UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September~~June 30, ~~2021~~2022

OR


☐	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 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 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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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~~July 28, ~~2021,~~2022, there were ~~32,038,216~~33,030,266 total shares of common stock outstanding.

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)


		June 30, 2022	December 31, 2021
Assets
Cash and cash equivalents	$	151,252	$	305,635
Restricted cash		34,361		42,812
Pledged securities, at fair value		149,560		148,996
Loans held for sale, at fair value		931,516		1,811,586
Loans held for investment, net		247,243		269,125
Mortgage servicing rights		978,745		953,845
Goodwill		937,881		698,635
Other intangible assets		207,024		183,904
Derivative assets		59,810		37,364
Receivables, net		236,786		212,019
Committed investments in tax credit equity		187,393		177,322
Other assets		413,201		364,746
Total assets	$	4,534,772	$	5,205,989

Liabilities
Warehouse notes payable	$	1,125,677	$	1,941,572
Notes payable		719,210		740,174
Allowance for risk-sharing obligations		48,475		62,636
Derivative liabilities		17,176		6,403
Commitments to fund investments in tax credit equity		173,740		162,747
Other liabilities		784,719		714,250
Total liabilities	$	2,868,997	$	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 32,322 shares at June 30, 2022 and 32,049 shares at December 31, 2021)		323		320
Additional paid-in capital ("APIC")		403,668		393,022
Accumulated other comprehensive income ("AOCI")		(222)		2,558
Retained earnings		1,229,712		1,154,252
Total stockholders’ equity	$	1,633,481	$	1,550,152
Noncontrolling interests		32,294		28,055
Total equity	$	1,665,775	$	1,578,207
Commitments and contingencies (NOTES 2 and 9)		—		—
Total liabilities and equity	$	4,534,772	$	5,205,989

See accompanying notes to condensed consolidated financial statements.

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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 six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues
Loan origination and debt brokerage fees, net	$	102,605	$	107,472	$	184,915		183,351
Fair value of expected net cash flows from servicing, net		51,949		61,849		104,679		119,784
Servicing fees		74,260		69,052		146,941		135,030
Property sales broker fees		46,386		22,454		69,784		31,496
Investment management fees		10,282		3,815		22,930		6,551
Net warehouse interest income		5,268		4,630		10,041		9,185
Escrow earnings and other interest income		6,751		1,823		8,554		3,940
Other revenues		43,347		10,316		112,448		16,362
Total revenues	$	340,848	$	281,411	$	660,292	$	505,699

Expenses
Personnel	$	168,368	$	141,421	$	312,549		237,636
Amortization and depreciation		61,103		48,510		117,255		95,381
Provision (benefit) for credit losses		(4,840)		(4,326)		(14,338)		(15,646)
Interest expense on corporate debt		6,412		1,760		12,817		3,525
Other operating expenses		36,195		19,748		68,409		37,335
Total expenses	$	267,238	$	207,113	$	496,692	$	358,231
Income from operations	$	73,610	$	74,298	$	163,600	$	147,468
Income tax expense		19,503		18,240		38,963		33,358
Net income before noncontrolling interests	$	54,107	$	56,058	$	124,637	$	114,110
Less: net income (loss) from noncontrolling interests		(179)		—		(858)		—
Walker & Dunlop net income	$	54,286	$	56,058	$	125,495	$	114,110
Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes		(1,810)		768		(2,780)		610
Walker & Dunlop comprehensive income	$	52,476	$	56,826	$	122,715	$	114,720

Basic earnings per share (NOTE 10)	$	1.63	$	1.75	$	3.77	$	3.57
Diluted earnings per share (NOTE 10)	$	1.61	$	1.73	$	3.73	$	3.52

Basic weighted-average shares outstanding		32,388		31,019		32,304		30,922
Diluted weighted-average shares outstanding		32,694		31,370		32,657		31,322

See accompanying notes to condensed consolidated financial statements.

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Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)


	For the three and six months ended June 30, 2022
		Stockholders' Equity
	Common Stock							Retained		Noncontrolling		Total
	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)
Cash dividends paid ($0.60 per common share)	—		—		—		—		(20,077)		—		(20,077)
Other activity (NOTE 10)	—		—		(5,303)		—		—		15,490		10,187
Balance at March 31, 2022	32,398	$	324	$	387,009	$	1,588	$	1,205,384	$	42,866	$	1,637,171
Walker & Dunlop net income	—		—		—		—		54,286		—		54,286
Net income (loss) from noncontrolling interests	—		—		—		—		—		(179)		(179)
Other comprehensive income (loss), net of tax	—		—		—		(1,810)		—		—		(1,810)
Stock-based compensation - equity classified	—		—		9,980		—		—		—		9,980
Issuance of common stock in connection with equity compensation plans	43		—		110		—		—		—		110
Repurchase and retirement of common stock	(119)		(1)		(2,409)		—		(9,892)		—		(12,302)
Distributions to noncontrolling interest holders	—		—		—		—		—		(1,675)		(1,675)
Cash dividends paid ($0.60 per common share)	—		—		—		—		(20,066)		—		(20,066)
Other activity (NOTE 10)	—		—		8,978		—		—		(8,718)		260
Balance at June 30, 2022	32,322	$	323	$	403,668	$	(222)	$	1,229,712	$	32,294	$	1,665,775


	For the three and six months ended June 30, 2021
		Stockholders' Equity
	Common Stock							Retained		Total
	Shares	Amount		APIC		AOCI		Earnings		Equity
Balance at December 31, 2020	30,678	$	307	$	241,004	$	1,968	$	952,943	$	1,196,222
Walker & Dunlop net income	—		—		—		—		58,052		58,052
Other comprehensive income (loss), net of tax	—		—		—		(158)		—		(158)
Stock-based compensation - equity classified	—		—		7,836		—		—		7,836
Issuance of common stock in connection with equity compensation plans	430		4		12,602		—		—		12,606
Repurchase and retirement of common stock	(131)		(1)		(13,373)		—		—		(13,374)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,052)		(16,052)
Balance at March 31, 2021	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

See accompanying notes to condensed consolidated financial statements.

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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

Revenues

Loan origination and debt brokerage fees, net

$
123,242

$
83,825

$
306,593

$
238,105

Fair value of expected net cash flows from servicing, net

89,482

78,065

209,266

236,434

Servicing fees

70,628

60,265

205,658

172,561

Property sales broker fees

33,677

6,756

65,173

19,928

Net warehouse interest income

5,583

7,558

14,768

22,454

Escrow earnings and other interest income

2,032

2,275

5,972

15,689

Other revenues

21,646

8,272

44,559

28,827

Total revenues

$
346,290

$
247,016

$
851,989

$
733,998

Expenses

Personnel

$
170,181

$
114,548

$
407,817

$
310,993

Amortization and depreciation

53,498

41,919

148,879

123,998

Provision (benefit) for credit losses

1,266

3,483

(14,380)

32,029

Interest expense on corporate debt

1,766

1,786

5,291

6,724

Other operating expenses

24,836

16,165

62,171

47,324

Total expenses

$
251,547

$
177,901

$
609,778

$
521,068

Income from operations

$
94,743

$
69,115

$
242,211

$
212,930

Income tax expense

22,953

15,925

56,311

50,076

Net income before noncontrolling interests

$
71,790

$
53,190

$
185,900

$
162,854

Less: net income (loss) from noncontrolling interests

69

—

69

(224)

Walker & Dunlop net income

$
71,721

$
53,190

$
185,831

$
163,078

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

159

1,219

769

731

Walker & Dunlop comprehensive income

$
71,880

$
54,409

$
186,600

$
163,809

Basic earnings per share (NOTE 10)

$
2.23

$
1.69

$
5.80

$
5.21

Diluted earnings per share (NOTE 10)

$
2.21

$
1.66

$
5.73

$
5.11

Basic weighted-average shares outstanding

31,064

30,560

30,969

30,379

Diluted weighted-average shares outstanding

31,459

31,074

31,367

30,995

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

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Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (CONTINUED)

(In thousands)

(Unaudited)


	For the six months ended June 30,
	2022		2021
Supplemental Disclosure of Non-Cash Activity:
Issuance of common stock to settle compensation liabilities	$	6,551	$	9,589
Issuance of common stock to settle contingent consideration liabilities (NOTE 7)		8,750		—
Net increase (decrease) in total equity due to consolidations of tax credit entities (NOTE 10)		10,447		—
Net increase (decrease) in total assets due to consolidations of tax credit entities (NOTE 10)		13,700		—
Net increase (decrease) in total liabilities due to consolidations of tax credit entities (NOTE 10)		3,559		—
Forgiveness of a receivable the Company had with an acquired joint venture (NOTE 7)		5,460		—
Additions of contingent consideration liabilities from acquisitions (NOTE 7)		117,000		7,504
Increase in Goodwill (NOTE 7)		29,695		—

See accompanying notes to condensed consolidated financial statements.

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NOTE 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” and the “Company” mean the Walker & Dunlop consolidated companies. The statements have been prepared in conformity with U.S. generally accepted accounting principles (“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 Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“~~2020~~2021 Form 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~~six months ended ~~September~~June 30, ~~2021~~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”), the Federal Home Loan Mortgage Corporation (“Freddie Mac” and, together with Fannie Mae, the “GSEs”), 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”). 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. Interim loans on multifamily properties are offered (i) through the Company and recorded on the Company’s balance sheet (the “Interim Loan 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 Program 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—2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—The condensed consolidated financial statements include the accounts of Walker & Dunlop, Inc., its ~~wholly owned~~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”) or the voting

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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~~$4.4 million and ~~$5.1~~$3.6 million for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~$15.2~~$10.3 million and ~~$20.4~~$8.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Loans Held for Investment, net—Loans held for investment are multifamily interim 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”) ~~financing.~~financing (“Interim Loan Program”). 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~~June 30, ~~2021,~~2022, Loans held for investment, net consisted of 9 loans with an aggregate ~~$238.7~~$252.1 million of unpaid principal balance less $0.9 million of net unamortized deferred fees and costs and ~~$4.1~~$4.0 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.~~

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Net Warehouse Interest 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 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 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 at the end of 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 and six months ended June 30, 2021. Included in Net warehouse interest income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 are the following components:

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	For the three months ended				For the nine months ended					For the three months ended				For the six months ended
	September 30,				September 30,					June 30,				June 30,
Description (in thousands)	2021		2020		2021		2020		Statement of income line item	2022		2021		2022		2021		Statement of income line item
Certain loan origination fees	$	46,527	$	10,731	$	113,650	$	40,769	Loan origination and debt brokerage fees, net	$	53,281	$	43,222	$	90,646	$	67,123	Loan origination and debt brokerage fees, net
Property sales broker fees		33,677		6,756		65,173		19,928	Property sales broker fees		46,386		22,454		69,784		31,496	Property sales broker fees
Investment management fees, application fees, subscription revenues, and other		10,936		4,532		25,114		14,632	Other revenues
Investment management fees											10,282		3,815		22,930		6,551	Investment management fees
Application fees, subscription revenues, other revenues from LIHTC operations, and other revenues											35,198		4,113		50,855		7,627	Other revenues
Total revenues derived from contracts with customers	$	91,140	$	22,019	$	203,937	$	75,329		$	145,147	$	73,604	$	234,215	$	112,797

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 ~~2020~~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 ~~September~~June 30, ~~2021.~~2022.

Reclassifications—The Company has made certain immaterial reclassifications to prior-year balances to conform to current-year ~~presentations.~~ presentation.

NOTE 3—MORTGAGE SERVICING RIGHTS

The fair value of the mortgage servicing rights (“MSRs”) was $1.3 billion as of ~~September~~both June 30, ~~2021~~2022 and December 31, ~~2020 was $1.2 billion and $1.1 billion, respectively.~~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:~~sensitivities related to the discount rate:

The impact of a 100-basis point increase in the discount rate at ~~September~~June 30, ~~2021~~2022 would be a decrease in the fair value of ~~$37.2~~$40.6 million to the MSRs outstanding as of ~~September~~June 30, ~~2021.~~2022.

The impact of a 200-basis point increase in the discount rate at ~~September~~June 30, ~~2021~~2022 would be a decrease in the fair value of ~~$72.0~~$78.6 million to the MSRs outstanding as ~~September~~of June 30, ~~2021.~~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.

Activity related to MSRs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 follows:


	For the three months ended				For the nine months ended				For the three months ended				For the six months ended
	September 30,				September 30,				June 30,				June 30,
Roll Forward of MSRs (in thousands)	2021		2020		2021		2020		2022		2021		2022		2021
Beginning balance	$	915,519	$	778,269	$	862,813	$	718,799	$	976,554	$	909,884	$	953,845	$	862,813
Additions, following the sale of loan		70,095		71,485		224,035		215,288		60,445		57,300		137,299		153,940
Amortization		(44,402)		(38,319)		(130,868)		(110,243)		(47,098)		(43,914)		(93,455)		(86,466)
Pre-payments and write-offs										(11,156)		(7,751)		(18,944)		(14,768)
Ending balance									$	978,745	$	915,519	$	978,745	$	915,519

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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 as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


Components of MSRs (in thousands)	September 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Gross value	$	1,521,190	$	1,394,901	$	1,617,975	$	1,548,870
Accumulated amortization		(591,365)		(532,088)		(639,230)		(595,025)
Net carrying value	$	929,825	$	862,813	$	978,745	$	953,845

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


	Expected		Expected
(in thousands)	Amortization		Amortization
Three Months Ending December 31,
2021	$	43,927
Six Months Ending December 31,
2022			$	92,455
Year Ending December 31,
2022	$	167,770
2023		155,112	$	177,502
2024		134,111		159,556
2025		113,562		136,593
2026		93,833		115,353
2027				97,384
Thereafter		221,510		199,902
Total	$	929,825	$	978,745

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

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~~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. Additionally, a guaranty obligation is presented as a component of Other liabilities on the Condensed Consolidated Balance Sheets.

Activity related to the allowance for risk-sharing obligations for the three and six months ended June 30, 2022 and 2021 follows:


	For the three months ended				For the six months ended
	June 30,				June 30,
Roll Forward of Allowance for Risk-Sharing Obligations (in thousands)	2022		2021		2022		2021
Beginning balance	$	53,244	$	64,580	$	62,636	$	75,313
Provision (benefit) for risk-sharing obligations		(4,769)		(4,251)		(14,161)		(14,984)
Write-offs		—		—		—		—
Ending balance	$	48,475	$	60,329	$	48,475	$	60,329

During the first quarter of 2022, the Company updated its historical loss rate factor calculation to the current 10-year rolling period, with no change during the three months ended June 30, 2022. The ~~Company utilizes~~historical loss rate used for the ~~weighted-average remaining maturity (“WARM”) method to calculate~~calculation of the CECL reserve ~~and one year~~was 1.2 basis points as of June 30, 2022 compared to 1.8 basis points as of December 31, 2021, contributing to the benefit for risk-sharing obligations for the ~~reasonable and supportable forecast period (the “forecast period”), as~~six months ended June 30, 2022 presented above. During the second quarter of 2022, the Company ~~currently believes forecasts beyond one year are inherently less reliable. The WARM method uses an average annual charge-off~~updated its estimate of the forecast-period loss rate ~~that contains loss content over multiple vintages~~to 2.2 basis points from 3 basis points as of March 31, 2022, based on (i) the projected unemployment rate, (ii) overall health of the multifamily market, and ~~loan terms~~(iii) other information expected during the forecast-period and ~~is used as a foundation for estimating the CECL reserve. The Company reverts to a historical loss rate~~reverted over a one-year ~~period. For all remaining years until~~period to the

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~~maturity,~~aforementioned 1.2 basis points historical loss rate. The change in the ~~Company uses the historical weighted-average annual charge-off~~forecast-period loss rate ~~to estimate losses. The average annual charge-off rate is applied~~led 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~~benefit for risk-sharing obligations for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021~~2022, presented above, 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

~~As a result of~~contributed to the ~~onset of the pandemic and the resulting forecasts for significant unemployment rates during 2020, the Company’s loss rate~~benefit 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~~six months ended ~~September~~June 30, ~~2020 and an increase in the allowance for risk-sharing obligations as of September 30, 2020 as seen~~2022 presented above.

During the first ~~three quarters~~half of 2021, ~~economic conditions have improved significantly compared to the same period in 2020, with~~ reported and ~~forecast~~forecasted unemployment rates significantly ~~better~~improved compared to ~~both~~ December 31, ~~2020 and September 30,~~ 2020. In response to improving unemployment statistics and the ~~current and~~ expected continued overall health of the multifamily market, the Company ~~adjusted~~reduced the loss rate for the forecast period to 4 basis points as of March 31, 2021 and 3 basis points as of June 30, 2021 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~~resulting 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 and six months ended ~~September~~June 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 forwardas presented above.

The calculated CECL reserve for the Company’s ~~$47.0~~$51.2 billion at-risk Fannie Mae servicing portfolio as of ~~September~~June 30, ~~2021~~2022 was ~~$54.0~~$37.7 million compared to ~~$67.0~~$52.3 million as of December 31, ~~2020.~~2021. The weighted-average remaining life of the at-risk Fannie Mae servicing portfolio as of ~~September~~June 30, ~~2021~~2022 was 7.3 years compared to 7.5 ~~years. The at-risk Fannie Mae servicing portfolio does not include at-risk loans held for sale.~~years as of December 31, 2021.

NaN loans ~~that defaulted in 2019~~ had aggregate collateral-based reserves of ~~$7.6~~$10.8 million and ~~$8.3~~$10.3 million as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Activity related to the guaranty obligation for the three and six months ended June 30, 2022 and 2021 is presented in the following table:


	For the three months ended				For the six months ended
	June 30,				June 30,
Roll Forward of Guaranty Obligation (in thousands)	2022		2021		2022		2021
Beginning balance	$	46,490	$	51,836	$	47,378	$	52,306
Additions, following the sale of loan		1,759		853		3,310		2,574
Amortization and write-offs		(2,600)		(2,320)		(5,039)		(4,511)
Ending balance	$	45,649	$	50,369	$	45,649	$	50,369

As of ~~September~~June 30, 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 ~~$9.8 billion.~~$10.5 billion and $9.5 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 ~~$113.9~~$119.0 billion as of ~~September~~June 30, ~~2021~~2022 compared to ~~$107.2~~$115.7 billion as of December 31, ~~2020.~~2021.

As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, custodial escrow accounts relating to loans serviced by the Company totaled ~~$3.0~~$2.3 billion and ~~$3.1~~$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~~fees 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

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NOTE 6—WAREHOUSE NOTES PAYABLE

As of ~~September~~June 30, ~~2021,~~2022, 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~~$3.9 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~~June 30, ~~2021,~~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 Company also has a warehouse line of credit in the amount of $30.0 million with a national bank to assist in funding the Company’s Committed investments in tax credit equity before transferring them to a tax credit fund (“Tax Credit Equity Warehouse Facility”).

The maximum amount and outstanding borrowings under Warehouse notes payable at ~~September~~June 30, ~~2021 follows:~~2022 follows.


	September 30, 2021									June 30, 2022
(dollars in thousands)	Committed		Uncommitted		Total Facility		Outstanding			Committed		Uncommitted		Total Facility		Outstanding
Facility⁽¹⁾	Amount		Amount		Capacity		Balance		Interest rate⁽²⁾	Amount		Amount		Capacity		Balance		Interest rate⁽¹⁾
Agency Warehouse Facility #1	$	425,000	$	—	$	425,000	$	277,872	30-day LIBOR plus 1.30%	$	425,000	$	—	$	425,000	$	105,286	Adjusted Term SOFR plus 1.30%
Agency Warehouse Facility #2		700,000		300,000		1,000,000		346,047	30-day LIBOR plus 1.30%		700,000		300,000		1,000,000		272,369	Adjusted Term SOFR plus 1.30%
Agency Warehouse Facility #3		600,000		265,000		865,000		378,624	30-day LIBOR plus 1.30%		600,000		265,000		865,000		287,275	Adjusted Term SOFR plus 1.35%
Agency Warehouse Facility #4		350,000		—		350,000		136,616	30-day LIBOR plus 1.30%		200,000		225,000		425,000		128,251	Adjusted Term SOFR plus 1.30%
Agency Warehouse Facility #5		—		1,000,000		1,000,000		885,308	30-day LIBOR plus 1.45%		—		1,000,000		1,000,000		68,804	Adjusted Term SOFR plus 1.45%
Agency Warehouse Facility #6		150,000		100,000		250,000		118,124	30-day LIBOR plus 1.40%		150,000		50,000		200,000		—	30-day LIBOR plus 1.30%
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		$	2,075,000	$	1,840,000	$	3,915,000	$	861,985
Fannie Mae repurchase agreement, uncommitted line and open maturity		—		1,500,000		1,500,000		482,861			—		1,500,000		1,500,000		71,119
Total Agency Warehouse Facilities	$	2,375,000	$	3,215,000	$	5,590,000	$	2,717,745		$	2,075,000	$	3,340,000	$	5,415,000	$	933,104

Interim Warehouse Facility #1	$	135,000	$	—	$	135,000	$	—	30-day LIBOR plus 1.90%	$	135,000	$	—	$	135,000	$	—	Adjusted Term SOFR plus 1.80%
Interim Warehouse Facility #2		100,000		—		100,000		—	30-day LIBOR plus 1.65% to 2.00%		100,000		—		100,000		—	Adjusted Term SOFR plus 1.35% to 1.85%
Interim Warehouse Facility #3		200,000		—		200,000		111,817	30-day LIBOR plus 1.75% to 3.25%		200,000		—		200,000		163,468	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%		19,810		—		19,810		19,810	30-day LIBOR plus 3.00%
Total National Bank Interim Warehouse Facilities	$	454,810	$	—	$	454,810	$	131,627		$	454,810	$	—	$	454,810	$	183,278
Tax Credit Equity Warehouse Facility										$	30,000	$	—	$	30,000	$	9,777	Adjusted Daily SOFR plus 3.00%
Debt issuance costs		—		—		—		(793)			—		—		—		(482)
Total warehouse facilities	$	2,829,810	$	3,215,000	$	6,044,810	$	2,848,579		$	2,559,810	$	3,340,000	$	5,899,810	$	1,125,677

(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.

~~The~~During 2022, 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.

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Agency Warehouse Facilities

During the second quarter of ~~2021,~~2022, the Company executed ~~amendments to the agreement related~~an amendment to Agency Warehouse Facility #2 that extended the maturity date to April ~~14, 2022~~13, 2023 and ~~decreased~~transitioned the ~~borrowing~~interest rate ~~to 30-day LIBOR plus 130 basis points~~ from 30-day LIBOR to Adjusted Term SOFR plus ~~140~~130 basis points. No other material modifications have been made to the agreement during ~~2021.~~2022.

During the second quarter of ~~2021,~~2022, the Company executed ~~amendments to the agreement~~an amendment related to Agency Warehouse Facility #3 that extended the maturity date to May ~~14, 2022, increased~~15, 2023 and transitioned the ~~borrowing~~interest rate ~~to 30-day LIBOR plus 130 basis points~~ from 30-day LIBOR to Adjusted Term SOFR plus ~~115~~135 basis points ~~and decreased the 30-day LIBOR~~with an Adjusted Term SOFR floor ~~to 0 basis points from 50~~of 15 basis points. No other material modifications have been made to the agreement during ~~2021.~~2022.

During the second quarter of ~~2021,~~2022, the Company executed an amendment ~~to the agreement~~ related to Agency Warehouse Facility #4 that extended the maturity date to June 22, ~~2022, decreased~~2023, increased the total borrowing ~~rate~~capacity to ~~30-day LIBOR plus 130 basis points~~$425 million from $350 million, and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus ~~140 basis points, and decreased the 30-day LIBOR floor to 5 basis points from 25~~130 basis points. No other material modifications have been made to the agreement during ~~2021.~~2022.

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

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,~~2022, the Company executed ~~amendments to the agreement~~an amendment related to Interim Warehouse Facility #1 that extended the maturity date to May ~~14, 2022~~15, 2023 and ~~decreased~~transitioned the interest rate from 30-day LIBOR ~~floor~~ to ~~0 basis points from 50~~Adjusted Term SOFR plus 180 basis points. No other material modifications have been made to the agreement during ~~2021.~~2022.

During the ~~third~~first quarter of ~~2021,~~2022, the Company executed an amendment ~~to the agreement~~ related to Interim Warehouse Facility #3#2 that extended the maturity date to ~~September 29, 2022, increased~~December 13, 2023 and transitioned the ~~committed borrowing capacity~~interest rate from 30-day LIBOR to ~~$200.0 million, and eliminated the uncommitted borrowing capacity.~~Adjusted Term SOFR plus 135 to 185 basis points. No other material modifications have been made to the agreement during ~~2021.~~2022.

~~In October 2021,~~Tax Credit Equity Warehouse Facility

During 2022, the Company executed ~~an amendment~~amendments related to ~~Interim~~the Tax Credit Equity Warehouse Facility #4 that extended the ~~stated~~ maturity date to ~~October 1,~~August 30, 2022. Additionally, the amendments 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 ~~2021.~~2022.

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

2022. Interest on the Company’s warehouse notes payable is based on 30-day ~~LIBOR.~~LIBOR, Adjusted Term SOFR, or Adjusted Daily 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 six months ended June 30, 2022 and 2021 follows:


	For the six months ended
	June 30,
Roll Forward of Goodwill (in thousands)	2022		2021
Beginning balance	$	698,635	$	248,958
Additions from acquisitions		213,874		17,507
Measurement-period adjustments		25,372		—
Impairment		—		—
Ending balance	$	937,881	$	266,465

The addition to goodwill from acquisitions during 2022 shown in the table above during the six months ended June 30, 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

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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 $210.1 million and consisted of $87.6 million of cash, $5.5 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 $117.0 million of contingent consideration.

GeoPhy’s data analytics and technology development capabilities are expected to 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. GeoPhy’s financial results since the acquisition and pro-forma information as if the acquisition occurred January 1, 2021 were immaterial.

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 $132.7 million, or 65% of the maximum earnout, is achievable based on management forecasts. The discounted balance of $117.0 million is 57% of the maximum earnout amount. The Company estimated the fair value of this contingent consideration using a Monte Carlo simulation. The weighted average cost of capital (“WACC”) used for the valuation of the contingent consideration was 17.0% for the Apprise portion of the earnout and 14.5% for the small-balance portion of the earnout. The WACC reflects the additional risk inherent in the Apprise performance estimates as it is still in the startup stage of its development. The estimated achievable earnout amount was discounted using a forward curve for a Company-specific subordinated debt rating.

The calculation of goodwill of $211.9 million included the fair value of the consideration transferred of $210.1 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’s 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 in the Condensed Consolidated Statements of Income. The Company used a discounted cash flow model to estimate the acquisition-date fair value of Apprise, with the discount rate. and management’s forecast of future revenues and cash flows as the most-significant inputs for the estimate. The discount rate used was 17.0%, and a control premium was not included in the estimate.

The Company expects a large portion of the goodwill to be 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 deferred tax assets of $9.4 million. The technology intangible assets will be amortized over a 10-year period. Immaterial liabilities were assumed.

As of June 30, 2022, the amounts recorded for the GeoPhy acquisition were provisional as the Company had not completed the purchase accounting for the GeoPhy acquisition as it awaits additional tax information.

The measurement-period adjustments above primarily relate to the Company’s acquisition of Alliant Capital Ltd. (“Alliant”), an acquisition completed in December of 2021, as more fully described in the Company’s 2021 Form 10-K. The measurement-period adjustments consist of (i) $29.7 million additional purchase price consideration related to the settlement of working capital adjustments and (ii) immaterial other adjustments. The additional consideration was paid during the third quarter of 2022. The Company has substantially completed the purchase accounting for the Alliant acquisition as of June 30, 2022.

As discussed in NOTE 11 below and beginning in the first quarter of 2022, the Company now has 3 reportable segments. The following table shows goodwill by reportable segments as of June 30, 2022. As the Company did not have segment reporting as of December 31, 2021, all of the goodwill balance was 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 the measurement-period adjustments relate to both Capital Markets and Servicing & Asset Management.

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Goodwill by Reportable Segment (in thousands)	As of June 30, 2022
Capital Markets	$	448,048
Servicing & Asset Management		489,833
Corporate		—
Ending balance	$	937,881

~~NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS~~

~~A summary~~Other Intangible Assets

Activity related to other intangible assets for the six months ended June 30, 2022 and 2021 follows:


	For the six months ended
	June 30,
Roll Forward of Other Intangible Assets (in thousands)	2022		2021
Beginning balance	$	183,904	$	1,880
Additions from acquisitions		31,000		504
Amortization		(7,880)		(831)
Ending balance	$	207,024	$	1,553

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s ~~goodwill for the nine months ended September~~other intangible assets as of June 30, ~~2021~~2022 and ~~2020 follows:~~December 31, 2021:

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


Components of Other Intangible Assets (in thousands)	June 30, 2022		December 31, 2021
Gross value	$	220,682	$	189,682
Accumulated amortization		(13,658)		(5,778)
Net carrying value	$	207,024	$	183,904

The ~~additions to goodwill from acquisitions during 2021~~expected amortization of other intangible assets shown in the Condensed Consolidated Balance Sheet as of June 30, 2022 is shown in the table ~~above during the nine months ended September 30, 2021 relate to the following immaterial acquisitions:~~below. Actual amortization may vary from these estimates.


	Expected
(in thousands)	Amortization
Six Months Ending December 31,
2022	$	8,870
Year Ending December 31,
2023	$	17,303
2024		16,246
2025		16,206
2026		16,206
2027		16,206
Thereafter		115,987
Total	$	207,024

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Contingent Consideration Liabilities

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 contingent consideration liabilities, which are included in Other liabilities in the Condensed Consolidated Balance Sheets, as of and for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 ~~and 2020~~ follows:

For the nine months ended

September 30,

Roll Forward of Contingent Consideration Liabilities (in thousands)

2021

2020

Beginning balance

$
28,829

$
5,752

Additions

7,504

27,645

Accretion

1,405

826

Payments

(6,080)

(5,800)

Ending balance

$
31,658

$
28,423


	For the six months ended
	June 30,
Roll Forward of Contingent Consideration Liabilities (in thousands)	2022		2021
Beginning balance	$	125,808	$	28,829
Additions		117,000		7,504
Accretion and revaluation		1,823		906
Payments		(26,439)		—
Ending balance	$	218,192	$	37,239

The contingent consideration liabilities presented in the table 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~~

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fair value of the 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

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


							Balance as of
(in thousands)	Level 1		Level 2		Level 3		Period End
June 30, 2022
Assets
Loans held for sale	$	—	$	931,516	$	—	$	931,516
Pledged securities		10,149		139,411		—		149,560
Derivative assets		—		—		59,810		59,810
Total	$	10,149	$	1,070,927	$	59,810	$	1,140,886

Liabilities
Derivative liabilities	$	—	$	—	$	17,176	$	17,176
Contingent consideration liabilities		—		—		218,192		218,192
Total	$	—	$	—	$	235,368	$	235,368

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

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

There were 0 transfers between any of the levels within the fair value hierarchy during the six months ended June 30, 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 six months ended June 30, 2022 and 2021:


	For the three months ended				For the six months ended
	June 30,				June 30,
Derivative Assets and Liabilities, net (in thousands)	2022		2021		2022		2021
Beginning balance	$	99,623	$	48,880	$	30,961	$	44,720
Settlements		(211,543)		(211,771)		(277,921)		(341,515)
Realized gains recorded in earnings⁽¹⁾		111,920		162,891		246,960		296,795
Unrealized gains (losses) recorded in earnings⁽¹⁾		42,634		6,340		42,634		6,340
Ending balance	$	42,634	$	6,340	$	42,634	$	6,340

(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.

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


	Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value		Valuation Technique	Unobservable Input⁽¹⁾	Input Range ⁽¹⁾	Weighted Average ⁽³⁾
Derivative assets	$	59,810	Discounted cash flow	Counterparty credit risk	—	—
Derivative liabilities	$	17,176	Discounted cash flow	Counterparty credit risk	—	—
Contingent consideration liabilities	$	218,192	Various⁽²⁾	Probability of earn-out achievement	65% - 100%	76%

(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 financial instruments as of June 30, 2022 and December 31, 2021 are presented below:


	June 30, 2022				December 31, 2021
	Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value
Financial Assets:
Cash and cash equivalents	$	151,252	$	151,252	$	305,635	$	305,635
Restricted cash		34,361		34,361		42,812		42,812
Pledged securities		149,560		149,560		148,996		148,996
Loans held for sale		931,516		931,516		1,811,586		1,811,586
Loans held for investment, net		247,243		248,383		269,125		270,826
Derivative assets		59,810		59,810		37,364		37,364
Total financial assets	$	1,573,742	$	1,574,882	$	2,615,518	$	2,617,219

Financial Liabilities:
Derivative liabilities	$	17,176	$	17,176	$	6,403	$	6,403
Contingent consideration liabilities		218,192		218,192		125,808		125,808
Warehouse notes payable		1,125,677		1,126,159		1,941,572		1,942,448
Notes payable		719,210		723,931		740,174		745,175
Total financial liabilities	$	2,080,255	$	2,085,458	$	2,813,957	$	2,819,834

The following methods and assumptions were used for recurring fair value measurements as of June 30, 2022 and December 31, 2021.

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

Pledged Securities—Consist of cash, highly liquid investments in money market accounts invested in government securities, and investments in 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.

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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.

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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 June 30, 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
June 30, 2022
Rate lock commitments	$	820,439	$	20,105	$	12,556	$	32,661	$	33,386	$	(725)	$	—
Forward sale contracts		1,753,635		—		9,973		9,973		26,424		(16,451)		—
Loans held for sale		933,196		20,849		(22,529)		(1,680)		—		—		(1,680)
Total			$	40,954	$	—	$	40,954	$	59,810	$	(17,176)	$	(1,680)

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—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”) 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 June 30, 2022. The majority of the loans for which the Company has risk sharing are Tier 2 loans.

The Company is in compliance with the June 30, 2022 collateral requirements as outlined above. As of June 30, 2022, reserve requirements for the DUS loan portfolio will require the Company to fund $70.4 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 available cash.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate the Company's servicing authority for all or some of the portfolio if, at any time, it determines that the 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 June 30, 2022. The net worth requirement is derived primarily from unpaid principal balances on Fannie Mae loans and the level of risk sharing. At June 30, 2022, the net worth requirement was $266.2 million, and the Company's net worth, as defined in the requirements, was $621.6 million, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC. As of June 30, 2022, the Company was required to maintain at least $52.8 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 $116.0 million as of June 30, 2022, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC.

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


	June 30,				December 31,
Pledged Securities (in thousands)	2022		2021		2021		2020
Restricted cash	$	5,979	$	7,442	$	3,779	$	4,954
Money market funds		4,170		39,954		40,954		12,519
Total pledged cash and cash equivalents	$	10,149	$	47,396	$	44,733	$	17,473
Agency MBS		139,411		99,152		104,263		119,763
Total pledged securities, at fair value	$	149,560	$	146,548	$	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 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 June 30, 2022 and December 31, 2021:


Fair Value and Amortized Cost of Agency MBS (in thousands)	June 30, 2022		December 31, 2021
Fair value	$	139,411	$	104,263
Amortized cost		139,737		100,847
Total gains for securities with net gains in AOCI		1,242		3,636
Total losses for securities with net losses in AOCI		(1,568)		(220)
Fair value of securities with unrealized losses		104,433		4,757

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.


	June 30, 2022
Detail of Agency MBS Maturities (in thousands)	Fair Value		Amortized Cost
Within one year	$	—	$	—
After one year through five years		13,901		13,903
After five years through ten years		100,704		100,835
After ten years		24,806		24,999
Total	$	139,411	$	139,737

NOTE 10—EARNINGS PER SHARE AND STOCKHOLDERS’ EQUITY

Earnings per share (“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.

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The following table presents the calculation of basic and diluted EPS for the three and six months ended June 30, 2022 and 2021 under the two-class method. Participating securities were included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the treasury-stock method.


	For the three months ended June 30,				For the six months ended June 30,
EPS Calculations (in thousands, except per share amounts)	2022		2021		2022		2021
Calculation of basic EPS
Walker & Dunlop net income	$	54,286	$	56,058	$	125,495	$	114,110
Less: dividends and undistributed earnings allocated to participating securities		1,554		1,831		3,708		3,798
Net income applicable to common stockholders	$	52,732	$	54,227	$	121,787	$	110,312
Weighted-average basic shares outstanding		32,388		31,019		32,304		30,922
Basic EPS	$	1.63	$	1.75	$	3.77	$	3.57

Calculation of diluted EPS
Net income applicable to common stockholders	$	52,732	$	54,227	$	121,787	$	110,312
Add: reallocation of dividends and undistributed earnings based on assumed conversion		9		14		27		34
Net income allocated to common stockholders	$	52,741	$	54,241	$	121,814	$	110,346
Weighted-average basic shares outstanding		32,388		31,019		32,304		30,922
Add: weighted-average diluted non-participating securities		306		351		353		400
Weighted-average diluted shares outstanding		32,694		31,370		32,657		31,322
Diluted EPS	$	1.61	$	1.73	$	3.73	$	3.52

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 six months ended June 30, 2022, 136 thousand average restricted shares and 87 thousand average restricted shares, respectively, were excluded. An immaterial number of average restricted shares were excluded from the computation of diluted EPS under the treasury-stock method for the three and six months ended June 30, 2021. These average restricted shares were excluded from the computation of diluted EPS 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 shares of common stock during the periods presented.

The following non-cash transactions did not impact the amount of cash paid on the Condensed Consolidated Statements of Cash Flows. During 2022, the operating agreement of 3 of the Company’s tax-credit-related joint ventures changed. The Company reconsidered its consolidation conclusion based on these changes and concluded that the joint ventures should be consolidated, resulting in a $3.7 million increase in APIC and $6.8 million of noncontrolling interests consolidated as shown on the Consolidated Statements of Changes in Equity for the six months ended June 30, 2022. 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.

In February 2022, the Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of the Company’s common stock over a 12-month period beginning on February 13, 2022. During the first quarter of 2022, the Company did 0t repurchase any shares of its common stock under the share repurchase program. During the second quarter of 2022, the Company repurchased 109 thousand shares of its common stock under the 2022 share repurchase program at a weighted-average price of $101.77 per share and immediately retired the shares, reducing stockholders’ equity by $11.1 million. As of June 30, 2022, the Company had $63.9 million of authorized share repurchase capacity remaining under the 2022 share repurchase program.

During each of the first and second quarters of 2022, the Company paid a dividend of $0.60 per share. On August 3, 2022, the Company’s Board of Directors declared a dividend of $0.60 per share for the third quarter of 2022. The dividend will be paid on September 2, 2022 to all holders of record of the Company’s restricted and unrestricted common stock as of August 18, 2022.

The Company’s Note Payable (“Term Loan”) contains direct restrictions 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”) 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. 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 collateral requirements as outlined above. As of September 30, 2021, reserve requirements for the DUS loan portfolio will require the Company to fund $64.2 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 available cash.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate the Company's servicing authority for all or some of the portfolio if, at any time, it determines that the 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. 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, the net worth requirement was $250.2 million, and the Company's net worth, as defined in the requirements, was $1.1 billion, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, 2021, the Company was required to maintain at least $49.5 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 million as of September 30, 2021, as measured at our wholly owned operating subsidiary, Walker & Dunlop, LLC.

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NOTE 11—SEGMENTS

In the first quarter of 2022, as a result of the Company’s growth and recent acquisitions, the Company’s executive leadership team, which functions as the Company’s chief operating decision making body, began making decisions and assessing performance based on the following 3 operating segments. The operating segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information.

(i)

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

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

(ii)

Servicing & Asset Management (“SAM”)—SAM’s activities include: (i) servicing and asset-managing the ~~amount~~portfolio of ~~dividends~~loans the Company ~~may pay. The Company does not believe that these restrictions currently limit~~(a) originates and sells to 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~~Agencies, (b) brokers to ~~acquire Alliant Capital, Ltd.~~certain life insurance companies, and ~~certain of~~(c) originates through its ~~affiliates (“Alliant”). Alliant provides alternative investment management services~~principal lending and investing activities, (ii) managing third-party capital invested in tax credit equity funds focused on the affordable housing sector ~~through low-income~~and other commercial real estate, and (iii) real estate-related investment banking and advisory services, including housing market research.

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

(iii)

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

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


	For the three months ended June 30, 2022
Segment Results					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	102,085	$	520	$	—	$	102,605
Fair value of expected net cash flows from servicing, net			51,949		—		—		51,949
Servicing fees			—		74,260		—		74,260
Property sales broker fees			46,386		—		—		46,386
Investment management fees			—		10,282		—		10,282
Net warehouse interest income			3,707		1,561		—		5,268
Escrow earnings and other interest income			—		6,648		103		6,751
Other revenues			3,895		39,280		172		43,347
Total revenues		$	208,022	$	132,551	$	275	$	340,848

Expenses
Personnel		$	138,913	$	21,881	$	7,574	$	168,368
Amortization and depreciation			810		58,760		1,533		61,103
Provision (benefit) for credit losses			—		(4,840)		—		(4,840)
Interest expense on corporate debt			—		—		6,412		6,412
Other operating expenses			4,583		6,559		25,053		36,195
Total expenses		$	144,306	$	82,360	$	40,572	$	267,238
Income from operations		$	63,716	$	50,191	$	(40,297)	$	73,610
Income tax expense			16,476		12,850		(9,823)		19,503
Net income before noncontrolling interests		$	47,240	$	37,341	$	(30,474)	$	54,107
Less: net income (loss) from noncontrolling interests			—		(179)		—		(179)
Walker & Dunlop net income		$	47,240	$	37,520	$	(30,474)	$	54,286

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	For the three months ended June 30, 2021
Segment Results					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	105,583	$	1,889	$	—	$	107,472
Fair value of expected net cash flows from servicing, net			61,849		—		—		61,849
Servicing fees			—		69,052		—		69,052
Property sales broker fees			22,454		—		—		22,454
Investment management fees			—		3,815		—		3,815
Net warehouse interest income			2,884		1,746		—		4,630
Escrow earnings and other interest income			—		1,768		55		1,823
Other revenues			3,135		6,885		296		10,316
Total revenues		$	195,905	$	85,155	$	351	$	281,411

Expenses
Personnel		$	119,994	$	9,447	$	11,980	$	141,421
Amortization and depreciation			18		47,395		1,097		48,510
Provision (benefit) for credit losses			—		(4,326)		—		(4,326)
Interest expense on corporate debt			—		—		1,760		1,760
Other operating expenses			3,598		2,604		13,546		19,748
Total expenses		$	123,610	$	55,120	$	28,383	$	207,113
Income from operations		$	72,295	$	30,035	$	(28,032)	$	74,298
Income tax expense			17,739		7,475		(6,974)		18,240
Net income before noncontrolling interests		$	54,556	$	22,560	$	(21,058)	$	56,058
Less: net income (loss) from noncontrolling interests			—		—		—		—
Walker & Dunlop net income		$	54,556	$	22,560	$	(21,058)	$	56,058

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


	As of and for the six months ended June 30, 2022
Segment Results and Total Assets					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	183,908	$	1,007	$	—	$	184,915
Fair value of expected net cash flows from servicing, net			104,679		—		—		104,679
Servicing fees			—		146,941		—		146,941
Property sales broker fees			69,784		—		—		69,784
Investment management fees			—		22,930		—		22,930
Net warehouse interest income			7,237		2,804		—		10,041
Escrow earnings and other interest income			—		8,406		148		8,554
Other revenues			6,658		61,529		44,261		112,448
Total revenues		$	372,266	$	243,617	$	44,409	$	660,292

Expenses
Personnel		$	237,639	$	40,519	$	34,391	$	312,549
Amortization and depreciation			810		113,691		2,754		117,255
Provision (benefit) for credit losses			—		(14,338)		—		(14,338)
Interest expense on corporate debt			—		—		12,817		12,817
Other operating expenses			10,694		12,678		45,037		68,409
Total expenses		$	249,143	$	152,550	$	94,999	$	496,692
Income from operations		$	123,123	$	91,067	$	(50,590)	$	163,600
Income tax expense			29,323		21,689		(12,049)		38,963
Net income before noncontrolling interests		$	93,800	$	69,378	$	(38,541)	$	124,637
Less: net income (loss) from noncontrolling interests			—		(858)		—		(858)
Walker & Dunlop net income		$	93,800	$	70,236	$	(38,541)	$	125,495

Total assets		$	1,611,951	$	2,607,990	$	314,831	$	4,534,772

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	As of and for the six months ended June 30, 2021
Segment Results and Total Assets					Servicing &
(in thousands)			Capital		Asset
			Markets		Management		Corporate		Consolidated
Revenues
Loan origination and debt brokerage fees, net		$	180,878	$	2,473	$	—	$	183,351
Fair value of expected net cash flows from servicing, net			119,784		—		—		119,784
Servicing fees			—		135,030		—		135,030
Property sales broker fees			31,496		—		—		31,496
Investment management fees			—		6,551		—		6,551
Net warehouse interest income			5,343		3,842		—		9,185
Escrow earnings and other interest income			—		3,767		173		3,940
Other revenues			5,695		11,657		(990)		16,362
Total revenues		$	343,196	$	163,320	$	(817)	$	505,699

Expenses
Personnel		$	192,629	$	16,558	$	28,449	$	237,636
Amortization and depreciation			539		92,773		2,069		95,381
Provision (benefit) for credit losses			—		(15,646)		—		(15,646)
Interest expense on corporate debt			—		—		3,525		3,525
Other operating expenses			7,000		4,857		25,478		37,335
Total expenses		$	200,168	$	98,542	$	59,521	$	358,231
Income from operations		$	143,028	$	64,778	$	(60,338)	$	147,468
Income tax expense			32,354		14,653		(13,649)		33,358
Net income before noncontrolling interests		$	110,674	$	50,125	$	(46,689)	$	114,110
Less: net income (loss) from noncontrolling interests			—		—		—		—
Walker & Dunlop net income		$	110,674	$	50,125	$	(46,689)	$	114,110

Total assets		$	2,070,549	$	1,404,895	$	467,677	$	3,943,121

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.

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 2022, the operating agreement of 3 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 June 30, 2022 and December 31, 2021, the assets and liabilities of the consolidated tax credit funds were immaterial.

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


Consolidated VIEs (in thousands)		June 30, 2022		December 31, 2021
Assets:
Cash and cash equivalents	$	1,101	$	—
Restricted cash		1,049		—
Receivables, net		34,051		—
Other Assets		49,224		54,880
Total assets of consolidated VIEs	$	85,425	$	54,880

Liabilities:
Other liabilities	$	33,662	$	36,480
Total liabilities of consolidated VIEs	$	33,662	$	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)		June 30, 2022		December 31, 2021
Assets
Committed investments in tax credit equity	$	187,393	$	177,322
Other assets: Equity-method investments		55,970		74,997
Total interests in nonconsolidated VIEs	$	243,363	$	252,319

Liabilities
Commitments to fund investments in tax credit equity		173,740		162,747
Total commitments to fund nonconsolidated VIEs	$	173,740	$	162,747

Maximum exposure to losses⁽¹⁾⁽²⁾	$	243,363	$	252,319

(1)

Maximum exposure determined as Total interests in nonconsolidated VIEs. The maximum exposure for the Company’s investments in tax credit ~~syndication, joint venture development,~~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 ~~community preservation fund management.~~

24

~~Table~~the underlying expected cash flows from the underlying investment, the maximum exposure of ~~Contents~~

~~Under the terms~~loss is not representative of the ~~purchase agreement,~~actual loss, if any, that the Company ~~will acquire Alliant at a total enterprise value of $696 million, comprised of:~~

●

may incur.$361 million of cash and the assumption of Alliant’s securitized debt facility, 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 based on the actual balance of the assumed securitized debt facility at closing and for customary net working capital);

●

~~$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~~

~~The transaction is expected to close during the fourth quarter of 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~~

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Item 2.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”). 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” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (“~~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.

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~~Table of Contents~~

~~Item 2.~~~~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”). 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” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 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 & Dunlop,” “we,” or “us”), may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “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”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac,” and together with Fannie Mae, the “GSEs”), including their existence, relationship to the U.S. federal government, origination capacities, and their impact on our business;

●

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 Alliant (as defined below) and~~ successfully integrate Alliant’s and GeoPhy’s (each as defined below) 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 ability to prevent, detect, and mitigate cybersecurity risks;~~ and

●

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.

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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

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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 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 and investment 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% of refinancing volumes in the quarter were~~ new loans to us representing 68% of refinancing volumes and ~~27%~~25% of total transaction volumes ~~were~~coming from new ~~customers.~~customers in the quarter.

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 ~~Fannie Mae Delegated Underwriting~~range of multifamily and ~~Servicing™ ("DUS") lender since 1988, when~~other commercial real estate financing products, including loans through the ~~DUS program began; a lender with~~programs of the ~~Government National Mortgage Association (“Ginnie Mae”)~~GSEs, and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “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”). ~~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 ~~balance sheet as loans held for investment.~~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 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 executive leadership team, which functions as our chief operating decision making body, 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 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.

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Corporate

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 requirements, including our corporate debt. The major other corporate-level functions include our strategic equity-method investments, accounting, information technology, legal, human resources, marketing, 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 of the leading lenders with the Agencies, where we originate and ~~Loan Servicing~~sell 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.

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

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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 HUD and be reimbursed for our advances. We are not obligated to make advances on the loans we service u~~nder the Freddie Mac Optigo® program, and our bank and life insurance company servicing agreements.~~

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.

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 be 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 multifamily lending platform, which involves a high volume of transactions with smaller loan balances. In support of this product, we acquired a small technology company ~~with~~during the second quarter of 2021, that had 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. To further this strategy, we acquired GeoPhy during the first quarter of 2022, a leading commercial real estate technology company based in the Netherlands, to support our small-balance lending platform with data analytics and to further advance our technology development capabilities in this area.

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Debt Brokerage

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

Property Sales

We offer property sales 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 across 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 our proprietary technology and leveraging our expertise in the commercial real estate industry. Prior to the GeoPhy acquisition, we and GeoPhy each owned a 50% interest in Apprise, and we accounted for the interest as an equity-method investment. Subsequent to the GeoPhy acquisition, Apprise is a wholly-owned subsidiary of Walker & Dunlop. Apprise’s revenues 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 third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate, and (iii) real estate-related investment banking and advisory services, including housing market research. 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 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

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HUD and be reimbursed for our advances. We are not obligated to make advances on the loans we service under the Freddie Mac 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 have been subject to modified risk-sharing at much lower levels.

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

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Principal Lending and Investing

Our ~~Interim Program~~principal lending and investing operation is composed of the loans held by the Interim Program JV and the Interim Loan Program as described ~~below.~~below (collectively the “Interim Program”). 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 Program JV” or the “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 Loan 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.

~~WDIP~~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 ~~subsidiaries~~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 team 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 unlikely to keep the properties affordable. Through these preservation funds,

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

Through our subsidiary, Walker & Dunlop Investment Partners, 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 current assets under management (“AUM”) of ~~$1.4~~$1.3 billion primarily consist of five sources: Fund III, Fund IV, Fund V, and Fund VI (collectively, the “Funds”), and separate accounts managed primarily 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~~

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 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

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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~~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”), 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 are recorded at fair value at loan sale or upon purchase. The fair value at loan sale (“OMSR”) is based on estimates of expected net cash flows associated with the servicing rights and takes into consideration an estimate of loan prepayment. Initially, the fair value amount is included as a component of the derivative asset fair value at the loan commitment date. The estimated net cash flows from servicing, which includes assumptions for discount rate, escrow earnings, prepayment speed, and servicing costs, are discounted at a rate that reflects the credit and liquidity risk of the 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 and between 10-15% during 2020~~ 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”) 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

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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 estimated life at purchase (and thus included as a component of the 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”) 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”) for all loans in our Fannie Mae at-risk servicing portfolio using the weighted-average remaining maturity method (“WARM”). WARM uses an average annual loss rate that contains loss content over multiple vintages and loan terms and is

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used as a foundation for estimating the CECL reserve. The average annual loss rate is applied to the estimated unpaid principal balance over the contractual term, adjusted for estimated prepayments and amortization to arrive at the CECL reserve for the entire current portfolio as described further below. We currently use one year for our reasonable and supportable forecast period (“forecast period”) as we believe forecasts beyond one year are inherently less reliable. During the forecast period, we apply an adjusted loss factor ~~associated with~~based on loss rates from 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 over the coming year in relation to the historical period. For example, in the second quarter of 2022, we updated the loss rate used in the forecast period from three basis points to 2.2 basis points. Changes in the loss rate used in the forecast period have significantly 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 isare determined using historical data; however, changes in prepayment and amortization behavior may significantly impact the estimate. We have not experienced significant changes in the runoff rate since we implemented CECL in 2020.

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 have not had a loss settlement in nearly six years.

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 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~~Obligations 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

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Allowance for Risk-Sharing ~~Obligation~~Obligations 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.

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.

Over the past year, we have made two large acquisitions that included significant portions of contingent consideration. The aggregate fair value of our contingent consideration liabilities as of June 30, 2022 was $218.2 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 June 30, 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 prior to 2021 have involved businesses that operated in our core debt financing business and involved substantially smaller amounts of contingent consideration as compared to the two recent acquisitions.

Goodwill. As of June 30, 2022 and December 31, 2021, we reported goodwill of $937.9 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 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 are 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 June 30, 2022, we continue to believe our goodwill is not impaired.

Overview of Current Business Environment

Entering 2021, 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 conditions continue to recover with 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~~The fundamentals of the ~~pandemic and has maintained that rate~~commercial real estate market remained strong through the first ~~nine months~~half of ~~2021. The Federal Reserve also indicated in its September 2021 meeting that it intends to keep rates at these low levels as~~2022, particularly multifamily, which is 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 mostvast majority of our ~~lending.~~

~~Multifamily~~transaction volumes. Over the 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~~overall vacancy rates ~~have increased to 97.3% as~~remain historically low at 3.7%. Overall demand for multifamily rental units, coupled with a lack of ~~September 2021, compared to 95.8% as of December 2019, prior to the start of the pandemic. Additionally, residential retention rates reached all-time highs at 58.0%~~supply has resulted in double-digit rent growth in most markets during the ~~third quarter~~first half of ~~2021.~~2022. Robust rent growth in the first half of 2022 for both new leases and renewals has helped offset the impacts of inflation on multifamily properties. Low vacancy rates ~~coupled with high retention rates~~ and ~~demand for new leases~~stabilizing rent growth still indicate a ~~robust and~~ healthy multifamily market.

Macroeconomic conditions impacting multifamily markets remained stable in the second quarter of 2022, with the national unemployment rate falling to pre-pandemic lows of 3.6% as of June 2022. The high rate of inflation during the first half of 2022 resulted in the Federal Reserve increasing its target Federal Funds Rate by 1.50% from December 2021, with a target range of 1.50% to 1.75% as of June 30, 2022, with an additional 0.75% increase to 2.25% to 2.50% following its July 2022 meeting. The Federal Reserve continues to signal that it anticipates additional increases in the target range and will continue the reduction of its holdings in Treasury securities and Agency mortgage-backed securities (“Agency MBS”) until the inflation rate returns to the Federal Reserve’s long-term target. Both of these actions by the Federal

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Reserve have resulted in an increase in long-term mortgage interest rates, which form the basis of most of our lending.

The market’s transition from a historically low interest rate environment to a rising interest rate environment disrupted certain sectors of the lending market, with the most acute impact felt in the consumer lending sector (e.g., residential mortgages, auto lending, consumer credit, etc). Although volatility in long-term interest rates also disrupted certain segments of the commercial real estate lending environment at times during the first half of 2022, the commercial real estate debt and property sales markets remained active. As a result, our total transaction volumes increased 56% over the first half of 2021, with the largest increases in multifamily property sales (141%), debt brokerage (41%), and Fannie Mae (72%) volumes. The product we offer that was most significantly impacted by rising interest rates was our HUD product, which declined 54% when compared to the first half of 2021. As the Federal Reserve continues to combat inflation by increasing interest rates, we expect commercial real estate debt and property sales transaction activity to slow down from second quarter peaks, but still remain quite active overall. As with the first half of 2022, we expect certain products to be impacted more than others, with debt brokerage executions in non-multifamily assets classes being impacted the most, as banks and life insurance companies pull back and potentially increase capital reserves in the second half of 2022. However, we anticipate Agency lending volumes to accelerate in the second half of 2022. As the broader capital markets tighten, the Agencies historically step in to provide liquidity to the multifamily borrowing community as they did throughout 2020 and the second half of last year, and as one of the largest providers of capital to the multifamily sector, we are well positioned. As interest rates increased over the last several months, we have experienced declines in credit spreads to offset a portion of the interest rate increases. Although our lending activity with the Agencies may remain strong in the second half of 2022, the servicing fees and associated profitability of those executions may decline.

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 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. During the three months ended June 30, 2022, Fannie Mae and Freddie Mac had multifamily origination volumes of $18.7 billion and $14.7 billion, respectively, up 71.6% and 12.2%, respectively, from the same period in 2021. During the six months ended June 30, 2022, Fannie Mae and Freddie Mac had multifamily origination volumes of $34.7 billion and $29.6 billion, respectively, up 7.1% and 9.2% from the first half of 2021, respectively, leaving a combined $91.7 billion of available lending capacity for the remainder of the year, or 43% more lending volume than the GSEs delivered to the multifamily market in the first half of 2022.

As part of 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.

As noted above, our debt financing operations with HUD declined during the first half of 2022. HUD loan volumes accounted for 1.4% and 2.5% of our total debt financing volumes for the three and six months ended June 30, 2022, respectively, compared to 6.8% and 7.5% for the three and six months ended June 30, 2021, respectively. 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 half of 2021 and the increasing interest-rate environment discussed above.

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 six months ended June 30, 2022, servicing fees were up 7.5% and 8.8%, respectively, compared to the same periods in 2021, due to the growth in our Agency servicing portfolio over the last year. 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 ~~the past few quarters, including the third quarter of 2021,~~and (ii) we ~~have expanded~~continue to expand 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~~low vacancies, 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. The ~~increases~~increase in volume ~~for the three and nine months ended September 30, 2021 reflect~~

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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, retail, and ~~retail. Additionally, our debt brokerage volumes~~hospitality. Although lending activity in the ~~third quarter of 2020 were unusually low due to~~non-multifamily asset classes may slow in the ~~pandemic. We~~short-term, we expect ~~the~~ non-multifamily debt financing volumes to continue to ~~recover over time~~remain attractive in the long-term 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.~~loans beyond the use of our own balance sheet. The demand for transitional lending has brought increased competition from lenders, specifically banks, private debt funds, mortgage real estate investment trusts, and life insurance companies. For the ~~third quarter of 2021,~~six months ended June 30, 2022, we originated ~~$314.9~~$86.3 million of Interim Program JV loans, compared to no$351.0 million of originations infor the ~~third quarter of 2020. In the third quarter of 2020, we did not originate any new Interim Program loans as a result of the pandemic.~~same period last year. 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.~~

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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.

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Consolidated Results of Operations

The following is a discussion of our consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~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

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~~SUPPLEMENTAL OPERATING DATA (continued)~~CONSOLIDATED

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


	For the three months ended						For the six months ended
	June 30,						June 30,
(dollars in thousands; except per share data)	2022			2021			2022			2021
Transaction Volume:
Total Debt Financing Volume	$	14,650,958		$	10,186,684		$	23,785,975		$	17,835,303
Property Sales Volume		7,892,062			3,341,532			11,423,752			4,737,292
Total Transaction Volume	$	22,543,020		$	13,528,216		$	35,209,727		$	22,572,595

Key Performance Metrics:
Operating margin		22	%		26	%		25	%		29	%
Return on equity		14			18			16			19
Walker & Dunlop net income	$	54,286		$	56,058		$	125,495		$	114,110
Adjusted EBITDA⁽¹⁾		94,844			66,514			157,480			127,181
Diluted EPS		1.61			1.73			3.73			3.52

Key Expense Metrics (as a percentage of total revenues):
Personnel expenses		49	%		50	%		47	%		47	%
Other operating expenses		11			7			10			7

~~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


	As of June 30,
Managed Portfolio:	2022		2021
Total Servicing Portfolio	$	119,021,507	$	112,276,582
Assets under management		16,692,556		1,801,577
Total Managed Portfolio	$	135,714,063	$	114,078,159

(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 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.~~

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

FINANCIAL RESULTS – THREE MONTHS

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

CONSOLIDATED


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	102,605	$	107,472	$	(4,867)	(5)	%
Fair value of expected net cash flows from servicing, net		51,949		61,849		(9,900)	(16)
Servicing fees		74,260		69,052		5,208	8
Property sales broker fees		46,386		22,454		23,932	107
Investment management fees		10,282		3,815		6,467	170
Net warehouse interest income		5,268		4,630		638	14
Escrow earnings and other interest income		6,751		1,823		4,928	270
Other revenues		43,347		10,316		33,031	320
Total revenues	$	340,848	$	281,411	$	59,437	21

Expenses
Personnel	$	168,368	$	141,421	$	26,947	19	%
Amortization and depreciation		61,103		48,510		12,593	26
Provision (benefit) for credit losses		(4,840)		(4,326)		(514)	12
Interest expense on corporate debt		6,412		1,760		4,652	264
Other operating expenses		36,195		19,748		16,447	83
Total expenses	$	267,238	$	207,113	$	60,125	29
Income from operations	$	73,610	$	74,298	$	(688)	(1)
Income tax expense		19,503		18,240		1,263	7
Net income before noncontrolling interests	$	54,107	$	56,058	$	(1,951)	(3)
Less: net income (loss) from noncontrolling interests		(179)		—		(179)	N/A
Walker & Dunlop net income	$	54,286	$	56,058	$	(1,772)	(3)

3642

Table of Contents

FINANCIAL RESULTS – ~~NINE~~SIX 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

CONSOLIDATED


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	184,915	$	183,351	$	1,564	1	%
Fair value of expected net cash flows from servicing, net		104,679		119,784		(15,105)	(13)
Servicing fees		146,941		135,030		11,911	9
Property sales broker fees		69,784		31,496		38,288	122
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income		10,041		9,185		856	9
Escrow earnings and other interest income		8,554		3,940		4,614	117
Other revenues		112,448		16,362		96,086	587
Total revenues	$	660,292	$	505,699	$	154,593	31

Expenses
Personnel	$	312,549	$	237,636	$	74,913	32	%
Amortization and depreciation		117,255		95,381		21,874	23
Provision (benefit) for credit losses		(14,338)		(15,646)		1,308	(8)
Interest expense on corporate debt		12,817		3,525		9,292	264
Other operating expenses		68,409		37,335		31,074	83
Total expenses	$	496,692	$	358,231	$	138,461	39
Income from operations	$	163,600	$	147,468	$	16,132	11
Income tax expense		38,963		33,358		5,605	17
Net income before noncontrolling interests	$	124,637	$	114,110	$	10,527	9
Less: net income (loss) from noncontrolling interests		(858)		—		(858)	N/A
Walker & Dunlop net income	$	125,495	$	114,110	$	11,385	10

Overview

Three months ended ~~September~~June 30, ~~2021~~2022 compared to three months ended ~~September~~June 30, ~~2020~~2021

The increase in revenues was primarily driven by increases in servicing fees, property sales broker fees, investment management fees, escrow earnings and other interest income, and other revenues, partially offset by decreases in loan origination and debt brokerage fees, net (“origination fees”), and 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. Investment management fees increased due to the addition of investment management fees from our LIHTC operations acquired in the fourth quarter of 2021. Escrow earnings and other interest income increased as a result of higher escrow earnings rate due to rising interest rates. Other revenues increased primarily as a result of increases inin: (i) prepayment fees, (ii) other revenues from our LIHTC operations, and (iii) research subscription ~~fees.~~fees from a subsidiary acquired in the second half of 2021. The decreases in origination fees and MSR income this quarter were primarily related to a substantial decline in our HUD debt financing volume, partially offset by increases in other debt financing volumes. Additionally, during the second quarter of 2022, we closed a $1.9 billion portfolio of loans with Fannie Mae. Consistent with large portfolio transactions, the origination fee and servicing fee we earn as a percentage of the total transaction size was lower than our typical Fannie Mae originations.

Other revenues for the three months ended June 30, 2022 primarily consisted of the following: (i) $20.7 million in other revenues related to our LIHTC operations, (ii) $10.3 million of prepayment and application fees, (iii) $7.5 million of research subscription fees, and (iv) $4.8 million of miscellaneous revenues. Other revenues for the three months ended June 30, 2021 primarily consisted of (i) $7.2 million of prepayment and application fees and (ii) $3.4 million of assumption and other revenues.

43

Table of Contents

The increase in expenses was ~~largely attributable~~due to increases in ~~personnel expenses, amortization and depreciation, and other operating expenses.~~most expense categories. The increase in personnel expenses was primarily a result of increases in ~~(i)~~ commission costs due to the ~~increases~~increase 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.~~balance and an increase in intangible asset amortization resulting from acquisitions over the past year. Interest expense on corporate debt increased primarily due to the increase in the size of the debt outstanding and the assumption of Alliant’s note payable in 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 including expenses from acquired subsidiaries and ~~acquisition activity.~~(ii) an increase in travel and entertainment costs compared to 2021 when our travel and entertainment expenses were depressed due to the on-going effects of the pandemic.

~~Nine~~Income Tax Expense. The increase in income tax expense relates primarily to an increase in the estimated annual effective tax rate due to a significant increase in nondeductible executive compensation and a $0.9 million decrease in realizable excess tax benefits, partially offset by a decrease in income from operations.

Six months ended ~~September~~June 30, ~~2021~~2022 compared to ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021

The increase in revenues was primarily driven by increases in ~~origination fees,~~ servicing fees, property sales broker fees, investment management fees, escrow earnings and other interest income, and other revenues, partially offset by ~~decreases~~a decrease in MSR ~~Income, net warehouse interest income, and escrow earnings and other interest~~ income. ~~The increase in~~

37

~~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~~a substantial increase in property sales volume. ~~Other revenues~~Investment management fees increased ~~primarily~~ due to ~~increases in prepayment~~the addition of investment management 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~~from our LIHTC operations acquired in the ~~average balances and net spreads for both LHFS and LHFI.~~fourth quarter of 2021. Escrow earnings and other interest income ~~decreased largely~~increased as a result of higher escrow earnings rates due to rising interest rates. Other revenues increased primarily as a ~~substantial~~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, (iii) other revenues from our LIHTC operations, and (iv) research subscription fees from a subsidiary acquired in the second half of 2021. MSR Income decreased primarily as a result of a significant decrease in HUD debt financing volumes.

Other revenues for the ~~average earnings rate.~~six months ended June 30, 2022 primarily consisted of the following: (i) $39.6 million of Apprise revaluation gain (as defined above), (ii) $19.9 million of prepayment and application fees, (iii) $28.5 million in other revenues related to our LIHTC operations, iv) $12.0 million of research subscription fees, and (v) $12.4 million of miscellaneous revenues. Other revenues for the six months ended June 30, 2021 primarily consisted of (i) $12.0 million of prepayment and application fees and (ii) $4.4 million of miscellaneous revenue.

The increase in expenses was ~~mainly driven by~~due to increases in ~~personnel expenses, amortization and depreciation, and other operating expenses, partially offset by a change in provision (benefit) for credit losses.~~all expense categories. The increase in personnel expenses was primarily ~~due to~~a result of increases in ~~(i)~~ commission costs due to the ~~increases~~increase in ~~origination fees and~~ property sales ~~broker~~brokers fees ~~(ii)~~and salaries and benefits costs ~~due primarily to~~driven by an increase in the average ~~headcount, 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.~~headcount. Amortization and depreciation expense increased primarily due to an increase in the average MSR ~~balance.~~balance and an increase in intangible asset amortization resulting from acquisitions over the past year. Interest expense on corporate debt largely 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 ~~and acquisition activity. The change to a benefit for credit losses in 2021~~including expenses from ~~a provision for credit losses in 2020 was driven primarily by a decrease in our CECL reserve.~~

~~Revenues~~

~~Loan origination~~acquired subsidiaries 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.

38

~~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. 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.

39

~~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) 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 compared to one basis point upon implementation at January 1, 2020 as a result of the expected

40

~~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 lowered 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 ascompared to 2021 when our ~~bankers~~travel 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 officeentertainment expenses were depressed 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.~~on-going effects of the pandemic.

Income Tax Expense. ~~For the three months ended September 30, 2021, the~~The increase in income tax expense relates primarily to the ~~37%~~11% increase in income from operations and ~~a decrease in the absolute and relative realizable excess 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 a 14% increase in income from operations and a $1.2 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.~~estimated annual effective tax rate due to a significant increase in nondeductible executive compensation.

We do not expect our annual estimated effective tax rate to differ significantly from the ~~26.3%~~27.2% rate estimated for the three and six months ended ~~September~~June 30, ~~2021 as we do not have significant permanent differences.~~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%~~22.6% in ~~2020~~2021 to ~~23.2%~~23.8% 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~~Measure

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

44

Table of Contents

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 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.

41

~~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:

ADJUSTED FINANCIAL ~~METRIC~~MEASURE RECONCILIATION TO GAAP

CONSOLIDATED


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income	$	54,286	$	56,058	$	125,495	$	114,110
Income tax expense		19,503		18,240		38,963		33,358
Interest expense on corporate debt		6,412		1,760		12,817		3,525
Amortization and depreciation		61,103		48,510		117,255		95,381
Provision (benefit) for credit losses		(4,840)		(4,326)		(14,338)		(15,646)
Net write-offs		—		—		—		—
Share-based compensation expense		10,329		8,121		21,608		16,237
Gain from revaluation of previously held equity-method investment		—		—		(39,641)		—
Fair value of expected net cash flows from servicing, net		(51,949)		(61,849)		(104,679)		(119,784)
Adjusted EBITDA	$	94,844	$	66,514	$	157,480	$	127,181

45

Table of Contents

The following tables present period-to-period comparisons of the components of adjusted EBITDA for the three and six months ended June 30, 2022 and 2021.

ADJUSTED EBITDA – THREE MONTHS

CONSOLIDATED


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	102,605	$	107,472	$	(4,867)	(5)	%
Servicing fees		74,260		69,052		5,208	8
Property sales broker fees		46,386		22,454		23,932	107
Investment management fees		10,282		3,815		6,467	170
Net warehouse interest income		5,268		4,630		638	14
Escrow earnings and other interest income		6,751		1,823		4,928	270
Other revenues		43,526		10,316		33,210	322
Personnel		(158,039)		(133,300)		(24,739)	19
Net write-offs		—		—		—	N/A
Other operating expenses		(36,195)		(19,748)		(16,447)	83
Adjusted EBITDA	$	94,844	$	66,514	$	28,330	43

ADJUSTED EBITDA – SIX MONTHS

CONSOLIDATED


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	184,915	$	183,351	$	1,564	1	%
Servicing fees		146,941		135,030		11,911	9
Property sales broker fees		69,784		31,496		38,288	122
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income		10,041		9,185		856	9
Escrow earnings and other interest income		8,554		3,940		4,614	117
Other revenues		73,665		16,362		57,303	350
Personnel		(290,941)		(221,399)		(69,542)	31
Net write-offs		—		—		—	N/A
Other operating expenses		(68,409)		(37,335)		(31,074)	83
Adjusted EBITDA	$	157,480	$	127,181	$	30,299	24

Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021

Origination fees decreased for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to a significant decrease in HUD debt financing volume. For both the three and six months ended June 30, 2022, servicing fees increased due to growth in the average servicing portfolio period over period. For both the three and six months ended June 30, 2022, property sales broker fees increased as a result of the increases in property sales volumes. For both the three and six months ended June 30, 2022, investment management fees increased due to the addition of investment management fees from our LIHTC operations acquired in the fourth quarter of 2021. For both the three and six months ended June 30, 2022, escrow earnings and other interest income increased as a result of higher escrow earnings rate due to rising interest rates. For both the three and six months ended June 30, 2022, other revenues increased primarily due to increases in (i) prepayment and application fees and (ii) other revenues from our LIHTC operations and research subscription fees generated from our acquired subsidiaries in the second half of 2021. For both the three and six months ended June 30, 2022, the increases in personnel expense were primarily due to increased commission costs due to the increases in property sales broker fees and salaries and benefits resulting from growth in average headcount. For both the three and six months ended June 30, 2022, other operating expenses increased as a result of the overall growth of the Company over the past year, increased travel and entertainment costs, and increased costs from acquired companies.

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

~~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 and 2020.~~

~~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

~~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

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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. Servicing fees increased due to increases 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. Property sales broker fees increased as a result of the increases in property sales volumes. Net warehouse interest income decreased primarily due to decreases in the net spreads and average outstanding balances. Escrow earnings and other interest income decreased primarily as a result of declines in the average earnings rates. 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 in average headcount. Other operating expenses increased as a result of the overall growth of the Company over the past year and from increased costs associated with due diligence for acquisitions.

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, investment management 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.

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 ~~AFS~~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 also use warehouse facilities to assist in funding investments in tax credit equity before transferring them to a tax credit fund. 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).

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Table of Contents

~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

The following table presents a period-to-period comparison of the significant components of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

43

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SIGNIFICANT COMPONENTS OF CASH FLOWS


	For the nine months ended September 30,				Dollar		Percentage		For the six months ended June 30,				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)	%	$	853,869	$	759,342	$	94,527	12	%
Net cash provided by (used in) investing activities		49,325		147,624		(98,299)	(67)			(113,928)		75,411		(189,339)	(251)
Net cash provided by (used in) financing activities		194,265		2,341,258		(2,146,993)	(92)			(937,359)		(802,999)		(134,360)	17
Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")		404,613		328,580		76,033	23			195,762		389,756		(193,994)	(50)

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)	%	$	832,200	$	731,775	$	100,425	14	%
Net cash provided by (used in) operating activities, excluding loan origination activity		104,942		109,546		(4,604)	(4)			21,669		27,567		(5,898)	(21)

Cash flows from (used in) investing activities
Purchases of pledged AFS securities	$	(7,250)	$	(14,130)	$	6,880	(49)	%	$	(46,395)	$	(2,000)	$	(44,395)	2,220	%
Proceeds from the prepayment/sale of pledged AFS securities		28,781		15,531		13,250	85			6,101		22,092		(15,991)	(72)
Purchase of equity-method investments		(8,029)		(974)		(7,055)	724			(12,029)		(3,248)		(8,781)	270
Acquisitions, net of cash received		(62,208)		(46,784)		(15,424)	33			(78,465)		(10,507)		(67,958)	647
Capital expenditures										(11,902)		(3,800)		(8,102)	213
Net payoff of (investment in) loans held for investment		127,591		199,569		(71,978)	(36)			22,443		89,566		(67,123)	(75)
Net distributions from (investments in) joint ventures	$	(24,053)	$	(3,538)	$	(20,515)	580			6,319		(16,692)		23,011	138

Cash flows from (used in) financing activities
Borrowings (repayments) of warehouse notes payable, net	$	333,887	$	2,497,627	$	(2,163,740)	(87)	%	$	(826,454)	$	(744,281)	$	(82,173)	11	%
Borrowings of interim warehouse notes payable		154,661		34,028		120,633	355			36,459		84,766		(48,307)	(57)
Repayments of interim warehouse notes payable		(157,277)		(109,860)		(47,417)	43			(26,000)		(34,174)		8,174	(24)
Repayments of notes payable										(21,244)		(1,490)		(19,754)	1,326
Payment of contingent consideration										(17,612)		—		(17,612)	N/A
Repurchase of common stock		(15,686)		(42,525)		26,839	(63)			(39,380)		(14,190)		(25,190)	178
Repayment of secured borrowings		(73,312)		—		(73,312)	N/A
Borrowings (repayments) of secured borrowings										—		(73,312)		73,312	(100)
Cash dividends paid		(48,268)		(33,984)		(14,284)	42			(40,143)		(32,122)		(8,021)	25

The ~~change~~increase in net cash ~~flows from~~provided by 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~~increase in cash flows ~~used~~received in loan origination activities is primarily attributable to a ~~decrease~~net increase in ~~originations outpacing~~ sales ~~of loans held for sale~~ (net cash ~~used)~~received) outpacing originations by ~~$301.9~~$832.2 million in ~~2021~~2022 compared to ~~$2.4 billion~~$731.8 million in ~~2020. Our Agency debt financing activity decreased year over year, which resulted in less cash used in originations during the first nine months of~~ 2021. Excluding cash used for the origination and sale of loans, cash flows provided by ~~operations~~operating activities were ~~$104.9~~$21.7 million in ~~2021,~~2022, down from ~~$109.5~~$27.6 million in ~~2020.~~2021. The decrease is primarily the result of a ~~$64.6~~$13.9 million higher ~~adjustment~~use for other operating activities, net, and a $39.6 million increase in non-cash adjustments for the Apprise revaluation gain in 2022 with no comparable activity in 2021, partially offset by a ~~lower adjustment~~$10.5 million increase in net income before noncontrolling interest and a $37.0 million net reduction in non-cash adjustments for ~~gains~~MSRs and amortization and depreciation. The significant decrease in Total cash over the past year is largely attributable to ~~the fair value of future servicing rights, net of guaranty obligation of $27.2 million and a lower adjustment for change~~acquisition activity, partially offset by an increase in ~~the fair value of premiums and origination fees of $31.3 million.~~our long-term debt.

The ~~decrease in~~change from net cash provided by investing activities ~~is primarily attributable~~in 2021 to ~~(i) a greater increase~~net 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) a reduction~~partially offset by the change from net investments in joint ventures to net distributions from joint ventures. In the ~~purchases~~first half of ~~pledged AFS securities. Pledged AFS securities prepay at unpredictable times. Our purchases were less in~~ 2021, ~~as several prepayments occurred close~~we had two small acquisitions compared to the ~~end of the third quarter of 2021,~~GeoPhy acquisition, which was substantially larger, resulting in ~~little time to reinvest prior to September 30, 2021. We have increased our investments in equity-method investments as we continue to invest in small strategic investments.~~

~~The decrease in cash provided 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, partially offset by an increase in net borrowings of interim warehouse notes payables and a decrease in cash paid for stock repurchases. The decrease in net borrowings of warehouse notes payable during 2021 was largely due to the decrease in cash used for ~~loan origination activity, as noted above. The repayment~~acquisitions. Net payoff of ~~secured borrowings was the~~loans held for

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~~result~~investment decreased, as there were fewer payoffs and originations in 2022 than in 2021. Our purchases of AFS securities increased in 2022, as we reinvested the ~~repayment~~funds from the payoff of ~~the~~AFS securities that occurred late in 2021.

The increase in cash used in financing activities was attributable to increases in: (i) net warehouse repayments, (ii) repayments of notes payable, (iii) repurchases of common stock, (iv) dividends paid, and (v) cash payments of contingent consideration liabilities, partially offset by (a) a decrease in net borrowings of interim warehouse notes payables and (b) a decrease in repayments of secured ~~borrowing~~borrowings. The increase in the ~~second quarter~~net repayments of ~~2021, a unique transaction. Cash dividends paid increased as a result of~~warehouse notes payable was due to the aforementioned increase in ~~our dividend to $0.50 per share~~cash received for loan origination activity. The decrease in ~~2021 compared to $0.36 per share in 2020. Net~~net cash borrowings of interim warehouse notes payable ~~increased~~was primarily due to a reduction in borrowings as we had fewer originations in 2022. 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 significant vesting events in our various share-based compensation plans and the $11.1 million repurchase of common stock through our 2022 stock repurchase program compared to no repurchases under ~~approved~~the 2021 stock repurchase ~~programs. In~~program. 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						For the six months ended
	June 30,						June 30,
(in thousands; except per share data)	2022			2021			2022			2021
Transaction Volume:
Components of Debt Financing Volume
Fannie Mae	$	3,918,400		$	1,911,976		$	5,916,774		$	3,445,000
Freddie Mac		1,141,034			1,003,319			2,128,883			2,016,039
Ginnie Mae ̶ HUD		201,483			672,574			593,176			1,294,707
Brokered⁽¹⁾		9,258,490			6,280,578			14,901,571			10,583,070
Total Debt Financing Volume	$	14,519,407		$	9,868,447		$	23,540,404		$	17,338,816
Property Sales Volume		7,892,062			3,341,532			11,423,752			4,737,292
Total Transaction Volume	$	22,411,469		$	13,209,979		$	34,964,156		$	22,076,108

Key Performance Metrics:
Adjusted EBITDA⁽²⁾	$	16,880		$	14,215		$	28,136		$	31,346
Operating Margin		31	%		37	%		33	%		42	%

Key Revenue Metrics (as a percentage of debt financing volume):
Origination related fees⁽³⁾		0.71	%		1.07	%		0.78	%		1.04	%
MSR income⁽⁴⁾		0.36			0.63			0.44			0.69
MSR income, as a percentage of Agency debt financing volume⁽⁴⁾		0.99			1.72			1.21			1.77

(1)

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

(2)

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

(3)

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

(4)

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

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Table of Contents

FINANCIAL RESULTS – THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	102,085	$	105,583	$	(3,498)	(3)	%
Fair value of expected net cash flows from servicing, net		51,949		61,849		(9,900)	(16)
Property sales broker fees		46,386		22,454		23,932	107
Net warehouse interest income, loans held for sale		3,707		2,884		823	29
Other revenues		3,895		3,135		760	24
Total revenues	$	208,022	$	195,905	$	12,117	6

Expenses
Personnel	$	138,913	$	119,994	$	18,919	16	%
Amortization and depreciation		810		18		792	4,400
Other operating expenses		4,583		3,598		985	27
Total expenses	$	144,306	$	123,610	$	20,696	17
Income from operations	$	63,716	$	72,295	$	(8,579)	(12)
Income tax expense		16,476		17,739		(1,263)	(7)
Net income	$	47,240	$	54,556	$	(7,316)	(13)

FINANCIAL RESULTS – SIX MONTHS

CAPITAL MARKETS


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	183,908	$	180,878	$	3,030	2	%
Fair value of expected net cash flows from servicing, net		104,679		119,784		(15,105)	(13)
Property sales broker fees		69,784		31,496		38,288	122
Net warehouse interest income, loans held for sale		7,237		5,343		1,894	35
Other revenues		6,658		5,695		963	17
Total revenues	$	372,266	$	343,196	$	29,070	8

Expenses
Personnel	$	237,639	$	192,629	$	45,010	23	%
Amortization and depreciation		810		539		271	50
Other operating expenses		10,694		7,000		3,694	53
Total expenses	$	249,143	$	200,168	$	48,975	24
Income from operations	$	123,123	$	143,028	$	(19,905)	(14)
Income tax expense		29,323		32,354		(3,031)	(9)
Net income	$	93,800	$	110,674	$	(16,874)	(15)

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Table of Contents

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				For the six months ended
	June 30,				June 30,
Debt Financing Volume by Product Type	2022		2021		2022		2021
Fannie Mae	27	%	19	%	25	%	20	%
Freddie Mac	8		10		9		12
Ginnie Mae ̶ HUD	1		7		3		7
Brokered	64		64		63		61


	For the three months ended					For the six months ended
	June 30,					June 30,
Mortgage Banking Details (basis points)	2022			2021		2022			2021
Origination Fee Rate ⁽¹⁾		71			107		78			104
Basis Point Change		(36)					(26)
Percentage Change		(34)	%				(25)	%
MSR Rate ⁽²⁾		36			63		44			69
Basis Point Change		(27)					(25)
Percentage Change		(43)	%				(36)	%
Agency MSR Rate ⁽³⁾		99			172		121			177
Basis Point Change		(73)					(56)
Percentage Change		(42)	%				(32)	%

(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 June 30, 2022, the decrease in origination fees was the result of a 36-point decrease in our origination fee rate, partially offset by the increase in overall debt financing volume. The decline in the origination fee rate was largely due to the significant decline in HUD debt financing volume and the $1.9 billion Fannie Mae portfolio, which comprised just under 50% of our Fannie Mae debt financing volume for the quarter and had a very low origination fee rate. The portfolio was the primary driver of the 105% increase in our Fannie Mae debt financing volume and was 13% of our total debt financing volume for the quarter. Large portfolios such as the $1.9 billion Fannie Mae portfolio typically have small origination fee rate. HUD loans are our most profitable loan product.

For the six months ended June 30, 2022, the increase in origination fees was primarily due to an increase in overall debt financing volume, particularly the substantial growth in brokered and Fannie Mae debt financing volume. Our brokered loan volumes grew 40.8% year over year. Excluding the aforementioned large Fannie Mae portfolio, our Fannie Mae debt financing volumes grew 17.7% year over year. The increase in origination fees from the overall growth in debt financing volume was partially offset by a significant reduction in our HUD debt financing volume and an overall decrease in the origination fee rate for many of the same reasons discussed for the three months ended June 30, 2022.

The decrease in MSR income for the three months ended June 30, 2022 is attributable to the decrease in our MSR and Agency MSR Rates, partially offset by the increase in overall debt financing volume. The decline in the Agency MSR Rate was primarily the result of a 56% decrease in the weighted-average servicing fee (“WASF”) for Fannie Mae debt financing volume. The decline in the WASF was related to the $1.9 billion Fannie Mae portfolio, which had a very low servicing fee that is typical of such a portfolio, and a decline in the WASF for our non-portfolio Fannie Mae debt financing volume. Additionally, our HUD debt financing volume declined significantly in 2022. The decrease in the MSR Rate was the result of the decrease in the Agency MSR Rate coupled with an increase in our brokered debt financing volume.

For the six months ended June 30, 2022, the decrease in MSR income was due to a 32% decline in the Agency MSR Rate, partially offset by a 27.9% increase in Agency debt financing volume. The decrease in Agency MSR rate was the result of the large Fannie Mae portfolio originated in the second quarter of 2022 combined with a significant decline in HUD debt financing volume as HUD loans have the highest MSR rate of all our products. The impacts to the Agency MSR Rate discussed above for the three months ended June 30, 2022 also impacted the six months ended June 30, 2022.

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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. For the three months and six months ended June 30, 2022, the increase in property sales broker fees was driven by significant increases in the property sales volumes year over year, partially offset by declines in the property sales broker fee margin. See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the changes in property sales volumes.

Expenses

Personnel. For the three months ended June 30, 2022, the increase was primarily the result of (i) a $14.3 million increase in property sales commission costs due to higher property sales broker fees and (ii) a $7.0 million increase in salaries and benefits due to a higher average headcount due to (i) the GeoPhy acquisition and corresponding consolidation of Apprise and (ii) hiring initatives to increase the number of bankers and brokers, partially offset by decreases in (i) debt financing commissions due to lower origination fees and (ii) accrual for subjective bonuses.

For the six months ended June 30, 2022, the increase was primarily the result of (i) a $27.6 million increase in overall commission costs due to higher origination fees and property sales broker fees, (ii) an $11.5 million increase in salaries and benefits due to (i) the GeoPhy acquisition and corresponding consolidation of Apprise, (ii) hiring initatives to increase the number of bankers and brokers, and (iii) a $4.0 million net increase in bonuses due to the Company’s financial performance.

Other Operating Expenses. For the six months ended June 30, 2022, the increase primarily stemmed from a $3.9 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 2021, partially offset by a slight decrease in other expenses.

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 Measure

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 Measure. CM adjusted EBITDA is reconciled to net income as follows:

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ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CAPITAL MARKETS


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	47,240	$	54,556	$	93,800	$	110,674
Income tax expense		16,476		17,739		29,323		32,354
Amortization and depreciation		810		18		810		539
Share-based compensation expense		4,303		3,751		8,882		7,563
Fair value of expected net cash flows from servicing, net		(51,949)		(61,849)		(104,679)		(119,784)
Adjusted EBITDA	$	16,880	$	14,215	$	28,136	$	31,346

The following tables present period-to-period comparisons of the components of CM adjusted EBITDA for the three and six months ended June 30, 2022 and 2021.

ADJUSTED EBITDA – THREE MONTHS

CAPITAL MARKETS


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	102,085	$	105,583	$	(3,498)	(3)	%
Property sales broker fees		46,386		22,454		23,932	107
Net warehouse interest income, loans held for sale		3,707		2,884		823	29
Other revenues		3,895		3,135		760	24
Personnel		(134,610)		(116,243)		(18,367)	16
Other operating expenses		(4,583)		(3,598)		(985)	27
Adjusted EBITDA	$	16,880	$	14,215	$	2,665	19

ADJUSTED EBITDA – SIX MONTHS

CAPITAL MARKETS


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	183,908	$	180,878	$	3,030	2	%
Property sales broker fees		69,784		31,496		38,288	122
Net warehouse interest income, loans held for sale		7,237		5,343		1,894	35
Other revenues		6,658		5,695		963	17
Personnel		(228,757)		(185,066)		(43,691)	24
Net write-offs		—		—		—	N/A
Other operating expenses		(10,694)		(7,000)		(3,694)	53
Adjusted EBITDA	$	28,136	$	31,346	$	(3,210)	(10)

Three months ended June 30, 2022 compared to three months ended June 30, 2021

Loan origination and debt brokerage fees, net decreased due to a decrease in our origination fee rate and decreases in our HUD debt financing volumes, partially offset by an increase in overall debt financing volume. Property sales broker fees increased as a result of the significant increases in property sales volumes, partially offset by a decrease in the property sales broker fee margin. The increase in personnel expense was primarily due to increased (i) commission costs due to the increase in property sales broker fees and (ii) salaries and benefits resulting from increases in average headcount from strategic acquisitions and hiring initiatives.

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Six months ended June 30, 2022 compared to six months ended June 30, 2021

Loan origination and debt brokerage fees, net increased due to increases in overall debt financing volumes, partially offset by reductions in our HUD debt financing volume. Property sales broker fees increased as a result of the significant increases in property sales volumes, partially offset by a decrease in the property sales broker fee margin. The increase in personnel expense was primarily due to increased (i) commission costs due to higher origination fees and property sales broker fees, (ii) salaries and benefits resulting from increases in average headcount from strategic acquisitions and hiring initiatives, and (iii) accruals 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.

Servicing & Asset Management

SUPPLEMENTAL OPERATING DATA

SERVICING & ASSET MANAGEMENT


(dollars in thousands)	As of June 30,
Managed Portfolio:	2022		2021
Components of Servicing Portfolio
Fannie Mae	$	57,122,414	$	51,077,660
Freddie Mac		36,886,666		37,887,969
Ginnie Mae - HUD		9,570,012		9,904,246
Brokered ⁽¹⁾		15,190,315		13,129,969
Principal Lending and Investing ⁽²⁾		252,100		276,738
Total Servicing Portfolio	$	119,021,507	$	112,276,582
Assets under management		16,692,556		1,801,577
Total Managed Portfolio	$	135,714,063	$	114,078,159


	For the three months ended						For the six months ended
	June 30,						June 30,
Key Volume and Performance Metrics:	2022			2021			2022			2021
Principal Lending and Investing Origination Volume⁽³⁾	$	131,551		$	318,237		$	245,571		$	496,487
Adjusted EBITDA⁽⁴⁾		105,062			73,703			192,835			143,122
Operating Margin		38	%		35	%		37	%		40	%


	As of June 30,
Key Servicing Portfolio Metrics:	2022		2021
Custodial escrow account balance (in billions)	$	2.3	$	3.0
Weighted-average servicing fee rate (basis points)		24.9		24.5
Weighted-average remaining servicing portfolio term (years)		8.9		9.2


		As of June 30,
Components of assets under management (in thousands)	2022		2021
Alliant⁽⁵⁾	$	14,495,126	$	—
WDIP		1,298,143		1,172,045
Interim Program JV Managed Loans⁽⁶⁾		899,287		629,532
Total assets under management	$	16,692,556	$	1,801,577

(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 June 30, 2022, includes $113.6 million from the Interim Loan Program and $17.9 million from WDIP separate accounts. For the six months ended June 30, 2022, includes $86.3 million from the Interim Program JV, $113.6 million from the Interim Loan Program and $45.7 million from WDIP separate accounts. For the three months ended June 30, 2021, includes $206.5 million from the Interim Program JV, $95.7 million from the Interim Loan Program,

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and $16.0 million from WDIP separate accounts. For the six months ended June 30, 2021, includes $351.0 million from the Interim Program JV, $129.5 million from the Interim Loan Program and $16.0 million from WDIP separate accounts.

(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 June 30, 2022 and 2021, only comprised of Interim Program JV managed loans.

FINANCIAL RESULTS – THREE MONTHS

SERVICING & ASSET MANAGEMENT


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	520	$	1,889	$	(1,369)	(72)	%
Servicing fees		74,260		69,052		5,208	8
Investment management fees		10,282		3,815		6,467	170
Net warehouse interest income, loans held for investment		1,561		1,746		(185)	(11)
Escrow earnings and other interest income		6,648		1,768		4,880	276
Other revenues		39,280		6,885		32,395	471
Total revenues	$	132,551	$	85,155	$	47,396	56

Expenses
Personnel	$	21,881	$	9,447	$	12,434	132	%
Amortization and depreciation		58,760		47,395		11,365	24
Provision (benefit) for credit losses		(4,840)		(4,326)		(514)	12
Other operating expenses		6,559		2,604		3,955	152
Total expenses	$	82,360	$	55,120	$	27,240	49
Income from operations	$	50,191	$	30,035	$	20,156	67
Income tax expense		12,850		7,475		5,375	72
Income before noncontrolling interests	$	37,341	$	22,560	$	14,781	66
Less: net income (loss) from noncontrolling interests		(179)		—		(179)	N/A
Net income	$	37,520	$	22,560	$	14,960	66

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FINANCIAL RESULTS – SIX MONTHS

SERVICING & ASSET MANAGEMENT


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Loan origination and debt brokerage fees, net	$	1,007	$	2,473	$	(1,466)	(59)	%
Servicing fees		146,941		135,030		11,911	9
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income, loans held for investment		2,804		3,842		(1,038)	(27)
Escrow earnings and other interest income		8,406		3,767		4,639	123
Other revenues		61,529		11,657		49,872	428
Total revenues	$	243,617	$	163,320	$	80,297	49

Expenses
Personnel	$	40,519	$	16,558	$	23,961	145	%
Amortization and depreciation		113,691		92,773		20,918	23
Provision (benefit) for credit losses		(14,338)		(15,646)		1,308	(8)
Other operating expenses		12,678		4,857		7,821	161
Total expenses	$	152,550	$	98,542	$	54,008	55
Income from operations	$	91,067	$	64,778	$	26,289	41
Income tax expense		21,689		14,653		7,036	48
Income before noncontrolling interests	$	69,378	$	50,125	$	19,253	38
Less: net income (loss) from noncontrolling interests		(858)		—		(858)	N/A
Net income	$	70,236	$	50,125	$	20,111	40

Revenues

Servicing Fees. For the three and six months ended June 30, 2022, the increase was primarily attributable to an increase in the average servicing portfolio period over period as shown below, primarily due to a $6.0 billion net increase in Fannie Mae serviced loans and a $2.1 billion net increase in brokered loans serviced over the past year, coupled with increases in the servicing portfolio’s average servicing fee rates as shown below. The increases in the average servicing fee rates are the result of the large volume of Fannie Mae debt financing volume over the past year.


	For the three months ended					For the six months ended
	June 30,					June 30,
Servicing Fees Details (dollars in thousands)	2022			2021		2022			2021
Average Servicing Portfolio	$	117,628,010		$	110,949,226	$	116,972,088		$	109,736,658
Dollar Change	$	6,678,784				$	7,235,430
Percentage Change		6	%				7	%
Average Servicing Fee (basis points)		24.9			24.4		24.9			24.3
Basis Point Change		0.5					0.6
Percentage Change		2	%				2	%

Investment Management Fees. For the three and six months ended June 30, 2022, the increases were primarily driven by the addition of investment management fees from our LIHTC operations that were acquired late in the fourth quarter of 2021, which added $7.9 million and $18.7 million in additional fees, respectively.

Escrow earnings and other interest income. For the three and six months ended June 30, 2022, the increase was driven primarily by increases in our escrow earnings of $2.9 million and $3.7 million, respectively. The earnings rates on escrow earnings and other interest income increased as a result of rising interest rates over the past six months.

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Other Revenues. For the three months ended June 30, 2022, the increase was primarily attributable to: (i) a $20.7 million increase in other revenues from our LIHTC operations, (ii) a $7.5 million increase in research subscription fees, and (iii) a $3.5 million increase in prepayment penalties. For the six months ended June 30, 2022, the increase was primarily attributable to: (i) a $28.5 million increase in other revenues from our LIHTC operations, (ii) a $12.0 million increase in research subscription fees, and (iii) an $8.6 million increase in prepayment penalties. The increase in other revenues from LIHTC operations was driven by our subsidiary Alliant, 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.

Expenses

Personnel. For the three and six months ended June 30, 2022, the increases were primarily the result of a $12.3 million increase and a $23.6 million increase, respectively, 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. For the three and six months ended June 30, 2022, the increases were primarily attributed to loan origination activity and the resulting growth in the average MSR balance and due to an increase in intangible asset amortization. Over the past 12 months, we ~~did not repurchase any shares under approved repurchase programs, while in 2020 we repurchased $23.7~~have added $125.3 million of ~~shares under such programs.~~MSRs, net of disposals. Due to strategic investments over the past year, we have added $175.3 million in intangible assets to SAM, resulting in increases in amortization expense of $3.4 million and $6.8 million for the three and six months ended June 30, 2022, respectively.

Other Operating Expenses. For the three and six months ended June 30, 2022, the increases primarily stemmed from an increase in professional fees of $1.2 million and $2.4 million, respectively. Additionally, there were increases in other costs across all expense categories. The increases in professional fees and other costs primarily stemmed from additional operating expenses incurred at subsidiaries acquired in the second half 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 Measure

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 Measure. SAM adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

SERVICING & ASSET MANAGEMENT


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	37,520	$	22,560	$	70,236	$	50,125
Income tax expense		12,850		7,475		21,689		14,653
Amortization and depreciation		58,760		47,395		113,691		92,773
Provision (benefit) for credit losses		(4,840)		(4,326)		(14,338)		(15,646)
Net write-offs		—		—		—		—
Share-based compensation expense		772		599		1,557		1,217
Adjusted EBITDA	$	105,062	$	73,703	$	192,835	$	143,122

The following tables present period-to-period comparisons of the components of SAM adjusted EBITDA for the three and six months ended June 30, 2022 and 2021.

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ADJUSTED EBITDA – THREE MONTHS

SERVICING & ASSET MANAGEMENT


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	520	$	1,889	$	(1,369)	(72)	%
Servicing fees		74,260		69,052		5,208	8
Investment management fees		10,282		3,815		6,467	170
Net warehouse interest income, loans held for investment		1,561		1,746		(185)	(11)
Escrow earnings and other interest income		6,648		1,768		4,880	276
Other revenues		39,459		6,885		32,574	473
Personnel		(21,109)		(8,848)		(12,261)	139
Net write-offs		—		—		—	N/A
Other operating expenses		(6,559)		(2,604)		(3,955)	152
Adjusted EBITDA	$	105,062	$	73,703	$	31,359	43

ADJUSTED EBITDA – SIX MONTHS

SERVICING & ASSET MANAGEMENT


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Loan origination and debt brokerage fees, net	$	1,007	$	2,473	$	(1,466)	(59)	%
Servicing fees		146,941		135,030		11,911	9
Investment management fees		22,930		6,551		16,379	250
Net warehouse interest income, loans held for investment		2,804		3,842		(1,038)	(27)
Escrow earnings and other interest income		8,406		3,767		4,639	123
Other revenues		62,387		11,657		50,730	435
Personnel		(38,962)		(15,341)		(23,621)	154
Net write-offs		—		—		—	N/A
Other operating expenses		(12,678)		(4,857)		(7,821)	161
Adjusted EBITDA	$	192,835	$	143,122	$	49,713	35

Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021

Servicing fees increased due to growth in the average servicing portfolio period over period as a result of loan originations and an increase in the average servicing fee rate. Investment management fees increased due to the addition of our LIHTC operations. Other revenues increased primarily due to the addition of other revenues from our LIHTC operations 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.

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Corporate

FINANCIAL RESULTS – THREE MONTHS

CORPORATE


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Other interest income	$	103	$	55	$	48	87	%
Other revenues		172		296		(124)	(42)
Total revenues	$	275	$	351	$	(76)	(22)

Expenses
Personnel	$	7,574	$	11,980	$	(4,406)	(37)	%
Amortization and depreciation		1,533		1,097		436	40
Interest expense on corporate debt		6,412		1,760		4,652	264
Other operating expenses		25,053		13,546		11,507	85
Total expenses	$	40,572	$	28,383	$	12,189	43
Income from operations	$	(40,297)	$	(28,032)	$	(12,265)	44
Income tax expense		(9,823)		(6,974)		(2,849)	41
Net income	$	(30,474)	$	(21,058)	$	(9,416)	45

Adjusted EBITDA	$	(27,098)	$	(21,404)	$	(5,694)	27	%

FINANCIAL RESULTS – SIX MONTHS

CORPORATE


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Revenues
Other interest income	$	148	$	173	$	(25)	(14)	%
Other revenues		44,261		(990)		45,251	(4,571)
Total revenues	$	44,409	$	(817)	$	45,226	(5,536)

Expenses
Personnel	$	34,391	$	28,449	$	5,942	21	%
Amortization and depreciation		2,754		2,069		685	33
Interest expense on corporate debt		12,817		3,525		9,292	264
Other operating expenses		45,037		25,478		19,559	77
Total expenses	$	94,999	$	59,521	$	35,478	60
Income from operations	$	(50,590)	$	(60,338)	$	9,748	(16)
Income tax expense		(12,049)		(13,649)		1,600	(12)
Net income	$	(38,541)	$	(46,689)	$	8,148	(17)

Adjusted EBITDA	$	(63,491)	$	(47,287)	$	(16,204)	34	%

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Revenues

Other Revenues. For the six months ended June 30, 2022, the increase was primarily due to the $39.6 million Apprise revaluation gain, which was recognized in the first quarter fo 2022. As part of our acquisition of GeoPhy, we acquired its 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 primarily due to a $4.6 million increase in income from our other equity-method investments, mostly related to the first quarter of 2022.

Expenses

Personnel. For the three months ended June 30, 2022, the decrease was primarily the result of a $5.1 million decrease to the accrual for subjective bonuses and a $2.1 million decrease in compensation expense related to the Company’s deferred compensation plan, partially offset by a $1.2 million increase in salaries and benefits due to an increase in the average headcount and $1.5 million increase in stock compensation.

For the six months ended June 30, 2022, the increase was primarily the result of (i) a $4.8 million increase in salaries and benefits due to an increase in the average headcount and (ii) a $3.7 million increase in stock compensation expense, partially offset by a $2.5 million decrease in compensation expense related to the Company’s deferred compensation plan

Interest expense on corporate debt. For the three and six months ended June 30, 2022, the increases were driven by a doubling in the size of our corporate debt during the fourth quarter of 2021 and increases in interest expense related to a note payable at our subsidiary, Alliant, which we assumed in the fourth quarter of 2021.

Other Operating Expenses. For the three months ended June 30, 2022, the increase was primarily driven by: (i) a $6.5 million increase in office expenses, (ii) a $1.8 million increase in professional fees, and (iii) a $1.4 million increase in marketing costs. The increases in expenses were attributable to the growth of the Company, especially from acquired subsidiaries.

For the six months ended June 30, 2022, the increase was primarily driven by: (i) a $7.2 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 $7.5 million increase in office expenses related to the growth of the Company and acquired offices, (iii) a $1.8 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, and (iv) a $1.7 million increase in marketing costs related to the growth of the Company, especially from acquisition subsidiaries.

Non-GAAP Financial Measure

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 Measure. Corporate adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CORPORATE


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2022		2021		2022		2021
Reconciliation of Net Income to Adjusted EBITDA
Net Income	$	(30,474)	$	(21,058)	$	(38,541)	$	(46,689)
Income tax expense		(9,823)		(6,974)		(12,049)		(13,649)
Interest expense on corporate debt		6,412		1,760		12,817		3,525
Amortization and depreciation		1,533		1,097		2,754		2,069
Share-based compensation expense		5,254		3,771		11,169		7,457
Gain from revaluation of previously held equity-method investment		—		—		(39,641)		—
Adjusted EBITDA	$	(27,098)	$	(21,404)	$	(63,491)	$	(47,287)

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The following tables present period-to-period comparisons of the components of Corporate adjusted EBITDA for the three and six months ended June 30, 2022 and 2021.

ADJUSTED EBITDA – THREE MONTHS

CORPORATE


	For the three months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Other interest income		103		55		48	87	%
Other revenues		172		296		(124)	(42)
Personnel		(2,320)		(8,209)		5,889	(72)
Other operating expenses		(25,053)		(13,546)		(11,507)	85
Adjusted EBITDA	$	(27,098)	$	(21,404)	$	(5,694)	27

ADJUSTED EBITDA – SIX MONTHS

CORPORATE


	For the six months ended
	June 30,				Dollar		Percentage
(dollars in thousands)	2022		2021		Change		Change
Other interest income		148		173		(25)	(14)	%
Other revenues		4,620		(990)		5,610	(567)
Personnel		(23,222)		(20,992)		(2,230)	11
Other operating expenses		(45,037)		(25,478)		(19,559)	77
Adjusted EBITDA	$	(63,491)	$	(47,287)	$	(16,204)	34

Three months ended June 30, 2022 compared to three months ended June 30, 2021

The decrease in personnel expense was primarily due to the decreases in accruals for subjective bonuses and expenses related to the Company’s deferred compensation plan, partially offset by increased salaries and benefits resulting from increases in average headcount. 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.

Six months ended June 30, 2022 compared to six months ended June 30, 2021

Other revenues increased primarily due to our equity method investments generating income in 2022 compared to losses in 2021. The increase in personnel expense was primarily due to increased salaries and benefits resulting from increases in average headcount, partially offset by a decrease in deferred compensation costs. 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 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.

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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~~June 30, ~~2021.~~2022. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. As of ~~September~~June 30, ~~2021,~~2022, the net worth requirement was ~~$250.2~~$266.2 million, and our net worth was ~~$1.1 billion,~~$621.6 million, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker & Dunlop, LLC. As of ~~September~~June 30, ~~2021,~~2022, we were required to maintain at least ~~$49.5~~$52.8 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~~June 30, ~~2021,~~2022, we had operational liquidity of ~~$254.7~~$116.0 million, as measured at our ~~wholly owned~~wholly-owned operating subsidiary, Walker & Dunlop, LLC.

We paid a cash dividend of ~~$0.50~~$0.60 per share ~~in each~~for the second quarter of ~~the first three quarters of 2021,~~2022, which is ~~39%~~20% higher than the quarterly dividend paid in ~~each~~the second quarter of 2021. On August 3, 2022, the ~~first three quarters of 2020. On November 3, 2021, our~~Company’s Board of Directors declared a dividend of ~~$0.50~~$0.60 per share for the ~~fourth~~third quarter of ~~2021.~~2022. The dividend will be paid on ~~November 29, 2021~~September 2, 2022 to all holders of record of ~~the Company’s~~our restricted and unrestricted common stock as of ~~November 19, 2021.~~August 18, 2022.

Over the past three years, we have returned ~~$210.7~~$208.5 million to investors ~~in the form of~~through the repurchase of ~~1.5~~0.6 million shares of our common stock under share repurchase programs for a cost of ~~$72.0~~$39.9 million and cash dividend payments of ~~$138.7~~$168.6 million. Additionally, we have invested ~~$179.0~~$649.1 million in ~~acquisitions.~~acquisitions, $300.0 million of which was financed by an increase in our Term Debt. 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~~June 30, ~~2021,~~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.

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~~June 30, ~~2021~~2022 we have ~~not~~ repurchased ~~any~~109 thousand shares under the ~~2021~~2022 stock repurchase program and have ~~$75.0~~$63.9 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

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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~~June 30, ~~2021,~~2022, we held substantially all of our restricted liquidity in Agency MBS in the aggregate amount of ~~$97.2~~$139.4 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~~June 30, ~~2021~~2022 collateral requirements as outlined above. As of ~~September~~June 30, ~~2021,~~2022, reserve requirements for the ~~September~~June 30, ~~2021~~2022 DUS loan portfolio will require us to fund ~~$64.2~~$70.4 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~~June 30, ~~2021.~~2022.

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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.

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~~Agency Warehouse Facility #1:~~

~~We have~~ For a warehousing credit and security agreement with a national bank for a $425.0 million committed warehouse line 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%detailed description of the ~~loan balance and borrowings under this line bear interest at the 30-day London Interbank Offered Rate (“LIBOR”) plus 130 basis points.~~ ~~During the second quarter~~terms 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 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 theeach warehouse agreement ~~bear interest at a rate of 30-day LIBOR plus 130 basis points. During~~including the ~~second quarter of~~affirmative and negative covenants, refer to “Warehouse Facilities” in NOTE 6 in the consolidated financial statements in our 2021 ~~we executed amendments that extended~~Form 10-K, as updated in NOTE 6 in 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.condensed consolidated financial statements in this Form 10-Q.

~~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:~~Notes Payable

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

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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

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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 300 basis points, with a floor of 450 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 loan 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~~provides for a ~~$300.0~~$600 million term loan (the “Term Loan”)~~. The~~ that bears interest at Adjusted Term ~~Loan was issued at~~SOFR plus 225 basis points with a ~~0.5% discount,~~floor of 50 basis points and 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 of March, June, September, and December. The Term Loan also requires certain other prepayments in certain circumstances pursuant to the terms 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 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~~June 30, ~~2021,~~2022, the outstanding ~~unpaid~~ principal balance of the Term Loan was ~~$292.5~~$597.0 million.

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

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

We have a note payable through our wholly-owned subsidiary Alliant, which has an outstanding balance of $126.9 million as of June 30, 2022 and bears interest at a fixed rate of 4.75%. The note has a stated maturity of January 15, 2035 and requires quarterly payments of principal, interest, and other required priority items shortly after the beginning of each quarter as further detailed in “Notes Payable – Alliant Note Payable” in NOTE 6 in the consolidated financial statements in our 2021 Form 10-K. There have been no changes to the terms of the note payable during 2022.

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~~To allow us to fund the acquisition of Alliant, we are currently in the process of refinancing and upsizing our~~ ~~Note payable~~ (“existing term loan”) to $600 million. We have 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 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.

Credit Quality and Allowance for Risk-Sharing Obligations

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


	September 30,						June 30,
(dollars in thousands)	2021			2020			2022			2021
Key Credit Metrics
Risk-sharing servicing portfolio:
Fannie Mae Full Risk	$	44,069,885		$	37,018,792		$	47,461,520		$	42,444,569
Fannie Mae Modified Risk		8,235,475			9,165,490			9,651,421			8,617,020
Freddie Mac Modified Risk		36,883			52,685			23,715			36,894
Total risk-sharing servicing portfolio	$	52,342,243		$	46,236,967		$	57,136,656		$	51,098,483

Non-risk-sharing servicing portfolio:
Fannie Mae No Risk	$	12,593		$	40,267		$	9,473		$	16,071
Freddie Mac No Risk		38,002,131			35,673,424			36,862,951			37,851,075
GNMA - HUD No Risk		9,894,893			9,639,820			9,570,012			9,904,246
Brokered		13,429,801			11,513,521			15,190,315			13,129,969
Total non-risk-sharing servicing portfolio	$	61,339,418		$	56,867,032		$	61,632,751		$	60,901,361
Total loans serviced for others	$	113,681,661		$	103,103,999		$	118,769,407		$	111,999,844
Interim loans (full risk) servicing portfolio		238,713			273,754			252,100			276,738
Total servicing portfolio unpaid principal balance	$	113,920,374		$	103,377,753		$	119,021,507		$	112,276,582

Interim Program JV Managed Loans ⁽¹⁾		918,518			639,466			899,287			629,532

At risk servicing portfolio ⁽²⁾	$	48,209,532		$	41,848,548		$	51,905,985		$	46,866,767
Maximum exposure to at risk portfolio ⁽³⁾		9,784,054			8,497,807			10,525,093			9,517,609
Defaulted loans		48,481			48,481			78,659			48,481

Defaulted loans as a percentage of the at-risk portfolio		0.10	%		0.12	%		0.15	%		0.10	%
Allowance for risk-sharing as a percentage of the at-risk portfolio		0.13			0.17			0.09			0.13
Allowance for risk-sharing as a percentage of maximum exposure		0.63			0.83			0.46			0.63

(1)

As of ~~September~~June 30, 2022 and 2021, this balance consists entirely ~~of Interim Program JV managed loans. As of September 30, 2020, this balance consists of $73.3 million of loans serviced directly for the Interim Program JV partner and $566.1 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.

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.

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(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”) of the loan.

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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” section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of 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 $51.2 billion at-risk Fannie Mae servicing portfolio as of ~~September~~June 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 rates2022 was $37.7 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~~2021. The significant decrease in the CECL reserve was principally related to a reduction in our historical loss factor used for both the three and ~~17 basis points of~~six months ended June 30, 2022 and the ~~at-risk balance as of September~~forecast-period loss rate for the three months ended June 30, ~~2021 and December 31, 2020, respectively.~~2022.

As of ~~September~~June 30, ~~2021, and 2020, two~~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~~June 30, 2021. The collateral-based reserve on defaulted loans was $10.8 million ~~for both the three months ended September~~and $7.6 million as of June 30, 2022 and June 30, 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~~$4.8 million for the ~~nine~~three months ended ~~September~~June 30, ~~2021~~2022 compared to a ~~provision~~benefit for risk-sharing obligations of ~~$28.9~~$4.3 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020. For the nine months ended September 30, 2021, the majority of the~~2021. We had a benefit for risk-sharing obligations ~~was~~of $14.2 million for 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~~six months ended ~~September~~June 30, ~~2020,~~2022 compared to a benefit for risk-sharing obligations of $15.0 million for the ~~majority of the provision was the result of an increase in the forecasted losses resulting from the pandemic.~~six months ended June 30, 2021.

We have never been required to repurchase a loan.

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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~~June 30, ~~2021.~~2022.

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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.

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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~~June 30, 2022 and 2021 ~~and 2020~~ was ~~eight~~179 basis points and 1510 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 June 30,
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	$	23,499	$	30,204
100 basis point decrease in 30-day LIBOR⁽¹⁾		(2,357)		(3,500)		(23,265)		(2,996)

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 150 basis points as of June 30, 2022. The interest income on our loans held for investment is based on ~~LIBOR.~~LIBOR or SOFR. The LIBOR or SOFR reset date for loans held for investment is the same date as the LIBOR or SOFR 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,				As of June 30,
Change in annual net warehouse interest income due to: (in thousands)	2021		2020		2022		2021
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
100 basis point increase in SOFR or 30-day LIBOR					$	(11,262)	$	(15,928)
100 basis point decrease in SOFR or 30-day LIBOR ⁽¹⁾⁽²⁾						11,030		1,147

~~All of our corporate debt~~Our Term Loan is based on Adjusted Term SOFR as of June 30, 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 June 30, 2022 and June 30, 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,				As of June 30,
Change in annual income from operations due to: (in thousands)	2021		2020		2022		2021
100 basis point increase in 30-day LIBOR	$	(2,925)	$	(2,955)
100 basis point decrease in 30-day LIBOR ⁽¹⁾		235		433
100 basis point increase in SOFR or 30-day LIBOR					$	(5,970)	$	(2,933)
100 basis point decrease in SOFR or 30-day LIBOR ⁽¹⁾⁽²⁾						5,970		295

(1)

The decrease as of June 30, 2021 is limited to ~~the~~ 30-day LIBOR ~~rate~~ as of ~~period end~~June 30, 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 June 30, 2022 is limited to 30-day LIBOR or SOFR as of June 30, 2022, as they were less than 100 basis points, or the interest rate floor, if applicable.

~~LIBOR Transition~~

In the first quarter of 2021, the United Kingdom’s Financial Conduct Authority, the regulator for the administration of LIBOR, announced specific dates for its intention to stop publishing LIBOR rates, including the 30-day LIBOR (our primary reference rate) which is scheduled for June 30, 2023. It is expected that legacy LIBOR-based loans will transition to Secured Overnight Financing Rate (“SOFR”) before June 30, 2023. 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 of our MSRs is subject to ~~market~~market-value risk. A 100-basis point increase or decrease in the ~~weighted-average~~weighted average discount rate would decrease or increase, respectively, the fair value of our MSRs by approximately $~~37.2~~ $40.6 million as of ~~September~~June 30, ~~2021,~~2022 compared to ~~$29.1~~

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$36.9 million as of ~~September~~June 30, ~~2020.~~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 ~~September~~June 30, ~~2021, 89%~~2022, 88% of the servicing fees are protected from the risk of prepayment through prepayment provisions, compared to ~~87%~~89% as of ~~September~~June 30, ~~2020.~~2021. Given this significant level of prepayment protection, we do not hedge our servicing portfolio for prepayment risk.

London Interbank Offered Rate (“LIBOR”) Transition

In the first quarter of 2021, the United Kingdom’s Financial Conduct Authority, the regulator for the administration of LIBOR, announced specific dates for its intention to stop publishing LIBOR rates, including the 30-day LIBOR (our primary reference rate) which is scheduled for

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June 30, 2023. It is expected that legacy LIBOR-based loans will transition to Secured Overnight Financing Rate (“SOFR”) on or before June 30, 2023. With respect to the loans we underwrite and service, we have been working closely with the GSEs on this matter through our participation on subcommittees and advisory councils. We continue to monitor our LIBOR exposure, review legal contracts and assess fallback language impacts, engage with our clients and other stakeholders, and monitor developments associated with LIBOR alternatives. We have also updated our debt agreements with warehouse facility providers to include fallback language governing the transition and have already transitioned our Term Loan and five of our warehouse facilities to SOFR.

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 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~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have integrated and continue to enhance the accounting processes and internal controls over financial reporting for Alliant and its affiliates into our internal control over financial reporting environment.

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”). ~~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 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;~~

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●

~~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 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~~June 30, ~~2021,~~2022, we purchased 1410 thousand shares to satisfy grantee tax withholding obligations on share-vesting events. During the first quarter of ~~2021,~~2022, the Company’s Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of the Company’s common stock over a 12-month period beginning on February ~~12, 2021.~~13, 2022. During the

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quarter ended ~~September~~June 30, ~~2021~~2022, we ~~did not repurchase any~~repurchased 109 thousand shares under this share repurchase program. The Company had ~~$75.0~~$63.9 million of authorized share repurchase capacity remaining as of ~~September~~June 30, ~~2021.~~2022. The following table provides information regarding common stock repurchases for the quarter ended ~~September~~June 30, ~~2021:~~2022:

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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

On July 13, 2021, we issued 50,219 shares (the “Shares”) of our common stock as partial consideration for our purchase of the controlling interest of Zelman. All of the Shares are prohibited from being transferred until July 13, 2022. The issuance of the Shares was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.


				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
April 1-30, 2022	5,380	$	128.05	—		75,000,000
May 1-31, 2022	39,928		103.01	39,928		70,885,840
June 1-30, 2022	73,995		101.32	69,124		63,901,743
2nd Quarter	119,303	$	103.09	109,052

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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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 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 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 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 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 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 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 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 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 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 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 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 proxy statement filed on July 26, 2012)
10.1	†*	Amended and Restated Employment Agreement, dated May 4, 2022, by and between Walker & Dunlop, Inc. and Stephen P. Theobald
10.2	†*	Amended and Restated Employment Agreement, dated May 4, 2022, by and between Walker & Dunlop, Inc. and Gregory A. Florkowski
10.3	†*	Indemnification Agreement, dated May 4, 2022, by and among Walker & Dunlop, Inc. and Gregory A. Florkowski
10.4	†*	Non-Executive Director Compensation Rates
10.5		Eleventh Amendment ~~No. 2~~ to ~~Master Repurchase~~Second Amended and Restated Warehousing Credit and Security Agreement, dated as of ~~August 23, 2021,~~April 7, 2022, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and ~~JPMorgan Chase~~PNC Bank, ~~N.A.~~National Association, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on ~~August 26, 2021).~~April 12, 2022)
~~10.2~~10.6		Twelfth Amendment ~~No. 3~~ to ~~Master Repurchase~~Second Amended and Restated Warehousing Credit and Security Agreement, dated as of ~~September 30, 2021,~~May 12, 2022, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc., and ~~JPMorgan Chase~~PNC Bank, ~~N.A.~~National Association, as Lender (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).May 16, 2022)
31.1	*	Certification of Walker & Dunlop, Inc.'s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification of Walker & Dunlop, Inc.'s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	**	Certification of Walker & Dunlop, Inc.'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

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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 anin Exhibit 101)

*: Filed herewith.

57

~~Table of Contents~~

**: Furnished herewith. Information in this Quarterly Report on Form 10-Q furnished herewith shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in 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.Denotes a management contract or compensation plan, contract, or arrangement.

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


Date: ~~November~~August 4, ~~2021~~2022	By:	/s/ ~~Stephen P. Theobald~~Gregory A. Florkowski
		~~Stephen P. Theobald~~Gregory A. Florkowski
		Executive Vice President and Chief Financial Officer

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		Page

PART I	~~FINANCIAL INFORMATION~~	3

~~Item 1.~~	~~Financial Statements~~	3

~~Item 2.~~	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~	26

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	53

~~Item 4.~~	~~Controls and Procedures~~	54

~~PART II~~	~~OTHER INFORMATION~~	54

~~Item 1.~~	~~Legal Proceedings~~	54

~~Item 1A.~~	~~Risk Factors~~	54

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	55

~~Item 3.~~	~~Defaults Upon Senior Securities~~	56

~~Item 4.~~	~~Mine Safety Disclosures~~	56

~~Item 5.~~	~~Other Information~~	56

~~Item 6.~~	~~Exhibits~~	57

	~~Signatures~~	58


	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


	For the three months ended				For the nine months ended				For the three months ended				For the six months ended
	September 30,				September 30,				June 30,				June 30,
Components of Net Warehouse Interest Income (in thousands)	2021		2020		2021		2020		2022		2021		2022		2021
Warehouse interest income - loans held for sale	$	11,334	$	12,649	$	28,315	$	37,150	$	12,175	$	7,863	$	21,038	$	16,981
Warehouse interest expense - loans held for sale		(7,611)		(7,780)		(19,249)		(24,475)		(8,468)		(4,979)		(13,801)		(11,638)
Net warehouse interest income - loans held for sale	$	3,723	$	4,869	$	9,066	$	12,675	$	3,707	$	2,884	$	7,237	$	5,343

Warehouse interest income - loans held for investment	$	3,108	$	4,015	$	9,298	$	15,083	$	3,015	$	2,962	$	5,365	$	6,190
Warehouse interest expense - loans held for investment		(1,248)		(1,326)		(3,596)		(5,304)		(1,454)		(1,216)		(2,561)		(2,348)
Warehouse interest income - secured borrowings		—		869		1,748		2,564		—		883		—		1,748
Warehouse interest expense - secured borrowings		—		(869)		(1,748)		(2,564)		—		(883)		—		(1,748)
Net warehouse interest income - loans held for investment	$	1,860	$	2,689	$	5,702	$	9,779	$	1,561	$	1,746	$	2,804	$	3,842

Total net warehouse interest income	$	5,583	$	7,558	$	14,768	$	22,454	$	5,268	$	4,630	$	10,041	$	9,185


	Level 3 Fair Value Measurements:
	Derivative Instruments
	For the three months ended				For the nine months ended
	September 30,				September 30,
Derivative Assets and Liabilities, net (in thousands)	2021		2020		2021		2020
Beginning balance	$	6,340	$	13,346	$	44,720	$	15,532
Settlements		(146,841)		(141,804)		(488,356)		(456,639)
Realized gains recorded in earnings⁽¹⁾		140,501		128,458		443,636		441,107
Unrealized gains (losses) recorded in earnings⁽¹⁾		72,223		33,432		72,223		33,432
Ending balance	$	72,223	$	33,432	$	72,223	$	33,432


	September 30, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair
(in thousands)	Amount		Value		Amount		Value
Financial Assets:
Cash and cash equivalents	$	318,188	$	318,188	$	321,097	$	321,097
Restricted cash		34,875		34,875		19,432		19,432
Pledged securities		148,774		148,774		137,236		137,236
Loans held for sale		2,711,900		2,711,900		2,449,198		2,449,198
Loans held for investment, net		233,685		234,996		360,402		362,586
Derivative assets		85,486		85,486		49,786		49,786
Total financial assets	$	3,532,908	$	3,534,219	$	3,337,151	$	3,339,335

Financial Liabilities:
Derivative liabilities	$	13,263	$	13,263	$	5,066	$	5,066
Secured borrowings		—		—		73,314		73,314
Warehouse notes payable		2,848,579		2,849,372		2,517,156		2,518,101
Note payable		289,763		292,539		291,593		294,773
Total financial liabilities	$	3,151,605	$	3,155,174	$	2,887,129	$	2,891,254


	For the three and nine months ended September 30, 2021
	Common Stock							Retained		Noncontrolling		Total Stockholders'
	Shares	Amount		APIC		AOCI		Earnings		Interests		Equity
Balance at December 31, 2020	30,678	$	307	$	241,004	$	1,968	$	952,943	$	—	$	1,196,222
Walker & Dunlop net income	—		—		—		—		58,052		—		58,052
Other comprehensive income (loss), net of tax	—		—		—		(158)	��	—		—		(158)
Stock-based compensation - equity classified	—		—		7,836		—		—		—		7,836
Issuance of common stock in connection with equity compensation plans	430		4		12,602		—		—		—		12,606
Repurchase and retirement of common stock	(131)		(1)		(13,373)		—		—		—		(13,374)
Cash dividends paid ($0.50 per common share)	—		—		—		—		(16,052)		—		(16,052)
Balance at March 31, 2021	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

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


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

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