agreement, dated as of September 11, 2017, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc. and PNC Bank, National Association, as Lender ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 13, 2017).~~
~~10.3~~		~~Second Amended and Restated Guaranty and Suretyship Agreement, dated as of September 11, 2017, by Walker~~  ~~Dunlop, Inc. in favor of PNC Bank, National Association, as Lender~~ ~~(incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 13, 2017)~~.
~~10.4~~		~~First Amendment to Second Amended and Restated Warehousing Credit and Security Agreement, dated as of September 15, 2017, by and among Walker~~  ~~Dunlop, LLC, Walker~~  ~~Dunlop, Inc. and PNC Bank, National Association, as Lender~~ ~~(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 20, 2017)~~.
31.1	*	Certification of Walker && Dunlop, Inc.'s's Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of Walker && Dunlop, Inc.'s's Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	**	Certification of Walker && Dunlop, Inc.'s's Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
~~101.1~~101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	*	Inline XBRL ~~Instance~~Taxonomy Extension Schema Document
~~101.2~~101.CAL	*	~~XBRL Taxonomy Extension Schema Document~~
~~101.3~~	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
~~101.4~~101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
~~101.5~~101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
~~101.6~~101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained an Exhibit 101)

~~†: Denotes a management contract or compensation plan, contract, or arrangement.~~

*: Filed herewith.

**: Furnished herewith.

Information in this Quarterly Report on Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in

4659

Table of Contents

such a filing.

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Walker & Dunlop, Inc.
Date: ~~November 8, 2017~~May 5, 2022	By:	/s/ William M. Walker
		William M. Walker
		Chairman and Chief Executive Officer


Date: ~~November 8, 2017~~May 5, 2022	By:	/s/ Stephen P. Theobald
		Stephen P. Theobald
		Executive Vice President and Chief Financial Officer ~~and Treasurer~~

4760


(Mark One)
~~(Mark One)~~☒
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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


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


		Page

PART I	FINANCIAL INFORMATION		3
		~~Page~~

~~PART I~~Item 1.	~~FINANCIAL INFORMATION~~Financial Statements	2 3

Item 1.2.	~~Financial Statements~~	2

~~Item 2.~~	~~Management's~~Management's Discussion and Analysis of Financial Condition and Results of Operations	21 28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43 56

Item 4.	Controls and Procedures	44 57

PART II	OTHER INFORMATION	44 57

Item 1.	Legal Proceedings	44 57

Item 1A.	Risk Factors	44 57

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44 58

Item 3.	Defaults Upon Senior Securities	45 58

Item 4.	Mine Safety Disclosures	45 58

Item 5.	Other Information	45 58

Item 6.	Exhibits	45
		59

	Signatures	47 60


	For the three months ended
	March 31,
Components of Provision (Benefit) for Credit Losses (in thousands)	2022		2021
Provision (benefit) for loan losses	$	(106)	$	(587)
Provision (benefit) for risk-sharing obligations		(9,392)		(10,733)
Provision (benefit) for credit losses	$	(9,498)	$	(11,320)


☐☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Revenues
Gains from mortgage banking activities	$	111,304	$	100,630	$	309,912	$	249,406
Servicing fees		44,900		37,134		129,639		101,554
Net warehouse interest income		5,358		5,614		17,778		15,925
Escrow earnings and other interest income		5,804		2,630		13,610		6,225
Other		12,370		8,778		33,716		23,775
Total revenues	$	179,736	$	154,786	$	504,655	$	396,885

Expenses
Personnel	$	78,469	$	64,377	$	198,157	$	154,365
Amortization and depreciation		32,343		29,244		97,541		80,824
Provision (benefit) for credit losses		9		283		(216)		166
Interest expense on corporate debt		2,555		2,485		7,401		7,419
Other operating expenses		11,664		9,685		34,871		29,511
Total expenses	$	125,040	$	106,074	$	337,754	$	272,285
Income from operations	$	54,696	$	48,712	$	166,901	$	124,600
Income tax expense		19,988		18,851		54,621		47,295
Net income before noncontrolling interests	$	34,708	$	29,861	$	112,280	$	77,305
Less: net income from noncontrolling interests		330		233		114		198
Walker & Dunlop net income	$	34,378	$	29,628	$	112,166	$	77,107

Basic earnings per share	$	1.14	$	1.01	$	3.74	$	2.62
Diluted earnings per share	$	1.06	$	0.96	$	3.49	$	2.51

Basic weighted average shares outstanding		30,085		29,374		30,009		29,417
Diluted weighted average shares outstanding		32,312		30,793		32,170		30,743


	For the three months ended March 31, 2022
		Stockholders' Equity
	Common Stock							Retained		Noncontrolling		Total Stockholders'
	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)
Noncontrolling interests added due to new consolidations	—		—		(5,303)		—		—		15,490		10,187
Cash dividends paid ($0.60 per common share)	—		—		—		—		(20,077)		—		(20,077)
Balance at March 31, 2022	32,398	$	324	$	387,009	$	1,588	$	1,205,384	$	42,866	$	1,637,171


	For the three months ended
	March 31,
Components of Net Warehouse Interest Income (in thousands)	2022		2021
Warehouse interest income - loans held for sale	$	8,863	$	9,118
Warehouse interest expense - loans held for sale		(5,333)		(6,659)
Net warehouse interest income - loans held for sale	$	3,530	$	2,459

Warehouse interest income - loans held for investment	$	2,350	$	3,228
Warehouse interest expense - loans held for investment		(1,107)		(1,132)
Warehouse interest income - secured borrowings		—		865
Warehouse interest expense - secured borrowings		—		(865)
Net warehouse interest income - loans held for investment	$	1,243	$	2,096

Total net warehouse interest income	$	4,773	$	4,555


	September 30,				December 31,
(in thousands)	2017		2016		2016		2015
Cash and cash equivalents	$	85,363	$	83,887	$	118,756	$	136,988
Restricted cash		17,179		14,370		9,861		5,306
Pledged securities, at fair value (restricted cash equivalents)		95,102		81,933		84,850		72,190
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	197,644	$	180,190	$	213,467	$	214,484


~~Standard~~	~~Issue Date~~	~~Description~~	~~Effective Date~~	~~Expected Financial Statement Impact~~
~~Accounting Standards Update ("ASU") 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~	~~Q2 2016~~	ASU 2016-13 ("the Standard") represents a significant change to the incurred loss model currently used to account for credit losses. The Standard requires an entity to estimate the credit losses expected over the life of the credit exposure upon initial recognition of that exposure. The expected credit losses consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. Exposures with similar risk characteristics are required to be grouped together when estimating expected credit losses. The initial estimate and subsequent changes to the estimated credit losses are required to be reported in current earnings in the income statement and through an allowance in the balance sheet. ASU 2016-13 is applicable to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures. The Standard will modify the way the Company estimates its allowance for risk-sharing obligations and its allowance for loan losses. ASU 2016-13 requires modified retrospective application to all outstanding, in-scope instruments, with a cumulative-effect adjustment recorded to opening retained earnings as of the beginning of the period of adoption.	~~January 1, 2020 (early adoption permitted January 1, 2019)~~	The Company is in the preliminary stages of implementation and is still in the process of determining the significance of the impact the Standard will have on its financial statements and the timing of when it will adopt ASU 2016-13. The Company expects its Allowance for risk-sharing obligations to increase when ASU 2016-13 is adopted. The magnitude of the impacts will not be known until closer to the adoption date.
~~ASU 2016-02,~~ ~~Leases (Topic 842)~~	~~Q1 2016~~	ASU 2016-02 represents a significant reform to the accounting for leases. Lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The ROU asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. Lessees generally recognize lease expense for these leases on a straight-line basis, which is similar to what they do today. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.	~~January 1, 2019 (early adoption is permitted)~~	The Company is in the preliminary stages of implementation and is still in the process of determining the significance of the impact ASU 2016-02 will have on its financial statements. The Company will adopt ASU 2016-02 when required in 2019.
~~ASU 2016-01,~~ ~~Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities~~	~~Q1 2016~~	The guidance requires that unconsolidated equity investments not accounted for under the equity method be recorded at fair value, with changes in fair value recorded through net income. The accounting principles that permitted available-for-sale classification with unrealized holding gains and losses recorded in other comprehensive income for equity securities will no longer be applicable. The guidance is not applicable to debt securities and loans and requires minor changes to the disclosure and presentation of financial instruments. ASU 2016-01 generally requires a cumulative-effect adjustment to opening retained earnings as of the beginning of the period of adoption.	~~January 1, 2018 (early adoption permitted for certain parts)~~	~~The Company does not believe that ASU 2016-01 will have a material impact on its reported financial results.~~


	For the three months ended
	March 31,
Description (in thousands)	2022		2021		Statement of income line item
Certain loan origination fees	$	37,365	$	23,901	Loan origination and debt brokerage fees, net
Property sales broker fees		23,398		9,042	Property sales broker fees
Investment management fees, application fees, subscription revenues, other revenues from LIHTC operations, and other		28,305		6,250	Other revenues
Total revenues derived from contracts with customers	$	89,068	$	39,193


	For the three months ended
	March 31,
Roll Forward of MSRs (in thousands)	2022		2021
Beginning balance	$	953,845	$	862,813
Additions, following the sale of loan		76,854		96,640
Amortization		(46,357)		(42,552)
Pre-payments and write-offs		(7,788)		(7,017)
Ending balance	$	976,554	$	909,884


	As of September 30, 2017
	Gross		Accumulated		Net
(in thousands)	carrying value		amortization		carrying value
Acquired MSRs	$	175,934	$	(117,861)	$	58,073
Originated MSRs		760,795		(230,959)		529,836
Total	$	936,729	$	(348,820)	$	587,909


	As of December 31, 2016
	Gross		Accumulated		Net
(in thousands)	carrying value		amortization		carrying value
Acquired MSRs	$	175,934		(104,264)	$	71,670
Originated MSRs		642,030		(191,770)		450,260
Total	$	817,964	$	(296,034)	$	521,930


	Expected
(in thousands)	Amortization
Nine Months Ending December 31,
2022	$	135,495
Year Ending December 31,
2023	$	171,194
2024		152,155
2025		129,694
2026		109,489
2027		92,535
Thereafter		185,992
Total	$	976,554


Components of MSRs (in thousands)	March 31, 2022		December 31, 2021
Gross value	$	1,598,350	$	1,548,870
Accumulated amortization		(621,796)		(595,025)
Net carrying value	$	976,554	$	953,845


	Originated MSRs		Acquired MSRs		Total MSRs
(in thousands)	Amortization		Amortization		Amortization
Three Months Ending December 31,
2017	$	26,528	$	3,065	$	29,593
Year Ending December 31,
2018	$	98,640	$	11,310	$	109,950
2019		84,761		10,119		94,880
2020		76,136		8,536		84,672
2021		66,589		6,821		73,410
2022		53,579		4,918		58,497
Thereafter		123,603		13,304		136,907
Total	$	529,836	$	58,073	$	587,909


	For the three months ended
	March 31,
Roll Forward of Guaranty Obligation (in thousands)	2022		2021
Beginning balance	$	47,378	$	52,306
Additions, following the sale of loan		1,551		1,721
Amortization and write-offs		(2,439)		(2,191)
Ending balance	$	46,490	$	51,836


	For the three months ended
	March 31,
Roll Forward of Allowance for Risk-Sharing Obligations (in thousands)	2022		2021
Beginning balance	$	62,636	$	75,313
Provision (benefit) for risk-sharing obligations		(9,392)		(10,733)
Write-offs		—		—
Ending balance	$	53,244	$	64,580


	March 31, 2022
(dollars in thousands)	Committed		Uncommitted		Total Facility		Outstanding
Facility⁽¹⁾	Amount		Amount		Capacity		Balance		Interest rate⁽²⁾
Agency Warehouse Facility #1	$	425,000	$	—	$	425,000	$	49,860	Adjusted Term SOFR plus 1.30%
Agency Warehouse Facility #2		700,000		300,000		1,000,000		46,647	30-day LIBOR plus 1.30%
Agency Warehouse Facility #3		600,000		265,000		865,000		274,690	30-day LIBOR plus 1.30%
Agency Warehouse Facility #4		350,000		—		350,000		128,298	30-day LIBOR plus 1.30%
Agency Warehouse Facility #5		—		1,000,000		1,000,000		135,453	Adjusted Term SOFR plus 1.45%
Agency Warehouse Facility #6		150,000		50,000		200,000		24,800	30-day LIBOR plus 1.30%
Total National Bank Agency Warehouse Facilities	$	2,225,000	$	1,615,000	$	3,840,000	$	659,748
Fannie Mae repurchase agreement, uncommitted line and open maturity		—		1,500,000		1,500,000		91,330
Total Agency Warehouse Facilities	$	2,225,000	$	3,115,000	$	5,340,000	$	751,078

Interim Warehouse Facility #1	$	135,000	$	—	$	135,000	$	—	30-day LIBOR plus 1.90%
Interim Warehouse Facility #2		100,000		—		100,000		—	Adjusted Term SOFR plus 1.35% to 1.85%
Interim Warehouse Facility #3		200,000		—		200,000		141,809	30-day LIBOR plus 1.75% to 3.25%
Interim Warehouse Facility #4		19,810		—		19,810		19,810	30-day LIBOR plus 3.00%
Total National Bank Interim Warehouse Facilities	$	454,810	$	—	$	454,810	$	161,619
Alliant Warehouse Facility	$	30,000	$	—	$	30,000	$	12,005	Daily LIBOR plus 3.00%
Debt issuance costs		—		—		—		(422)
Total warehouse facilities	$	2,709,810	$	3,115,000	$	5,824,810	$	924,280


	September 30, 2017
(dollars in thousands)	Committed		Uncommitted		Temporary		Total Facility		Outstanding
Facility1	Amount		Amount		Increase		Capacity		Balance		Interest rate
Agency Warehouse Facility #1	$	425,000	$	—	$	—	$	425,000	$	190,054	30-day LIBOR plus 1.40%
Agency Warehouse Facility #2		500,000		—		2,066,000		2,566,000		2,228,837	30-day LIBOR plus 1.30%
Agency Warehouse Facility #3		480,000		—		400,000		880,000		424,714	30-day LIBOR plus 1.25%
Agency Warehouse Facility #4		350,000		—		—		350,000		285,170	30-day LIBOR plus 1.40%
Agency Warehouse Facility #5		30,000		—		—		30,000		5,797	30-day LIBOR plus 1.80%
Agency Warehouse Facility #6		250,000		250,000		—		500,000		—	30-day LIBOR plus 1.35%
Fannie Mae repurchase agreement, uncommitted line and open maturity		—		1,500,000		—		1,500,000		75,391	30-day LIBOR plus 1.15%
Total Agency Warehouse Facilities	$	2,035,000	$	1,750,000	$	2,466,000	$	6,251,000	$	3,209,963

Interim Warehouse Facility #1	$	85,000	$	—	$	—	$	85,000	$	43,440	30-day LIBOR plus 1.90%
Interim Warehouse Facility #2		200,000		—		—		200,000		23,272	30-day LIBOR plus 2.00%
Interim Warehouse Facility #3		75,000		—		—		75,000		29,132	30-day LIBOR plus 2.00% to 2.50%
Total Interim Warehouse Facilities	$	360,000	$	—	$	—	$	360,000	$	95,844
Debt issuance costs		—		—		—		—		(218)
Total warehouse facilities	$	2,395,000	$	1,750,000	$	2,466,000	$	6,611,000	$	3,305,589


	Nine Months Ended September 30,
(in thousands)	2017		2016

					For the three months ended
					March 31,
Roll Forward of Goodwill (in thousands)					2022		2021
Beginning balance	$	96,420	$	90,338	$	698,635	$	248,958
Additions from acquisitions		27,347		—		213,874		12,231
Measurement-period adjustments						(3,765)		—
Impairment		—		—		—		—
Ending balance	$	123,767	$	90,338	$	908,744	$	261,189


	As of March 31,
Goodwill by Reportable Segment (in thousands)	2022
Capital Markets	$	449,992
Servicing & Asset Management		458,752
Corporate		—
Ending balance	$	908,744


	For the three months ended
	March 31,
Roll Forward of Other Intangible Assets (in thousands)	2022		2021
Beginning balance	$	183,904	$	1,880
Additions from acquisitions		31,000		504
Amortization		(3,499)		(667)
Ending balance	$	211,405	$	1,717


	As of March 31,
Components of Other Intangible Assets (in thousands)	2022		2021
Gross value	$	220,682	$	189,682
Accumulated amortization		(9,277)		(5,778)
Net carrying value	$	211,405	$	183,904


	For the three months ended
	March 31,
Roll Forward of Contingent Consideration Liabilities (in thousands)	2022		2021
Beginning balance	$	125,808	$	28,829
Additions		119,000		5,229
Accretion and revaluation		359		430
Payments		(26,438)		—
Ending balance	$	218,729	$	34,488


	Quoted Prices in		Significant		Significant
	Active Markets		Other		Other
	For Identical		Observable		Unobservable
	Assets		Inputs		Inputs		Balance as of
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Period End
September 30, 2017
Assets
Loans held for sale	$	—	$	3,275,761	$	—	$	3,275,761
Pledged securities		95,102		—		—		95,102
Derivative assets		—		—		43,853		43,853
Total	$	95,102	$	3,275,761	$	43,853	$	3,414,716

Liabilities
Derivative liabilities	$	—	$	—	$	175	$	175
Total	$	—	$	—	$	175	$	175

December 31, 2016
Assets
Loans held for sale	$	—	$	1,858,358	$	—	$	1,858,358
Pledged securities		84,850		—		—		84,850
Derivative assets		—		—		61,824		61,824
Total	$	84,850	$	1,858,358	$	61,824	$	2,005,032

Liabilities
Derivative liabilities	$	—	$	—	$	4,396	$	4,396
Total	$	—	$	—	$	4,396	$	4,396


	Fair Value Measurements
	Using Significant Unobservable Inputs:
	Derivative Instruments
	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2017		2016		2017		2016
Derivative assets and liabilities, net
Beginning balance	$	24,491	$	600	$	57,428	$	10,345
Settlements		(92,117)		(71,250)		(323,662)		(229,178)
Realized gains recorded in earnings (1)		67,626		70,650		266,234		218,833
Unrealized gains recorded in earnings (1)		43,678		31,156		43,678		31,156
Ending balance	$	43,678	$	31,156	$	43,678	$	31,156


	September 30, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	85,363	$	85,363	$	118,756	$	118,756
Restricted cash		17,179		17,179		9,861		9,861
Pledged securities		95,102		95,102		84,850		84,850
Loans held for sale		3,275,761		3,275,761		1,858,358		1,858,358
Loans held for investment, net		152,050		152,764		220,377		222,313
Derivative assets		43,853		43,853		61,824		61,824
Total financial assets	$	3,669,308	$	3,670,022	$	2,354,026	$	2,355,962

Financial liabilities:
Derivative liabilities	$	175	$	175	$	4,396	$	4,396
Warehouse notes payable		3,305,589		3,305,807		1,990,183		1,992,111
Note payable		163,935		166,499		164,163		167,327
Total financial liabilities	$	3,469,699	$	3,472,481	$	2,158,742	$	2,163,834


		Stockholders' Equity
				Additional
	Common Stock			Paid-In		Retained		Noncontrolling		Total
(in thousands)	Shares	Amount		Capital		Earnings		Interests		Equity
Balance at December 31, 2016	29,551	$	296	$	228,889	$	381,031	$	4,858	$	615,074
Walker & Dunlop net income	—		—		—		112,166		—		112,166
Net income from noncontrolling interests	—		—		—		—		114		114
Stock-based compensation - equity classified	—		—		14,948		—		—		14,948
Issuance of common stock in connection with equity compensation plans	1,077		10		2,877		—		—		2,887
Repurchase and retirement of common stock	(679)		(7)		(20,622)		(8,234)		—		(28,863)
Other	—		—		6		—		—		6
Balance at September 30, 2017	29,949	$	299	$	226,098	$	484,963	$	4,972	$	716,332


	As of September 30,
Servicing Portfolio by Product:	2017		2016
Fannie Mae	$	30,005,596	$	25,875,684
Freddie Mac		25,930,819		19,702,477
Ginnie Mae - HUD		8,878,899		9,254,830
Brokered (1)		5,170,479		4,024,490
Interim Loans		298,889		264,508
Total Servicing Portfolio	$	70,284,682	$	59,121,989

Key Servicing Metrics (end of period):
Weighted-average servicing fee rate (basis points)		25.7		25.6
Weighted-average remaining term (years)		9.9		10.5


	Loan Origination Volume by Product Type
	For the three months ended				For the nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Fannie Mae	18	%	37	%	30	%	41	%
Freddie Mac	53		31		35		26
Ginnie Mae - HUD	3		9		5		5
Brokered	26		21		29		26
Interim Loans (1)	-		2		1		2


	Servicing Fees Details
	For the three months ended					For the nine months ended
	September 30,					September 30,
(dollars in thousands)	2017			2016		2017			2016
Average Servicing Portfolio	$	67,685,503		$	58,181,130	$	65,438,795		$	53,820,305
Dollar Change	$	9,504,373				$	11,618,490
Percentage Change		16	%				22	%
Average Servicing Fee (basis points)		26.3			25.3		26.3			25.1
Basis Point Change		1.0					1.2
Percentage Change		4	%				5	%


	Net Warehouse Interest Income Details
	For the three months ended					For the nine months ended
	September 30,					September 30,
(dollars in thousands)	2017			2016		2017			2016
Average LHFS Outstanding Balance	$	1,633,976		$	1,366,356	$	1,289,861		$	1,212,304
Dollar Change	$	267,620				$	77,557
Percentage Change		20	%				6	%
LHFS Net Spread (basis points)		85			102		99			119
Basis Point Change		(17)					(20)
Percentage Change		(17)	%				(17)	%
Average LHFI Outstanding Balance	$	192,244		$	240,431	$	254,421		$	214,608
Dollar Change	$	(48,187)				$	39,813
Percentage Change		(20)	%				19	%
LHFI Net Spread (basis points)		389			356		429			320
Basis Point Change		33					109
Percentage Change		9	%				34	%


	As of September 30,
Change in annual escrow earnings due to (in thousands):	2017		2016
100 basis point increase in 30-day LIBOR	$	17,856	$	16,734
100 basis point decrease in 30-day LIBOR (1)		(17,856)		(8,413)