UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


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

For the transition period from to

Commission File Number: 001-35000

Walker && Dunlop, Inc.

~~(Exact~~ (Exact name of registrant as specified in its charter)

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

~~7501~~7272 Wisconsin Avenue, Suite ~~1200E~~1300

Bethesda, Maryland 20814

(301) 215-5500

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

Not Applicable

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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share	WD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☒ No ☐☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒☒ No ☐☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~“large accelerated filer,~~” “accelerated~~” “accelerated filer,~~” “smaller~~” “smaller reporting company,”” and ~~“emerging~~“emerging growth ~~company”~~company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒☒

Smaller Reporting Company ☐☐

Accelerated Filer ☐☐

Emerging Growth Company ☐☐

Non-accelerated Filer ☐☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐☐ No ☒☒

As of ~~October~~April 28, ~~2021,~~2022, there were ~~32,038,216~~33,130,194 total shares of common stock outstanding.

Table of Contents

Walker && Dunlop, Inc.

Form 10-Q

INDEX


		Page

PART I	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

Item 2.	~~Management's~~Management's Discussion and Analysis of Financial Condition and Results of Operations	2628

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5356

Item 4.	Controls and Procedures	5457

PART II	OTHER INFORMATION	5457

Item 1.	Legal Proceedings	5457

Item 1A.	Risk Factors	5457

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5558

Item 3.	Defaults Upon Senior Securities	5658

Item 4.	Mine Safety Disclosures	5658

Item 5.	Other Information	5658

Item 6.	Exhibits	5759

	Signatures	5860

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Walker && Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

September 30, 2021

December 31, 2020

Assets

Cash and cash equivalents

$
318,188

$
321,097

Restricted cash

34,875

19,432

Pledged securities, at fair value

148,774

137,236

Loans held for sale, at fair value

2,711,900

2,449,198

Loans held for investment, net

233,685

360,402

Mortgage servicing rights

929,825

862,813

Goodwill and other intangible assets

341,703

250,838

Derivative assets

85,486

49,786

Receivables, net

106,228

65,735

Other assets

206,198

134,438

Total assets

$
5,116,862

$
4,650,975

Liabilities

Warehouse notes payable

$
2,848,579

$
2,517,156

Note payable

289,763

291,593

Allowance for risk-sharing obligations

61,607

75,313

Guaranty obligation, net

49,060

52,306

Derivative liabilities

13,263

5,066

Other liabilities

470,654

513,319

Total liabilities

$
3,732,926

$
3,454,753

Stockholders' Equity

Preferred stock (authorized 50,000; NaN issued)

$
—

$
—

Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 31,194 shares at September 30, 2021 and 30,678 shares at December 31, 2020)

312

307

Additional paid-in capital ("APIC")

271,562

241,004

Accumulated other comprehensive income ("AOCI")

2,737

1,968

Retained earnings

1,090,506

952,943

Total stockholders’ equity

$
1,365,117

$
1,196,222

Noncontrolling interests

18,819

—

Total equity

$
1,383,936

$
1,196,222

Commitments and contingencies (NOTES 2 and 9)

—

—

Total liabilities and equity

$
5,116,862

$
4,650,975


		March 31, 2022	December 31, 2021
Assets
Cash and cash equivalents	$	141,375	$	305,635
Restricted cash		41,584		42,812
Pledged securities, at fair value		148,647		148,996
Loans held for sale, at fair value		703,629		1,811,586
Loans held for investment, net		216,620		269,125
Mortgage servicing rights		976,554		953,845
Goodwill		908,744		698,635
Other intangible assets		211,405		183,904
Derivative assets		112,023		37,364
Receivables, net		249,305		212,019
Committed investments in tax credit equity		223,771		177,322
Other assets		405,974		364,746
Total assets	$	4,339,631	$	5,205,989

Liabilities
Warehouse notes payable	$	924,280	$	1,941,572
Notes payable		726,555		740,174
Allowance for risk-sharing obligations		53,244		62,636
Derivative liabilities		12,400		6,403
Commitments to fund investments in tax credit equity		206,605		162,747
Other liabilities		779,376		714,250
Total liabilities	$	2,702,460	$	3,627,782

Stockholders' Equity
Preferred stock (authorized 50,000 shares; NaN issued)	$	—	$	—
Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 32,398 shares at March 31, 2022 and 32,049 shares at December 31, 2021)		324		320
Additional paid-in capital ("APIC")		387,009		393,022
Accumulated other comprehensive income ("AOCI")		1,588		2,558
Retained earnings		1,205,384		1,154,252
Total stockholders’ equity	$	1,594,305	$	1,550,152
Noncontrolling interests		42,866		28,055
Total equity	$	1,637,171	$	1,578,207
Commitments and contingencies (NOTES 2 and 9)		—		—
Total liabilities and equity	$	4,339,631	$	5,205,989

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Walker && Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

(Unaudited)


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2021		2020		2021		2020

									For the three months ended
									March 31,
									2022		2021
Revenues
Loan origination and debt brokerage fees, net	$	123,242	$	83,825	$	306,593	$	238,105	$	82,310	$	75,879
Fair value of expected net cash flows from servicing, net		89,482		78,065		209,266		236,434		52,730		57,935
Servicing fees		70,628		60,265		205,658		172,561		72,681		65,978
Property sales broker fees		33,677		6,756		65,173		19,928		23,398		9,042
Net warehouse interest income		5,583		7,558		14,768		22,454		4,773		4,555
Escrow earnings and other interest income		2,032		2,275		5,972		15,689		1,803		2,117
Other revenues		21,646		8,272		44,559		28,827		81,749		8,782
Total revenues	$	346,290	$	247,016	$	851,989	$	733,998	$	319,444	$	224,288


Expenses
Personnel	$	170,181	$	114,548	$	407,817	$	310,993	$	144,181	$	96,215
Amortization and depreciation		53,498		41,919		148,879		123,998		56,152		46,871
Provision (benefit) for credit losses		1,266		3,483		(14,380)		32,029		(9,498)		(11,320)
Interest expense on corporate debt		1,766		1,786		5,291		6,724		6,405		1,765
Other operating expenses		24,836		16,165		62,171		47,324		32,214		17,587
Total expenses	$	251,547	$	177,901	$	609,778	$	521,068	$	229,454	$	151,118
Income from operations	$	94,743	$	69,115	$	242,211	$	212,930	$	89,990	$	73,170
Income tax expense		22,953		15,925		56,311		50,076		19,460		15,118
Net income before noncontrolling interests	$	71,790	$	53,190	$	185,900	$	162,854	$	70,530	$	58,052
Less: net income (loss) from noncontrolling interests		69		—		69		(224)		(679)		—
Walker & Dunlop net income	$	71,721	$	53,190	$	185,831	$	163,078
Walker & Dunlop net income									$	71,209	$	58,052
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes		159		1,219		769		731		(970)		(158)
Walker & Dunlop comprehensive income	$	71,880	$	54,409	$	186,600	$	163,809

Walker & Dunlop comprehensive income									$	70,239	$	57,894

Basic earnings per share (NOTE 10)	$	2.23	$	1.69	$	5.80	$	5.21	$	2.14	$	1.82
Diluted earnings per share (NOTE 10)	$	2.21	$	1.66	$	5.73	$	5.11	$	2.12	$	1.79


Basic weighted-average shares outstanding		31,064		30,560		30,969		30,379		32,219		30,823
Diluted weighted-average shares outstanding		31,459		31,074		31,367		30,995		32,617		31,276

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Walker && Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)


	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 and nine months ended September 30, 2021
	Common Stock							Retained		Noncontrolling		Total Stockholders'
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity

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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Walker && Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of ~~Changes in Equity~~Cash Flows

(In ~~thousands, except per share data)~~thousands)

(Unaudited)

For the three and nine months ended September 30, 2020

Stockholders' Equity

Common Stock

Retained

Noncontrolling

Total


Shares

Amount

APIC

AOCI

Earnings

Interests

Equity

Balance at December 31, 2019

30,035

$
300

$
237,877

$
737

$
796,775

$
6,596

$
1,042,285

Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax

—

—

—

—

(23,678)

—

(23,678)

Walker & Dunlop net income

—

—

—

—

47,829

—

47,829

Net loss from noncontrolling interests

—

—

—

—

—

(224)

(224)

Contributions from noncontrolling interests

675

675

Other comprehensive income (loss), net of tax

—

—

—

(1,918)

—

—

(1,918)

Stock-based compensation - equity classified

—

—

5,061

—

—

—

5,061

Issuance of common stock in connection with equity compensation plans

675

7

11,362

—

—

—

11,369

Repurchase and retirement of common stock

(380)

(4)

(18,293)

—

(8,440)

—

(26,737)

Cash dividends paid ($0.36 per common share)

—

—

—

—

(11,347)

—

(11,347)

Balance at March 31, 2020

30,330

$
303

$
236,007

$
(1,181)

$
801,139

$
7,047

$
1,043,315

Walker & Dunlop net income

—

—

—

—

62,059

—

62,059

Purchase of noncontrolling interests

—

—

(3,295)

—

—

(7,047)

(10,342)

Other comprehensive income (loss), net of tax

—

—

—

1,430

—

—

1,430

Stock-based compensation - equity classified

—

—

5,592

—

—

—

5,592

Issuance of common stock in connection with equity compensation plans

50

1

195

—

—

—

196

Repurchase and retirement of common stock

(11)

—

(405)

—

—

—

(405)

Cash dividends paid ($0.36 per common share)

—

—

—

—

(11,294)

—

(11,294)

Balance at June 30, 2020

30,369

$
304

$
238,094

$
249

$
851,904

$
—

$
1,090,551

Walker & Dunlop net income

—

—

—

—

53,190

—

53,190

Purchase of noncontrolling interests

—

—

(21,635)

—

—

—

(21,635)

Other comprehensive income (loss), net of tax

—

—

—

1,219

—

—

1,219

Stock-based compensation - equity classified

—

—

6,598

—

—

—

6,598

Issuance of common stock in connection with equity compensation plans and purchase of noncontrolling interests

574

5

11,923

—

—

—

11,928

Repurchase and retirement of common stock

(324)

(3)

(4,678)

—

(10,702)

—

(15,383)

Cash dividends paid ($0.36 per common share)

—

—

—

—

(11,343)

—

(11,343)

Balance at September 30, 2020

30,619

$
306

$
230,302

$
1,468

$
883,049

$
—

$
1,115,125


	For the three months ended March 31,
	2022		2021
Cash flows from operating activities
Net income before noncontrolling interests	$	70,530	$	58,052
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Gains attributable to the fair value of future servicing rights, net of guaranty obligation		(52,730)		(57,935)
Change in the fair value of premiums and origination fees		2,883		21,562
Amortization and depreciation		56,152		46,871
Provision (benefit) for credit losses		(9,498)		(11,320)
Gain from revaluation of previously held equity-method investment		(39,641)		—
Originations of loans held for sale		(3,185,019)		(3,577,153)
Proceeds from transfers of loans held for sale		4,198,206		4,917,187
Other operating activities, net		(68,955)		(81,572)
Net cash provided by (used in) operating activities	$	971,928	$	1,315,692

Cash flows from investing activities
Capital expenditures	$	(11,790)	$	(1,794)
Purchases of equity-method investments		(5,941)		(1,124)
Purchases of pledged available-for-sale ("AFS") securities		(7,010)		(2,000)
Proceeds from prepayment and sale of pledged AFS securities		1,672		20,884
Investments in joint ventures		(5,040)		(18,445)
Distributions from joint ventures		9,241		11,419
Acquisitions, net of cash received		(78,465)		(7,506)
Originations of loans held for investment		(107)		(33,750)
Principal collected on loans held for investment		53,000		113,495
Net cash provided by (used in) investing activities	$	(44,440)	$	81,179

Cash flows from financing activities
Borrowings (repayments) of warehouse notes payable, net	$	(1,006,545)	$	(1,400,704)
Borrowings of interim warehouse notes payable		—		25,313
Repayments of interim warehouse notes payable		(11,200)		(29,534)
Repayments of notes payable		(13,759)		(745)
Proceeds from issuance of common stock		153		12,606
Repurchase of common stock		(27,049)		(13,374)
Cash dividends paid		(20,077)		(16,052)
Payment of contingent consideration		(17,612)		—
Debt issuance costs		(567)		(769)
Net cash provided by (used in) financing activities	$	(1,096,656)	$	(1,423,259)

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents (NOTE 2)	$	(169,168)	$	(26,388)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period		393,180		358,002
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	224,012	$	331,614

Supplemental Disclosure of Cash Flow Information:
Cash paid to third parties for interest	$	13,037	$	9,621
Cash paid for income taxes		1,290		—

See accompanying notes to condensed consolidated financial statements.

Table of Contents

~~Walker & Dunlop, Inc. and Subsidiaries~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(In thousands)~~

~~(Unaudited)~~

For the nine months ended September 30,

2021

2020

Cash flows from operating activities

Net income before noncontrolling interests

$
185,900

$
162,854

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Gains attributable to the fair value of future servicing rights, net of guaranty obligation

(209,266)

(236,434)

Change in the fair value of premiums and origination fees

6,909

(24,393)

Amortization and depreciation

148,879

123,998

Provision (benefit) for credit losses

(14,380)

32,029

Originations of loans held for sale

(12,761,432)

(15,923,846)

Proceeds from transfers of loans held for sale

12,459,511

13,517,432

Other operating activities, net

(13,100)

51,492

Net cash provided by (used in) operating activities

$
(196,979)

$
(2,296,868)

Cash flows from investing activities

Capital expenditures

$
(5,507)

$
(2,050)

Purchases of equity-method investments

(8,029)

(974)

Purchases of pledged available-for-sale ("AFS") securities

(7,250)

(14,130)

Proceeds from prepayment and sale of pledged AFS securities

28,781

15,531

Investments in joint ventures

(58,065)

(16,215)

Distributions from joint ventures

34,012

12,677

Acquisitions, net of cash received

(62,208)

(46,784)

Originations of loans held for investment

(269,737)

(36,950)

Principal collected on loans held for investment

397,328

236,519

Net cash provided by (used in) investing activities

$
49,325

$
147,624

Cash flows from financing activities

Borrowings (repayments) of warehouse notes payable, net

$
333,887

$
2,497,627

Borrowings of interim warehouse notes payable

154,661

34,028

Repayments of interim warehouse notes payable

(157,277)

(109,860)

Repayments of note payable

(2,234)

(2,234)

Repayment of secured borrowings

(73,312)

—

Proceeds from issuance of common stock

5,256

12,587

Repurchase of common stock

(15,686)

(42,525)

Purchase of noncontrolling interests

—

(10,400)

Cash dividends paid

(48,268)

(33,984)

Payment of contingent consideration

—

(1,641)

Debt issuance costs

(2,762)

(2,340)

Net cash provided by (used in) financing activities

$
194,265

$
2,341,258

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents (NOTE 2)

$
46,611

$
192,014

Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period

358,002

136,566

Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period

$
404,613

$
328,580

Supplemental Disclosure of Cash Flow Information:

Cash paid to third parties for interest

$
24,906

$
33,116

Cash paid for income taxes

38,728

21,437

~~See accompanying notes to condensed consolidated financial statements.~~

~~Table of Contents~~

NOTE 1—1—ORGANIZATION AND BASIS OF PRESENTATION

These financial statements represent the condensed consolidated financial position and results of operations of Walker && Dunlop, Inc. and its subsidiaries. Unless the context otherwise requires, references to ~~“we,” “us,” “our,” “Walker & Dunlop”~~“we,” “us,” “our,” “Walker & Dunlop” and the ~~“Company”~~“Company” mean the Walker && Dunlop consolidated companies. The statements have been prepared in conformity with U.S. generally accepted accounting principles ~~(“GAAP”~~(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they may not include certain financial statement disclosures and other information required for annual financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the ~~Company’s~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020 (“2020~~2021 (“2021 Form ~~10-K”~~10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the Company in the interim periods presented have been included. Results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021~~2022 or thereafter.

Walker && Dunlop, Inc. is a holding company and conducts the majority of its operations through Walker && Dunlop, LLC, the operating company. Walker && Dunlop is one of the leading commercial real estate services and finance companies in the United States. The Company originates, sells, and services a range of commercial real estate debt and equity financing products, provides multifamily property sales brokerage and valuation services, engages in commercial real estate investment management activities with a particular focus on the affordable housing sector through low-income housing tax credit (“LIHTC”) syndication, provides housing market research, and delivers real estate-related investment banking and advisory services.

Through its agency lending products, the Company originates and sells loans pursuant to the programs of the Federal National Mortgage Association (“(“Fannie ~~Mae”~~Mae”), the Federal Home Loan Mortgage Corporation (“(“Freddie ~~Mac”~~Mac” and, together with Fannie Mae, the ~~“GSEs”~~“GSEs”), the Government National Mortgage Association (“(“Ginnie ~~Mae”~~Mae”), and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, ~~“HUD”~~“HUD”). Through its debt brokerage products, the Company brokers, and in some cases services, loans for various life insurance companies, commercial banks, commercial mortgage-backed securities issuers, and other institutional ~~investors, in which cases the Company does not fund the loan.~~investors.

The Company also provides a variety of commercial real estate debt and equity solutions through its principal lending and investing ~~products, including interim loans, and preferred and joint venture equity on commercial real estate properties.~~products. Interim loans on multifamily properties are offered (i) through the Company and recorded on the ~~Company’s~~Company’s balance sheet (the ~~“Interim~~“Interim Loan ~~Program”~~Program”) and (ii) through a joint venture with an affiliate of Blackstone Mortgage Trust, Inc., in which the Company holds a 15% ownership interest (the ~~“Interim~~“Interim Program ~~JV”~~JV”). Interim loans on all commercial real estate property types are also offered through separate accounts managed by the Company’s subsidiary, Walker & Dunlop Investment Partners, Inc. (“WDIP”). Preferred and joint venture equity products on commercial real estate properties are offered through funds managed by WDIP.

The Company brokers the sale of multifamily properties through its wholly owned subsidiary, Walker & Dunlop Investment Sales, LLC. In some cases, the Company also provides the debt financing for the property sale.

The Company has a joint venture, branded as “Apprise by Walker & Dunlop,” with an international technology services company to offer automated multifamily valuation and appraisal services (the “Appraisal JV”). The Appraisal JV leverages technology and data science to dramatically improve the consistency, transparency, and speed of multifamily appraisals in the U.S. through the licensing of the partner’s technology and leveraging of the Company’s expertise in the commercial real estate industry. The Company owns a 50% interest in the Appraisal JV and accounts for the interest as an equity-method investment. The operations of the Appraisal JV for the three and nine months ended September 30, 2021 and 2020 were immaterial.

During the third quarter of 2021, the Company acquired certain assets and assumed certain liabilities of Zelman Holdings, LLC (“Zelman”) through a 75% interest in a newly formed entity, which does business as Zelman & Associates. Zelman & Associates provides housing market research and real estate-related investment banking and advisory services.

NOTE 2——SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation——The condensed consolidated financial statements include the accounts of Walker && Dunlop, Inc., its wholly owned subsidiaries, and its majority owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity ~~(“VIE”~~(“VIE”) or the voting

~~Table of Contents~~

interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it holds a variable interest in a VIE and has a controlling financial interest and therefore is considered the primary beneficiary, the Company consolidates the entity. In instances where the Company holds a variable interest in a VIE but is not the primary beneficiary, the Company uses the equity-method of accounting.

If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity. If the Company does not have a majority voting interest but has significant influence, it uses the equity method of accounting. In instances where the Company owns less than 100% of the equity interests of an entity but owns a majority of the voting interests or has control over an entity, the Company accounts for the portion of equity not attributable to Walker && Dunlop, Inc. as Noncontrolling interests on the Condensed Consolidated Balance Sheets and the portion of net income not attributable to Walker && Dunlop, Inc. as Net income (loss) from noncontrolling interests in the Condensed Consolidated Statements of Income.

Subsequent Events——The Company has evaluated the effects of all events that have occurred subsequent to ~~September 30, 2021.~~March 31, 2022. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to ~~September 30, 2021.~~March

Table of Contents

31, 2022. There have been no other material subsequent events that would require recognition in the condensed consolidated financial statements.

Use of Estimates——The preparation of condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, including the allowance for risk-sharing obligations, capitalized mortgage servicing rights, asset management fee receivable related to LIHTC funds, derivative instruments, estimation of contingent consideration for business combinations, estimation of the fair value of the Apprise joint venture (as discussed in NOTE 7), and the disclosure of contingent assets and liabilities. Actual results may vary from these estimates.

~~Derivative Assets and Liabilities—~~Co-broker Fees—Loan commitments that meet the definition of a derivative are recorded at fair value on the Condensed Consolidated Balance Sheets upon the executions of the commitments to originate a loan with a borrower and to sell the loan to an investor, with a corresponding amount recognized as revenue in the Condensed Consolidated Statements of Income. The estimated fair value of loan commitments includes (i) the fair value of loan origination fees and premiums on the anticipated sale of the loan, net of co-broker fees (included in ~~Derivative assets~~ ~~on the Condensed Consolidated Balance Sheets and as a component of~~ ~~Loan origination and debt brokerage fees, net~~ in the Condensed Consolidated Statements of Income), (ii) the fair value of the expected net cash flows associated with the servicing of the loan, net of any estimated net future cash flows associated with the guaranty obligation (included in ~~Derivative assets~~ ~~on the Condensed Consolidated Balance Sheets and in~~ ~~Fair value of expected net cash flows from servicing, net~~ in the Condensed Consolidated Statements of Income), and (iii) the effects of interest rate movements between the trade date and balance sheet date. Loan commitments are generally derivative assets but can become derivative liabilities if the effects of the interest rate movement between the trade date and the balance sheet date are greater than the combination of (i) and (ii) above. Forward sale commitments that meet the definition of a derivative are recorded as either derivative assets or derivative liabilities depending on the effects of the interest rate movements between the trade date and the balance sheet date. Adjustments to the fair value are reflected as a component of income within ~~Loan origination and debt brokerage fees, net~~ ~~in the Condensed Consolidated Statements of Income.~~

Co-broker fees, which are netted against Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income, were ~~$6.3~~$5.9 million and ~~$5.1~~$5.3 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $15.2 million and $20.4 million for the nine months ended September 30, 2021 and 2020,~~ respectively.

Loans Held for Investment, net——Loans held for investment are multifamily loans originated by the Company through the Interim Loan Program for properties that currently do not qualify for permanent GSE or HUD (collectively, the ~~“Agencies”~~“Agencies”) financing. These loans have terms of up to three years and are all adjustable-rate, interest-only, multifamily loans with similar risk characteristics and no geographic concentration. The loans are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs, and net of any allowance for loan losses.

As of ~~September 30, 2021,~~March 31, 2022, Loans held for investment, net consisted of 910 loans with an aggregate ~~$238.7~~$221.6 million of unpaid principal balance less $0.9 million of net unamortized deferred fees and costs and $4.1 million of allowance for loan losses. As of December 31, ~~2020,~~2021, Loans held for investment, net consisted of 1812 loans with an aggregate ~~$366.3~~$274.5 million of unpaid principal balance less ~~$1.1~~$1.2 million of net unamortized deferred fees and costs and ~~$4.8~~$4.2 million of allowance for loan losses.

During the third quarter of 2018, the Company transferred a portfolio of participating interests in loans held for investment to a third party that was paid off in the second quarter of 2021. The Company accounted for the transfer as a secured borrowing, with the aggregate unpaid principal balance of the loans of $81.5 million presented as a component of ~~Loans held for investment, net~~ ~~and the secured borrowing of $73.3 million presented within~~ ~~Other liabilities~~ ~~on the Condensed Consolidated Balance Sheets as of December 31, 2020.~~

~~Table of Contents~~

The Company assesses the credit quality of loans held for investment in the same manner as it does for the loans in the Fannie Mae at-risk portfolio and records an allowance for these loans as necessary. The allowance for loan losses is estimated collectively for loans with similar characteristics. The collective allowance is based on the same methodology that the Company uses to estimate its allowance for risk-sharing obligations under the Current Expected Credit Losses ~~(“CECL”~~(“CECL”) standard for at-risk Fannie Mae Delegated Underwriting and Servicing ~~(“DUS”~~(“DUS”) loans (with the exception of a reversion period) because the nature of the underlying collateral is the same, and the loans have similar characteristics, except they are significantly shorter in maturity. The reasonable and supportable forecast period used for the CECL allowance for loans held for investment is one year.

The loss rate for the forecast period was 15 basis points ~~and 36 basis points~~ as of ~~September 30, 2021~~both March 31, 2022 and December 31, ~~2020, respectively.~~2021. The loss rate for the remaining period until maturity was 6 basis points and 9 basis points as of ~~both September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021, respectively.

NaN loan held for investment with an unpaid principal balance of $14.7 million ~~that was originated in 2017~~ was delinquent and on non-accrual status as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. The Company had a $3.7 million ~~reserve~~in collateral-based reserves for this loan ~~based on its collateral fair value~~ as of ~~September 30, 2021~~both March 31, 2022 and December 31, ~~2020~~2021 and has not recorded any interest related to this loan since it went on non-accrual ~~status in 2019.~~status. All other loans were current as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. The amortized cost basis of loans that were current as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$223.1~~$206.0 million and ~~$350.5~~$258.6 million, respectively. As of ~~September 30, 2021, $195.7~~March 31, 2022, $178.6 million and $28.3 million of the loans that were current were originated in 2021 and 2019, respectively. ~~NaN loans originated in 2020 were outstanding as of September 30, 2021. Prior to 2019,~~Other than the defaulted loan noted above, the Company ~~had~~has not experienced any delinquencies related to loans held for investment.

Provision (Benefit) for Credit Losses——The Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income. NOTE 4 contains additional discussion related to the allowance for risk-sharing obligations. Provision (benefit) for credit losses consisted of the following activity for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

For the three months ended

For the nine months ended

September 30,

September 30,

Components of Provision (Benefit) for Credit Losses (in thousands)

2021

2020

2021

2020

Provision (benefit) for loan losses

$
(12)

$
2,179

$
(674)

$
3,107

Provision (benefit) for risk-sharing obligations

1,278

1,304

(13,706)

28,922

Provision (benefit) for credit losses

$
1,266

$
3,483

$
(14,380)

$
32,029

Table of Contents


	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)

Net Warehouse Interest ~~Income—~~Income—The Company presents warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Generally, a substantial portion of the ~~Company’s~~Company’s loans is financed with matched borrowings under one of its warehouse facilities. The remaining portion of loans not funded with matched borrowings is financed with the ~~Company’s~~Company’s own cash. The Company also ~~occasionally~~ fully funds a small number of loans held for sale or loans held for investment with its own cash. Warehouse interest expense is incurred on borrowings used to fund loans solely while they are held for sale or for investment. Warehouse interest income and expense are earned or incurred on loans held for sale after a loan is closed and before a loan is sold. Warehouse interest income and expense are earned or incurred on loans held for investment after a loan is closed and before a loan is repaid. The Company had a portfolio of participating interests in loans held for investment that was accounted for as a secured borrowing and paid off in the second quarter of 2021. The Company recognized Net warehouse interest income on the unpaid principal balance of the loans and secured borrowing for the three months ended March 31, 2021. Included in Net warehouse interest income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ are the following components:


	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

Statement of Cash Flows—For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cash and cash equivalents (as detailed in NOTE 9) to be restricted cash and restricted cash equivalents. The following table presents a reconciliation of the total cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of March 31, 2022 and 2021 and December 31, 2021 and 2020.


	March 31,				December 31,
(in thousands)	2022		2021		2021		2020
Cash and cash equivalents	$	141,375	$	277,277	$	305,635	$	321,097
Restricted cash		41,584		14,805		42,812		19,432
Pledged cash and cash equivalents (NOTE 9)		41,053		39,532		44,733		17,473
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	224,012	$	331,614	$	393,180	$	358,002

Income Taxes—The Company records the realizable excess tax benefits from stock-based compensation as a reduction to income tax expense. The realizable excess tax benefits were $4.9 million and $4.1 million for the three months ended March 31, 2022 and 2021, respectively.

Table of Contents

Contracts with Customers—A majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers. Substantially all of the Company’s contracts with customers do not require significant judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for substantially all of the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three months ended March 31, 2022 and 2021:


	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

Litigation—In the ordinary course 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.

Recently Adopted and Recently Announced Accounting Pronouncements—There have been no material changes to the accounting policies discussed in NOTE 2 of the Company’s 2021 Form 10-K. There are no recently announced but not yet effective accounting pronouncements that are expected to have a material impact to the Company as of March 31, 2022.

Reclassifications—TheCompany has made certain immaterial reclassifications to prior-year balances to conform to current-year presentation.

NOTE 3—MORTGAGE SERVICING RIGHTS

The fair value of the mortgage servicing rights (“MSRs”) was $1.3 billion as of both March 31, 2022 and December 31, 2021. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities related to the discount rate:

The impact of a 100-basis point increase in the discount rate at March 31, 2022 would be a decrease in the fair value of $39.1 million to the MSRs outstanding as of March 31, 2022.

The impact of a 200-basis point increase in the discount rate at March 31, 2022 would be a decrease in the fair value of $75.6 million to the MSRs outstanding as of March 31, 2022.

These sensitivities are hypothetical and should be used with caution. These estimates do not include interplay among assumptions and are estimated as a portfolio rather than individual assets.

Table of Contents

Activity related to MSRs for the three months ended March 31, 2022 and 2021 follows:


	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

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s MSRs as of March 31, 2022 and December 31, 2021:


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

The expected amortization of MSRs shown in the Condensed Consolidated Balance Sheet as of March 31, 2022 is shown in the table below. Actual amortization may vary from these estimates.


	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

NOTE 4—GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS

When a loan is sold under the Fannie Mae DUS program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. The Company does not provide a guaranty for any other loan product it sells or brokers. The guaranty obligation is presented as a component of Other liabilities on the Condensed Consolidated Balance Sheets. Activity related to the guaranty obligation for the three months ended March 31, 2022 and 2021 is presented in the following table:


	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

Table of Contents

Substantially all loans sold under the Fannie Mae DUS program contain partial or full risk-sharing guaranties that are based on the credit performance of the loan. The Company records an estimate of the loss reserve for CECL for all loans in its Fannie Mae at-risk servicing portfolio and presents this loss reserve as Allowance for risk-sharing obligations on the Condensed Consolidated Balance Sheets.

Activity related to the allowance for risk-sharing obligations for the three months ended March 31, 2022 and 2021 follows:


	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

During the first quarter of 2022, the Company updated its historical loss rate factor calculation to the current 10-year rolling period. The historical loss rate used for the calculation of the CECL reserve was 1.2 basis points as of March 31, 2022 compared to 1.8 basis points as of December 31, 2021, resulting in the benefit for risk-sharing obligations for the three months ended March 31, 2022 seen above. The loss rates for the forecast period and the reversion period did not change from December 31, 2021. During the first quarter of 2021, reported and forecasted unemployment rates significantly improved compared to December 31, 2020. In response to improving unemployment statistics and the expected continued overall health of the multifamily market, the Company reduced the loss rate for the forecast period to 4 basis points as of March 31, 2021 from 6 basis points as of December 31, 2020, resulting in the benefit for risk-sharing obligations for the three months ended March 31, 2021 as seen above.

The 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 weighted-average remaining life of the at-risk Fannie Mae servicing portfolio as of March 31, 2022 was 7.4 years compared to 7.5 years as of December 31, 2021.

NaN loans had aggregate collateral-based reserves of $10.8 million and $10.3 million as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and 2021, the maximum quantifiable contingent liability associated with the Company’s guaranties for the at-risk loans serviced under the Fannie Mae DUS agreement was $10.2 billion and $9.3 billion, respectively. This maximum quantifiable contingent liability relates to the at-risk loans serviced for Fannie Mae at the specific point in time indicated. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement.

NOTE 5—SERVICING

The total unpaid principal balance of loans the Company was servicing for various institutional investors was $116.3 billion as of March 31, 2022 compared to $115.7 billion as of December 31, 2021.

As of March 31, 2022 and December 31, 2021, custodial escrow accounts relating to loans serviced by the Company totaled $2.5 billion and $3.7 billion, respectively. These amounts are not included in the Condensed Consolidated Balance Sheets as such amounts are not Company assets; however, the Company is entitled to earn interest income on these escrow balances, presented as a component of Escrow earnings and other interest income in the Condensed Consolidated Statements of Income. Certain cash deposits at other financial institutions exceed the Federal Deposit Insurance Corporation insured limits. The Company places these deposits with financial institutions that meet the requirements of the Agencies and where it believes the risk of loss to be minimal.

Table of Contents

NOTE 6—WAREHOUSE NOTES PAYABLE

As of March 31, 2022, to provide financing to borrowers under the Agencies’ programs, the Company has committed and uncommitted warehouse lines of credit in the amount of $3.8 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). In support of these Agency Warehouse Facilities, the Company has pledged substantially all of its loans held for sale under the Company’s approved programs. The Company’s ability to originate mortgage loans for sale depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.

Additionally, as of March 31, 2022, the Company has arranged for warehouse lines of credit in the amount of $0.5 billion with certain national banks to assist in funding loans held for investment under the Interim Loan Program (“Interim Warehouse Facilities”). The Company has pledged substantially all of its loans held for investment against these Interim Warehouse Facilities. The Company’s ability to originate loans held for investment depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.

The maximum amount and outstanding borrowings under Warehouse notes payable at March 31, 2022 follow:


	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

(1)	Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to fund loans held for investment.

(2)	Interest rate presented does not include the effect of any applicable interest rate floors.

During 2022, the following amendments to the Warehouse Facilities were executed in the normal course of business to support the growth of the Company’s business.

During the second quarter of 2022, the Company executed an amended and restated agreement related to Agency Warehouse Facility #2 that extended the maturity date to April 13, 2023 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 130 basis points. No other material modifications have been made to the agreement during 2022.

During the first quarter of 2022, the Company executed an amended and restated agreement related to Interim Warehouse Facility #2 that extended the maturity date to December 13, 2023 and transitioned the interest rate from 30-day LIBOR floor to Adjusted Term SOFR plus 135 to 185 basis points. No other material modifications have been made to the agreement during 2022.

Table of Contents

During the second quarter of 2022, the Company executed an amendment related to the Alliant Warehouse Facility that extended the maturity date to July 31, 2022. Additionally, the amendment transitioned the interest rate from Daily LIBOR plus 300 basis points to Adjusted Daily SOFR plus 300 basis points, with a SOFR floor of 150 basis points. No other material modifications have been made to the agreement during 2022.

During the first quarter of 2022, an Agency Warehouse Facility with a $150.0 million maximum committed borrowing capacity expired according to its terms. The Company believes that the 6 remaining committed and uncommitted credit facilities from nation banks, the uncommitted credit facility from Fannie Mae, and the Company’s corporate cash provide the Company with sufficient borrowing capacity to conduct is Agency lending operations without this facility.

The warehouse notes payable are subject to various financial covenants, all of which the Company was in compliance with as of March 31, 2022. Interest on the Company’s warehouse notes payable is based on 30-day LIBOR or Adjusted Term SOFR. As a result of the expected transition from LIBOR, the Company has updated its debt agreements to include fallback language to govern the transition from 30-day LIBOR to an alternative reference rate.

NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Acquisition Activities

A summary of the Company’s goodwill for the three months ended March 31, 2022 and 2021 follows:


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

The addition to goodwill from acquisitions during 2022 shown in the table above during the three months ended March 31, 2022 relates to the Company’s February 28, 2022 acquisition of 100% of the equity interests of GeoPhy B.V. (“GeoPhy”), a Netherlands-based commercial real-estate technology company. As part of the acquisition, the Company also obtained GeoPhy’s 50% interest in the Company’s appraisal joint venture, Apprise. The Company now owns 100% of Apprise and consolidates its balances and its operating results post acquisition. Prior to the acquisition, the Company accounted for its investment in Apprise under the equity method. The fair value of the consideration was $212.0 million and consisted of $87.6 million of cash, $5.4 million of forgiveness of a receivable the Company had with the joint venture (non-cash activity not reflected in the Condensed Consolidated Statements of Cash Flows), and $119.0 million of contingent consideration.

GeoPhy’s data analytics and development capabilities are expected to dramatically accelerate the growth of the Company’s lending, brokerage, and appraisal operations. The GeoPhy acquisition is also expected to allow the Company to meet its goal of $5 billion of annual small balance lending volume and appraisal revenue of $75 million by 2025 as part of the Company’s overall growth targets. A significant portion of the value associated with the GeoPhy acquisition was related to the assembled workforces with their combined expertise in information technology, data science, and commercial real estate. The Company believes that the combination of GeoPhy’s personnel, appraisal technology platform, and the future development of technology to accelerate growth in the origination of small balance commercial loans, along with Walker & Dunlop’s financial resources will (i) drive a significant increase in the identification and retention of borrowers in the small-balance segment of the multifamily market and (ii) continue to drive significant growth in appraisal revenues over the next five years.

The contingent consideration noted above is contingent on achieving certain Apprise revenue and productivity milestones and small balance loan volume and revenue milestones over a four-year period. The maximum earnout included as part of the GeoPhy acquisition is $205.0 million. The Company estimated that $182.5 million, or 89%, of the maximum earnout is achievable based on management forecasts. The discounted balance of $119.0 million is 58% of the maximum earnout amount. The Company estimated the fair value of this contingent consideration using a Monte Carlo simulation. The discount rate used for the valuation of the contingent consideration was 17.0% for the

Table of Contents

For the three months ended

For the nine months ended

September 30,

September 30,

Components of Net Warehouse Interest Income (in thousands)

2021

2020

2021

2020

Warehouse interest income - loans held for sale

$
11,334

$
12,649

$
28,315

$
37,150

Warehouse interest expense - loans held for sale

(7,611)

(7,780)

(19,249)

(24,475)

Net warehouse interest income - loans held for sale

$
3,723

$
4,869

$
9,066

$
12,675

Warehouse interest income - loans held for investment

$
3,108

$
4,015

$
9,298

$
15,083

Warehouse interest expense - loans held for investment

(1,248)

(1,326)

(3,596)

(5,304)

Warehouse interest income - secured borrowings

—

869

1,748

2,564

Warehouse interest expense - secured borrowings

—

(869)

(1,748)

(2,564)

Net warehouse interest income - loans held for investment

$
1,860

$
2,689

$
5,702

$
9,779

Total net warehouse interest income

$
5,583

$
7,558

$
14,768

$
22,454

Apprise portion of the earnout and 14.5% for the small-balance portion of the earnout. The discount rates reflect the additional risk inherent in the Apprise estimates as it is still in the startup stage of its development.

~~Statement~~

The calculation of ~~Cash Flows~~goodwill of $213.9 million included the fair value of the consideration transferred of $212.0 million and the acquisition-date fair value of the Company’s previously-held equity-method investment in Apprise of $58.5 million. The book value of the Company equity-method investment in Apprise prior to the acquisition date was $18.9 million, resulting in a $39.6 million gain from remeasuring to fair value. The gain is included as a component of Other revenues~~—For presentation~~ in the Condensed Consolidated Statements of ~~Cash Flows,~~Income. The Company used a discounted cash flow model to estimate the ~~Company considers pledged cash~~acquisition-date fair value of Apprise, with the discount rate and management’s forecast of future revenues and cash ~~equivalents (as detailed~~flows as the most-significant inputs for the estimate. The discount rate used was 17.0%, and a control premium was not included in ~~NOTE 9)~~the estimate.

The Company expects a large portion of the goodwill to be ~~restricted~~tax deductible, with the tax-deductible amount of goodwill related to the contingent consideration to be determined once the cash payments to settle the contingent consideration are made. The goodwill resulting from the GeoPhy acquisition was allocated to the Company’s Capital Markets reportable segment. The other assets primarily consisted of technology intangible assets of $31.0 million and ~~restricted cash equivalents.~~deferred tax assets of $9.4 million. The ~~following table presents~~technology intangible assets will be amortized over a ~~reconciliation~~10-year period. Immaterial liabilities were assumed. The operations of GeoPhy have since been merged into the ~~total cash, cash equivalents, restricted cash,~~Company’s existing operations. The financial results since the GeoPhy acquisition were immaterial. The revenues and ~~restricted cash equivalents~~earnings of Walker & Dunlop for the three months ended March 31, 2022 as if the GeoPhy acquisition had occurred as of January 1, 2021 would not be materially different from the amounts presented in the Condensed Consolidated Statements of ~~Cash Flows~~Income.

As of March 31, 2022, the amounts recorded for the GeoPhy acquisition were provisional as the Company had not completed the purchase accounting for the GeoPhy acquisition.

The immaterial measurement-period adjustments above relate to the ~~related captions~~Company’s acquisition of Alliant Capital Limited (“Alliant”), an acquisition completed in December of 2021 as more fully described in the ~~Condensed Consolidated Balance Sheets~~Company’s 2021 Form 10-K. The Company has not completed the purchase accounting for the Alliant acquisition as the working capital adjustments have not been agreed upon. The Company expects the accounting to be completed in the second quarter of 2022.

As discussed in NOTE 11 below, the Company transitioned to segment reporting during the first quarter of 2022. The following table shows goodwill by reportable segments as of ~~September 30, 2021 and 2020 and~~March 31, 2022. As the Company did not have segment reporting as of December 31, ~~2020~~2021, all of the goodwill balances were allocated to the Company’s 1 reportable segment as of December 31, 2021. As noted above, the additions in the first quarter of 2022 were allocated to Capital Markets and ~~2019.~~the measurement-period adjustments relate to Servicing & Asset Management.

September 30,

December 31,

(in thousands)
2021

2020

2020

2019

Cash and cash equivalents
$
318,188

$
294,873

$
321,097

$
120,685

Restricted cash

34,875

12,383

19,432

8,677

Pledged cash and cash equivalents (NOTE 9)

51,550

21,324

17,473

7,204

Total cash, cash equivalents, restricted cash, and restricted cash equivalents
$
404,613

$
328,580

$
358,002

$
136,566

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

~~Income~~ ~~Taxes~~~~—The Company records the realizable excess tax benefits from stock-based compensation as a reduction~~Other Intangible Assets

Activity related to ~~income tax expense. The realizable excess tax benefits were $2.1 million and $3.0 million~~other intangible assets for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020, respectively, and $7.3 million and $6.0 million during the nine months ended September 30, 2021 and 2020, respectively.~~follows:

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
~~Contracts with Customers~~—A majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers. The Company’s contracts with customers do not require significant judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three and nine months ended September 30, 2021 and 2020:

1115

Table of Contents

For the three months ended

For the nine months ended

September 30,

September 30,

Description (in thousands)

2021

2020

2021

2020

Statement of income line item
Certain loan origination fees

$
46,527

$
10,731

$
113,650

$
40,769

Loan origination and debt brokerage fees, net
Property sales broker fees

33,677

6,756

65,173

19,928

Property sales broker fees
Investment management fees, application fees, subscription revenues, and other

10,936

4,532

25,114

14,632

Other revenues
Total revenues derived from contracts with customers

$
91,140

$
22,019

$
203,937

$
75,329

~~Litigation~~—In the ordinary course 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.
~~Recently Adopted and Recently Announced Accounting Pronouncement~~s—There have been no material changes to the accounting policies discussed in NOTE 2 of the Company’s 2020 Form 10-K. There are no recently announced but not yet effective accounting pronouncements that are expected to have a material impact to the Company as of September 30, 2021.
~~Reclassifications~~~~—TheCompany has made certain immaterial reclassifications to prior-year balances to conform to current-year presentations.~~

~~NOTE 3—MORTGAGE SERVICING RIGHTS~~
The fair value of the mortgage servicing rights (“MSRs”) as of September 30, 2021 and December 31, 2020 was $1.2 billion and $1.1 billion, respectively. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities:
~~The impact of a 100-basis point increase in the discount rate at September 30, 2021 would be a decrease in the fair value of $37.2 million to the MSRs outstanding as of September 30, 2021.~~
~~The impact of a 200-basis point increase in the discount rate at September 30, 2021 would be a decrease in the fair value of $72.0 million to the MSRs outstanding as September 30, 2021.~~
~~These sensitivities are hypothetical and should be used with caution. These estimates do not include interplay among assumptions and are estimated as a portfolio rather than individual assets.~~
~~Activity related to MSRs for the three and nine months ended September 30, 2021 and 2020 follows:~~

For the three months ended

For the nine months ended

September 30,

September 30,

Roll Forward of MSRs (in thousands)

2021

2020

2021

2020

Beginning balance

$
915,519

$
778,269

$
862,813

$
718,799

Additions, following the sale of loan

70,095

71,485

224,035

215,288

Amortization

(44,402)

(38,319)

(130,868)

(110,243)

~~Table of Contents~~

Pre-payments and write-offs

(11,387)

(5,780)

(26,155)

(18,189)

Ending balance

$
929,825

$
805,655

$
929,825

$
805,655

The following table summarizes the gross value, accumulated amortization, and net carrying value of the ~~Company’s MSRs~~Company’s other intangible assets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

Components of MSRs (in thousands)

September 30, 2021

December 31, 2020

As of March 31,
Components of Other Intangible Assets (in thousands)

2022

2021
Gross value

$
1,521,190

$
1,394,901

$
220,682

$
189,682
Accumulated amortization

(591,365)

(532,088)

(9,277)

(5,778)
Net carrying value

$
929,825

$
862,813

$
211,405

$
183,904

The expected amortization of ~~MSRs held~~other intangible assets shown in the Condensed Consolidated Balance Sheet as of ~~September 30, 2021~~March 31, 2022 is shown in the table below. Actual amortization may vary from these estimates.


Expected
(in thousands)

  Amortization
Three Months Ending December 31,

2021

$
43,927
Year Ending December 31,

2022

$
167,770
2023

155,112
2024

134,111
2025

113,562
2026

93,833
Thereafter

221,510
Total

$
929,825


Expected
(in thousands)

  Amortization
Nine Months Ending December 31,

2022

$
13,496
Year Ending December 31,

2023

$
16,246
2024

16,246
2025

16,206
2026

16,206
2027

16,206
Thereafter

116,799
Total

$
211,405
~~NOTE 4—GUARANTY OBLIGATION AND ALLOWANCE FOR RISK-SHARING OBLIGATIONS~~
When a loan is sold under the Fannie Mae DUS program, the Company typically agrees to guarantee a portion of the ultimate loss incurred on the loan should the borrower fail to perform. The compensation for this risk is a component of the servicing fee on the loan. The guaranty is in force while the loan is outstanding. The Company does not provide a guaranty for any other loan product it sells or brokers. Activity related to the guaranty obligation for the three and nine months ended September 30, 2021 and 2020 is presented in the following table:

For the three months ended

For the nine months ended

September 30,

September 30,

Roll Forward of Guaranty Obligation (in thousands)

2021

2020

2021

2020

Beginning balance

$
50,369

$
54,872

$
52,306

$
54,695

Additions, following the sale of loan

1,449

876

4,023

4,346

Amortization

(2,758)

(2,274)

(7,269)

(7,035)

Other

—

—

—

1,468

Ending balance

$
49,060

$
53,474

$
49,060

$
53,474

Substantially all loans sold under the Fannie Mae DUS program contain partial or full risk-sharing guaranties that are based on the credit performance of the loan. The Company records an estimate of the loss reserve for CECL for all loans in its Fannie Mae at-risk servicing portfolio and presents this loss reserve as ~~Allowance for risk-sharing obligations~~ on the Condensed Consolidated Balance Sheets. The Company utilizes the weighted-average remaining maturity (“WARM”) method to calculate the CECL reserve and one year for the reasonable and supportable forecast period (the “forecast period”), as the Company currently believes forecasts beyond one year are inherently less reliable. The WARM method uses an average annual charge-off rate that contains loss content over multiple vintages and loan terms and is used as a foundation for estimating the CECL reserve. The Company reverts to a historical loss rate over a one-year period. For all remaining years until

~~Table of Contents~~

maturity, the Company uses the historical weighted-average annual charge-off rate to estimate losses. The average annual charge-off rate is applied to the unpaid principal balance over the contractual term, further adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio.
~~Activity related to the allowance for risk-sharing obligations for the three and nine months ended September 30, 2021 and 2020 follows:~~

For the three months ended

For the nine months ended

September 30,

September 30,

Roll Forward of Allowance for Risk-Sharing Obligations (in thousands)

2021

2020

2021

2020

Beginning balance

$
60,329

$
69,191

$
75,313

$
11,471

Adjustment related to adoption of CECL

—

—

—

31,570

Provision (benefit) for risk-sharing obligations

1,278

1,304

(13,706)

28,922

Write-offs

—

—

—

—

Other

—

—

—

(1,468)

Ending balance

$
61,607

$
70,495

$
61,607

$
70,495

Contingent Consideration Liabilities
As a result of the onset of the pandemic and the resulting forecasts for significant unemployment rates during 2020, the Company’s loss rate for the forecast period was 7 basis points as of September 30, 2020, resulting in the substantial provision for risk-sharing obligations for the nine months ended September 30, 2020 and an increase in the allowance for risk-sharing obligations as of September 30, 2020 as seen above. During the first three quarters of 2021, economic conditions have improved significantly compared to the same period in 2020, with reported and forecast unemployment rates significantly better compared to both December 31, 2020 and September 30, 2020. In response to improving unemployment statistics and the current and expected overall health of the multifamily market, the Company adjusted the loss rate for the forecast period from 6 basis points as of December 31, 2020 to 3 basis points as of both June 30, 2021 and September 30, 2021. The decrease in the loss rate resulted in the benefit for risk-sharing obligations seen above for the nine months ended September 30, 2021. The provision for risk-sharing obligations for the three months ended September 30, 2021 was a result of growth in the at-risk servicing portfolio. For the remaining expected life of the portfolio, the Company reverted over a one-year period on a straight-line basis to a historical loss rate of just under 2 basis points for all periods shown in the roll forward above.
The calculated CECL reserve for the Company’s $47.0 billion at-risk Fannie Mae servicing portfolio as of September 30, 2021 was $54.0 million compared to $67.0 million as of December 31, 2020. The weighted-average remaining life of the at-risk Fannie Mae servicing portfolio as of September 30, 2021 was 7.5 years. The at-risk Fannie Mae servicing portfolio does not include at-risk loans held for sale.
~~NaN loans that defaulted in 2019 had aggregate collateral-based reserves of $7.6 million and $8.3 million as of September 30, 2021 and December 31, 2020, respectively.~~
As of September 30, 2021, the maximum quantifiable contingent liability associated with the Company’s guaranties for the at-risk loans serviced under the Fannie Mae DUS agreement was $9.8 billion. The maximum quantifiable contingent liability is not representative of the actual loss the Company would incur. The Company would be liable for this amount only if all of the loans it services for Fannie Mae, for which the Company retains some risk of loss, were to default and all of the collateral underlying these loans were determined to be without value at the time of settlement.
~~NOTE 5—SERVICING~~
The total unpaid principal balance of loans the Company was servicing for various institutional investors was $113.9 billion as of September 30, 2021 compared to $107.2 billion as of December 31, 2020.
As of September 30, 2021 and December 31, 2020, custodial escrow accounts relating to loans serviced by the Company totaled $3.0 billion and $3.1 billion, respectively. These amounts are not included in the Condensed Consolidated Balance Sheets as such amounts are not Company assets; however, the Company is entitled to earn interest income on these escrow balances, presented as a component of ~~Escrow earnings and other interest income~~ ~~in the Condensed Consolidated Statements of Income. Certain cash deposits at other financial institutions~~

~~Table of Contents~~

exceed the Federal Deposit Insurance Corporation insured limits. The Company places these deposits with financial institutions that meet the requirements of the Agencies and where it believes the risk of loss to be minimal.

~~NOTE 6—WAREHOUSE NOTES PAYABLE~~
As of September 30, 2021, to provide financing to borrowers under the Agencies’ programs, the Company has committed and uncommitted warehouse lines of credit in the amount of $4.1 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”). In support of these Agency Warehouse Facilities, the Company has pledged substantially all of its loans held for sale under the Company’s approved programs. The Company’s ability to originate mortgage loans for sale depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.
Additionally, as of September 30, 2021, the Company has arranged for warehouse lines of credit in the amount of $0.5 billion with certain national banks to assist in funding loans held for investment under the Interim Loan Program (“Interim Warehouse Facilities”). The Company has pledged substantially all of its loans held for investment against these Interim Warehouse Facilities. The Company’s ability to originate loans held for investment depends upon its ability to secure and maintain these types of short-term financings on acceptable terms.
~~The maximum amount and outstanding borrowings under~~ ~~Warehouse notes payable~~ ~~at September 30, 2021 follows:~~

September 30, 2021

(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

$
277,872

30-day LIBOR plus 1.30%

Agency Warehouse Facility #2

700,000

300,000

1,000,000

346,047

30-day LIBOR plus 1.30%

Agency Warehouse Facility #3

600,000

265,000

865,000

378,624

30-day LIBOR plus 1.30%

Agency Warehouse Facility #4

350,000

—

350,000

136,616

30-day LIBOR plus 1.30%

Agency Warehouse Facility #5

—

1,000,000

1,000,000

885,308

30-day LIBOR plus 1.45%

Agency Warehouse Facility #6

150,000

100,000

250,000

118,124

30-day LIBOR plus 1.40%

Agency Warehouse Facility #7

150,000

50,000

200,000

92,293

30-day LIBOR plus 1.30%

Total National Bank Agency Warehouse Facilities

$
2,375,000

$
1,715,000

$
4,090,000

$
2,234,884

Fannie Mae repurchase agreement, uncommitted line and open maturity

—

1,500,000

1,500,000

482,861

Total Agency Warehouse Facilities

$
2,375,000

$
3,215,000

$
5,590,000

$
2,717,745

Interim Warehouse Facility #1

$
135,000

$
—

$
135,000

$
—

30-day LIBOR plus 1.90%

Interim Warehouse Facility #2

100,000

—

100,000

—

30-day LIBOR plus 1.65% to 2.00%

Interim Warehouse Facility #3

200,000

—

200,000

111,817

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

$
131,627

Debt issuance costs

—

—

—

(793)

Total warehouse facilities

$
2,829,810

$
3,215,000

$
6,044,810

$
2,848,579

~~(1)~~ ~~Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to fund loans held for investment.~~
~~(2)~~ ~~Interest rate presented does not include the effect of interest rate floors.~~

~~The following amendments to the Agency Warehouse Facilities were executed in the normal course of business to support the growth of the Company’s Agency business.~~
During the second quarter of 2021, the Company executed an amendment to the agreement related to Agency Warehouse Facility #1 that decreased the borrowing rate to 30-day London Interbank Offered Rate (“LIBOR”) plus 130 basis points from 30-day LIBOR plus 140 basis points and decreased the 30-day LIBOR floor to 0 from 25 basis points. In October 2021, the Company executed an amendment to the agreement that extended the maturity date to December 24, 2021. No other material modifications have been made to the agreement during 2021.

~~Table of Contents~~

During the second quarter of 2021, the Company executed amendments to the agreement related to Agency Warehouse Facility #2 that extended the maturity date to April 14, 2022 and decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points. No other material modifications have been made to the agreement during 2021.

During the second quarter of 2021, the Company executed amendments to the agreement related to Agency Warehouse Facility #3 that extended the maturity date to May 14, 2022, increased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 115 basis points, and decreased the 30-day LIBOR floor to 0 basis points from 50 basis points. No other material modifications have been made to the agreement during 2021.

During the second quarter of 2021, the Company executed an amendment to the agreement related to Agency Warehouse Facility #4 that extended the maturity date to June 22, 2022, decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points, and decreased the 30-day LIBOR floor to 5 basis points from 25 basis points. No other material modifications have been made to the agreement during 2021.

During the third quarter of 2021, the Company executed amendments to the agreement related to Agency Warehouse Facility #5 that extended the maturity date to September 15, 2022. No other material modifications have been made to the agreement during 2021.

During the first quarter of 2021, the Company executed an agreement to establish Agency Warehouse Facility #6. The warehouse facility has a $150.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures on March 5, 2022. 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 140 basis points with a 30-day LIBOR floor of 25 basis points. In addition to the committed borrowing capacity, the agreement provides $100.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The facility agreement requires the Company’s compliance with the same financial covenants as provided in the facility agreement for Agency Warehouse Facility #1, as described in the Company’s 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

During the third quarter of 2021, the Company executed an agreement to establish Agency Warehouse Facility #7. The warehouse facility has a $150.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures on August 24, 2022. 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 130 basis points. In addition to the committed borrowing capacity, the agreement provides $50.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The facility agreement requires the Company’s compliance with the same financial covenants as provided in the facility agreement for Agency Warehouse Facility #1, as described in the Company’s 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

During the second quarter of 2021, the Company executed amendments to the agreement related to Interim Warehouse Facility #1 that extended the maturity date to May 14, 2022 and decreased the 30-day LIBOR floor to 0 basis points from 50 basis points. No other material modifications have been made to the agreement during 2021.

During the third quarter of 2021, the Company executed an amendment to the agreement related to Interim Warehouse Facility #3 that extended the maturity date to September 29, 2022, increased the committed borrowing capacity to $200.0 million, and eliminated the uncommitted borrowing capacity. No other material modifications have been made to the agreement during 2021.

In October 2021, the Company executed an amendment related to Interim Warehouse Facility #4 that extended the stated maturity date to October 1, 2022. No other material modifications have been made to the agreement during 2021.

~~The warehouse notes payable are subject to various financial covenants, all of which the Company was in compliance with as of September 30, 2021.~~

Interest on the Company’s warehouse notes payable is based on 30-day LIBOR. As a result of the expected transition from LIBOR, the Company has updated its debt agreements to include fallback language to govern the transition from 30-day LIBOR to an alternative reference rate.

~~Table of Contents~~

~~NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS~~
A summary of the ~~Company’s goodwill for the nine months ended September 30, 2021 and 2020 follows:~~

For the nine months ended

September 30,

Roll Forward of Goodwill (in thousands)

2021

2020

Beginning balance

$
248,958

$
180,424

Additions from acquisitions

84,291

68,534

Impairment

—

—

Ending balance

$
333,249

$
248,958

~~The additions to goodwill from acquisitions during 2021 shown in the table above during the nine months ended September 30, 2021 relate to the following immaterial acquisitions:~~

Detail of Acquisition Activity (in thousands)

Acquisition

Purchase Consideration

Assets

Liabilities

Noncontrolling

Goodwill
Acquisition

Date

Cash

Stock

Contingent

Total

Acquired

Assumed

Interest

Recognized
Acquisition #1

Q1 2021

$
7,506

$
—

$
5,229

$
12,735

$
504

$
—

$
—

$
12,231
Acquisition #2

Q2 2021

3,000

—

2,275

5,275

—

—

—

5,275
Acquisition #3

Q3 2021

53,420

5,250

—

58,670

16,521

5,886

18,750

66,785
Total

$
63,926

$
5,250

$
7,504

$
76,680

$
17,025

$
5,886

$
18,750

$
84,291

The assets acquired and liabilities assumed presented above were recorded at fair value. Acquisition #1 relates to a property sales brokerage company. Acquisition #2 relates to a company with a technology platform that streamlines and accelerates the quoting, processing, and underwriting of small-balance multifamily loans while providing the borrower with a web-based, user-friendly interface. The acquisition is part of the Company’s overall strategy to significantly increase its small-balance lending volumes using technology. Acquisition #3 relates to the purchase of a 75% controlling interest in Zelman, which specializes in housing market research and real estate-related investment banking and advisory services. The assets acquired for Acquisition #3 include $8.2 million of intangible assets. As of September 30, 2021, the Company completed the purchase accounting for Acquisitions #1 and #2. The purchase accounting for Acquisition #3 is pending the finalization of working capital adjustments in the fourth quarter of 2021, which are expected to be immaterial.
~~The stock consideration shown above is a non-cash transaction not impacting the amount of cash consideration paid on the Condensed Consolidated Statements of Cash Flows.~~
As of September 30, 2021 and December 31, 2020, the remaining balance of intangible assets from acquisitions totaled $8.5 million and $1.9 million, respectively. As of September 30, 2021, the weighted-average period over which the Company expects these intangible assets to be amortized is 5.4 years.
~~A summary of the Company’s~~’s contingent consideration liabilities, which are included in Other liabilities in the Condensed Consolidated Balance Sheets, as of and for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ follows:

For the nine months ended

September 30,

For the three months ended

March 31,

Roll Forward of Contingent Consideration Liabilities (in thousands)

2021

2020


2022

2021

Beginning balance

$
28,829

$
5,752

$
125,808

$
28,829

Additions

7,504

27,645

119,000

5,229

Accretion

1,405

826

Accretion and revaluation

359

430

Payments

(6,080)

(5,800)

(26,438)

—

Ending balance

$
31,658

$
28,423

$
218,729

$
34,488

The contingent consideration liabilities above relate to (i) acquisitions of debt brokerage companies and an investment sales brokerage company completed over the past several years, ~~including 2021,~~ (ii) the purchase of noncontrolling interests in 2020 that was fully earned as of December 31, 2021 and paid in 2022, (iii) the ~~aforementioned~~Alliant acquisition, and (iv) the GeoPhy acquisition.

~~Table of Contents~~

~~technology company acquired in 2021.~~ The contingent consideration for each of the acquisitions may be earned over various lengths of time after each acquisition, with a maximum earn-out period of five years, provided certain revenue targets and other metrics have been met. The last of the earn-out periods related to the contingent consideration ends in the first quarter of 2026. In each case, ~~the~~the Company estimated the initial fair value of the contingent consideration using a ~~probability-based, discounted cash flow model.~~Monte Carlo simulation.

The contingent consideration ~~included~~ for the ~~acquisitions and purchase of noncontrolling interests~~GeoPhy acquisition is non-cash and thus not reflected in the amount of cash consideration paid on the Condensed Consolidated Statements of Cash Flows.

Table of Contents

NOTE 8—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 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 measurement when there is evidence of 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 on occasion, 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, 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 market participants consider in valuing MSR assets. ~~During the first quarter of 2021, the Company reduced the discount rate and escrow earnings rate assumptions for its capitalized MSRs based on market participant data.~~ MSRs are carried at the lower of amortized cost or fair value.

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

●●

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

●●

Loans Held for Sale——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 inputs from market participants such as changes in the U.S. Treasury rate. Therefore, the Company classifies these loans held for sale as Level 2.

●

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

1817

Table of Contents

~~observable inputs from market participants such as changes in the U.S. Treasury rate. Therefore, the Company classifies these loans held for sale as Level 2.~~
● ~~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.~~fair value accretion. 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~~each contingent consideration liability based on a probability of ~~fair value. Consequently,~~achievement, which incorporates management estimates. As a result, the Company classifies ~~this portion of pledged securities~~these liabilities as Level 2.3.
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value:

Balance as of

Balance as of

(in thousands)

Level 1

Level 2

Level 3

Period End

Level 1

Level 2

Level 3

Period End

September 30, 2021

March 31, 2022

Assets

Loans held for sale

$
—

$
2,711,900

$
—

$
2,711,900

$
—

$
703,629

$
—

$
703,629

Pledged securities

51,550

97,224

—

148,774

41,053

107,594

—

148,647

Derivative assets

—

—

85,486

85,486

—

—

112,023

112,023

Total

$
51,550

$
2,809,124

$
85,486

$
2,946,160

$
41,053

$
811,223

$
112,023

$
964,299

Liabilities

Derivative liabilities

$
—

$
—

$
13,263

$
13,263

$
—

$
—

$
12,400

$
12,400

Contingent consideration liabilities

—

—

218,729

218,729

Total

$
—

$
—

$
13,263

$
13,263

$
—

$
—

$
231,129

$
231,129

December 31, 2020

December 31, 2021

Assets

Loans held for sale

$
—

$
2,449,198

$
—

$
2,449,198

$
—

$
1,811,586

$
—

$
1,811,586

Pledged securities

17,473

119,763

—

137,236

44,733

104,263

—

148,996

Derivative assets

—

—

49,786

49,786

—

—

37,364

37,364

Total

$
17,473

$
2,568,961

$
49,786

$
2,636,220

$
44,733

$
1,915,849

$
37,364

$
1,997,946

Liabilities

Derivative liabilities

$
—

$
—

$
5,066

$
5,066

$
—

$
—

$
6,403

$
6,403

Contingent consideration liabilities

—

—

125,808

125,808

Total

$
—

$
—

$
5,066

$
5,066

$
—

$
—

$
132,211

$
132,211

There were 0 transfers between any of the levels within the fair value hierarchy during the ~~nine~~three months ended ~~September 30, 2021.~~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, 2021~~March 31, 2022 and ~~2020:~~2021:

Level 3 Fair Value Measurements:

Derivative Instruments

For the three months ended

For the nine months ended

September 30,

September 30,

For the three months ended

March 31,
Derivative Assets and Liabilities, net (in thousands)

2021

2020

2021

2020


2022

2021
Beginning balance

$
6,340

$
13,346

$
44,720

$
15,532

$
30,961

$
44,720
Settlements

(146,841)

(141,804)

(488,356)

(456,639)

(66,378)

(129,655)
Realized gains recorded in earnings⁽¹⁾

140,501

128,458

443,636

441,107

35,417

84,935
Unrealized gains (losses) recorded in earnings⁽¹⁾

72,223

33,432

72,223

33,432

99,623

48,880
Ending balance

$
72,223

$
33,432

$
72,223

$
33,432

$
99,623

$
48,880
(1) Realized and unrealized gains (losses) from derivatives are recognized in Loan origination and debt brokerage fees, net and Fair value of expected net cash flows from servicing, net in the Condensed Consolidated Statements of Income.

1918

Table of Contents

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, 2021:~~March 31, 2022:

Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements
(in thousands)

Fair Value

Valuation Technique

Unobservable Input⁽¹⁾

Input Value ⁽¹⁾


Fair Value

Valuation Technique

Unobservable Input⁽¹⁾

Input Range ⁽¹⁾

Weighted Average ⁽³⁾
Derivative assets

$
85,486

Discounted cash flow

Counterparty credit risk

—

$
112,023

Discounted cash flow

Counterparty credit risk

—

—
Derivative liabilities

$
13,263

Discounted cash flow

Counterparty credit risk

—

$
12,400

Discounted cash flow

Counterparty credit risk

—

—
Contingent consideration liabilities

$
218,729

Various⁽²⁾

Probability of earn-out achievement

88% - 100%

90%
(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, 2021~~March 31, 2022 and December 31, ~~2020~~2021 are presented below:

September 30, 2021

December 31, 2020


Carrying

Fair

Carrying

Fair

March 31, 2022

December 31, 2021


Carrying

Fair

Carrying

Fair

(in thousands)

Amount

Value

Amount

Value

Amount

Value

Amount

Value

Financial Assets:

Cash and cash equivalents

$
318,188

$
318,188

$
321,097

$
321,097

$
141,375

$
141,375

$
305,635

$
305,635

Restricted cash

34,875

34,875

19,432

19,432

41,584

41,584

42,812

42,812

Pledged securities

148,774

148,774

137,236

137,236

148,647

148,647

148,996

148,996

Loans held for sale

2,711,900

2,711,900

2,449,198

2,449,198

703,629

703,629

1,811,586

1,811,586

Loans held for investment, net

233,685

234,996

360,402

362,586

216,620

217,932

269,125

270,826

Derivative assets

85,486

85,486

49,786

49,786

112,023

112,023

37,364

37,364

Total financial assets

$
3,532,908

$
3,534,219

$
3,337,151

$
3,339,335

$
1,363,878

$
1,365,190

$
2,615,518

$
2,617,219

Financial Liabilities:

Derivative liabilities

$
13,263

$
13,263

$
5,066

$
5,066

$
12,400

$
12,400

$
6,403

$
6,403

Secured borrowings

—

—

73,314

73,314

Contingent consideration liabilities

218,729

218,729

125,808

125,808

Warehouse notes payable

2,848,579

2,849,372

2,517,156

2,518,101

924,280

924,702

1,941,572

1,942,448

Note payable

289,763

292,539

291,593

294,773

Notes payable

726,555

731,416

740,174

745,175

Total financial liabilities

$
3,151,605

$
3,155,174

$
2,887,129

$
2,891,254

$
1,881,964

$
1,887,247

$
2,813,957

$
2,819,834

The following methods and assumptions were used for recurring fair value measurements as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~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 Agency debt securities. 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 a mortgage loan is funded and are valued using discounted cash flow models that incorporate observable prices from market participants.

Table of Contents

Contingent Consideration Liability—Consists of the estimated fair values of expected future earn-out payments related to acquisitions completed over the past several years, including 2022. The earn-out liabilities are valued using 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 flows. 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.

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.~~Company.

~~Table of Contents~~

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.~~investor.

To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into a sale commitment with the investor 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.~~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 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:~~applicable:

●●

the estimated gain 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 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 (Level 2). The fair value of the expected net cash flows associated with servicing the loan is calculated pursuant to the valuation techniques applicable to the fair value of future servicing, net at loan sale (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 and the balance sheet date by the notional loan commitment amount (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~~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 been minimal (Level 3). The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of September 30, 2021 and December 31, 2020:

2120

Table of Contents

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

September 30, 2021

Rate lock commitments

$
1,979,035

$
52,838

$
(31,638)

$
21,200

$
32,111

$
(10,911)

$
—

Forward sale contracts

4,667,125

—

51,023

51,023

53,375

(2,352)

—

Loans held for sale

2,688,090

43,195

(19,385)

23,810

—

—

23,810

Total

$
96,033

$
—

$
96,033

$
85,486

$
(13,263)

$
23,810

December 31, 2020

Rate lock commitments

$
1,374,784

$
45,581

$
(1,697)

$
43,884

$
43,895

$
(11)

$
—

Forward sale contracts

3,760,953

—

836

836

5,891

(5,055)

—

Loans held for sale

2,386,169

62,167

861

63,028

—

—

63,028

Total

$
107,748

$
—

$
107,748

$
49,786

$
(5,066)

$
63,028

The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of March 31, 2022 and December 31, 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

(in thousands)

Amount

on Sale

Movement

Adjustment

Assets

Liabilities

Held for Sale

March 31, 2022

Rate lock commitments

$
1,179,917

$
36,930

$
(10,360)

$
26,570

$
33,564

$
(6,994)

$
—

Forward sale contracts

1,932,125

—

73,053

73,053

78,459

(5,406)

—

Loans held for sale

752,208

14,114

(62,693)

(48,579)

—

—

(48,579)

Total

$
51,044

$
—

$
51,044

$
112,023

$
(12,400)

$
(48,579)

December 31, 2021

Rate lock commitments

$
1,115,829

$
29,837

$
(4,604)

$
25,233

$
26,526

$
(1,293)

$
—

Forward sale contracts

2,881,224

—

5,728

5,728

10,838

(5,110)

—

Loans held for sale

1,765,395

47,315

(1,124)

46,191

—

—

46,191

Total

$
77,152

$
—

$
77,152

$
37,364

$
(6,403)

$
46,191

NOTE 9—9—FANNIE MAE COMMITMENTS AND 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 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, 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. Pledged securities held in the form of money market funds holding U.S. Treasuries are discounted 5%, and Agency mortgage-backed securities (“(“Agency ~~MBS”~~MBS”) are discounted 4% for purposes of calculating compliance with the restricted liquidity requirements. As seen below, the Company held the majority of its pledged securities in Agency MBS as of ~~September 30, 2021.~~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, 2021~~March 31, 2022 collateral requirements as outlined above. As of ~~September 30, 2021,~~March 31, 2022, reserve requirements for the DUS loan portfolio will require the Company to fund ~~$64.2~~$68.2 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within the at-risk portfolio. Fannie Mae 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 increases to collateral requirements may adversely impact the ~~Company’s~~Company’s available cash.
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, 2021.~~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, 2021,~~March 31, 2022, the net worth requirement was ~~$250.2~~$261.2 million, and the ~~Company's~~Company's net worth, as defined in the requirements, was ~~$1.1 billion,~~$704.8 million, as measured at our wholly owned operating subsidiary, Walker && Dunlop, LLC. As of ~~September 30, 2021,~~March 31, 2022, the Company was required to maintain at least ~~$49.5~~$51.8 million of liquid assets to meet operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, and Ginnie Mae, and the Company had operational liquidity, as defined in the requirements, of ~~$254.7~~$98.6 million as of ~~September 30, 2021,~~March 31, 2022, as measured at our wholly owned operating subsidiary, Walker && Dunlop, LLC.

2221

Table of Contents

Pledged Securities, at Fair Value——Pledged securities, at fair value consisted of the following balances as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ and December 31, ~~2020~~2021 and ~~2019:~~2020:

September 30,

December 31,

March 31,

December 31,

Pledged Securities (in thousands)
2021

2020

2020

2019

2022

2021

2021

2020

Restricted cash
$
10,596

$
13,370

$
4,954

$
2,150

$
4,099

$
24,578

$
3,779

$
4,954

Money market funds

40,954

7,954

12,519

5,054

36,954

14,954

40,954

12,519

Total pledged cash and cash equivalents
$
51,550

$
21,324

$
17,473

$
7,204

$
41,053

$
39,532

$
44,733

$
17,473

Agency MBS

97,224

112,971

119,763

114,563

107,594

100,038

104,263

119,763

Total pledged securities, at fair value
$
148,774

$
134,295

$
137,236

$
121,767

$
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 2.
The ~~Company’s~~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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

Fair Value and Amortized Cost of Agency MBS (in thousands)
September 30, 2021

December 31, 2020

March 31, 2022

December 31, 2021

Fair value
$
97,224

$
119,763

$
107,594

$
104,263

Amortized cost

93,570

117,136

105,484

100,847

Total gains for securities with net gains in AOCI

3,796

2,669

2,743

3,636

Total losses for securities with net losses in AOCI

(142)

(42)

(633)

(220)

Fair value of securities with unrealized losses

2,139

12,267

38,964

4,757

~~None~~An immaterial amount of the pledged securities has been in a continuous unrealized loss position for more than 12 months.
The following 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.

September 30, 2021

March 31, 2022

Detail of Agency MBS Maturities (in thousands)
Fair Value

Amortized Cost

Fair Value

Amortized Cost

Within one year
$
—

$
—

$
—

$
—

After one year through five years

5,720

5,697

2,253

2,248

After five years through ten years

61,939

61,056

78,112

77,631

After ten years

29,565

26,817

27,229

25,605

Total
$
97,224

$
93,570

$
107,594

$
105,484

NOTE ~~10—~~10—EARNINGS PER SHARE AND ~~STOCKHOLDERS’~~STOCKHOLDERS’ EQUITY
Earnings per share ~~(“EPS”~~(“EPS”) is calculated under the two-class method. The two-class method allocates all earnings (distributed and undistributed) to 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.

2322

Table of Contents

The following table presents the calculation of basic and diluted EPS for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ 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 September 30,

For the nine months ended September 30,

For the three months ended March 31,

EPS Calculations (in thousands, except per share amounts)
2021

2020

2021

2020

2022

2021

Calculation of basic EPS

Walker & Dunlop net income
$
71,721

$
53,190

$
185,831

$
163,078

Walker & Dunlop net income
$
71,209

$
58,052

Less: dividends and undistributed earnings allocated to participating securities

2,364

1,528

6,163

4,923

2,172

1,967

Net income applicable to common stockholders
$
69,357

$
51,662

$
179,668

$
158,155

$
69,037

$
56,085

Weighted-average basic shares outstanding

31,064

30,560

30,969

30,379

32,219

30,823

Basic EPS
$
2.23

$
1.69

$
5.80

$
5.21

$
2.14

$
1.82

Calculation of diluted EPS

Net income applicable to common stockholders
$
69,357

$
51,662

$
179,668

$
158,155

$
69,037

$
56,085

Add: reallocation of dividends and undistributed earnings based on assumed conversion

23

19

57

75

19

20

Net income allocated to common stockholders
$
69,380

$
51,681

$
179,725

$
158,230

$
69,056

$
56,105

Weighted-average basic shares outstanding

31,064

30,560

30,969

30,379

32,219

30,823

Add: weighted-average diluted non-participating securities

395

514

398

616

398

453

Weighted-average diluted shares outstanding

31,459

31,074

31,367

30,995

32,617

31,276

Diluted EPS
$
2.21

$
1.66

$
5.73

$
5.11

$
2.12

$
1.79

The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury-stock method includes the unrecognized compensation costs associated with the awards. ~~For the three and nine months ended September 30, 2021, an~~An immaterial number of average restricted shares were excluded from the computation of diluted earnings per share under the ~~treasury method. For~~treasury-stock method for the three ~~and nine~~ months ended ~~September 30, 2020, 175 thousand~~March 31, 2022 and ~~142 thousand average restricted shares,~~March 31, 2021, respectively, ~~were excluded. These average restricted shares were excluded from the computation of diluted earnings per share under the treasury method~~ because the effect would have been anti-dilutive, 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. ~~For the nine months ended September 30, 2021, the Company issued shares of common stock totaling $9.6 million to settle compensation liabilities; these are~~

The following non-cash transactions ~~that do~~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.

~~The Company’s~~In February 2022, the Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to ~~$75.0~~$75.0 million of the ~~Company’s~~Company’s common stock over a 12-month period beginning on February ~~12, 2021.~~13, 2022. During the first ~~three quarters~~quarter of ~~2021,~~2022, the Company did 0t0t repurchase any shares of its common stock under the share repurchase program. As of ~~September 30, 2021,~~March 31, 2022, the Company had ~~$75.0~~$75.0 million of authorized share repurchase capacity remaining under the ~~2021~~2022 share repurchase program.

~~During each of the first three quarters of 2021, the Company paid a dividend of $0.50 per share. On November 3, 2021, the Company’s~~In February 2022, our Board of Directors declared a dividend of ~~$0.50~~$0.60 per share for the ~~fourth~~first quarter of ~~2021.~~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 ~~November 29, 2021~~June 3, 2022 to all holders of record of the ~~Company’s~~Company’s restricted and unrestricted common stock as of ~~November~~May 19, ~~2021.~~2022.

The ~~Company’s~~ Company’s Note Payable (“Term Loan”) contains direct restrictions onto 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.

~~NOTE 11—PENDING ACQUISITION ACTIVITIES~~

During the third quarter of 2021, the Company entered into a purchase agreement to acquire Alliant Capital, Ltd. and certain of its affiliates (“Alliant”). Alliant provides alternative investment management services focused on the affordable housing sector through low-income housing tax credit syndication, joint venture development, and community preservation fund management.

2423

Table of Contents

~~Under~~NOTE 11—SEGMENTS

In the ~~terms~~first quarter of 2022, as a result of the ~~purchase agreement,~~Company’s growth and recent acquisitions, the Company ~~will acquire Alliant at a total enterprise value of $696 million, comprised of:~~’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”)~~$361 million~~—CM provides a comprehensive range of ~~cash~~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 ~~assumption~~Agencies and institutional investors enable CM to offer a broad range of ~~Alliant’s securitized debt facility,~~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 ~~had an outstanding balance of $145 million as of October 4, 2021,~~ is ~~rated A2 by Moody’s and carries a 4.75% interest rate (with the value of cash subject to adjustment~~allocated proportionally based on ~~the actual balance of the assumed securitized debt facility~~income from operations at ~~closing and for customary net working capital);~~each segment.

●

~~$90 million of Walker & Dunlop common stock, with the number of shares to be determined at closing; and~~

●

~~$100 million of earn-out structured as participating interest in future cash flows over the next four years~~

Table of Contents

The ~~transaction is expected to close during~~following table provides a summary and reconciliation of each segment’s results for the ~~fourth quarter~~three months ended March 31, 2022 and 2021 and total assets as of March 31, 2022 and 2021. ~~Closing is subject to certain regulatory approvals and consents of Alliant’s investors and lender partners.~~
~~To allow it to fund the acquisition of Alliant, the Company is currently in the process of refinancing and upsizing its~~ ~~Note payable~~ (“existing term loan”) to $600 million. The Company has received commitments well in excess of the $600 million targeted amount. The new term loan is expected to close during the fourth quarter of 2021 simultaneously with the close of the acquisition of Alliant. The proceeds from the new term loan will be used to repay the Company’s existing term loan and to fund a significant amount of the $361 million cash payment due at the closing of the acquisition of Alliant. The new term loan is expected to have a term of seven years.

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

Table of Contents

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.

Table of Contents

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.

Table of Contents

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”~~“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020 (“2020~~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,”~~” “we,” or ~~“us”~~“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;
●● 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, including additional regulatory requirements for broker-dealer and other financial services ~~firms that became applicable to us upon our acquisition of Zelman (as defined below);~~firms;
●● our ability to ~~complete the acquisition of~~successfully integrate Alliant ~~(as~~’s and GeoPhy’s (each as defined below) ~~and successfully integrate Alliant’s~~ employees and ~~businesses;~~operations;
●● trends in the commercial real estate finance market, commercial real estate values, the credit and capital markets, or the general 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

Table of Contents

●●

other risks and uncertainties associated with our business described in our ~~2020~~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.

~~Table of Contents~~

While forward-looking statements reflect our good-faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. 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
Overview
We are ~~one of the~~a leading commercial real estate (i) services, (ii) finance, and ~~finance companies~~(iii) technology company in the United ~~States, with~~States. Through strategic investments in people, brand, and technology, we have built a ~~primary focus on~~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 ~~property sales. We were the largest lender to multifamily properties~~advisory, (iii) investment management, and ~~the fourth largest overall commercial real estate lender in the country in 2020.~~(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 ~~our~~new and existing customers, and (iii) ~~identify potential new customers.~~drive efficiencies in our internal processes. We believe our people, brand, and technology provide us with a competitive advantage, as evidenced by ~~the fact that 76%~~61% of refinancing volumes in the quarter ~~were~~being new loans to us and ~~27%~~19% of total transaction volumes ~~were~~coming from new customers.
We ~~have been~~are one of the largest lenders to multifamily properties and commercial real estate in ~~business for more than 80 years;~~the country. We originate, sell, and service a range of multifamily and other commercial real estate financing products, including loans through the programs of Fannie Mae ~~Delegated Underwriting~~ and ~~Servicing™ ("DUS"~~Freddie Mac (the “GSEs”) ~~lender since 1988, when the DUS program began; a lender with the Government National Mortgage Association (“Ginnie Mae”)~~, and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, ~~“HUD”~~“HUD”) ~~since acquiring a HUD license in 2009;~~(collectively, the “Agencies”). We retain servicing rights and ~~a Freddie Mac Multifamily approved seller/servicer~~asset management responsibilities on substantially all loans that we originate for ~~Conventional Loans.~~the Agencies’ programs. We ~~originate, sell,~~broker, and occasionally service, ~~a range of multifamily~~loans for many life insurance companies, commercial banks, and other ~~commercial real estate financing products,~~institutional investors, in which cases we do not fund the loan but rather act as a loan broker.
We provide multifamily property sales brokerage and appraisal and valuation services and engage in commercial real estate investment management ~~activities.~~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 originate and sell multifamily loans through the programs of Fannie Mae, Freddie Mac, and HUD (collectively, the “Agencies”). We retain servicing rights and asset management responsibilities on substantially all loans that we originate for the Agencies’ programs. We are approved as a Fannie Mae DUS lender nationally, an approved Freddie Mac Multifamily Optigo® Seller/Servicer (“Freddie Mac lender”) nationally for Conventional, Seniors Housing, Targeted Affordable Housing, and small balance loans, a HUD Multifamily Accelerated Processing (“MAP”) lender nationally, a HUD Section 232 LEAN (“LEAN”) lender nationally, and a Ginnie Mae issuer. We broker, and occasionally service, loans for 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 also underwrite, service, and asset-manage ~~interim loans.~~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”~~(“WDIP”). ~~Those~~Some of these interim loans ~~not~~are closed ~~by the joint venture or WDIP are originated~~and retained by us through our Interim Program JV or Interim Loan Program (as defined below in Principal Lending and ~~presented on~~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 our customers and (ii) allow us to reach a broader customer base.
On February 28, 2022, we 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 ~~sheet as loans held for investment.~~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

Table of Contents

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 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 are one the leading lenders with the Agencies, where we originate and ~~Loan Servicing~~sell to 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 our 2021 Form 10-K.

We recognize loan origination and debt brokerage fees, net and the fair value of expected net cash flows from 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 loan origination and debt brokerage fees, net and the fair value of expected net cash flows from 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 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 the sale of the loan are used to pay off the warehouse facility borrowing. The sale of the loan is typically completed within 60 days after the loan is closed. We earn net warehouse interest income from loans held for sale while they are outstanding equal to the difference between the note rate on the loan and 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.

Table of Contents

Debt Brokerage

Property Sales

We offer property sales 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 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 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

~~Table of Contents~~

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 protection to us in the event of a voluntary prepayment. For loans serviced outside of Fannie Mae and Freddie Mac, we typically do not 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 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 eligible to assign a loan to HUD once it is in default for 30 days. If the loan is not brought current, or the loan otherwise defaults, we are not reimbursed for our advances until such time as we assign the loan to HUD or work out a payment modification for the borrower. For loans in default, we may repurchase those loans out of the Ginnie Mae security, at which time our advance requirements cease and we may then modify and resell the loan or assign the loan back to

Table of Contents

HUD and be reimbursed for our advances. We are not obligated to make advances on the loans we service under the Freddie Mac ~~Optigo®~~Optigo® program and our bank and life insurance company servicing 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). Our full risk-sharing is currently limited to loans up to $300 million, which equates to a maximum loss per loan 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). 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 loans below $300 million, which reduces our potential risk-sharing losses from the levels described above if we do not believe that we are being fully compensated for the risks of the transaction. The full risk-sharing limit prior to June 30, 2021 was less than $300 million. Accordingly, loans originated prior to then may behave 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.

As part of our overall growth strategy, we are focused on significantly growing and investing in our small-balance lending platform, which involves a high volume of transactions with smaller loan balances. In support of this product, we acquired a company with 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.

~~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. For ~~those~~ 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 ~~for servicing loans with the Agencies.~~on Agency loans.

~~Table of Contents~~

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 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~~“Interim Program ~~JV”~~JV” or the ~~“joint venture”~~“joint venture”). The joint venture funds its operations using a combination of 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 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 our own capital and warehouse debt financing, we offer interim loans that do not meet the criteria of the Interim Program JV (the ~~“Interim~~“Interim Loan ~~Program”~~Program”). We underwrite, service, and asset-manage all loans 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 U.S. and provides alternative investment management services focused on the affordable housing sector through LIHTC syndication, development of 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 receive the portion of the economic benefits commensurate with its investment in the joint ventures. Additionally, Alliant also invests with third-party investors (either in a fund or joint-venture structure) with the goal of 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 preservation funds,

Table of Contents

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.

Through our subsidiary, WDIP and its subsidiaries, we 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 middle-market commercial real estate funds. ~~The activities of~~ WDIP ~~a wholly owned subsidiary of the Company, are part of our strategy to grow and diversify our operations by growing our investment management platform. WDIP’s~~’s current assets under management ~~(“AUM”~~(“AUM”) of ~~$1.4~~$1.3 billion primarily consist of five sources: Fund III, Fund IV, Fund V, and Fund VI (collectively, the ~~“Funds”~~“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 ~~fund raising~~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 percentage of the return above the fund return hurdle rate specified in the fund agreements.

~~Property Sales~~

~~Appraisal Services~~

~~We have a joint venture~~ ~~branded Apprise by Walker & Dunlop~~ with an international technology services company to offer automated multifamily appraisal services (“Appraisal JV”). The Appraisal JV 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 partner’s technology and leveraging of our expertise in the commercial real estate industry. We own a 50% interest in the Appraisal JV and account for the interest as an equity-method investment. While the operations of the Appraisal JV for the quarter ended September 30, 2021 were immaterial, the Appraisal JV’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.

Housing Market Research and Real Estate Investment Banking Services

~~During the third quarter of 2021, we closed on the acquisition of certain assets and the assumption of certain liabilities of Zelman Holdings, LLC (“Zelman”) through~~We own a 75% interest in a ~~newly formed entity, which does~~subsidiary doing business as Zelman ~~& Associates.~~& Associates (“Zelman”). Zelman is a nationally recognized housing market research and investment banking firm that will enhance the information we provide to our clients and increase our access to high-quality market insight in many areas of the housing market, including construction trends, demographics, mortgage

~~Table of Contents~~

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.

Critical Accounting ~~Policies and~~ Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ~~(“GAAP”~~(“GAAP”), which 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 and the use of different judgments and assumptions may have a material impact on our results. ~~We believe the~~The following critical accounting estimates ~~represent the areas where more~~involve significant ~~judgments and estimates~~estimation uncertainty that may have or are ~~used in the preparation~~reasonably likely to have a material impact on our financial condition or results of ~~our condensed consolidated financial statements.~~operations. Additional information about our critical accounting estimates and other significant accounting policies are discussed in NOTE 2 of the consolidated financial statements in our ~~2020~~2021 Form 10-K.

Mortgage Servicing Rights ~~(“MSRs”~~(“MSRs”). MSRs are recorded at fair value at loan sale or upon purchase. The fair value at loan sale ~~(“OMSR”~~(“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 OMSR over the estimated life of the underlying loan. The discount rates used throughout the periods presented for all OMSRs were between 8-14% during ~~2021~~2022 and ~~between 10-15% during 2020~~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 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 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 OMSR asset (or liability) for each loan at loan sale. The fair value of MSRs acquired through a stand-alone servicing portfolio purchase ~~(“PMSR”~~(“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.

The assumptions used to estimate the fair value of capitalized OMSRs are 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 limited volatility in the assumptions historically, including the ~~most~~ significant assumption –that most significantly impacts the estimate – the discount rate. We do not expect to see significant volatility in the assumptions for

Table of Contents

the foreseeable future. We actively monitor the assumptions used and make adjustments to those assumptions when market conditions change, or other factors indicate such adjustments are warranted. During the first quarter of 2021, we reduced the discount rate and escrow earnings rate assumptions for our 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. Changes in our discount rate assumptions may materially impact the fair value of the MSRs (NOTE 3 of the condensed consolidated financial statements details the portfolio-level impact of a change in the discount rate).

For 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 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 made adjustments to the estimated life of our PMSRs in the past when the actual experience of prepayments differed materially from the estimated prepayments.

Allowance for Risk-Sharing Obligations. This reserve liability (referred to as ~~“allowance”~~“allowance”) for risk-sharing obligations relates to our Fannie Mae at-risk servicing portfolio and is presented as a separate liability on our balance sheets. We record an estimate of the loss reserve for the current expected credit losses ~~(“CECL”~~(“CECL”) for all loans in our Fannie Mae at-risk servicing portfolio using the weighted-average remaining maturity method ~~(“WARM”~~(“WARM”). WARM uses an average annual loss rate that contains loss content over multiple vintages and loan terms and is

~~Table of Contents~~

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”~~period”) as we believe forecasts beyond one year are inherently less reliable. During the forecast period, we apply an adjusted loss factor ~~associated with~~based on loss rates form a ~~similar~~ historical ~~period.~~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 years, the loss rate used in the forecast period has been updated to reflect our expectations of the economic conditions. Changes in the loss rate used in the forecast period have materially impacted the estimate in the past.

One of the key components of a WARM calculation is the runoff rate, which is the expected rate at which loans in the current portfolio will amortize and prepay in the ~~future.~~future based on our historical prepayment and amortization experience. We group loans by similar origination dates (vintage) and contractual maturity terms for purposes of calculating the 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 time includes sufficiently different economic conditions to generate a reasonable estimate of expected results in the 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 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 evaluate our risk-sharing loans on a quarterly basis to determine whether there are loans that are probable of default. Specifically, we assess a ~~loan’s~~loan’s qualitative and quantitative risk factors, such as payment status, property financial performance, local real estate market conditions, loan-to-value ratio, debt-service-coverage ratio, and property condition. When a loan is determined to be probable of default based on these factors, we remove the 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 values and other factors that may differ significantly from actual results. Loss settlement with Fannie Mae has historically concluded within 18 to 36 months after foreclosure. Historically, the initial 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.

Table of Contents

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 this trend will continue in the future. Additionally, the earnouts completed in the past have involved substantially smaller amounts of contingent consideration as compared to the two recent acquisitions.

Goodwill. As of March 31, 2022 and December 31, 2021, we 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 asset and is reviewed for impairment annually in the fourth quarter. Between the annual evaluation time, we will perform an evaluation of recoverability when events and circumstances indicate that that it is more-likely-than not that 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, but not limited to, whether there has been a significant or adverse change in the 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 make judgements, assumptions, and estimates about projected cash flows, discount rates and other factors. As of March 31, 2022, we continue to believe our goodwill is not impaired.

Overview of Current Business Environment

~~Entering 2021,~~The fundamentals of the pandemic continued to impact macroeconomic conditions with U.S. unemployment rates at elevated levels but significantly improved compared to the middle of 2020. Congress passed three pandemic stimulus packages to provide funding for government programs directly supporting households and businesses, which included a total of $47 billion in renter assistance. In the second and third quarters of 2021, vaccination programs across the U.S. accelerated and became widely available to the public, resulting in most jurisdictions eliminating or significantly curtailing economic restrictions. With the lifting of economic restrictions, macroeconomic conditionscommercial real estate market continue to ~~recover with~~remain strong, particularly multifamily. Over the ~~reported unemployment rate falling to 4.8% as of September 2021 from 6.7% as of December 2020.~~

To support the economic recovery, the Federal Reserve set the Federal Funds Rate at a target of 0% to 0.25% at the beginning of the pandemic and has maintained that rate through the first nine months of 2021. The Federal Reserve also indicated in its September 2021 meeting that it intends to keep rates at these low levels as the economy continues to recover and until the economy reaches what it believes is full employment. The Federal Reserve also has noted that although the reported unemployment rates have improved significantly, it will monitor and determine whether full employment has been achieved based on a number of factors, including participation rate and wage growth. Although the Federal Reserve has indicated it will begin reducing its purchase of Treasury securities and Agency mortgage-backed securities (“Agency MBS”), the overall improvements in the economy coupled with the low Federal Fund Rate target have kept long-term mortgage interest rates very low, which form the basis for most of our lending.

~~Multifamily~~past two years, multifamily property fundamentals ~~continue to show~~showed strength, ~~during the ongoing recovery,~~ with multifamily occupancy rates, demand for new ~~multifamily residential~~ leases, and ~~residential~~ retention rates at record highs. According to RealPage, a provider of commercial real estate data and analytics, occupancy rates have increased to ~~97.3%~~97.6% as of ~~September 2021,~~March 2022, compared to 95.8% as of December 2019, prior to the start of the pandemic. Additionally, ~~residential retention~~the continued demand combined with limited supply of multifamily units drove rental rates ~~reached all-time highs at 58.0% during the third quarter~~higher for both new leases and renewals, with rent growth increasing by 15.2% year over year as of ~~2021. Low vacancy~~March 2022. Higher occupancy rates coupled with ~~high retention rates~~limited supply and ~~demand for new leases~~rent growth indicate a 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 long-term mortgage interest rates, which form the basis of most of our lending.

Our Agency multifamily debt financing operations have remained very active over the past year. We are a market-leading originator with

3135

Table of Contents

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 each year. In October 2021, the FHFA established Fannie Mae’s and Freddie Mac’s 2022 loan origination caps at $78 billion each for all multifamily business. In the first quarter of 2022, Fannie Mae and 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 targeted towards affordable housing. Additionally, in 2021 the FHFA raised the GSEs’ combined LIHTC investment cap to $1.7 billion, up 70% from the previous cap of $1.0 billion. We intend to leverage our affordable debt financing and our newly acquired LIHTC syndication platforms to create additional growth opportunities for our debt financing, property sales, and LIHTC syndication platforms.

Our debt financing operations with HUD fell during the first quarter of 2022, as we had strong HUD originations during the first quarter of 2021. HUD loan volumes accounted for 4% of our total debt financing volumes for the quarter ended March 31, 2022, compared to 8% for the 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 Agencies are our most profitable executions as they provide significant non-cash gains from 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 continued growth in our Agency servicing portfolio. A decline in our Agency originations would negatively impact our financial results as our non-cash revenues would decrease disproportionately with debt financing volume and future servicing fee revenue would be constrained or decline.

Our multifamily property sales volumes continued ~~their strong growth into the third quarter of 2021,~~to grow significantly in 2022, as (i) the multifamily acquisitions market ~~was~~continues to be very active during the ~~past few quarters, including the third quarter of 2021,~~year and (ii) we ~~have~~continue to leverage the expanded the number of property sales brokers and the geographical reach of our property sales ~~platform, and (iii) our volume in the third quarter of 2020 was lower due to the pandemic.~~platform. Long term, we believe the market fundamentals will continue to be positive for multifamily property sales. Over the last several years, and ~~in the months leading up to~~throughout the pandemic, household formation and a dearth of supply of entry-level single-family homes led to strong demand for rental housing in most geographic areas. Consequently, the fundamentals of the multifamily property sales market were strong prior to the pandemic, and, when combined with high occupancy and ~~retention rates~~rent growth and rising real-estate prices, it is our expectation that market demand for multifamily property sales will continue to grow as this asset class remains an attractive investment option.

Our debt brokerage platform continued its ~~strong~~ growth ~~into the third quarter of~~from 2021, with brokered volume increasing ~~significantly~~ during the ~~year.~~first quarter of 2022. The ~~increases~~increase in volume ~~for the three and nine months ended September 30, 2021 reflect~~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 retail. ~~Additionally, our debt brokerage volumes in the third quarter of 2020 were unusually low due to the pandemic.~~ We expect ~~the~~ non-multifamily debt financing volumes to continue to recover over time as other commercial real estate asset classes stabilize post-pandemic.

Our Agency multifamily debt financing operations have remained very active over the past year. We are a market-leading originator with 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.

The Federal Housing Finance Agency (“FHFA”) establishes loan origination caps for both Fannie Mae and Freddie Mac each year. In November 2020, FHFA established Fannie Mae’s and Freddie Mac’s 2021 loan origination caps at $70 billion each for all multifamily business. During the three months ended September 30, 2021, Fannie Mae and Freddie Mac had multifamily origination volumes of $16.3 billion and $17.7 billion, respectively, up 6.5% and down 2.2%, respectively, from the same period in 2020. During the nine months ended September 30, 2021, Fannie Mae and Freddie Mac had multifamily origination volumes of $48.7 billion and $44.8 billion, respectively, down 0.6% and 7.4%, respectively, from the first nine months of 2020, leaving a combined $46.5 billion of available lending capacity for the remainder of the year. GSE lending volume slowed in the first half of 2021, as the GSEs’ pricing on multifamily debt was less competitive as other capital sources reentered the market, and as the GSEs managed their originations under their lending caps. In the third quarter of 2021, GSE lending accelerated with combined lending up 10.1% in September 2021 compared to the same period in 2020. With a combined $46.5 billion or 33% of available lending capacity remaining, we expect the GSEs’ lending to continue to accelerate in the fourth quarter of 2021. In October 2021, FHFA established Fannie Mae’s and Freddie Mac’s 2022 loan origination caps at $78 billion each for all multifamily business, an 11% increase from the 2021 caps.

Our debt financing operations with HUD remained strong during the first nine months of 2021, with HUD loan volumes increasing 40% and 33% for the three and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. The increase in HUD debt financing volumes were driven by continued strong demand for HUD’s multifamily lending product, which provides borrowers with favorable economics on long-term, fully amortizing debt.

We expect strength in our Agency operations to continue despite the return of other capital sources. An additional positive factor influencing multifamily financing volumes is the historically low interest rate environment, which is incentivizing some borrowers to refinance their properties in spite of the prepayment penalty fees they may incur. We continue to seek additional resources and to scale our Agency lending platform.

Our originations with the Agencies are our most profitable executions as they provide significant non-cash gains from MSRs that turn into significant cash revenue streams from future servicing fees. During the three and nine months ended September 30, 2021, servicing fees are up 17% and 19%, respectively, over the same periods last year due to the record amount of MSRs we generated in 2020. A decline in our Agency originations would negatively impact our financial results as our non-cash revenues would decrease disproportionately with debt financing volume and future servicing fee revenue would be constrained or decline.

We entered into the Interim Program JV to both increase the overall capital available to transitional multifamily properties and to dramatically expand our capacity to originate Interim Program loans. The demand for transitional lending has brought increased competition from lenders, specifically banks, mortgage real estate investment trusts, and life insurance companies. For the ~~third~~ quarter ~~of 2021,~~ended March 31, 2022, we originated ~~$314.9~~$86.3 million of Interim Program JV loans, compared to no$144.5 million of originations infor the ~~third quarter of 2020.~~same period last year. In ~~the third quarter of~~ 2020, we ~~did not originate any~~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 our portfolio and in the Interim Program JV continue to perform as ~~agreed. Our Interim Loan Program has similarly rebounded in the third quarter of 2021, with originations of $157.2 million compared to $37.0 million in the third quarter of 2020.~~

agreed~~Table of Contents~~.

In the third quarter of 2021, we entered into a purchase agreement to acquire Alliant Capital, Ltd. and certain of its affiliates (“Alliant”), a privately held alternative investment manager focused on the affordable housing sector through low-income housing tax credit (“LIHTC”) syndication, joint venture development, and community preservation fund management. The transaction is expected to close in the fourth quarter of 2021, and we expect the combination of Alliant and our existing strong position in the affordable housing space to generate significant financing and property sales opportunities.

In September 2021, the White House announced plans to increase the affordable housing supply across the country. These plans include the relaunching and expansion of programs designed to increase the available capital for the development of affordable housing projects. In conjunction with the announcement, the FHFA raised the GSEs’ combined LIHTC investment cap to $1.7 billion, up 70% from the previous cap of $1.0 billion. Additionally, as part of FHFA’s 2022 loan origination caps of $156 billion announced in October 2021, at least 50% of the GSEs’ multifamily business is required to be targeted towards affordable housing. We expect these initiatives will create additional growth opportunities for both Alliant and our debt financing and property sales teams focused on affordable housing.

~~Table of Contents~~

Consolidated Results of Operations

The following is a discussion of our consolidated results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~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. The table below provides supplemental data regarding our financial performance.

~~SUPPLEMENTAL OPERATING DATA~~

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands; except per share data)

2021

2020

2021

2020


Transaction Volume:

Components of Debt Financing Volume

Fannie Mae

$
3,271,765

$
1,977,607

$
6,716,765

$
8,911,397

Freddie Mac

2,591,906

3,136,313

4,607,945

5,903,389

Ginnie Mae ̶ HUD

522,093

373,480

1,816,800

1,368,317

Brokered⁽¹⁾

6,402,862

1,711,541

16,985,932

7,200,926

Principal Lending and Investing⁽²⁾

472,142

105,488

968,629

227,529

Total Debt Financing Volume

$
13,260,768

$
7,304,429

$
31,096,071

$
23,611,558

Property Sales Volume

5,230,093

1,106,162

9,967,385

3,283,463

Total Transaction Volume

$
18,490,861

$
8,410,591

$
41,063,456

$
26,895,021

Key Performance Metrics:

Operating margin

27
%

28
%

28
%

29
%

Return on equity

22

20

20

21

Walker & Dunlop net income

$
71,721

$
53,190

$
185,831

$
163,078

Adjusted EBITDA⁽³⁾

72,430

45,165

199,611

157,687

Diluted EPS

2.21

1.66

5.73

5.11

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

Personnel expenses

49
%

46
%

48
%

42
%

Other operating expenses

7

7

7

6

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

Origination related fees⁽⁴⁾

0.95
%

1.15
%

1.00
%

1.01
%

MSR income⁽⁵⁾

0.70

1.08

0.69

1.01

MSR income, as a percentage of Agency debt financing volume⁽⁶⁾

1.40

1.42

1.59

1.46

(dollars in thousands)

As of September 30,

Managed Portfolio:

2021

2020

Components of Servicing Portfolio

Fannie Mae

$
52,317,953

$
46,224,549

Freddie Mac

38,039,014

35,726,109

Ginnie Mae - HUD

9,894,893

9,639,820

Brokered ⁽⁷⁾

13,429,801

11,513,521

Principal Lending and Investing ⁽⁸⁾

238,713

273,754

Total Servicing Portfolio

$
113,920,374

$
103,377,753

Assets under management ⁽⁹⁾

2,309,332

1,936,679

Total Managed Portfolio

$
116,229,706

$
105,314,432

3436

Table of Contents

SUPPLEMENTAL OPERATING DATA ~~(continued)~~

As of September 30,
Key Servicing Portfolio Metrics (end of period):

2021

2020
Custodial escrow account balance (in billions)

$
3.0

$
2.8
Weighted-average servicing fee rate (basis points)

24.6

23.4
Weighted-average remaining servicing portfolio term (years)

9.2

9.4

CONSOLIDATED

~~The following tables present WDIP’s AUM as of September 30, 2021 and 2020:~~

As of September 30, 2021

Unfunded

Funded

Components of WDIP assets under management (in thousands)

Commitments

Investments

Total

Fund III

$
37,781

$
65,975

$
103,756

Fund IV

88,827

106,498

195,325

Fund V

273,853

45,064

318,917

Fund VI

30,498

2,478

32,976

Separate accounts

150,000

589,840

739,840

Total assets under management

$
580,959

$
809,855

$
1,390,814

As of September 30, 2020

Unfunded

Funded

Components of WDIP assets under management (in thousands)

Commitments

Investments

Total
Fund III

$
56,072

$
123,818

$
179,890
Fund IV

165,294

139,657

304,951
Fund V

192,113

10,036

202,149
Separate accounts

—

610,223

610,223
Total assets under management

$
413,479

$
883,734

$
1,297,213


	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

(1)	~~Brokered transactions for life insurance companies, commercial banks, and other capital sources.~~

~~(2)~~

For the three months ended September 30, 2021, includes $314.9 million from the Interim Program JV and $157.2 million from the Interim Loan Program. For the nine months ended September 30, 2021, includes $665.9 million from the Interim Program JV, $286.7 million from the Interim Loan Program and $16.0 million from WDIP separate accounts. For the three months ended September 30, 2020, includes $37.0 million from the Interim Program and $68.5 million from WDIP separate accounts. For the nine months ended September 30, 2020, includes $37.0 million from the Interim Program, $86.2 million from the Interim Program JV and $104.4 million from WDIP separate accounts.

~~(3)~~

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.”

~~(4)~~

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

~~(5)~~

~~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.~~

~~(6)~~

~~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.~~

~~(7)~~

~~Brokered loans serviced primarily for life insurance companies.~~

~~(8)~~

~~Consists of interim loans not managed for the Interim Program JV.~~

~~(9)~~

~~As of September 30, 2021, includes $918.5 million of Interim Program JV managed loans and~~ ~~WDIP~~ assets under management of $1.4 billion. As of September 30, 2020, includes $566.1 million of Interim Program JV managed loans, $73.3 million of loans serviced directly for the Interim Program JV partner, and ~~WDIP~~ ~~assets under management of $1.3 billion.~~”

3537

Table of Contents

The following ~~tables present~~table presents a period-to-period comparison of our financial results for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

FINANCIAL RESULTS –– THREE MONTHS

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

For the three months ended

September 30,

Dollar

Percentage

(dollars in thousands)

2021

2020

Change

Change

Revenues

Loan origination and debt brokerage fees, net

$
123,242

$
83,825

$
39,417

47
%

Fair value of expected net cash flows from servicing, net

89,482

78,065

11,417

15

Servicing fees

70,628

60,265

10,363

17

Property sales broker fees

33,677

6,756

26,921

398

Net warehouse interest income

5,583

7,558

(1,975)

(26)

Escrow earnings and other interest income

2,032

2,275

(243)

(11)

Other revenues

21,646

8,272

13,374

162

Total revenues

$
346,290

$
247,016

$
99,274

40

Expenses

Personnel

$
170,181

$
114,548

$
55,633

49
%

Amortization and depreciation

53,498

41,919

11,579

28

Provision (benefit) for credit losses

1,266

3,483

(2,217)

(64)

Interest expense on corporate debt

1,766

1,786

(20)

(1)

Other operating expenses

24,836

16,165

8,671

54

Total expenses

$
251,547

$
177,901

$
73,646

41

Income from operations

$
94,743

$
69,115

$
25,628

37

Income tax expense

22,953

15,925

7,028

44

Net income before noncontrolling interests

$
71,790

$
53,190

$
18,600

35

Less: net income (loss) from noncontrolling interests

69

—

69

N/A

Walker & Dunlop net income

$
71,721

$
53,190

$
18,531

35

~~Table of Contents~~

~~FINANCIAL RESULTS – NINE MONTHS~~

For the nine months ended

September 30,

Dollar

Percentage

(dollars in thousands)

2021

2020

Change

Change


Revenues

Loan origination and debt brokerage fees, net

$
306,593

$
238,105

$
68,488

29
%

Fair value of expected net cash flows from servicing, net

209,266

236,434

(27,168)

(11)

Servicing fees

205,658

172,561

33,097

19

Property sales broker fees

65,173

19,928

45,245

227

Net warehouse interest income

14,768

22,454

(7,686)

(34)

Escrow earnings and other interest income

5,972

15,689

(9,717)

(62)

Other revenues

44,559

28,827

15,732

55

Total revenues

$
851,989

$
733,998

$
117,991

16

Expenses

Personnel

$
407,817

$
310,993

$
96,824

31
%

Amortization and depreciation

148,879

123,998

24,881

20

Provision (benefit) for credit losses

(14,380)

32,029

(46,409)

(145)

Interest expense on corporate debt

5,291

6,724

(1,433)

(21)

Other operating expenses

62,171

47,324

14,847

31

Total expenses

$
609,778

$
521,068

$
88,710

17

Income from operations

$
242,211

$
212,930

$
29,281

14

Income tax expense

56,311

50,076

6,235

12

Net income before noncontrolling interests

$
185,900

$
162,854

$
23,046

14

Less: net income (loss) from noncontrolling interests

69

(224)

293

(131)

Walker & Dunlop net income

$
185,831

$
163,078

$
22,753

14

Overview

~~Three months ended September 30, 2021 compared to~~Other revenues for the three months ended ~~September 30, 2020~~March 31, 2022 primarily consisted of the 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 was primarily driven by increases in loan origination and debt brokerage fees, net (“(“origination ~~fees”~~fees”), servicing fees, 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”~~Income”)~~, servicing fees, property sales broker fees and other revenues.~~. The increase in origination fees was primarily related to an overall increase in debt financing volume, particularly in our Fannie Mae and brokered debt financing volumes. ~~MSR Income increased as a result of an overall increase in Agency debt financing volume.~~ Servicing fees increased largely from an increase in the average servicing portfolio outstanding. The increase in property sales broker fees was a result of a substantial increase in property sales volume. Other revenues 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.~~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 ~~largely attributable~~due to a decrease in the benefit for credit losses and increases in ~~personnel expenses, amortization and depreciation, and~~all other ~~operating expenses.~~expense categories. The increase in personnel expenses was primarily a result of increases in ~~(i)~~ commission costs due to the increases in origination fees and property sales brokers fees ~~(ii)~~and salaries and benefits costs driven by an increase in the average ~~headcount, and (iii) stock compensation expense due to increases in costs for our 2020 broad-based employee stock grant and costs associated with our performance plan for executives.~~headcount. Amortization and depreciation expense increased primarily due to an increase in the average MSR balance. Interest expense on corporate debt increased due to the increase in the size of the debt outstanding and the assumption of Alliant’s note payable the fourth quarter of 2021. Other operating expenses increased largely as a result of (i) the overall growth of the Company over the past year, (ii) an increase in travel and ~~acquisition activity.~~

~~Nine months ended September 30, 2021~~entertainment costs compared to ~~nine months ended September 30, 2020~~

~~The increase in revenues was driven by increases in origination fees, servicing fees, property sales broker fees~~2021 when our travel and ~~other revenues, partially offset by decreases in MSR Income, net warehouse interest income, and escrow earnings and other interest income. The increase in~~entertainment

3738

Table of Contents

origination fees was primarily related to an overall increase in debt financing volume, particularly in our brokered and HUD loan origination volumes. Servicing fees increased largely from an increase in the average servicing portfolio outstanding. The increase in property sales broker fees was a result of the significant increase in property sales volume. Other revenues increased primarily due to increases in prepayment fees and research subscription fees. MSR Income decreased as a result of a decrease in Agency debt financing volume. Net warehouse interest income decreased due to decreases in the average balances and net spreads for both LHFS and LHFI. Escrow earnings and other interest income decreased largely due to a substantial decrease in the average earnings rate.

~~The increase in~~ expenses ~~was mainly driven by increases in~~ personnel expenses, amortization and depreciation, and other operating expenses, partially offset by a change in provision (benefit) for credit losses. The increase in personnel expenses was primarily due to increases in (i) commission costswere depressed due to the ~~increases in origination fees and property sales broker fees, (ii) salaries and benefits costs due primarily to an increase in~~on-going effects of the ~~average headcount,~~pandemic, and (iii) stock-based compensation expense due to increases in costs for our 2020 broad-based employee stock grant and costs associated with our performance plan for executives. Amortization and depreciation expense increased due to an increase in the average MSR balance. Other operating expenses increased as a result of the overall growth of the Company over the past year and acquisition ~~activity. The change to a benefit for credit losses in 2021 from a provision for credit losses in 2020 was driven primarily by a decrease in our CECL reserve.~~

~~Revenues~~

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

For the three months ended

For the nine months ended

September 30,

September 30,

Debt Financing Volume by Product Type

2021

2020

2021

2020

Fannie Mae

25
%

27
%

22
%

38
%
Freddie Mac

20

43

15

25

Ginnie Mae ̶ HUD

4

5

6

6

Brokered

47

24

54

30

Principal Lending and Investing

4

1

3

1

For the three months ended

For the nine months ended

September 30,

September 30,

Mortgage Banking Details (basis points)
2021

2020

2021

2020

Origination Fee Rate ⁽¹⁾

95

115

100

101

Basis Point Change

(20)

(1)

Percentage Change

(17)
%

(1)
%

MSR Rate ⁽²⁾

70

108

69

101

Basis Point Change

(38)

(32)

Percentage Change

(35)
%

(32)
%

Agency MSR Rate ⁽³⁾

140

142

159

146

Basis Point Change

(2)

13

Percentage Change

(1)
%

9
%

~~(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.~~

For the three months ended September 30, 2021, 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 65% and 274%, respectively, from the three months ended September 30, 2020. The increase in origination fees due to the increase in volume was partially offset by a decrease in the origination fee rate resulting from the shift in transaction mix from 75% Agency loans in 2020 to 49% Agency loans in 2021. We typically earn higher origination fees on Agency loans than brokered loans.

~~Table of Contents~~

~~MSR Income increased for the three months ended September 30, 2021, primarily as a result of a 16% increase in Agency debt financing volume.~~related costs. The decrease in the ~~MSR Rate was attributable to the same shift in transaction mix noted above.~~

For the nine months ended September 30, 2021, the increase in origination fees was driven by the increase in overall debt financing volume from the nine months ended September 30, 2020, partially offset by a small decline in the Origination Fee Rate.

MSR Income declined for the nine months ended September 30, 2021, as a result of a 19% decrease in Agency debt financing volumes, particularly our Fannie Mae debt financing volume, which decreased 25%. Partially offsetting the decline due to volume was an increase in the Agency MSR Rate. The decline in Fannie Mae debt financing volume was primarily the result of a portfolio of loans originated in 2020 with over $2 billion in volume, with no comparable large portfolio transaction in 2021. The Agency MSR Rate increased year over year due primarily to this large portfolio, which had a lower than average servicing fee.

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

~~Servicing Fees.~~ For both the three and nine months ended September 30, 2021, the increases were primarily attributable to increases in the average servicing portfolio period over period as shown below, primarily due to higher loan originations and relatively few payoffs over the last 12 months, coupled with increases in the servicing portfolio’s average servicing fee rates as shown below. The increases in the average servicing fee are the result of the large volume of Fannie Mae debt financing volume with high servicing fees over the past year.

For the three months ended

For the nine months ended

September 30,

September 30,

Servicing Fees Details (dollars in thousands)
2021

2020

2021

2020

Average Servicing Portfolio
$
112,308,470

$
101,551,127

$
110,516,000

$
97,914,210

Dollar Change

10,757,343

12,601,790

Percentage Change

11
%

13
%

Average Servicing Fee (basis points)

24.6

23.4

24.4

23.3

Basis Point Change

1.2

1.1

Percentage Change

5.1
%

4.7
%

~~Property sales broker fees.~~ For the three and nine months ended September 30, 2021, the increases in property sales broker fees were 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.~~ For the three and nine months ended September 30, 2021, the decreases in net warehouse interest income were the result of decreases in net warehouse interest income from both LHFS and LHFI. The decreases in net warehouse interest income from LHFS were primarily due to the decreases in the net spreads shown below, as the short-term interest rates upon which we incur interest expense decreased at a slower rate than the mortgage rates upon which we earn interest income. Additionally, the average balances of loans outstanding were lower in 2021 than in 2020 as seen below.

The decreases in net warehouse interest income from LHFI were primarily due to decreases in the average outstanding balances and the net spreads shown below. The average outstanding balances decreased due to low origination activity during the year ended December 31, 2020, as the market for interim loans was interrupted due to the pandemic. The payoffs we had in 2020 were not fully replaced with new originations, resulting in a lower starting balance in 2021 than in 2020. We have seen an increase in our interim loan volume in 2021; however, payoffs continue to outpace originations as more production volume is going to our Interim Program JV, contributing to the lower average outstanding balances in LHFI. The decreases in net spreads were the result of having a larger balance of LHFI funded with corporate cash in 2020 than 2021.

~~Table of Contents~~

For the three months ended

For the nine months ended

September 30,

September 30,

Net Warehouse Interest Income Details (dollars in thousands)
2021

2020

2021

2020

Average LHFS Outstanding Balance
$
1,780,594

$
1,845,687

$
1,458,110

$
1,759,594

Dollar Change
$
(65,093)

$
(301,484)

Percentage Change

(4)
%

(17)
%

LHFS Net Spread (basis points)

84

106

83

96

Basis Point Change

(22)

(13)

Percentage Change

(21)
%

(14)
%

Average LHFI Outstanding Balance
$
274,338

$
329,559

$
278,181

$
379,249

Dollar Change
$
(55,221)

$
(101,068)

Percentage Change

(17)
%

(27)
%

LHFI Net Spread (basis points)

271

326

273

344

Basis Point Change

(55)

(71)

Percentage Change

(17)
%

(21)
%

~~Escrow Earnings and Other Interest Income.~~ For the nine months ended September 30, 2021, the decrease was primarily due to a significant decrease in average earnings rate on our escrow accounts resulting from a decrease in short-term interest rates in the broader market, slightly offset by an increase in the average balance of escrow accounts due to an increase in the average servicing portfolio.

~~Other Revenues.~~ For the three and nine months ended September 30, 2021, the increases were driven primarily by increases in prepayment fees and research subscription fees. Prepayment fees increased $6.6 million and $4.1 million for the three and nine months ended September 30, 2021, respectively. We acquired Zelman in July 2021, which resulted in the addition of $4.5 million in new revenues for both the three and nine months ended September 30, 2021.

~~Expenses~~

~~Personnel.~~ For the three months ended September 30, 2021, the increase was primarily the result of (i) a $40.9 million increase in commission costs due to higher origination fees and property sales broker fees, (ii) a $6.9 million increase in salaries and benefits due to a 22% increase in average headcount to support our growth efforts, (iii) a $3.6 million increase in the accrual for subjective bonuses due to the increase in average headcount and the Company’s financial performance, and (iv) a $3.8 million increase in stock-based compensation expense due to a higher expense associated with a stock grant provided to the vast majority of our non-executive employee base in the fourth quarter of 2020 and stock-based compensation expense associated with our performance share plans due to the Company’s improved financial performance for the third quarter of 2021 compared to the same period in 2020.

For the nine months ended September 30, 2021, the increase was primarily the result of (i) a $66.0 million increase in commission costs due to higher origination fees and property sales broker fees, (ii) an $18.4 million increase in salaries and benefits due to a 16% increase in average headcount to support our growth efforts, and (iii) an $8.7 million increase in stock-based compensation expense due to higher expense associated with a stock grant provided to the vast majority of our non-executive employee base in the fourth quarter of 2020 and stock-based compensation expense associated with our performance share plans due to the Company’s improved financial performance in 2021 compared to 2020.

~~Amortization and Depreciation.~~ For the three and nine months ended September 30, 2021, 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 $124.2 million of MSRs, net of amortization and write offs due to prepayment.

~~Provision (Benefit) for Credit Losses.~~ For the three months ended September 30, 2021, the decrease in the provision for credit losses was primarily attributable to $2.4 million in additional reserves recorded in the third quarter of 2020 for a loan that defaulted in 2019, with no comparable activity in the third quarter of 2021.

~~For the nine months ended September 30, 2021, the change in the provision (benefit)~~benefit for credit losses was due to improvements in the forecasted unemployment rate and sustained strength in multifamily operating fundamentals. The forecasted loss rate for our March 31, 2020 CECL reserve calculation was seven basis points compareda lower reduction to one ~~basis point upon implementation at January 1, 2020 as a result~~ of the ~~expected~~

~~Table of Contents~~

negative economic impacts of the COVID-19 pandemic, resulting in a significant provision expense for the nine months ended September 30, 2020, primarily during the first quarter of 2020. With the economic improvements noted above, we loweredloss rates used to calculate our ~~forecast-period loss rate from six basis points at December 31, 2020 to three basis points for our June 30, 2021~~ CECL reserve calculation, resulting in a large benefit for the first six months of 2021. We maintained the loss rate at September 30, 2021, resulting in a small provision for credit losses in the third quarter of 2021, but an overall benefit for credit losses for the nine months ended September 30, 2021.

~~We have not experienced any defaults and minimal delinquencies in our at-risk servicing portfolio since the onset of the pandemic.~~

~~Other Operating Expenses.~~ The increase for the three months ended September 30, 2021, primarily stemmed from a $3.8 million increase in professional fees largely due to $2.9 million of due diligence costs for our pending acquisition of Alliant, a $1.4 million increase in travel and entertainment costs as our bankers and brokers resumed traveling for in person meetings, and a $1.4 million increase in marketing costs to support our growth initiatives.

The increase for the nine months ended September 30, 2021 was largely attributable to a $6.1 million increase in professional fees largely due to $2.9 million of due diligence costs for our pending acquisition of Alliant, a $2.1 million increase in marketing costs to support our growth initiatives, a $1.8 million increase in office expenses due to the increased average headcount year over year and increased technology costs to support our growth, and a $3.3 million increase in miscellaneous expenses.reserves.

Income Tax Expense. ~~For the three months ended September 30, 2021, the~~The increase in income tax expense relates primarily to the ~~37%~~23% increase in income from operations and a ~~decrease~~70-basis point increase in the ~~absolute and relative realizable excess~~estimated annual effective tax ~~benefits recognized year over year as the number of stock options exercised decreased year over year.~~

~~For the nine months ended September 30, 2021, the increase in income tax expense relates primarily to~~rate, partially offset by a ~~14% increase in income from operations and a $1.2~~$0.8 million ~~absolute~~ increase in realizable excess tax ~~benefits recognized year over year due to a substantial increase in the number of shares of restricted stock vested and an increase in the price at which these awards vested.~~benefits.

We do not expect our annual estimated effective tax rate to differ significantly from the ~~26.3%~~26.9% rate estimated for the three months ended ~~September 30, 2021 as we do not have significant permanent differences.~~March 31, 2022. Accordingly, we expect an estimated effective tax rate of between approximately ~~25.5%~~26.5% and ~~26.5%~~27.5% for the remainder of the year. The effective tax rate ~~decreased~~increased year over year from ~~23.5%~~20.7% in ~~2020~~2021 to ~~23.2%~~21.6% in ~~2021~~2022 due to the ~~aforementioned decreases in~~factors noted above.

A discussion of the ~~absolute and relative realizable excess tax benefits, partially offset by a slightly lower estimated annual effective tax rate in 2021 compared to 2020.~~financial results for 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, ~~and~~ the fair value of expected net cash flows from servicing, ~~net.~~net, and the gain from 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 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 ongoing operating results;

●●

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

●●

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

~~Table of Contents~~

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 reconciled to net income as follows:

Table of Contents

ADJUSTED FINANCIAL METRIC RECONCILIATION TO GAAP

For the three months ended

For the nine months ended

September 30,

September 30,

(in thousands)

2021

2020

2021

2020

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income

$
71,721

$
53,190

$
185,831

$
163,078

Income tax expense

22,953

15,925

56,311

50,076

Interest expense on corporate debt

1,766

1,786

5,291

6,724

Amortization and depreciation

53,498

41,919

148,879

123,998

Provision (benefit) for credit losses

1,266

3,483

(14,380)

32,029

Net write-offs

—

—

—

—

Stock-based compensation expense

10,708

6,927

26,945

18,216

Fair value of expected net cash flows from servicing, net

(89,482)

(78,065)

(209,266)

(236,434)

Adjusted EBITDA

$
72,430

$
45,165

$
199,611

$
157,687

CONSOLIDATED


	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 table presents a period-to-period comparison of the components of adjusted EBITDA for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

ADJUSTED EBITDA –– THREE MONTHS

For the three months ended

September 30,

Dollar

Percentage

(dollars in thousands)
2021

2020

Change

Change

Loan origination and debt brokerage fees, net
$
123,242

$
83,825

$
39,417

47
%
Servicing fees

70,628

60,265

10,363

17

Property sales broker fees

33,677

6,756

26,921

398

Net warehouse interest income

5,583

7,558

(1,975)

(26)

Escrow earnings and other interest income

2,032

2,275

(243)

(11)

Other revenues

21,577

8,272

13,305

161

Personnel

(159,473)

(107,621)

(51,852)

48

Net write-offs

—

—

—

N/A

Other operating expenses

(24,836)

(16,165)

(8,671)

54

Adjusted EBITDA
$
72,430

$
45,165

$
27,265

60

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

~~ADJUSTED EBITDA – NINE MONTHS~~

For the nine months ended

September 30,

Dollar

Percentage

(dollars in thousands)
2021

2020

Change

Change

Loan origination and debt brokerage fees, net
$
306,593

$
238,105

$
68,488

29
%
Servicing fees

205,658

172,561

33,097

19

Property sales broker fees

65,173

19,928

45,245

227

Net warehouse interest income

14,768

22,454

(7,686)

(34)

Escrow earnings and other interest income

5,972

15,689

(9,717)

(62)

Other revenues

44,490

29,051

15,439

53

Personnel

(380,872)

(292,777)

(88,095)

30

Net write-offs

—

—

—

N/A

~~Table of Contents~~

Other operating expenses

(62,171)

(47,324)

(14,847)

31

Adjusted EBITDA
$
199,611

$
157,687

$
41,924

27

~~Three and nine months ended September 30, 2021 compared to three and nine months ended September 30, 2020~~

Loan origination and debt brokerage fees, net increased due to ~~significant~~ increases in overall debt financing volumes, particularly in our Fannie Mae and brokered debt financing volumes. Servicing fees increased due to ~~increases~~growth in the average servicing portfolio period over ~~period as a result of the substantial loan originations and relatively few payoffs over the last 12 months and increases in the average servicing fee.~~period. Property sales broker fees increased as a result of the ~~increases~~increase in property sales volumes. ~~Net warehouse interest income decreased~~Other revenues increased primarily due to ~~decreases~~an increase in asset management and research subscription fees generated from our acquired subsidiaries in the ~~net spreads and average outstanding balances. Escrow earnings and other interest income decreased primarily as a result~~second half of ~~declines in the average earnings rates.~~2021. The increases in personnel expense were primarily due to increased commission costs due to the increases in total transaction volumes and salaries and benefits resulting from ~~increases~~growth in average headcount. Other operating expenses increased as a result of the overall growth of the Company over the past year, increased travel and ~~from~~entertainment costs, and increased ~~costs associated with due diligence for acquisitions.~~acquisition related costs.

Financial Condition

Cash Flows from Operating Activities

Our cash flows from 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.

Table of Contents

Cash Flows from Investing Activities

We usually lease facilities and equipment for our operations. 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 purchase of available-for-sale (“AFS”) securities pledged to Fannie Mae. We opportunistically invest cash for acquisitions and MSR portfolio purchases.

Cash Flows from Financing Activities

We use our warehouse loan facilities and, when necessary, our corporate cash to fund loan 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 debt and cash on hand to fund large acquisitions. Additionally, we repurchase shares, pay cash dividends, make long-term debt principal payments, and repay short-term borrowings on a regular basis. We issue stock primarily for exercise of stock options (cash inflow) and for acquisitions (non-cash transactions).

~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to ~~Nine~~Three Months Ended ~~September 30, 2020~~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, 2021~~March 31, 2022 and ~~2020.~~2021.

4341

Table of 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)	2021		2020		Change		Change		2022		2021		Change		Change
Net cash provided by (used in) operating activities	$	(196,979)	$	(2,296,868)	$	2,099,889	(91)	%	$	971,928	$	1,315,692	$	(343,764)	(26)	%
Net cash provided by (used in) investing activities		49,325		147,624		(98,299)	(67)			(44,440)		81,179		(125,619)	(155)
Net cash provided by (used in) financing activities		194,265		2,341,258		(2,146,993)	(92)			(1,096,656)		(1,423,259)		326,603	(23)
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")		404,613		328,580		76,033	23

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	$	(301,921)	$	(2,406,414)	$	2,104,493	(87)	%	$	1,013,187	$	1,340,034	$	(326,847)	(24)	%
Net cash provided by (used in) operating activities, excluding loan origination activity		104,942		109,546		(4,604)	(4)			(41,259)		(24,342)		(16,917)	69


Cash flows from (used in) investing activities
Purchases of pledged AFS securities	$	(7,250)	$	(14,130)	$	6,880	(49)	%	$	(7,010)	$	(2,000)	$	(5,010)	251	%
Proceeds from the prepayment/sale of pledged AFS securities		28,781		15,531		13,250	85			1,672		20,884		(19,212)	(92)
Purchase of equity-method investments		(8,029)		(974)		(7,055)	724			(5,941)		(1,124)		(4,817)	429
Acquisitions, net of cash received		(62,208)		(46,784)		(15,424)	33			(78,465)		(7,506)		(70,959)	945
Capital expenditures										(11,790)		(1,794)		(9,996)	557
Net payoff of (investment in) loans held for investment		127,591		199,569		(71,978)	(36)			52,893		79,745		(26,852)	(34)
Net distributions from (investments in) joint ventures	$	(24,053)	$	(3,538)	$	(20,515)	580			4,201		(7,026)		11,227	160


Cash flows from (used in) financing activities
Borrowings (repayments) of warehouse notes payable, net	$	333,887	$	2,497,627	$	(2,163,740)	(87)	%	$	(1,006,545)	$	(1,400,704)	$	394,159	(28)	%
Borrowings of interim warehouse notes payable		154,661		34,028		120,633	355			—		25,313		(25,313)	(100)
Repayments of interim warehouse notes payable		(157,277)		(109,860)		(47,417)	43			(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		(15,686)		(42,525)		26,839	(63)			(27,049)		(13,374)		(13,675)	102
Repayment of secured borrowings		(73,312)		—		(73,312)	N/A
Cash dividends paid		(48,268)		(33,984)		(14,284)	42			(20,077)		(16,052)		(4,025)	25

The change in cash flows from operating activities was driven primarily by loans 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 ~~used~~received in loan origination activities is primarily attributable to a net decrease in ~~originations outpacing~~ sales ~~of loans held for sale~~ (net cash ~~used)~~received) outpacing originations by ~~$301.9 million~~$1.0 billion in ~~2021~~2022 compared to ~~$2.4~~$1.3 billion in ~~2020.~~2021. Our Agency debt financing activity decreased ~~year over year,~~in 2021, which resulted in ~~less cash used~~a lower loan held for sale balance as of December 31, 2021 compared to December 31, 2020 resulting in ~~originations during the first nine months of~~fewer loans transferred in 2022 compared to 2021. Excluding cash used for the origination and sale of loans, cash flows ~~provided by operations~~used in operating activities were ~~$104.9~~$41.3 million in ~~2021, down~~2022, up from ~~$109.5~~$24.3 million in ~~2020.~~2021. The ~~decrease~~increase is primarily the result of a ~~$64.6~~$39.6 million ~~higher adjustment~~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, and a $12.5 million increase in net income before noncontrolling interest. The significant decrease in Total cash over the past year is largely attributable to acquisition activity, partially offset by ~~a lower adjustment for gains attributable to the fair value of future servicing rights, net of guaranty obligation of $27.2 million and a lower adjustment for~~an increase in our long-term debt.

The change in ~~the fair value of premiums and origination fees of $31.3 million.~~

~~The decrease in~~ cash flows provided by investing activities ~~is primarily attributable~~in 2021 to ~~(i) a greater increase~~cash used in ~~the originations of loans held for investments than the payoffs of these loans as our origination volume for 2020~~investing activities in 2022 was ~~low~~ due to ~~the COVID-19 pandemic, (ii)~~(i) an increase in the cash used in acquisitions due to an increase in the ~~average~~ size of ~~acquisitions~~the acquisition in 2022 compared to 2021, ~~than 2020,~~(ii) a decrease in the net payoff of loans held for investment, (iii), a decrease in the payoff of pledged AFS securities, which is unpredictable, (iv) an increase in ~~net investments in joint ventures as~~capital expenditures due to the build out of our ~~joint ventures have been growing in 2021, and (iv)~~new corporate headquarters, (v) an increase in the purchase of equity-method investments ~~partially offset by (i)~~as capital calls for capital commitments increased year over year, and (vi) an increase in the ~~prepayment~~purchase of ~~pledged~~ AFS securities, ~~and (ii)~~partially offset by a reduction in the ~~purchases of pledged AFS securities. Pledged AFS securities prepay at unpredictable times. Our purchases were less~~net investment in ~~2021 as several prepayments occurred close to~~joint ventures. In the ~~end of the third~~first quarter of 2021, we had one small acquisition compared to the GeoPhy acquisition, which was substantially larger, resulting in ~~little time to reinvest prior to September 30,~~an increase in cash used for acquisitions. Net payoff of loans held for investment decreased as there were fewer payoffs in 2022 than in 2021. ~~We have~~Our purchases of AFS securities increased ~~our investments~~ in ~~equity-method investments~~2022 as we ~~continue to invest~~reinvested the funds from the payoff of AFS securities late in ~~small strategic investments.~~2021.

The decrease in cash ~~provided~~used by financing activity was primarily attributable to a decrease in ~~the~~ net warehouse ~~borrowings, the repayment of our secured borrowings, and an increase in cash dividends paid,~~repayments, partially offset by ~~an increase~~increases in (i) the net ~~borrowings~~repayment of interim warehouse notes payables, ~~and a decrease in cash paid for stock repurchases. The decrease in net borrowings~~(ii) repayments of ~~warehouse~~ notes payable, ~~during 2021 was largely due to the decrease in cash used for loan origination activity, as noted above. The repayment~~(iii) repurchase of ~~secured borrowings was the~~common stock, (iv)

4442

Table of Contents

~~result~~dividends paid, and (v) cash payments of ~~the repayment of the secured borrowing~~contingent consideration liabilities. The decrease in the ~~second quarter of 2021, a unique transaction. Cash dividends paid increased as a result of~~net repayment in warehouse notes payable was due to the aforementioned decrease in cash received from loan origination activity. The increase in ~~our dividend to $0.50 per share in 2021 compared to $0.36 per share in 2020. Net borrowings~~net cash repayments of interim warehouse notes payable ~~increased~~was primarily due to a reduction in borrowings. The increase in repayments of notes payable was due to the ~~increase in originations~~quarterly paydowns of ~~loans held for investments noted above.~~a note payable at our subsidiary, Alliant. The ~~decrease~~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 ~~repurchases under approved stock repurchase programs. In~~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.

Table of Contents

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

Table of Contents

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 net spread shown below, as the short-term interest rates upon which we ~~did not repurchase any shares under approved repurchase programs, while~~incur interest expense increased at a slower rate than the mortgage rates upon which we earn interest income. The increase in ~~2020~~net warehouse interest income was partially offset by a lower average balance of loans held for sale 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 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 the 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:

Table of Contents

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 increased primarily due to an increase in the 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 the increased travel and marketing costs.

Table of Contents

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.

Table of Contents

(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 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 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.

Table of Contents

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 ~~repurchased $23.7~~have added $66.7 million of ~~shares under such programs.~~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

Table of Contents

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	%

Table of Contents

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 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)

Table of Contents

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 primarily due to our equity method investments generating income in 2022 compared to 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 the overall growth of the Company over the past year and 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 liquidity to (i) fund loans held for sale; (ii) fund loans held for investment under the Interim Loan Program; (iii) pay cash dividends; (iv) fund our portion of the equity necessary for the operations of the Interim Program JV, ~~the Appraisal~~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 and payments for salaries, commissions, and income ~~taxes;~~taxes,; and ~~(vi)~~(viii) meet working capital ~~needs~~ 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 requirements as of ~~September 30, 2021.~~March 31, 2022. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. As of ~~September 30, 2021,~~March 31, 2022, the net worth requirement was ~~$250.2~~$261.2 million, and our net worth was ~~$1.1 billion,~~$704.8 million, as measured at our wholly owned operating subsidiary, Walker && Dunlop, LLC. As of ~~September 30, 2021,~~March 31, 2022, we were required to maintain at least ~~$49.5~~$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, 2021,~~March 31, 2022, we had operational liquidity of ~~$254.7~~$98.6 million, as measured at our wholly owned operating subsidiary, Walker && Dunlop, LLC.

We paid a cash dividend of ~~$0.50~~$0.60 per share ~~in each of~~for the first ~~three quarters~~quarter of ~~2021,~~2022, which is ~~39%~~20% higher than the quarterly dividend paid in ~~each of~~ the first ~~three quarters~~quarter of ~~2020.~~2021. On ~~November 3, 2021, our~~May 4, 2022, the Company’s Board of Directors declared a dividend of ~~$0.50~~$0.60 per share for the ~~fourth~~second quarter of ~~2021.~~2022. The dividend will be paid on ~~November 29, 2021~~June 3, 2022 to all holders of record of ~~the Company’s~~our restricted and unrestricted common stock as of ~~November~~May 19, ~~2021.~~2022.

Over the past three years, we have returned ~~$210.7~~$188.3 million to investors in the form of the repurchase of ~~1.5~~0.5 million shares of our common stock under share repurchase programs for a cost of ~~$72.0~~$30.5 million and cash dividend payments of ~~$138.7~~$157.8 million. Additionally, we have invested ~~$179.0~~$834.9 million in acquisitions. On occasion, we may use cash to fully fund some loans held for investment or loans held for sale instead of using our warehouse lines. As of ~~September 30, 2021,~~March 31, 2022, we ~~used corporate cash to~~did not fully fund ~~loans held for investment with an unpaid principal balance of $53.0 million.~~any such loans. We continually seek opportunities to complete additional acquisitions if we believe the economics are favorable.

Table of Contents

In February ~~2021,~~2022, our Board of Directors approved a stock repurchase program that permits the repurchase of up to ~~$75~~$75.0 million of shares of our common stock over a 12-month period beginning February ~~12, 2021.~~13, 2022. Through ~~September 30, 2021~~March 31, 2022 we have not repurchased any shares under the ~~2021~~2022 repurchase program and have $75.0 million of remaining capacity under 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 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, 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

~~Table of Contents~~

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, 2021,~~March 31, 2022, we held substantially all of our restricted liquidity in Agency MBS in the aggregate amount of ~~$97.2~~$107.6 million. Additionally, the majority of the loans for which we have 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, 2021~~March 31, 2022 collateral requirements as outlined above. As of ~~September 30, 2021,~~March 31, 2022, reserve requirements for the ~~September 30, 2021~~March 31, 2022 DUS loan portfolio will require us to fund ~~$64.2~~$68.2 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae has assessed the DUS Capital Standards in the past and may make changes to these standards in the future. We generate sufficient cash 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, 2021.~~March 31, 2022.

Sources of Liquidity: Warehouse Facilities and Notes Payable

Warehouse Facilities

~~The following table provides information related to our~~We utilize a combination of warehouse facilities ~~as of September 30, 2021.~~

September 30, 2021

(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

$
277,872

30-day LIBOR plus 1.30%
Agency Warehouse Facility #2

700,000

300,000

1,000,000

346,047

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

600,000

265,000

865,000

378,624

30-day LIBOR plus 1.30%
Agency Warehouse Facility #4

350,000

—

350,000

136,616

30-day LIBOR plus 1.30%
Agency Warehouse Facility #5

—

1,000,000

1,000,000

885,308

30-day LIBOR plus 1.45%
Agency Warehouse Facility #6

150,000

100,000

250,000

118,124

30-day LIBOR plus 1.40%
Agency Warehouse Facility #7

150,000

50,000

200,000

92,293

30-day LIBOR plus 1.30%
Total National Bank Agency Warehouse Facilities

$
2,375,000

$
1,715,000

$
4,090,000

$
2,234,884

Fannie Mae repurchase agreement, uncommitted line and open maturity

$
—

$
1,500,000

$
1,500,000

$
482,861

Total Agency Warehouse Facilities

2,375,000

3,215,000

5,590,000

2,717,745

Interim Warehouse Facility #1

$
135,000

$
—

$
135,000

$
—

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

100,000

—

100,000

—

30-day LIBOR plus 1.65% to 2.00%
Interim Warehouse Facility #3

200,000

—

200,000

111,817

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

131,627

Total warehouse facilities

$
2,829,810

$
3,215,000

$
6,044,810

$
2,849,372

~~(1)~~

~~Agency Warehouse Facilities, including the Fannie Mae repurchase agreement are used to fund loans held for sale, while Interim Warehouse Facilities are used to fund loans held for investment.~~

~~(2)~~

~~Interest rate presented does not include the effect of interest rate floors.~~

~~Agency Warehouse Facilities~~

~~As of September 30, 2021, we had seven~~and notes payable to provide funding for our operations. We utilize warehouse lines of credit in the aggregate amount of $4.1 billion with certain national banks and a $1.5 billion uncommitted facility with Fannie Mae (collectively, the “Agency Warehouse Facilities”) that we usefacilities to fund ~~substantially all of~~ our ~~loan originations. The seven warehouse facilities are revolving commitments we expect to renew annually (consistent with industry practice),~~Agency Lending, Interim Loan Program, and ~~the Fannie Mae facility is provided on an uncommitted basis without a specific maturity date.~~LIHTC operations. Our ability to originate Agency mortgage loans and loans held for investments depends upon our ability to secure and maintain these types of short-term financing agreements on acceptable terms.

~~Table~~ For a detailed description of ~~Contents~~the terms of each warehouse agreement including the affirmative and negative covenants, refer to “Warehouse Facilities” in NOTE 6 in the consolidated financial statements in our 2021 Form 10-K, updated in NOTE 6 in the condensed consolidated financial statements in this Form 10-Q.

~~Agency Warehouse Facility #1:~~Notes Payable

We have a ~~warehousing~~senior secured credit ~~and security~~ agreement ~~with a national bank~~(the “Credit Agreement”) that provides for a ~~$425.0~~$600 million committed warehouse line that is scheduled to mature on December 24, 2021. The agreement provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans. Advances are made at 100% of theterm loan ~~balance and borrowings under this line bear interest at the 30-day London Interbank Offered Rate (“LIBOR”~~(the “Term Loan”) ~~plus 130 basis points.~~ During the second quarter of 2021, we executed an amendment that decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points and decreased the 30-day LIBOR floor to zero from 25 basis points. ~~In October 2021, we executed an amendment to the agreement that extended the maturity date to December 24, 2021.No other~~ ~~material modifications have been made to the agreement in 2021~~.

~~Agency Warehouse Facility #2:~~

We have a warehousing credit and security agreement with a national bank for a $700.0 million committed warehouse line that is scheduled to mature on April 14, 2022. 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 the 30-day LIBOR plus 130 basis points. In addition to the committed borrowing capacity, the agreement provides $300.0 million of uncommitted borrowing capacity that bears interest at ~~the same rate as the committed facility~~. ~~During the second quarter of 2021, we executed amendments that extended the maturity date thereunder until April 14, 2022 and decreased the borrowing rate to 30-day LIBOR~~Adjusted Term SOFR plus ~~130 basis points from 30-day LIBOR plus 140 basis points. No other material modifications have been made to the agreement during 2021.~~

~~Agency Warehouse Facility #3:~~

We have a $600.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature on May 14, 2022. 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 130 basis points. During the second quarter of 2021, we executed amendments that extended the maturity date to May 14, 2022 for the committed borrowing capacity. Additionally, the amendments increased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 115 basis points and decreased the 30-day LIBOR floor to zero basis points from 50 basis points. No other material modifications have been made to the agreement during 2021.

~~Agency Warehouse Facility #4:~~

We have a $350.0 million committed warehouse credit and security agreement with a national bank that is scheduled to mature on June 22, 2022. The warehouse facility provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, FHA, and defaulted HUD and FHA loans and has a sublimit of $75.0 million to fund defaulted 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 130 basis points. During the second quarter of 2021, we executed an amendment that extended the maturity date thereunder until June 22, 2022, decreased the borrowing rate to 30-day LIBOR plus 130 basis points from 30-day LIBOR plus 140 basis points, and decreased the 30-day LIBOR floor to five basis points from 25 basis points. No other material modifications have been made to the agreement during 2021.

~~Agency Warehouse Facility #5:~~

We have a master repurchase agreement with a national bank for a $1.0 billion uncommitted advance credit facility that is scheduled to mature on September 15, 2022. The 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 repurchase agreement bear interest at a rate of 30-day LIBOR plus 145 basis points. During the third quarter of 2021, we executed amendments to the agreement related to Agency Warehouse Facility #5 that extended the maturity date to September 15, 2022. No other material modifications have been made to the agreement during 2021.

~~Agency Warehouse Facility #6:~~

During the first quarter of 2021, we entered into an agreement with a national bank to establish Agency Warehouse Facility #6. The facility has a $150.0 million committed borrowing capacity and provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans under the facility. Advances are made at 100% of the loan balance, and the borrowings under the warehouse agreement bear interest at a

~~Table of Contents~~

rate of LIBOR plus 140 basis points. The agreement also provides $100.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The negative and financial covenants of the warehouse agreement substantially conform to those of the warehouse agreement for Agency Warehouse Facility #1, as described in our 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

~~Agency Warehouse Facility #7:~~

During the third quarter of 2021, we entered into an agreement to establish Agency Warehouse Facility #7. The warehouse facility has a $150.0 million maximum committed borrowing capacity, provides us with the ability to fund Fannie Mae, Freddie Mac, HUD, and FHA loans, and matures on August 24, 2022. 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 130 basis points. In addition to the committed borrowing capacity, the agreement provides $50.0 million of uncommitted borrowing capacity that bears interest at the same rate as the committed facility. The negative and financial covenants of the warehouse agreement substantially conform to those of the warehouse agreement for Agency Warehouse Facility #1, as described in our 2020 Form 10-K. No material modifications have been made to the agreement during 2021.

~~Uncommitted Agency Warehouse Facility:~~

We have a $1.5 billion uncommitted facility with Fannie Mae under its ASAP 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. There is no expiration date for this facility. The uncommitted facility has no specific negative or financial covenants.

~~Interim Warehouse Facilities~~

To assist in funding loans held for investment under the Interim Loan Program, we have four warehouse facilities with certain national banks in the aggregate amount of $454.8 million as of September 30, 2021 (“Interim Warehouse Facilities”). Consistent with industry practice, three of these facilities are revolving commitments we expect to renew annually or bi-annually, and one is a commitment that matures according to the maturity date of the underlying loan it finances. Our ability to originate loans held for investment depends upon our ability to secure and maintain these types of short-term financings on acceptable terms.

~~Interim Warehouse Facility #1:~~

We have a $135.0 million committed warehouse line agreement that is scheduled to mature on May 14, 2022. The facility 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 2021, we executed amendments that extended the maturity date to May 14, 2022 and decreased the 30-day LIBOR floor to zero basis points from 50 basis points.~~ ~~No other material modifications have been made to the agreement during 2021.~~

~~Interim Warehouse Facility #2:~~

We have a $100.0 million committed warehouse line agreement that is scheduled to mature on December 13, 2021. 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. Borrowings under the facility are full recourse to the Company. All borrowings originally bear interest at 30-day LIBOR plus 165 to 200 basis points (“the spread”). The spread varies according to the type of asset the borrowing finances. 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 2021.

~~Interim Warehouse Facility #3:~~

We have a $200.0 million repurchase agreement with a national bank that is scheduled to mature on September 29, 2022. 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

~~Table of Contents~~

cash in combination with advances under the facility. Borrowings under the facility are full recourse to the Company. The borrowings under the agreement bear interest at a rate of 30-day LIBOR plus 175 to 325 basis points. 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 third quarter of 2021, we executed amendments to the agreement related to Interim Warehouse Facility #3 that extended the maturity date to September 29, 2022, increased the committed borrowing capacity to $200.0 million, and eliminated the uncommitted borrowing capacity. ~~No other material modifications have been made to the agreement during 2021~~.

~~Interim Warehouse Facility #4:~~

We have a $19.8 million committed warehouse loan and security agreement with a national bank that funds one specific loan. The agreement provides for a maturity date to coincide with the earlier of the maturity date for the underlying loan or the stated maturity date of October 1, 2022. Borrowings under the facility are full recourse and bear interest at 30-day LIBOR plus 300225 basis points with a floor of ~~450~~50 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. The committed warehouse loanpoints and security agreement has only two financial covenants, both of which are similar to the other Interim Warehouse Facilities. We may request additional capacity under the agreement to fund specific loans. In October 2021, we executed an amendment related to Interim Warehouse Facility #4 that extended the stated maturity date to October 1, 2022. No other material modifications have been made to the agreement during 2021.

The warehouse agreements above contain cross-default provisions, such that if a default occurs under any of our warehouse agreements, generally the lenders under our other warehouse agreements could also declare a default. As of September 30, 2021, we were in compliance with all of our warehouse line covenants.

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

~~Note Payable~~

On November 7, 2018, we entered into a senior secured credit agreement (the “Credit Agreement”) that amended and restated our prior credit agreement and provided for a $300.0 million term loan (the “Term Loan”). The Term Loan was issued at a 0.5% discount, has a stated maturity date of ~~November 7, 2025, and bears interest at 30-day LIBOR plus 200 basis points.~~December 16, 2028 (or, if earlier, the date of acceleration of the Term Loan pursuant to the term of the Credit Agreement). At any time, we may also elect to request one or more incremental term loan commitments not to exceed ~~$150.0~~the lesser of $230 million and 100% of trailing four-quarter Consolidated Adjusted EBITDA, provided that ~~the~~ total indebtedness would not cause the leverage ratio ~~(as defined in the Credit Agreement)~~ to exceed ~~2.00~~3.00 to 1.00.

~~We are obligated to repay the aggregate outstanding principal amount of the Term Loan in consecutive quarterly installments equal to $0.7 million on the last business day of each~~As of March ~~June, September, and December. The Term Loan also requires certain other prepayments in certain circumstances pursuant to~~31, 2022, the ~~terms~~

Table of the Credit Agreement. The final principal installment of the Term Loan is required to be paid in full on November 7, 2025 (or, if earlier, the date of acceleration of the Term Loan pursuant to the terms of the Credit Agreement) and will be in an amount equal to the aggregate Contents

outstanding ~~principal of the Term Loan on such date (together with all accrued interest thereon).~~

Our obligations under the Credit 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 the Amended and Restated Guarantee and Collateral Agreement entered into on November 7, 2018 among the Loan Parties and Wells Fargo Bank, National Association, as administrative agent (the “Guarantee and Collateral Agreement”). Subject to certain exceptions and qualifications contained in the Credit Agreement, the Company is required to cause any newly created or acquired subsidiary, unless such subsidiary has been designated as an Excluded Subsidiary (as defined in the Credit Agreement) by the Company in accordance with the terms of the Credit Agreement, to guarantee the obligations of the Company under the Credit Agreement and become a party to the Guarantee and Collateral Agreement. The Company may designate a newly created or acquired subsidiary as an Excluded Subsidiary, so long as certain conditions and requirements provided for in the Credit Agreement are met. As of September 30, 2021, the outstanding unpaid principal balance of the Term Loan was ~~$292.5~~$598.5 million.

The note payable and the warehouse facilities are senior obligations of the Company. As of ~~September 30, 2021,~~March 31, 2022, we were in compliance with all ~~such~~ covenants related to the Credit Agreement.

~~Table~~For a detailed description of ~~Contents~~

~~To allow us~~the terms of the Credit Agreement, refer to ~~fund the acquisition of Alliant, we are currently~~“Notes Payable – Term Loan Note Payable” in NOTE 6 in the ~~process of refinancing and upsizing~~consolidated financial statements in our ~~Note payable~~ ~~(“existing term loan”)~~2021 Form 10-K. There have been no changes to ~~$600 million.~~ the Credit Agreement in 2022.

We have ~~received commitments well~~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 ~~excess~~“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 ~~$600 million targeted amount. The new term loan is expected to close~~note during the fourth quarter of 2021 simultaneously with the closing of the acquisition of Alliant. The proceeds from the new term loan will be used to repay the existing term loan and to fund a significant amount of the $361 million cash due at the closing of the acquisition of Alliant. The new term loan is expected to have a term of seven years.2022.

Credit Quality and Allowance for Risk-Sharing Obligations

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


	September 30,

							March 31,
(dollars in thousands)	2021			2020			2022			2021
Key Credit Metrics
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	44,069,885		$	37,018,792		$	46,194,756		$	41,152,790
Fannie Mae Modified Risk		8,235,475			9,165,490			7,794,710			8,941,234
Freddie Mac Modified Risk		36,883			52,685			23,715			37,006
Total risk-sharing servicing portfolio	$	52,342,243		$	46,236,967		$	54,013,181		$	50,131,030


Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	12,593		$	40,267		$	11,084		$	19,052
Freddie Mac No Risk		38,002,131			35,673,424			36,941,470			37,658,456
GNMA - HUD No Risk		9,894,893			9,639,820			9,954,262			9,754,667
Brokered		13,429,801			11,513,521			15,115,619			12,090,825
Total non-risk-sharing servicing portfolio	$	61,339,418		$	56,867,032		$	62,022,435		$	59,523,000
Total loans serviced for others	$	113,681,661		$	103,103,999		$	116,035,616		$	109,654,030
Interim loans (full risk) servicing portfolio		238,713			273,754			221,649			213,240
Total servicing portfolio unpaid principal balance	$	113,920,374		$	103,377,753		$	116,257,265		$	109,867,270


Interim Program JV Managed Loans ⁽¹⁾		918,518			639,466			930,296			660,999


At risk servicing portfolio ⁽²⁾	$	48,209,532		$	41,848,548		$	50,176,521		$	45,796,952
Maximum exposure to at risk portfolio ⁽³⁾		9,784,054			8,497,807			10,178,454			9,304,440
Defaulted loans		48,481			48,481			78,659			48,481


Defaulted loans as a percentage of the at-risk portfolio		0.10	%		0.12	%		0.16	%		0.11	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.13			0.17			0.11			0.14
Allowance for risk-sharing as a percentage of maximum exposure		0.63			0.83			0.52			0.69

(1)

As of ~~September 30, 2021,~~March 31, 2022, this balance consists entirely of Interim Program JV managed loans. As of ~~September 30, 2020,~~March 31, 2021, this balance consists of $73.3 million of loans serviced directly for the Interim Program JV partner and ~~$566.1~~$587.7 million of Interim Program JV managed loans. We indirectly share in a portion of the risk of loss associated with 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)

At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio.

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 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.

~~Table of Contents~~

(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.

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 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		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.

The ~~“Business”~~“Business” section of ~~“Item~~“Item 2. ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations” contains a discussion of the risk-sharing caps we have with 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 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 collateral-based reserve is recorded when it is probable that a risk-sharing loan will foreclose or has foreclosed, and a reserve for estimated credit losses and a guaranty obligation are recorded for all other risk-sharing loans.

~~As a result of the onset of the pandemic and the resulting forecasts for significant unemployment rates~~The calculated CECL reserve for the ~~remainder of 2020, we adjusted the loss rate for the forecast period CECL reserve, resulting in a total allowance for risk-sharing obligation of $70.5 million~~Company’s $49.7 billion at-risk Fannie Mae servicing portfolio as of September 30, 2020, or 17 basis points of the at-risk balance. During the first three quarters of 2021, economic conditions improved significantly, with reported unemployment rates and forecasts for future unemployment rates at improved ratesMarch 31, 2022 was $42.5 million compared to both December 31, 2020 and September 30, 2020. In response to the improving unemployment statistics, we adjusted the loss rate for the forecast period downwards during 2021, contributing $13.0 million of the $13.7 million benefit for risk-sharing obligations and a decrease in the allowance for risk-sharing obligations to $61.6 million as of September 30, 2021 from $75.3$52.3 million as of December 31, ~~2020, or 13 basis points and 17 basis points of~~2021. The significant decrease in the ~~at-risk balance as of September 30, 2021 and December 31, 2020, respectively.~~CECL reserve was principally related to a reduction in our historical loss factor.

As of ~~September 30, 2021, and 2020, two~~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 ~~in our at-risk portfolio were in default. We had a provision for risk-sharing obligations~~as of ~~$1.3~~March 31, 2021. The collateral-based reserve on defaulted loans was $10.8 million ~~for both the three months ended September 30,~~and $7.6 million as of March 31, 2022 and March 31, 2021, ~~and 2020. For the three months ended September 30, 2021 and 2020, the provision was entirely the result of increases in the balance of the at-risk servicing portfolio.~~respectively. We had a benefit for risk-sharing obligations of ~~$13.7~~$9.4 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to a ~~provision~~benefit for risk-sharing obligations of ~~$28.9~~$10.7 million for the ~~nine~~three months ended September 30, 2020. For the nine months ended September 30, 2021, the majority of the benefit for risk-sharing obligations was the result of a decrease in the CECL reserve due to improved unemployment forecasts partially offset by increases in the balance of the at-risk servicing portfolio. For the nine months ended September 30, 2020, the majority of the provision was the result of an increase in the forecasted losses resulting from the pandemic.March 31, 2021.

We have never been required to repurchase a loan.

~~Table of Contents~~

New/Recent Accounting Pronouncements

As seen in NOTE 2 in the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, 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 as of ~~September 30, 2021.~~March 31, 2022.

5255

Table of Contents

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

Interest Rate Risk

For loans held for sale to 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 generally track 30-day LIBOR. 30-day LIBOR as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~eight~~45 basis points and 1511 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,

					As of March 31,
Change in annual escrow earnings due to: (in thousands)	2021		2020		2022		2021
100 basis point increase in 30-day LIBOR	$	29,824	$	27,521	$	24,807	$	25,292
100 basis point decrease in 30-day LIBOR⁽¹⁾		(2,357)		(3,500)		(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 an increase or decrease in the interest rate earned on our loans held for sale.

As of September 30,

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

2021

2020

100 basis point increase in 30-day LIBOR

$
(26,212)

$
(29,530)

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

1,684

3,695


	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

~~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.~~LIBOR and entered into a $600 million note payable with an interest based Adjusted Term SOFR and a SOFR floor of 50 basis points. The following table shows the impact on our annual 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 September 30,

Change in annual income from operations due to: (in thousands)

2021

2020

100 basis point increase in 30-day LIBOR

$
(2,925)

$
(2,955)

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

235

433


	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

(1)

The decrease as of March 31, 2021 is limited to ~~the~~ 30-day LIBOR ~~rate~~ as of ~~period end~~March 31, 2021, as ~~30-day LIBOR~~it was less than 100 basis ~~points.~~points, or the interest rate floor, if applicable.

(2)

The 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, or the interest rate floor, if applicable.

(3)

As of March 31, 2022, the SOFR floor of 50 basis points was in effect, resulting in no impact from a 100-basis point decrease in SOFR.

Market Value Risk

The fair value of our MSRs is subject to 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 $39.1 million as of March 31, 2022 compared to $36.0

Table of Contents

million as of March 31, 2021. Our Fannie Mae and Freddie Mac servicing engagements provide for 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 them to provide us with prepayment fees. As of March 31, 2022 and March 31, 2021, 85% of the servicing fees are protected from the risk of prepayment through 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~~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”~~(“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.

~~Market Value Risk~~

~~The fair value~~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 ~~MSRs is subject~~warehouse facilities to ~~market risk. A 100-basis point increase or decrease~~SOFR, and a fourth warehouse facility in the ~~weighted-average discount rate would decrease or increase, respectively, the fair value~~second quarter of ~~our MSRs by approximately $37.2~~ ~~million as of September 30, 2021, compared to $29.1~~

~~Table of Contents~~

million as of September 30, 2020. Our Fannie Mae and Freddie Mac servicing engagements provide for 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 them to provide us with prepayment fees. As of September 30, 2021, 89% of the servicing fees are protected from the risk of prepayment through prepayment provisions compared to 87% as of September 30, 2020. Given this significant level of prepayment protection, we do not hedge our servicing portfolio for prepayment risk.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 ~~September 30, 2021~~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 ~~2020~~2021 Form 10-K ~~and in Part II, Item 1A of our Form 10-Q for the quarterly period ended June 30, 2021,~~ descriptions of certain risks and uncertainties that could affect our business, future performance, or financial condition (the ~~“Risk Factors”~~“Risk Factors”). ~~Except as described below, there~~There have been no material changes from the disclosures provided in the ~~2020~~2021 Form 10-K ~~or our Form 10-Q for the quarterly period ended June 30, 2021~~ 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.

~~Our acquisition of Alliant may not be completed on the terms or timeline currently contemplated, or at all.~~

On August 30, 2021, we entered into a Purchase Agreement to acquire Alliant and certain of its affiliates (the “Acquisition”). The closing of the Acquisition is subject to certain conditions, including required regulatory approvals and consents of Alliant’s investor and lender partners. It is not certain that these conditions will be met or waived, that the required approvals will be obtained, or that we will be able to successfully consummate the Acquisition as provided for in the Purchase Agreement, or at all. We face risks and uncertainties due both to the pendency of the Acquisition as well as the potential failure to consummate the Acquisition, including:

●

~~We may not realize any or all of the potential benefits of the Acquisition that could result from acquiring Alliant’s businesses;~~

5457

Table of Contents

●

~~We will remain liable for significant transaction costs, including legal, financial advisory, accounting, and other costs relating to the Acquisition, even if it is not consummated;~~

●

~~If the Purchase Agreement is terminated before we complete the Acquisition, under some circumstances, we may have to pay a termination fee of $20.0 million; and~~

●

~~The attention of our management and employees may be diverted from day-to-day operations.~~

~~The occurrence of any of these events individually or in combination could have a material adverse effect on our stock price, business and cash flows, results of operations and financial position.~~

~~We may not be able to successfully integrate Alliant’s businesses into the Company in a timely fashion or at all and may encounter significant unexpected difficulties in integrating the businesses.~~

The Company and Alliant are independent organizations, each utilizing different systems, controls, processes and procedures. Following completion of the Acquisition, our ability to fully realize the anticipated benefits of the Acquisition will depend, to a large extent, on our ability to integrate Alliant’s businesses into the Company. The overall integration may result in unanticipated problems, expenses, liabilities, loss of client relationships, expenditure of resources and distraction of management and other employees. The difficulties of combining the operations include:

●

~~Management’s attention may be diverted to integration matters;~~

●

~~We may devote significant resources to integration, including relating to information technology;~~

●

~~Alliant is a privately held company and we may have difficulties integrating financial accounting systems, internal controls and standards, procedures and policies;~~

●

~~We may have difficulties managing the expanded operations of a larger and more complex company;~~

●

~~We may be unable to retain key personnel; and~~

●

~~We may have difficulties addressing the differences in the corporate cultures and management philosophies of the two companies while assimilating Alliant’s employees.~~

~~Therefore, there can be no assurance that the integration of Alliant’s businesses will result in the realization of the full benefits anticipated from the Acquisition.~~

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

Issuer Purchases of Equity Securities

Under the 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 the Company to withhold and purchase the shares of stock otherwise issuable to the grantee. During the quarter ended ~~September 30, 2021,~~March 31, 2022, we purchased 14195 thousand shares to satisfy grantee tax withholding obligations on share-vesting events. During the first quarter of ~~2021,~~2022, the ~~Company’s~~Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of the ~~Company’s~~Company’s common stock over a 12-month period beginning on February ~~12, 2021.~~13, 2022. During the quarter ended ~~September 30, 2021~~March 31, 2022 we did not repurchase any shares under this share repurchase program. The Company had $75.0 million of authorized share repurchase capacity remaining as of ~~September 30, 2021.~~March 31, 2022. The following table provides information regarding common stock repurchases for the quarter ended ~~September 30, 2021:~~March 31, 2022:

~~Table of Contents~~

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, 2021

4,447

104.46

—

$
75,000

August 1-31, 2021

661

103.48

—

75,000

September 1-30, 2021

8,605

110.50

—

75,000

3rd Quarter

13,713

$
108.21

—

75,000


				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 ~~July 13, 2021,~~January 31, 2022, we issued ~~50,219~~66,667 shares (the ~~“Shares”~~“Shares”) of our common stock as ~~partial~~earnout consideration for our purchase of the ~~controlling~~noncontrolling interest ~~of Zelman. All~~from one of the members of WDIS in August 2020. The Shares are prohibited from being transferred until ~~July 13, 2022.~~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”~~“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.

5658

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 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)
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~~		Amendment No. 2 to Master Repurchase Agreement, dated as of August 23, 2021, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 26, 2021).
~~10.2~~		Amendment No. 3 to Master Repurchase Agreement, dated as of September 30, 2021, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 5, 2021).
~~10.3~~		Amended and Restated Letter, dated as of September 30, 2021, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 5, 2021).
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.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 Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained an Exhibit 101)

*: Filed herewith.

~~Table of Contents~~

**: Furnished herewith. Information in this Quarterly Report on Form 10-Q furnished herewith shall not be deemed to be ~~“filed”~~“filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~“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 ~~of 1933, as amended,~~ or the Exchange Act, except as expressly set forth by specific reference in

Table of Contents

such a filing.

†: Schedules (or similar attachments) have been omitted from this exhibit pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules (or similar attachments) to the Securities and Exchange Commission upon request.

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 4, 2021~~May 5, 2022	By:	/s/ William M. Walker
		William M. Walker
		Chairman and Chief Executive Officer


Date: ~~November 4, 2021~~May 5, 2022	By:	/s/ Stephen P. Theobald
		Stephen P. Theobald
		Executive Vice President and Chief Financial Officer

5860


		September 30, 2021	December 31, 2020
Assets
Cash and cash equivalents	$	318,188	$	321,097
Restricted cash		34,875		19,432
Pledged securities, at fair value		148,774		137,236
Loans held for sale, at fair value		2,711,900		2,449,198
Loans held for investment, net		233,685		360,402
Mortgage servicing rights		929,825		862,813
Goodwill and other intangible assets		341,703		250,838
Derivative assets		85,486		49,786
Receivables, net		106,228		65,735
Other assets		206,198		134,438
Total assets	$	5,116,862	$	4,650,975

Liabilities
Warehouse notes payable	$	2,848,579	$	2,517,156
Note payable		289,763		291,593
Allowance for risk-sharing obligations		61,607		75,313
Guaranty obligation, net		49,060		52,306
Derivative liabilities		13,263		5,066
Other liabilities		470,654		513,319
Total liabilities	$	3,732,926	$	3,454,753

Stockholders' Equity
Preferred stock (authorized 50,000; NaN issued)	$	—	$	—
Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 31,194 shares at September 30, 2021 and 30,678 shares at December 31, 2020)		312		307
Additional paid-in capital ("APIC")		271,562		241,004
Accumulated other comprehensive income ("AOCI")		2,737		1,968
Retained earnings		1,090,506		952,943
Total stockholders’ equity	$	1,365,117	$	1,196,222
Noncontrolling interests		18,819		—
Total equity	$	1,383,936	$	1,196,222
Commitments and contingencies (NOTES 2 and 9)		—		—
Total liabilities and equity	$	5,116,862	$	4,650,975


	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

Pre-payments and write-offs			(11,387)			(5,780)			(26,155)			(18,189)
Ending balance		$	929,825		$	805,655		$	929,825		$	805,655



Detail of Acquisition Activity (in thousands)
	Acquisition		Purchase Consideration								Assets	Liabilities		Noncontrolling		Goodwill
Acquisition	Date	Cash		Stock		Contingent		Total			Acquired	Assumed		Interest		Recognized
Acquisition #1	Q1 2021	$	7,506	$	—	$	5,229	$	12,735	$	504	$	—	$	—	$	12,231
Acquisition #2	Q2 2021		3,000		—		2,275		5,275		—		—		—		5,275
Acquisition #3	Q3 2021		53,420		5,250		—		58,670		16,521		5,886		18,750		66,785
Total		$	63,926	$	5,250	$	7,504	$	76,680	$	17,025	$	5,886	$	18,750	$	84,291


							Balance as of

															Balance as of
(in thousands)	Level 1		Level 2		Level 3		Period End		Level 1		Level 2		Level 3		Period End
September 30, 2021
March 31, 2022
Assets
Loans held for sale	$	—	$	2,711,900	$	—	$	2,711,900	$	—	$	703,629	$	—	$	703,629
Pledged securities		51,550		97,224		—		148,774		41,053		107,594		—		148,647
Derivative assets		—		—		85,486		85,486		—		—		112,023		112,023
Total	$	51,550	$	2,809,124	$	85,486	$	2,946,160	$	41,053	$	811,223	$	112,023	$	964,299


Liabilities
Derivative liabilities	$	—	$	—	$	13,263	$	13,263	$	—	$	—	$	12,400	$	12,400
Contingent consideration liabilities										—		—		218,729		218,729
Total	$	—	$	—	$	13,263	$	13,263	$	—	$	—	$	231,129	$	231,129

December 31, 2020

December 31, 2021
Assets
Loans held for sale	$	—	$	2,449,198	$	—	$	2,449,198	$	—	$	1,811,586	$	—	$	1,811,586
Pledged securities		17,473		119,763		—		137,236		44,733		104,263		—		148,996
Derivative assets		—		—		49,786		49,786		—		—		37,364		37,364
Total	$	17,473	$	2,568,961	$	49,786	$	2,636,220	$	44,733	$	1,915,849	$	37,364	$	1,997,946


Liabilities
Derivative liabilities	$	—	$	—	$	5,066	$	5,066	$	—	$	—	$	6,403	$	6,403
Contingent consideration liabilities										—		—		125,808		125,808
Total	$	—	$	—	$	5,066	$	5,066	$	—	$	—	$	132,211	$	132,211


	Level 3 Fair Value Measurements:
	Derivative Instruments
	For the three months ended				For the nine months ended
	September 30,				September 30,

									For the three months ended
									March 31,
Derivative Assets and Liabilities, net (in thousands)	2021		2020		2021		2020		2022		2021
Beginning balance	$	6,340	$	13,346	$	44,720	$	15,532	$	30,961	$	44,720
Settlements		(146,841)		(141,804)		(488,356)		(456,639)		(66,378)		(129,655)
Realized gains recorded in earnings⁽¹⁾		140,501		128,458		443,636		441,107		35,417		84,935
Unrealized gains (losses) recorded in earnings⁽¹⁾		72,223		33,432		72,223		33,432		99,623		48,880
Ending balance	$	72,223	$	33,432	$	72,223	$	33,432	$	99,623	$	48,880


	Quantitative Information about Level 3 Fair Value Measurements

						Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value		Valuation Technique	Unobservable Input⁽¹⁾	Input Value ⁽¹⁾	Fair Value		Valuation Technique	Unobservable Input⁽¹⁾	Input Range ⁽¹⁾	Weighted Average ⁽³⁾
Derivative assets	$	85,486	Discounted cash flow	Counterparty credit risk	—	$	112,023	Discounted cash flow	Counterparty credit risk	—	—
Derivative liabilities	$	13,263	Discounted cash flow	Counterparty credit risk	—	$	12,400	Discounted cash flow	Counterparty credit risk	—	—
Contingent consideration liabilities						$	218,729	Various⁽²⁾	Probability of earn-out achievement	88% - 100%	90%


	September 30, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair

									March 31, 2022				December 31, 2021
									Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value		Amount		Value		Amount		Value
Financial Assets:
Cash and cash equivalents	$	318,188	$	318,188	$	321,097	$	321,097	$	141,375	$	141,375	$	305,635	$	305,635
Restricted cash		34,875		34,875		19,432		19,432		41,584		41,584		42,812		42,812
Pledged securities		148,774		148,774		137,236		137,236		148,647		148,647		148,996		148,996
Loans held for sale		2,711,900		2,711,900		2,449,198		2,449,198		703,629		703,629		1,811,586		1,811,586
Loans held for investment, net		233,685		234,996		360,402		362,586		216,620		217,932		269,125		270,826
Derivative assets		85,486		85,486		49,786		49,786		112,023		112,023		37,364		37,364
Total financial assets	$	3,532,908	$	3,534,219	$	3,337,151	$	3,339,335	$	1,363,878	$	1,365,190	$	2,615,518	$	2,617,219


Financial Liabilities:
Derivative liabilities	$	13,263	$	13,263	$	5,066	$	5,066	$	12,400	$	12,400	$	6,403	$	6,403
Secured borrowings		—		—		73,314		73,314
Contingent consideration liabilities										218,729		218,729		125,808		125,808
Warehouse notes payable		2,848,579		2,849,372		2,517,156		2,518,101		924,280		924,702		1,941,572		1,942,448
Note payable		289,763		292,539		291,593		294,773
Notes payable										726,555		731,416		740,174		745,175
Total financial liabilities	$	3,151,605	$	3,155,174	$	2,887,129	$	2,891,254	$	1,881,964	$	1,887,247	$	2,813,957	$	2,819,834


			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
September 30, 2021
Rate lock commitments	$	1,979,035	$	52,838	$	(31,638)	$	21,200	$	32,111	$	(10,911)	$	—
Forward sale contracts		4,667,125		—		51,023		51,023		53,375		(2,352)		—
Loans held for sale		2,688,090		43,195		(19,385)		23,810		—		—		23,810
Total			$	96,033	$	—	$	96,033	$	85,486	$	(13,263)	$	23,810

December 31, 2020
Rate lock commitments	$	1,374,784	$	45,581	$	(1,697)	$	43,884	$	43,895	$	(11)	$	—
Forward sale contracts		3,760,953		—		836		836		5,891		(5,055)		—
Loans held for sale		2,386,169		62,167		861		63,028		—		—		63,028
Total			$	107,748	$	—	$	107,748	$	49,786	$	(5,066)	$	63,028



Fair Value and Amortized Cost of Agency MBS (in thousands)	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Fair value	$	97,224	$	119,763	$	107,594	$	104,263
Amortized cost		93,570		117,136		105,484		100,847
Total gains for securities with net gains in AOCI		3,796		2,669		2,743		3,636
Total losses for securities with net losses in AOCI		(142)		(42)		(633)		(220)
Fair value of securities with unrealized losses		2,139		12,267		38,964		4,757


	September 30, 2021

					March 31, 2022
Detail of Agency MBS Maturities (in thousands)	Fair Value		Amortized Cost		Fair Value		Amortized Cost
Within one year	$	—	$	—	$	—	$	—
After one year through five years		5,720		5,697		2,253		2,248
After five years through ten years		61,939		61,056		78,112		77,631
After ten years		29,565		26,817		27,229		25,605
Total	$	97,224	$	93,570	$	107,594	$	105,484


	For the three months ended September 30,				For the nine months ended September 30,

									For the three months ended March 31,
EPS Calculations (in thousands, except per share amounts)	2021		2020		2021		2020		2022		2021
Calculation of basic EPS
Walker & Dunlop net income	$	71,721	$	53,190	$	185,831	$	163,078
Walker & Dunlop net income									$	71,209	$	58,052
Less: dividends and undistributed earnings allocated to participating securities		2,364		1,528		6,163		4,923		2,172		1,967
Net income applicable to common stockholders	$	69,357	$	51,662	$	179,668	$	158,155	$	69,037	$	56,085
Weighted-average basic shares outstanding		31,064		30,560		30,969		30,379		32,219		30,823
Basic EPS	$	2.23	$	1.69	$	5.80	$	5.21	$	2.14	$	1.82


Calculation of diluted EPS
Net income applicable to common stockholders	$	69,357	$	51,662	$	179,668	$	158,155	$	69,037	$	56,085
Add: reallocation of dividends and undistributed earnings based on assumed conversion		23		19		57		75		19		20
Net income allocated to common stockholders	$	69,380	$	51,681	$	179,725	$	158,230	$	69,056	$	56,105
Weighted-average basic shares outstanding		31,064		30,560		30,969		30,379		32,219		30,823
Add: weighted-average diluted non-participating securities		395		514		398		616		398		453
Weighted-average diluted shares outstanding		31,459		31,074		31,367		30,995		32,617		31,276
Diluted EPS	$	2.21	$	1.66	$	5.73	$	5.11	$	2.12	$	1.79


	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


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


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


	As of September 30,
Key Servicing Portfolio Metrics (end of period):	2021		2020
Custodial escrow account balance (in billions)	$	3.0	$	2.8
Weighted-average servicing fee rate (basis points)		24.6		23.4
Weighted-average remaining servicing portfolio term (years)		9.2		9.4


	As of September 30, 2021
	Unfunded		Funded
Components of WDIP assets under management (in thousands)	Commitments		Investments		Total
Fund III	$	37,781	$	65,975	$	103,756
Fund IV		88,827		106,498		195,325
Fund V		273,853		45,064		318,917
Fund VI		30,498		2,478		32,976
Separate accounts		150,000		589,840		739,840
Total assets under management	$	580,959	$	809,855	$	1,390,814


	As of September 30, 2020
	Unfunded		Funded
Components of WDIP assets under management (in thousands)	Commitments		Investments		Total
Fund III	$	56,072	$	123,818	$	179,890
Fund IV		165,294		139,657		304,951
Fund V		192,113		10,036		202,149
Separate accounts		—		610,223		610,223
Total assets under management	$	413,479	$	883,734	$	1,297,213

Other operating expenses		(62,171)			(47,324)			(14,847)		31
Adjusted EBITDA	$	199,611		$	157,687		$	41,924		27