Table of Contents

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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 30, 20222023

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)

 

 

7272 Wisconsin Avenue, Suite 1300

Bethesda, Maryland 20814

(301) 215-5500

(Address of principal executive offices and registrant’soffices)(Zip Code)(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 31, 2022,27, 2023, there were 33,012,08233,450,185 total shares of common stock outstanding.

Table of Contents

Walker & Dunlop, Inc.
Form 10-Q
INDEX

Page

PART I

 

FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

65

Item 4.

Controls and Procedures

66

PART II

OTHER INFORMATION

67

Item 1.

Legal Proceedings

67

Item 1A.

Risk Factors

67

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

67

Item 3.

Defaults Upon Senior Securities

67

Item 4.

Mine Safety Disclosures

67

Item 5.

Other Information

67

Item 6.

Exhibits

68

Signatures

70

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.Financial Statements3

Walker & Dunlop, Inc. and SubsidiariesItem 1.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)Financial Statements

(Unaudited)3

September 30, 2022

December 31, 2021

Assets

 

Cash and cash equivalents

$

152,188

$

305,635

Restricted cash

 

40,246

 

42,812

Pledged securities, at fair value

 

151,413

 

148,996

Loans held for sale, at fair value

 

2,180,117

 

1,811,586

Loans held for investment, net

 

247,106

 

269,125

Mortgage servicing rights

 

967,770

 

953,845

Goodwill

948,164

698,635

Other intangible assets

 

202,834

 

183,904

Derivative assets

 

255,295

 

37,364

Receivables, net

 

216,963

 

212,019

Committed investments in tax credit equity

214,430

177,322

Other assets

 

426,487

 

364,746

Total assets

$

6,003,013

$

5,205,989

Liabilities

Warehouse notes payable

$

2,545,406

$

1,941,572

Notes payable

 

711,107

 

740,174

Allowance for risk-sharing obligations

 

49,658

 

62,636

Derivative liabilities

 

24,054

 

6,403

Commitments to fund investments in tax credit equity

198,073

162,747

Other liabilities

780,012

714,250

Total liabilities

$

4,308,310

$

3,627,782

Stockholders' Equity

Preferred stock (authorized 50,000 shares; none issued)

$

$

Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 32,344 shares at September 30, 2022 and 32,049 shares at December 31, 2021)

 

323

 

320

Additional paid-in capital ("APIC")

 

407,417

 

393,022

Accumulated other comprehensive income (loss) ("AOCI")

(1,460)

2,558

Retained earnings

 

1,256,663

 

1,154,252

Total stockholders’ equity

$

1,662,943

$

1,550,152

Noncontrolling interests

 

31,760

 

28,055

Total equity

$

1,694,703

$

1,578,207

Commitments and contingencies (NOTES 2 and 9)

 

 

Total liabilities and equity

$

6,003,013

$

5,205,989

See accompanying notes to condensed consolidated financial statements.

3

TableItem 2.

Management's Discussion and Analysis of ContentsFinancial Condition and Results of Operations

32

Item 3.

Walker & Dunlop, Inc.

Quantitative and SubsidiariesQualitative Disclosures About Market Risk

67

Item 4.

Controls and Procedures

68

PART II

Condensed Consolidated Statements

OTHER INFORMATION

68

Item 1.

Legal Proceedings

68

Item 1A.

Risk Factors

68

Item 2.

Unregistered Sales of IncomeEquity Securities and Comprehensive IncomeUse of Proceeds

(In thousands, except per share data)68

(Unaudited)

Item 3.

Defaults Upon Senior Securities

69

Item 4.

Mine Safety Disclosures

69

Item 5.

Other Information

69

Item 6.

Exhibits

69

Signatures

For the three months ended

For the nine months ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

 

Revenues

Loan origination and debt brokerage fees, net

$

90,858

$

123,242

$

275,773

306,593

Fair value of expected net cash flows from servicing, net

55,291

89,482

159,970

209,266

Servicing fees

 

75,975

 

70,628

 

222,916

205,658

Property sales broker fees

30,308

33,677

100,092

65,173

Investment management fees

16,301

2,564

47,345

9,115

Net warehouse interest income

 

3,980

 

5,583

 

14,021

14,768

Escrow earnings and other interest income

 

18,129

 

2,032

 

26,683

5,972

Other revenues

 

24,769

 

19,082

 

129,103

35,444

Total revenues

$

315,611

$

346,290

$

975,903

$

851,989

Expenses

Personnel

$

157,059

$

170,181

$

469,608

407,817

Amortization and depreciation

59,846

53,498

177,101

148,879

Provision (benefit) for credit losses

 

1,218

 

1,266

 

(13,120)

(14,380)

Interest expense on corporate debt

 

9,306

 

1,766

 

22,123

5,291

Other operating expenses

 

33,991

 

24,836

 

102,400

62,171

Total expenses

$

261,420

$

251,547

$

758,112

$

609,778

Income from operations

$

54,191

$

94,743

$

217,791

$

242,211

Income tax expense

 

7,532

 

22,953

 

46,495

56,311

Net income before noncontrolling interests

$

46,659

$

71,790

$

171,296

$

185,900

Less: net income (loss) from noncontrolling interests

 

(174)

 

69

 

(1,032)

 

69

Walker & Dunlop net income

$

46,833

$

71,721

$

172,328

$

185,831

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

(1,238)

159

(4,018)

769

Walker & Dunlop comprehensive income

$

45,595

$

71,880

$

168,310

$

186,600

Basic earnings per share (NOTE 10)

$

1.41

$

2.23

$

5.18

$

5.80

Diluted earnings per share (NOTE 10)

$

1.40

$

2.21

$

5.13

$

5.73

Basic weighted-average shares outstanding

 

32,290

 

31,064

 

32,300

 

30,969

Diluted weighted-average shares outstanding

 

32,620

 

31,459

32,645

 

31,367

71

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.Financial Statements

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

September 30, 2023

December 31, 2022

Assets

 

Cash and cash equivalents

$

236,321

$

225,949

Restricted cash

 

17,768

 

17,676

Pledged securities, at fair value

 

177,509

 

157,282

Loans held for sale, at fair value

 

758,926

 

396,344

Mortgage servicing rights

 

921,746

 

975,226

Goodwill

949,710

959,712

Other intangible assets

 

185,927

 

198,643

Receivables, net

 

265,234

 

202,251

Committed investments in tax credit equity

212,296

254,154

Other assets

 

552,414

 

658,122

Total assets

$

4,277,851

$

4,045,359

Liabilities

Warehouse notes payable

$

790,742

$

537,531

Notes payable

 

774,677

 

704,103

Allowance for risk-sharing obligations

 

30,957

 

44,057

Commitments to fund investments in tax credit equity

196,250

239,281

Other liabilities

754,234

803,558

Total liabilities

$

2,546,860

$

2,328,530

Stockholders' Equity

Preferred stock (authorized 50,000 shares; none issued)

$

$

Common stock ($0.01 par value; authorized 200,000 shares; issued and outstanding 32,779 shares at September 30, 2023 and 32,396 shares at December 31, 2022)

 

328

 

323

Additional paid-in capital ("APIC")

 

420,062

 

412,636

Accumulated other comprehensive income (loss) ("AOCI")

(1,864)

(1,568)

Retained earnings

 

1,287,653

 

1,278,035

Total stockholders’ equity

$

1,706,179

$

1,689,426

Noncontrolling interests

 

24,812

 

27,403

Total equity

$

1,730,991

$

1,716,829

Commitments and contingencies (NOTES 2 and 9)

 

 

Total liabilities and equity

$

4,277,851

$

4,045,359

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

(Unaudited)

For the three months ended

For the nine months ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

 

Revenues

Loan origination and debt brokerage fees, net

$

56,149

$

90,858

$

168,201

275,773

Fair value of expected net cash flows from servicing, net

35,375

55,291

107,446

159,970

Servicing fees

 

79,200

 

75,975

 

232,027

222,916

Property sales broker fees

16,862

30,308

38,831

100,092

Investment management fees

13,362

16,301

44,844

47,345

Net warehouse interest income (expense)

 

(2,031)

 

3,980

 

(3,556)

14,021

Placement fees and other interest income

 

43,000

 

18,129

 

109,310

26,683

Other revenues

 

26,826

 

24,769

 

83,001

129,103

Total revenues

$

268,743

$

315,611

$

780,104

$

975,903

Expenses

Personnel

$

136,507

$

157,059

$

388,425

469,608

Amortization and depreciation

57,479

59,846

170,737

177,101

Provision (benefit) for credit losses

 

421

 

1,218

 

(11,088)

(13,120)

Interest expense on corporate debt

 

17,594

 

9,306

 

49,878

22,123

Other operating expenses

 

28,529

 

33,991

 

83,322

102,400

Total expenses

$

240,530

$

261,420

$

681,274

$

758,112

Income from operations

$

28,213

$

54,191

$

98,830

$

217,791

Income tax expense

 

7,069

 

7,532

 

24,695

46,495

Net income before noncontrolling interests

$

21,144

$

46,659

$

74,135

$

171,296

Less: net income (loss) from noncontrolling interests

 

(314)

 

(174)

 

(1,623)

 

(1,032)

Walker & Dunlop net income

$

21,458

$

46,833

$

75,758

$

172,328

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

(399)

(1,238)

(296)

(4,018)

Walker & Dunlop comprehensive income

$

21,059

$

45,595

$

75,462

$

168,310

Basic earnings per share (NOTE 10)

$

0.64

$

1.41

$

2.26

$

5.18

Diluted earnings per share (NOTE 10)

$

0.64

$

1.40

$

2.25

$

5.13

Basic weighted-average shares outstanding

 

32,737

 

32,290

 

32,654

 

32,300

Diluted weighted-average shares outstanding

 

32,895

 

32,620

32,853

 

32,645

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(In thousands, except per share data)

(Unaudited)

For the three and nine months ended September 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

Walker & Dunlop net income

46,833

46,833

Net income (loss) from noncontrolling interests

(174)

(174)

Other comprehensive income (loss), net of tax

(1,238)

(1,238)

Stock-based compensation - equity classified

5,185

5,185

Issuance of common stock in connection with equity compensation plans

36

Repurchase and retirement of common stock

(14)

(1,436)

(1,436)

Distributions to noncontrolling interest holders

(360)

(360)

Cash dividends paid ($0.60 per common share)

(19,882)

(19,882)

Balance at September 30, 2022

32,344

$

323

$

407,417

$

(1,460)

$

1,256,663

$

31,760

$

1,694,703

For the three and nine months ended September 30, 2023

Stockholders' Equity

Common Stock

Retained

Noncontrolling

Total

  

Shares

  

Amount

  

APIC

  

AOCI

  

Earnings

  

Interests

  

Equity

 

Balance at December 31, 2022

32,396

$

323

$

412,636

$

(1,568)

$

1,278,035

$

27,403

$

1,716,829

Walker & Dunlop net income

26,665

26,665

Net income (loss) from noncontrolling interests

805

805

Other comprehensive income (loss), net of tax

(53)

(53)

Stock-based compensation - equity classified

6,664

6,664

Issuance of common stock in connection with equity compensation plans

468

5

3,397

3,402

Repurchase and retirement of common stock

(185)

(1)

(17,394)

(17,395)

Distributions to noncontrolling interest holders

(600)

(600)

Cash dividends paid ($0.63 per common share)

(21,221)

(21,221)

Other activity

(2,360)

2,360

Balance at March 31, 2023

32,679

$

327

$

405,303

$

(1,621)

$

1,281,119

$

29,968

$

1,715,096

Walker & Dunlop net income

27,635

27,635

Net income (loss) from noncontrolling interests

(2,114)

(2,114)

Other comprehensive income (loss), net of tax

156

156

Stock-based compensation - equity classified

7,541

7,541

Issuance of common stock in connection with equity compensation plans

33

Repurchase and retirement of common stock

(9)

(662)

(662)

Distributions to noncontrolling interest holders

(1,735)

(1,735)

Cash dividends paid ($0.63 per common share)

(21,180)

(21,180)

Other activity

(240)

(240)

Balance at June 30, 2023

32,703

$

327

$

412,182

$

(1,465)

$

1,287,334

$

26,119

$

1,724,497

Walker & Dunlop net income

21,458

21,458

Net income (loss) from noncontrolling interests

(314)

(314)

Other comprehensive income (loss), net of tax

(399)

(399)

Stock-based compensation - equity classified

7,015

7,015

Issuance of common stock in connection with equity compensation plans

86

1

1,736

1,737

Repurchase and retirement of common stock

(10)

(871)

(871)

Distributions to noncontrolling interest holders

(993)

(993)

Cash dividends paid ($0.63 per common share)

(21,139)

(21,139)

Balance at September 30, 2023

32,779

$

328

$

420,062

$

(1,864)

$

1,287,653

$

24,812

$

1,730,991

5

Table of Contents

Walker & Dunlop, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity (CONTINUED)

(In thousands, except per share data)

(Unaudited)

For the three and nine months ended September 30, 2021

Stockholders' Equity

Common Stock

Retained

Noncontrolling

Total

  

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 acquisition

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

For the three and nine months ended September 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

(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

8,978

(8,718)

260

Balance at June 30, 2022

32,322

$

323

$

403,668

$

(222)

$

1,229,712

$

32,294

$

1,665,775

Walker & Dunlop net income

46,833

46,833

Net income (loss) from noncontrolling interests

(174)

(174)

Other comprehensive income (loss), net of tax

(1,238)

(1,238)

Stock-based compensation - equity classified

5,185

5,185

Issuance of common stock in connection with equity compensation plans

36

Repurchase and retirement of common stock

(14)

(1,436)

(1,436)

Distributions to noncontrolling interest holders

(360)

(360)

Cash dividends paid ($0.60 per common share)

(19,882)

(19,882)

Balance at September 30, 2022

32,344

$

323

$

407,417

$

(1,460)

$

1,256,663

$

31,760

$

1,694,703

See accompanying notes to condensed consolidated financial statements.

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Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

For the nine months ended September 30, 

 

    

2022

    

2021

 

Cash flows from operating activities

Net income before noncontrolling interests

$

171,296

$

185,900

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

 

(159,970)

 

(209,266)

Change in the fair value of premiums and origination fees

 

8,586

 

6,909

Amortization and depreciation

 

177,101

 

148,879

Provision (benefit) for credit losses

 

(13,120)

 

(14,380)

Gain from revaluation of previously held equity-method investment

(39,641)

Originations of loans held for sale

(13,877,961)

(12,761,432)

Proceeds from transfers of loans held for sale

13,283,455

12,459,511

Other operating activities, net

(16,512)

(13,100)

Net cash provided by (used in) operating activities

$

(466,766)

$

(196,979)

Cash flows from investing activities

Capital expenditures

$

(19,302)

$

(5,507)

Purchases of equity-method investments

(25,098)

(8,029)

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

(51,302)

(7,250)

Proceeds from prepayment and sale of pledged AFS securities

9,261

28,781

Investments in joint ventures

(5,040)

(58,065)

Distributions from joint ventures

11,926

34,012

Acquisitions, net of cash received

(114,163)

(62,208)

Originations of loans held for investment

 

(50,772)

 

(269,737)

Principal collected on loans held for investment

 

73,500

 

397,328

Net cash provided by (used in) investing activities

$

(170,990)

$

49,325

Cash flows from financing activities

Borrowings (repayments) of warehouse notes payable, net

$

593,685

$

333,887

Borrowings of interim warehouse notes payable

 

36,459

 

154,661

Repayments of interim warehouse notes payable

 

(26,000)

 

(157,277)

Repayments of notes payable

 

(29,487)

 

(2,234)

Repayment of secured borrowings

(73,312)

Proceeds from issuance of common stock

 

263

 

5,256

Repurchase of common stock

 

(40,675)

 

(15,686)

Cash dividends paid

(60,025)

(48,268)

Payment of contingent consideration

(19,720)

Distributions to noncontrolling interest

(2,035)

Debt issuance costs

 

(2,831)

 

(2,762)

Net cash provided by (used in) financing activities

$

449,634

$

194,265

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

$

(188,122)

$

46,611

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

 

393,180

 

358,002

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

$

205,058

$

404,613

Supplemental Disclosure of Cash Flow Information:

Cash paid to third parties for interest

$

48,590

$

24,906

Cash paid for income taxes

56,099

38,728

For the nine months ended September 30, 

 

    

2023

    

2022

 

Cash flows from operating activities

Net income before noncontrolling interests

$

74,135

$

171,296

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

 

(107,446)

 

(159,970)

Change in the fair value of premiums and origination fees

 

6,634

 

8,586

Amortization and depreciation

 

170,737

 

177,101

Provision (benefit) for credit losses

 

(11,088)

 

(13,120)

Gain from revaluation of previously held equity-method investment

(39,641)

Originations of loans held for sale

(8,402,185)

(13,877,961)

Proceeds from transfers of loans held for sale

8,023,294

13,283,455

Other operating activities, net

(86,493)

(16,512)

Net cash provided by (used in) operating activities

$

(332,412)

$

(466,766)

Cash flows from investing activities

Capital expenditures

$

(13,880)

$

(19,302)

Purchases of equity-method investments

(15,062)

(25,098)

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

(51,302)

Proceeds from prepayment and sale of pledged AFS securities

9,274

9,261

Investments in joint ventures

(5,040)

Distributions from joint ventures

5,436

11,926

Acquisitions, net of cash received

(114,163)

Originations of loans held for investment

 

 

(50,772)

Principal collected on loans held for investment

 

160,801

 

73,500

Net cash provided by (used in) investing activities

$

146,569

$

(170,990)

Cash flows from financing activities

Borrowings (repayments) of warehouse notes payable, net

$

387,109

$

593,685

Borrowings of interim warehouse notes payable

 

 

36,459

Repayments of interim warehouse notes payable

 

(119,835)

 

(26,000)

Repayments of notes payable

 

(120,046)

 

(29,487)

Borrowings of notes payable

196,000

Proceeds from issuance of common stock

 

2,186

 

263

Repurchase of common stock

 

(18,928)

 

(40,675)

Cash dividends paid

(63,540)

(60,025)

Payment of contingent consideration

(26,090)

(19,720)

Distributions to noncontrolling interest holders

(3,328)

(2,035)

Debt issuance costs

 

(5,321)

 

(2,831)

Net cash provided by (used in) financing activities

$

228,207

$

449,634

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

$

42,364

$

(188,122)

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

 

258,283

 

393,180

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

$

300,647

$

205,058

Supplemental Disclosure of Cash Flow Information:

Cash paid to third parties for interest

$

86,663

$

48,590

Cash paid for income taxes

26,656

56,099

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Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (CONTINUED)

(In thousands)

(Unaudited)

For the nine months ended September 30, 

For the nine months ended September 30, 

2022

    

2021

2023

    

2022

Supplemental Disclosure of Non-Cash Activity:

Issuance of common stock in connection with acquisitions

$

$

5,250

Issuance of common stock to settle compensation liabilities

6,551

9,589

2,953

6,551

Issuance of common stock to settle contingent consideration liabilities (NOTE 7)

8,750

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

Net increase in total equity due to consolidations of tax credit entities (NOTE 10)

10,447

Net increase in total assets due to consolidations of tax credit entities (NOTE 10)

13,700

Net increase in total liabilities due to consolidations of tax credit entities (NOTE 10)

3,559

Forgiveness of receivables related to acquisitions

5,460

Allowance charge-off of loan held for investment

(6,033)

Additions of contingent consideration liabilities from acquisitions (NOTE 7)

119,955

7,504

119,955

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, 20212022 (“20212022 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 months ended September 30, 20222023 are not necessarily indicative of the results that may be expected for the year ending December 31, 20222023 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.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—The condensed consolidated financial statements include the accounts of Walker & Dunlop, Inc., its wholly-owned subsidiaries, and its majority owned subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or the voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it holds a variable interest in a VIE and has a controlling financial interest and therefore is considered the primary beneficiary, the Company consolidates the entity. In instances where the Company holds a variable interest in a VIE but is not the primary beneficiary, the Company uses the equity-method of accounting.

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

Subsequent Events—The Company has evaluated the effects of all events that have occurred subsequent to September 30, 2022.2023. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to September 30, 2022.2023. There have been no other material subsequent events that would require recognition in the condensed consolidated financial statements.

Use of Estimates—The preparation of condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”)GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, including the allowance for risk-sharing obligations, initial and recurring fair value assessments of capitalized mortgage servicing rights, asset management fee receivable related to LIHTC funds, derivative instruments, estimationgoodwill, initial fair value estimate of contingent consideration for business

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combinations, estimation ofother intangible assets, and the initial and recurring fair value of the Apprise joint venture (as discussed in NOTE 7), and the disclosureassessments of contingent assets andconsideration liabilities. Actual results may vary from these estimates.

Co-broker Fees—Provision (Benefit) Third-party co-broker fees are netted against Loan originationfor Credit LossesThe Company records the income statement impact of the changes in the allowance for loan losses and debt brokerage fees, netthe allowance for risk-sharing obligations within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income were $3.1 millionIncome. NOTE 4 contains additional discussion related to the allowance for risk-sharing obligations. The Company has credit risk exclusively on loans secured by multifamily real estate, with no exposure to any other sector of commercial real estate, including office, retail, industrial and $6.3 millionhospitality. Substantially all of the Provision (benefit) for credit losses for the three months ended September 30, 2022 and 2021, respectively, and $13.4 million and $15.2 million for the nine months ended September 30, 2023 and 2022 and 2021, respectively.is related to the provision (benefit) for risk-sharing obligations, with the other portion attributable to the provision (benefit) for loan losses related to loans held for investment.

Loans Held for Investment (“LHFI”), netLoans held for investmentLHFI are multifamily interim loans originated by the Company for properties that currently do not qualify for permanent GSE or HUD (collectively, the “Agencies”) 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 30, 2023, LHFI consisted of two loans with an aggregate $40.0 million of unpaid principal balance less an immaterial amount of net unamortized deferred fees and costs and allowance for loan losses. As of December 31, 2022, Loans held for investment, netLHFI consisted of nine loans with an aggregate $251.8$206.8 million of unpaid principal balance less $0.7$0.4 million of net unamortized deferred fees and costs and $4.0$6.2 million of allowance for loan losses. AsLHFI are included as a component of December 31, 2021, Loans held for investment, netOther assets consistedin the Condensed Consolidated Financial Statements.

The Company did not have any LHFI that were delinquent and in non-accrual status as of 12 loans with an aggregate $274.5 million of unpaid principal balance less $1.2 million of net unamortized deferred fees and costs and $4.2 million of allowance for September 30, 2023, compared to one loan losses.

One loan held for investment with an unpaid principal balance of $14.7 million was delinquent and on non-accrual statusan allowance for loan losses of $5.9 million as of September 30, 2022 and December 31, 2021.2022. During the second quarter of 2023, the Company sold the underlying collateral for $8.7 million and wrote off the $6.0 million of collateral-based reserves. The Company had $3.7 million in collateral-based reserves for this loan as of both September 30, 2022 and December 31, 2021 and has not recorded any interest related to this loan since it went on non-accrual status in 2019. AllThe Company has not previously charged off any other loan or had any other delinquencies related to loans were current as of September 30, 2022 and December 31, 2021.held for investment. The amortized cost basis of loans that were current as of September 30, 20222023 and December 31, 20212022 was $236.1$39.9 million and $258.6$191.7 million, respectively. As of September 30, 2022, $48.6 million, $162.2 million, and $26.3 million of the loans that were current were originated in 2022, 2021, and 2019, respectively. Other than the defaulted loan noted above, the Company has never experienced any delinquencies related to2023, all loans held for investment.investment were originated between 2019 and 2021.

Provision (Benefit) Statementfor Credit LossesThe Company records the income statement impact of the changes in the allowance for loan losses and the allowance for risk-sharing obligations within Provision (benefit) for credit lossesCash Flows—For presentation in the Condensed Consolidated Statements of Income.Cash Flows, the Company considers pledged cash and cash equivalents (as detailed in NOTE 4 contains additional discussion related9) to be restricted cash and restricted cash equivalents. The following table presents a reconciliation of the total cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the allowance for risk-sharing obligations. Provision (benefit) for credit losses consistedrelated captions in the Condensed Consolidated Balance Sheets as of September 30, 2023 and 2022 and December 31, 2022 and 2021.

September 30, 

December 31,

(in thousands)

2023

    

2022

    

2022

    

2021

 

Cash and cash equivalents

$

236,321

$

152,188

$

225,949

$

305,635

Restricted cash

17,768

40,246

17,676

42,812

Pledged cash and cash equivalents (NOTE 9)

 

46,558

 

12,624

 

14,658

 

44,733

Total cash, cash equivalents, restricted cash, and restricted cash equivalents

$

300,647

$

205,058

$

258,283

$

393,180

Income Taxes—The Company records the following activityrealizable excess tax benefits from stock-based compensation as a reduction to income tax expense. The realizable excess tax benefits were $0.7 million and $0.3 million for the three months ended September 30, 2023 and 2022, respectively, and $2.2 million and $5.5 million for the nine months ended September 30, 2023 and 2022, and 2021:respectively.

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For the three months ended 

For the nine months ended 

September 30, 

September 30, 

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

    

2022

    

2021

    

2022

    

2021

 

Provision (benefit) for loan losses

$

35

$

(12)

$

(142)

$

(674)

Provision (benefit) for risk-sharing obligations

 

1,183

 

1,278

 

(12,978)

 

(13,706)

Provision (benefit) for credit losses

$

1,218

$

1,266

$

(13,120)

$

(14,380)

Net Warehouse Interest Income—Income (Expense)—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

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principal balance of the loans and secured borrowing for the nine months ended September 30, 2021. Included in Net warehouse interest income (expense) for the three and nine months ended September 30, 20222023 and 20212022 are the following components:

For the three months ended 

For the nine months ended 

September 30, 

September 30, 

Components of Net Warehouse Interest Income (in thousands)

    

2022

    

2021

    

2022

    

2021

 

Warehouse interest income - loans held for sale

$

14,517

$

11,334

$

35,555

$

28,315

Warehouse interest expense - loans held for sale

 

(12,339)

 

(7,611)

 

(26,140)

 

(19,249)

Net warehouse interest income - loans held for sale

$

2,178

$

3,723

$

9,415

$

9,066

Warehouse interest income - loans held for investment

$

3,896

$

3,108

$

9,261

$

9,298

Warehouse interest expense - loans held for investment

 

(2,094)

 

(1,248)

 

(4,655)

 

(3,596)

Net warehouse interest income - loans held for investment

$

1,802

$

1,860

$

4,606

$

5,702

Total net warehouse interest income

$

3,980

$

5,583

$

14,021

$

14,768

For the three months ended 

For the nine months ended 

September 30, 

September 30, 

Components of Net Warehouse Interest Income (Expense)
(in thousands)

    

2023

    

2022

    

2023

    

2022

Warehouse interest income

$

11,912

$

18,413

$

34,015

$

44,816

Warehouse interest expense

 

(13,943)

 

(14,433)

 

(37,571)

 

(30,795)

Net warehouse interest income (expense)

$

(2,031)

$

3,980

$

(3,556)

$

14,021

StatementCo-broker Fees—Third-party co-broker fees are netted against of Cash FlowsLoan origination and debt brokerage fees, net—For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cashIncome and cash equivalents (as detailed in NOTE 9) to be restricted cash and restricted cash equivalents. The following table presents a reconciliation of the total cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of September 30, 2022 and 2021 and December 31, 2021 and 2020.

September 30, 

December 31,

(in thousands)

2022

    

2021

    

2021

    

2020

 

Cash and cash equivalents

$

152,188

$

318,188

$

305,635

$

321,097

Restricted cash

40,246

34,875

42,812

19,432

Pledged cash and cash equivalents (NOTE 9)

 

12,624

 

51,550

 

44,733

 

17,473

Total cash, cash equivalents, restricted cash, and restricted cash equivalents

$

205,058

$

404,613

$

393,180

$

358,002

Income Taxes—The Company records the realizable excess tax benefits from stock-based compensation as a reduction to income tax expense. The realizable excess tax benefits were $0.3$2.5 million and $2.1$3.1 million for the three months ended September 30, 20222023 and 2021,2022, respectively, and $5.5$9.3 million and $7.3$13.4 million duringfor the nine months ended September 30, 20222023 and 2021,2022, respectively.

Contracts with Customers—A majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers.

The majority of the Company’s contracts with customers do not require significant judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for the

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majority all of the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three and nine months ended September 30, 20222023 and 2021:2022:  

For the three months ended 

For the nine months ended 

For the three months ended 

For the nine months ended 

September 30, 

September 30, 

September 30, 

September 30, 

Description (in thousands)

    

2022

    

2021

    

2022

    

2021

 

Statement of income line item

    

2023

    

2022

    

2023

    

2022

 

Statement of income line item

Certain loan origination fees

$

40,076

$

46,527

$

130,722

$

113,650

Loan origination and debt brokerage fees, net

$

16,259

$

40,076

$

50,982

$

130,722

Loan origination and debt brokerage fees, net

Property sales broker fees

30,308

33,677

100,092

65,173

Property sales broker fees

16,862

30,308

38,831

100,092

Property sales broker fees

Investment management fees

16,301

2,564

47,345

9,115

Investment management fees

13,362

16,301

44,844

47,345

Investment management fees

Application fees, subscription revenues, other revenues from LIHTC operations, and other revenues

 

12,643

 

8,372

 

55,384

 

15,999

Other revenues

Application fees, appraisal revenues, subscription revenues, syndication fees, and other revenues

 

15,138

 

12,643

 

56,602

 

55,384

Other revenues

Total revenues derived from contracts with customers

$

99,328

$

91,140

$

333,543

$

203,937

$

61,621

$

99,328

$

191,259

$

333,543

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.material, and the Company has accrued its best estimate of any probable impacts from pending litigation in its Condensed Consolidated Financial Statements. 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.

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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 20212022 Form 10-K. There are no recently announced but not yet effective accounting pronouncements that are expected to have a material impact to the Company as of September 30, 2022.2023.

Reclassifications—The Company has made certain immaterial reclassifications to prior-year balances to conform to current-year    presentation.presentation within our segment reporting.

NOTE 3—MORTGAGE SERVICING RIGHTS

The fair value of the mortgage servicing rights (“MSRs”) was $1.3$1.4 billion as of both September 30, 20222023 and December 31, 2021.2022. The Company uses a discounted static cash flow valuation approach, and the key economic assumption is the discount rate. For example, see the following sensitivities related to the discount rate:

The impact of a 100-basis point increase in the discount rate at September 30, 20222023 would be a decrease in the fair value of $40.6$43.2 million to the MSRs outstanding as of September 30, 2022.2023.

The impact of a 200-basis point increase in the discount rate at September 30, 20222023 would be a decrease in the fair value of $78.6$83.5 million to the MSRs outstanding as of September 30, 2022.2023.

These sensitivities are hypothetical and should be used with caution. Thesecaution, and these estimates do not include interplay among assumptionsassumptions.

Activity related to MSRs for the three and are estimatednine months ended September 30, 2023 and 2022 follows:

For the three months ended

For the nine months ended

 

September 30, 

September 30, 

 

Roll Forward of MSRs (in thousands)

    

2023

    

2022

    

2023

    

2022

 

Beginning balance

$

932,131

$

978,745

$

975,226

$

953,845

Additions, following the sale of loan

 

42,495

 

45,454

 

104,644

 

182,753

Amortization

 

(50,276)

 

(47,391)

 

(149,185)

 

(140,846)

Pre-payments and write-offs

 

(2,604)

 

(9,038)

 

(8,939)

 

(27,982)

Ending balance

$

921,746

$

967,770

$

921,746

$

967,770

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s MSRs as a portfolio rather than individual assets.of September 30, 2023 and December 31, 2022:

Components of MSRs (in thousands)

September 30, 2023

December 31, 2022

Gross value

$

1,710,517

$

1,659,185

Accumulated amortization

 

(788,771)

 

(683,959)

Net carrying value

$

921,746

$

975,226

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The expected amortization of MSRs shown in the Condensed Consolidated Balance Sheet as of September 30, 2023 is shown in the table below. Actual amortization may vary from these estimates.

  

Expected

(in thousands)

  Amortization  

Three Months Ending December 31, 

2023

$

49,384

Year Ending December 31, 

2024

$

187,062

2025

 

164,837

2026

 

139,019

2027

 

118,031

2028

 

95,632

Thereafter

167,781

Total

$

921,746

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

For the three months ended

For the nine months ended

 

September 30, 

September 30, 

 

Roll Forward of MSRs (in thousands)

    

2022

    

2021

    

2022

    

2021

 

Beginning balance

$

978,745

$

915,519

$

953,845

$

862,813

Additions, following the sale of loan

 

45,454

 

70,095

 

182,753

 

224,035

Amortization

 

(47,391)

 

(44,402)

 

(140,846)

 

(130,868)

Pre-payments and write-offs

 

(9,038)

 

(11,387)

 

(27,982)

 

(26,155)

Ending balance

$

967,770

$

929,825

$

967,770

$

929,825

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

Components of MSRs (in thousands)

September 30, 2022

December 31, 2021

Gross value

$

1,622,213

$

1,548,870

Accumulated amortization

 

(654,443)

 

(595,025)

Net carrying value

$

967,770

$

953,845

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

  

Expected

(in thousands)

  Amortization  

Three Months Ending December 31, 

2022

$

46,639

Year Ending December 31, 

2023

$

180,469

2024

 

163,771

2025

 

141,014

2026

 

119,503

2027

 

101,362

Thereafter

215,012

Total

$

967,770

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

When a loan is sold under the Fannie Mae DUSDelegated Underwriting and Servicing (“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. Substantially all loans sold under the Fannie Mae DUS program contain modified or full-risk sharing guaranties that are based on the credit performance of the loan. The Company records an estimate of the contingent loss reserve for Current Expected Credit Losses (“CECL”) for all loans in its Fannie Mae at-risk servicing portfolio and also records collateral-based reserves as necessary and presents this combined loss reserve as Allowance for risk-sharing obligations on the Condensed Consolidated Balance Sheets. Additionally, a guaranty obligation is

Activity related to the allowance for risk-sharing obligations for the three and nine months ended September 30, 2023 and 2022 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)

    

2023

    

2022

    

2023

    

2022

 

Beginning balance

$

32,410

$

48,475

$

44,057

$

62,636

Provision (benefit) for risk-sharing obligations

 

555

 

1,183

 

(11,092)

 

(12,978)

Write-offs

 

(2,008)

 

 

(2,008)

 

Ending balance

$

30,957

$

49,658

$

30,957

$

49,658

The Company assesses several factors to calculate the CECL allowance each quarter including the current and expected unemployment rate, macroeconomic conditions, and the multifamily market. The key inputs for the CECL allowance are the historic loss rate, the forecast-period loss rate, the reversion-period loss rate, and the unpaid principal balance (“UPB”) of the at-risk servicing portfolio. A summary of the key inputs of the CECL allowance as of the end of each of the quarters presented as a component of Other liabilities onand the Condensed Consolidated Balance Sheets.provision (benefit) impact during each quarter for the nine months ended September 30, 2023 and 2022 follows.

2023

CECL Calculation Details and Provision Impact

Q1

Q2

Q3

Total

Forecast-period loss rate (in basis points)

2.3

2.3

2.3

N/A

Reversion-period loss rate (in basis points)

1.5

1.5

1.5

N/A

Historical loss rate (in basis points)

0.6

0.6

0.6

N/A

At-risk Fannie Mae servicing portfolio UPB (in billions)

$

54.5

$

55.7

$

57.4

N/A

CECL allowance (in millions)

$

28.7

$

28.9

$

31.0

N/A

Provision (benefit) for risk-sharing obligations (in millions)

$

(11.0)

$

(0.7)

$

0.6

$

(11.1)

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Activity related to the allowance for risk-sharing obligations for the three and nine months ended September 30, 2022 and 2021 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)

    

2022

    

2021

    

2022

    

2021

 

Beginning balance

$

48,475

$

60,329

$

62,636

$

75,313

Provision (benefit) for risk-sharing obligations

 

1,183

 

1,278

 

(12,978)

 

(13,706)

Write-offs

 

 

 

 

Ending balance

$

49,658

$

61,607

$

49,658

$

61,607

2022

CECL Calculation Details and Provision Impact

Q1

Q2

Q3

Total

Forecast-period loss rate (in basis points)

3.0

2.2

2.2

N/A

Reversion-period loss rate (in basis points)

2.0

1.7

1.7

N/A

Historical loss rate (in basis points)

1.2

1.2

1.2

N/A

At-risk Fannie Mae servicing portfolio UPB (in billions)

$

49.7

$

51.2

$

52.1

N/A

CECL allowance (in millions)

$

42.5

$

37.7

$

38.9

N/A

Provision (benefit) for risk-sharing obligations (in millions)

$

(9.4)

$

(4.8)

$

1.2

$

(13.0)

During the first quarterquarters of 2023 and 2022, the Company updated its 10-year look-back period, resulting in loss data from the earliest year being replaced with the loss data for the most recently completed year. The look-back period updates resulted in the historical loss rate factor calculation todecreasing and the current 10-year rolling period, with no change to eitherbenefit for risk-sharing obligations, as noted in the table above. The Company also slightly increased its forecast-period and reversion-period loss rates, during the three months ended June 30, 2022 orMarch 31, 2023, to incorporate uncertain macroeconomic conditions. For the three months ended September 30, 2022. The historicalMarch 31, 2022, no adjustment was made to the forecast-period loss rate usedrate.

During the second quarter of 2023, the benefit for risk-sharing obligations shown above was the calculationresult of an updated collateral-based reserve, as the CECL reserve was 1.2 basis points asCompany settled this risk-sharing obligation with Fannie Mae early in the third quarter of both June 30, 2022 and September 30, 2022 compared to 1.8 basis points as of December 31, 2021.2023 for $2.0 million. During the second quarter of 2022, the Company updated its estimate of the forecast-period loss rate to 2.2 basis points from three basis points as of March 31, 2022, based on (i) the projected unemployment rate, (ii) overall health of the multifamily market, and (iii) other information expected during the forecast-period and reverted over a one-year period to the aforementioned 1.2 basis points historical loss rate and maintained this forecast-period loss-rate estimate through September 30, 2022. The changes in the historical loss rate factor and forecast-period loss rate during the first two quarters of 2022 contributed to the benefit for the nine months ended September 30, 2022 presented above, while an increase in the at-risk portfolio led to the small provision for the three months ended September 30, 2022.  

During the first three quarters of 2021, reported and forecasted unemployment rates significantly improved compared to December 31, 2020. In response to improving unemployment statistics and the expected continued overall health of the multifamily market, the Company reduced the loss rate for the forecast period to four basis points as of March 31, 2021 and three basis points as of both June 30, 2021 and September 30, 2021 from six basis points as of December 31, 2020, resulting in the benefit for risk-sharing obligations seen above was a result of the reductions in the forecast-period and reversion-period rates seen above, as the remaining risks and uncertainties related to the COVID-19 pandemic were removed from the forecast-period and reversion period loss rates.

During the third quarters of 2023 and 2022, the provision for risk-sharing obligations seen above were the three and nine months ended September 30, 2021, as presented above.result of increases in the at-risk portfolio.

The calculated CECL reserve for the Company’s $52.1 billion at-risk Fannie Mae servicing portfolio as of September 30, 2022 was $38.9 million compared to $52.3 million as of December 31, 2021. The weighted-averageweighted average remaining life of the at-risk Fannie Mae servicing portfolio as of September 30, 20222023 was 7.36.6 years compared to 7.57.2 years as of December 31, 2021.

Three loans had aggregate collateral-based reserves of $10.8 million and $10.3 million as of September 30, 2022 and December 31, 2021, respectively.

Activity related to the guaranty obligation for the three and nine months ended September 30, 2022 and 2021 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)

    

2022

    

2021

    

2022

    

2021

 

Beginning balance

$

45,649

$

50,369

$

47,378

$

52,306

Additions, following the sale of loan

 

1,401

 

1,449

 

4,711

 

4,023

Amortization and write-offs

 

(2,588)

 

(2,758)

 

(7,627)

 

(7,269)

Ending balance

$

44,462

$

49,060

$

44,462

$

49,060

2022.

As of September 30, 20222023, the Company had no loans with collateral-based reserves compared to two loans with an aggregate collateral-based reserve of $4.4 million as of December 31, 2022.

As of September 30, 2023 and 2021,2022, the maximum quantifiable contingent liability associated with the Company’s guaranties for the at-risk loans serviced under the Fannie Mae DUS agreement was $10.8$11.8 billion and $9.8$10.8 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.

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NOTE 5—SERVICING

The total unpaid principal balance of loans the Company was servicing for various institutional investors was $120.8$129.0 billion as of September 30, 20222023 compared to $115.7$123.1 billion as of December 31, 2021.2022.

As of September 30, 20222023 and December 31, 2021,2022, custodial deposit accounts (“escrow accountsdeposits”) relating to loans serviced by the Company totaled $3.1$2.8 billion and $3.7$2.7 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 earnplacement fees on these escrow balances,deposits, presented as a component of within Escrow earningsPlacement fees and other interest income in the Condensed Consolidated Statements of Income. Certain cash deposits at other financial institutions exceed the Federal Deposit Insurance Corporation insured limits. Theinsurance limits; however, the Company places thesebelieves it has mitigated this risk by holding uninsured deposits with financial institutions that meet the requirements of the Agencies and where it believes the risk of loss to be minimal.

balances at large national banks.

NOTE 6—WAREHOUSE NOTES PAYABLE AND NOTES PAYABLE

As of September 30, 2022,2023, to provide financing to borrowers under the Agencies’ programs, the Company has committed and uncommitted warehouse lines of credit in the amount of $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

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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 financings on acceptable terms.

Additionally, as of September 30, 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 and hold loans held for investment depends upon market conditions and its ability to secure and maintain these types of financings on acceptable terms. As of September 30, 2023, the Interim Warehouse Facilities had $454.8 million of total facility capacity with an outstanding balance of $25.6 million. The interest rate on the Interim Warehouse Facilities ranged from SOFR (defined below) plus 135 to 325 basis points.

The Company also has ainterest rate for all our 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 fundfacilities and debt is based on an Adjusted Term Secured Overnight Financing Rate (“Tax Credit Equity Warehouse Facility”SOFR”).

The maximum amount and outstanding borrowings under Agency Warehouse notes payable atFacilities as of September 30, 2022:2023 follows:

September 30, 2022

 

September 30, 2023

 

(dollars in thousands)

    

Committed

    

Uncommitted

    

Total Facility

    

Outstanding

    

    

 

    

Committed

    

Uncommitted

Total Facility

Outstanding

    

    

 

Facility

Amount

Amount

Capacity

Balance

Interest rate(1)

 

Amount

Amount

Capacity

Balance

Interest rate(1)

 

Agency Warehouse Facility #1

$

325,000

$

250,000

$

575,000

$

147,070

 

Adjusted Term SOFR plus 1.30%

$

325,000

$

250,000

$

575,000

$

92,872

 

SOFR plus 1.30%

Agency Warehouse Facility #2

 

700,000

 

300,000

 

1,000,000

 

536,956

Adjusted Term SOFR plus 1.30%

 

700,000

 

300,000

 

1,000,000

 

133,366

SOFR plus 1.30%

Agency Warehouse Facility #3

 

600,000

 

265,000

 

865,000

 

420,585

 

Adjusted Term SOFR plus 1.35%

 

600,000

 

265,000

 

865,000

 

106,856

 

SOFR plus 1.35%

Agency Warehouse Facility #4

200,000

225,000

425,000

92,924

Adjusted Term SOFR plus 1.30%

200,000

225,000

425,000

124,934

SOFR plus 1.30% to 1.35%

Agency Warehouse Facility #5

1,000,000

1,000,000

652,773

Adjusted Term SOFR plus 1.45%

1,000,000

1,000,000

94,755

SOFR plus 1.45%

Total National Bank Agency Warehouse Facilities

$

1,825,000

$

2,040,000

$

3,865,000

$

1,850,308

$

1,825,000

$

2,040,000

$

3,865,000

$

552,783

Fannie Mae repurchase agreement, uncommitted line and open maturity

 

 

1,500,000

 

1,500,000

 

507,412

 

 

 

1,500,000

 

1,500,000

 

212,811

 

Total Agency Warehouse Facilities

$

1,825,000

$

3,540,000

$

5,365,000

$

2,357,720

$

1,825,000

$

3,540,000

$

5,365,000

$

765,594

Interim Warehouse Facility #1

$

135,000

$

$

135,000

$

 

Adjusted Term SOFR plus 1.80%

Interim Warehouse Facility #2

 

100,000

 

 

100,000

 

 

Adjusted Term SOFR plus 1.35% to 1.85%

Interim Warehouse Facility #3

 

200,000

 

 

200,000

 

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%

Total National Bank Interim Warehouse Facilities

$

454,810

$

$

454,810

$

183,278

Tax Credit Equity Warehouse Facility

$

30,000

$

$

30,000

$

5,300

Adjusted Daily SOFR plus 3.00%

Debt issuance costs

 

 

 

 

(892)

Total warehouse facilities

$

2,309,810

$

3,540,000

$

5,849,810

$

2,545,406

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

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During 2022,2023, the following amendments to the Company’s Agency Warehouse Facilities and Notes Payable were executed in the normal course of business to support the growth of the Company’s business. Additionally, the Company had a note payable through its wholly-owned subsidiary, WDAE (as defined in NOTE 12), formerly known as “Alliant,” which had an outstanding balance of $114.5 million as of December 31, 2022. As noted below, on January 12, 2023, the Company repaid the Alliant note payable in full with proceeds from the Incremental Term Loan (as defined below).

Agency Warehouse Facilities

During August 2023, the third quarter of 2022, at the Company’s request,Company executed an amendment to Agency Warehouse Facility #1 was executed that decreased the committed borrowing capacity from $425.0 million to $325.0 million. In addition to the change in committed borrowing capacity, the amendment added $250 million of uncommitted borrowing capacity and extended the maturity date to August 30, 2023.28, 2024. No other material modifications have been made to the agreement during 2022.2023.

During the second quarter of 2022,April 2023, the Company executed an amendment to Agency Warehouse Facility #2 that extended the maturity date to April 13, 2023 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 130 basis points.12, 2024. No other material modifications have been made to the agreement during 2022.2023.

During the second quarter of 2022,May 2023, the Company executed an amendment related to Agency Warehouse Facility #3 that extended the maturity date to May 15, 2023 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 135 basis points with an Adjusted Term SOFR floor of 15 basis points.2024. No other material modifications have been made to the agreement during 2022.2023.

During the second quarter of 2022,June 2023, the Company executed an amendment related to Agency Warehouse Facility #4 that extended the maturity date to June 22, 2023, increased the total borrowing capacity to $425.0 million from $350.0 million, and transitioned2024, updated the interest rate from 30-day LIBORas shown in the table above, and updated one of the financial covenants to Adjusted Term SOFR plus 130 basis points.conform with the Company’s other financial covenants. No other material modifications have been made to the agreement during 2022.2023.

During the third quarter of 2022,September 2023, the Company executed an amendment related to Agency Warehouse Facility #5 that extended the maturity date to September 14, 2023.12, 2024. No other material modifications have been made to the agreement during 2022.2023.

During the third quarter of 2022, the Company allowed an agency warehouse facility to mature on September 29, 2022, as the Company believed it had sufficient borrowing capacity from the other warehouse lenders.

Interim Warehouse Facilities

During the second quarter of 2022, the Company executed an amendment related to Interim Warehouse Facility #1 that extended the maturity date to May 15, 2023 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 180 basis points. No other material modifications have been made to the agreementAgency Warehouse Facilities during 2022.

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

During the third quarter of 2022, the Company executed an amendment related to Interim Warehouse Facility #3 that extended the maturity date to September 29, 2023. No other material modifications have been made to the agreement during 2022.

During the fourth quarter of 2022, the Company executed an amendment related to Interim Warehouse Facility #4 that extended the maturity date to October 1, 2024 and transitioned the interest rate from 30-day LIBOR to Adjusted Term SOFR plus 311 basis points with an Adjusted Term SOFR floor of 15 basis points. No other material modifications have been made to the agreement during 2022.

Tax Credit Equity Warehouse Facility

During the third quarter of 2022, the Company executed amendments related to the Tax Credit Equity Warehouse Facility that extended the maturity date to October 14, 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. During October 2022, the Company allowed the Tax Credit Equity Warehouse Facility to mature according to the terms of the agreement.year.

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In OctoberNotes payable

Incremental Term Loan

As of December 31, 2022, the Company through one of its wholly-owned subsidiaries, replacedhad a senior secured credit agreement (the “Credit Agreement”) that provided for a $600 million term loan (the “Term Loan”). On January 12, 2023, the maturing TaxCompany entered into a lender joinder agreement and amendment to the Credit Equity Warehouse FacilityAgreement that provided for an increment term loan (“Incremental Term Loan”) with a new warehouse facility withprincipal amount of $200.0 million, modified the ratio thresholds related to mandatory prepayments, and included a national bank.provision that allows additional types of indebtedness. The credit agreement is scheduled to mature on October 5, 2025. The facility providesIncremental Term Loan was issued at a 2.0% discount and contains similar repayment terms as the Company with up to $20.0 million in committed borrowing capacity to fund investments in affordable housing limited partnerships that also secure the borrowings. Borrowings under this facility bearTerm Loan, bears interest at the Adjusted Terma rate equal to SOFR plus 280300 basis points, with a SOFR floorand matures on December 16, 2028. The Company used approximately $115.9 million of zero basis points.

the proceeds to pay off the Alliant note payable principal balance, accrued interest, and other fees. The credit agreement requiresCompany is obligated to make principal payments on the CompanyIncremental Term Loan in consecutive quarterly installments equal to abide by0.25% of the following financial covenants:

tangible net worth of the Company of not less than (i) $30.0 million;

liquid assets of the Company of not less than $15.0 million.

aggregate original principal amount of the Incremental Term Loan on the last business day of each March, June, September, and December that commenced on June 30, 2023.

The warehouse notes payable and notes payable are subject to various financial covenants, all of which thecovenants. The Company wasis in compliance with asall of these financial covenants. As of September 30, 2022. Interest on the Company’s warehouse notes payable is based on 30-day LIBOR, Adjusted Term SOFR, or Adjusted Daily SOFR. As a result of the expected transition from LIBOR,2023, the Company has transitioned all of its debt agreements to a SOFR based benchmark or has included fallback language to govern the transition from 30-day LIBOR to an alternative reference rate.SOFR-based benchmark.  

NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and Acquisition Activities

A summary of the Company’s goodwill for the nine months ended September 30, 20222023 and 20212022 follows:

For the nine months ended

For the nine months ended

September 30, 

September 30, 

Roll Forward of Goodwill (in thousands)

    

2022

    

2021

 

    

2023

    

2022

 

Beginning balance

$

698,635

$

248,958

$

959,712

$

698,635

Additions from acquisitions

 

222,670

 

84,291

 

 

222,670

Measurement-period adjustments

26,859

Measurement-period and other adjustments

3,998

26,859

Impairment

 

 

 

(14,000)

 

Ending balance

$

948,164

$

333,249

$

949,710

$

948,164

The additions toCompany recognized goodwill from acquisitions during 2022 shown in the table aboveimpairment during the ninethree months ended September 30, 2022 relate to two acquisitions. On February 28, 2022,2023 in conjunction with the Company acquired 100%Company’s reassessment of the equity interestsfair value of its contingent consideration liabilitiesassociated with its 2022 acquisition of GeoPhy B.V. (“GeoPhy”), a Netherlands-based commercial real-estate technology company. As part of the acquisition, the Company also obtained GeoPhy’s 50% interest in the Company’s appraisal joint venture, Apprise.. The Company now owns 100% of Appriserecorded a corresponding and consolidates its balances and its operating results post acquisition. Prioroffsetting impairment to the acquisition, the Company accounted for its investment in Apprise under the equity method. The fair value of the consideration was $204.6 million and consisted of $82.1 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 valuegoodwill associated with the GeoPhy acquisition, since a substantial portion of the goodwill originally recorded for the GeoPhy acquisition was directly related to the assembled workforces with their combined expertise in information technology, data science, and commercial real estate.contingent consideration liability. The Company believes that the combination of GeoPhy’s personnel, appraisal technology platform, and the future development of technologyallocated this goodwill impairment 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 segmentone of the multifamily markettwo reporting units to which the GeoPhy operations and (ii) continue to drive significant growth in appraisal revenues overgoodwill are assigned, both of which are components of 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.Capital Markets segment.

The Company does not believe the impairment recorded is indicative of a broader goodwill impairment at the reporting unit. The period over which the contingent consideration noted abovecan be earned (approximately two more years) is contingent on achieving certain Apprise revenuemuch shorter than the period of time considered in a fair value assessment of a reporting unit, and productivity milestonesthe Company believes the macroeconomic 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 estimatedcommercial real estate conditions that $132.7 million, or 65% of the maximum earnout, was achievable based on management forecasts.

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The discounted balance of $117.0 million is 57% of the maximum earnout amount. The Company estimatedled to the fair value of this contingentadjustment related to the continent consideration using a Monte Carlo simulation. liability are short term in nature.

The weighted average cost of capital (“WACC”) used for the valuation offair value adjustment to 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 $206.4 million included the fair value of the consideration transferred of $204.6 millionliability 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 isgoodwill impairment are both included as a component ofwithin Other revenuesoperating expenses in the Condensed Consolidated Statements of Income. The Company used a discounted cash flow model to estimateIncome and within 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 includedOther operating activities, net line in the estimate.

Condensed Consolidated Statements of Cash Flows.

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.

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 second acquisition occurred during the third quarter of 2022 for consideration of $6.0 million of cash and $3.0 million of contingent consideration and resulted in $8.8 million of goodwill. The Company allocated the goodwill from this acquisition to the Company’s Capital Markets reportable segment. The Company expects all of the goodwill from this acquisition 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 financial results since the acquisition and pro-forma financial information as if the acquisition occurred on January 1, 2021 were immaterial.

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 as a result of the Company obtaining additional information. 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 September 30, 2022. During the third quarter of 2022, the Company settled working capital adjustments related to the GeoPhy acquisition, resulting in a $5.5 million reduction in purchase price consideration. The settlement of the cash owed to the Company from GeoPhy for working capital adjustments will be a reduction of the cash paid to settle the contingent consideration achieved in the future. The Company has not completed the purchase accounting for the GeoPhy acquisition as it is waiting for the GeoPhy tax returns to be completed.

As discussed in NOTE 11 below, in the first quarter of 2022, the Company began disclosing three reportable segments. The following table shows goodwill by reportable segments as of September 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 one reportable segment as of December 31, 2021.

As of

Goodwill by Reportable Segment (in thousands)

September 30, 2022

Capital Markets

$

451,345

Servicing & Asset Management

496,819

Corporate

Ending balance

$

948,164

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The following table shows goodwill by reportable segments as of September 30, 2023 and December 31, 2022.

As of

As of

Goodwill by Reportable Segment (in thousands)

September 30, 2023

December 31, 2022

Capital Markets

$

510,189

$

520,191

Servicing & Asset Management

439,521

439,521

Ending balance

$

949,710

$

959,712

Other Intangible Assets

Activity related to other intangible assets for the nine months ended September 30, 20222023 and 20212022 follows:

For the nine months ended

For the nine months ended

September 30, 

September 30, 

Roll Forward of Other Intangible Assets (in thousands)

    

2022

    

2021

    

2023

    

2022

Beginning balance

$

183,904

$

1,880

$

198,643

$

183,904

Additions from acquisitions

 

31,000

 

8,719

 

 

31,000

Amortization

 

(12,070)

 

(2,145)

 

(12,716)

 

(12,070)

Ending balance

$

202,834

$

8,454

$

185,927

$

202,834

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s other intangible assets as of September 30, 20222023 and December 31, 2021:2022:

Components of Other Intangible Assets (in thousands)

September 30, 2022

December 31, 2021

September 30, 2023

December 31, 2022

Gross value

$

220,682

$

189,682

$

220,682

$

220,682

Accumulated amortization

 

(17,848)

 

(5,778)

 

(34,755)

 

(22,039)

Net carrying value

$

202,834

$

183,904

$

185,927

$

198,643

The expected amortization of other intangible assets shown in the Condensed Consolidated Balance Sheet as of September 30, 20222023 is shown in the table below. Actual amortization may vary from these estimates.

  

Expected

  

Expected

(in thousands)

  Amortization  

  Amortization  

Three Months Ending December 31,

2022

$

4,190

2023

$

4,257

Year Ending December 31,

2023

$

17,263

2024

 

16,206

$

16,235

2025

 

16,206

 

16,235

2026

 

16,206

 

16,235

2027

 

16,206

 

16,235

2028

 

16,235

Thereafter

116,557

100,495

Total

$

202,834

$

185,927

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Contingent Consideration Liabilities

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 months ended September 30, 20222023 and 20212022 follows:

For the nine months ended

For the nine months ended

September 30, 

September 30, 

Roll Forward of Contingent Consideration Liabilities (in thousands)

    

2022

    

2021

    

2023

    

2022

Beginning balance

$

125,809

$

28,829

$

200,346

$

125,809

Additions

119,955

7,504

119,955

Accretion and revaluation

3,767

1,405

Accretion

927

3,767

Fair value adjustments

(14,000)

Payments

(28,547)

(6,080)

(26,090)

(28,547)

Ending balance

$

220,984

$

31,658

$

161,183

$

220,984

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

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acquisitions may be earned over various lengths of time after each acquisition, with a maximum earn-outearnout period of five years, provided certain revenue targets and other metrics have been met. The last of the earn-outearnout periods related to the contingent consideration ends in the third quarter of 2027. In each case, the Company estimated the initial fair value of the contingent consideration using a Monte Carlo simulation.

As noted in the table above, the fair value adjustment recorded during the nine months ended September 30, 2023 was related to the GeoPhy acquisition. The probability of achievement for the contingent consideration declined due to short-term macroeconomic and commercial real estate market conditions and the reduced likelihood that those conditions will recover for the business to achieve the maximum contingent consideration targets.

The recognition of the contingent consideration liability for the two acquisitionsGeoPhy acquisition in the first quarter of 2022 is non-cash, and thus not reflected in the amount of cash consideration paid on the Condensed Consolidated Statements of Cash Flows. In addition, $8.8 million of the payments settling contingent consideration liabilities included in the table above for the nine months ended September 30, 2022 were from the issuance of the Company’s common stock, a non-cash transaction.

NOTE 8—FAIR VALUE MEASUREMENTS

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

Level 1—Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2—Financial assets and liabilities whose values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, discount rates, volatilities, prepayment speeds, earnings rates, credit risk, etc.) or inputs that are derived principally from, or corroborated by, market data by correlation or other means.
Level 3—Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation.

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The Company's MSRs are measured at fair value at inception, and thereafter on a nonrecurring basis. That is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value measurement when there is evidence of impairment and for disclosure purposes (NOTE 3). The Company's MSRs do not trade in an active, open market with readily observable prices. Accordingly, the estimated 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 placement fee revenue from escrow accounts,deposits, 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. 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.
Loans Held for Sale—All loans held for sale presented in the Condensed Consolidated Balance Sheets are reported at fair value. The Company determines the fair value of the loans held for sale using discounted cash flow models that incorporate quoted observable inputs from market participants, such as changes in the U.S. Treasury rate. Therefore, the Company classifies these loans held for sale as Level 2.

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Pledged Securities—Investments in money market funds are valued using quoted market prices from recent trades. Therefore, the Company classifies this portion of pledged securities as Level 1. The Company determines the fair value of its AFS investments in Agency debt securities using discounted cash flows that incorporate observable inputs from market participants and then compares the fair value to broker estimates of fair value. Consequently, the Company classifies this portion of pledged securities as Level 2.
Contingent Consideration Liabilities—Contingent consideration liabilities from acquisitions are initially recognized at fair value at acquisition and subsequently remeasured based on the change in probability of achievement of the performance objectives and fair value accretion. The remeasurement and fair value accretion are recognized as Other operating expenses in the Condensed Consolidated Statements of Income. The Company determines the fair value of each contingent consideration liability based on a combination of Monte Carlo simulations and probability of achievement estimates, which incorporates management estimates. As a result, the Company classifies these liabilities as Level 3.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 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

 

September 30, 2022

Assets

Loans held for sale

$

$

2,180,117

$

$

2,180,117

Pledged securities

 

12,624

 

138,789

 

 

151,413

Derivative assets

 

 

 

255,295

 

255,295

Total

$

12,624

$

2,318,906

$

255,295

$

2,586,825

Liabilities

Derivative liabilities

$

$

$

24,054

$

24,054

Contingent consideration liabilities

220,984

220,984

Total

$

$

$

245,038

$

245,038

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 no transfers between any of the levels within the fair value hierarchy during the nine months ended September 30, 2022.

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Table of Contents

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

For the three months ended

For the nine months ended

September 30, 

September 30, 

Derivative Assets and Liabilities, net (in thousands)

    

2022

    

2021

    

2022

    

2021

 

Beginning balance

$

42,634

$

6,340

$

30,961

$

44,720

Settlements

 

42,458

 

(146,841)

 

(235,463)

 

(488,356)

Realized gains recorded in earnings(1)

 

(85,092)

 

140,501

 

204,502

 

443,636

Unrealized gains (losses) recorded in earnings(1)

 

231,241

 

72,223

 

231,241

 

72,223

Ending balance

$

231,241

$

72,223

$

231,241

$

72,223

(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.

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 September 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

$

255,295

 

Discounted cash flow

 

Counterparty credit risk

 

Derivative liabilities

$

24,054

 

Discounted cash flow

 

Counterparty credit risk

 

Contingent consideration liabilities

$

220,984

Monte Carlo Simulation(2)

Probability of earn-out achievement

65% - 100%

76%

(1)Significant increases in this input may lead to significantly lower fair value measurements.
(2)Monte Carlo simulation analysis was supported by other valuation analyses.
(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 September 30, 2022 and December 31, 2021 are presented below:

September 30, 2022

December 31, 2021

 

    

Carrying

    

Fair

    

Carrying

    

Fair

 

(in thousands)

Amount

Value

Amount

Value

 

Financial Assets:

Cash and cash equivalents

$

152,188

$

152,188

$

305,635

$

305,635

Restricted cash

 

40,246

 

40,246

 

42,812

 

42,812

Pledged securities

 

151,413

 

151,413

 

148,996

 

148,996

Loans held for sale

 

2,180,117

 

2,180,117

 

1,811,586

 

1,811,586

Loans held for investment, net

 

247,106

 

248,098

 

269,125

 

270,826

Derivative assets

 

255,295

 

255,295

 

37,364

 

37,364

Total financial assets

$

3,026,365

$

3,027,357

$

2,615,518

$

2,617,219

Financial Liabilities:

Derivative liabilities

$

24,054

$

24,054

$

6,403

$

6,403

Contingent consideration liabilities

220,984

220,984

125,808

125,808

Warehouse notes payable

 

2,545,406

 

2,546,298

 

1,941,572

 

1,942,448

Notes payable

 

711,107

 

715,688

 

740,174

 

745,175

Total financial liabilities

$

3,501,551

$

3,507,024

$

2,813,957

$

2,819,834

The following methods and assumptions were used for recurring fair value measurements as of September 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).

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Pledged SecuritiesConsist of cash, highly liquid investmentsInvestments 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. Therefore, the Company classifies this portion of pledged securities as Level 1. The Company determines the fair value of theits AFS investments in 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 modelsflows that incorporate observable pricesinputs from market participants.participants

and then compares the fair value to broker estimates of fair value. Consequently, the Company classifies this portion of pledged securities as Level 2.
Contingent Consideration LiabilityLiabilitiesConsists of the estimatedContingent consideration liabilities from acquisitions are recognized at fair values of expected future earn-out payments related to acquisitions completed over the past several years, including 2022. The earn-out liabilities are valuedvalue and subsequently remeasured using a Monte Carlo simulation analysis.that uses updated management forecasts and current valuation assumptions and discount rates. The Company determines the fair value of theeach contingent consideration liabilities incorporates unobservable inputs, such as theliability based on probability of earn-out achievement, volatility rates,which incorporates management estimates. As a result, the Company classifies these liabilities as Level 3.

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Table of Contents

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022, 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

 

September 30, 2023

Assets

Loans held for sale

$

$

758,926

$

$

758,926

Pledged securities

 

46,558

 

130,951

 

 

177,509

Derivative assets

 

 

 

33,617

 

33,617

Total

$

46,558

$

889,877

$

33,617

$

970,052

Liabilities

Derivative liabilities

$

$

$

2,065

$

2,065

Contingent consideration liabilities

161,183

161,183

Total

$

$

$

163,248

$

163,248

December 31, 2022

Assets

Loans held for sale

$

$

396,344

$

$

396,344

Pledged securities

 

14,658

 

142,624

 

 

157,282

Derivative assets

 

 

 

17,636

 

17,636

Total

$

14,658

$

538,968

$

17,636

$

571,262

Liabilities

Derivative liabilities

$

$

$

2,076

$

2,076

Contingent consideration liabilities

200,346

200,346

Total

$

$

$

202,422

$

202,422

There were no transfers between any of the levels within the fair value hierarchy during the nine months ended September 30, 2023.

Derivative instruments (Level 3) are outstanding for short periods of time (generally less than 60 days). A roll forward of derivative instruments is presented below for the three and nine months ended September 30, 2023 and 2022:

For the three months ended

For the nine months ended

September 30, 

September 30, 

Derivative Assets and Liabilities, net (in thousands)

    

2023

    

2022

    

2023

    

2022

 

Beginning balance

$

20,241

$

42,634

$

15,560

$

30,961

Settlements

 

(80,213)

 

42,458

 

(259,655)

 

(235,463)

Realized gains (losses) recorded in earnings(1)

 

59,972

 

(85,092)

 

244,095

 

204,502

Unrealized gains (losses) recorded in earnings(1)

 

31,552

 

231,241

 

31,552

 

231,241

Ending balance

$

31,552

$

231,241

$

31,552

$

231,241

(1)Realized and discount rate,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.

20

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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 September 30, 2023:

Quantitative Information about Level 3 Fair Value Measurements

(in thousands)

    

Fair Value

    

Valuation Technique

    

Unobservable Input (1)

    

Input Range (1)

 

Weighted Average (2)

Derivative assets

$

33,617

 

Discounted cash flow

 

Counterparty credit risk

 

Derivative liabilities

$

2,065

 

Discounted cash flow

 

Counterparty credit risk

 

Contingent consideration liabilities

$

161,183

Monte Carlo Simulation

Probability of earnout achievement

48% - 100%

66%

(1)Significant changes in this input may lead to determinesignificant changes in the expected earn-out cash flows. The probability of the earn-out achievement isfair value measurements.
(2)Contingent consideration weighted based on management’s estimatemaximum gross earnout amount.

The carrying amounts and the fair values of the Company's financial instruments as of September 30, 2023 and December 31, 2022 are presented below:

September 30, 2023

December 31, 2022

 

    

Carrying

    

Fair

    

Carrying

    

Fair

 

(in thousands)

Amount

Value

Amount

Value

 

Financial Assets:

Cash and cash equivalents

$

236,321

$

236,321

$

225,949

$

225,949

Restricted cash

 

17,768

 

17,768

 

17,676

 

17,676

Pledged securities

 

177,509

 

177,509

 

157,282

 

157,282

Loans held for sale

 

758,926

 

758,926

 

396,344

 

396,344

Loans held for investment, net(1)

 

39,891

 

40,000

 

200,247

 

200,900

Derivative assets(1)

 

33,617

 

33,617

 

17,636

 

17,636

Total financial assets

$

1,264,032

$

1,264,141

$

1,015,134

$

1,015,787

Financial Liabilities:

Derivative liabilities(2)

$

2,065

$

2,065

$

2,076

$

2,076

Contingent consideration liabilities(2)

161,183

161,183

200,346

200,346

Warehouse notes payable

 

790,742

 

791,178

 

537,531

 

538,134

Notes payable

 

774,677

 

788,500

 

704,103

 

708,546

Total financial liabilities

$

1,728,667

$

1,742,926

$

1,444,056

$

1,449,102

(1)Included as a component of Other Assets in the expected future performance and other financial metricsCondensed Consolidated Balance Sheets.
(2)Included as a component of each ofOther Liabilities in the acquired entities, which are subject to significant uncertainty.

Derivative InstrumentsCondensed Consolidated Balance Sheets.

The following methods and assumptions were used for recurring fair value measurements as of September 30, 2023 and December 31, 2022.

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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Table of Contents

Contingent Consideration Liabilities—Consists of the estimated fair values of expected future earnout payments related to acquisitions completed over the past few years. The earnout 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 earnout achievement, volatility rates, and discount rate, to determine the expected earnout cash flows. The probability of the earnout 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—Consists 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.

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

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

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

the estimated gain of the expected loan sale to the investor (Level 2);
the expected net cash flows associated with servicing the loan, net of any guaranty obligations retained (Level 2);
the effects of interest rate movements between the date of the rate lock and the balance sheet date (Level 2); and
the nonperformance risk of both the counterparty and the Company (Level 3; derivative instruments only).

The estimated gain considers the origination fees the Company expects to collect upon loan closing (derivative instruments only) and premiums the Company expects to receive upon sale of the loan (Level 2). The fair value of the expected net cash flows associated with servicing the loan, is calculated pursuant to the valuation techniques applicable to the fair valuenet of future servicing, net at loan sale (Levelany guaranty obligations retained (Level 2).;

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

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

the notional amount of the forward sales contracts to measure the fair value.

23

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

The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of September 30, 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

 

September 30, 2022

Rate lock commitments

$

870,205

$

21,833

$

(37,337)

$

(15,504)

$

8,469

$

(23,973)

$

Forward sale contracts

 

3,230,106

 

 

246,745

 

246,745

 

246,826

(81)

 

Loans held for sale

 

2,359,901

 

29,624

 

(209,408)

 

(179,784)

 

 

 

(179,784)

Total

$

51,457

$

$

51,457

$

255,295

$

(24,054)

$

(179,784)

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,counterparty 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.

(Level 3; derivative instruments only).

The estimated gain considers the origination fees the Company expects to collect upon loan closing (derivative instruments only) and premiums the Company expects to receive upon sale of the loan (Level 2). The fair value of the expected net cash flows associated with servicing the loan is calculated pursuant to the valuation techniques applicable to the fair value of future servicing, net at loan sale (Level 2).

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

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

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

22

Table of Contents

The following table presents the components of fair value and other relevant information associated with the Company’s derivative instruments and loans held for sale as of September 30, 2023 and December 31, 2022:

Fair Value Adjustment Components

Balance Sheet Location

 

    

    

    

    

    

    

    

Fair Value

 

Notional or

Estimated

Total

Adjustment

 

Principal

Gain

Interest Rate

Fair Value 

Derivative

Derivative

to Loans 

 

(in thousands)

Amount

on Sale

Movement

Adjustment

Assets

Liabilities

Held for Sale

 

September 30, 2023

Rate lock commitments

$

349,336

$

10,990

$

(6,049)

$

4,941

$

5,142

$

(201)

$

Forward sale contracts

 

1,120,941

 

 

26,611

 

26,611

 

28,475

(1,864)

 

Loans held for sale

 

771,605

 

7,883

 

(20,562)

 

(12,679)

 

 

 

(12,679)

Total

$

18,873

$

$

18,873

$

33,617

$

(2,065)

$

(12,679)

December 31, 2022

Rate lock commitments

$

376,870

$

12,349

$

(4,495)

$

7,854

$

7,854

$

$

Forward sale contracts

 

769,585

 

 

7,706

 

7,706

 

9,782

(2,076)

 

Loans held for sale

 

392,715

 

6,840

 

(3,211)

 

3,629

 

 

 

3,629

Total

$

19,189

$

$

19,189

$

17,636

$

(2,076)

$

3,629

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 September 30, 2023. 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, 2023 collateral requirements as outlined above. As of September 30, 2023, reserve requirements for the DUS loan portfolio will require the Company to fund $79.6 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 reassessed the DUS Capital Standards in the past 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, 2023. The net worth requirement is derived primarily from unpaid principal balances on Fannie Mae loans and the level of risk sharing. As of September 30, 2023, the net worth requirement was $301.6 million, and the Company's net worth, as defined in the requirements, was $1.0 billion, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, 2023, the Company was required to maintain at least $60.0 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 $186.4 million as of September 30, 2023, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC.

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Table of Contents

Pledged Securities, at Fair ValuePledged securities, at fair value consisted of the following balances as of September 30, 2023 and 2022 and December 31, 2022 and 2021:

September 30, 

December 31,

Pledged Securities (in thousands)

2023

    

2022

    

2022

    

2021

 

Restricted cash

$

10,523

$

8,454

$

5,788

$

3,779

Money market funds

36,035

4,170

8,870

40,954

Total pledged cash and cash equivalents

$

46,558

$

12,624

$

14,658

$

44,733

Agency MBS

 

130,951

138,789

 

142,624

 

104,263

Total pledged securities, at fair value

$

177,509

$

151,413

$

157,282

$

148,996

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 September 30, 2023 and December 31, 2022:

Fair Value and Amortized Cost of Agency MBS (in thousands)

September 30, 2023

    

December 31, 2022

    

Fair value

$

130,951

$

142,624

Amortized cost

133,421

144,801

Total gains for securities with net gains in AOCI

381

797

Total losses for securities with net losses in AOCI

 

(2,851)

 

(2,974)

Fair value of securities with unrealized losses

 

115,337

 

118,565

Pledged securities with a fair value of $99.2 million, an amortized cost of $102.0 million, and a net unrealized loss of $2.8 million have been in a continuous unrealized loss position for more than 12 months, with the unrealized losses driven primarily by widening investor spreads as a result of the rapid increase in interest rates and related market uncertainty over the last 12 months. All securities that have been in a continuous loss position are Agency debt securities that carry a guarantee of the contractual payments. The Company concluded that an allowance for credit losses is not warranted, as the Company does not intend to sell the securities and does not believe it would be required to sell the securities, and as they carry the guarantee of payment from the Agencies.

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

September 30, 2023

Detail of Agency MBS Maturities (in thousands)

Fair Value

    

Amortized Cost

    

Within one year

$

$

After one year through five years

18,045

18,132

After five years through ten years

92,267

93,322

After ten years

 

20,639

21,967

Total

$

130,951

$

133,421

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Table of Contents

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.

The following table presents the calculation of basic and diluted EPS for the three and nine months ended September 30, 2023 and 2022 under the two-class method. Participating securities were included in the calculation of diluted EPS using the two-class method, as this computation was more dilutive than the treasury-stock method.

For the three months ended September 30, 

For the nine months ended September 30, 

 

EPS Calculations (in thousands, except per share amounts)

2023

2022

2023

2022

 

Calculation of basic EPS

Walker & Dunlop net income

$

21,458

$

46,833

$

75,758

$

172,328

Less: dividends and undistributed earnings allocated to participating securities

 

534

 

1,296

 

1,942

 

4,984

Net income applicable to common stockholders

$

20,924

$

45,537

$

73,816

$

167,344

Weighted-average basic shares outstanding

32,737

32,290

32,654

32,300

Basic EPS

$

0.64

$

1.41

$

2.26

$

5.18

Calculation of diluted EPS

Net income applicable to common stockholders

$

20,924

$

45,537

$

73,816

$

167,344

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

7

2

34

Net income allocated to common stockholders

$

20,924

$

45,544

$

73,818

$

167,378

Weighted-average basic shares outstanding

32,737

32,290

32,654

32,300

Add: weighted-average diluted non-participating securities

158

330

199

345

Weighted-average diluted shares outstanding

32,895

32,620

32,853

32,645

Diluted EPS

$

0.64

$

1.40

$

2.25

$

5.13

The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury-stock method includes the unrecognized compensation costs associated with the awards. For the three and nine months ended September 30, 2023, 169 thousand average restricted shares and 343 thousand average restricted shares, respectively, were excluded from the computation of diluted EPS under the treasury-stock method. For the three and nine months ended September 30, 2022, 218 thousand average restricted shares and 111 thousand average restricted shares, respectively, were excluded from the computation. 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 three 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 nine months ended September 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 2023, 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 23, 2023. During the first nine months of 2023, the Company did not repurchase any shares of its common stock under the share repurchase program. As of September 30, 2023, the Company had $75.0 million of authorized share repurchase capacity remaining under the 2023 share repurchase program.

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Table of Contents

During each of the first three quarters of 2023, the Company paid a dividend of $0.63 per share. On November 8, 2023, the Company’s Board of Directors declared a dividend of $0.63 per share for the fourth quarter of 2023. The dividend will be paid on December 8, 2023 to all holders of record of the Company’s restricted and unrestricted common stock as of November 24, 2023.

The Company’s Note Payable (“Term Loan”) contains direct restrictions 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, 2022. The majority of the loans for which the Company has risk sharing are Tier 2 loans.

The Company is in compliance with the September 30, 2022 collateral requirements as outlined above. As of September 30, 2022, reserve requirements for the DUS loan portfolio will require the Company to fund $71.8 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 reassessed the DUS Capital Standards in the past 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, 2022. The net worth requirement is derived primarily from unpaid principal balances on Fannie

24

Table of Contents

Mae loans and the level of risk sharing. At September 30, 2022, the net worth requirement was $275.0 million, and the Company's net worth, as defined in the requirements, was $646.0 million, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, 2022, the Company was required to maintain at least $54.7 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 $131.9 million as of September 30, 2022, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC.

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

September 30, 

December 31,

Pledged Securities (in thousands)

2022

    

2021

    

2021

    

2020

 

Restricted cash

$

8,454

$

10,596

$

3,779

$

4,954

Money market funds

4,170

40,954

40,954

12,519

Total pledged cash and cash equivalents

$

12,624

$

51,550

$

44,733

$

17,473

Agency MBS

 

138,789

97,224

 

104,263

 

119,763

Total pledged securities, at fair value

$

151,413

$

148,774

$

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 September 30, 2022 and December 31, 2021:

Fair Value and Amortized Cost of Agency MBS (in thousands)

September 30, 2022

    

December 31, 2021

    

Fair value

$

138,789

$

104,263

Amortized cost

140,782

100,847

Total gains for securities with net gains in AOCI

762

3,636

Total losses for securities with net losses in AOCI

 

(2,755)

 

(220)

Fair value of securities with unrealized losses

 

116,989

 

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.

September 30, 2022

Detail of Agency MBS Maturities (in thousands)

Fair Value

    

Amortized Cost

    

Within one year

$

$

After one year through five years

16,018

16,063

After five years through ten years

99,612

100,327

After ten years

 

23,159

24,392

Total

$

138,789

$

140,782

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Table of Contents

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.

The following table presents the calculation of basic and diluted EPS for the three and nine months ended September 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 September 30, 

For the nine months ended September 30, 

 

EPS Calculations (in thousands, except per share amounts)

2022

2021

2022

2021

 

Calculation of basic EPS

Walker & Dunlop net income

$

46,833

$

71,721

$

172,328

$

185,831

Less: dividends and undistributed earnings allocated to participating securities

 

1,296

 

2,364

 

4,984

 

6,163

Net income applicable to common stockholders

$

45,537

$

69,357

$

167,344

$

179,668

Weighted-average basic shares outstanding

32,290

31,064

32,300

30,969

Basic EPS

$

1.41

$

2.23

$

5.18

$

5.80

Calculation of diluted EPS

Net income applicable to common stockholders

$

45,537

$

69,357

$

167,344

$

179,668

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

7

23

34

57

Net income allocated to common stockholders

$

45,544

$

69,380

$

167,378

$

179,725

Weighted-average basic shares outstanding

32,290

31,064

32,300

30,969

Add: weighted-average diluted non-participating securities

330

395

345

398

Weighted-average diluted shares outstanding

32,620

31,459

32,645

31,367

Diluted EPS

$

1.40

$

2.21

$

5.13

$

5.73

The assumed proceeds used for calculating the dilutive impact of restricted stock awards under the treasury-stock method includes the unrecognized compensation costs associated with the awards. For the three and nine months ended September 30, 2022, 218 thousand average restricted shares and 111 thousand average restricted shares, respectively, were excluded from the computation of diluted EPS under the treasury-stock method. For the three months and nine months ended September 30, 2021, an immaterial number of average restricted shares were excluded from the computation. 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 three 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 nine months ended September 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 not 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. During the third quarter of 2022, the Company did not repurchase any shares of its common stock under the share repurchase program. As of September 30, 2022, the Company had $63.9 million of authorized share repurchase capacity remaining under the 2022 share repurchase program.

26

Table of Contents

During each of the first three quarters of 2022, the Company paid a dividend of $0.60 per share. On November 8, 2022, the Company’s Board of Directors declared a dividend of $0.60 per share for the fourth quarter of 2022. The dividend will be paid on December 9, 2022 to all holders of record of the Company’s restricted and unrestricted common stock as of November 25, 2022.

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

NOTE 11—SEGMENTS

The Company’s executive leadership team, which functions as the Company’s chief operating decision making body, makes decisions and assesses performance based on the following three reportable segments. The reportable segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information.  

(i)Capital Markets (“CM”)—CM provides a comprehensive range of commercial real estate finance products to its customers, including Agency lending, debt brokerage, property sales, and appraisal and valuation services. The Company’s long-established relationships with the Agencies contain minimum equity, liquidity, and other capital requirements that indirectly restrict the amountinstitutional investors enable CM to offer a broad range of dividends the Company may pay. The Company does not believe that these restrictions currently limit the amount of dividends the Company can pay for the foreseeable future.

NOTE 11—SEGMENTS

In the first quarter of 2022, as a result ofloan products and services to 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 three operating segments. The operating segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information.  

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

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

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

(ii)Servicing & Asset Management (“SAM”)—SAM’s activities include: (i) servicing and asset-managing the portfolio of loans the Company (a) originates and sells to the Agencies, (b) brokers to certain life insurance companies, and (c) originates through its principal lending and investing activities, (ii) managing third-party capital invested in 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.

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 commercial real estate assets through senior secured debt or limited partnership equity instruments; e.g., preferred equity, mezzanine debt, etc. either through funds primarily LIHTCor direct investments, and (iii) managing third-party capital invested in tax credit equity funds (iii) subscription revenue for its housing market research, and (iv) net interest incomefocused on the spread between the interest income on the loanslow-income housing tax credit (“LIHTC”) sector 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 operatingother commercial real estate.

SAM earns revenue through (i) fees for servicing and asset-managing the loans in the Company’s servicing portfolio, (ii) asset management fees for managing third-party capital, and (iii) net interest income on the spread between the interest income on the loans and the warehouse interest expense for loans held for investment. Direct internal, including compensation, and external costs that are specific to SAM are included within the results of this reportable segment.

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

27

Table of Contents

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

For the three months ended September 30, 2022

Segment Results

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

    

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

89,752

$

1,106

$

$

90,858

Fair value of expected net cash flows from servicing, net

55,291

55,291

Servicing fees

75,975

75,975

Property sales broker fees

30,308

30,308

Investment management fees

16,301

16,301

Net warehouse interest income

2,178

1,802

3,980

Escrow earnings and other interest income

17,760

369

18,129

Other revenues

5,845

21,544

(2,620)

24,769

Total revenues

$

183,374

$

134,488

$

(2,251)

$

315,611

Expenses

Personnel

$

125,980

$

21,676

$

9,403

$

157,059

Amortization and depreciation

952

57,239

1,655

59,846

Provision (benefit) for credit losses

 

 

1,218

 

 

1,218

Interest expense on corporate debt

 

 

 

9,306

 

9,306

Other operating expenses

 

6,063

 

6,043

 

21,885

 

33,991

Total expenses

$

132,995

$

86,176

$

42,249

$

261,420

Income from operations

$

50,379

$

48,312

$

(44,500)

$

54,191

Income tax expense (benefit)

 

12,751

12,110

(17,329)

 

7,532

Net income before noncontrolling interests

$

37,628

$

36,202

$

(27,171)

$

46,659

Less: net income (loss) from noncontrolling interests

 

 

(174)

 

 

(174)

Walker & Dunlop net income

$

37,628

$

36,376

$

(27,171)

$

46,833

For the three months ended September 30, 2021

Segment Results

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

    

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

121,133

$

2,109

$

$

123,242

Fair value of expected net cash flows from servicing, net

89,482

89,482

Servicing fees

70,628

70,628

Property sales broker fees

33,677

33,677

Investment management fees

2,564

2,564

Net warehouse interest income

3,723

1,860

5,583

Escrow earnings and other interest income

1,945

87

2,032

Other revenues

3,026

16,724

(668)

19,082

Total revenues

$

251,041

$

95,830

$

(581)

$

346,290

Expenses

Personnel

$

139,890

$

10,446

$

19,845

$

170,181

Amortization and depreciation

17

52,388

1,093

53,498

Provision (benefit) for credit losses

 

 

1,266

 

 

1,266

Interest expense on corporate debt

 

 

 

1,766

 

1,766

Other operating expenses

 

4,628

 

3,199

 

17,009

 

24,836

Total expenses

$

144,535

$

67,299

$

39,713

$

251,547

Income from operations

$

106,506

$

28,531

$

(40,294)

$

94,743

Income tax expense (benefit)

 

25,660

7,040

(9,747)

 

22,953

Net income before noncontrolling interests

$

80,846

$

21,491

$

(30,547)

$

71,790

Less: net income (loss) from noncontrolling interests

 

 

69

 

 

69

Walker & Dunlop net income

$

80,846

$

21,422

$

(30,547)

$

71,721

28

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

As of and for the nine months ended September 30, 2022

Segment Results and Total Assets

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

  �� 

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

273,660

$

2,113

$

$

275,773

Fair value of expected net cash flows from servicing, net

159,970

159,970

Servicing fees

222,916

222,916

Property sales broker fees

100,092

100,092

Investment management fees

47,345

47,345

Net warehouse interest income

9,415

4,606

14,021

Escrow earnings and other interest income

26,166

517

26,683

Other revenues

12,503

74,959

41,641

129,103

Total revenues

$

555,640

$

378,105

$

42,158

$

975,903

Expenses

Personnel

$

363,619

$

62,195

$

43,794

$

469,608

Amortization and depreciation

1,762

170,930

4,409

177,101

Provision (benefit) for credit losses

 

 

(13,120)

 

 

(13,120)

Interest expense on corporate debt

 

 

 

22,123

 

22,123

Other operating expenses

 

16,757

 

18,721

 

66,922

 

102,400

Total expenses

$

382,138

$

238,726

$

137,248

$

758,112

Income from operations

$

173,502

$

139,379

$

(95,090)

$

217,791

Income tax expense (benefit)

 

42,074

33,799

(29,378)

 

46,495

Net income before noncontrolling interests

$

131,428

$

105,580

$

(65,712)

$

171,296

Less: net income (loss) from noncontrolling interests

 

(1,032)

 

(1,032)

Walker & Dunlop net income

$

131,428

$

106,612

$

(65,712)

$

172,328

Total assets

$

3,016,153

$

2,621,380

$

365,480

$

6,003,013

As of and for the nine months ended September 30, 2021

Segment Results and Total Assets

Servicing &

(in thousands)

Capital

Asset

    

Markets

    

Management

    

Corporate

    

Consolidated

Revenues

Loan origination and debt brokerage fees, net

$

302,011

$

4,582

$

$

306,593

Fair value of expected net cash flows from servicing, net

209,266

209,266

Servicing fees

205,658

205,658

Property sales broker fees

65,173

65,173

Investment management fees

9,115

9,115

Net warehouse interest income

9,066

5,702

14,768

Escrow earnings and other interest income

5,712

260

5,972

Other revenues

8,721

28,381

(1,658)

35,444

Total revenues

$

594,237

$

259,150

$

(1,398)

$

851,989

Expenses

Personnel

$

332,519

$

27,004

$

48,294

$

407,817

Amortization and depreciation

556

145,161

3,162

148,879

Provision (benefit) for credit losses

 

 

(14,380)

 

 

(14,380)

Interest expense on corporate debt

 

5,291

 

5,291

Other operating expenses

 

11,628

8,056

42,487

 

62,171

Total expenses

$

344,703

$

165,841

$

99,234

$

609,778

Income from operations

$

249,534

$

93,309

$

(100,632)

$

242,211

Income tax expense (benefit)

 

58,014

21,693

(23,396)

 

56,311

Net income before noncontrolling interests

$

191,520

$

71,616

$

(77,236)

$

185,900

Less: net income (loss) from noncontrolling interests

 

 

69

 

 

69

Walker & Dunlop net income

$

191,520

$

71,547

$

(77,236)

$

185,831

Total assets

$

3,229,274

$

1,387,423

$

500,165

$

5,116,862

29

Table of Contents

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 treasury operations and other corporate-level activities. The Company’s treasury activities include monitoring and managing liquidity and funding requirements, including corporate debt. Other corporate-level activities include equity-method investments, accounting, policies regarding the consolidation of VIEsinformation technology, legal, human resources, marketing, internal audit, 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 agreements of three of the Company’s joint ventures were amended, resulting in the Company gaining the power to direct the activities that most significantly impact the economic performance of the joint ventures; previously, the Company only held rights to receive the significant economic benefits of the joint ventures.various other corporate groups (“support functions”). The Company reassessed its consolidation conclusionsdoes not allocate costs from these support functions to the CM or SAM segments in presenting segment operating results. The Company does allocate interest expense and determined that itincome tax expense. Corporate debt and the related interest expense are allocated first based on specific acquisitions where debt was directly used to fund the primary beneficiary,acquisition and as a result, consolidatedthen based on the joint ventures as of March 31, 2022. As of September 30, 2022 and December 31, 2021,remaining segment assets. Income tax expense is allocated proportionally based on income from operations at each segment, except for significant, one-time tax activities, which are allocated entirely to the assets and liabilities ofsegment impacted by the consolidated tax credit funds were immaterial.

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

Consolidated VIEs (in thousands)

    

September 30, 2022

    

December 31, 2021

Assets:

Cash and cash equivalents

$

387

$

Restricted cash

1,817

Receivables, net

33,235

Other Assets

49,475

54,880

Total assets of consolidated VIEs

$

84,914

$

54,880

Liabilities:

Other liabilities

$

38,114

$

36,480

Total liabilities of consolidated VIEs

$

38,114

$

36,480

26

Table of Contents

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

Segment Results (in thousands)

For the three months ended September 30, 2023

Revenues

CM

SAM

Corporate

Consolidated

Loan origination and debt brokerage fees, net

$

56,149

$

$

$

56,149

Fair value of expected net cash flows from servicing, net

35,375

35,375

Servicing fees

79,200

79,200

Property sales broker fees

16,862

16,862

Investment management fees

13,362

13,362

Net warehouse interest income (expense)

(2,565)

534

(2,031)

Placement fees and other interest income

39,475

3,525

43,000

Other revenues

11,875

15,569

(618)

26,826

Total revenues

$

117,696

$

148,140

$

2,907

$

268,743

Expenses

Personnel

$

97,973

$

17,139

$

21,395

$

136,507

Amortization and depreciation

1,137

54,375

1,967

57,479

Provision (benefit) for credit losses

 

421

 

421

Interest expense on corporate debt

 

4,874

11,096

1,624

 

17,594

Other operating expenses

 

4,193

5,039

19,297

 

28,529

Total expenses

$

108,177

$

88,070

$

44,283

$

240,530

Income (loss) from operations

$

9,519

$

60,070

$

(41,376)

$

28,213

Income tax expense (benefit)

 

2,386

15,040

(10,357)

 

7,069

Net income (loss) before noncontrolling interests

$

7,133

$

45,030

$

(31,019)

$

21,144

Less: net income (loss) from noncontrolling interests

 

83

(397)

 

 

(314)

Walker & Dunlop net income (loss)

$

7,050

$

45,427

$

(31,019)

$

21,458

27

Table of Contents

Segment Results (in thousands)

For the three months ended September 30, 2022

Revenues

CM

SAM

Corporate

Consolidated

Loan origination and debt brokerage fees, net

$

89,752

$

1,106

$

$

90,858

Fair value of expected net cash flows from servicing, net

55,291

55,291

Servicing fees

75,975

75,975

Property sales broker fees

30,308

30,308

Investment management fees

16,301

16,301

Net warehouse interest income (expense)

2,178

1,802

3,980

Placement fees and other interest income

17,760

369

18,129

Other revenues

11,011

16,378

(2,620)

24,769

Total revenues

$

188,540

$

129,322

$

(2,251)

$

315,611

Expenses

Personnel

$

128,981

$

18,728

$

9,350

$

157,059

Amortization and depreciation

1,052

57,139

1,655

59,846

Provision (benefit) for credit losses

 

 

1,218

 

 

1,218

Interest expense on corporate debt

 

2,430

 

6,324

 

552

 

9,306

Other operating expenses

 

6,869

 

5,237

 

21,885

 

33,991

Total expenses

$

139,332

$

88,646

$

33,442

$

261,420

Income (loss) from operations

$

49,208

$

40,676

$

(35,693)

$

54,191

Income tax expense (benefit)

 

12,468

10,204

(15,140)

 

7,532

Net income (loss) before noncontrolling interests

$

36,740

$

30,472

$

(20,553)

$

46,659

Less: net income (loss) from noncontrolling interests

 

277

 

(451)

 

 

(174)

Walker & Dunlop net income (loss)

$

36,463

$

30,923

$

(20,553)

$

46,833

28

Table of Contents

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

Segment Results and Total Assets (in thousands)

As of and for the nine months ended September 30, 2023

Revenues

CM

SAM

Corporate

Consolidated

Loan origination and debt brokerage fees, net

$

167,679

$

522

$

$

168,201

Fair value of expected net cash flows from servicing, net

107,446

107,446

Servicing fees

232,027

232,027

Property sales broker fees

38,831

38,831

Investment management fees

44,844

44,844

Net warehouse interest income (expense)

(7,006)

3,450

(3,556)

Placement fees and other interest income

100,636

8,674

109,310

Other revenues

40,735

42,697

(431)

83,001

Total revenues

$

347,685

$

424,176

$

8,243

$

780,104

Expenses

Personnel

$

281,502

$

53,669

$

53,254

$

388,425

Amortization and depreciation

3,412

161,935

5,390

170,737

Provision (benefit) for credit losses

 

(11,088)

 

(11,088)

Interest expense on corporate debt

 

13,870

31,385

4,623

 

49,878

Other operating expenses

 

15,037

16,465

51,820

 

83,322

Total expenses

$

313,821

$

252,366

$

115,087

$

681,274

Income (loss) from operations

$

33,864

$

171,810

$

(106,844)

$

98,830

Income tax expense (benefit)

 

8,462

42,931

(26,698)

 

24,695

Net income (loss) before noncontrolling interests

$

25,402

$

128,879

$

(80,146)

$

74,135

Less: net income (loss) from noncontrolling interests

 

1,741

(3,364)

 

 

(1,623)

Walker & Dunlop net income (loss)

$

23,661

$

132,243

$

(80,146)

$

75,758

Total assets

$

1,424,270

$

2,361,245

$

492,336

$

4,277,851

29

Table of Contents

Segment Results and Total Assets (in thousands)

As of and for the nine months ended September 30, 2022

Revenues

CM

SAM

Corporate

Consolidated

Loan origination and debt brokerage fees, net

$

273,660

$

2,113

$

$

275,773

Fair value of expected net cash flows from servicing, net

159,970

159,970

Servicing fees

222,916

222,916

Property sales broker fees

100,092

100,092

Investment management fees

47,345

47,345

Net warehouse interest income (expense)

9,415

4,606

14,021

Placement fees and other interest income

26,166

517

26,683

Other revenues

29,838

57,624

41,641

129,103

Total revenues

$

572,975

$

360,770

$

42,158

$

975,903

Expenses

Personnel

$

372,656

$

53,211

$

43,741

$

469,608

Amortization and depreciation

2,191

170,501

4,409

177,101

Provision (benefit) for credit losses

 

 

(13,120)

 

 

(13,120)

Interest expense on corporate debt

 

5,488

 

15,388

 

1,247

 

22,123

Other operating expenses

 

19,943

 

15,535

 

66,922

 

102,400

Total expenses

$

400,278

$

241,515

$

116,319

$

758,112

Income (loss) from operations

$

172,697

$

119,255

$

(74,161)

$

217,791

Income tax expense (benefit)

 

41,878

28,919

(24,302)

 

46,495

Net income (loss) before noncontrolling interests

$

130,819

$

90,336

$

(49,859)

$

171,296

Less: net income (loss) from noncontrolling interests

 

995

(2,027)

 

(1,032)

Walker & Dunlop net income (loss)

$

129,824

$

92,363

$

(49,859)

$

172,328

Total assets

$

3,093,803

$

2,543,730

$

365,480

$

6,003,013

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Table of Contents

NOTE 12—VARIABLE INTEREST ENTITIES

The Company, through its subsidiary Walker & Dunlop Affordable Equity (“WDAE”), formerly known as “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 2022 Form 10-K.

As of September 30, 2023 and December 31, 2022, the assets and liabilities of the consolidated tax credit funds were immaterial.

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)

    

September 30, 2023

    

December 31, 2022

Assets:

Cash and cash equivalents

$

379

$

201

Restricted cash

2,828

1,532

Receivables, net

31,948

33,593

Other Assets

50,501

49,768

Total assets of consolidated VIEs

$

85,656

$

85,094

Liabilities:

Other liabilities

$

44,745

$

39,148

Total liabilities of consolidated VIEs

$

44,745

$

39,148

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)

September 30, 2023

    

December 31, 2022

Assets

Committed investments in tax credit equity

$

212,296

$

254,154

Other assets: Equity-method investments

60,188

57,981

Total interests in nonconsolidated VIEs

$

272,484

$

312,135

Liabilities

Commitments to fund investments in tax credit equity

$

196,250

$

239,281

Total commitments to fund nonconsolidated VIEs

$

196,250

$

239,281

Maximum exposure to losses(1)(2)

$

272,484

$

312,135

(1)Maximum exposure determined as Total interests in nonconsolidated VIEs. The maximum exposure for the Company’s investments in tax credit equity is limited to the carrying value of its investment, as there are no funding obligations or other commitments related to the nonconsolidated VIEs other than the amounts presented in the table above.
(2)Based on historical experience and classificationthe underlying expected cash flows from the underlying investment, the maximum exposure of loss is not representative of the Company’s interests in nonconsolidated VIEs included inactual loss, if any, that the Condensed Consolidated Balance Sheets:

Company may incur.

Nonconsolidated VIEs (in thousands)

    

September 30, 2022

    

December 31, 2021

Assets

Committed investments in tax credit equity

$

214,430

$

177,322

Other assets: Equity-method investments

58,126

74,997

Total interests in nonconsolidated VIEs

$

272,556

$

252,319

Liabilities

Commitments to fund investments in tax credit equity

$

198,073

$

162,747

Total commitments to fund nonconsolidated VIEs

$

198,073

$

162,747

Maximum exposure to losses(1)(2)

$

272,556

$

252,319

(1)Maximum exposure determined as Total interests in nonconsolidated VIEs. The maximum exposure for the Company’s investments in tax credit equity is limited to the carrying value of its investment, as there are no funding obligations or other commitments related to the nonconsolidated VIEs other than the amounts presented in the table above.
(2)Based on historical experience and the underlying expected cash flows from the underlying investment, the maximum exposure of loss is not representative of the actual loss, if any, that the Company may incur.

30

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 (“2021

31

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” below and in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 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,”, “us”, “us,” or “our”), 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 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;
our ability to successfully integrate Alliant’s and GeoPhy’s (each as defined below) employees and operations;
trends in the commercial real estate finance market, 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; and
other risks and uncertainties associated with our business described in our 20212022 Form 10-K and our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission.

While forward-looking statements reflect our good-faith projections, assumptions, and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. For a further

31

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.”

32

Business

Overview

We are a leading commercial real estate (i) services, (ii) finance, and (iii) technology company in the United States. Through investments in people, brand, and technology, we have built a diversified suite of commercial real estate services to meet the needs of our customers. Our services include (i) multifamily lending, property sales, appraisal, valuation, and research, (ii) commercial real estate debt brokerage and advisory services, (iii) investment management, and (iv) affordable housing lending, tax credit syndication, 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 new and existing customers, and (iii) drive efficiencies in our internal processes. We believe our people, brand, and technology provide us with a competitive advantage, as evidenced by 65% of refinancing volumes coming from new loans to us representing 67% of refinancing volumes and 25%21% of total transaction volumes coming from new customers for the nine months ended September 30, 2022.2023.

We are one of the largest lendersservice providers to multifamily operators in the country. We originate, sell, and service a range of multifamily and other commercial real estate financing products, including loans through the programs of the GSEs, and the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (together with Ginnie Mae, “HUD”) (collectively, the “Agencies”). We retain servicing rights and asset management responsibilities on substantially all loans that we originate for the Agencies’ programs. We broker, and occasionally service, loans to commercial real estate operators 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 provide multifamily property sales brokerage and appraisal and valuation services and engage in commercial real estate investment management activities, including a focus on the affordable housing sector through low-income housing tax credit (“LIHTC”) syndication. We engage in the development and preservation of affordable housing projects through joint ventures with real estate developers and the management of funds focused on affordable housing. We provide housing market research and real estate-related investment banking and advisory services, which providesprovide our clients and us with market insight into many areas of the housing market. Our clients are owners and developers of multifamily properties and other commercial real estate assets across the country, some of whom are the largest owners and developers in the industry. We also underwrite, service, and asset-manage shorter termshorter-term loans on commercial real estate. Most of these shorter-term interim loans are closed through a joint venture or through separate accounts managed by our investment management subsidiary, Walker & Dunlop Investment Partners, Inc. (“WDIP”). Some of these interim loans are closed and retained by us through our Interim Program JV or Interim Loan Program (as defined below in Principal Lending and Investing). We are a leader in commercial real estate technology, developing and acquiring technology resources that (i) provide innovative solutions and a better experience for our customers and (ii) allow us to drive efficiencies across our internal processes.

On February 28, 2022, weWe acquired GeoPhy B.V. (“GeoPhy”), a leading commercial real estate technology company based in the Netherlands.Netherlands, in the first quarter of 2022. We plan to useare using 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.Apprise, by providing data analytics and other technology capabilities.  

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, ourOur executive leadership team, which functions as our chief operating decision making body, began makingmakes decisions and assessingassesses performance based on the following three operatingreportable segments: (i) Capital Markets (“CM”), (ii) Servicing & Asset Management (“SAM”), and (iii) Corporate. The operatingreportable 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.

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

32

include our 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.services, and real estate related investment banking and advisory services, including housing market research. 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

33

commercial real estate and multifamily property appraisals for various investors. Additionally, we earn subscription fees for our housing related research. The primary services within CM are described below.

AgencyPrincipal Lending and Investing

). We are one of the leading lenders with the Agencies, where we originatea leader in commercial real estate technology, developing and sell multifamily, manufactured housing communities, student housing, affordable housing, seniors housing,acquiring technology resources that (i) provide innovative solutions and small-balance multifamily loans. For additional information ona better experience for our Agency Lending services, refercustomers and (ii) allow us to Item 1. Business indrive efficiencies across our 2021 Form 10-K.internal processes.

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

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

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

As part of our overall growth strategy, we are focused on significantly growing and investing in our small-balance multifamily lending platform, which involves a high volume of transactions with smaller loan balances. In support of this product, we acquired a small technology company 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,B.V. (“GeoPhy”), a leading commercial real estate technology company based in the Netherlands, in the first quarter of 2022. We are using GeoPhy’s data analytics and technology development capabilities to supportaccelerate the growth of our small-balance lending platform withand our technology-enabled appraisal and valuation platform, Apprise, by providing data analytics and to further advanceother technology capabilities.  

Walker & Dunlop, Inc. is a holding company. We conduct the majority of our technology development capabilities in this area.operations through Walker & Dunlop, LLC, our operating company.

Debt BrokerageSegments

Our mortgage bankers who focusexecutive leadership team, which functions as our chief operating decision making body, makes decisions and assesses performance based on the following three reportable segments: (i) Capital Markets (“CM”), (ii) Servicing & Asset Management (“SAM”), and (iii) Corporate. The reportable segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information. The segments and related services are described in the following paragraphs.

Capital Markets

Capital Markets provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, are engaged by borrowersproperty sales, appraisal and valuation services, and real estate related investment banking and advisory services, including housing market research. Our long-established relationships with the Agencies and institutional investors enable us to work withoffer a varietybroad range of institutional lendersloan products and banksservices to find the most appropriate loan instrument for the borrowers’ needs. These loans are then funded directly by the lender,our customers. We provide property sales services to owners and we receive an origination fee for placing the loan.developers of multifamily properties and

33

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. To further support our growth strategy, we acquired an investment sales brokerage company during the third quarter of 2022, which expands our investment sales service offerings to include land sales.

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 provides appraisal services to a client list that includes several national commercial real estate lenders. Apprise also provides quarterly and annual valuation services to some of the largest institutional commercial real estate investors in the country.

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.various investors. 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.research. The primary services within SAMCM 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 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

34

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 on Agency loans.

Principal Lending and Investing). We are a leader in commercial real estate technology, developing and acquiring technology resources that (i) provide innovative solutions and a better experience for our customers and (ii) allow us to drive efficiencies across our internal processes.

We acquired GeoPhy B.V. (“GeoPhy”), a leading commercial real estate technology company based in the Netherlands, in the first quarter of 2022. We are using 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, by providing data analytics and other technology capabilities.  

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

Segments

Our executive leadership team, which functions as our chief operating decision making body, makes decisions and assesses performance based on the following three reportable segments: (i) Capital Markets (“CM”), (ii) Servicing & Asset Management (“SAM”), and (iii) Corporate. The reportable segments are determined based on the product or service provided and reflect the manner in which management is currently evaluating the Company’s financial information. The segments and related services are described in the following paragraphs.

Capital Markets

Capital Markets provides a comprehensive range of commercial real estate finance products to our customers, including Agency lending, debt brokerage, property sales, appraisal and valuation services, and real estate related investment banking and advisory services, including housing market research. 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

33

commercial real estate and multifamily property appraisals for various investors. Additionally, we earn subscription fees for our housing related research. The primary services within CM are described below.

Agency Lending

We are one of the leading lenders with the Agencies, where we originate and 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 2022 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. On occasion, our cost of borrowing can exceed the note rate on the loan, resulting in a net interest expense.

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

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

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 debt and/or equity solution for the borrowers’ needs. These financing solutions are then funded directly by the lender, and we receive an origination fee for our services.

Property Sales

We offer property sales brokerage services to owners and developers of multifamily properties that are seeking to sell these properties. 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. To further support our growth strategy, we acquired an investment sales brokerage company during the third quarter of 2022, which expands our investment sales service offerings to include land sales.

Housing Market Research and Real Estate Investment Banking Services

We own a 75% interest in a subsidiary doing business as Zelman & Associates (“Zelman”). Zelman is a nationally recognized housing market research and investment banking firm that will enhance the information we provide to our clients and increase our access to high-quality

34

market insight in many areas of the housing market, including construction trends, demographics, housing demand and mortgage finance. Zelman generates revenues through the sale of its housing market research data and related publications to banks, investment banks and other financial institutions. Zelman is also a leading independent investment bank providing comprehensive M&A advisory services and capital markets solutions to our clients within the housing and commercial real estate sectors. As part of our growth strategy, we have increased the number of investment bankers to broaden our reach and expertise within the residential housing, building products, multifamily and commercial real estate sectors.

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 provides appraisal services to a client list that includes many national commercial real estate lenders. Apprise also provides quarterly and annual valuation services to some of the largest institutional commercial real estate investors in the country. 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. We have increased the number of valuation specialists and the geographical reach of our appraisal platform over the past several years through hiring and recruiting in support of our long-term growth strategy.

Servicing & Asset Management

Servicing & Asset Management focuses on servicing and asset-managing the portfolio of loans we originate and sell to the Agencies, broker to certain life insurance companies, and originate through our principal lending and investing activities, and managing third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate. 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 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 placement fees 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 Delegated Underwriting and Servicing (“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 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

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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 on Agency loans.

Investment Management and Principal Lending and Investing

Our principal lendingInvestment Management—Through our subsidiary, Walker & Dunlop Investment Partners (“WDIP”), we function as the operator of a private commercial real estate investment advisor focused on the management of debt, preferred equity, and investing operation is composedmezzanine equity investments in middle-market commercial real estate funds. WDIP’s current regulatory assets under management (“AUM”) of $1.4 billion primarily consist of six sources: Fund III, Fund IV, Fund V, Fund VI, and Fund VII (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 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 loans held byreturn above the Interim Program JV andfund return hurdle rate specified in the Interim Loan Program as described below (collectively the “Interim Program”). fund agreements.

Through a joint venture with an affiliate of Blackstone Mortgage Trust, Inc., we offerWDIP also offers 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.

Principal Lending and Investing—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. We believe third-party capital solutions, in the form of direct real estate investment or commingled funds, are a long-term growth opportunity for our servicing and asset management businesses, and we have steadily reduced our reliance on our own capital and warehouse debt financing to fund interim loans in order to focus on raising third-party capital solutions to meet market demand and pursue our asset management growth strategy.

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

We provide affordable housing investment management and real estate services through our subsidiary, Walker & Dunlop Affordable Equity (“WDAE”), formerly known as Alliant Capital, Ltd. and its affiliates (“Alliant”). AlliantWDAE 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. AlliantWDAE 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, AlliantWDAE 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 / 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, AlliantWDAE 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, Alliant WDAE

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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.

ThroughCorporate

The Corporate segment consists primarily of our subsidiary, Walker & Dunlop Investment Partners (“WDIP”), 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. WDIP’s current assets under management (“AUM”) of $1.4 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

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the separate accounts consists of both unfunded commitments and funded investments. Unfunded commitments are highest during the fundraising and investment phases. WDIP receives management fees based on both unfunded commitments and funded investments. Additionally, with respect to the Funds, WDIP receives a percentage of the return above the fund return hurdle rate specified in the fund agreements.

Housing Market Research and Real Estate Investment Banking Services

We own a 75% interest in a subsidiary doing business as Zelman & Associates (“Zelman”). Zelman is a nationally recognized housing market research and investment banking firm that will enhance the information we provide to our clients and increase our access to high-quality market insight in many areas of the housing market, including construction trends, demographics, mortgage finance, and real estate technology and services. Zelman generates revenues through the sale of its housing market research data and related publications to banks, investment bankstreasury operations and other financial institutions,corporate-level activities. Our treasury operations include monitoring and through its offering of real estate-related investment bankingmanaging our liquidity and advisory services.funding requirements, including our corporate debt. The major other corporate-level functions include our equity-method investments, accounting, information technology, legal, human resources, marketing, internal audit, and various other corporate groups.

Basis of Presentation

The accompanying condensed consolidated financial statements include all of the accounts of the Company and its wholly-owned subsidiaries, and all intercompany transactions have been eliminated.

Critical Accounting 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. The following critical accounting estimates involve significant estimation uncertainty that may have or are reasonably likely to have a material impact on our financial condition or results of operations. Additional information about our critical accounting estimates and other significant accounting policies are discussed in NOTE 2 of the consolidated financial statements in our 20212022 Form 10-K.

Mortgage Servicing Rights (“MSRs”).MSRs are recorded at fair value at loan sale or upon purchase.sale. The fair value at loan sale (“OMSR”MSR”) 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,placement fees, prepayment speed, and servicing costs, are discounted at a rate that reflects the credit and liquidity risk of the OMSRMSR over the estimated life of the underlying loan. The discount rates used throughout the periods presented for all OMSRsMSRs were between 8-14% 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 OMSRsMSRs 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 earningsplacement fees on the escrowdeposit 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 materialde minimis impact on the estimate.estimate historically. We record an individual OMSRMSR 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 OMSRsMSRs 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 material assumptions historically, including the significant assumption that most significantly impacts the estimate –estimate: the discount rate. We do not expect to see significant volatility in the material assumptions for 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. DuringOver the first quarterpast two years, we have adjusted the placement fee assumption related to escrow deposits several times to reflect the current and expected future earnings rate projected for the life of 2021,the MSR. Additionally, we reducedadjusted the discount rate and escrow earnings rate assumptions for our OMSRs. Duringat the third quarterbeginning of 2022, we increased the escrow earnings rate assumptions2021 to reflect currentmirror changes observed from market participant assumptions.participants. 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).

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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 based on loss rateseconomic and unemployment forecasts from a market survey and a blended loss rate from historical periodperiods that we believe is similar.reflect the forecast from the survey. 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 secondfirst quarter of 2022,2023, we updated the loss rate used in the forecast period from three2.1 basis points to 2.22.3 basis points. ChangesThis change resulted in our forecast-period loss rate increasing from 1.8 times to 3.8 times the historical loss rate factor to reflect our current expectations of the evolving and uncertain macroeconomic conditions facing the multifamily sector. We made multiple revisions to the loss rate used in the forecast period in the past, most notably related to the COVID-19 pandemic, and those changes in the loss rates have significantly impacted the estimate in the past.estimate.

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 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 are 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 2022,2023, loss data from earlier periods in the look-back period with significantly higher losses fell off and were replaced with more recent loss data with significantly lower losses, resulting in the weighted-average annual loss rate changing from 1.81.2 basis points to 1.20.6 basis points. Changes in our expectations and forecasts have materially impacted, and in the future may materially impact, the estimate. We have notIn 2022, we had aour first loss settlement in nearly six years. We settled another immaterial loss in July 2023.

NOTE 4 of the consolidated financial statements outlines adjustments made in the loss rates used to account for the expected economic conditions as of a given period and the related impact on the estimate.

We evaluate our risk-sharing loans on a quarterly basis to determine whether there are loans that are probable of default.foreclosure. 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 defaultforeclosure 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, thatwhich 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 ObligationsObligation estimate and make adjustments to those assumptions when market conditions change, or when other factors indicate such adjustments are warranted. We believe the level of Allowance for Risk-Sharing ObligationsObligation 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 is included within Other liabilities in the Consolidated Balance Sheet and adjusted to the estimated fair value at the end of each reporting period.

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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-outearnout 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. Changes to the aforementioned inputs impact the estimate; for example, in the fourth quarter of 2022, we recorded a net $13.5 million reduction to the fair value of our contingent consideration liabilities based primarily on revised management forecasts of the financial performance of the entities over the remaining earnout period. During the third quarter of 2023, we recorded a reduction of $14.0 million to the fair value of our contingent consideration liabilities based on revised management forecasts, scenarios, and other valuation inputs.

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 September 30, 20222023 was $221.0$161.2 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 September 30, 20222023 was $325.0$292.9 million. Historically, allOver the past two years, we have made two large acquisitions that included significant amounts of contingent consideration to maximize alignment 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, thekey principals and management teams. 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 aforementioned acquisitions.

GoodwillGoodwill. . As of September 30, 20222023 and December 31, 2021,2022, we reported goodwill of $948.2$949.7 million and $698.6$959.7 million, respectively. Goodwill represents the excess of cost over the identifiable net assets of businesses acquired. Goodwill is assigned to the segmentreporting unit to which the acquisition relates. Goodwill is recognized as an asset and is reviewed for impairment annually in the fourth quarter.as of October 1. Between the annual evaluation time,impairment analyses, 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,judgments, assumptions, and estimates about projected cash flows, discount rates and other factors.

We recorded goodwill impairment during the third quarter of 2023 in conjunction with the aforementioned reassessment of contingent consideration liabilities. The fair value adjustment reduced the contingent consideration liability associated with our 2022 acquisition of GeoPhy, and we recorded a corresponding and offsetting impairment to the goodwill associated with the acquisition since a substantial portion of the goodwill originally recorded was directly related to the contingent consideration liability. We attributed this goodwill impairment to one of the two reporting units to which the GeoPhy operations and goodwill are assigned, both of which are components of the Capital Markets segment. The period over which the contingent consideration can be earned (approximately two more years) is much shorter than the period of time considered in a fair value assessment of a reporting unit, and we believe the macroeconomic and commercial real estate market conditions that led to the fair value adjustment related to the continent consideration liability are short term in nature. As of September 30, 2022,2023, we continue to believe the remaining goodwill at each of our goodwillother reporting units is not impaired. However, if the volatile macroeconomic and commercial real estate market conditions continue, the fair value of our contingent consideration liabilities may decline further in the coming quarters, resulting in a corresponding and offsetting goodwill impairment similar to the one we recorded during the three months ended September 30, 2023, as discussed above.

Overview of Current Business Environment

The fundamentalsHigher and volatile interest rates continue to disrupt many sectors of the capital markets, causing significant volatility and uncertainty, including: (a) disruption in the commercial real estate market began the year strong, particularly multifamily, which is the vast majority of our transaction volumes. Despite significant marketlending and transactions environment, (b) volatility caused by the high inflation rate and resulting rising interest rates, multifamily property fundamentals remain healthy. According to RealPage, a providerin pricing of commercial real estate dataassets, (c) challenges in the banking sector which are significantly constraining the supply of capital, and analytics, vacancies have risen(d) uncertainty amongst owners, operators, and developers of commercial real estate assets. Due to the disruption and uncertainties, our total transaction volumes decreased 54% from their Marchthe first nine months of 2022, lows to 4.4% aswith the largest decreases in our debt brokerage (59%) and multifamily property sales (64%) executions. The decrease in total transaction volumes also included a decrease in our GSE lending (34%) and HUD originations (61%).

To combat the high rate of September 30, 2022; however, national vacancy rates still remain below their historical averages. Additionally, rent collections remain strong at pre-pandemic levels, despite inflationary pressures and high rent growthinflation over the past two years.

Macroeconomic conditions impacting multifamily markets remained stable in the third quarter of 2022, with the national unemployment rate falling to pre-pandemic lows of 3.5% as of September 2022. The high rate of inflation during the year resulted inyears the Federal Reserve increasingincreased its target Federal Funds Rate by 3.00% from5.25% since December 2021, with a target range of 3.00%5.25% to 3.25%5.50% as of September 30, 2022. The2023. Following the September 2023 meeting, the Federal Reserve continuessignaled a slower pace of increases, but that rates would need 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 theremain higher for longer to bring inflation rate returns todown toward the Federal Reserve’s long-term target. BothThe actions of these actions by the Federal Reserve have resulted in an increase in medium to 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 initially in the consumer lending sector (e.g., residential mortgages, auto lending, and consumer credit). Although volatility in long-term interest rates also disrupted certain segments of the commercial real estate lending environment at times during 2022, the commercial real estate debt and property sales markets remained active. As a result, our total transaction volumes increased 27% over the first three quarters of 2021, with the largest increases in multifamily property sales (65%), debt brokerage (27%), and Fannie Mae (33%) volumes. The product we offer that was most significantly impacted by rising interest rates was our HUD product, which declined 49% when compared to the first three quarters of 2021.

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Over the last ninety days, the Federal Reserve’s stance on inflation has become more aggressive with fourth consecutive 0.75% increasesbasis of most of our lending. The increase in the Federal Funds Rate. Rate has increased our placement fee revenue on escrow deposits and cash and cash equivalents but also increased our borrowing costs for both our warehouse lines and corporate debt.

As the Federal Reserve continues to combat inflation by increasingthrough higher interest rates and with the turmoil in the banking sector from earlier in the year, we expect commercial real estate debt and property sales transaction activity to slow downbe depressed in 2023 from peaks earlierthe levels we achieved in the year. As with the first three quarters2022. Certain of 2022, we expect certainour products to beare impacted more than others, with property sales volumes and debt brokerage executions in non-multifamily assetsasset classes being impacted the most during the first nine months of the year, as banks and life insurance companies continue to pull backother third-party capital sources reduced their lending activities significantly and potentially increaseincreased capital reservesreserves. We also saw a significant slowdown in lending activity from the GSEs in the lastfirst quarter, as overall demand for new loans was down sharply as the market adjusted to the macroeconomic environment early in the year. However, as the market adjusted, the GSEs saw a 68% and 81% increase in their lending activity in the second and third quarters of 2023, respectively, compared to the first quarter of 2022. However, we anticipate Agency2023. We expect the GSEs’ lending volumesterms to remain steady incompetitive and supply much needed countercyclical capital to the fourth quarter asmultifamily sector for the Agencies provide liquidity in countercyclical markets. rest of 2023. When the broader capital markets tighten, the AgenciesGSEs historically step inincrease their lending activity to provide liquidity to the multifamily borrowing community as they did throughout 2020 and the second half of last year, and as one of2021. As the largest providers of capitalGSE multifamily lender by volume in 2022, we remain well positioned to originate loans for the multifamily sector, we are well positioned.GSEs. As interest rates increased rapidly, over the last several months, and liquidity in the capital markets tightened, we have experienced declines in credit spreads to offset a portion of the interest rate increases. Although our lending activity withincreases on the Agencies is expected to remain strongtotal cost of borrowing. This has resulted in the fourth quarter of 2022, thelower average servicing fees on our new loans and associated profitability of those executions is expected to remain consistent with third quarter levels.

We are a market-leading originator withGSE lending over the Agencies,past year, and we believe our market leadership positions us well to continue gaining market share and remain a significant lender withdo not anticipate that changing in the Agencies for the foreseeable future.near term.

The Federal Housing Finance Agency (“FHFA”) establishes loan origination caps for both Fannie Mae and Freddie Mac each year. In October 2021,November 2022, the FHFA established Fannie Mae’s and Freddie Mac’s 20222023 loan origination caps at $78$75 billion each for all multifamily business.business, a 4% decrease from the 2022 caps, but an increase over actual 2022 lending volumes for both Agencies. During the three months ended September 30, 2022,2023, Fannie Mae and Freddie Mac had multifamily origination volumes of $15.9$16.5 billion, up 3.8%, and $14.7$13.3 billion, respectively, down 2.5% and 16.9%9.5%, respectively, from the same period in 2021.2022, respectively. During the nine months ended September 30, 2022,2023, Fannie Mae and Freddie Mac had multifamily origination volumes of $50.6$41.7 billion and $44.3$32.4 billion, respectively, up 3.9%down 17.6% and down 1.1%26.9%, from the first nine months of 2021,ended September 30, 2022, respectively, leaving a combined $61.1$75.9 billion of available lending capacity for the remainder of the year.2023. A decline in our GSE originations negatively impacts our financial results, as our non-cash MSR revenues decrease disproportionately with debt financing volume and future servicing revenue would be constrained or decline.

As partDespite the higher interest rate environment and declines in commercial real estate lending and property sales, macroeconomic conditions impacting multifamily property fundamentals remained healthy in the third quarter of FHFA’s2023, with the national unemployment rate remaining low at 3.8% as of September 2023. According to RealPage, a provider of commercial real estate data and analytics, vacancies have risen from their historical low of 2.4% in February 2022 loan origination caps,and stabilized at least 50%5.6% as of September 2023. The recent historically low vacancy rates were largely considered to be unsustainable from a long-term perspective, and the current vacancy rate represents a return to normal that matches the pre-pandemic decade-long average. Despite the increase in vacancies and an increase in supply of multifamily units, national rent growth remains flat indicating continued healthy demand for multifamily units.

Our multifamily property sales volumes decreased 64% in the first nine months of 2023. We continue to compete for market share in the multifamily property sales sector, as customers increasingly look to experienced brokers to maximize value in this uncertain environment. Long term, we believe the market fundamentals will continue to be positive for multifamily properties, and we are beginning to see an increase in assets brought to market as we enter the second half of the GSEs’year. Over the last several years, household formation and a dearth of supply of entry-level single-family homes led to strong demand for rental housing in many geographical areas. Consequently, the fundamentals of the multifamily business is requiredassets were strong prior to be targeted towards affordable housing. Additionally,the pandemic, and, when combined with high occupancy and elevated real-estate prices, we expect that market demand for multifamily assets in 2021 the FHFA raisedlong-term will return as this asset class remains an attractive investment option.

Our debt brokerage platform had lower volumes the GSEs’ combined LIHTC investment capfirst nine months of 2023 compared to $1.7 billion, up 70%same period in 2022 due to the volatile interest rate environment and constrained supply of capital from banks, securitization markets, and other specialty finance lenders. As the previous cap of $1.0 billion. We intendinterest rate environment and banking sector begin to leverage our affordable debt financing and our newly acquired LIHTC syndication platformsstabilize, we expect to create additional growth opportunities for our debt financing, property sales, and LIHTC syndication platforms.see capital slowly return to the market.

As noted above, our debt financing operations with HUD declined during the first three quarters ofcompared to 2022. HUD loan volumes accounted for 1.4% and 2.0% of our total debt financing volumes for the three and nine months ended September 30, 2023, respectively, compared to 2.8% and 2.6% of our total debt financing volumes for the three and nine months ended September 30, 2022, respectively, compared to 4.1% and 6.0% for the three and nine months ended September 30, 2021, respectively. The decline in HUD debt financing volumes as a percentage of our total debt financing volumes was driven by lower aggregate HUD lending volumes industry-wide, as the increasingongoing high interest-rate environment discussed above more acutely impacted the HUD product given the longer lead times associated with HUD executions.

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, 2022, servicing fee revenues were up 7.6% and 8.4%, 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 grew significantly in the first half of 2022, as (i) the multifamily acquisitions market was very active during the first half of the year and (ii) we expanded the number of property sales brokers and geographical reach of our property sales platform. Beginning in the third quarter of 2022, the multifamily acquisitions market began to slow down due to the aforementioned market volatility driven by significant increases in interest rates. Long term, we believe the market fundamentals will continue to be positive for multifamily property sales. Over the last several years, and 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 historically low vacancies, steadying rental rates, and healthy rent collections, it is our expectation that market demand for multifamily property sales will remain steady as this asset class remains an attractive investment option.

Our debt brokerage platform continued its growth from 2021, with brokered volume increasing during the year. The increase in volume in 2022 reflects the continued demand from private capital providers, with activity focused not only on multifamily but also on other commercial real estate assets such as office, retail, and hospitality. Although lending activity in the non-multifamily asset classes is expected to slow in the short-term, we expect non-multifamily debt financing volumes to continue to remain attractive in the long-term.

3940

We entered into the Interim Program JV to expand our capacity to originate Interim Program loans beyond the use of our own balance sheet. The demandDemand for transitional lending has broughtwas strong over the last several years and drove increased competition from lenders, specifically banks, private debt funds, mortgage real estate investment trusts, and life insurance companies. Since the Federal Reserve began increasing interest rates, the supply of capital to transitional lending decreased substantially due to constraints in lending from banks, as well as tightening credit standards for transitional assets. For the nine months ended September 30, 2022,2023, we originated $86.3 million ofdid not originate any Interim Program JV loans, compared to $665.9$86.3 million of originations for the same period last year, dueyear. Given the volatile macroeconomic conditions discussed above, we continue to the aforementioned competitive pressures and the impactapproach our lending activity on transitional assets cautiously. We expect our lending volumes for transitional assets to remain low until economic conditions normalize. As of rising interest rates on interim lending opportunities. Except for one loan that defaulted in early 2019,September 30, 2023, all the loans in our portfolio and in the Interim Program JV continue to perform according to their terms.

We provide alternative investment management services focused on the affordable housing sector through LIHTC syndication, joint venture development, and community preservation fund management through our subsidiary, WDAE. We remain the 6th largest LIHTC syndicator despite the volatile and uncertain economic conditions mentioned above. We continue to approach the affordable housing space with a combined LIHTC syndication and affordable housing service offering that we believe will generate significant long-term financing, property sales, and syndication opportunities. Additionally, as agreed.  part of FHFA’s 2023 loan origination caps of $150 billion announced in November 2022, 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 WDAE and our debt financing and property sales teams focused on affordable housing, as evidenced by the $461 million of equity syndicated by WDAE for the nine months ended September 30, 2023, putting them on pace for their strongest year of syndicated equity ever.

41

Consolidated Results of Operations

The following is a discussion of our consolidated results of operations for the three and nine months ended September 30, 20222023 and 2021.2022. 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

CONSOLIDATED

For the three months ended

For the nine months ended

For the three months ended

For the nine months ended

September 30, 

September 30, 

September 30, 

September 30, 

(dollars in thousands; except per share data)

    

2022

    

2021

2022

    

2021

    

    

2023

    

2022

2023

    

2022

    

Transaction Volume:

Components of Debt Financing Volume

Total Debt Financing Volume

$

11,925,593

$

13,260,768

$

35,711,568

$

31,096,071

$

6,047,394

$

11,925,593

$

17,781,027

$

35,711,568

Property Sales Volume

 

4,993,615

 

5,230,093

 

16,417,367

 

9,967,385

 

2,508,073

 

4,993,615

 

5,907,138

 

16,417,367

Total Transaction Volume

$

16,919,208

$

18,490,861

$

52,128,935

$

41,063,456

$

8,555,467

$

16,919,208

$

23,688,165

$

52,128,935

Key Performance Metrics:

Operating margin

17

%  

27

%  

22

%  

28

%  

10

%  

17

%  

13

%  

22

%  

Return on equity

11

22

14

20

5

11

6

14

Walker & Dunlop net income

$

46,833

$

71,721

$

172,328

$

185,831

$

21,458

$

46,833

$

75,758

$

172,328

Adjusted EBITDA(1)

74,990

72,430

232,470

199,611

74,065

74,990

212,541

232,470

Diluted EPS

1.40

2.21

5.13

5.73

0.64

1.40

2.25

5.13

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

Personnel expenses

50

%  

49

%  

48

%  

48

%  

51

%  

50

%  

50

%  

48

%  

Other operating expenses

11

7

10

7

11

11

11

10

As of September 30, 

As of September 30, 

Managed Portfolio:

    

2022

    

2021

    

2023

    

2022

Total Servicing Portfolio

$

120,778,424

$

113,920,374

$

128,959,434

$

120,778,424

Assets under management

17,017,355

2,309,332

17,334,877

17,017,355

Total Managed Portfolio

$

137,795,779

$

116,229,706

$

146,294,311

$

137,795,779

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

4042

The following tables present period-to-period comparisons of our financial results for the three and nine months ended September 30, 20222023 and 2021.2022.

FINANCIAL RESULTS – THREE MONTHS

CONSOLIDATED

For the three months ended

 

For the three months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

    

2023

    

2022

    

Change

    

Change

 

Revenues

Loan origination and debt brokerage fees, net

$

90,858

$

123,242

$

(32,384)

(26)

%  

$

56,149

$

90,858

$

(34,709)

(38)

%  

Fair value of expected net cash flows from servicing, net

55,291

89,482

(34,191)

(38)

35,375

55,291

(19,916)

(36)

Servicing fees

 

75,975

 

70,628

 

5,347

8

 

79,200

 

75,975

 

3,225

4

Property sales broker fees

30,308

33,677

(3,369)

(10)

16,862

30,308

(13,446)

(44)

Investment management fees

16,301

2,564

13,737

536

13,362

16,301

(2,939)

(18)

Net warehouse interest income

 

3,980

 

5,583

 

(1,603)

(29)

Escrow earnings and other interest income

 

18,129

 

2,032

 

16,097

792

Net warehouse interest income (expense)

 

(2,031)

 

3,980

 

(6,011)

(151)

Placement fees and other interest income

 

43,000

 

18,129

 

24,871

137

Other revenues

 

24,769

 

19,082

 

5,687

30

 

26,826

 

24,769

 

2,057

8

Total revenues

$

315,611

$

346,290

$

(30,679)

(9)

$

268,743

$

315,611

$

(46,868)

(15)

Expenses

Personnel

$

157,059

$

170,181

$

(13,122)

(8)

%  

$

136,507

$

157,059

$

(20,552)

(13)

%  

Amortization and depreciation

 

59,846

 

53,498

 

6,348

12

 

57,479

 

59,846

 

(2,367)

(4)

Provision (benefit) for credit losses

 

1,218

 

1,266

 

(48)

(4)

 

421

 

1,218

 

(797)

(65)

Interest expense on corporate debt

 

9,306

 

1,766

 

7,540

427

 

17,594

 

9,306

 

8,288

89

Other operating expenses

 

33,991

 

24,836

 

9,155

37

 

28,529

 

33,991

 

(5,462)

(16)

Total expenses

$

261,420

$

251,547

$

9,873

4

$

240,530

$

261,420

$

(20,890)

(8)

Income from operations

$

54,191

$

94,743

$

(40,552)

(43)

$

28,213

$

54,191

$

(25,978)

(48)

Income tax expense

 

7,532

 

22,953

 

(15,421)

(67)

 

7,069

 

7,532

 

(463)

(6)

Net income before noncontrolling interests

$

46,659

$

71,790

$

(25,131)

(35)

$

21,144

$

46,659

$

(25,515)

(55)

Less: net income (loss) from noncontrolling interests

 

(174)

 

69

 

(243)

 

(352)

 

(314)

 

(174)

 

(140)

 

80

Walker & Dunlop net income

$

46,833

$

71,721

$

(24,888)

(35)

$

21,458

$

46,833

$

(25,375)

(54)

4143

FINANCIAL RESULTS – NINE MONTHS

CONSOLIDATED

For the nine months ended

 

For the nine months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

  

    

2023

    

2022

    

Change

    

Change

 

  

Revenues

Loan origination and debt brokerage fees, net

$

275,773

$

306,593

$

(30,820)

(10)

%  

$

168,201

$

275,773

$

(107,572)

(39)

%  

Fair value of expected net cash flows from servicing, net

159,970

209,266

(49,296)

(24)

107,446

159,970

(52,524)

(33)

Servicing fees

 

222,916

 

205,658

 

17,258

8

 

232,027

 

222,916

 

9,111

4

Property sales broker fees

100,092

65,173

34,919

54

38,831

100,092

(61,261)

(61)

Investment management fees

47,345

9,115

38,230

419

44,844

47,345

(2,501)

(5)

Net warehouse interest income

 

14,021

 

14,768

 

(747)

(5)

Escrow earnings and other interest income

 

26,683

 

5,972

 

20,711

347

Net warehouse interest income (expense)

 

(3,556)

 

14,021

 

(17,577)

(125)

Placement fees and other interest income

 

109,310

 

26,683

 

82,627

310

Other revenues

 

129,103

 

35,444

 

93,659

264

 

83,001

 

129,103

 

(46,102)

(36)

Total revenues

$

975,903

$

851,989

$

123,914

15

$

780,104

$

975,903

$

(195,799)

(20)

Expenses

Personnel

$

469,608

$

407,817

$

61,791

15

%  

$

388,425

$

469,608

$

(81,183)

(17)

%  

Amortization and depreciation

177,101

148,879

28,222

19

170,737

177,101

(6,364)

(4)

Provision (benefit) for credit losses

 

(13,120)

 

(14,380)

 

1,260

(9)

 

(11,088)

 

(13,120)

 

2,032

(15)

Interest expense on corporate debt

 

22,123

 

5,291

 

16,832

318

 

49,878

 

22,123

 

27,755

125

Other operating expenses

 

102,400

 

62,171

 

40,229

65

 

83,322

 

102,400

 

(19,078)

(19)

Total expenses

$

758,112

$

609,778

$

148,334

24

$

681,274

$

758,112

$

(76,838)

(10)

Income from operations

$

217,791

$

242,211

$

(24,420)

(10)

$

98,830

$

217,791

$

(118,961)

(55)

Income tax expense

 

46,495

 

56,311

 

(9,816)

(17)

 

24,695

 

46,495

 

(21,800)

(47)

Net income before noncontrolling interests

$

171,296

$

185,900

$

(14,604)

(8)

$

74,135

$

171,296

$

(97,161)

(57)

Less: net income (loss) from noncontrolling interests

 

(1,032)

 

69

 

(1,101)

 

(1,596)

 

(1,623)

 

(1,032)

 

(591)

 

57

Walker & Dunlop net income

$

172,328

$

185,831

$

(13,503)

(7)

$

75,758

$

172,328

$

(96,570)

(56)

Overview

Three months ended September 30, 20222023 compared to three months ended September 30, 20212022

The decrease in revenues was primarily driven by decreases in loan origination and debt brokerage fees, net (“origination fees”), the fair value of expected net cash flows from servicing, net (“MSR income”), property sales broker fees, investment management fees, and property broker sales fees,net warehouse interest income (expense), partially offset by increases in servicing fees, investment managementplacement fees escrow earnings and other interest income, and other revenues. Origination fees and MSR income decreased largely as a result of a 10%49% decline in overall debt financing volume and a decline in the origination related fee rate and MSR income rate, respectively, as market volatility and rising interest rates resulted in tighter spreads on loans.volume. Property sales broker sales fees decreased primarily due to a 50% decline in property sales volume. Investment management fees decreased primarily as a result of a decline in LIHTC investment management fees. Net warehouse interest income (expense) decreased from a net revenue position in 2022 to a net expense position in 2023 due to short-term rates remaining higher than long-term rates (“inverted yield curve”) during the third quarter of 2023. Servicing fees increased largely from an increase in the average servicing portfolio outstanding. Investment managementPlacement 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 primarily as a result of a higher placement fee rate due to rising short-term interest rates. Other revenues increased largely as a result of a higher escrow earnings rate due to rising interest rates. Other revenues increased primarily due to the addition of other revenues related to our LIHTC operations, partially offset by a decreasean increase in prepayment fees.assumption fee income.

The increasedecrease in expenses was due to increasesdecreases in personnel costs, amortization and depreciation, interest expense on corporate debt, and other operating expenses, partially offset by an increase in interest expense on corporate debt. Personnel costs decreased largely due to decreases in commission costs as a decrease in personnel costs.result of our lower transaction volumes. Amortization and depreciation expense increaseddecreased primarily due to an increasea decline in write-offs of MSRs due to lower prepayments in the average MSR balanceservicing portfolio. Other operating expenses decreased as a direct result of our cost-reduction initiatives across a variety of general and an increase in intangible asset amortization resulting from acquisitions over the past year.administrative cost categories. Interest expense on corporate debt increased primarily due to the increaseincreases in the size of the debt outstanding, an increase in SOFR to which our Term Debt is indexed, 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 growthinterest rate as our corporate debt’s floating rate is tied to short-term interest rates, (ii) the outstanding principal balance of corporate debt, and (iii) the Company overprincipal balance of our corporate debt subject to floating interest rates, as we replaced the past year, including expenses from acquiredfixed-rate debt at one of our subsidiaries and (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. The decrease in personnel expenses was primarily a result of decreases in commission costs due to the decrease in debt financing and propertywith floating-rate debt.

4244

sales volumes and other variable costs due to the Company’s performance, partially offset by an increase in salaries and benefits costs primarily driven by an increase in the average headcount.

Income Tax Expense. The decrease in income tax expense primarily relates to a 48% decrease in income from operations, andlargely offset by a one-time $10.2 million tax benefit during the three months ended September 30, 2022 totaling $6.3 million resulting from (i) the dissolution during the third quarter of 2022 of the Apprisea joint venture that we acquired full ownership of earlier in the year (“Apprise dissolution”). Partially offsetting this benefit was (i) an increase in the estimated annual effective tax rate due to an increase in nondeductible executive compensation,2022 and (ii) a $1.8 million decrease in realizable excess tax benefits, and (iii) a one-time internationalintellectual property (“IP”) transfer tax of $3.9 million related to the IP intangible assets we acquired as part of the 2022 GeoPhy acquisition. There was no comparable one-time tax benefit during the three months ended September 30, 2023.

Nine months ended September 30, 20222023 compared to nine months ended September 30, 20212022

The increasedecrease in revenues was primarily driven by increasesdecreases in servicingorigination fees, MSR income, property sales broker fees, investment management fees, escrow earnings and othernet warehouse interest income (expense), and other revenues, partially offset by decreasesincreases in originationservicing fees and placement fees and other interest income. Origination fees and MSR income.income decreased largely as a result of a 50% decline in overall debt financing volume. Property sales broker fees decreased primarily due to a 64% decline in property sales volume. Net warehouse interest income (expense) decreased from a net revenue position in 2022 to a net expense position in 2023 due to the inverted yield curve throughout 2023. Other revenues decreased primarily due to a $39.6 million one-time gain from the revaluation of our previously held equity-method investment in Apprise in the first quarter of 2022, with no comparable activity in 2023, combined with a decline in prepayment fees. Servicing fees increased largely from an increase in the average servicing portfolio outstanding. The increase in property sales brokerPlacement fees was primarily 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 largely as a result of higher escrow earnings rates due to rising interest rates. Other revenues increased primarily as a result of increases in: (i) a one-time gain from the revaluationhigher placement fee rate due to rising short-term interest rates.

The decrease in expenses was due to decreases in personnel costs, amortization and depreciation, and other operating expenses, partially offset by an increase in interest expense on corporate debt. Personnel costs decreased, largely due to decreases in commission costs as a result of our previously held equity-method investmentlower transaction volumes. Amortization and depreciation decreased, largely due to a decline in Apprise (“Apprise revaluation gain”), (ii) prepayment fees, (iii) other revenues from our LIHTC operations, (iv) research subscription fees, and (v) gains from equity-method investments. Origination fees and MSR incomewrite-offs of MSRs due to lower prepayments in the servicing portfolio. Other operating expenses decreased primarily as a result of the write off of unamortized debt premium as we paid off a decline in the earnings rate fromnote payable at one of our debt financing volumes due to market volatilitysubsidiaries, and rising interest rates over the past several months, partially offset by an increase in Agency debt financing volume.

The increase in expenses was due to increases in all expense categories. The increase in personnel expenses was primarilyother decreases as a result of increases in commission costs due to the increase in property sales brokers fees and salaries and benefits costs driven by an increase in the average headcount. Amortization and depreciation expense increased primarily due to an increase in the average MSR balance and an increase in intangible asset amortization resulting from acquisitions in 2021 and 2022.our cost-reduction initiatives. Interest expense on corporate debt largely increased due to the increaseincreases in the size of the debt outstanding, including 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 growthinterest rate as our corporate debt’s floating rate is tied to short-term interest rates, (ii) the outstanding principal balance of corporate debt, and (iii) the Company overprincipal balance of our corporate debt subject to floating interest rates, as we replaced the past year including expenses from acquiredfixed-rate debt at one of our subsidiaries and (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.  with a floating-rate debt.

Income Tax Expense. The decrease in income tax expense primarily relates to a 55% decrease in income from operations, andpartially offset by a one-time $10.2 million tax benefit resulting from the Apprise dissolution. Partially offsetting this benefit was (i) an increase in the estimated annual effective tax rate due to an increase in nondeductible executive compensation, (ii) a $1.8$3.3 million decrease in realizable excess tax benefits and (iii) athe one-time expense of $3.9 million related to the IP transfer.

We do not expect our annual estimated effective tax rate to differ significantly from the 27.0% rate estimated for the three and nine months ended September 30, 2022. Accordingly, we expect an estimated annual effective tax rate of between approximately 26.5% and 27.5% for the remainder of the year. The effective tax rate decreased year over year from 23.2% in 2021 to 21.3%benefit recognized in 2022 due to the factors notedand not 2023 as more fully described above.

A discussion of the financial results for our segments is included further below.  

Non-GAAP Financial 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 to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan and Alliant’s note payable,corporate debt, and amortization and depreciation, adjusted for provision (benefit) for credit losses, net of write-offs, stock-based incentive compensation charges, the fair value of expected net cash flows from servicing, net, the write off of the unamortized balance of premium associated with the repayment of a portion of our corporate debt, goodwill impairment, and the gain from revaluation of a previously held equity-method investment. The goodwill impairment that is incorporated into the calculation of Adjusted EBITDA includes goodwill impairment resulting from our annual goodwill impairment test and the quarterly evaluations of recoverability. Goodwill impairment that results from a downward fair value adjustment to contingent consideration liabilities is not included as an adjustment to GAAP net income to arrive at Adjusted EBITDA, since the goodwill impairment is offset by the downward fair value adjustment to the contingent consideration liability, resulting in no net impact to GAAP net income. 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

43

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.

45

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.

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 on both a consolidated and segment basis. Adjusted EBITDA is reconciled to net income as follows:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CONSOLIDATED

For the three months ended

For the nine months ended

For the three months ended

For the nine months ended

September 30, 

September 30, 

September 30, 

September 30, 

(in thousands)

    

2022

    

2021

    

2022

    

2021

    

    

2023

    

2022

    

2023

    

2022

    

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income

$

46,833

$

71,721

$

172,328

$

185,831

$

21,458

$

46,833

$

75,758

$

172,328

Income tax expense

 

7,532

 

22,953

 

46,495

 

56,311

 

7,069

 

7,532

 

24,695

 

46,495

Interest expense on corporate debt

 

9,306

 

1,766

 

22,123

 

5,291

 

17,594

 

9,306

 

49,878

 

22,123

Amortization and depreciation

 

59,846

 

53,498

 

177,101

 

148,879

 

57,479

 

59,846

 

170,737

 

177,101

Provision (benefit) for credit losses

 

1,218

 

1,266

 

(13,120)

 

(14,380)

 

421

 

1,218

 

(11,088)

 

(13,120)

Net write-offs(1)

 

 

 

 

 

(2,008)

 

 

(8,041)

 

Share-based compensation expense

 

5,546

 

10,708

 

27,154

 

26,945

 

7,427

 

5,546

 

22,468

 

27,154

Gain from revaluation of previously held equity-method investment

(39,641)

(39,641)

Write off of unamortized premium from corporate debt repayment

(4,420)

Fair value of expected net cash flows from servicing, net

 

(55,291)

 

(89,482)

 

(159,970)

 

(209,266)

 

(35,375)

 

(55,291)

 

(107,446)

 

(159,970)

Adjusted EBITDA

$

74,990

$

72,430

$

232,470

$

199,611

$

74,065

$

74,990

$

212,541

$

232,470

(1)The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

The following tables present period-to-period comparisons of the components of adjusted EBITDA for the three and nine months ended September 30, 20222023 and 2021.2022.

ADJUSTED EBITDA – THREE MONTHS

CONSOLIDATED

For the three months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

Loan origination and debt brokerage fees, net

$

90,858

$

123,242

$

(32,384)

(26)

%  

Servicing fees

 

75,975

 

70,628

 

5,347

8

Property sales broker fees

30,308

33,677

(3,369)

(10)

Investment management fees

16,301

2,564

13,737

536

Net warehouse interest income

 

3,980

 

5,583

 

(1,603)

(29)

Escrow earnings and other interest income

 

18,129

 

2,032

 

16,097

792

Other revenues

 

24,943

 

19,013

 

5,930

31

Personnel

 

(151,513)

 

(159,473)

 

7,960

(5)

Net write-offs

 

 

 

N/A

Other operating expenses

 

(33,991)

 

(24,836)

 

(9,155)

37

Adjusted EBITDA

$

74,990

$

72,430

$

2,560

4

For the three months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2023

    

2022

    

Change

    

Change

 

Loan origination and debt brokerage fees, net

$

56,149

$

90,858

$

(34,709)

(38)

%  

Servicing fees

 

79,200

 

75,975

 

3,225

4

Property sales broker fees

16,862

30,308

(13,446)

(44)

Investment management fees

13,362

16,301

(2,939)

(18)

Net warehouse interest income (expense)

 

(2,031)

 

3,980

 

(6,011)

(151)

Placement fees and other interest income

 

43,000

 

18,129

 

24,871

137

Other revenues

 

27,140

 

24,943

 

2,197

9

Personnel

 

(129,080)

 

(151,513)

 

22,433

(15)

Net write-offs

 

(2,008)

 

 

(2,008)

N/A

Other operating expenses

 

(28,529)

 

(33,991)

 

5,462

(16)

Adjusted EBITDA

$

74,065

$

74,990

$

(925)

(1)

4446

ADJUSTED EBITDA – NINE MONTHS

CONSOLIDATED

For the nine months ended 

 

For the nine months ended 

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

2023

    

2022

    

Change

    

Change

 

Loan origination and debt brokerage fees, net

$

275,773

$

306,593

$

(30,820)

(10)

%  

$

168,201

$

275,773

$

(107,572)

(39)

%  

Servicing fees

 

222,916

 

205,658

 

17,258

8

 

232,027

 

222,916

 

9,111

4

Property sales broker fees

100,092

65,173

34,919

54

38,831

100,092

(61,261)

(61)

Investment management fees

47,345

9,115

38,230

419

44,844

47,345

(2,501)

(5)

Net warehouse interest income

 

14,021

 

14,768

 

(747)

(5)

Escrow earnings and other interest income

 

26,683

 

5,972

 

20,711

347

Net warehouse interest income (expense)

 

(3,556)

 

14,021

 

(17,577)

(125)

Placement fees and other interest income

 

109,310

 

26,683

 

82,627

310

Other revenues

 

90,494

 

35,375

 

55,119

156

 

84,624

 

90,494

 

(5,870)

(6)

Personnel

 

(442,454)

 

(380,872)

 

(61,582)

16

 

(365,957)

 

(442,454)

 

76,497

(17)

Net write-offs(1)

 

 

 

N/A

 

(8,041)

 

 

(8,041)

N/A

Other operating expenses

 

(102,400)

 

(62,171)

 

(40,229)

65

 

(87,742)

 

(102,400)

 

14,658

(14)

Adjusted EBITDA

$

232,470

$

199,611

$

32,859

16

$

212,541

$

232,470

$

(19,929)

(9)

(1)The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

Three and nine months ended September 30, 20222023 compared to three and nine months ended September 30, 20212022

Origination fees decreased primarily due to a declinedeclines in the earnings rate from our debt financing volumes coupled with a slight decrease inoverall debt financing volumes. Servicing fees increased largely due to growth in the average servicing portfolio period over period. Property sales broker fees decreased principally due to declines in property sales volumes. Investment management fees decreased primarily as a result of a decline in the property sales volume. InvestmentLIHTC investment management fees increasedfees. Net warehouse interest income (expense) decreased from a net revenue position in 2022 to a net expense position in 2023 primarily due to the additioninverted yield curve throughout much of investment management2023. Placement fees from our LIHTC operations acquired in the fourth quarter of 2021. Escrow earnings and other interest income increased largely as a result of a higher escrow earnings rateplacement fee rates due to rising short-term interest rates. OtherFor the nine months ended September 30, 2023 only, other revenues increaseddecreased primarily due to the addition of other revenues from our LIHTC operations,declines in prepayment fees, partially offset by a decreaseincreases in prepayment fees.investment banking revenues and miscellaneous revenues. The decreasedecreases in personnel expenses waswere primarily a result ofdue to decreases in commission costs due to our lower transaction volumes. Net write-offs increased due to the decreasecharge off of an Interim Program loan that defaulted in debt financing and property sales volumes, partially offset by increases in salaries and benefits costs driven by an increase2019 that was settled in the average headcount.second quarter of 2023 and a loss settlement in our at-risk portfolio during the third quarter of 2023 with no comparable activity in 2022. Other operating expenses increaseddecreased largely as a result of (i) the overall growth of the Company over the past year including expenses from acquired subsidiaries and (ii) an increasedecreases 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 months ended September 30, 2022 compared to nine months ended September 30, 2021

Originationprofessional fees decreased as a result of a decline in the earnings rate from our debt financing volumes due to market volatility and rising interest rates and a decrease in overall 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 largely as a result of a higher escrow earnings rate due to rising interest rates. Other revenues increased primarily as a result of increases in: (i) prepayment fees, (ii) other revenues from our LIHTC operations, and (iii) research subscription fees. The increase in personnel expenses was primarily a result of increases in commission costs due to the increase in property sales broker fees and salaries and benefits costs driven by an increase in the average headcount. 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 (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.

cost-reduction initiatives.

Financial Condition

Cash Flows from Operating Activities

Our cash flows from operating activities are generated from loan sales, servicing fees, placement fees from escrow earnings,deposits, 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 and property sales, 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.

45

Cash Flows from Investing Activities

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

47

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 forin connection with the exercise of stock options (cash inflow) and for acquisitions (non-cash transactions).

Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022

The following table presents a period-to-period comparison of the significant components of cash flows for the nine months ended September 30, 20222023 and 2021.2022.

SIGNIFICANT COMPONENTS OF CASH FLOWS

For the nine months ended September 30, 

Dollar

Percentage

 

For the nine months ended September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

    

2023

    

2022

    

Change

    

Change

 

Net cash provided by (used in) operating activities

$

(466,766)

$

(196,979)

$

(269,787)

137

%  

$

(332,412)

$

(466,766)

$

134,354

(29)

%  

Net cash provided by (used in) investing activities

 

(170,990)

 

49,325

 

(220,315)

(447)

 

146,569

 

(170,990)

 

317,559

(186)

Net cash provided by (used in) financing activities

 

449,634

 

194,265

 

255,369

131

 

228,207

 

449,634

 

(221,427)

(49)

Total of cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period ("Total cash")

205,058

404,613

(199,555)

(49)

300,647

205,058

95,589

47

Cash flows from (used in) operating activities

Net receipt (use) of cash for loan origination activity

$

(594,506)

$

(301,921)

$

(292,585)

97

%  

$

(378,891)

$

(594,506)

$

215,615

(36)

%  

Net cash provided by (used in) operating activities, excluding loan origination activity

127,740

104,942

22,798

22

46,479

127,740

(81,261)

(64)

Cash flows from (used in) investing activities

Purchases of pledged AFS securities

$

(51,302)

$

(7,250)

$

(44,052)

608

%  

$

$

(51,302)

$

51,302

(100)

%  

Proceeds from the prepayment/sale of pledged AFS securities

9,261

28,781

(19,520)

(68)

Purchase of equity-method investments

(25,098)

(8,029)

(17,069)

213

Purchases of equity-method investments

(15,062)

(25,098)

10,036

(40)

Acquisitions, net of cash received

(114,163)

(62,208)

(51,955)

84

(114,163)

114,163

(100)

Capital expenditures

(19,302)

(5,507)

(13,795)

250

(13,880)

(19,302)

5,422

(28)

Net payoff of (investment in) loans held for investment

22,728

127,591

(104,863)

(82)

160,801

22,728

138,073

608

Net distributions from (investments in) joint ventures

6,886

(24,053)

30,939

129

Cash flows from (used in) financing activities

Borrowings (repayments) of warehouse notes payable, net

$

593,685

$

333,887

$

259,798

78

%  

$

387,109

$

593,685

$

(206,576)

(35)

%  

Borrowings of interim warehouse notes payable

 

36,459

 

154,661

 

(118,202)

(76)

 

 

36,459

 

(36,459)

(100)

Repayments of interim warehouse notes payable

 

(26,000)

 

(157,277)

 

131,277

(83)

 

(119,835)

(26,000)

 

(93,835)

361

Repayments of notes payable

(29,487)

(2,234)

(27,253)

1,220

(120,046)

(29,487)

(90,559)

307

Borrowings of notes payable

196,000

196,000

N/A

Payment of contingent consideration

(19,720)

(19,720)

N/A

(26,090)

(19,720)

(6,370)

32

Repurchase of common stock

(40,675)

(15,686)

(24,989)

159

(18,928)

(40,675)

21,747

(53)

Borrowings (repayments) of secured borrowings

(73,312)

73,312

(100)

Cash dividends paid

(60,025)

(48,268)

(11,757)

24

The increasedecrease in net cash used in 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.time due to the timing difference between the date of origination and date of delivery. The increasedecrease in cash flows used in loan

46

origination activities is primarily attributable to a net increase in originations (net cash used) outpacing sales by $378.9 million in 2023 compared to $594.5 million in 20222022. The decline in the amount of originations in excess of sales was due to a decline in our total origination activity in 2023 compared to $301.9 million in 2021.2022. Excluding cash used for the origination and sale of loans, cash flows provided by operating activities were $46.5 million in 2023, down from $127.7 million in 2022, up from $104.9 million in 2021.2022. The increasedecrease is primarily the result of a $77.5$97.2 million changedecrease in net income before noncontrolling interests and a $70.0 million increase in cash used for other operating activities, net, partially offset by a $46.2 million net increase in non-cash adjustments for MSRs and amortization and depreciation partially offset by (i)and a $39.6 million increase in a non-cash adjustment for the Apprise revaluation gain in 2022 with no comparable activity in 2021 and (ii) a $14.6 million decrease in net income before noncontrolling interests. The significant decrease in Total cash over the past year is largely attributable to acquisition activity, partially offset by an increase in our long-term debt.2023.

The change from net cash provided by investing activities in 2021 to net cash used in investing activities in 2022 to net cash provided by investing activities in 2023 was due to (i) an increase in cash used in acquisitions in 2022 compared to 2021, (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 capital expenditures due to the build out of our new corporate headquarters, (v) an increase in the purchase of equity-method investments as capital calls for capital commitments increased year over year, and (vi) an increase in the purchase of AFS securities, which iswas impacted by the elevated payoffs of pledged AFS securities partially offset byleading up to 2022 and no purchases in 2023 as the change from net investments in joint ventures to net distributions from joint ventures. For the nine months ended September 30, 2021, we had three acquisitions, two of whichmarket interest rates on pledged securities AFS were small, compared to the GeoPhy acquisition, which wasnot substantially largerhigher than the acquisitions in 2021, resulting in an increase inshort-term rate earned on uninvested cash used for acquisitions. We also made a large payment for working capital adjustments for the Alliant acquisition in 2022, with no comparable activity in 2021. Net payoff of loans held for 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 funds from the payoff of AFS securities that occurred late in 2021.

The increase in cash provided by financing activities was attributable to (i) an increase in net warehouse borrowings and (ii) a decrease in repayments of secured borrowings, partially offset by (i) a change to net borrowings from net repayments of interim warehouse notes payable, (ii) an increase in repayments of notes payable, (iii) an increase in the payment of contingent consideration as the Company made payments in 2022 for outsized performances of certain acquired entities in 2021, (iv) an increase in repurchases of common stock, and (v) an increase in dividends paid. The increase in the net borrowings of warehouse notes payable was due to the aforementioned increase in cash used for loan origination activity. The change to net cash borrowings from net repayments of interim warehouse notes payable was primarily due to a reduction in repayments as we had fewer originations in 2022. The increase in repayments of notes payable was due to the quarterly paydowns of a note payable at our subsidiary, Alliant, with no comparable activity in 2021. 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 the 2021 stock repurchase 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.

4748

due to the inverted yield curve, (ii) a decrease in purchases of equity-method investments, as we made fewer capital contributions in our LIHTC investments and other equity-method investments, (iii) a significant reduction in cash used for acquisitions in 2023 compared to 2022, as we had no acquisitions in 2023, (iv) a decrease in capital expenditures due to elevated capital expenditures in 2022 related to the build out of our new headquarters, and (v) an increase in net payoffs of loans held for investment in 2023 due to (a) contractual maturities and the refinancing of these transitional bridge loans to permanent debt structures and (b) no originations in 2023 as we have shifted away from the Interim Loan Program over the past year to invest in other endeavors.

The decrease in cash provided by financing activities in 2023 was largely attributable to (i) a decrease in net warehouse borrowings due to the aforementioned decrease in loan origination activity, (ii) a decrease in borrowings of interim warehouse notes payable due to the aforementioned reduction in Interim Loan Program loan originations in 2023, (iii) an increase in repayments of interim warehouse notes payable due to the aforementioned maturities and refinancings mentioned above, (iv) an increase in repayments of notes payable, and (v) an increase in the payment of contingent consideration liabilities (“earnouts”), partially offset by (a) an increase in borrowings of notes payable and (b) a decrease in repurchases of common stock. The increase in earnout payments was due to a larger payment in 2023 compared to 2022 for one of our acquisitions. The increase in borrowings of notes payable was due to borrowings under our Incremental Term Loan (defined in Liquidity and Capital Resources below), a portion of which was used to repay notes payable at one of our subsidiaries, resulting in an increase in the repayments of notes payable. The decrease in repurchases of common stock was related to a decrease in the number and value of employee stock vesting events related to previously issued equity grants under our various share-based compensation plans due to both our financial performance and the substantially lower stock price at which these vesting events occurred.

Segment Results

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

Capital Markets

SUPPLEMENTAL OPERATING DATA

CAPITAL MARKETS

For the three months ended

For the nine months ended

September 30, 

September 30, 

(in thousands; except per share data)

    

2022

    

2021

2022

    

2021

    

Transaction Volume:

Components of Debt Financing Volume

Fannie Mae

$

3,038,788

$

3,271,765

$

8,955,562

$

6,716,765

Freddie Mac

 

1,885,492

 

2,591,906

 

4,014,375

 

4,607,945

Ginnie Mae ̶ HUD

 

338,054

 

522,093

 

931,230

 

1,816,800

Brokered(1)

 

6,601,244

 

6,402,862

 

21,502,815

 

16,985,932

Total Debt Financing Volume

$

11,863,578

$

12,788,626

$

35,403,982

$

30,127,442

Property Sales Volume

4,993,615

5,230,093

16,417,367

9,967,385

Total Transaction Volume

$

16,857,193

$

18,018,719

$

51,821,349

$

40,094,827

Key Performance Metrics:

Adjusted EBITDA(2)

$

119

$

21,288

$

28,255

$

52,633

Operating Margin

27

%

42

%

31

%

42

%

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

Origination related fees(3)

0.76

%  

0.95

%  

0.77

%  

1.00

%  

MSR income(4)

0.47

0.70

0.45

0.69

MSR income, as a percentage of Agency debt financing volume(4)

1.05

1.40

1.15

1.59

For the three months ended

September 30, 

Dollar

    

Percentage

(in thousands; except per share data)

    

2023

    

2022

Change

Change

Transaction Volume:

Components of Debt Financing Volume

Fannie Mae

$

1,739,332

$

3,038,788

$

(1,299,456)

(43)

%  

Freddie Mac

 

1,072,048

 

1,885,492

(813,444)

(43)

Ginnie Mae ̶ HUD

 

86,557

 

338,054

(251,497)

(74)

Brokered(1)

 

3,149,457

 

6,601,244

 

(3,451,787)

(52)

Total Debt Financing Volume

$

6,047,394

$

11,863,578

$

(5,816,184)

(49)

%  

Property sales volume

2,508,073

4,993,615

(2,485,542)

(50)

Total Transaction Volume

$

8,555,467

$

16,857,193

$

(8,301,726)

(49)

%  

Key Performance Metrics:

Net income

$

7,050

$

36,463

(29,413)

(81)

Adjusted EBITDA(2)

(15,704)

1,302

(17,006)

(1,306)

Operating margin

8

%

26

%

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

Origination fees

0.93

%  

0.76

%  

MSR income

0.58

0.47

MSR income, as a percentage of Agency debt financing volume

1.22

1.05

 

49

For the nine months ended

September 30, 

Dollar

    

Percentage

(in thousands; except per share data)

2023

    

2022

    

Change

Change

Transaction Volume:

Components of Debt Financing Volume

Fannie Mae

$

5,328,992

$

8,955,562

$

(3,626,570)

(40)

%  

Freddie Mac

 

3,260,672

 

4,014,375

(753,703)

(19)

Ginnie Mae ̶ HUD

 

361,929

 

931,230

(569,301)

(61)

Brokered(1)

 

8,829,434

 

21,502,815

 

(12,673,381)

(59)

Total Debt Financing Volume

$

17,781,027

$

35,403,982

$

(17,622,955)

(50)

%  

Property sales volume

5,907,138

16,417,367

(10,510,229)

(64)

Total Transaction Volume

$

23,688,165

$

51,821,349

$

(28,133,184)

(54)

%  

Key Performance Metrics:

Net income

$

23,661

$

129,824

(106,163)

(82)

%

Adjusted EBITDA(2)

(44,725)

32,666

(77,391)

(237)

Operating margin

10

%

30

%

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

Origination fees

0.94

%  

0.77

%  

MSR income

0.60

0.45

MSR income, as a percentage of Agency debt financing volume

1.20

1.15

(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 Measure”.Measure.”
(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.

FINANCIAL RESULTS – THREE MONTHS

CAPITAL MARKETS

For the three months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2023

    

2022

    

Change

    

Change

 

Revenues

Origination fees

$

56,149

$

89,752

$

(33,603)

(37)

%  

MSR Income

35,375

55,291

(19,916)

(36)

Property sales broker fees

16,862

30,308

(13,446)

(44)

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

 

(2,565)

 

2,178

 

(4,743)

(218)

Other revenues

 

11,875

 

11,011

 

864

8

Total revenues

$

117,696

$

188,540

$

(70,844)

(38)

Expenses

Personnel

$

97,973

$

128,981

$

(31,008)

(24)

%  

Amortization and depreciation

 

1,137

 

1,052

 

85

8

Interest expense on corporate debt

4,874

2,430

2,444

101

Other operating expenses

 

4,193

 

6,869

 

(2,676)

(39)

Total expenses

$

108,177

$

139,332

$

(31,155)

(22)

Income from operations

$

9,519

$

49,208

$

(39,689)

(81)

Income tax expense

 

2,386

 

12,468

 

(10,082)

(81)

Net income before noncontrolling interests

$

7,133

$

36,740

$

(29,607)

(81)

Less: net income (loss) from noncontrolling interests

 

83

 

277

 

(194)

 

(70)

Net income

$

7,050

$

36,463

$

(29,413)

(81)

4850

FINANCIAL RESULTS – THREE MONTHS

CAPITAL MARKETS

For the three months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

Revenues

Loan origination and debt brokerage fees, net

$

89,752

$

121,133

$

(31,381)

(26)

%  

Fair value of expected net cash flows from servicing, net

55,291

89,482

(34,191)

(38)

Property sales broker fees

30,308

33,677

(3,369)

(10)

Net warehouse interest income, loans held for sale

 

2,178

 

3,723

 

(1,545)

(41)

Other revenues

 

5,845

 

3,026

 

2,819

93

Total revenues

$

183,374

$

251,041

$

(67,667)

(27)

Expenses

Personnel

$

125,980

$

139,890

$

(13,910)

(10)

%  

Amortization and depreciation

 

952

 

17

 

935

5,500

Other operating expenses

 

6,063

 

4,628

 

1,435

31

Total expenses

$

132,995

$

144,535

$

(11,540)

(8)

Income from operations

$

50,379

$

106,506

$

(56,127)

(53)

Income tax expense

 

12,751

 

25,660

 

(12,909)

(50)

Net income

$

37,628

$

80,846

$

(43,218)

(53)

FINANCIAL RESULTS – NINE MONTHS

CAPITAL MARKETS

For the nine months ended

 

For the nine months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

    

2023

    

2022

    

Change

    

Change

 

Revenues

Loan origination and debt brokerage fees, net

$

273,660

$

302,011

$

(28,351)

(9)

%  

Fair value of expected net cash flows from servicing, net

159,970

209,266

(49,296)

(24)

Origination fees

$

167,679

$

273,660

$

(105,981)

(39)

%  

MSR Income

107,446

159,970

(52,524)

(33)

Property sales broker fees

100,092

65,173

34,919

54

38,831

100,092

(61,261)

(61)

Net warehouse interest income, loans held for sale

 

9,415

 

9,066

 

349

4

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

 

(7,006)

 

9,415

 

(16,421)

(174)

Other revenues

 

12,503

 

8,721

 

3,782

43

 

40,735

 

29,838

 

10,897

37

Total revenues

$

555,640

$

594,237

$

(38,597)

(6)

$

347,685

$

572,975

$

(225,290)

(39)

Expenses

Personnel

$

363,619

$

332,519

$

31,100

9

%  

$

281,502

$

372,656

$

(91,154)

(24)

%  

Amortization and depreciation

 

1,762

 

556

 

1,206

217

 

3,412

 

2,191

 

1,221

56

Interest expense on corporate debt

13,870

5,488

8,382

153

Other operating expenses

 

16,757

 

11,628

 

5,129

44

 

15,037

 

19,943

 

(4,906)

(25)

Total expenses

$

382,138

$

344,703

$

37,435

11

$

313,821

$

400,278

$

(86,457)

(22)

Income from operations

$

173,502

$

249,534

$

(76,032)

(30)

$

33,864

$

172,697

$

(138,833)

(80)

Income tax expense

 

42,074

 

58,014

 

(15,940)

(27)

 

8,462

 

41,878

 

(33,416)

(80)

Net income before noncontrolling interests

$

25,402

$

130,819

$

(105,417)

(81)

Less: net income (loss) from noncontrolling interests

 

1,741

 

995

 

746

 

75

Net income

$

131,428

$

191,520

$

(60,092)

(31)

$

23,661

$

129,824

$

(106,163)

(82)

49

Revenues

Loan origination and debt brokerageOrigination fees net (“origination fees”) and Fair value of expected net cash flows from servicing, net (“MSR income”).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 nine months ended

For the three months ended

For the nine months ended

September 30, 

September 30, 

September 30, 

September 30, 

Debt Financing Volume by Product Type

2022

2021

2022

2021

2023

2022

2023

2022

Fannie Mae

25

%

26

%

25

%

22

%

29

%

25

%

30

%

25

%

Freddie Mac

16

20

11

15

18

16

18

11

Ginnie Mae ̶ HUD

3

4

3

6

1

3

2

3

Brokered

56

50

61

57

52

56

50

61

For the three months ended

For the nine months ended

For the three months ended

For the nine months ended

September 30, 

September 30, 

September 30, 

September 30, 

Mortgage Banking Details (basis points)

2022

2021

2022

2021

2023

2022

2023

2022

Origination Fee Rate (1)

76

95

77

100

93

76

94

77

Basis Point Change

(19)

(23)

17

17

Percentage Change

(20)

%

(23)

%

22

%

22

%

MSR Rate (2)

47

70

45

69

58

47

60

45

Basis Point Change

(23)

(24)

11

15

Percentage Change

(33)

%

(35)

%

23

%

33

%

Agency MSR Rate (3)

105

140

115

159

122

105

120

115

Basis Point Change

(35)

(44)

17

5

Percentage Change

(25)

%

(28)

%

16

%

4

%

(1)Loan origination and debt brokerageOrigination fees net as a percentage of total mortgage bankingdebt financing volume.
(2)MSR Income as a percentage of total debt financing volume, excluding the income and debt financing volume from principal lending and investing.

51

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

For the three and nine months ended September 30, 2023, the decreases in origination fees were primarily the result of a 49% and 50% decrease in debt financing volume, respectively, partially offset by a 17-basis-point increase in our origination fee rate for both the three and nine-month periods. The increases in the origination fee rate were driven by increases in GSE debt financing volume as a percentage of total debt financing volume as seen above. GSE debt financing volume has higher origination fees than brokered debt financing volume. Additionally, during the nine months ended September 30, 2022, our Fannie Mae debt financing volumes included a $1.9 billion Fannie Mae loan portfolio, for which we received a much lower origination fee than is typical for individual loans.

For the three months ended September 30, 2022, the decrease in origination fees was the result of a 19-basis-point decrease in our origination fee rate and a 7.2% decrease in segment debt financing volume. The decline in the origination fee rate was driven by a combination of a decline in the Agency debt financing volumes, particularly in our HUD debt financing volumes, and a decline in the margins we earn on our debt financing products as spreads tightened due to large interest rate increases during the third quarter of 2022.

For the nine months ended September 30, 2022, the decrease in origination fees was primarily due to a 23-basis-point decrease in our origination fee rate, partially offset by an increase in overall debt financing volumes. Our origination fee rate declined due to substantial declines in our HUD debt financing volumes and a reduction in our Fannie Mae origination fee margin. The decrease in our origination fee rate was partially offset by an increase in Fannie Mae and brokered origination fees as both debt financing product volumes increased substantially during the year.

For the three months ended September 30, 2022,2023, the decrease in MSR income was attributable to the 25% decrease in our Agency MSR Rate, coupled with a 45% decrease in Agency debt financing volumes. Ourvolume, partially offset by a 17-basis point increase in the Agency MSR Rate decreased primarily due to a 27% decrease in the weighted-average servicing fee on our Fannie Mae loans. Our Agency debt financing volumes, particularly our Freddie Mac and HUD volumes, declined due to the current interest rate environment. Our Fannie Mae and HUD products are our most profitable products.

seen above. For the nine months ended September 30, 2022,2023, the decrease in MSR income was dueattributable to a 28% decline36% decrease in Agency debt financing volume, partially offset by a five-basis point increase in the Agency MSR Rate partially offset by a 33% increaseseen above. The increases in the Agency MSR Rate were primarily the result of increases in Fannie Mae debt financing volume. The decrease in Agency MSR rate was driven by (i) a significant decline in HUD debt financing volumevolumes as a percentage of segmenttotal debt financing volume and (ii)volumes. Additionally, we had a 38% decrease$1.9 billion Fannie Mae portfolio that closed in the second quarter of 2022, which had a very low servicing fee rate that is typical of such a portfolio. There was no comparable portfolio in 2023. Our Fannie Mae products have higher weighted-average servicing fee on(“WASF”) than our Fannie Mae volume.other products.

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

50

Property sales broker fees. For the three and nine months ended September 30, 2022, 2023, the decreasedecreases in property sales broker fees waswere driven principally by a 4.5% decreasethe 50% and 64% decreases, respectively, in the property sales volumes yearperiod over year, combined with a decrease in the property sales broker fee margin.

For the nine months ended September 30, 2022, the increase in property sales broker fees was driven by the 64.7% increase in the property sales volumes year over year, partially offset by a decline in the property sales broker fee margin.period.

See the “Overview of Current Business Environment” section above for a detailed discussion of the factors driving the changeschange in property sales volume.

Net warehouse interest income (expense). For both the three and nine months ended September 30, 2023, the decreases in net warehouse interest income from a net revenue position in 2022 to a net expense position in 2023 were primarily attributable to an inverted yield curve during much of 2023. Short-term interest rates, upon which we incur interest expense, were higher than the long-term mortgage rates, upon which we earn interest income, during 2023. Partially reducing the negative impact of the inverted yield curve and resulting negative net spreads shown below were the lower average balances of loans held for sale outstanding in 2023 compared to 2022, which were driven by reductions in the number of days loans were held before delivery and lower debt financing volumes.

For the three months ended

For the nine months ended

September 30, 

September 30, 

Net Warehouse Interest Income (Expense) Details (dollars in thousands)

2023

2022

2023

2022

Average LHFS Outstanding Balance

$

764,615

$

1,325,419

$

669,878

$

1,338,784

Dollar Change

$

(560,804)

$

(668,906)

Percentage Change

(42)

%

(50)

%

LHFS Net Spread (basis points)

(134)

66

(139)

94

Basis Point Change

(200)

(233)

Percentage Change

(303)

%

(248)

%

Other revenues. For the nine months ended September 30, 2023, the increase was due to a $6.9 million increase in investment banking revenues and smaller increases in various other revenues categories. The increase in investment banking revenues was primarily due to the closing of the largest investment banking advisory transaction in Company history.

Expenses

Personnel. For the three months ended September 30, 2022, the2023, the decrease was primarily the result of (i) a $19.8$25.2 million decrease in commission costs due to lower origination fees and property sales broker fees and (ii)noted above, combined with a $2.9$6.1 million decrease in the accrual for subjective bonuses, partially offset by (i) a $6.5 million increase in salaries and benefits and (ii) a $2.5 million increase other compensation costs, bothbonuses due to higher averagelower headcount resulting from (a) acquisitions and hiring initiatives and (b)our financial performance. Our lower headcount was due to a workforce reduction undertaken in the GeoPhy acquisition and corresponding consolidationsecond quarter of Apprise.2023.  

52

For the nine months ended September 30, 2022, the increase2023, the decrease was primarily the result of (i) a $21.4an $89.4 million increasedecrease in property sales commission costs due to higherlower origination fees and property sales broker fees, (ii) an $18.0 million increase in salariesfees.

Interest expense on corporate debt. Interest expense on corporate debt is determined at a consolidated corporate level and benefits, and (iii) a $9.0 million increase in other compensation costs.allocated to each segment proportionally based on each segment’s use of that corporate debt. The increases in (ii) and (iii)discussion of our consolidated results above were duehas additional information related to higher average headcount resulting from (a) acquisitions and hiring initiatives and (b) the GeoPhy acquisition and corresponding consolidation of Apprise. Partially offsetting the increase in personnelinterest expense was a $13.7 million decrease in debt financing commission costs as a result of the decrease in origination fees, coupled with a $5.4 million decrease in the accrual for subjective bonuses.on corporate debt.

Other Operating Expenses.operating expenses. For the three and nine months ended September 30, 2022,2023, the increasedecreases were primarily stemmed from increasesa result of cost-reduction initiatives across a variety of cost categories, with the most prominent decreases in professional fees and travel and entertainment costs of $5.2 million 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.costs.

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, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our CM segment is presented below. Our segment levelsegment-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:

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CAPITAL MARKETS

For the three months ended

For the nine months ended

For the three months ended

For the nine months ended

September 30, 

September 30, 

September 30, 

September 30, 

(in thousands)

    

2022

    

2021

    

2022

    

2021

    

2023

    

2022

    

2023

    

2022

Reconciliation of Net Income to Adjusted EBITDA

Reconciliation of Net Income to Adjusted EBITDA

Reconciliation of Net Income to Adjusted EBITDA

Net Income

$

37,628

$

80,846

$

131,428

$

191,520

$

7,050

$

36,463

$

23,661

$

129,824

Income tax expense

 

12,751

 

25,660

 

42,074

 

58,014

 

2,386

 

12,468

 

8,462

 

41,878

Interest expense on corporate debt

4,874

2,430

13,870

5,488

Amortization and depreciation

952

17

1,762

556

1,137

1,052

3,412

2,191

Share-based compensation expense

4,079

4,247

12,961

11,809

4,224

4,180

13,316

13,255

Fair value of expected net cash flows from servicing, net

 

(55,291)

 

(89,482)

 

(159,970)

 

(209,266)

MSR Income

 

(35,375)

 

(55,291)

 

(107,446)

 

(159,970)

Adjusted EBITDA

$

119

$

21,288

$

28,255

$

52,633

$

(15,704)

$

1,302

$

(44,725)

$

32,666

The following tables present period-to-period comparisons of the components of CM adjusted EBITDA for the three and nine months ended September 30, 20222023 and 2021.2022.

51

ADJUSTED EBITDA – THREE MONTHS

CAPITAL MARKETS

For the three months ended

 

For the three months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

2023

    

2022

    

Change

    

Change

 

Loan origination and debt brokerage fees, net

$

89,752

$

121,133

$

(31,381)

(26)

%  

Origination fees

$

56,149

$

89,752

$

(33,603)

(37)

%  

Property sales broker fees

30,308

33,677

(3,369)

(10)

16,862

30,308

(13,446)

(44)

Net warehouse interest income, loans held for sale

 

2,178

 

3,723

 

(1,545)

(41)

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

 

(2,565)

 

2,178

 

(4,743)

(218)

Other revenues

 

5,845

 

3,026

 

2,819

93

 

11,792

 

10,734

 

1,058

10

Personnel

 

(121,901)

 

(135,643)

 

13,742

(10)

 

(93,749)

 

(124,801)

 

31,052

(25)

Other operating expenses

 

(6,063)

 

(4,628)

 

(1,435)

31

 

(4,193)

 

(6,869)

 

2,676

(39)

Adjusted EBITDA

$

119

$

21,288

$

(21,169)

(99)

$

(15,704)

$

1,302

$

(17,006)

(1,306)

53

ADJUSTED EBITDA – NINE MONTHS

CAPITAL MARKETS

For the nine months ended 

 

For the nine months ended 

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

2023

    

2022

    

Change

    

Change

 

Loan origination and debt brokerage fees, net

$

273,660

$

302,011

$

(28,351)

(9)

%  

Origination fees

$

167,679

$

273,660

$

(105,981)

(39)

%  

Property sales broker fees

100,092

65,173

34,919

54

38,831

100,092

(61,261)

(61)

Net warehouse interest income, loans held for sale

 

9,415

 

9,066

 

349

4

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

 

(7,006)

 

9,415

 

(16,421)

(174)

Other revenues

 

12,503

 

8,721

 

3,782

43

 

38,994

 

28,843

 

10,151

35

Personnel

 

(350,658)

 

(320,710)

 

(29,948)

9

 

(268,186)

 

(359,401)

 

91,215

(25)

Other operating expenses

 

(16,757)

 

(11,628)

 

(5,129)

44

 

(15,037)

 

(19,943)

 

4,906

(25)

Adjusted EBITDA

$

28,255

$

52,633

$

(24,378)

(46)

$

(44,725)

$

32,666

$

(77,391)

(237)

Three months ended September 30, 20222023 compared to three months ended September 30, 20212022

Loan origination and debt brokerageOrigination fees net decreased due to a decrease in our overall debt financing volume, partially offset by an increase in our origination fee rate and a decrease in our Agency debt financing volume.rate. Property sales broker fees decreased as a result of the decline in property sales volumes, combined with a decrease involumes. Net warehouse interest income (expense) decreased largely due to the property sales broker fee margin.inverted yield curve. The decrease in personnel expense was primarily due to decreased commission costs due to the decrease in origination fees and property sales broker fees, partially offset by growth in salaries and benefits costs resulting from an increase in the average headcount from acquisitions and hiring initiatives.fees. Other operating expenses increased primarily due to increases in travel and entertainment costsdecreased largely as a result of our bankers and brokers attended more in person meetings in 2022.cost-reduction initiatives.

Nine months ended September 30, 20222023 compared to nine months ended September 30, 20212022

Loan origination and debt brokerageOrigination fees net decreased due to a decrease in our origination fee rate,overall debt financing volume, partially offset by an increase in segment debt financing volumes.our origination fee rate. Property sales broker fees increaseddecreased as a result of the significant increasesdecline in property sales volumes, partially offset by avolumes. Net warehouse interest income (expense) decreased primarily due to the inverted yield curve. Other revenues increased largely due to increased investment banking revenues. The decrease in the property sales broker fee margin. The increase in personnel expense was primarily due to increased (i) property salesdecreased commission costs and (ii) salaries and benefits costs resulting from an increase in average headcount from acquisitions and hiring initiatives, partially offset by a decrease in debt financing commission costs as a result ofdue to the decrease in origination fees. Other operating expenses increaseddecreased primarily as a result of the increased travel and entertainment costs.our cost-reduction initiatives.

5254

Servicing & Asset Management

SUPPLEMENTAL OPERATING DATA

SERVICING & ASSET MANAGEMENT

(dollars in thousands)

As of September 30, 

Managed Portfolio:

    

2022

    

2021

Components of Servicing Portfolio

Fannie Mae

$

58,426,446

$

52,317,953

Freddie Mac

 

37,241,471

 

38,039,014

Ginnie Mae - HUD

 

9,634,111

 

9,894,893

Brokered (1)

 

15,224,581

 

13,429,801

Principal Lending and Investing (2)

 

251,815

 

238,713

Total Servicing Portfolio

$

120,778,424

$

113,920,374

Assets under management

17,017,355

2,309,332

Total Managed Portfolio

$

137,795,779

$

116,229,706

For the three months ended

For the nine months ended

September 30, 

September 30, 

Key Volume and Performance Metrics:

2022

2021

2022

2021

Principal Lending and Investing Origination Volume(3)

$

62,015

$

472,142

$

307,586

$

968,629

Adjusted EBITDA(4)

107,517

82,810

300,352

225,933

Operating Margin

36

%

30

%

37

%

36

%

(dollars in thousands)

As of September 30, 

Dollar

    

Percentage

Managed Portfolio:

    

2023

    

2022

    

Change

Change

Components of Servicing Portfolio

Fannie Mae

$

62,850,853

$

58,426,446

$

4,424,407

8

%  

Freddie Mac

 

38,656,136

 

37,241,471

1,414,665

4

Ginnie Mae - HUD

 

10,320,520

 

9,634,111

686,409

7

Brokered (1)

 

17,091,925

 

15,224,581

 

1,867,344

12

Principal Lending and Investing (2)

 

40,000

 

251,815

(211,815)

(84)

Total Servicing Portfolio

$

128,959,434

$

120,778,424

$

8,181,010

7

%  

Assets under management

17,334,877

17,017,355

317,522

2

Total Managed Portfolio

$

146,294,311

$

137,795,779

$

8,498,532

6

%  

As of September 30, 

Key Servicing Portfolio Metrics:

2022

    

2021

Custodial escrow account balance (in billions)

$

3.1

$

3.0

Weighted-average servicing fee rate (basis points)

24.7

24.6

Weighted-average remaining servicing portfolio term (years)

8.9

9.2

For the three months ended

September 30, 

Dollar

    

Percentage

Key Volume and Performance Metrics:

2023

2022

Change

Change

Equity syndication volume(3)

$

54,119

$

43,880

$

10,239

23

%  

Principal Lending and Investing debt financing volume(4)

62,015

(62,015)

(100)

Net income

45,427

30,923

14,504

47

Adjusted EBITDA(5)

124,849

106,281

18,568

17

Operating margin

41

%

31

%

As of September 30, 

Components of assets under management (in thousands)

2022

2021

Alliant(5)

$

14,692,962

$

WDIP

1,424,356

1,390,814

Interim Program JV Managed Loans(6)

900,037

918,518

Total assets under management

$

17,017,355

$

2,309,332

For the nine months ended

September 30, 

Dollar

    

Percentage

Key Volume and Performance Metrics:

2023

2022

Change

Change

Equity syndication volume(3)

$

461,212

$

405,170

$

56,042

14

%  

Principal Lending and Investing debt financing volume(4)

307,586

(307,586)

(100)

Net income

132,243

92,363

39,880

43

Adjusted EBITDA(5)

346,283

295,888

50,395

17

Operating margin

41

%

33

%

As of September 30, 

Key Servicing Portfolio Metrics:

2023

    

2022

Custodial escrow deposit balance (in billions)

$

2.8

$

3.1

Weighted-average servicing fee rate (basis points)

24.2

24.7

Weighted-average remaining servicing portfolio term (years)

8.4

8.9

As of September 30, 

Components of assets under management (in thousands)

2023

2022

LIHTC

$

15,248,530

$

14,692,962

Investment funds

1,350,027

1,424,356

Interim Program JV Managed Loans

736,320

900,037

Total assets under management

$

17,334,877

$

17,017,355

(1)Brokered loans serviced primarily for life insurance companies.
(2)Consists of interim loans not managed for the Interim Program JV.
(3)Amount of equity called and syndicated into LIHTC funds.

55

(4)For the three months ended September 30, 2022, comprised solely of WDIP separate account originations.originations. For the nine months ended September 30, 2022, includes $86.3 million from the Interim Program JV, $113.6 million from the Interim Loan Program, and $107.7 million from WDIP separate accounts. 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.
(4)(5)This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section below titled “Non-GAAP Financial Measure”.
(5)Alliant assets under management were acquired in December 2021.
(6)As of September 30, 2022 and 2021, only comprised of Interim Program JV managed loans.  

FINANCIAL RESULTS – THREE MONTHS

SERVICING & ASSET MANAGEMENT

For the three months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2023

    

2022

    

Change

    

Change

 

Revenues

Origination fees

$

$

1,106

$

(1,106)

(100)

%  

Servicing fees

79,200

75,975

3,225

4

Investment management fees

13,362

16,301

(2,939)

(18)

Net warehouse interest income (expense), loans held for investment

 

534

 

1,802

 

(1,268)

(70)

Placement fees and other interest income

 

39,475

 

17,760

 

21,715

122

Other revenues

 

15,569

 

16,378

 

(809)

(5)

Total revenues

$

148,140

$

129,322

$

18,818

15

Expenses

Personnel

$

17,139

$

18,728

$

(1,589)

(8)

%  

Amortization and depreciation

 

54,375

 

57,139

 

(2,764)

(5)

Provision (benefit) for credit losses

421

1,218

(797)

(65)

Interest expense on corporate debt

11,096

6,324

4,772

75

Other operating expenses

 

5,039

 

5,237

 

(198)

(4)

Total expenses

$

88,070

$

88,646

$

(576)

(1)

Income from operations

$

60,070

$

40,676

$

19,394

48

Income tax expense

 

15,040

 

10,204

 

4,836

47

Income before noncontrolling interests

$

45,030

$

30,472

$

14,558

48

Less: net income (loss) from noncontrolling interests

 

(397)

 

(451)

 

54

 

(12)

Net income

$

45,427

$

30,923

$

14,504

47

5356

FINANCIAL RESULTS – THREE MONTHS

SERVICING & ASSET MANAGEMENT

For the three months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

Revenues

Loan origination and debt brokerage fees, net

$

1,106

$

2,109

$

(1,003)

(48)

%  

Servicing fees

75,975

70,628

5,347

8

Investment management fees

16,301

2,564

13,737

536

Net warehouse interest income, loans held for investment

 

1,802

 

1,860

 

(58)

(3)

Escrow earnings and other interest income

 

17,760

 

1,945

 

15,815

813

Other revenues

 

21,544

 

16,724

 

4,820

29

Total revenues

$

134,488

$

95,830

$

38,658

40

Expenses

Personnel

$

21,676

$

10,446

$

11,230

108

%  

Amortization and depreciation

 

57,239

 

52,388

 

4,851

9

Provision (benefit) for credit losses

1,218

1,266

(48)

(4)

Other operating expenses

 

6,043

 

3,199

 

2,844

89

Total expenses

$

86,176

$

67,299

$

18,877

28

Income from operations

$

48,312

$

28,531

$

19,781

69

Income tax expense

 

12,110

 

7,040

 

5,070

72

Income before noncontrolling interests

$

36,202

$

21,491

$

14,711

68

Less: net income (loss) from noncontrolling interests

 

(174)

 

69

 

(243)

 

(352)

Net income

$

36,376

$

21,422

$

14,954

70

FINANCIAL RESULTS – NINE MONTHS

SERVICING & ASSET MANAGEMENT

For the nine months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

Revenues

Loan origination and debt brokerage fees, net

$

2,113

$

4,582

$

(2,469)

(54)

%  

Servicing fees

222,916

205,658

17,258

8

Investment management fees

47,345

9,115

38,230

419

Net warehouse interest income, loans held for investment

 

4,606

 

5,702

 

(1,096)

(19)

Escrow earnings and other interest income

 

26,166

 

5,712

 

20,454

358

Other revenues

 

74,959

 

28,381

 

46,578

164

Total revenues

$

378,105

$

259,150

$

118,955

46

Expenses

Personnel

$

62,195

$

27,004

$

35,191

130

%  

Amortization and depreciation

 

170,930

 

145,161

 

25,769

18

Provision (benefit) for credit losses

(13,120)

(14,380)

1,260

(9)

Other operating expenses

 

18,721

 

8,056

 

10,665

132

Total expenses

$

238,726

$

165,841

$

72,885

44

Income from operations

$

139,379

$

93,309

$

46,070

49

Income tax expense

 

33,799

 

21,693

 

12,106

56

Income before noncontrolling interests

$

105,580

$

71,616

$

33,964

47

Less: net income (loss) from noncontrolling interests

 

(1,032)

 

69

 

(1,101)

 

(1,596)

Net income

$

106,612

$

71,547

$

35,065

49

54

For the nine months ended

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2023

    

2022

    

Change

    

Change

 

Revenues

Origination fees

$

522

$

2,113

$

(1,591)

(75)

%  

Servicing fees

232,027

222,916

9,111

4

Investment management fees

44,844

47,345

(2,501)

(5)

Net warehouse interest income (expense), loans held for investment

 

3,450

 

4,606

 

(1,156)

(25)

Placement fees and other interest income

 

100,636

 

26,166

 

74,470

285

Other revenues

 

42,697

 

57,624

 

(14,927)

(26)

Total revenues

$

424,176

$

360,770

$

63,406

18

Expenses

Personnel

$

53,669

$

53,211

$

458

1

%  

Amortization and depreciation

 

161,935

 

170,501

 

(8,566)

(5)

Provision (benefit) for credit losses

(11,088)

(13,120)

2,032

(15)

Interest expense on corporate debt

31,385

15,388

15,997

104

Other operating expenses

 

16,465

 

15,535

 

930

6

Total expenses

$

252,366

$

241,515

$

10,851

4

Income from operations

$

171,810

$

119,255

$

52,555

44

Income tax expense

 

42,931

 

28,919

 

14,012

48

Income before noncontrolling interests

$

128,879

$

90,336

$

38,543

43

Less: net income (loss) from noncontrolling interests

 

(3,364)

 

(2,027)

 

(1,337)

 

66

Net income

$

132,243

$

92,363

$

39,880

43

Table of Contents

Revenues

Servicing Fees. For the three and nine months ended September 30, 2022,2023, the increase wasincreases were primarily attributable to an increaseincreases in the average servicing portfolio period over period as shown below, primarily due to a $6.1 billion net increaseslightly offset by declines in Fannie Mae serviced loans and a $1.8 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.rates. The increases in the average servicing portfolio were driven by the $4.4 billion increase in Fannie Mae and the $1.4 billion increase in Freddie Mac loans serviced. The decreases in the average servicing fee rates arewere the result of decreases in the large volume ofWASF on our new Fannie Mae debt financing volume over the past year resulting in Fannie Mae loans composing a higher percentage ofas the overall portfolio. Fannie Mae loans have the highest servicing fees of all our products.

For the three months ended

For the nine months ended

September 30, 

September 30, 

Servicing Fees Details (dollars in thousands)

2022

2021

2022

2021

Average Servicing Portfolio

$

119,551,659

$

112,308,470

$

117,798,975

$

110,516,000

Dollar Change

$

7,243,189

$

7,282,975

Percentage Change

6

%

7

%

Average Servicing Fee (basis points)

24.8

24.6

24.9

24.4

Basis Point Change

0.2

0.5

Percentage Change

1

%

2

%

Investment Management Fees. For the three and nine months ended September 30, 2022, the increases were primarily driven by the addition of investment management fees from our LIHTC operations that were acquired latevolatility in the fourth quarter of 2021, which added $13.9 millioninterest rate environment compressed the spread on our debt financing volume and $40.8 millionreduced the servicing fee rates on loans originated in additional2023. The WASF on new debt financing volume was lower than the loans paid off in the portfolio over the past year.

For the three months ended

For the nine months ended

September 30, 

September 30, 

Servicing Fees Details (dollars in thousands)

2023

2022

2023

2022

Average Servicing Portfolio

$

127,971,088

$

119,551,659

$

125,741,670

$

117,798,975

Dollar Change

$

8,419,429

$

7,942,695

Percentage Change

7

%

7

%

Average Servicing Fee (basis points)

24.2

24.8

24.3

24.9

Basis Point Change

(0.6)

(0.6)

Percentage Change

(2)

%

(2)

%

Placement fees respectively.

Escrow earnings and other interest income. For the three and nine months ended September 30, 2022,2023, the increases were driven primarily by increases in our placement fees on escrow earningsdeposits of $12.9$21.5 million and $15.9$70.4 million, respectively, coupled with increases in interest income from our investments.pledged securities investments of $1.3 million and $4.3 million, respectively. The earningsplacement fee rates on escrow earnings and other interest incomedeposits increased significantly as a result of rising interest rates over the past three months.

Other Revenues. For the three months ended September 30, 2022, the increase was primarily due to an $8.5 million increase in other revenues from our LIHTC operations, partially offset by a $3.3 million decrease in prepayment fees. For the nine months ended September 30, 2022, the increase was primarily attributable to:  (i) a $29.8 million increase in other revenues from our LIHTC operations, (ii) a $12.6 million increase in research subscription fees, and (iii) a $5.2 million increase in prepayment fees. The increase in other revenues from LIHTC operations was driven by our subsidiary Alliant, which was acquired in the fourth quarter of 2021. The increase in research subscription fees was primarily driven by the addition of revenues from our subsidiary, Zelman, as there was no comparable activity for the first six months of the year. 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 thehigher short-term interest rate environment.

Expenses

Personnel. For the three and nine months ended September 30, 2022, the increases were primarily the result of increasesenvironment in salaries and benefits of $7.1 million and $23.4 million, respectively. Additionally, bonus accruals increased by $3.1 million and $10.5 million for the2023 compared to same periods. Salaries and benefits and bonus accruals increased during the three and nine months ended September 30, 2022, primarily due to growth in headcount as a result of the Alliant acquisition that occurred during the fourth quarter of 2021, partially offset by a decrease in the accrual rate due to the Company’s performanceperiod in 2022.

Amortization and Depreciation. For the three and nine months ended September 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 have added $101.0 million of MSRs, net of disposals. Due to acquisitions over the past year, we have added $170.8 million in intangible assets to SAM, resulting in increases in amortization expense of $2.1 million and $8.9 million for the three and nine months ended September 30, 2022, respectively.

Other Operating Expenses. For the three months ended September 30, 2022, the increase primarily stemmed from small increases in various expense types. For the nine months ended September 30, 2022, the increase was primarily due to a $7.4 million increase in other operating costs and a $2.9 million increase in professional fees. The increases in other operating costs and professional fees were primarily due to additional operating expenses incurred at subsidiaries acquired in the second half of 2021.

5557

Other Revenues. For the nine months ended September 30, 2023, the decrease was primarily due to a $21.7 million decline in prepayment fees, partially offset by increases in syndication and other miscellaneous fees from our LIHTC operations of $6.0 million. The decrease in prepayment fees was due to the aforementioned reduction in the volume of loans prepaying and the amount of prepayment fees. Syndication fees increased due to the higher volume of capital syndicated into our LIHTC funds.

Expenses

Amortization and Depreciation. For thethree and nine months ended September 30, 2023, the decreases were primarily due to reductions in the amortization expense related to write-offs of MSRs due to declines in the prepayment of MSRs, partially offset by increases in the amortization expense of existing MSRs.

Provision (benefit) for credit losses. For both the nine months ended September 30, 2023 and 2022, the benefit for credit losses was primarily attributable to updates to our historical loss rate factor. The updates resulted in the loss data from earlier periods within the historical lookback period falling off and being replaced with a period with significantly lower loss data, resulting in the historical loss rate decreasing by 0.6 basis points for both the nine months ended September 30, 2023 and 2022.

Interest expense on corporate debt. Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s use of that corporate debt. The discussion of our consolidated results above has additional information related to the increase in interest expense on corporate debt.

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, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our SAM segment is presented below. Our segment levelsegment-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 nine months ended

For the three months ended

For the nine months ended

September 30, 

September 30, 

September 30, 

September 30, 

(in thousands)

    

2022

    

2021

    

2022

    

2021

    

2023

    

2022

    

2023

    

2022

Reconciliation of Net Income to Adjusted EBITDA

Reconciliation of Net Income to Adjusted EBITDA

Reconciliation of Net Income to Adjusted EBITDA

Net Income

$

36,376

$

21,422

$

106,612

$

71,547

$

45,427

$

30,923

$

132,243

$

92,363

Income tax expense

 

12,110

 

7,040

 

33,799

 

21,693

 

15,040

 

10,204

 

42,931

 

28,919

Interest expense on corporate debt

11,096

6,324

31,385

15,388

Amortization and depreciation

 

57,239

 

52,388

 

170,930

 

145,161

 

54,375

 

57,139

 

161,935

 

170,501

Provision (benefit) for credit losses

1,218

1,266

(13,120)

(14,380)

421

1,218

(11,088)

(13,120)

Net write-offs

Net write-offs(1)

(2,008)

(8,041)

Write off of unamortized premium from corporate debt repayment

(4,420)

Share-based compensation expense

 

574

 

694

 

2,131

 

1,912

 

498

 

473

 

1,338

 

1,837

Adjusted EBITDA

$

107,517

$

82,810

$

300,352

$

225,933

$

124,849

$

106,281

$

346,283

$

295,888

(1)The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

58

The following tables present period-to-period comparisons of the components of SAM adjusted EBITDA for the three and nine months ended September 30, 20222023 and 2021.2022.

ADJUSTED EBITDA – THREE MONTHS

SERVICING & ASSET MANAGEMENT

For the three months ended

 

For the three months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

2023

    

2022

    

Change

    

Change

 

Loan origination and debt brokerage fees, net

$

1,106

$

2,109

$

(1,003)

(48)

%  

Origination fees

$

$

1,106

$

(1,106)

(100)

%  

Servicing fees

 

75,975

 

70,628

 

5,347

8

 

79,200

 

75,975

 

3,225

4

Investment management fees

16,301

2,564

13,737

536

13,362

16,301

(2,939)

(18)

Net warehouse interest income, loans held for investment

 

1,802

 

1,860

 

(58)

(3)

Escrow earnings and other interest income

 

17,760

 

1,945

 

15,815

813

Net warehouse interest income (expense), loans held for investment

 

534

 

1,802

 

(1,268)

(70)

Placement fees and other interest income

 

39,475

 

17,760

 

21,715

122

Other revenues

 

21,718

 

16,655

 

5,063

30

 

15,966

 

16,829

 

(863)

(5)

Personnel

 

(21,102)

 

(9,752)

 

(11,350)

116

 

(16,641)

 

(18,255)

 

1,614

(9)

Net write-offs

N/A

(2,008)

(2,008)

N/A

Other operating expenses

 

(6,043)

 

(3,199)

 

(2,844)

89

 

(5,039)

 

(5,237)

 

198

(4)

Adjusted EBITDA

$

107,517

$

82,810

$

24,707

30

$

124,849

$

106,281

$

18,568

17

56

ADJUSTED EBITDA – NINE MONTHS

SERVICING & ASSET MANAGEMENT

For the nine months ended 

 

For the nine months ended 

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

2023

    

2022

    

Change

    

Change

 

Loan origination and debt brokerage fees, net

$

2,113

$

4,582

$

(2,469)

(54)

%  

Origination fees

$

522

$

2,113

$

(1,591)

(75)

%  

Servicing fees

 

222,916

 

205,658

 

17,258

8

 

232,027

 

222,916

 

9,111

4

Investment management fees

47,345

9,115

38,230

419

44,844

47,345

(2,501)

(5)

Net warehouse interest income, loans held for investment

 

4,606

 

5,702

 

(1,096)

(19)

Escrow earnings and other interest income

 

26,166

 

5,712

 

20,454

358

Net warehouse interest income (expense), loans held for investment

 

3,450

 

4,606

 

(1,156)

(25)

Placement fees and other interest income

 

100,636

 

26,166

 

74,470

285

Other revenues

 

75,991

 

28,312

 

47,679

168

 

46,061

 

59,651

 

(13,590)

(23)

Personnel

 

(60,064)

 

(25,092)

 

(34,972)

139

 

(52,331)

 

(51,374)

 

(957)

2

Net write-offs(1)

 

 

 

N/A

 

(8,041)

 

 

(8,041)

N/A

Other operating expenses

 

(18,721)

 

(8,056)

 

(10,665)

132

 

(20,885)

 

(15,535)

 

(5,350)

34

Adjusted EBITDA

$

300,352

$

225,933

$

74,419

33

$

346,283

$

295,888

$

50,395

17

(1)The net write-off for the nine months ended September 30, 2023 includes the write off of collateral-based reserves related to a loan held for investment.

Three and nine months ended September 30, 2023 compared to three and nine months ended September 30, 2022 compared to three months ended September 30, 2021

Servicing fees increased due to growth in the average servicing portfolio period over period as a result of loan originations, and an increasepartially offset by a decrease in the average servicing fee rate. Investment managementPlacement fees increased due to the addition of our LIHTC operations from our acquisition in the fourth quarter of 2021. Escrow earnings and other interest income increased primarily due to the riseincreases in the escrow earnings rate.placement fee rates. Other revenues increaseddecreased primarily due to the addition of other revenues from our LIHTC operations, partially offset by a decreasedecreases in prepayment fees. Personnel and other operating expensesNet write-offs increased due to growththe write-off of a loan held for investment during the second quarter of 2023 and the settlement of a risk-sharing obligation in headcount and operations from the aforementioned acquisition.

Nine months ended September 30, 2022 compared tothird quarter of 2023, with no comparable activity in 2022. For the nine months ended September 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 acquired in the fourth quarter of 2021. Escrow earnings and other interest income increased primarily due to the rise in the escrow earnings rate. Other revenues increased primarily due to an increase in prepayment fees and the additions of (i) other revenues from our LIHTC operations and (ii) research subscription fees as there was no comparable activity for the first six months of 2021. Personnel and2023 only, other operating expenses increased largely due to growth in headcountprofessional fees and operations from the aforementioned acquisitions.various other expense categories.

5759

Corporate

FINANCIAL RESULTS – THREE MONTHS

CORPORATE

s

For the three months ended

 

For the three months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

    

2023

    

2022

    

Change

    

Change

 

Revenues

Other interest income

$

369

$

87

$

282

324

%  

$

3,525

$

369

$

3,156

855

%  

Other revenues

 

(2,620)

 

(668)

 

(1,952)

292

 

(618)

 

(2,620)

 

2,002

(76)

Total revenues

$

(2,251)

$

(581)

$

(1,670)

287

$

2,907

$

(2,251)

$

5,158

(229)

Expenses

Personnel

$

9,403

$

19,845

$

(10,442)

(53)

%  

$

21,395

$

9,350

$

12,045

129

%  

Amortization and depreciation

 

1,655

 

1,093

 

562

51

 

1,967

 

1,655

 

312

19

Interest expense on corporate debt

 

9,306

 

1,766

 

7,540

427

 

1,624

 

552

 

1,072

194

Other operating expenses

 

21,885

 

17,009

 

4,876

29

 

19,297

 

21,885

 

(2,588)

(12)

Total expenses

$

42,249

$

39,713

$

2,536

6

$

44,283

$

33,442

$

10,841

32

Income from operations

$

(44,500)

$

(40,294)

$

(4,206)

10

Income (loss) from operations

$

(41,376)

$

(35,693)

$

(5,683)

16

Income tax expense (benefit)

 

(17,329)

 

(9,747)

 

(7,582)

78

 

(10,357)

 

(15,140)

 

4,783

(32)

Net income

$

(27,171)

$

(30,547)

$

3,376

(11)

Net income (loss)

$

(31,019)

$

(20,553)

$

(10,466)

51

Adjusted EBITDA

$

(32,646)

$

(31,668)

$

(978)

3

%

$

(35,080)

$

(32,593)

$

(2,487)

8

%

FINANCIAL RESULTS – NINE MONTHS

CORPORATE

For the nine months ended

 

For the nine months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

    

2022

    

2021

    

Change

    

Change

 

    

2023

    

2022

    

Change

    

Change

 

Revenues

Other interest income

$

517

$

260

$

257

99

%  

$

8,674

$

517

$

8,157

1,578

%  

Other revenues

 

41,641

 

(1,658)

 

43,299

(2,612)

 

(431)

 

41,641

 

(42,072)

(101)

Total revenues

$

42,158

$

(1,398)

$

43,556

(3,116)

$

8,243

$

42,158

$

(33,915)

(80)

Expenses

Personnel

$

43,794

$

48,294

$

(4,500)

(9)

%  

$

53,254

$

43,741

$

9,513

22

%  

Amortization and depreciation

 

4,409

 

3,162

 

1,247

39

 

5,390

 

4,409

 

981

22

Interest expense on corporate debt

 

22,123

 

5,291

 

16,832

318

 

4,623

 

1,247

 

3,376

271

Other operating expenses

 

66,922

 

42,487

 

24,435

58

 

51,820

 

66,922

 

(15,102)

(23)

Total expenses

$

137,248

$

99,234

$

38,014

38

$

115,087

$

116,319

$

(1,232)

(1)

Income from operations

$

(95,090)

$

(100,632)

$

5,542

(6)

Income (loss) from operations

$

(106,844)

$

(74,161)

$

(32,683)

44

Income tax expense (benefit)

 

(29,378)

 

(23,396)

 

(5,982)

26

 

(26,698)

 

(24,302)

 

(2,396)

10

Net income

$

(65,712)

$

(77,236)

$

11,524

(15)

Net income (loss)

$

(80,146)

$

(49,859)

$

(30,287)

61

Adjusted EBITDA

$

(96,137)

$

(78,955)

$

(17,182)

22

%

$

(89,017)

$

(96,084)

$

7,067

(7)

%

Revenues

Other interest income. For the three and nine months ended September 30, 2023, the increases were due to increases in the interest rates we earn on our cash deposits held by our corporate segment combined with an increase in the average balance concentrated in interest-earning accounts.

Other revenues. For the three months ended September 30, 2023, the increase was largely due increases in miscellaneous fees and income from equity-method investments.

5860

Revenues

Other Revenues. For the nine months ended September 30, 2022,2023, the increasedecrease was primarily due to the $39.6 million Apprisegain from revaluation gain,of previously held equity-method investment, which was a one-time transaction recognized in the first quarter of 2022. As part of our acquisition of GeoPhy, we acquired its 50% interest2022, and a $5.2 million decrease in Apprise. The revaluation of our existing 50% ownership interest withincome from equity-method investments, partially offset by 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 $7.0$3.3 million increase in incomerevenues from our other equity-method investments, mostly related to the first quarter of 2022. Partially offsetting the increase in Other revenues was a $3.0 million decrease in investment income from the Company’s deferred compensation plan.

Expenses

Personnel. For the three months ended September 30, 2022,2023, the decreaseincrease was primarily the result ofdue to a $6.2$9.6 million decrease to the accrual forincrease in subjective bonus expense and a $1.8 million increase in stock compensation expense. The increases in subjective bonuses and stock compensation were due to a $4.9 million decrease inlower bonus and stock compensation expense relatedin the third of quarter of 2022 compared to the Company’s performance share plan, partially offset by a slight increasethird quarter of 2023, resulting from downward adjustments to the annual accruals made in salaries and benefitsthe third quarter of 2022 due to an increase inour financial performance for the average headcount.year-to-date period ended September 30, 2022 and the expected performance for the remainder of 2022.

For the nine months ended September 30, 2022,2023, the decreaseincrease was primarily the result of (i) a $6.3$7.4 million decrease to the accrual forincrease in subjective bonuses, (ii) a $3.0$3.4 million decreaseincrease in compensation expense related to the Company’ssalaries, and a $3.3 million increase in deferred compensation plan, and (iii)costs, partially offset by a $1.2$4.2 million decrease in stock compensation expense related toas we are accruing performance-based stock compensation at an overall lower rate this year than last. An increase in the Company’s performance share plan, partially offset by a $5.5 million increase incorporate average headcount during 2023 was the primary driver for the increased subjective bonus and salaries and benefits due to an increaseexpenses. The corporate average headcount for the nine months ended September 30, 2023 does not fully reflect the impact of our workforce reduction that we announced in April and that was effective at the average headcount.beginning of May.

Interest expense on corporate debt. Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s use of that corporate debt. The discussion of our consolidated results above has additional information related to the increase in interest expense on corporate debt.

Other operating expenses.For the three and nine months ended September 30, 2022,2023, the increasesdecreases were primarily driven by the doublingdecreases in the size of our corporate debt during the fourth quarter of 2021, an increase in the interest rate on our corporate debt as the lock on our floating interest rate expired, and an increase in interest expense related to a note payable at our subsidiary, Alliant, which we assumed in the fourth quarter of 2021.

Other Operating Expenses. For the three months ended September 30, 2022, the increase was primarily driven by:  a $3.6 million increase in office expenses and small increases in other expenses includingprofessional fees, travel and entertainment, and marketing costs. The increasesmiscellaneous expense categories, partially offset by a small increase in expenses were attributable tooffice expenses. Professional fees decreased $2.0 million and $8.2 million for the growth of the Company, especially from acquired subsidiaries.

For thethree and nine months ended September 30, 2022, the increase was primarily driven by: (i) a $6.4 million increase2023, respectively. The decreases in professional fees largelywere primarily due to increases in legal and otherelevated professional fees in 2022 related to our acquisitionsacquisition costs. Travel and growth ofentertainment decreased $0.7 million and $2.4 million for the Company, (ii) an $11.1three and nine months ended September 30, 2023, respectively. Miscellaneous expenses for the three and nine-month periods decreased $1.1 million increase in office expenses related to the growth of the Company and acquired offices, (iii) a $2.6$6.5 million, increaserespectively. The decreases in travel and entertainment costs attributable to the growth of the Company and as travel and entertainment costs in 2021miscellaneous expenses were depressedprimarily due to our cost-reduction initiatives. Office expenses increased $0.7 million and $2.3 million for the pandemic,three and (iv) a $2.0 million increasenine months ended September 30, 2023, respectively, due primarily to increases in marketing costs related to the growth of the Company, especially from acquisition subsidiaries.software costs.

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, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity.

59

Non-GAAP Financial Measure

A reconciliation of adjusted EBITDA for our Corporate segment is presented below. Our segment levelsegment-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:

61

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

CORPORATE

For the three months ended

For the nine months ended

For the three months ended

For the nine months ended

September 30, 

September 30, 

September 30, 

September 30, 

(in thousands)

    

2022

    

2021

    

2022

    

2021

    

2023

    

2022

    

2023

    

2022

Reconciliation of Net Income to Adjusted EBITDA

Net Income

$

(27,171)

$

(30,547)

$

(65,712)

$

(77,236)

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Reconciliation of Net Income (Loss) to Adjusted EBITDA

Net Income (Loss)

$

(31,019)

$

(20,553)

$

(80,146)

$

(49,859)

Income tax expense (benefit)

 

(17,329)

 

(9,747)

 

(29,378)

 

(23,396)

 

(10,357)

 

(15,140)

 

(26,698)

 

(24,302)

Interest expense on corporate debt

 

9,306

 

1,766

 

22,123

 

5,291

 

1,624

 

552

 

4,623

 

1,247

Amortization and depreciation

 

1,655

 

1,093

 

4,409

 

3,162

 

1,967

 

1,655

 

5,390

 

4,409

Share-based compensation expense

 

893

 

5,767

 

12,062

 

13,224

 

2,705

 

893

 

7,814

 

12,062

Gain from revaluation of previously held equity-method investment

(39,641)

(39,641)

Adjusted EBITDA

$

(32,646)

$

(31,668)

$

(96,137)

$

(78,955)

$

(35,080)

$

(32,593)

$

(89,017)

$

(96,084)

The following tables present period-to-period comparisons of the components of Corporate adjusted EBITDA for the three and nine months ended September 30, 20222023 and 2021.2022.

ADJUSTED EBITDA – THREE MONTHS

CORPORATE

For the three months ended

 

For the three months ended

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

2023

    

2022

    

Change

    

Change

 

Other interest income

 

369

 

87

 

282

324

%  

$

3,525

$

369

$

3,156

855

%  

Other revenues

 

(2,620)

 

(668)

 

(1,952)

292

 

(618)

 

(2,620)

 

2,002

(76)

Personnel

 

(8,510)

 

(14,078)

 

5,568

(40)

 

(18,690)

 

(8,457)

 

(10,233)

121

Other operating expenses

 

(21,885)

 

(17,009)

 

(4,876)

29

 

(19,297)

 

(21,885)

 

2,588

(12)

Adjusted EBITDA

$

(32,646)

$

(31,668)

$

(978)

3

$

(35,080)

$

(32,593)

$

(2,487)

8

ADJUSTED EBITDA – NINE MONTHS

CORPORATE

For the nine months ended 

 

For the nine months ended 

 

September 30, 

Dollar

Percentage

 

September 30, 

Dollar

Percentage

 

(dollars in thousands)

2022

    

2021

    

Change

    

Change

 

2023

    

2022

    

Change

    

Change

 

Other interest income

 

517

 

260

 

257

99

%  

 

8,674

 

517

 

8,157

1,578

%  

Other revenues

 

2,000

 

(1,658)

 

3,658

(221)

 

(431)

 

2,000

 

(2,431)

(122)

Personnel

 

(31,732)

 

(35,070)

 

3,338

(10)

 

(45,440)

 

(31,679)

 

(13,761)

43

Other operating expenses

 

(66,922)

 

(42,487)

 

(24,435)

58

 

(51,820)

 

(66,922)

 

15,102

(23)

Adjusted EBITDA

$

(96,137)

$

(78,955)

$

(17,182)

22

$

(89,017)

$

(96,084)

$

7,067

(7)

Three months ended September 30, 20222023 compared to three months ended September 30, 20212022

Other interest income increased primarily due to an increase in the interest rates on our cash deposits and increased balances. Other revenues increased due to increases in miscellaneous fees and income from equity method investments. The decreaseincrease in personnel expense was primarily due to lower subjective bonus expense in the decreases in accrualsthird quarter of 2022 than the third quarter of 2023 due to our expected financial performance for subjective bonuses and expenses related to the Company’s deferred compensation plan, partially offset by slightly 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 office costs from our acquisitions.2022.

Nine months ended September 30, 2023 compared to nine months ended September 30, 2022

Other interest income increased primarily due to an increase in interest earned on our cash deposits and increased balances. Other revenues decreased, largely due to a decline in income from equity-method investments. The increase in personnel expense was primarily due to increased

6062

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

Other revenues increased primarily due to our equity method investments generating income in 2022 compared to losses in 2021. The decrease in personnel expense was primarily due to decreases in deferred compensation costssubjective bonus and the accrual for subjective bonuses, partially offset by increased salaries and benefits resulting from increasesexpense due to an increase in corporate average headcount.headcount during 2023. Other operating expenses increaseddecreased as a result of the overall growth of the Company over the past year and from increased office costs anda decline in professional fees resulting from our acquisitions.and other operating expenses as a result of cost-reduction initiatives.

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)(iii) fund our portion of the equity necessary for the operations of the Interim Program JV, and otherto support equity-method investments; (v)(iv) fund investments in properties to be syndicated to LIHTC investment funds that we will asset-manage; (vi)(v) make payments related to earnouts from acquisitions, (vii)(vi) meet working capital needs to support our day-to-day operations, including debt service payments, joint venture development partnerships contributions, advances for servicing advancesand loan repurchases and payments for salaries, commissions, and income taxes,; and (viii)(vii) meet working capital to satisfy collateral requirements for our Fannie Mae DUS risk-sharing obligations and to meet the operational liquidity requirements of Fannie Mae, Freddie Mac, HUD, Ginnie Mae, and our warehouse facility lenders.

Fannie Mae has established benchmark standards for capital adequacy and reserves the right to terminate our servicing authority for all or some of the portfolio if, at any time, it determines that our financial condition is not adequate to support our obligations under the DUS agreement. We are required to maintain acceptable net worth as defined in the standards, and we satisfied the requirements as of September 30, 2022.2023. The net worth requirement is derived primarily from unpaid balances on Fannie Mae loans and the level of risk-sharing. As of September 30, 2022,2023, the net worth requirement was $275.0$301.6 million, and our net worth was $646.0 million,$1.0 billion, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC. As of September 30, 2022,2023, we were required to maintain at least $54.7$60.0 million of liquid assets to meet our operational liquidity requirements for Fannie Mae, Freddie Mac, HUD, Ginnie Mae and our warehouse facility lenders. As of September 30, 2022,2023, we had operational liquidity of $131.9$186.4 million, as measured at our wholly-owned operating subsidiary, Walker & Dunlop, LLC.

We paid a cash dividend of $0.60$0.63 per share forduring the third quarter of 2022,2023, which is 20%5% higher than the quarterly dividend paid in the third quarter of 2021.2022. On November 8, 2022,2023, the Company’s Board of Directors declared a dividend of $0.60$0.63 per share for the thirdfourth quarter of 2022.2023. The dividend will be paid on December 9, 20228, 2023 to all holders of record of our restricted and unrestricted common stock as of November 25, 2022.24, 2023.

Over the past three years, we have returned $216.4 million to investors through the repurchase of 0.6 million shares of our common stock under share repurchase programs for a cost of $37.2 million and cash dividend payments of $179.2 million. Additionally, we have invested $655.1 million in acquisitions, $300.0 million of which was financed by an increase in our Term Loan (as defined below). On occasion, we may use cash to fully fund some loans held for investment or loans held for sale instead of using our warehouse lines. As of September 30, 2022,2023, we did not fully fund any such loans.loans held for investment, and we funded a de minimis amount of loans held for sale. We continually seek opportunities to complete additional acquisitions if we believe the economics are favorable.  

In February 2022,2023, our Board of Directors approved a stock repurchase program that permits the repurchase of up to $75.0 million of shares of our common stock over a 12-month period beginning February 13, 2022.23, 2023. Through September 30, 20222023, we have not repurchased 109 thousandany shares under the 20222023 stock repurchase program and have $63.9$75.0 million of remaining capacity under that program.

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

Restricted Cash and Pledged Securities

Restricted cash consists primarily of good faith deposits held on behalf of borrowers between the time we enter into a loan commitment with the borrower and the investor purchases the loan and cash held in collection accounts to be used to fund the repayment of the Alliant note payable.loan. We are generally required to share the risk of any losses associated with loans sold under the Fannie Mae DUS program, our only off-

61

balanceoff-balance sheet arrangement. We are required to secure this obligation by assigning collateral to Fannie Mae. We meet this obligation by assigning pledged securities to Fannie Mae. The amount of collateral required by Fannie Mae is a formulaic calculation at the loan level and considers the balance of the loan, the risk level of the loan, the age of the loan, and the level of risk-sharing. Fannie Mae requires collateral for Tier 2 loans of 75 basis points, which is funded over a 48-month period that begins upon delivery of the loan to Fannie Mae. Collateral held in the form of money market funds holding U.S. Treasuries is discounted 5%, and Agency MBS are discounted 4% for purposes of calculating compliance with the collateral requirements. As of September 30, 2022,2023, we held substantially all of our restricted liquidity in Agency MBS in the aggregate amount of $138.8$131.0 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.

63

We are in compliance with the September 30, 20222023 collateral requirements as outlined above. As of September 30, 2022,2023, reserve requirements for the September 30, 20222023 DUS loan portfolio will require us to fund $71.8$79.6 million in additional restricted liquidity over the next 48 months, assuming no further principal paydowns, prepayments, or defaults within our at-risk portfolio. Fannie Mae has assessed the DUS Capital Standards in the past and may make changes to these standards in the future. We generate sufficient cash flows from our operations to meet these capital standards and do not expect any future changes to have a material impact on our future operations; however, any future changes to collateral requirements may adversely impact our available cash.

Under the provisions of the DUS agreement, we must also maintain a certain level of liquid assets referred to as the operational and unrestricted portions of the required reserves each year. We satisfied these requirements as of September 30, 2022.2023.

Sources of Liquidity: Warehouse Facilities and Notes Payable

Warehouse Facilities

We utilizeuse a combination of warehouse facilities and notes payable to provide funding for our operations. We utilizeuse warehouse facilities to fund our Agency Lending and Interim Loan Program, and LIHTC operations.Program. Our ability to originate Agency mortgage loans and loans held for investments depends upon our ability to secure and maintain these types of financing agreements on acceptable terms.  For a detailed description of the terms of each warehouse agreement, including the affirmative and negative covenants, refer to “Warehouse Facilities” in NOTE 6 in the consolidated financial statements in our 20212022 Form 10-K, as updated in NOTE 6 in the condensed consolidated financial statements in this Form 10-Q.

Notes Payable

We have a senior secured credit agreement (the “Credit Agreement”) that provides for a $600 million term loan (the “Term Loan”) that bears interest at Adjusted Term SOFRSecured Overnight Financing Rate (“SOFR”) plus 225 basis points with a floor of 50 basis points and has a stated maturity date of 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,

On January 12, 2023, we may also electentered into a lender joinder agreement and amendment to request one or morethe Credit Agreement that provided for an incremental term loan commitments not(“Incremental Term Loan”) with a principal amount of $200.0 million, modified the ratio thresholds related to exceedmandatory prepayments, and included a provision that allows additional types of indebtedness. The Incremental Term Loan was issued at a 2.0% discount and contains similar repayment terms as the lesserTerm Loan. The Incremental Term Loan bears interest at Adjusted Term SOFR plus 300 basis points and matures on December 16, 2028. We are obligated to make principal payments on the Incremental Term Loan in consecutive quarterly installments equal to 0.25% of $230the aggregate original principal amount of the Incremental Term Loan on the last business day of each March, June, September, and December, which began on June 30, 2023. We used approximately $115.9 million of the proceeds to pay off the Alliant note payable principal balance and 100%related accrued interest and other fees of trailing four-quarter Consolidated Adjusted EBITDA, provided that total indebtedness would not cause the leverage ratio to exceed 3.00 to 1.00.a subsidiary. As of September 30, 2022,2023, the aggregate outstanding principal balance of the original Term Loan and Incremental Term Loan (“Corporate Debt”) was $595.5$788.5 million. The note payable and the warehouse facilities are senior obligations of the Company. As of September 30, 2022, we were in compliance with all 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 20212022 Form 10-K. There have been no changes

The note payable and the warehouse facilities are senior obligations of the Company. As of September 30, 2023, we were in compliance with all covenants related to the Credit Agreement in 2022.Agreement.

We have a note payable through our wholly-owned subsidiary Alliant, which has an outstanding balance of $120.2 million as of September 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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Credit Quality and Allowance for Risk-Sharing Obligations

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

 

September 30, 

 

September 30, 

(dollars in thousands)

    

2022

    

2021

    

    

2023

    

2022

    

Key Credit Metrics

Risk-sharing servicing portfolio:

Fannie Mae Full Risk

$

49,241,243

$

44,069,885

$

53,549,966

$

49,241,243

Fannie Mae Modified Risk

 

9,177,094

 

8,235,475

 

9,295,368

 

9,177,094

Freddie Mac Modified Risk

 

23,615

 

36,883

 

23,415

 

23,615

Total risk-sharing servicing portfolio

$

58,441,952

$

52,342,243

$

62,868,749

$

58,441,952

Non-risk-sharing servicing portfolio:

Fannie Mae No Risk

$

8,109

$

12,593

$

5,519

$

8,109

Freddie Mac No Risk

 

37,217,856

 

38,002,131

 

38,632,721

 

37,217,856

GNMA - HUD No Risk

 

9,634,111

 

9,894,893

 

10,320,520

 

9,634,111

Brokered

 

15,224,581

 

13,429,801

 

17,091,925

 

15,224,581

Total non-risk-sharing servicing portfolio

$

62,084,657

$

61,339,418

$

66,050,685

$

62,084,657

Total loans serviced for others

$

120,526,609

$

113,681,661

$

128,919,434

$

120,526,609

Interim loans (full risk) servicing portfolio

 

251,815

 

238,713

 

40,000

 

251,815

Total servicing portfolio unpaid principal balance

$

120,778,424

$

113,920,374

$

128,959,434

$

120,778,424

Interim Program JV Managed Loans (1)

900,037

918,518

736,320

900,037

At risk servicing portfolio (2)

$

53,430,615

$

48,209,532

$

57,857,659

$

53,430,615

Maximum exposure to at risk portfolio (3)

 

10,826,654

 

9,784,054

 

11,750,068

 

10,826,654

Defaulted loans(4)

 

78,203

 

48,481

 

 

78,203

Defaulted loans as a percentage of the at-risk portfolio

0.15

%  

0.10

%  

0.00

%  

0.15

%  

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

0.09

0.13

0.05

0.09

Allowance for risk-sharing as a percentage of maximum exposure

0.46

0.63

0.26

0.46

(1)As of September 30, 20222023 and 2021,2022, this balance consists entirely 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.

(3)Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.
(4)Defaulted loans represent loans in our Fannie Mae at-risk portfolio which are probable of foreclosure or that have foreclosed and for which the Company has recorded a collateral-based reserve (i.e. loans where we have assessed a probable loss). Other loans that have defaulted but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to the Company are not included here.

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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.

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”Segments - Capital Markets section of “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”1. Business” in our 2022 Form 10-K 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.

The calculated CECL reserve for the Company’s $52.1$57.4 billion at-risk Fannie Mae servicing portfolio as of September 30, 20222023 was $38.9$31.0 million compared to $52.3$39.7 million as of December 31, 2021.2022. The significant decrease in the CECL reserve was principally related to a reduction in our historical loss rate factor, used for both the three and nine months endedwhich decreased from 1.2 basis points as of December 31, 2022 to 0.6 basis points as of March 31, 2023 (with no change from March 31, 2023 to September 30, 2022 and the forecast-period loss rate for the three months ended June 30, 2022 and September 30, 2022.2023), as a year with significant losses in our 10-year lookback period was replaced with a year with significantly fewer losses.  

As of September 30, 2022,2023, no at-risk loans were in default compared to three at-risk loans with an aggregate UPB of $78.2 million were in default compared to two loans with an aggregated UPB of $48.5 million as of September 30, 2021.2022. The collateral-based reserve on defaulted loans was $10.8 millionzero and $7.6$10.8 million as of September 30, 20222023 and September 30, 2021,2022, respectively. We had a provision for risk-sharing obligations of $0.6 million for the three months ended September 30, 2023 compared to a provision for risk-sharing obligations of $1.2 million for the three months ended September 30, 2022 compared to2022. We had a benefit for risk-sharing obligations of $1.3$11.1 million for the threenine months ended September 30, 2021. We had2023, compared to a benefit for risk-sharing obligations of $13.0 million for the nine months ended September 30, 2022 compared2022.

We are obligated to a benefit for risk-sharing obligations of $13.7 millionrepurchase loans that are originated for the nine months ended September 30, 2021.

Agencies’ programs if certain representations and warranties that we provide in connection with such originations are breached. We have never been required to repurchase a loan; however, in October 2023, we received a repurchase request from each of Freddie Mac and Fannie Mae relating to loans with an outstanding principal balance totaling $24.8 million. We appealed the repurchase request from Freddie Mac and are awaiting a final determination on the appeal. Our appeal request may not be honored, resulting in a repurchase during the fourth quarter of 2023. The repurchase request from Fannie Mae will result in the repurchase of the loan in the first quarter of 2024. Based on the value of the underlying collateral, we do not believe we will realize a material loss for the repurchase of either loan.

New/Recent Accounting Pronouncements

As seen in NOTE 2 in the condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q, there are no accounting pronouncements that the Financial Accounting Standards Board has issued and that have the potential to impact us but have not yet been adopted by us as of September 30, 2022.2023.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

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

Some of our assets and liabilities are subject to changes in interest rates. EarningsPlacement fee revenue from escrowsescrow deposits generally track the effective Federal Funds Rate (“EFFR”). The EFFR was 308533 basis points and six308 basis points as of September 30, 20222023 and 2021,2022, respectively. The following table shows the impact on our annual escrow earningsplacement fee revenue due to a 100-basis point increase and decrease in EFFR 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 EFFR would be delayed by several months due to the negotiated nature of some of our escrowplacement arrangements.

As of September 30, 

As of September 30, 

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

    

2022

    

2021

    

Change in annual placement fee revenue due to: (in thousands)

    

2023

    

2022

    

100 basis point increase in EFFR

$

30,790

$

29,824

$

28,164

$

30,790

100 basis point decrease in EFFR (1)

 

(30,628)

 

(2,357)

 

(28,164)

 

(30,628)

The borrowing cost of our warehouse facilities used to fund loans held for sale loans held for investment, and investments in tax credit equity is based on LIBOR or Adjusted Term Secured Overnight Financing Rate (“SOFR”).SOFR. The base SOFR was 531 basis points and 298 basis points as of September 30, 2022. 30-day LIBOR as of September 30, 2021 was eight basis points.2023 and 2022, respectively. The interest income on our loans held for investment is based on 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 LIBOR or Adjusted Term SOFR, based on our warehouse borrowings outstanding at each period end. In the table below, the large decrease in absolute value for 2023 is due to a significant decline in the outstanding Agency Warehouse balances as of September 30, 2023. 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 September 30, 

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

    

2022

    

2021

    

2023

    

2022

100 basis point increase in SOFR or 30-day LIBOR

$

(23,630)

$

(26,212)

100 basis point decrease in SOFR or 30-day LIBOR (2)

 

23,630

 

1,684

100 basis point increase in SOFR

$

(7,822)

$

(23,630)

100 basis point decrease in SOFR

 

7,822

 

23,630

Our Term LoanCorporate Debt is based on Adjusted Term SOFR as of September 30, 2022.2023. In December 2021, we fully paid the prior $300 million term loan agreement, which was based on interest at 30-day LIBOR and entered into a $600 million note payable with an interest based Adjusted Term SOFR and a SOFR floor of 50 basis points.January 2023, our Corporate Debt increased by $200 million. The following table shows the impact on our annual earnings due to a 100-basis point increase and decrease in SOFR and/or 30-day LIBOR as of September 30, 20222023 and September 30, 2021,2022, respectively, based on our current and previous notesthe note payable balance outstanding at each period end. The Alliant note payable isas of September 30, 2022 was a fixed-rate debt;note; therefore, there iswas no impact to our earnings related to this debt when interest rates change.change as of September 30, 2022.

As of September 30, 

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

    

2022

    

2021

100 basis point increase in SOFR or 30-day LIBOR

$

(5,955)

$

(2,925)

100 basis point decrease in SOFR or 30-day LIBOR (2)

 

5,955

 

235

(1)The decrease is limited to EFFR in cases where the 100 basis point decrease resulted in a negative effective interest rate.
(2)The decrease as of September 30, 2021 is limited to 30-day LIBOR as of September 30, 2021, as it was less than 100 basis points, or the interest rate floor.

As of September 30, 

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

    

2023

    

2022

100 basis point increase in SOFR

$

(7,885)

$

(5,955)

100 basis point decrease in SOFR

 

7,885

 

5,955

Market Value Risk

The fair value of our MSRs is subject to market-value risk. A 100-basis point increase or decrease in the weighted average discount rate would decrease or increase, respectively, the fair value of our MSRs by approximately $43.2 million as of September 30, 2023 compared to $40.6 million as of September 30, 2022 compared to $37.2 million as of September 30, 2021.2022. Our Fannie Mae and Freddie Mac servicing engagements provide for prepayment fees inloans include economic deterrents that reduce the eventrisk of a voluntaryloan prepayment prior to the expiration of the prepayment protection period.period, including prepayment premiums, loan defeasance, or yield maintenance fees. These prepayment protections generally extend the duration of a loan compared to a loan without similar protections. If a loan is prepaid prior to the expiration of the prepayment protection period, and the customer is obligated to incur a prepayment premium, our servicing contacts with Fannie Mae and Freddie Mac allow us to receive a portion of the prepayment premium. Our servicing contractscontract with institutional investors and

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and HUD do not require them to provide us with prepayment fees. As of both September 30, 2023 and 2022, 90% and 2021, 89% of the loans for which we earn servicing fees are protected from the risk of prepayment through prepayment provisions.provisions, respectively. Given this significant level of prepayment protection, we do not hedge our servicing portfolio for prepayment risk. As interest rates have risen rapidly over the past 18 months, we have experienced a significant reduction in prepayment activity within our loan servicing portfolio, which in turn has significantly reduced the volume and amount of prepayment premium revenues we receive.

London Interbank Offered Rate (“LIBOR”) Transition

In the first quarter of 2021,On June 30, 2023, the United Kingdom’s Financial Conduct Authority, the regulator for the administration of LIBOR, announced specific dates for its intention to stopstopped publishing LIBOR rates, including the 30-day LIBOR (our(previously our primary reference rate) which is scheduled for June 30, 2023. It is expected that. All of our legacy GSE LIBOR-based loans will transitiontransitioned to Secured Overnight Financing Rate (“SOFR”) on or before June 30, 2023. With respectSOFR effective July 1, 2023, after providing formal notice 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 updatedall impacted borrowers. All of 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 have transitioned to SOFR.SOFR as of June 30, 2023.

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 30, 20222023 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 control over financial reporting for Alliant and its affiliates into our internal control over financial reporting environment.

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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 20212022 Form 10-K descriptions of certain risks and uncertainties that could affect our business, future performance, or financial condition (the “Risk Factors”). There have been no material changes from the disclosures provided in the 2021our 2022 Form 10-K, with respect toexcept as provided in Part II, Item 1A of our quarterly report on Form 10-Q for the Risk Factors.quarterly period ended March 31, 2023. Investors should consider the Risk Factors prior to making an investment decision with respect to the Company’s stock.

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

68

issuable to the grantee. During the quarter ended September 30, 2022,2023, we purchased 14ten thousand shares to satisfy grantee tax withholding obligations on share-vesting events. During the first quarter of 2022,2023, the Company’s Board of Directors approved a share 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, 2022.23, 2023. During the quarter ended September 30, 20222023 we did not repurchase any shares under this share repurchase program. The Company had $63.9$75.0 million of authorized share repurchase capacity remaining as of September 30, 2022.2023. The following table provides information regarding common stock repurchases for the quarter ended September 30, 2022:2023:

Total Number of

Approximate 

Total Number of

Approximate 

 Shares Purchased as

Dollar Value

 Shares Purchased as

Dollar Value

Total Number

Average 

Part of Publicly

 of Shares that May

Total Number

Average 

Part of Publicly

 of Shares that May

    

of Shares

    

Price Paid

    

Announced Plans

    

 Yet Be Purchased Under

    

of Shares

    

Price Paid

    

Announced Plans

    

 Yet Be Purchased Under

Period

Purchased

 per Share 

or Programs

the Plans or Programs

Purchased

 per Share 

or Programs

the Plans or Programs

July 1-31, 2022

 

1,204

$

98.13

63,901,743

August 1-31, 2022

 

4,720

113.20

63,901,743

September 1-30, 2022

 

7,975

98.24

63,901,743

July 1-31, 2023

 

923

$

79.09

75,000,000

August 1-31, 2023

 

4,872

90.53

75,000,000

September 1-30, 2023

 

4,205

84.87

75,000,000

3rd Quarter

13,899

$

103.31

10,000

$

87.09

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.Rule 10b5-1 Trading Arrangements

67

TableDuring the quarter ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of Contentsthe Company adopted or terminated a “Rule 10b5-1 trading agreement” or “non-Rule 10b5-1 trading agreement,” as each term is defined in Item 408 of Regulation S-K.

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 Alinksy, 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)

69

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)February 10, 2023)

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

Amendment No. 46 to Master Repurchase Agreement, dated as of September 15, 2022,12, 2023, by and among Walker & Dunlop, LLC, Walker & Dunlop, Inc.,Inc, and JPMorgan Chase Bank,bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 20, 2022)15, 2023)

10.2

Amendment No. 12 to Amended and Restated Letter, dated as of September 15, 2022,12, 2023, 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 September 20, 2022)15, 2023)

10.3

*†

Amendment One to the Walker & Dunlop, Inc, Deferred Compensation Plan

10.4

*

Form of Trust Agreement

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

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

68

101.PRE

*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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

*: Filed herewith.

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

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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 9, 20222023

By:  

/s/ William M. Walker

 

 

William M. Walker

 

 

Chairman and Chief Executive Officer 

 

 

 

 

 

 

Date: November 9, 20222023

By:  

/s/ Gregory A. Florkowski

 

 

Gregory A. Florkowski

 

 

Executive Vice President and Chief Financial Officer

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